Max J. Pucher - On Writing

I have just read the 2008 IBM Global CEO Study based on feedback from a 1000 CEOs and public leaders, sponsored by IBM’s CEO Samuel Palmisano. It was a very interesting read and deeply troubling at the same time. Interestingly enough, the case studies mentioned are not from the large global organisations but mostly from smaller companies that also work globally. That is not surprising. The findings of the study would maybe apply to one percent of large enterprises.

Let me give you my take on the opinions expressed. IBM has identifed five areas of business strategy that they feel are relevant to global enterprises. These are ‘Hungry For Change’, ‘Innovative Beyond Customer Imagination,’ ‘Globally Integrated,’ ‘Disruptive by Nature,’ and ‘Genuine, Not Just Generous.’ While I have stepped down from the post of chief executive at ISIS Papyrus, I do speak with executives and work with mostly large enterprises every one of my working days. What I see is a day to day struggle to keep an unmanageable ship from hitting invisible icebergs. While doing so the owners (or better the analysts) expect that the captain performs continuous improvement and enlargement of the ship or he will get sacked. So either most of these CEOs are completely delusional and disconnected or this study is just one part of the overall show they put on for everyone to see.

This study is correct when they speak of the ‘Enterprise of the Future’ - for short EOTF - because hardly any of the enterprises does truly display the above qualities TODAY. As it happens I truly doubt whether any of the above is relevant, necessary or even possible. Let me explain point by point.

Illusion number one: ‘Hungry For Change’
Supposedly the EOTF is not only embracing change but shapes it to move ahead of the competition. This leads me to the question why everyone of these CEOs is so interested in market research that only looks at the past. Is that supposedly to spot a trend? Trends are unreal as they are based on inaccurate measurement of attributes predisposed to a certain result. Correlation of those attributes is not causation but guesswork. The future is unpredicatable as even economist Peter Drucker pointed out so clearly in 1995 (Managing in a time of Great Change). CEOs of public companies are not driven by change in doing business but driven by an upward change of revenue and profit numbers as demanded by the shareholders. Large enterprises achieve this by buying smaller profitable businesses and large revenue competitors.

Illusion number two: ‘Innovative Beyond Customer Imagination’
There are very few companies that come to mind based this definition. Steve Jobs runs one of them but Apple tiny compared to Microsoft. Steve Balmer on the other hand is anything but innovative and just takes  ideas from competitors, which are then pushed out by brute force. Not a single large financial institution is innovative. You don’t agree? Tell me which one? The bigger the business the less innovation happens. Innovation is risky and expensive and it takes a very charismatic owner/entrepreneur/executive to dare to step into it. Steve Jobs was originally kicked out of his own business by the shareholders because the numbers were not satisfactory. A lot of innovation in smaller businesses does not happen because of patent laws and in larger ones because of regulation such as Sarbanes-Oxley. Most customers would already be happy if the company would at least live up to its marketing promises, and does not care much about how innovative that is. Most innovation is created by marketing and sold as brand values with huge budgets rather than true innovations that actually improve our life.

Illusion number three: ‘Globally Integrated’

Fact? There is no such thing. Global businesses do one thing only: Buy cheap manpower in less developed countries and sell it for a profit in more developed ones. I am not talking about the overhyped child labor that is really not happening as much as proposed and not as horrible as a false morality would want to make us believe. Most of these kids would go straight back into absolute poverty if they are not allowed to earn a little money for their families. Don’t get me wrong, I don’t see child labour as great. But manufcaturing there moves global income to these underdeveloped countries. So admit it and stand up to it. It would actually be true CSR (see illusion 5). Otherwise, I don’t see the global customer they talk about. Yes, Apple is selling the iPhone for more or less the same price around the world but even at $199 it is not a product affordable for more than 1% of the world’s population. A phone contract to use it is at least $49 per month and that is more than the majority of this planet’s population has to survive on.

Illusion number four: ‘Disruptive by Nature’
Don’t make me laugh! Companies do not re-invent themselves except under pressure from competition. Most businesses above a certain size (maybe a 1000 people) don’t have enough of a handle on current operations to survive a shift in value propositions or  overturned delivery approaches. What a joke! In IT everyone is talking about AGILITY and what they sell to these EOTFs is software that requires two year projects to analyze business processes. Then they hardcode them with no means to verify whether this process is actually good for the customer or for the business. Oh yes, by the way - 50% of those projects FAIL! Which is actually good, because the business remains more flexible that way by not tying down its employees in senseless rigid workflows.

Illusion number five: ‘Genuine. Not Just Generous’
This is abolute crap. Most EOTFs are not genuine. They live a branded MARKETING LIE. A business has one sensible responsibility only: Take care of its employees that will therefore make their customers happy and thus create a profit for the business. The reason that we have Corporate Social Responsibility (CSR) is because EOTFs fail in both respects! They lie to their customers and fire employees at will to move work to cheaper countries and to create even higher profits (see illusion 3). Then they take a tiny part of that profit to sell a CSR lie. CSR departments belong to marketing in case you have not noticed.

Well, you can call me jaded, but I see myself as realistic. Yes, I know I am an idealist too. And me standing here and saying these things does more or less nothing. That is actually not true. I can sleep well knowing that I stood up and said the things that have to be said without being afraid. Or do I have to be ….

Well, it has happened. I am very unhappy to say, I told you so. The financial crisis that started two years ago is heating up. Unfortunately I can’t tell you that I believe that the huge government bailouts have stopped the process. Is it not unfair that the US government - that has forced many third world countries from giving up its monetary controls and subsidies - is now doing exactly the same thing? Am I surprised? No. The same people that have called for free markets and globalisation so that they could loot third world countries, have previously called for trade barriers to stop foreign products from ’stealing’ American jobs.

On the other hand, I feel that to stop the faltering of these financial institutions is a sensible step, because it slows the crash and lets everyone adjust to it. I agree that there should be game rules (I would hate to call it regulation) for the stock markets that stop traders from wild speculation. One of the game rules would be to tax stock market gains identically to any other form of income. Some of it has happened but there are still too many loop holes. Once that happens overall taxation could be reduced. Unfortunately that is quite unlikely, just as is the lowering of energy prices when the oil price finally drops.

Another form of game rule would be to limit business size. There is no need for huge businesses that monopolize the market. These huge corporations are unmanageable and their profitability is achieved on paper by constantly buying or selling revenue and/or profits. There is no need for these huge players. That is even true for the software business. There is no benefit for the market and its customers in a business the size of Microsoft.

I believe in democratic freedom and free markets for individuals and reasonable size entities so that the dynamics of economy - as far as we understand them - can do their job. Huge corporations that now suddenly are TO BIG TO FAIL are to no ones benefit. The same is true for unions, government organizations as well as for countries and towns. They are all like dinosaurs that are not nimble and adaptable enough to survive. Countries should form loose federations and businesses should cooperate rather than merge. The huge amount of legislation necessary to allow these large businesses on the stock market has not stopped the Enrons and Worldcoms from fraud and it has not stopped the Lehmans from failing. It has however stopped many businesses like ours from going public. Smaller entities would also be easier to understand for the investor and if they fail it would be economy at work.

So don’t hold your breath - it is not over yet!