Zoom: How 12 Exceptional Companies Are Navigating the Road to the Next Economy

Zoom: How 12 Exceptional Companies Are Navigating the Road to the Next Economy

by James M. Citrin
     
 

A groundbreaking new book that examines the companies leading the charge in merging the practices of traditional and e-commerce business -- and the lessons we can learn from them.

In Lessons from the Top, James M. Citrin, of the world-renowned executive search firm Spencer Stuart, identified and interviewed (with coauthor Thomas Neff) the fifty

Overview

A groundbreaking new book that examines the companies leading the charge in merging the practices of traditional and e-commerce business -- and the lessons we can learn from them.

In Lessons from the Top, James M. Citrin, of the world-renowned executive search firm Spencer Stuart, identified and interviewed (with coauthor Thomas Neff) the fifty top CEOs in America, and distilled the essential principles of leadership they all share.

In Citrin's compelling new management book, Zoom, he offers in-depth analyses of twelve market leaders -- including General Motors' e-GM, BEA Systems, eBay, Sun Microsystems, and General Electric -- and reveals how they are bridging the complex demands of yesterday's and today's economies. From the hard-won lessons these pioneering market leaders have learned along the way, Citrin identifies the principles that characterize success today and will help chart success in the future -- principles that other companies can use to redirect their thinking, resources, and energies. Among them:

Encourage flexibility. Relationships are much more fluid and multidimensional today. Rather than using a strategic planning process, the best leaders use a strategic framework, with a lot of room for improvisation.

Share the vision. It's not enough to just talk about the company's vision -- you need to evangelize about it, and repeat its mantra so often that it becomes second nature to everyone in the company.

Create a genuine learning organization by shortening feedback cycles, effectively transferring knowledge, and expanding a company's "listeningcircles."

Reward Failure. It is important to find ways to mitigate personal and organizational risk, and identify and encourage risk takers. They are the ones who can transform a company.

What makes this book invaluable are the strategies top managers and executives reveal on how to implement their principles of success: how to flatten the organization, be first to market, measure the right things, and manage customer information. The result is an indespensable road map of the twenty-first century economy that corporate leaders can use to guide and shape their own efforts.

In the bestselling fashion of First, Break All the Rules and Built to Last, Zoom is essential reading for those determined to triumph in the years ahead.

Editorial Reviews

bn.com
This book nicely summarizes much of the conventional wisdom that the business press has offered over the past few years: the need for speed, the paramount importance of customer relations, the necessity for strategic partnerships, and so on. Unfortunately, some of that wisdom has come to have an unintentionally ironic quality. For instance, the chapter entitled "Success Factor #5: Absorb Uncertainty" uses Enron as a case study. Under the header "We Like Change," Enron's fast-forward culture is discussed, with the author giving the company credit for rewarding people with professional mobility and the opportunity to become rich quickly. While this book presents some of the standard knowledge of the past few years, it doesn't push the envelope at all and sometimes it ends up sounding embarrassingly dated.
Publishers Weekly
The snide answer to the subtitle is "not very well." Enron has collapsed amid allegations of accounting fraud and management self-dealing. Soapbox.com did not survive 2000. A $10,000 investment in three other companies (Yahoo!, Akamai and Commerce One) in January 2000 would be worth $400 today. Unluckily, Citrin picked his 13 companies in 2000 and had the hubris to boast how much they had outperformed the S&P 500 at that point. But past performance does not guarantee future returns, and stockholders of these companies have lost 83% of their investment since the beginning of 2000, while the S&P 500 is down only 21%. Of the 13 companies, only eBay has managed to beat the index. Despite these companies' failures, there is much useful information here. Thoughtful interviews with 17 innovative business people are presented with minimal intrusion from the author, and broad themes abound: embrace change, encourage risk taking and obsess about customers. However, the executives differ in how these tenets are implemented in different industries and organizations. For example, George Conrades of Akamai likes to share his vision with employees, then measure how well they can realize that vision; he sees himself as a referee. But Tim Koogle of Yahoo! stresses hiring people who will bring their own visions and views himself as a coach. And John Chambers of Cisco focuses on acquiring companies whose employees have already developed the skills Cisco needs, as if he were a team owner. Although this business management book carries an albatross (the failures of its subjects), it nonetheless has merit. Agent, Rafe Sagalyn. (Feb. 1) Copyright 2001 Cahners Business Information.
Library Journal
Citrin, a business consultant and coauthor of Lessons from the Top, here presents six factors for success in the modern digital economy: go for speed, create a learning organization, obsess on the customer, reward appropriate risk-taking, absorb uncertainty, and master deal-making and partnering skills. For each factor, he presents his theories and illustrates them with two company case studies. For deal making, he recounts how Cisco Systems and BEA Systems have successfully grown by both partnering with and acquiring other companies. General Electric is presented in a final case study as a company that has implemented all six factors successfully. A couple of the companies cited for exemplary performance have had recent problems. Commerce One, Citrin notes, has been rocked by the dot-com stock market meltdown. Since the book's completion, Enron, another of his case study companies, has suffered a financial debacle that is unresolved as of this writing. Nonetheless, Citrin makes a good case that the Internet and other new technologies will further affect the way business is done and that a study of his six factors would be a good start in coping. Recommended for business collections in larger public and academic libraries. Lawrence R. Maxted, Gannon Univ., Erie, PA Copyright 2001 Cahners Business Information.

Product Details

ISBN-13:
9780385501316
Publisher:
Doubleday Publishing
Publication date:
01/22/2002
Edition description:
1ST
Pages:
272
Product dimensions:
6.43(w) x 9.58(h) x 0.97(d)

Read an Excerpt

CHAPTER 1

"Are we there yet?"

The trouble with our times is that the future is not what it used to be. --Paul Valery

Are we there yet?" is a familiar and sometimes grating refrain for parents who take to the highways with their children. It's also the sentiment of many weary business travelers along the road to the era when technology, services, and knowledge combine to create a frictionless economy with seamless markets and price transparency. In such a Utopian world, information is readily available and infinitely searchable, and every product is custom-designed and produced as needed. The upshot: low inventory costs, improved quality, and lower prices. An ideal business scenario.

Are we there yet?

Trouble is, no one really knows where there is. Parents have an advantage: They know precisely where they're heading (most of the time). They know how long it will take, how much gas they'll need, and where they can stop to stretch their legs. Managers nowadays aren't so lucky.

For those of us struggling to apply the latest technologies, define new businesses, attract talented employees, and achieve profitable growth amid a difficult economy, unrelenting competition, and unforgiving capital markets, there is no simple road map to success. This is precisely why it's tougher than ever to be an effective leader and manager today. No one is going to fake their way through to sustainable success in the years ahead. And unfortunately, no one can prescribe easy remedies. They simply don't exist. The prickly problems are far too complex, and winning strategies are only beginning to emerge.

But it is possible to examine howsome of the country's top companies are successfully building thriving enterprises based on the new realities unleashed by technological changes, including the Internet. My research team and I have spoken with thousands of executives and pored over scores of companies. In the end we've selected 13 of the very best to profile, including eBay, Sun Microsystems, Wal-Mart, Enron, Cisco Systems, and General Electric, to cull out practical management lessons for today's business executives. It is my intent to strip away the jargon and management fads in the popular press to offer enduring ideas and strategies for tomorrow's emerging economy. These strategies are based on both timeless leadership principles and today's successful new management practices. Together, the blend of the lasting and the new make up the rules for navigating the road to the future. While they won't necessarily transform your business overnight, in time, these methods will help to build a more effective and confident management team in an era marked by tremendous upheaval and uncertainty.

"Upheaval and uncertainty." This hasn't always been the best way to characterize American business. For most of the 20th century, businesses operated on calculated risk, and successful companies followed fairly predictable linear paths: Identify a niche, and then develop, market, and sell a product or service. The most significant challenges to the corporation used to be efficient manufacturing, cost containment, and consumer or industrial marketing. The major corporations that dominated the economy were asset-intensive operations that produced hard goods like automobiles or washing machines, resource-based products like oil, or infrastructure-laden services such as railroads or telephones. They transformed manufacturing into a science, gaining greater efficiencies every year. There were points along the business highway when other countries, such as Japan in the 1980s, surpassed American manufacturing abilities. But major U.S. companies eventually faced down that challenge and reasserted themselves.

This is not to belittle the business achievements of the last century. Efficient production, cost control, and effective marketing are tremendously complex challenges; but they are problems managers know and understand. They've lived with them for decades and leaders like Jack Welch of General Electric have built their legacies on them. Outsourcing. Vertical integration. Downsizing. Automation. All of these approaches have been deftly used in the war on cost. Market research, focus groups, brand extension, promotion, and advertising have been arrows in the marketing quiver for decades. Savvy managers are only getting better and better at cutting the fat from their operations and building on their established brands. In other words, when it comes to the major business challenges of the last century, we know the way.

But somewhere between the invention of the microchip and the first use of the words "hot link" everything changed. Cost faded as a primary focus of business and long-standing brand-building approaches lost their clout. What concerned American business in the nineties was not one particular scourge, but a bevy of difficult business conundrums: Technology that suddenly made it easier to hear from customers, but harder to assimilate their feedback; the fact that while capital flowed freely, it flowed to many players chasing the same idea, making it more difficult to earn a return on substantial investments; the proliferation of new competitors, striking mortal fear into all managers, only to disappear, in most cases, just as precipitously.

At the root of this rapidly changing landscape is digital technology. Some experts claim that technology is just another business tool, like a slide rule or a protractor. But it's a tool that comes with entirely new and onerous demands upon businesses and the people who use it. If they get it right, managers can help their organizations deal with the upheaval and uncertainty that typify today's environment. A business culture that grows up centered on digital technology is radically different from one that does not. Software applications, for example, are never completely finished; they are kicked out in versions. Customers respond to each version and the product is constantly updated and tweaked, with no finish line. Internet applications for business are the same way. Web sites, networking tools, and viral marketing programs are in a constant state of refinement and experimentation. Serendipitously, managers increasingly find success by trying a series of ideas and seeing which work best. And rapid prototyping and computer-aided design have brought similar management approaches to the manufacturing sector. Ford Motor Company, for example, doesn't need to build a car to test its fuel efficiency. Computer models take care of that. Pharmaceutical firms, likewise, can use 3-D molecular modeling to create new compounds that might turn into real drugs.

What we see evolving around these new technologies is nothing less than an entirely new corporate ethos: one that encompasses constant change, experimentation, failure, retooling, and finally, success--only to be reinvented yet again in the near future. While this new digital world can be challenging and nerve-racking, especially for those who like solid answers and definite goals, what we discovered is that managers can learn to cope with the uncertainty that comes with experimentation, and define the boundaries of a business that must fluidly and frequently morph into something else.

Even success itself has become more conditional in today's world. On the one hand, many of the companies profiled in Zoom encourage their employees to fail. Yet executives are under increasing pressure to show results for their actions. If you succeed one quarter, the goals are set higher for the next. And if your company fails to meet its goals, its stock will be pummeled. The bar is constantly set higher on every front--including your customers. Fabled Silicon Valley marketer Regis McKenna points out that the more you give a consumer, the more he or she expects from you. If you deliver a package overnight, customers soon expect same-day delivery. Executive management has discovered that the corporate board is not much different. Give them results and they want better results, faster.

Rising expectations can also lead to rapidly deflated stock prices on Wall Street when these expectations aren't met. As we've seen in the last year, billions of dollars of net worth can be obliterated in a matter of days. When AT and T announced in May 2000 that its growth rate would be 1 percent less than the consensus estimate on Wall Street, it lost 15 percent of its market value--$27 billion, in a single day--paving the way for the break-up of the venerable corporation. Dramatic though that was, it was still less than half as large as the 35 percent collapse in market value that Procter and Gamble suffered several months earlier for similarly missing growth estimates, an event that contributed to former Chief Executive Officer Durk Jager losing his job. When Apple Computer warned that disappointing sales of new products would cause its profit in the fiscal fourth quarter of 2000 to fall short of forecasts, the company's stock fell an astounding 52 percent, cleaving over $9 billion off its $17 billion market value. And Cisco Systems, universally acclaimed for its growth and innovation, reached the pinnacle of corporate success on March 27, 2000, when its $550 billion market capitalization gave it the honor as the most valuable public company; by April 6, 2001, barely a year later, it had crashed 83 percent. Its precipitous decline was driven by a slowdown in capital spending, which forced the company to write off $2.5 billion for excess inventory, lay off 8,500 workers, and deal with a 30 percent third-quarter 2001 revenue decline.

With each new round of earnings disappointments, there are a spate of CEO departures. According to the outplacement firm Challenger, Gray and Christmas, chief executives have been leaving their companies at an accelerating pace in recent years. For the second half of 1999, approximately 50 CEOs left their companies per month, on average. But in 2000, the rate rose to nearly 90 per month. In October 2000, more than 125 CEOs were forced out or retired from their companies, including such major corporations as Lucent Technologies, Gillette, and Maytag Corporation.

Expect more bloodshed in the years ahead. For while companies may hope for a quick payoff from their enormous technology investments of recent years, chances are that returns on investment will take longer than most expect. Speaking at a recent technology conference, Andy Grove, chairman of Intel, claimed that the industry trends we are seeing today are exactly analogous to trends that emerged in the 1970s, when Grove and other high-tech CEOs successfully convinced corporate America to invest in technology to compete with the Japanese and gain greater efficiency. But the payoff from the investment took far longer than corporations expected, and by the 1980s, many were unhappy with their high-tech expenditures. As a result, technology spending began to slow, sending companies like Intel into a quandary. Grove claims that the Internet is now having its "1980s." "People expect to generate a return from going online, but the return always takes longer than people wish, and then they get frustrated and disappointed," says Grove.

The truth is, many companies feel they have already been waiting an awfully long time for the power of information technology and networked computing to streamline our businesses. The first significant shift began in the early 1980s, as Business Week and Fortune magazines reported, when we entered an era where services and knowledge for the first time outpaced tangible outputs. Since then, employment in the manufacturing sector has fallen from nearly 40 percent of total employment in 1950 to less than 18 percent in 2000, while service sector employment has grown from less than 14 percent in 1950 to more than 35 percent today, with the inflection point occurring in the mid-1980s.

By 1995 the trends driving the information age were feeding off themselves and the Internet supercharged the economy and captured the attention of a global audience already thinking about how information and knowledge had become the cornerstones of their professional and personal lives. The date that many on Wall Street and in Silicon Valley realized something significant was under way was August 9, 1995, when a tiny software company with no visible profits named Netscape was taken public. In an incredible IPO, driven by enormous buzz, Netscape's stock skyrocketed on its first trading day and gave notice to the investing public of the promise of this new thing called the Internet. The ensuing boom and later bust of the dot.com-driven new economy shattered managers' understanding of the formulas for success and left a hole in their confidence as gaping as that in the portfolios managed by the formerly hot money managers.

A TALE OF 2 ECONOMIES

For nearly a decade it was hard to imagine things getting much better economically. The United States enjoyed the longest continuous economic expansion in its history. Until recently, U.S. unemployment rates have been at a historic low and income at almost all levels has risen over the past decade. The median household income in the United States is now over $40,000 a year, the highest in our nation's history (in constant dollars). Labor shortages have been common, especially among knowledge workers, a sector in which the U.S. unemployment rate hovers well below 2 percent. And the market for talented professionals, while softer than in 1999 and 2000, remains just about the hottest in history.

Yet on the other hand, the economy was sent reeling in 2000 and 2001. After an 18-year bull market run, when the Dow Jones Industrial Average rose from 777 on August 12, 1982, to an all-time high of 11,723 on January 14, 2000 (a 16 percent annualized increase), the index fell nearly 10 percent by April 30, 2001. And after the technology-heavy Nasdaq Index, which rose from 483 to 5,048 in the 8 years ending March 31, 2000 (a 34 percent annualized increase), crashed 67 percent from its high point by April 4, 2001. The fall of the Nasdaq Index is all the more sobering when you consider that the Great Crash of October 1929 sent the Dow down 44 percent and that Black Monday, October 19, 1987, drove the Dow down a relatively modest 22.6 percent.

Beyond the financial markets there is disturbing news as well. There were 1.4 million bankruptcies in the year ended June 30, 2001--an increase of over 400 percent since 1980--which broke all records. Our personal saving rate, which was as high as 10.6 percent as a percentage of disposable personal income in 1984, is now in the negative column, and at a 53-year low. The income disparity between the wealthiest and poorest citizens is at an all-time high, which, many argue, portends serious social and societal challenges.

Through the dot.com era, with regard to business and the economy, we swung from great optimism to great despair. At one point, in March 2000, a nationwide poll conducted by accounting and consulting firm Ernst and Young reported that 74 percent of 2000's college seniors believed they would become millionaires in their lifetimes. Yet a mere month later, New York magazine perfectly captured the economic downturn with a cover headline that read: "Dot's All Folks!"

It is no wonder that it seems as if we have been traveling to the future of the new economy for a long time now. Many executives are becoming impatient--losing faith in the technology they've paid so dearly to acquire and becoming a bit flustered by the relentless change that they've been forced to absorb. The continual introduction of newer, more powerful, computer and communications hardware and software has increased the need for employees and management to develop new skills and knowledge; increasingly, many companies seem to be frozen in place, waiting for the future to unfold, rather than proactively trying to take charge of an uncertain environment and future. Companies are unsure of how to proceed, whether to embrace the new technologies and the ideas and strategies forged in the cauldron of the Internet, or whether to fall back safely on traditional approaches and thinking. It is what Alvin Toffler best described, nearly a quarter of a century ago, as Future Shock: "The dizzying disorientation brought on by the premature arrival of the future." Gregory Papadopoulos, chief technology officer of Sun Microsystems, echoed the dizzying rate of change, when he told me that "thirty percent of the knowledge generated inside our company is obsolete within a year."

Meet the Author

JAMES M. CITRIN is the managing director of Spencer Stuart's Global Communications and Media Practice. The coauthor, with Thomas Neff, of Lessons from the Top, Cirtrin has a regular column in Business 2.0, has written for The New York Times and Strategy+Business, and has appeared on CNBC, CNN, NBC, and many other national business forums. He lives in New Canaan, Connecticut.

Brief Biography

Hometown:
New Canaan, Connecticut USA
Place of Birth:
Great Neck, New York, USA
Education:
Vassar College, A.B. 1981 in Economics, Harvard Business School, MBA 1986
Website:
http://www.thedynamicpath.com

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