Download - Process Thinking
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The Return ofProcess Thinking
Making Business
Processes ManageableThe Principles ofScientific Management
ManagementCultures
Why American Businessis That Way
Li & Fung:Confucius MeetsJohn Wayne
Managing a Danish (?)
Bicycle Team
GlobalInterdependence
From Globalization
to InterdependenceAdapting to Change
Fall 2001CSCWORLD
I N S I D E
26 MBAs,Managers,and Change:An Interview with Henry Mintzberg
28 Findings / Getting Smart
30 In Practice / Building a Customer-FriendlyTelcoFast Putting the Internet in Space
36 Review/ Nextby Michael Lewis
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With the rest of the world, we watched in horror as terrorists attacked the World Trade Centerand the Pentagon on September 11. This issue was being laid out at the time of the attacks, so it
does not speak directly to the concerns that they have raised. We plan to examine those concerns
in future issues. We are grateful that CSC employees in the targeted areas escaped unharmed.
We mourn the loss of those who were not as fortunate.
hat is good management? What makes a good manager?
These are questions every business magazine tries to address, and we took a
couple of different approaches to them in this issue.
One approach was to go to Henry Mintzberg, the McGill University
professor whose unconventional thinking about management has been getting
increased attention in recent years. He says good managers are not the super-
heroes of business best-sellers. Rather, they are people who have the intuition,
good judgment, and sense of context that come from a deep knowledge oftheir business.
Thinking about context also led us to Charles M. Hampden-Turner
and Fons Trompenaars, who look at the impact of national cultures on business
management. The first of three articles on management cultures is an excerpt
from their book,Building Cross-Cultural Competence. Harvard Business School
Professor F. Warren McFarlan explains how two Harvard-trained brothers went
back to China to modernize their old family company; and Tour de France
winner Bjarne Riis tells us how he manages an international bicycle racing team.
One of the biggest management challenges of recent years was
e-business. In the lead article, Howard Smith, CSCs chief technology officer for
Europe, and Douglas Neal and Lynette Ferrara of CSCs Research Services, explain
why it was so difficult to get e-business right and how it can be made easier.
The answer lies in managing business processes within and across companies.
Then there are those events that are well beyond the scope of
ordinary business management. Kenneth S. Courtis, vice chairman of Goldman
Sachs Asia, discusses the growing interdependence in the global economy.
Theres not much any single company can do about the global economy,
but James Cook, president of CSCs Financial Services Group, tells us how
companies usually react to macroeconomic change.
Finally, we look back at Frederick Winslow Taylor, one of the first
management gurus. His 1911 book on business processes shows just how muchour thinking has changed in the last 90 years.
In this issue, we also look ahead at smart technology, show how
NASA can benefit from putting the Internet in space, see how a business process
approach got a telco startup off to a fast start in the UK, and review Michael
Lewiss latest book.
This is only the second issue of the new CSC World, and wed like
to know what you think. Nearly all the response so far has been positive, and we
want to keep on making our readers happy. Drop us a line at [email protected],
and visit us on line at csc.com/aboutus/publications.
Bob Olivier, Publisher
IN T HI S ISSUE
CSCWORLD
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features
THE RE TU RN O F PROCESS THINKING
Making Business Processes ManageableHOWARD SMITH, DOUGLAS NEAL,AND LYNETTE FERRARRAE-business turned out to be harder than anyone thought. Thats becausebusiness still has trouble managing business processes. Thats about to change.
The Principles of Scientific Management FREDERICKWINSLOW TAYLOROne of the first management gurus did some early thinking aboutbusiness processes in this 1911 book.
MAN AGE ME NT CULTURESWhy American Business is That WayCHARLES M. HAMPDEN-TURNER ANDFONS TROMPENAARSThe role of managers is increasingly to manage diversity per se, whateverits origins in culture, industry, or discipline. An excerpt fromBuildingCross-Cultural Competence: How to Create Wealth from Conflicting Values.
Li & Fung: Confucius Meets John Wayne F. WARRENMCFARLANTwo Harvard-trained brothers bring the family business, founded in theQing Dynasty, into the Internet age.
Managing a Danish (?) Bicycle Team BJARNE RIISHow to manage a racing team whose members speak several differentlanguages and are seldom in the same place at the same time.
GLOBAL INTERDEPENDENCE
From Globalization to Interdependence KENNETH S. COURTISGlobalization is the word everyone uses to describe whats going on in theworld economy. But its actually something broader and more complex.
Adapting to Change JAMES COOKIts always been beyond the capability of companies or industries to affectthe speed and breadth of macroeconomic change. How do they deal withit when it happens?
Computer Sciences Corporation
CSCWORLD
Fall 2001 Volume 1 No. 2
contributors
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First HandIn an age of grand theory, HenryMintzbergs unconventional wisdomabout the actual job of managing isbeginning to attract more attention.
FindingsA LEADING EDGE FORUM REPORTHere are five smart quotients tohelp you make sense of the newsmart technology.
In PracticeBuilding a Customer-Friendly TelcoFastVANESSA REED How a startup telco got off toa fast start with a company built to last.
Putting the Internet in SpaceEDWARD CRISCUOLO, KEITH HOGIE, RON PARISENASA is experimenting with Internet protocolsas a way to reduce the cost of space missions.
Book Review ROBERT MUTCHIn Next: The Future Just Happened, Michael Lewissays the kids are taking over. But are they?
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departments
JAMES COOKis president of CSCs Financial Services Group.
KENNETH S. COURTIS is managing director and vice chairman of Goldman
Sachs Asia. He also lectures at Keio and Tokyo universities, and is a visiting
professor at the Stockholm School of Economics. He has an MBA from the
European Institute of Business Administration in Fontainbleau, France,
and a PhD from the Institute of Economic and Political Studies in Paris.
EDWARD CRISCUOLO, a CSC engineer, is the backup technical lead on NASAs
Operating Missions as Nodes on the Internet project.
KEITH HOGIE, a CSC engineer, is the technical lead on NASAs Operating
Missions as Nodes on the Internet project.
CHARLES M. HAMPDEN-TURNER is senior research associate at the Judge
Institute of Management Studies, Cambridge University. He also is director
of research and development of the Trompenaars-Hampden-Turner Group,
a cross-cultural consulting and training company based in Amsterdam.
He has a DBA from Harvard and has written 15 books. He is a winner of
the Douglas McGregor Memorial Award.
F. WARREN MCFARLAN is the Albert H. Gordon professor of business adminis-
tration at Harvard Business School, and senior associate dean and director of
the schools Asia-Pacific Initiative. He also sits on CSCs board of directors.
DOUGLAS NEAL is a research fellow at CSC Research Services.
RON PARISE, a senior scientist at CSC, was a payload specialist on the space
shuttle Columbia in 1990 and on the Endeavour in 1995. He is on NASAs
Operating Missions as Nodes on the Internet project.
VANESSA REED is CSCs manager for the ipsaris/Easynet account.
BJARNE RIIS is manager of the Danish professional cycling team, CSC-Tiscali,
which finished 18th in this years Tour de France. A professional cyclist since
1986, Riis won the Tour de France in 1996 and the World Cup in 1997.
HOWARD SMITHis the chief technology officer for CSC in Europe.
He also is co-chair of the Business Process Management Initiative.
FONS TROMPENAARS is founder and president of Trompenaars-Hampden-
Turner Group, an intercultural management consulting company based in
Amsterdam. He has a PhD from the Wharton School at the University of
Pennsylvania and is the author and co-author of several books. He is a
winner of the American Society for Training and Developments International
Professional Practice Research Award.
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CSCWORLD
K. PETER MANERIVice President,
Corporate Communicationsnd Marketing
ROBERT D. OLIVIERPublisher
ROBERT MUTCHManaging Editor
REDSPRITE MARKETING INC.Graphic Design
EDITORIAL BOARD:F. Warren McFarlan, Nicholas Morgan,Howard Smith
Editorial Office:170 Fairview Park Drive
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It must change, because shareholders
still expect companies to fulfill the
promise of e-business. Companies are
under pressure to perform better,
faster, to do more with less, and to be
super pleasing to customers. This
means changing the way they manage
their business processes, allowing them
to innovate around their own strategic
processes while simultaneously collab-
orating with partners and customers.
WHY SO DIFFICULT?
Many companies tried to make their
business processes more manageable
10 years ago, by reengineering them.
At the time, reengineering typically
meant designing a new process, then implementing it through
a one-time systems and organizational change program.
These efforts were more about redesigning processes than
about making those processes easy to change and combine
with those of partners. This also was the problem with ERP
and other packaged solutions that emerged later. These
packages implemented best-practice processes, but did so by
embedding business processes in the software applications
that supported them. These solutions had all the flexibility of
wet concrete before they were installed and all the flexibility
of dry concrete after installation.
Achieving process collaboration inside the enterprise has
been difficult enough. Getting processes to collaborate across
the networked enterprise is far harder. B2B is an attempt to
create the networked enterprise from the outside in.
What has surprised everyonein the last few years is how
challenging it has been toactually do e-business. One of
the reasons why this is so is that
companies have found it difficult
to manage their business processes,
especially when they stretch
across multiple systems, software
applications, companies and
countries. Thats about to change.
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BY HOWARD SMITH, DOUGLAS NEAL, AND LYNETTE FERRARA
MAKING BUSINESSPROCESSES MANAGEABLE
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Not all integration problems
are technical. Collaboration
requires sharing processes that
once were proprietary, and this is
not an easy step to take. But if
companies are under pressure to
be better, faster, and cheaper, they
will have to do only what they do
best. Whatever a company doesnt
do well has to be done by some-
one else.
If commerce is to be truly
collaborative, the underlying busi-
ness processes must collaborate,
too, both within and across firms.
This must be achieved at the
business level and from the top
down, leveraging existing systems
in the enterprise. That is, collaboration must start from the
business purpose, not the technical details.
WHAT IS NEEDED
What business needs is not a one-time fix but a connected
systems environment that can flex and recombine as
required by changes in the market. Most companies now
want more control over their own processes, more interaction
between their processes and those of their partners and some
A startup telco in the UK got
started in record time by using
a business process management
approach to building its new
system. That system included
applications from 12 vendors,
some of whom estimated that integrating all the pack-
ages would require 14 months. CSC completed the job
in half that time.
The short development time was made possible by
building a business process engine into the architecture.
The key business processes were extracted from the
component applications and migrated into that engine.
This procedure allowed business processes to be
configurable by a drag-and-drop interface without
being coded into the applications.
The focus on process meant that developers did not
have to integrate the component packages at every level.
They forged links into the packages only at the functional
level, to expose them to the business process engine.
That meant developers didnt have to integrate the
applications user interfaces, reporting mechanisms, or
databases. They used one single user interface across all
packages, an interface that has the brand of the client,
not the application vendor. Extracting business processes
meant less integration and less time for development.
This was top-down development, starting with
the business processes themselves rather than with the
applications that support them. It puts business
processes back in the hands of business users instead
of the IT department.
KING BUSINESS PROCESSES MANAGEABLE
and the connections between data
sets in different applications became
important to the CEO, CFO, and
functional units, it became obviousthat data should be managed outside
of the application architecture.
By allowing a company to manage its data apart from the
applications that use it, the DBMS supports a variety of data
models and data management tasks. Today, no one would
think of building a new system without a DBMS. The IT
industry is largely founded on the DBMS and related capabilities.
B2B participants may have informal
designs for the processes they need
to implement, but as they refine
those designs they also have to
change the technical implementa-
tions that support them. This may
be possible in simple cases, but in
the more complex cases of supply
chains, the project may never be
completed. Upgrading applications
or adding new suppliers or business
units can cause the technical integration activities to escalate
out of control.
In the networked enterprise, collaboration is not restricted
to any one process domain. Collaboration is now 360 degrees,
going on at all points on the compass. This creates a many-to-
many integration
task, and existing
tools and tech-
niques simply are
not up to the job.
IS departments
often try to develop
business processes
by performing
bottom-up techni-
cal integration, stitching together systems components that
never were intended to work together at the business level.
They soon find that these projects denude their budgets
and that delivery time scales are often unacceptable to the
business managers.
control over and monitoring of processes performed on their
behalf by partners. Firms are also seeking to expose discrete
business competencies as processes they can sell to others
or commercialize through channel partners. To do all this,
firms need to understand the processes that underpin their
core business competencies. In short, they need a business
process management capability, not a new suite of
enterprise applications.
The situation is similar to the period before the invention
of the relational database management system. Data used to
be embedded in applications. As the volume of this data grew
76
f commerce is to be truly
ollaborative, the underlying
usiness processes must
ollaborate, too, both
within and across firms.
P R O C E S S T H I N K I N G
Building up from the top down
What business needs isnot a one-time fix but a
systems environment that
can flex and recombine
as required by changes
in the market.
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BPMI is a non-profit organization that empowers
companies of all sizes, across all industries, to develop
and operate business processes that span multiple
applications and business partners, behind the firewall
and over the Internet. The Initiative's mission is to
promote and develop the use of business process
management (BPM) through the establishment of
standards for top-down process design, deployment,
execution, maintenance, and optimization. BPMI
develops open specifications, assists IT vendors for
marketing their implementations, and supports
businesses using BPM technologies. CSC is co-chair
of the BPMI.
For more information, go to www.bpmi.org.
Business Process Management Initiative
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Its time we did the same thing for
business processes.
One of the key enabling
technologies is Business Process
Modeling Language (BPML). The
first draft of BPML was developed
by a software startup called Intalio,
which worked closely with CSC
and other founders of the Business
Process Management Initiative
(see sidebar). The new language
which, like SQL, has a strong
mathematical foundation is a
standard way to represent any
business process. The new founda-
tion is designed to support process
management, not data management,
and new process-aware applications
will be built upon it. Such applica-
tions will be able to manipulate
business processes as easily as
todays applications manipulate data sets. The processes
they support will be reliable, transactional, and distributed,
and will allow collaboration between processes designed
independently by different organizations.
Strangely, the design of a language like BPML had not
been attempted before. Although other process modeling
CEOs never asked for applications in the first place.
When CEOs speak about business processes, they equate
them directly to their companies business objectives.
The processes literally define a companys competitive
advantage and market differentiation. The last things
CEOs want to hear about are standard processes
supported by standard applications that are
available off the shelf to their competitors.
Even where applications are aligned
with enterprise goals, processes
are ingrained within the software,
inaccessible to change and
unable to be integrated with processes in other applications.
The connection with business objectives means that
business processes are complex, unique, numerous, and con-
stantly evolving.
The complexity of
the processes
drives complexity
in the technical
infrastructure that
delivers process
management. An effective business process management
system will have to support the great diversity of business
practices with a foundation as strong as that of the DBMS.
A PROCESS LANGUAGE
The first step is to make processes explicit by abstracting
them from application software. This is hardly new. Decades
ago, operating systems were created by abstracting memory
management, file access, and graphical user interface from
applications. Database management systems removed both
the management of data and the management of the schema.
8
KING BUSINESS PROCESSES MANAGEABLEP R O C E S S T H I N K I N G
pricing plan. They will sit with
business staff to design, test, and
deploy new business capabilities.
They will do this by orchestrating
fine-grained services and rules to
produce new business capabilities.
When processes fail to perform, thebusiness process architect will sit
with the participants in the process
to review what each needs to do
basedon the data, metrics, and
analytics from the process execution.
To be effective, these new
business process architects will
need deep understanding of their
company. This means that firms
will have to grow their own.
Developing these new business
process architects will require
strong, business-oriented
leadership by the IT departments. The payoff for this effort will
be the ability to deliver on the vision that grabbed management
attention a decade ago with reengineering.
Business processes that areingrained within software
are inaccessible to change.
languages existed, none were designed with the objective of
supporting an enterprise-scale, top-down process manage-
ment capability that could leverage open systems standards
and interoperate across organizational boundaries.
BPML is a business-oriented language designed for top-
down deployment in a process management infrastructure
that leverages existing enterprise and B2B-convergent
standards. It supports dynamic collaboration among partners,
and is more expressive than the process modeling supported
by traditional software engineering paradigms.
REENGINEERING REDUX
Process management is heralding a renaissance in
reengineering, process thinking, and organizational design.
This renaissance is not being driven just by technical
innovation. Just as in the first wave of reengineering in the
early 1990s, tinkering with existing ways of doing business is
not enough. Responding to these new challenges with this
new technology will require two types of people: business
process architects and project managers.
Business process architects will operate at the level of
business concepts, such as implementing a new long distance
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Americans have been very successful in
creating wealth. But they have done that within
a business culture that is different from those
of other countries.
We explored these differences by asking
business managers 46,000 managers from
more than 40 countries a series of questions
designed to reveal the diversity of values. We
measured these values along six dimensions:
universalism-particularism, individualism-
communitarianism, specificity-diffuseness,
achieved-ascribed status, inner vs. outer
direction, and sequential and synchronous
time (see sidebar, page 12).
In the questions we asked our sample of
managers, we presented them with dilemmas
that pitted one value against another. But the
relationships between the two values in each
dimension also can be seen as circular, as com-
plementing as well as contradicting one another.
The fashionable name for this circular thinking
among the business consulting community is
cross-cultural competence. This is what we are
trying to illuminate: the capacity for creating
wealth through reconciling cultural dilemmas.In this article, we will explore only two of the
six cultural dilemmas, univeralism-particular-
ism and individualism-communitarianism.
UNIVERSALISM-PARTICULARISM
Suppose youre riding in a car driven by a
close friend. He hits a pedestrian. You know he
was exceeding the speed limit. You also know
that you are the only witness. If you testify
under oath that he was not exceeding the speed
limit, you will save him from serious conse-
quences. What does your friend have a right
to expect from you?
a. He has a definite right as a friend to
expect you to testify to the lower speed.
b. He has some right as a friend toexpect you to testify to the lower speed.
c. He has no right as a friend to expect
you to testify to the lower speed.
More than 75 percent of American managers
answered b or c; fewer than half of Japanese
and French managers gave the same answers.
Religion may help explain these responses. Of
the top 10 universalist countries, all but two
Ireland and Pakistan are stable democracies
and Protestant. Catholics are, on the whole, less
universalist, and Buddhist countries are more
particularist still. This may be why France and
Japan are at roughly the same place on the
scale as Portugal, Belgium, and Singapore.
One historical reason why American
business managers are universalist is that the
United States itself was created as a New World
or universe, complete with a Declaration of
Independence and a written constitution.
Immigrants to the United States have voluntarily
relegated their ethnic and national identities to
a commitment to a new belief system.
What does this mean for business? The
universalist culture accepts and serves all
comers equally, whether they want citizenship
or hamburgers. Universalism is crucial to mass
manufacturing and mass marketing. The danger
is that quantity is seen as a good thing in itself.
Benchmarking, the comparative measurement of
11
WHYAMERICAN BUSINESS
IS THAT WAY.
BY
CHARLES M. HAMPDEN-TURNERAND FONS TROMPENAARS
AND WHYBUSINESS IN OTHERCOUNTRIES IS NOT.
America has contributed disproportionately to the totalvolume of business studies. So it is crucial to ask:
Do these business studies tell us how to create wealth
anywhere in the world, or do they tell us only how
wealth has been created in America?
M A N A G E M E N T C U L T U R E S
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HY AMERICAN BUSINESS IS THAT WAY
Who is to define a particular form of achieve-
ment as important? One solution is to let
different activities compete in the market for
popularity. Football, boxing, and basketball
are important because their fans make these
sports rich. In achieving societies, markets
define what is valuable.
If markets do much of the ascribing in
achieving societies, achievement can do the
same in ascriptive societies. The French lyce
and the Japanese high school, for example,
are notoriously competitive and achievement-
oriented, hence examination hell. But these
countries bring competitive achieving to an end
relatively early in life. Once you are admitted
to agrand cole or a prestigious Japanese cor-
poration, your ability to achieve competitively
has been discovered and certified. From then
on you are guaranteed status in return for
using your abilities to serve the corporation,
its customers, and the nation at large.
Taken too far, though, ascribed status can
become laughably absurd. In Britain, the habit
of elevating the well-bred was memorably sati-
rized on television as the Race of the Upper-
Class Twits. The focus on achievement also can
be taken too far, allowing winners to eclipse more
creditable performances that did not quite win.
Insisting that varying skills be rank-ordered on
some arbitrary scale best-sellers, for example
places serious biography in the same categoryasHow to Erect a Teepee in Ten Minutes.
VARIED CORPORATE CULTURES
In the real world of business, the cultural
dimensions examined above do not exist in
isolation they interact with each other. We
can illuminate these interactions by crossing
the two axes and creating four quadrants of
corporate culture.
A majority of the worlds corporations are
family-owned, and the family business culture,
on the lower left, is represented by le patron,
who was born into his position. China,
Singapore, Hong Kong, and Thailand produce
the most family-owned companies.
The Eiffel Tower culture also depends on
people in key roles, but has a strong rule orien-
tation. People in these roles may have achieved
in the past, at somegrande cole for example,
but their current authority depends on their
formal position, on their ascribed expertise
rather than on recent successes. This business
culture is found in many countries but is identi-
fied with France and Germany. Both countries
put great stress
on formal
education but
thereafter rely
on an expert
culture, whichtends to be
ascriptive and
rule-bound.
The guided
missile culture
is oriented around teamwork and project teams.
Teams are rule-oriented, but only insofar as
they are trying to achieve set tasks, to generate
new products and systems. NASA pioneered the
use of project groups.
13
the way you really are, even if you dont
get things done. Sixty percent of American
managers disagreed, putting them at the
far achieved end of the status scale,
slightly ahead of Canadians and Australians.
Once again, Japanese and French managers
were on the opposite end. Seventy percent of
the Japanese and 65 percent of the French
managers agreed with the statement.
America is among the highest in achieve-
ment orientation of any national business
culture for historical reasons. An immigrant
nation has great difficulty ascribing status to
persons of varied national origins. (Who cares
that you came from Lithuanian nobility?)
What matters is not where you came from but
what you have done recently and what you
can contribute now. While ascribed status
does not travel well, achieved status can be
demonstrated in the New World for all to see.
Even in an achieving society it is still neces-
sary for individuals to say at some point, This
is worth achieving, but that is not so important.
America is high inachievement orienta-
tion. What matters is
not where you came
from, but what you
can contribute now.
Achieved Status
Incubator Guided Missile
Particular Universal
Person Rules
Family Eiffel Tower
Ascribed Status
Universalism (rules, codes, laws, generalizations)
USA, Scandinavia, Switzerland, Australia
ndividualism (personal freedom, competitiveness)
USA, Canada, Scandinavia, Switzerland
Specificity (atomistic, reductive analytic, objective)
USA, UK, Canada, Netherlands, Australia
Achieved status (what youve done)
USA, Canada, Australia, UK, Sweden
nner direction (personal conscience and convictions)
USA, Canada, France, Australia, UK
Sequential time (race along a set course)
USA, India, Russia, Australia
Particularism (unique relationships, special circumstances)
Russia, China, India, Belgium, Japan, France
Communitarianism (social responsibility, cooperation)
India, Japan, France, China, Singapore
Diffusion (holistic, elaborative synthetic, relational)
China, Japan, India, Singapore
Ascribed status (who you are)
Russia, Japan, China, Belgium, Netherlands
Outer direction (examples and influence from outside)
Russia, China, India, Japan
Synchronous time (a dance of fine coordinations)
Hong Kong, China, France, Sweden
Six Dimensions of Cultural Diversity
Universalist cultures excel in massmanufacturing and mass marketing.
Particularist cultures celebrate
what is unique and incomparable.
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M A N A G E M E N T C U L T U R E S
industrial processes, tends to assume that the
major challenge is doing things right as opposed
to doing the right things.
Particularist cultures celebrate what is
unique and incomparable, such as French
cuisine and couture. Business in these cultures
excel in customization. Products specially made
for certain customers are an important source
of prototype devices. Taken too far, though,
particularist cultures find that intimidation
and conspiracy become more important than
sanctions of legality. Extreme examples are the
Sicilian and Russian mafias.
ACHIEVED-ASCRIBED STATUS
To place managers on this dimension, we
asked them if they agreed or disagreed with this
statement: The most important thing in life is
to think and act in the manner that best suits
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1514
Finally, the incubator culture is achieve-
ment-motivated but oriented to the particular
genius of the entrepreneur or innovator.
Companies in this culture typically are small
startups in Silicon Valley, Taipei, Bangalore,
Cambridge, and so on. The United States, the
UK, and northwest Europe produce most of the
guided missile and incubator cultures, although
Taipei and Bangalore have been at the intersec-
tion of family and incubator cultures.
MEASURING TRANSCULTURAL COMPETENCE
We have just seen that in the real world of
business, corporate cultures are not one-dimen-
sional but are the product of interactions
between different cultural values. It is also true
that business managers do not act
according to only one value.
Our questionnaire gave managers
a straight either/or choice between
two ends of a continuum. Under
normal circumstances, though,business managers dont have to
make such stark choices. Thats why our new
questionnaire gives five choices instead of two.
Respondents can still choose one value and
reject the other; but they can also choose
various combinations of the two values.
The traffic accident question, for example,
now offers these choices:
a. There is a general obligation to tell the
truth as a witness. I will not perjure myself.
b. I will tell the truth. But I owe my
friend an explanation and social
and financial support.
c. My friend comes first. I will not
desert him before a court of strangers
for an abstract principle.
d. I will support my friend whatever
his testimony. Yet I would urge him
to tell the truth.
e. I will testify that my friend was driving
a little over the speed limit but that
it was difficult to read the speedometer.
After administering the second questionnaire to
American, Canadian, and European managers,
we discovered that there is a capacity to deal
with and reconcile values in general. Cross-
cultural competence as measured by our
questionnaire correlates strongly with extent
of international experience and high positive
evaluations via 360-degree feedback.
Interestingly, there is a negative correlation
with assessed technical competence, which
warns us that manipulative logics may impede
us from relating to living systems.
But and here is the surprise the
transculturally competent do not necessarily
put their own cultural stereotype ahead of
foreign values in a logical sequence. For example,
American transcultural competents are as likely
to argue that good communities and teams
generate outstanding individuals as thereverse proposition.
The role of managers is increasingly to
manage diversity per se, whatever its origins in
culture, industry, or discipline. If there is a way
of thinking which integrates values as opposed to
adding value, the implications are far-reaching.
This article is based on our book, Building Cross-CulturalCompetence: How to Create Wealth from Conflicting
Values (New Haven: Yale University Press, 2000).
LI & FUNG:
CONFUCIUS MEETS JOHN WAYNE
BY F. WARREN MCFARLAN
Harvard did not teach Victorand William Fung how tomake a global company outof the family business.
They did that on their own, after earning a
PhD in economics and an MBA, respectively.
But their management training came in handy
once the brothers had successfully rebuilt the
company their grandfather had founded almost
a century ago. The Li & Fung Trading Co. now
combines the business cultures and practices of
old China and the modern West.
HY AMERICAN BUSINESS IS THAT WAY
Cross-cultural competencecorrelates strongly with
extent of internationalexperience, but negatively
with technical competence.
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Internet. When the telephone
came along, the Fung brothers
grandfather was shocked.
But he adapted, just as their
father adapted to the fax. Now
the company has adapted to the Internet.
Unlike some other old-line companies, though,
Li & Fung never entertained the idea of
creating a dot-com division and spinning it
off. To start a pure Internet division is asabsurd as starting a fax division, a division
that exclusively uses faxes, Victor Fung said.
What the company did do was add techni-
cal directors to its board, people who can keep
Li & Fung abreast of technological changes.
Anything to do with information technology
is crucial to us, William Fung said. The
Internet is just another technology that
affects the way information is transferred.
The brothers also had no fear of being
disintermediated by B2B exchanges. Those
Internet trading platforms were, as Victor Fung
put it, a molecule thick and a mile wide,
based on many depthless relationships. The
brothers are convinced that a smaller number
of deep and lasting relationships will ensure
that their company lasts another 100 years.
Victor Fung captures this approach in one
phrase: Think like a big company, act like a
small one.
This article is adapted from Li & Fung: Beyond
Filling in the Mosaic, 1995-1998, #9-398-092,
by Anthony St. George, research associate, under
the supervision of Carin-Isabel Knoop, director,
research and development, executive education,
and Professor Michael Y. Yoshino; and Li &
Fung, #9-301-009, by Fred Young, senior
researcher, under the supervision of Professor
F. Warren McFarlan.
companies. These dedicated teams
of product specialists focus on the
needs of specific customers and
are grouped under a corporate
umbrella that provides centralized
IT, financial, and administrative
support from Hong Kong. This
decentralized corporate structure allows
for rapid reaction to seasonal fashion shifts.
The term little John Waynes expresses
very well the drive and independence ofLi & Fungs managers worldwide.
These relatively independent, customer-
focused divisions are now the companys basic
operating units. We may be a Hong Kong com-
pany with a Chinese view of life, said William
Fung, but we do not ram notions best suited to
Hong Kong down a Thais throat, for example
we tend to let our foreign operations run to the
best local practices.
OLD VALUES
For all its business-school methods,
Li & Fung is very much a Chinese company.
Li & Fung is a company rooted in Chinese
values, said Victor Fung. We do not retrench
an employee. In fact we retain some of the
retirees as consultants. Furthermore, we do
not believe in the trappings of titles and the
attendant hierarchy; we treat employees of
Li & Fung as family.
Another old company value is the nurturing
of deep relationships with a small number of
customers. This strategy had always served the
company well, and the Fung brothers believe
that it will continue to be successful. The old
relationships, the old values, still matter, said
Victor Fung. It makes a difference to suppliers
when they know that youve been honoring
your commitments for 90 years.
It may have been this outlook that explains
why Li & Fung did not feel threatened by the
17
A POSTER-CHILD FOR SHAREHOLDER VALUE
Li & Fung was founded in 1906 as a bilin-
gual broker to match Chinese manufacturers
with English-speaking buyers. By the 1970s,
when the Fung brothers returned from the
United States, it was clear that those days
were over. Li & Fung still calls itself a trading
company and it still is a middleman between
mostly Asian manufacturers and Western
buyers such as Abercrombie & Fitch,
American Eagle, and Levi Strauss.
But now, by managing the entire produc-
tion process from raw materials to finished
product, the company meets its customers
needs by customizing their supply chains.
With 48 offices
in 32 countries,
Li & Fung has a
global sourcing
network that
allows it to
provide value-
added services
across the entire supply chain in a border-
less manufacturing environment.
A down jackets filling, for example,
might come from China, the outer shell fabric
from Korea, the zippers from Japan, the inner
lining from Taiwan, and the elastics, label,
Velcro, and other trim from Hong Kong.
The garment might be dyed in SouthAsia, stitched in China, then sent back
to Hong Kong for quality control,
packaging, and delivery. This supply-
chain customization shortens order
fulfillment, allowing clients to reduce
inventory costs.
Li & Fung does not own any of the
boxes in the supply chain, said Victor
Fung. Rather, we manage and orches-
trate it from above. In recent years,
however, the company has begun to improve
operations by controlling or owning strategic
links in the chain. In some cases, Li & Fung
offered raw material sourcing. In the past,
when clients placed an order, Li & Fung
would identify the manufacturer best suited
to supply the goods, and that factory would
source its own raw materials. But Li & Fung
understood its clients needs better than its
manufacturing plants did. By offering raw
materials to its suppliers, the company
ensured better quality control and saved
money for manufacturers by buying larger
and thus more cost-effective amounts of
raw materials.
The transformation has been very success-
ful. In 2000, Li & Fung outperformed the Hang
Seng Index by more than 75 percent. The
South China Morning Post said the company
could be a poster-child for shareholder value.
LITTLE JOHN WAYNES
While modernizing the old family firm,
the Fung brothers tried to preserve the best of
what their father and grandfather had created.
That meant finding a way to combine a focus
on a few relationships the essence of the
old model with the management of large,
complex systems that was the core of the
new business.
The solution: Create small units dedicatedto serving one or a few customers, and have
them run by entrepreneurial executives called
little John Waynes. People who wanted to
run their own businesses turned out to be the
ideal Li & Fung employees. William Fung said,
We give them the resources, opportunities,
and protection against the downside, making
it more attractive for them to work for us.
Senior managers run 90 small, worldwide
management teams as separate and individual
16
Li & Fung is acompany rooted in
Chinese values.
The Fung brothershought B2B exchanges
were a molecule thick
nd a mile wide.
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And I have to be sure that theyre the
right goals for the team. When Im sure I have
the right goals, then I go for them 100 percent.
AN INTERNATIONAL TEAM
One way that cycling is like business is
that its becoming more international. Team
CSC-Tiscali was founded as a Danish team in
1997 and has been made up mostly of Danish
riders ever since. But almost half the team
members are from other countries: France, the
Netherlands, Sweden, Spain, the United States.
Fortunately, I have a lot of experiencewith such teams. I have been on German,
Italian, French, and other national teams,
which had riders from all over Europe. The
language differences do present some manage-
ment difficulties, but communication still isnt
a big problem. Everyone speaks some English,
so that tends to be the common language on
our team. Most of us speak more than one
language, too. I speak French, Italian, German,
and English, as well as Danish.
Language problems arent a big price topay for getting the best riders. Just like in
business, you dont want to settle for hiring
the top people in one country. You want to
hire the top people, period.
A TEAM THAT TELECOMMUTES
The riders on my team dont just come
from many different countries. They still live
in those countries. None of the teams top
riders lives in Denmark. Laurent Jalabert,
the team leader, lives in Switzerland. Michael
BY BJARNE RIIS
MANAGING ADANISH (?) BICYCLE TEAM
Is managing a cycling teamanything like managing in
business? Probably it is. If Iwant to get the best out of
my riders, I have to be very
clear about what my goals are.
19
King of the Mounatain Team CSC-Tiscalis Laurent Jalabert.
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Sandstd lives in Spain, Tristan Hoffman in
Belgium, and Rolf Srensen in Italy. All four
riders participate in races around Europe and
train at home. Even I dont live in Denmark.
I live in Italy.
Unlike a football team, we cant meet on
the same practice field every morning. How
do I manage a team whose members arent
even in the same place at the same time for
much of the year? Computers. All the riders
have bicycle computers, which provide several
performance measures. After a rider finishes
a training session no matter what country
or time zone hes in he plugs his computer
into a PC and e-mails the data to me. The data
tell a lot about how riders are doing and how
they can improve their performance.
I introduced computers into the team
because Ive been using them for several
years and have had good results with them.
It takes some time to learn how to use these
computers the right way, but they allow us to
design very specific training programs.
STARS AND WARS
When I can, I bring the team together at
my home in Italy. Cycling teams have to be
very close. Bicycle racing can be like war and
the team members have to be willing to fight
for each other. They have to know they can
rely on each other. Every rider has a respon-
sibility to the team, and even the least experi-
enced riders have to know that the team can
fail if they dont meet their responsibilities.
A big part of my job is motivating riders,
building up a team spirit. I find that many
riders dont really know why theyre doing
what theyre doing. I want them to think
about that, to explain to themselves why
theyre sitting on a bike so many hours of the
day. I dont want them to do it just because
its what theyve always done. You shouldnt
enter a race just to win some money. It has to
be what you love doing. I try get riders to find
their own motivation, their own ambition.
The teams top riders have a big role in
keeping the team together, too. Laurent
Jalabert, our star rider, is a complete profes-
sional. They have more experience than the
younger ones and can give them valuable
advice and guidance. By sharing their
experience, they make the team stronger
and the team spirit better.
THE CHALLENGE
The challenge is to build a team that
works well together, and that has clearly
defined roles that still leave lots of room for
Bicycle racing is like war.Team members must know
they can rely on each other.
Bjarne Riis
A professional
cyclist since
1986, Bjarne Riis
rose steadily to
the top ranks of the sport. In 1997, he won
the World Cup in the Amstel Gold Race.
He won the 1996 Tour de France, in which
he wore the yellow jersey for 13 days and
won four stages. He also reached the podium
in the 1995 Tour de France, in which he
finished third and wore the yellow jersey
for a day. He was the first Danish cyclist to
achieve each of these triumphs. He also won
the Danish national championships in 1992,
1995, and 1996.
21
each riders talent and personality.
My job is to make the racing and training
program for the team. I work with my sports
directors to decide who goes to which race. One
week, we send a group of six riders to one race,
a group of eight to another race, while others are
training at home.
The next week it
will be different.
It changes all the
time, which is
why structure is
so important.
Without a struc-
ture, you cant make riders work together, for
each other.
Thats not easy, but I bring a lot of experience
to the job. Ive been a rider in the back of the
pack, Ive been a star, and now Im a manager.
My experience is my strength.
Ibring a lot of
experience to thejob. My experience
is my strength.
NAGING A DANISH BYCYCLE TEAM
Team CSC-Tiscali
This Danish bicycling team was founded
in 1997 and first competed in the Tour de
France in 2000. In the months following
that competition, the team went through
some dramatic ups and downs that led
observers to doubt it could even qualify
for the Tour in 2001.
First, a successful recruiting drive
attracted several experienced riders,
including French star Laurent Jalabert, one
of the top cyclists in the world. Then the
teams ability to pay those new riders was
thrown into doubt when its main sponsor
suffered financial setbacks and had
to withdraw its support.
The teams new manager,
Bjarne Riis, soon found two new
sponsors, Computer Sciences
Corporation and Tiscali, a leading European
Internet communications company. Then the
teams new star, Jalabert, fell from a ladder in
his home and broke three vertebrae.
Fortunately, the recuperative powers of
Jalabert and his teammates were strong
enough to overcome these setbacks. The
team not only qualified for the 2001 Tour
de France but Jalaberts performance in the
Tour ended all doubts about his recovery.
He won two mountain stages, earning him
the polka-dotted jersey that is awarded to
the King of the Mountains.
Jalabert finished 19th overall, 50 minutes
behind winner Lance Armstrong. The team
finished 18th, three hours and 17 min utes
behind Spanish team Kelme-Costa Blanca.
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22
FROM GLOBALIZATION TOINTERDEPENDENCE
BY KENNETH S. COURTIS
Globalization is the wordeveryone uses to describe
whats going on in the world
economy. But I think its
something broader and morecomplex. Its the growing
interdependence between
countries around the world.
That interdependence is having a huge impact
on how we all live and interact. And its not just
the big countries that have an impact on the
small countries.
On a Monday afternoon in July 1997,
Thailand devalued its currency. Over the
next few months, that triggered a cascade of
devaluations throughout the emerging markets
that finally led to the implosion of Russia, the
collapse of the currency market in Brazil, and
started to shake the global banking system.
The Bankers Trust went
bankrupt and Long Term
Credit Management was
about to implode and
bring down major insti-
tutions on Wall Street.
It was only the very
quick footwork of global
central banks and mone-
tary authorities that enabled us to back off from
the edge of the greatest financial crisis since the
1930s. That crisis is over, but interdependence
with the vulnerability and potential volatility
it creates is still with us. France, Germany,
the United States, the UK all these countries
are generating huge net negative financial
balances. That means theyre increasingly
dependent on other peoples decisions to
finance them.
Who is making those decisions? Much ofthe financing of Western economies comes
from Japan. Thats no surprise. But China has
invested more than US$225 billion in the US
bond market. There are issues here that need
to be thought through very carefully.
JAPAN. In 1991, Japans debt to GNP ratio
was 51 percent. It made the rest of the world
look totally undisciplined. But today that ratio
is running at around 146 percent of GNP.
Theyve increased debt, government on-balance
sheet debt, by 100 percent of GNP in but a
decade as theyve tried to struggle with this un-
precedented, at least for Japan, economic crisis.
The off-balance sheet claims on the
Japanese state, by the most conservative
estimate, would be 150 percent of GNP, as well.
I think thats the government
statistic. John Maynard
Keynes once said there are
three types of lies. There are
lies we make by mistake,
those we make on purpose,
and there are government
statistics. We estimate that
the off-balance sheet claims
in the Japanese state are somewhere north
of 260 percent of GNP. Total bank loans,
132 percent of GNP as of the end of March.
Other forms of corporate debt bring the total
up to around five times GNP.
Today, its not justthe big countries that
have an impact on
the small countries.
Now, what if you had a client who had debt
that was five times sales? Thats what youve
got here. Someone might say it wouldnt matter
as long as interest rates are at zero, and short-
term Japanese interest rates are at zero. But
its not servicing your debt thats the problem;
its how you pay back that debt.
The core of the crisis is the Japanese
banking system. Last year, we estimated that
bad debt in the system was close to US$900
billion. Theres probably been US$100 billion
added to that since, which makes probably a
trillion dollars of bad debt. That works out to
about 20 percent of GNP. To give you a sense
of how big this is, the savings and loans crisis,
at its peak, was 2.8 percent of GNP.
Theres also a demographic problem. By
2020 Japan will have aged so much that it
will make Florida look juvenile in comparison.
Forty-three percent of the electorate will be
over 60. With this type of debt load, the
government will have to squeeze back govern-
ment spending quite aggressively. How will
they finance pensions, life insurance, and
health care?
But if you cut back spending that aggres-
sively, with this much debt, with an economy
this slow, and a financial sector this weak,
youre very likely to push that economy into
a huge recession. We saw what Thailand
generated. Imagine what this could lead to.
No country has had this much debt and
not seen a major devaluation. Even small
countries that get into this kind of trouble
create large international consequences.
This is the biggest financial crisis that weve
ever known, and its in the economy that
finances a very large part of the US funding
needs every day. We should be prepared for
it both the opportunities and the risks.
CHINA. China is going through a change
of another kind, the kind that happens only
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24
M GLOBALIZATION TO INTERDEPENDENCE
once every 200 or 300
years. The Chinese
are dismantling the
state, going to a
market economy, and
catapulting themselves
into the 21st century.
These changes are so complex because
different parts of the economy are changing at
different rates. Much of the economy in that
country has operated the same way for 400 or
500 years. Theres also a part thats becoming
like that great industrial class that was created
in the West with the development of mass
production. At the same time, another part is
completely integrated in the latest technology.
For example, I was in Beijing recently,
talking with seven people who have created a
young biotechnology company. All seven have
doctorates from East Coast US universities, and
all had worked in US labs. Their company is
starting by doing subcontracting for the interna-
tional pharmaceutical majors. What they do is
hire their old professors as consultants, then
get those professors to give them their best
students. The students work for them for three
or four years, then go work in the United States
for five or 10 years. Then they go back to China
and keep this thing rolling.
Their ambition is to turn their company
into a hugely powerful research organization.
Their research will create breakthroughs, which
theyll license to international companies.
I asked them how they compete with
other companies that do the same type of
thing in the United States and Europe. They
answered that their cost structure is 16
times lower. They dont see any difference
between the quality of work theyre doing
now and the quality of work they were
doing when they worked in the best labs in the
top companies in the United States. But they
have a different cost structure.
But thats only part of whats happening
in China. On the sidewalk outside their office,
theres a guy whos laid out a tarpaulin to sell
garlic that hes carried on the train for two days
from his collective farm. The kind of change
China is going through is extremely complex to
manage. But its a country thats rolling ahead,
in good years and bad. Ten years ago the Chinese
economy was an eighth the size of Japans.
Today its one-fourth. It wouldnt surprise me to
see it double again in the next decade.
Were navigating in a world thats going
through incredibly complex change at all levels.
There are very big risks in the mid-term that
well have to turn our attention to very quickly
if were to prevent them from becoming huge,
destabilizing factors in the world economy.
POSTSCRIPT. The September 11 terrorist attacks
in New York and Washington have altered
substantially the short-term outlook for the
world economy. This year may show the slowest
global growth rate since World War II. But the
determination of governments to fight terrorism
and coordinate measures to revive growth will
support a sharper-than-expected recovery by
the second quarter of 2002. China, however,
still is a bright light. Because China is dependent
on domestic demand, it can expect better than
6 percent growth this year.
Companies have always had to adapt to marketchange. That was true before the era of global
economic interdependence that Ken Courtis
describes. It remains true when the changes that
swirl around a com-
pany can begin with
central bank deci-
sions made halfway
around the world.
And today, as Courtis
points out, even
decisions made in
small countries can
have global impact.
Its always been
beyond the capability
of any company or
industry to affect the
speed and breadth of
macroeconomic
change that includes currency and trade
instability, financial retrenchment, indecision,
and employment uncertainty. That always has
been the responsibility of those same centralbanks and of international monetary authorities.
The inability to affect either the fact or the
pace of change causes some companies to see
these worldwide events as overwhelming.
But others see those same events as presenting
new challenges and opportunities.
Companies tend to respond to change by
choosing one of three paths:
Expansionists will attempt to grow out of any
risk of slowdown by investing in technologies
that expand: distribution capabilities;
portfolios of products and services; and into
new market segments or geographical areas.
Acquirers will buy other companies that
extend their reach, increase their scale,
or expand their offerings.
Conservatives will cost-optimize and hunker
down. They will invest only where the bottom
line value can be justified in the current
climate of economic activity.
Whatever path a firm takes, it must strive
to make change an ally instead of an enemy.
To accomplish this end, the leaders of the enter-
prise must shape a resolute strategy defined by
speed limits. The speed limits will set the pace
of change and the expectations for results and
measurements. These will permit the organiza-
tion to evaluate its success or failure versus the
competition, and to make essential and frequent
mid-course corrections and adjustments.
The merit of this
approach is that it
builds a tolerance
for ambiguity into
organizations.Progress is not
for the faint-hearted.
It never has been.
Risks need to be
taken and IT invest-
ments need to con-
tinue. The substance
and strength of the implementation at each
company will be the measure of winners and
losers in this fast-paced environment.
Whatever path
a firm takes,
it must strive to
make change
an ally instead
of an enemy.
ADAPTINGTO
CHANGEBY JAMES COOK
G L O B A L I N T E R D E P E N D E N C E
China is going through a changeof the kind that happens only
once every 200 or 300 years.
Companiestend to respond
to change by
choosing one
of three paths:
expanding,
acquiring, or
hunkering down.
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Teaching ManagementAgainst the Grain:
AN INTERVIEW WITH
Henry Mintzberg
enry Mintzbergs standing asne of the worlds most important
management thinkers was under-cored by two honors last year:
He received the Distinguishedcholar award from the Academyf Management, and placed seventhn theFinancial Timess list of theop 50 business gurus. According to
Management Todays guru guide,Mintzberg is hotting up fast.
Unlike many other gurus,Mintzberg isnt known for grandheory. His emphasis on the prac-ce of management was evident
n his first book, The Nature ofManagerial Work (1973). One ofhe findings of that book was that
managers spend most of their timeutting out fires, a job that isnt
made any easier by studyingeneral theories of management.
Although much of his writings against the grain of businessterature, Mintzberg has spent hisareer in business education. He
as been teaching managementt McGill University in Montrealince 1968, and is now Cleghornrofessor of Management Studieshere. He also is a visiting scholart INSEAD (the European Institutef Business Administration) inontainbleau, France.
In 1995, Mintzberg put hisriticism of business education intoractice by co-founding thenternational Masters Program inracticing Management (impm.org).
He and Jonathan Gosling of
Lancaster University in the UK,working with business schools inFrance, India, and Japan, createdthe IMPM as the next generationmasters program. He is no longerdirector of the program, but hes stillvery much interested in changing
business education. Hes working ona book titledDeveloping Managers,not MBAs.
CSC World: For a business schoolprofessor, you have been very criti-cal of the most popular businessschool degree, the MBA. What dontyou like about it?
Mintzberg: It trains the wrongpeople the wrong way for the wrongreasons. I dont think you can createmanagers in a classroom. You cantteach management to people whohave never been managers and
dont have much business experi-ence. So instead you teach themabout analysis and other functionsand they walk out thinking theyknow how to be managers.
CSC World: Do you mean thatbusiness schools are providing goodeducation but not the right kind?
Mintzberg: The MBA is goodtraining for analyzing business. If
analyzing business is what youregoing to do, then the MBA is a gooddegree to get. But managers donthave to be analysts.
Good management has to dowith good judgment and under-standing of context. Managers haveto be connected, in a sense. Theyneed to have a deep knowledgeof the business theyre in, andthey wont get that in a classroom.Learning the general principlesof management isnt much helpto people who have to managesomething in particular.
CSC World: And yet there areMBAs in management positions allover the world.
Mintzberg: Companies needmanagers. Organizations of all kinds
need managers,and businessschools tell
them where tofind them. TheMBA is seenas training formanagement. Socompanies hire
people with MBAs. Then they givethem jobs running things they dontunderstand. That goes on all over.
CSC World: Why is there such alarge management literature?Theres nothing like that for, say,high school teachers or engineersor politicians.
The MBA is good training foranalyzing business. But managers
dont have to be analysts.
26 27
Mintzberg:Theres now a cult ofmanagement. The
literature wasnt thatbig several years ago,but its grown enormously. Maybeas much as half of that literatureis very similar to self-help books.How to clean up your psyche, livea happy life. Probably most seriousmanagers dont look much at those
books. But a lot of unserious man-agers who nonetheless have quitea lot of influence do look at them.Theres a lot of good management
literature, too, but it doesnt offerquick fixes or self-help.
CSC World: Why has this literatureexploded the way it has?
Mintzberg: Im not sure why.One of the key things might bethe growth of business schools.Business schools werent verysignificant before 1965 or 1970. Buttheres been an enormous growthsince then. Theres also the obses-sion with finding heroic leadership.MBA programs are training heroes.But business doesnt need heroes.Business needs good managers.
CSC World: We keep hearing thatthe information economy orreengineering, knowledge manage-ment, the Internet will changeeverything. So far, not much seems
to have changed. Why do you thinkthat is?
Mintzberg: I think the notion thatwe live in this great age of change isa crock. Certainly there are thingschanging. Information technologyis changing. But some things arealways changing, and other thingsdont. We drive cars that still useModel T technology. We fly in air-planes that still use Comet technolo-gy from 1952. The French came upwith the metric system 200 yearsago, but America has yet to adopt it
and Britain has only sort of halfmade up its mind to adopt it. So youget in your cars and drive miles andmeasure gallons. We dont noticethe things that dont change.
CSC World: What about the riseand fall of the dot-coms? Wasnt thatan important change?
Mintzberg: The press certainlyhyped the dot-coms. The change ininformation technology was viewedas very dramatic and utterly differ-ent. But maybe it was just anotherone of the many changes that busi-ness always has to incorporate.
Suppose that architectural styleschanged. You wouldnt expect spe-cial companies to grow up becausethey have this new architecture.Thats nota perfectparallel,
but youget mypoint.The oldcompanieswouldntdie. Theyd adapt. We used tocommunicate by letter, then bytelephone, now by e-mail. These
were all changes in informationtechnology and business adaptedto all of them.
The hype was that the dot-coms were going to revolutionizeshopping, but all they really did wasrevolutionize ordering. Shippingwhat people order is no different.Sears has been doing it for decades.
CSC World: Will the increasingimportance of knowledge work
bring about a change in manage-ments role?
Mintzberg: It should, but I thinkits going in the opposite direction.Knowledge workers have to becoordinated, but they dont have to
be encouraged to put out energy.They already know what they haveto do and they dont need to com-municate with each other through asuperior. Knowledge workers needa management style thats engagedand connected. But managers are
becoming less engaged and lessconnected, which makes it hard forthem to deal with people who think.
Hewlett and Packard, forexample, set a different pattern forhow you manage knowledge work.So did Grove at Intel. But now whatyoure getting is a reversion to anoverseeing kind of managing, andI think its going to wreak havoc.
CSC World: Why?
Mintzberg: Because theres a trivi-alization of thewhole sense ofmanagement.Weve drivenout everythingthat makes agood manager intuition,connection,
context. People just float in and outwithout knowing what theyre man-aging. A great leader is supposed todo everything now.
CSC World: And yet the need toattract and keep talented employeesis still high on the business agenda.How should companies do that?
Mintzberg: By treating employeeslike human beings instead ofhuman resources. You dont have toempower people. If you treat themdecently, they empower themselves.Support your employees andencourage them, but otherwise
leave them alone to do their work.
Good management has todo with good judgment and
understanding of context.
Business doesnt needheroes. Business needs
good managers.
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irst Hand
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long as it stays within a
single domain of knowledge.Expert systems are programs
that capture the knowledge ina very narrow field and provide
expert solutions to problems inthat field. Examples are Big Blue inchess and AMOS, the CSC-designed
system that operates NASAs X-RayTiming Explorer satellite.
But maybe the fire making thesmoke is small. Or mostly burnt
out. Computers cant handlenuances like maybe and mostly they prefer yes and no. Fuzzy
logic was invented to allow comput-ers to handle such natural languageproblems. Antilock braking systems,
for example, use fuzzy logic todecide what to do when the car is
going fast or slow, with thosespeeds being determined by circum-stances rather than by a specified
number of RPMs.Another kind of inferring sys-
tem is data mining, which harvestsuseful information from mountainsof data. It differs from traditional
statistics in that statistics forms ahypothesis and validates it against
the data. Data mining, by contrast,discovers patterns in the dataand forms its own hypotheses.
Organizations are excited about datamining because the digital age has
provided them with a wealth of datathey know is valuable if onlythey knew how to use it.
Learning Intelligent systemsimprove through the course oftheir interactions with the world.One learning approach is case-based
reasoning (CBR), which uses acase base of solutions to previous
problems to analyze and solvenew problems. CBR has been mostsuccessful in domains involving
classification (e.g., medical andlegal) and problem-solving
(e.g., help desks, design, planning,diagnosis).
Another approach is neural
nets, which are simplified computerversions of the human brain. Neural
nets are best suited to problemsthat are difficult to describe, such asrecognizing handwriting. Rather
than writing a program for this task,systems are trained by being
provided with handwriting samplesand the correct answer. The system
learns to generalize from the train-
ing set and recognize most peopleshandwriting. Optical character
recognition is one of the mostsuccessful neural net applications.However, most neural nets used in
commercial applicationstoday do not continue to
learn. They are trainedwhen they are designed, but
become static when insert-
ed into broader applications.Genetic algorithms,
another approach to learn-ing, are based on a biologicalmetaphor: survival of the fittest.
This approach works by creatinga large population of candidate
solutions, only the fittest of which
survive. New solutions are createdfrom the survivors, through a
process analogous to breeding. Thisprocess continues through several
generations, with weak solutionsbeing replaced from the ever-stronger population of solutions.
Genetic algorithms are emergingin the pharmaceuticals industry as
computational aids for drug design.They have even been used to createmusic, although opinions of the
quality vary with the listener.
Anticipating The culmination ofsmart is the anticipating system.
Anticipating systems arent directedto solve specific problems; they findproblems, recommend solutions,
and in some cases fix them on theirown. Such systems are not limited
to one domain, but can apply theirknowledge and reasoning acrossmultiple domains. In this sense,
anticipating systems come the clos-est to modeling human intelligence.
Its also true that mature antici-pating systems exist only in theminds of visionaries and science
fiction writers. Nonetheless, theseeds of such systems are present
today in goal-directed robots. Oneof the most impressive of these is
NASAs Nomad robot. Nomad suc-cessfully completed a 200-kilometertrek through Chiles Atacama desert,
and later traveled throughAntarctica, finding and classifying
meteorites and terrestrial rocks.
Smart new world
The technologies that underpinthese smart systems will fundamen-
tally change the way we live andconduct business. Smart systems
will become our skilled assistants,adapting to us as needed and, overtime, disappearing into everyday
life. This change will not comeovernight. But continuing innova-
tion and technology advances willhelp todays smart systems over-come their limitations.
Getting Smart
indings
Computers are not yet as smart,
r as dangerous, as HAL in 2001.ut practical applications of smart
chnology are emerging that willhange our lives. Today, though,
many organizations are wonderingow to recognize and make use of
mart systems. To help organiza-ons understand these systems,SC has identified five attributes
f smart, dubbed smart quotients.
dapting The ability to adapt tosers and the environment tocognize context is one of the
asic attributes of smart systems.Nomadic computing envisions a
me when networks will adapt to
ndividual users by greeting themith their personal environments
hen they log in, no matterhere they are or what device
hey are using.One element of those future
evices is likely to be the human-
ed interface. A still-experimentalxample is one developed at the
IT Media Lab, which is designedexpress emotion. These virtual
ssistants are based on the assump-on that people prefer talking to a
person instead of to a machine. Butits also true that there is a very thin
line between natural, emotion-ladeninteraction and annoying stupidity.
Malfunctioning computers are
another source of annoyance.Researchers are finding ways to
enable networks to adjust todifferent levels of stress withoutrequiring
abandonmentof users by
a wholesaleshutdown.There already
are smart disksystems that
can predict the
imminent fail-ure of a drive
by continuouslymonitoring network components.
In the future, systems will be ableto adapt dynamically to a wide range
of stress situations, such as securityattacks, performance requirements,and component failure.
Sensing Sensing systems acquireinformation from the world aroundthem and respond to it. Some
luxury car makers have incorporat-
ed simple warning and collision-avoidance systems in their vehicles,
and cars will become even smarter
when they are combined withsmart roads. Smart transportation
systems will manage traffic bymonitoring road conditions and
controlling the speed and locationof cars. Advances in this area areslow, though, because the tech-
nology must be absolutely reliableand there are no standards for
systems and interfaces.Improving salmon traffic is the
job of the sensor fish, a mechanical
fish that is sent through hydro-electric dams on the Snake and
Columbia Rivers in the UnitedStates Northwest.Salmon trying to
reach the PacificOcean through
those dams oftenare killed byspinning turbine
blades and
changes in waterpressure. Thesensor fish will
help engineers design safer dams.
Sensors arent just for inanimateobjects. Some forms of deafness
can be cured by tiny implants thatdirectly stimulate the nerves of apersons hearing system.
Inferring If theres smoke, thentheres fire. Computers can do thiskind of simple if-then inferring as
mart systems have always fascinated us.
ince the first practical computers were
onceived, engineers have dreamed of creating
machines that can think like humans.
We havent done that yet.
S
A NASA robot made a200-kilometer trek across
Chiles Atacama desert.
Smart roads will improveauto traffic. Smart fish will
improve salmon traffic.
There is a very thinline between natural,
emotion-laden
interaction and
annoying stupidity.
A LEADING EDGE FORUM REPORT
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arconi PLCdidnt want to createst another telco. When the com-
any decided to transformits darkber business, they wanted to do
ore than move up thevaluechainselling managed bandwidth.
heywanted to build thetelcothat
as theeasiest to do business with.Thats not all Marconi wanted.
heyalsowanted theflexibilitytodapt to changing business require-ents without getting lockedintoa
articularset of applications. And itadto be done fast. Marconi want-
dthe new telco tobe ready forusiness in the record time of sevenonths. All these requirements
eremet byusing a formofusiness process management to
uildthe system.
uildinga new companyIn June 2000, ipsaris contracted
ith CSCto design, build,and
ploy all theirbusiness supportstems. The company-to-be beganith a 14-page strategy statement
utliningwhat they wanted to
achieve as a business.At a nine-day business process workshop,
CSChelped ipsaris flesh outthesegoals aswell asthe means for
implementing them.Likemost businesses, they
wanted theflexibilityto adapt to
changing business requirementsandthe scalability to meet future
growthin the business. Unlikemostbusinesses, they understood thatflexibility and scalability, if they
were to last more than a fewyears,hadto be designed into thesystem
architecture. That meantavoidingacommon pitfall of startups:integrat-ing third-party applications in such
a waythat it becomes very costlytoaddor replace themwhen better
products become available.Thesolutionwas to
integratethem from thetopdown,startingwith the
business processes instead
of with the applicationsthatsupport those processes.
Theteam designed anarchitecture around prod-ucts from BEA,Tuxedo,
Web Logic, andELink, anda workflow management
product fromStaffware.Then they selected commercialapplications from 12 leading ven-
dors,including thenew Oracle11isuiteof applications.Developers
abstractedkey business processesfrom these componentsand migrat-ed them into a business process
enginethat was built into the
architecture. This solution enabledbusiness processes to be configured
in onecentral function rather thanhard-coded in manyapplications.
Long-lasting, fast-actingNot hard-wiring the applications
together brought two more benefits.First, it gave ipsaris a systemthatmakes business processes easy to
modify. As thebusinesschangesand grows,it willbe aseasy to
remove existing applications as toaddnew ones, thus reducing thecost of owningthe systemover
time. The transformation team builta systemthat canaccommodatea
great deal of changewithout havingto be rebuilt every fewyears.
Thesecondbenefit was
meeting ipsariss very aggressivedeadline.Not surprisingly, some of
theproduct vendors thought theseven-month timetable was wildlyoptimistic.But the focus on busi-
ness processesallowed theteam to
n Practice
speed up development by not
having to integrate the applicationsat every level.They didnthave tointegrate the applications user
interfaces, reporting mechanisms,or databases. They used onesingle
user interface across all packages,an interfacethat hasthe brand ofthe client, notthe application
vendor. Extractingbusiness process-es meant less integration andless
time for development.In February2001,sevenmonths
after theproject started, thenewsystems hadbeen developedandtested, company staff hadbeen
trained andipsariswas in thetelco business.
The customers experienceBecause ipsaris wanted to allow
its corporate customersto managetheir ownrequirements as muchas possible,self-carefeatures had
been builtinto system architecture.That meant automating as many
processes as possible, and givingcustomers and staff Internet accessto the companys systems.
Customers can orderalmosttheir full suite of services through
ipsaris.com.Standard, catalog-basedservices are almost self-provisioned
because theyare automatedthrough the business processes,ordering canbe done entirely
through the Web. More complicatedrequests onesthat requiredigging
up streets,buildingor acquiringphysical network,and procuringand installing equipment are
handedoff by thebusinessprocessengine as special mini-projects.
To request service and accessthe self-carefunction, customersregister with thecompany at
ipsaris.com. Through the Web site,customerscan then choosetheir
services, get price information, and
negotiate
contractualdetails andservice
provisiondates.They canuse the same
self-carefunctionto check on theprogressof theirservice requestand are automaticallyinformed
when service provision is complete.
After provisioning, customers
receive e-mailsaskingaboutthequality of service. If theres a
faultanywhereon thenetwork,ipsaris automatically e-mails those
BY VANESSA REED
Building aCustomer-Friendly Telco
Fast
The focus on business processesallowed the team to speed up
development by not having to inte-
grate applications at every level.
Flexibility was built intothe system architecture,
so applications can be
added or replaced
quickly and cheaply.
ipsaris Ltd.
In the 1980s, Marconi PLC, Britains biggest telecommunications
equipment maker, laid 1,300 kms of optical fiber along the canal
system in the UK through its subsidiary, Fibreway, a joint venture
with British Waterways. For several years, the only business of that
subsidiary, later named ipsaris, was selling dark fiber. That is, it
sold fiber to other telecom operators who could light it and
provide services over it.
Looking for new ways to boost revenue, Marconi recognized
in mid-1999 that it could improve its investment by turning
ipsaris into a telco and selling direct to corporate customers. At
the time, the equity markets were bullish, so there was a strong
potential for an IPO to enable them to recoup their investment.
That transformation meant creating a company and all the
associated business infrastructure from scratch. Although Marconi
financed th is transformation, it kept ipsaris at arms length from
day one. This meant that an entirely new team had to be
recruited to design every aspect of the new business. A few of
the challenges facing the team were: expanding the existingfibre routes from 1,300 to 3,500 km s, together with the entire
associated infrastructure to house their equipment; designing all
the transmission architecture, which included 10 Gbps SDH and
an 80 DWDM system capable of carrying 500 times the capacity
of Yahoo; and developing a leading edge IP network.
In June, ipsaris was purchased by the smaller telecom and
Internet servic