Billion Dollar Lessons » Learning

Interview of Chunka Mui by Michael Santoli of Barron’s

export — Tue, 30 Jun 2009 15:29:10 +0000

Chunka Mui gave the closing keynote at the recent annual meeting of NIRI, the National Investor Relations Institute. Following that address, he engaged in a wide-ranging interview conducted by Michael Santoli, a senior editor of Barron’s. Santoli writes the “Streetwise” column, offering a forward-looking take on the financial markets, illuminating market trends and themes and identifying investment opportunities. Below is the video of that interview, divided into five parts.

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.

Not Learning in Davos, and Beyond

export — Mon, 02 Feb 2009 18:50:49 +0000

Bill Taylor, on his blog at HarvardBusiness.org, has an insightful post piggybacking off a Daniel Gross dispatch from the 2009 World Economic Conference in Davos, Switzerland. Taylor and Gross observe that there seems to be little soul-searching going on at Davos relative to the roots of the worldwide financial mess. Gross puts it this way: “At least with regard to finance and business, the consensus [at Davos] seems to be clear: Success is the work of Great Men and Great Women, while failure can be pinned on the system.” Taylor is more blunt: “So it goes for the world’s economic elite: We’ll gladly take the credit (and the pay) for good times, but don’t blame us (or deny us our bonuses) when things go sour. Welcome to the no-fault economy!”

While we’re sympathetic to both bloggers’ ire, we believe that those at Davos are just exhibiting a common human tendency. We’re all simply wired to think highly of ourselves and our efforts, so we don’t dwell on possible failures. In golf, for example, we all tend to believe that a great drive is the real us, whereas bad ones are aberrations. In the business world, a long term study of Exxon executives cited by Charles R. Schwenk, in The Essence of Strategic Decision Making (Lanham, MD: Lexington Books, 1988), found that “cognitive maps that explain poor performance contain significantly more assumptions about the environment while those that explain good performance contain more assumptions dealing with the effects of the executives’ actions.” To translate that into English: If something went wrong, the executives blamed the business climate; if something went right, they took credit.

The unfortunate consequence is all of us, not just the lions of Davos, tend not to learn from our failures, much less share those lessons with others. In that regards, Bill Taylor offers a valuable set of questions for the CEOs at Davos, and rightly points out that they’d be valuable for all executives to ponder:

– What’s one major strategic mistake you made over the last two years–and what did you learn from that mistake?

– Did you see the financial meltdown approaching? If not, why not? If so, how did you prepare your company for it?

– What personal sacrifices are you making to respond to the sobering realities of the economy?

– What personal responsibility as a leader do you bear for not acting boldly enough, or speaking out loudly enough, to have helped avert this catastrophe?

We agree.

A Kindred Spirit

export — Wed, 03 Dec 2008 03:14:45 +0000

“When You Shouldn’t Go Global (subscription required),” by Marcus Alexander and Harry Korine, in the December 2008 issue of Harvard Business Review, does precisely the kind of analysis that companies should be doing continually as they evaluate whether to pursue a strategy. In evaluating whether it makes sense for a company to expand globally, the authors don’t just look at success stories–which is what strategists typically do as they search for companies to emulate. The authors dig up examples of companies that went global and flopped. They then suggest pitfalls to avoid.

Trying to avoid failure may not sound as glamorous as aspiring to great success, but, then, having your career derailed because of a catastrophe isn’t so glamorous, either.

Warren Buffett: Why Panic Passes Him By

export — Wed, 15 Oct 2008 14:58:31 +0000

Read Paul’s review of Alice Schroeder’s “The Snowball: Warren Buffett and the Business of Life” in today’s Wall Street Journal. Here is an excerpt:

While much of Mr. Buffett’s methods can’t be duplicated — genius is genius, after all — “The Snowball” usefully emphasizes a few core Buffett imperatives: taking a close look at an investment’s intrinsic value, making a brutal evaluation of its risks, and calculating a margin of safety. The book also underscores the importance of learning from failures. The Buffett-Munger approach is to “invert, always invert. Turn a situation or problem upside down. Look at it backward. What’s in it for the other guy? What happens if all our plans go wrong? Where don’t we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead.”

Here’s the link to the full article.