Management Quotes

Examine a business situation gone bad and there is a good chance you will find, somewhere in the chain of failure, an executive who did not listen. The executive was told but never heard.
— John McCallum

No Comments » Posted by Administrator / Communication

Strategically, intrinsic value is not maximized solely by the maximization of Current Operations Value (COV), but by the simultaneous maximization of the sum of its two components–COV and Future Growth Value (FGV), including the value of real options. Ultimately, this requires business leaders to address, in the context of value-based strategy, both the renewal of future growth value through investments in intangibles and the future, as well as the conversion of opportunities into performance, via execution or operational excellence. The implications for business strategy, financial policy, financial management and compensation are far-reaching.
— Justin Pettit

No Comments » Posted by Administrator / Finance and Strategy

We often find that improper costing of fixed costs and capital, such as the cost of capacity, creates misleading signals of performance and value in a business’s portfolio. First, traditional costing systems today ignore the cost of capital. Second, the treatment of excess capacity is often incorrectly treated as a unit cost, instead of the period expense that it truly is.

Indirect overhead costs are often capitalized and recorded as inventory, rather than expensed as period costs. The capitalization of overhead costs where there is no cost for capital actually makes these costs “free,” and creates a great short-term incentive to overproduce to inventory rather than make to demand. This characteristically leads to month-, quarter- and year-end production spurts, production-planning problems, excess inventory, trade loading, and stale, discounted product pushed onto the customer.
— Justin Pettit

No Comments » Posted by Administrator / Accounting and Finance

Profit is an incomplete measure that ignores capital and is inappropriate for making the many business decisions that trade off between income statement and balance sheet. Tied to incentive compensation, this can lead to dysfunctional behaviour among managers.
— Justin Pettit

No Comments » Posted by Administrator / Finance

There are at least a dozen major design variables in a business. How you go to market, which competencies you use, how you put together your value web, what is your core mission, where do you look for differentiation, and so on. And most people Don’t see those as design variables after a while. They just start accepting them for what they are. …I’m trying to get people to think about the entire business concept as being malleable and open to redesign.

I believe that business concepts can be changed all at once in a big way and I believe they can be changed more slowly over time. But I think the challenge for organizations is to recognize that all of those design variables need to be open to question all the time. Because if they’re not, someone else is going to come along and take some dimension of that that you never regarded as important, and they’re going to use it in a very interesting way.
— Gary Hamel

No Comments » Posted by Administrator / Business Plans and Business Rules

A company today is made up of six kinds of capital. There’s the financial capital, the structural capital and the intellectual capital, all of which we understand pretty well. Yet I don’t believe those things by themselves create wealth. Those are actually almost inanimate. And it’s a complete mistake to say that knowledge is the most critical resource in the New Economy. Knowledge today is a commodity. You can buy it by the yard from just about anywhere.

It seems to me there’s three different kinds of capital that animate the traditional sources of capital, that serve as the catalyst that translate the traditional sources of capital into wealth. Those new sources of capital are imagination capital, the ability that people have to imagine entirely new uses for their traditional capital; entrepreneurial capital, the courage and the guts of people to actually experiment and try new things; and relationship capital, the connections that people in the organization have with each other, and with organizations and individuals outside of the company.
— Gary Hamel

No Comments » Posted by Administrator / Organizational Behavior

Silicon Valley isn’t based on resource allocation, it’s based on resource attraction, where somebody throws out an idea into this kind of marketplace for ideas. Either that idea attracts capital and talent or it doesn’t. But there’s no giant CEO brain making allocational decisions in Silicon Valley. There are many, many people making those decisions - It’s very distributed. If one venture capitalist doesn’t like it, you send it to another and another and another, and maybe you get funding and maybe you don’t. You have to create the expectation that the kind of ideas that could change the destiny of a company can emerge from anywhere, and you have to create a system whereby people can quickly share those ideas.
— Gary Hamel

No Comments » Posted by Administrator / Entrepreneurship and Innovation

When we went and studied the process of innovation, we found that innovators shared not so much a common set of personal traits, but a common way of looking at the world. Number one, they were contrarians. And by definition the way you create a strategy differentiation means that you violate industry norms. Number two, we found these people were “novelty addicts,” people who loved to be out on the fringes of what was changing, to see what was new. They were the people who went to the new restaurants, who saw the new movies, who were the first to vacation in new places. And therefore they were constantly seeing and experiencing things that other people were not. And thirdly, they were deeply empathetic with customers, not in a “we need to be customer led” kind of a way, but in “I really understand the unarticulated frustrations and desires and anxieties of the people around me and I want to do something about that.”
— Gary Hamel

No Comments » Posted by Administrator / Innovation

CIOs should ask themselves two questions: “How well can we convert business ideas into business processes?” and “How flexible are my systems to translate BP into IT?” Those who make this transition will be the facilitators of their companies’ success. If not, they will be the bottleneck. The choice is clear: CIOs must be the bridge in the logic chain between strategy and operational excellence.
— C.K. Prahalad

No Comments » Posted by Administrator / IT / Internet / E-Business

Traditionally, most companies allocate IT funds based on net present value (NPV) or ROI. The problem with this approach is it naturally favors projects that deliver productivity benefits, even when other projects with less tangible value may be more important to the overall business strategy. Projects with the highest NPV or ROI don’t necessarily create the most value. What really matters is whether an investment supports critical business processes and affects key value drivers.
— Steve Poniatowski and J.D. Wichser

No Comments » Posted by Administrator / Finance and IT / Internet / E-Business