Part one of the interview addresses a number of questions, including the role of the investor relations officer in his/her organization’s strategic deliberations, the challenge of addressing investor and financial analyst sentiment without becoming hostage to them, the limits of intuition, the importance (and limits) of outside perspectives, and the role of discipline in the planning process.

Part two address the institutionalizing of dissent, the corporate evolution of successful companies, why companies keep making big acquisitions in the face of overwhelming evidence that they tend to fail, the danger of trying to buy oneself out of a tough strategic situation, the red flags associated with big synergy plays, and what to do before a big deal is on the table.

Part three addresses executive compensation, corporate culture, how to be effective when dissent is not tolerated, and the importance of assessing alternative future scenarios in the course of evaluating strategy.

Part four explores how to avoid analysis paralysis, why dissent is valuable for CEOs, how to improve the dialog between management and the board of directors while still respecting the bright line between management and governance, the danger of consensus building, the personality of CEOs, and why “the only thing harder than starting a new initiative is killing one.”

Part five closes the interview with an exploration of the difference between noble and ignoble failures and the legacy of George Eastman, founder of Kodak.

Thanks to NIRI and Michael Santoli for permission to post this video.

In the Atlantic, James Fallows makes this noteworthy observation (emphasis is ours):

In Beijing, in Shanghai, in Shenzhen, and elsewhere, I’ve recently visited companies that are trying to use the disruption of this moment to enter wholly new markets and do what so few Chinese firms have yet done: make high-tech, high-value products that bring high rewards. In a country as big and chaotic as China, you can find illustrations of any “trend” you want. But in only a few weeks of asking, I found indications of companies that were growing rather than shrinking, and of corporate leaders who were pouring in money based on their belief that now, when competitors are at their weakest and talent and assets could be snapped up cheap, is the time to prepare for their next big advance.

In Shenzhen, north of Hong Kong, I went to see Liam Casey, the Irish entrepreneur I described two years ago as “Mr. China” for his success in matching big, famous foreign companies with small, obscure Chinese factories that can produce brand-name products quickly and well. Casey said that of the top 100 Chinese companies he works with regularly, not one had gone out of business. While many were struggling, some viewed the recession as a chance to move into higher-value work and introduce their own advanced products rather than serving strictly as subcontractors.

The article gives numerous examples of aggressive moves that Chinese companies are making to take advantage of the downturn.

The Wall Street Journal has a related article about the rise of Craftmaster Furniture Inc., a maker of upholstered furniture with two factories in Taylorsville, N.C.  Sales in the $80B U.S. furniture market is off by an estimated 20% over the last six months, and Craftmaster competitors like La-Z-Boy Inc. and Ethan Allen are posting huge declines in sales and earnings.  Craftmaster, on the other hand, pulled off a 4% gain in revenues last year and a 5% gain since January.

Craftmaster, as it turns out, is owned by Dongguan, China-based Samson Holding Ltd. Craftmaster leverages its parent to operate an especially efficient supply chain that ships fabric, wooden frames, and other parts from China to Craftmaster’s two assembly plants in North Carolina.  Insulated in part by the financial wherewithal of its parent, Craftmaster is aggressively pursuing market share at the expense of weakened competition.  In one example described in the article, Craftmaster pounced when a competitor, Norwalk Furniture Corp., filed for bankruptcy last fall.  Craftmaster quickly hired Norwalk’s head of sales and five regional sales associates.    Norwalk quickly reemerged from bankruptcy with a new group of investors, but, by that time, Craftmaster had already snatched up much of its former customer base.

We think it’s worth learning from the Chinese example.

The WSJ says Microsoft actually got a second bite at the apple when it was approached about buying Overture in 2003, a time when Google was still plenty vulnerable. Overture combined advertising with search results much as Google does. But Microsoft CEO Steve Ballmer and founder Bill Gates shot the idea down. Yahoo ended up buying Overture, and it now forms the core of the part of Yahoo that Microsoft has been most interested in buying.

Now, Ballmer and Gates are awfully smart guys. They even had the benefit of having had a tight relationship with IBM that gave them a front-row seat as IBM hurt itself in the personal-computer market in the 1980s by making precisely the kind of mistake Microsoft made on search technology. Among other things, IBM delayed using a breakthrough Intel processor because IBM didn’t want to cut into revenue for minicomputers and mainframes. Compaq had no such qualms. It came out with a PC that used the processor and stole the leadership position in PCs from IBM, which never recovered. IBM lost as much as $1 billion a year on its PC business in the 1990s, before selling it to Lenovo.

If Ballmer and Gates goofed, despite their great track record and their experience with IBM, there must be powerful motivations that make people miss opportunities like that presented by Google. And there are.

Our research found numerous situations where an existing business blinded executives to what was coming.

One problem is that the economics of a potential new business are compared with the economics of the existing business, even though the existing business model may soon be obsolete. Kodak, for instance, delayed by years its entry into digital photography because it didn’t want to give up the cushy 65% gross margins it generated from sales of film, chemicals and paper, in return for maybe a 15% gross margin on products related to digital technology. What Kodak couldn’t get its head around was that those 65% margins were going away, no matter what Kodak did, and it needed to adapt to the new world sooner rather than later.

Another problem has to do with size.  Even when executives accept the need to innovate, it is hard for large corporations to nurture new ideas, no matter how good.  One client referred to this as his “Starbucks” problem.  His annual growth target was equivalent to all of Starbucks, making it hard for him to consider an idea that did not quickly add hundreds of millions of dollars of revenue. Another executive talked about his “oak and acorn” problem. Tasked with finding huge oaks, he couldn’t spend much time on acorns.

Two lessons to consider:  First, if you find yourself evaluating the prospects for an innovative idea, don’t limit yourself to what those responsible for protecting existing businesses think. You also need to figure out what the competition can do to you, because it’s unlikely that you’re going to be able to stem the tide of innovation.  Second, make sure that you save some room in your investment portfolio for radical innovations, killer ideas that just might grow into the next Google.  [For more on how to innovate, check out "Unleashing the Killer App," which Chunka co-wrote and which was published in 1998.]

You don’t want to ruin your existing business by letting someone pull a Page-Brin on you. You also don’t want to miss a chance to generate that kind of innovation yourself.