Eddielogic

– Thoughts on Strategy and Management

November 5, 2006
by Dagmar
Comments Off on Is Strategy the Path or the Objective?

Is Strategy the Path or the Objective?

Well, you may be inclined to say both. Henry Mintzberg goes even further with his concept of ‘Four P’s for Strategy’: Path, Perspective (equivalent to objective), Pattern and Ploy.

But let’s stay with the path and the objective. Of course, a strategy can describe your objective, i.e. what you want to achieve, and your path to this objective, i.e. how you are going to do that. But it doesn’t necessarily have to be both. A strategy can determine an intended future position without explicitly describing how this is to be achieved. But it should never consist just of the path (no matter how brilliant analysis and recommended actions are) without giving the objective. Continue Reading →

November 5, 2006
by Oliver
1 Comment

Strategic web marketing 2.0 by MGM?

I would like to discuss an issue for which I posted my first opinions a couple of days ago. These days we can read a lot about web 2.0. It is said that users are not only consumers of web contents; instead of that they generate the content themselves. Videoportals (e.g. YouTube, Clipfish) and blogs are examples for this development. But it might be that “web 2.0” might change marketing techniques more that we would ever have expected.

In August 2006 it was announced that a very famous TV show (Stargate SG 1) will find its end after season 10. (I know that is a very crude description, but there are a lot of explanations and theories concerning this issue. NBC / SciFi-channel (the TV station that broadcasts SG1) cancelled the show within its broadcast program; possible reasons – but every item has got its question mark – : low ratings, decline of visitors, to give way to a new show, cost of production (approximately 2 Mio. US $ per show). Hence MGM decided to stop the production. According to some web based information NBC is the bailee of the show, which causes some difficulties for MGM now.)

If you check the Web you can find a huge number of discussions and chats concerning this issue as well as presumptions about rationales (you can also check the comment to my post by “Guest”, who shared his view of the reasonse with us.)

So let us take a more theoretical point of view to this issue. What could be the reasons to end such a famous show, which obviously has so many fans (including me)? In general there could be three reasons:

a) Irrational reasons. The managers, who were responsible for this decision (to cancel the show) might not deal in a rational manner. In general we expect that managers are always rational. But in practice we have to accept (and this is confirmed by various studies) that managers are “just” human beings and therefore a lot of other factors than economical logic (e.g. personal values, beliefs, personal interests) might influence their decisions. It may be that the managers’ girl Friday did not like the show and hence they preferred a new show on air.

b) Rational reasons. There are economic reasons that support this decision, but the facts are not known (or not announced) to the public. To analyse this issue I would like to check all their (MGM, NBC, SciFi Channel) P&L accounts. If you check the Internet you can find a set of numbers (visitors, costs of production) relating to this show. But at the end of the day you will be not able to answer the question whether the show is successful in financial terms, whether it is able to meet certain hurdle rates (e.g. ROE) or whether another show is likely to perform better (in financial terms!). According to the high profile of the show option B is not so likely.

c) Strategic web 2.0 guerrilla marketing. You never heard about this? Me too! This is just my personal theory about what’s going on here: We experience web 2.0 marketing + guerrilla marketing + strategic marketing. I know that might sounds crazy, but I would like to present three arguments:

Continue Reading →

November 4, 2006
by Dagmar
Comments Off on How often do you touch your strategy?

How often do you touch your strategy?

Recently I talked to a freelance consultant who had been working for a company in a turnaround situation for the last couple of months. This company had been through a long and severe crisis and had now – under new ownership – taken its time to develop and implement a new strategy. Of course this had brought along a major restructuring and change in organisational structure.

The consultant told me about a discussion he had with the people from the strategic planning department there. This team had played a major role during the transformation process. They had worked out most of the details of the new strategy and were now pushing the company through implementation phase. In doing so they turned out to be quite efficient problem solvers for all sorts of problems that came up (and there were many).

Nevertheless, this department would be reduced by half of its team members. The team, obviously, was not happy with that and had asked the consultant for the reasons. Continue Reading →

November 2, 2006
by Oliver
1 Comment

The end of videoportals ?

Today a very interesting article concerning youtube and copyright issues could be found in the German newspaper “Handelsblatt”. The headline was that the American sport league attacks Google due to various violations of their copyrights. That is a very interesting development for all videoportals, no matter whether they are in USA or in Germany.

In fact videoportals like YouTube, clipfish and myvideo have become very popular in the last year. They actually present a major part or trend of that what we call “Web 2.0 ” today. But we have to consider that the huge success has a “dark side”.

Why? Go to one of these portals and check them out for your favourite tv show or music video. Check for your most favourite actress and you will find….a huge number of videos related to them. Some of them might be recorded on private occasions, but most of them will represent a copyright violation to a certain degree. That is a very conserative formulation, since some clips contain 2 violations (pictures and sound) at the same time. I have to be fair, some of this clips are really masterpieces of art and demonstrate the effort and enthusiasm of their editors. I LIKE THESE VIDEOCLIPS….

Most interesting is that actually the “copyright empire” strikes back with this power now. As long as the videoportals did not look like big business the situation was accepted: users uploaded 70.000 clips PER DAY and Youtube/Google deleted some of them (News Corp. has forced Google to delete 30.000 clips; 23 firms from Nippon requested to delete 30.000 clips). (I have to mention this: Before the acquisition of YouTube, Google made agreements with Universal, Sony / BMG and Time Warner. However there are still hundreds of other small labels and movie makers left.)

But now we have reached a new business level. Videoportals have become able to generate cash flows and therefore everyone in the business will have his stake. Welcome to Web 3.0! Two options will remain:

Continue Reading →

November 2, 2006
by Oliver
Comments Off on Berlin

Berlin

Today I had business meeting in Berlin. Travelling to Berlin by plane is very easy and convenient for me, since we live near the Frankfurt International Airport.

Coordinator for this meeting was the federal association of private loan and building associations (specialised house = finance banks; the so called “Bausparkassen”). On our agenda we had risk management issues and the new regulatory requirements that arise from the Basel II Capital accord; especially those which are related to interest rates. One key issue was to compare the different approaches from our companies to calculate and to manage interest rate related risks. Within our commission we decided to set up a small project to develop a specification. The aim of this specification is to describe how “Bausparkassen” might calculate these risks. Receiver of this specification will be the German Regulator for the Finance Industry. Actually I am short of time this month, but this issue is important; hence I gonna support this project.

October 31, 2006
by Oliver
Comments Off on Spam and Courtesy

Spam and Courtesy

It is amazing how “cool” some German companies generate spam. Today I discovered a spam
mail within my mail inbox that has this end: This is no mass advertising or even spam (really?) but some grave and specific information (….I did not ask for)! We assume, which interests you in forms of serious business information you might have (…your assumption is wrong….). If you should wish no more business information or if you are not interested in making contacts etc., we apologize and ask to you to cancel (here) from our distribution list. Then we will immediately remove your e-mail address from our distribution list.  Thanks for your cooperation!

That is process reenigneering!

October 30, 2006
by Dagmar
1 Comment

What is Strategy all about?

The probably most common way to develop strategies is to ask (and hopefully answer) questions like: Which products do we want to offer? In which markets? How are we going to do that? Do we want to do that on our own or are we looking out for a partner? Such questions are necessary to guide a company on its way to the future. My experience is, however, that strategy efforts that centre around these questions often lead to results that are perceived as not satisfying. Even if a company successfully thinks about its products, its markets, its technologies or about whatever might be relevant for it, many people there may end up with the vague feeling that there is no real strategy at all. Continue Reading →

October 29, 2006
by Oliver
6 Comments

Strategy: Raising the „right“ question(s) meets STARGATE SG 1

An important issue in order to develop a strategy or a strategic objective is raising the right question(s).

To proof this I would like to use an example: You are in Berlin, Germany (your current position) with your car (company) and want to go to a new place (your desired corporate future). There are a lot of interesting cities in Europe.
You choose Vienna. According to your (strategic) plan you decide to travel by car (your strategic way to achieve your objective) since it gives you the best flexibility in terms of time management and luggage. You decide to travel on county road in order to avoid traffic jams on the highway, using GPS based travel guide (tactics). You are very successful and achieve Vienna within your expected time frame and with all your luggage.
In Vienna you discover that you prefer French cuisine and that you are in the wrong city. But your tactics were great…..

This problem is often illustrated with this statement: Doing the things right vs. doing the right things.

That sounds easy…but in practice it is very hard to find the right question(s) and to do the right things.
A couple of days ago I discovered that one of my and my wife’s favourite TV shows (STARGATE SG1) is going to end. The reason might be that the number of viewers has declined from 2,55 million to 1,95 million. That makes a decline of 23 %, a figure that would make every TV station think twice. Hence NBC (Sci Fi channel) decided to end this TV show after season 10.
Continue Reading →

October 25, 2006
by Oliver
Comments Off on Strategy and Decision Analysis

Strategy and Decision Analysis

The German Railway used decision analysis in order to develop a new HR strategy. A lot impact factors were considered, e.g. demographic development (which is very dramatic in Germany), health care issues and law issues.

The firm is supported by two PhD students from the London School of Economics. They take care for a project called Mara, which has the objective to connect decision experts globally. On the project website you can find this statement: “MARA enables its partner organisations to develop coherent strategies in a transparent and participative process. The result: an efficient allocation of resources prioritised projects and optimised portfolios.” I will check their website periodically for two reasons: You can not organise creativity and synthesis for strategy development. But you can probably start with a strategic objective; and then you can start a structured process in order to define the ways to achieve this. I hope that I can get some ideas for my own PhD-research.

October 23, 2006
by Oliver
1 Comment

CEO Pay

Today I did read a very interesting article about a recent study about CEO pay. The authors are Xavier Gabaix (Pinceton) and Augustin Landier (New York University). They developed this hypothesis in order to research CEO pay: Managers are different in order to increase the value of a firm. In particular in large firms ”above average managers” are able to achieve a lot, since the total increase in value is larger compared to medium sized companies. Hence large firms try to attract the best manager with high salaries. The result: On average the value of the firm and managers’ salary correlate 1 to 1. The authors discovered one paradox: Companies belief that the differences between managers in terms of talent are very low. Otherwise they would pay much more for the best.