Tuesday, November 29, 2011
Saturday, November 19, 2011
Rachel Siegel and Carol Yacht
Publication Date: December 2009
License: Creative Commons
Flat World Knowledge
ISBN 13: (B & W): 978-0-9823618-6-3
ISBN 13 (Color): 978-1-936126-19-4
Unit 1- Personal Financial Planning
Unit 2- Basic Finance and Financial Statements
Unit 3- Evaluating Choices: Time, Risk & Value
Unit 4- Financial Plans: Budgets
Unit 5- Consumers Strategies
Unit 6- Personal Risk Management: Insurance and Retirement Planning
Unit 7- Investing Basics
Unit 8- Investing in Mutual Funds, Commodities, Real Estate & Collectibles
Unit 9- Final Examination
Personal Finance by Rachel Siegel and Carol Yacht is a comprehensive Personal Finance text which includes a wide range of pedagogical aids to keep students engaged and instructors on track.
If you would like to hear Rachel talk about her book, and the Personal Finance course listen here to her podcast.
This book is arranged by learning objectives. The headings, summaries, reviews, and problems all link together via the learning objectives. This helps instructors to teach what they want, and to assign the problems that correspond to the learning objectives covered in class.
Personal Finance includes personal finance planning problems with links to solutions, and personal application exercises, with links to their associated worksheet(s) or spreadsheet(s). In addition, the text boasts a large number of links to videos, podcasts, experts’ tips or blogs, and magazine articles to illustrate the practical applications for concepts covered in the text.
Thursday, October 13, 2011
Go It Alone or Team Up
New entrepreneurs consider many factors when starting a business
(The following one-page essay is taken from the U.S. Department of State publication, Principles of Entrepreneurship.)
Go It Alone or Team Up?
One important choice that new entrepreneurs have to make is whether to start a business alone or with other entrepreneurs. They need to consider many factors, including each entrepreneur's personal qualities and skills and the nature of the planned business.
In the United States, for instance, studies show that almost half of all new businesses are created by teams of two or more people. Often the people know each other well; in fact, it is common for teams to be spouses.
There are many advantages to starting a firm with other entrepreneurs. Team members share decision-making and management responsibilities. They can also give each other emotional support, which can help reduce individual stress.
Companies formed by teams have somewhat lower risks. If one of the founders is unavailable to handle his or her duties, another can step in.
Team interactions often generate creativity. Members of a team can bounce ideas off each other and “brainstorm” solutions to problems.
Studies show that investors and banks seem to prefer financing new businesses started by more than one entrepreneur. This alone may justify forming a team.
Other important benefits of teaming come from combining monetary resources and expertise. In the best situations, team members have complementary skills. One may be experienced in engineering, for example, and the other may be an expert in promotion.
In general, strong teams have a better chance at success. In Entrepreneurs in High Technology, Professor Edward Roberts of the Massachusetts Institute of Technology (MIT) reported that technology companies formed by entrepreneurial teams have a lower rate of failure than those started by individuals. This is particularly true when the team includes a marketing expert.
Entrepreneurs of different ages can create complementary teams also. Optimism and a "can-do" spirit characterize youth, while age brings experience and realism. In 1994, for example, Marc Andreessen was a talented young computer scientist with an innovative idea. James Clark, the founder and chairman of Silicon Graphics, saw his vision. Together they created Netscape Navigator, the Internet-browsing computer software that transformed personal computing.
But entrepreneurial teams have potential disadvantages as well. First, teams share ownership. In general, entrepreneurs should not offer to share ownership unless the potential partner can make a significant contribution to the venture.
Teams share control in making decisions. This may create a problem if a team member has poor judgment or work habits.
Most teams eventually experience serious conflict. This may involve management plans, operational procedures, or future goals. It may stem from an unequal commitment of time or a personality clash. Sometimes such conflicts can be resolved; in others, a conflict can even lead to selling the company or, worse, to its failure.
It is important for a new entrepreneur to be aware of potential problems while considering the advantages of working with other entrepreneurs. In general, however, the benefits of teaming outweigh the risks.
[Author Jeanne Holden is a free-lance writer with expertise in economic issues. She worked as a writer-editor in the U.S. Information Agency for 17 years.]
Peter Drucker On Leadership
Rich Karlgaard, 11.19.04, 6:00 AM ET
NEW YORK - Peter F. Drucker was born 95 years ago today--can it be possible?--in Vienna. The universally known writer, thinker and lecturer now is nearly deaf and doesn't get around like he used to. He stopped giving media interviews about a year ago. But in late October, Drucker granted an exception to Forbes.com at the urging of Dr. Rick Warren, the founder and head of the Christian evangelical Saddleback Community Church in Lake Forest, Calif.
|Peter F. Drucker at his home in California |
Warren and I met at Drucker's surprisingly spartan home in Claremont, Calif., on a cloudy Tuesday morning. We were greeted by Drucker's wife, Doris, and ushered into the den for what developed into a two-hour conversation. During the first 30 minutes, Drucker--a religious man himself, albeit of a more muted Episcopalian type as compared to Warren's exuberant brand of Southern Baptist--advised Warren on the challenges of ministry and church building. This consultation is one Drucker and Warren have engaged in twice yearly for two decades. For the last 90 minutes we moved to broader topics. Below are Drucker's thoughts on leadership. (Click here for Drucker's official biography.)
What Needs to Be DoneSuccessful leaders don't start out asking, "What do I want to do?" They ask, "What needs to be done?" Then they ask, "Of those things that would make a difference, which are right for me?" They don't tackle things they aren't good at. They make sure other necessities get done, but not by them. Successful leaders make sure that they succeed! They are not afraid of strength in others. Andrew Carnegie wanted to put on his gravestone, "Here lies a man who knew how to put into his service more able men than he was himself."
Check Your PerformanceEffective leaders check their performance. They write down, "What do I hope to achieve if I take on this assignment?" They put away their goals for six months and then come back and check their performance against goals. This way, they find out what they do well and what they do poorly. They also find out whether they picked the truly important things to do. I've seen a great many people who are exceedingly good at execution, but exceedingly poor at picking the important things. They are magnificent at getting the unimportant things done. They have an impressive record of achievement on trivial matters.
Mission DrivenLeaders communicate in the sense that people around them know what they are trying to do. They are purpose driven--yes, mission driven. They know how to establish a mission. And another thing, they know how to say no. The pressure on leaders to do 984 different things is unbearable, so the effective ones learn how to say no and stick with it. They don't suffocate themselves as a result. Too many leaders try to do a little bit of 25 things and get nothing done. They are very popular because they always say yes. But they get nothing done.
Creative AbandonmentA critical question for leaders is, "When do you stop pouring resources into things that have achieved their purpose?" The most dangerous traps for a leader are those near-successes where everybody says that if you just give it another big push it will go over the top. One tries it once. One tries it twice. One tries it a third time. But, by then it should be obvious this will be very hard to do. So, I always advise my friend Rick Warren, "Don't tell me what you're doing, Rick. Tell me what you stopped doing."
The Rise of the Modern MultinationalThe modern multinational corporation was invented in 1859. Siemens invented it because the English Siemens company had grown faster than the German parent. Before the Second World War, IBM was a small maker, not of computers, but of adding machines. They had one branch in England, which was very typical for the era. In the 1920s, General Motors bought a German and English and then Australian automobile manufacturer. The first time somebody from Detroit actually visited the European subsidiaries was in 1950. A trip to Europe was a big trip. You were gone three months. I still remember the excitement when the then head of GM went to Europe in the 1920s to buy the European properties. He never went back.
21st Century OrganizationsLet me give you one example. This happens to be a consulting firm headquartered in Boston. Each morning, between 8 A.M. and 9 A.M. Boston time, which is 5 A.M. in the morning here in California and 11 P.M. in Tokyo, the firm conducts a one-hour management meeting on the Internet. That would have been inconceivable a few years back when you couldn't have done it physically. And for a few years, I worked with this firm closely and I had rented a room in a nearby motel and put in a videoconferencing screen. Once a week, I participated in this Internet meeting and we could do it quite easily, successfully. As a result of which, that consulting firm is not organized around localities but around clients.
How To Lead a 21st Century OrganizationDon't travel so much. Organize your travel. It is important that you see people and that you are seen by people maybe once or twice a year. Otherwise, don't travel. Make them come to see you. Use technology--it is cheaper than traveling. I don't know anybody who can work while traveling. Do you? The second thing to say is make sure that your subsidiaries and foreign offices take up the responsibility to keep you informed. So, ask them twice a year, "What activities do you need to report to me?" Also ask them, "What about my activity and my plans do you need to know from me?" The second question is just as important.
Prisoner of Your Own OrganizationWhen you are the chief executive, you're the prisoner of your organization. The moment you're in the office, everybody comes to you and wants something, and it is useless to lock the door. They'll break in. So, you have to get outside the office. But still, that isn't traveling. That's being at home or having a secret office elsewhere. When you're alone, in your secret office, ask the question, "What needs to be done?" Develop your priorities and don't have more than two. I don't know anybody who can do three things at the same time and do them well. Do one task at a time or two tasks at a time. That's it. OK, two works better for most. Most people need the change of pace. But, when you are finished with two jobs or reach the point where it's futile, make the list again. Don't go back to priority three. At that point, it's obsolete.
How Organizations Fall DownMake sure the people with whom you work understand your priorities. Where organizations fall down is when they have to guess at what the boss is working at, and they invariably guess wrong. So the CEO needs to say, "This is what I am focusing on." Then the CEO needs to ask of his associates, "What are you focusing on?" Ask your associates, "You put this on top of your priority list--why?" The reason may be the right one, but it may also be that this associate of yours is a salesman who persuades you that his priorities are correct when they are not. So, make sure that you understand your associates' priorities and make sure that after you have that conversation, you sit down and drop them a two-page note--"This is what I think we discussed. This is what I think we decided. This is what I think you committed yourself to within what time frame." Finally, ask them, "What do you expect from me as you seek to achieve your goals?"
The Transition from Entrepreneur to Large Company CEOAgain, let's start out discussing what not to do. Don't try to be somebody else. By now you have your style. This is how you get things done. Don't take on things you don't believe in and that you yourself are not good at. Learn to say no. Effective leaders match the objective needs of their company with the subjective competencies. As a result, they get an enormous amount of things done fast.
How Capable Leaders Blow ItOne of the ablest men I've worked with, and this is a long time back, was Germany's last pre-World War II democratic chancellor, Dr. Heinrich Bruning. He had an incredible ability to see the heart of a problem. But he was very weak on financial matters. He should have delegated but he wasted endless hours on budgets and performed poorly. This was a terrible failing during a Depression and it led to Hitler. Never try to be an expert if you are not. Build on your strengths and find strong people to do the other necessary tasks.
The Danger Of CharismaYou know, I was the first one to talk about leadership 50 years ago, but there is too much talk, too much emphasis on it today and not enough on effectiveness. The only thing you can say about a leader is that a leader is somebody who has followers. The most charismatic leaders of the last century were called Hitler, Stalin, Mao and Mussolini. They were mis-leaders! Charismatic leadership by itself certainly is greatly overstated. Look, one of the most effective American presidents of the last 100 years was Harry Truman. He didn't have an ounce of charisma. Truman was as bland as a dead mackerel. Everybody who worked for him worshiped him because he was absolutely trustworthy. If Truman said no, it was no, and if he said yes, it was yes. And he didn't say no to one person and yes to the next one on the same issue. The other effective president of the last 100 years was Ronald Reagan. His great strength was not charisma, as is commonly thought, but that he knew exactly what he could do and what he could not do.
How To Reinvigorate PeopleWithin organizations there are people who, typically in their 40s, hit a midlife crisis when they realize that they won't make it to the top or discover that they are not yet first-rate. This happens to engineers and accountants and technicians. The worst midlife crisis is that of physicians, as you know. They all have a severe midlife crisis. Basically, their work becomes awfully boring. Just imagine seeing nothing for 30 years but people with a skin rash. They have a midlife crisis, and that's when they take to the bottle. How do you save these people? Give them a parallel challenge. Without that, they'll soon take to drinking or to sleeping around. In a coeducational college, they sleep around and drink. The two things are not incompatible, alas! Encourage people facing a midlife crisis to apply their skills in the non-profit sector.
Character DevelopmentWe have talked a lot about executive development. We have been mostly talking about developing people's strength and giving them experiences. Character is not developed that way. That is developed inside and not outside. I think churches and synagogues and the 12-step recovery programs are the main development agents of character today.
Tuesday, October 11, 2011
Entry Strategies for New Ventures
(The following one-page essay is taken from the U.S. Department of State publication, Principles of Entrepreneurship.)
Entry Strategies for New Ventures
It is easy to be captivated by the promise of entrepreneurship and the lure of becoming one's own boss. It can be difficult, however, for a prospective entrepreneur to determine what product or service to provide. Many factors need to be considered, including: an idea's market potential, the competition, financial resources, and one's skills and interests. Then it is important to ask: Why would a consumer choose to buy goods or services from this new firm?
One important factor is the uniqueness of the idea. By making a venture stand out from its competitors, uniqueness can help facilitate the entry of a new product or service into the market.
It is best to avoid an entry strategy based on low cost alone. New ventures tend to be small. Large firms usually have the advantage of lowering costs by producing large quantities.
Successful entrepreneurs often distinguish their ventures through differentiation, niche specification, and innovation.
• Differentiation is an attempt to separate the new company's product or service from that of its competitors. When differentiation is successful, the new product or service is relatively less sensitive to price fluctuations because customers value the quality that makes the product unique.
A product can be functionally similar to its competitors' product but have features that improve its operation, for example. It may be smaller, lighter, easier to use or install, etc. In 1982, Compaq Computer began competing with Apple and IBM. Its first product was a single-unit personal computer with a handle. The concept of a portable computer was new and extremely successful.
• Niche specification is an attempt to provide a product or service that fulfills the needs of a specific subset of consumers. By focusing on a fairly narrow market sector, a new venture may satisfy customer needs better than larger competitors can.
Changes in population characteristics may create opportunities to serve niche markets. One growing market segment in developed countries comprises people over 65 years old. Other niches include groups defined by interests or lifestyle, such as fitness enthusiasts, adventure-travel buffs, and working parents. In fact, some entrepreneurs specialize in making "homemade" dinners for working parents to heat and serve.
• Innovation is perhaps the defining characteristic of entrepreneurship. Visionary business expert Peter F. Drucker explained innovation as "change that creates a new dimension of performance." There are two main types of product innovation. Pioneering or radical innovation embodies a technological breakthrough or new-to-the-world product. Incremental innovations are modifications of existing products.
But innovation occurs in all aspects of businesses, from manufacturing processes to pricing policy. Tom Monaghan's decision in the late 1960s to create Domino's Pizza based on home delivery and Jeff Bezos's decision in 1995 to launch Amazon.com as a totally online bookstore are examples of innovative distribution strategies that revolutionized the marketplace.
Entrepreneurs in less-developed countries often innovate by imitating and adapting products created in developed countries. Drucker called this process "creative imitation." Creative imitation takes place whenever the imitators understand how an innovation can be applied, used, or sold in their particular market better than the original creators do.
Innovation, differentiation, and/or market specification are effective strategies to help a new venture to attract customers and start making sales.
[Author Jeanne Holden is a free-lance writer with expertise in economic issues. She worked as a writer-editor in the U.S. Information Agency for 17 years.]
The Strengths of Small Business
Small businesses have flexibility to innovate, create new products, services
(The following one-page essay is taken from the U.S. Department of State publication, Principles of Entrepreneurship.)
The Strengths of Small Business
Any entrepreneur who is contemplating a new venture should examine the strengths of small businesses as compared to large ones and make the most of those competitive advantages. With careful planning, an entrepreneur can lessen the advantages of the large business vis-à-vis his operation and thereby increase his chances for success.
The strengths of large businesses are well documented. They have greater financial resources than small firms and therefore can offer a full product line and invest in product development and marketing. They benefit from economies of scale because they manufacture large quantities of products, resulting in lower costs and potentially lower prices. Many large firms have the credibility that a well-known name provides and the support of a large organization.
How can a small firm possibly compete?
In general, small start-up firms have greater flexibility than larger firms and the capacity to respond promptly to industry or community developments. They are able to innovate and create new products and services more rapidly and creatively than larger companies that are mired in bureaucracy. Whether reacting to changes in fashion, demographics, or a competitor's advertising, a small firm usually can make decisions in days – not months or years.
A small firm has the ability to modify its products or services in response to unique customer needs. The average entrepreneur or manager of a small business knows his customer base far better than one in a large company. If a modification in the products or services offered – or even the business's hours of operation – would better serve the customers, it is possible for a small firm to make changes. Customers can even have a role in product development.
Another strength comes from the involvement of highly skilled personnel in all aspects of a start-up business. In particular, start-ups benefit from having senior partners or managers working on tasks below their highest skill level. For example, when entrepreneur William J. Stolze helped start RF Communications in 1961 in Rochester, New York, three of the founders came from the huge corporation General Dynamics, where they held senior marketing and engineering positions. In the new venture, the marketing expert had the title "president" but actually worked to get orders. The senior engineers were no longer supervisors; instead, they were designing products. As Stolze said in his book Start Up, "In most start-ups that I know of, the key managers have stepped back from much more responsible positions in larger companies, and this gives the new company an immense competitive advantage."
Another strength of a start-up is that the people involved – the entrepreneur, any partners, advisers, employees, or even family members – have a passionate, almost compulsive, desire to succeed. This makes them work harder and better.
Finally, many small businesses and start-up ventures have an intangible quality that comes from people who are fully engaged and doing what they want to do. This is "the entrepreneurial spirit," the atmosphere of fun and excitement that is generated when people work together to create an opportunity for greater success than is otherwise available. This can attract workers and inspire them to do their best.
[Author Jeanne Holden is a free-lance writer with expertise in economic issues. She worked as a writer-editor in the U.S. Information Agency for 17 years.]
It was Ian E. Wilson, Chairman of the General Electric Corporation who noticed that our knowledge is about the past and all our decisions are about the future. Have you ever thought about that? In the next two units we will examine the past and learn from it to move into the future of better and more strategic decisions. Moreover, as part of your time management exercise, you will be asked to manage your time for the two units and all materials for the two units will be provided all at once. Thus, you will have to prepare your own plan when you will do all the tasks required in the two units and submit your work on time. Are you already stressed out? No need to be. Time management and decision making process are skills, like all others—the more you exercise, the better you become at them. You will also learn the basics of stress management and to ease your planning, you will be provided with an empty space of unit 6 that you will have to fill with tasks to ease the planning process for you.
Remember, your work for the two weeks is all included in this unit and it is up to you to manage it: divide it into manageable chunks and allocate time as needed. You will have to decide what you will do and when.
Decisions, Decisions, Decisions
Are decisions made or taken? Grammatically, of course, they are made in English and taken while relying on prior knowledge and experience of others, in French. However, if we stop for a moment to reflect on this significant difference, we might realize that the above noted grammar issue might be revealing common questions that arise with decision making: how do we reach a decision and what kind of conversations based on deep understanding of the issues at hand we must have prior to acting on our decisions. What grammar implies here is that if we follow the English language path, we create the decision making process-step-by-step to make it. Or, if we ascribe to the French language example, we search for the decision to ``take`` it because we might believe that a similar decision exists somewhere in the universe and perhaps someone else has already created it and we could just join in the group to ease the process for ourselves. What do you think?
In your mother tongue are decisions made, taken, or something else happens to them? To what extent do you think this notion of making or taking decisions has an effect on how you reach your decisions? Do you usually try to ask others for advice, or do you consult others, but realize that you have to create YOUR DECISION from A to Z? Are you comfortable with decisions because they are part of life or are you trying to avoid making decisions only to find out that others will gladly do it for you, but you will have to pay the price? Of course, there are many other complicating factors here, and we do not want to imply that Anglophones or Francophones are in any ways better in making or taking decisions, but merely imply a notion that we all differ in viewing and practicing the decision making process. We differ to the point of realizing that there is a significant gap in decision making process that describes one as a Manager and another one as a Leader. We will study in unit 7, that decision making process, like many others might be very much culturally based, thus you, as a student and future business leader will need to be cognizant of your cultural background, biases and tendencies at any times.
In today’s globalized world the issues of collective or individualistic approaches in decision making process are part of our contemporary reality and anyone running a business needs to be aware of existing differences in approaches related to decision making. Based on our make and take example could we state that Francophones tend to be more collective and Anglophones more individualistic when it comes to decisions and that is why there is different verb choice in the two respective languages? Let’s leave this question for now as we will study these issues later while examining the topic of diversity in unit 7.
At this point, though, you do need to ask yourself a question: how did you reach decisions in the past and and how did you learn from good and no so good decisions? Moreover, you need to become cognizant of how your individual preferences could impede making decisions on organisational level, and how to leverage your style to get the most benefit for your future organisation and its employees.
Introduction Whom have you been asking for direction?
One day, Alice came to a fork in the road and saw a Cheshire cat in a tree. `Which road do I take? ‘she asked. Its response was a question. `Where do you want to go? ` Ì don’t know ‘Alice answered. `Then, `said the cat, it doesn’t matter. `
Yes, it does matter where we are going and how are our planning skills. Do you know where you are going? Are you clear about your objectives? Do you understand the process of decision making? In this unit we will examine the decision making process and look at important elements of decision making. It is really important while learning about the decision making process to fully appreciate that we need to live with our decisions, and as leaders, our decisions impact a lot of people who need to live with not only the decisions but also the changed realities. Leaders’ decisions impact all areas of our lives, including performance, environment, budgeting, quality of life, future outcomes related to local and global economies, safety, etc.
When we have to follow the process of decision making, we also need to rely on our questioning skills: Did we take into account all necessary factors? Are we proactive? Do we have biases? What are they? Did we consult the stakeholders? Did we follow someone else’s path or did we have to create a new path? What about consequences? What would be the best future for our corporation? Did we take into account short term and long term consequences? Did we consider implications stemming from creating precedence? Do we have tools or patterns that we could use in the decision making process? What are the expected organisational outcomes?
We have started working on posing strategic questions in the previous two units and you will be able to appreciate in this unit how important it is to pose strategic questions while deciding. You will discover this while continuing to sharpen your asking questions skills in this unit as well.
Wait a moment. Maybe decisions are sometimes made and sometimes taken and some other times. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(fill in the gaps to indicate whatever happens to decision in your mother tongue). Let’s find out.
Visit the following website created by Dr. Hossein Arsham
from the Merrick School of Business, University of Baltimore:
and read the following chapters on Leadership Decision Making:
1. Introduction and Summary
2. How People Avoid Making Serious Decisions
3. When One Should Not Make Serious Decisions
4. How to Make Good Decisions
5. Decisions Concerning Personal Life
6. Problem of Determination of Values and Rank among Values
7. Thinkable Decisions and the Economy of Strategic Thinking
8. What Is Man? Man Has No Nature, But Has History
9. How the Mind Works: From Deciding to Action
10. How to Distinguish among Rumor, Belief, Opinion, and Fact
11. Leadership versus Managerial's Duties and Styles
Time management is the act or process of exercising conscious control over the amount of time spent on specific activities, especially to increase efficiency or productivity. Time management may be aided by a range of skills, tools, and techniques used to manage time when accomplishing specific tasks, projects and goals. This set encompasses a wide scope of activities, and these include planning, allocating, setting goals, delegation, analysis of time spent, monitoring, organizing, scheduling, and prioritizing. Initially, time management referred to just business or work activities, but eventually the term broadened to include personal activities as well. A time management system is a designed combination of processes, tools, techniques, and methods. Usually time management is a necessity in any project development as it determines the project completion time and scope.
Stephen R. Covey has offered a categorization scheme for the hundreds of time management approaches that they reviewed:
* First generation: reminders based on clocks and watches, but with computer implementation possible; can be used to alert a person when a task is to be done.
* Second generation: planning and preparation based on calendar and appointment books; includes setting goals.
* Third generation: planning, prioritizing, controlling (using a personal organizer, other paper-based objects, or computer or PDA-based systems) activities on a daily basis. This approach implies spending some time in clarifying values and priorities.
* Fourth generation: being efficient and proactive using any of the above tools; places goals and roles as the controlling element of the system and favors importance over urgency.
Time management literature can be paraphrased as follows:
* "Get Organized" - paperwork and task triage
* "Protect Your Time" - insulate, isolate, delegate
* "Set gravitational goals" - that attract actions automatically
* "Achieve through Goal management Goal Focus" - motivational emphasis
* "Work in Priority Order" - set goals and prioritize
* "Use Magical Tools to Get More Out of Your Time" - depends on when written
* "Master the Skills of Time Management"
* "Go with the Flow" - natural rhythms, Eastern philosophy
* "Recover from Bad Time Habits" - recovery from underlying psychological problems, e.g. procrastination
More unconventional time usage techniques, such as those discussed in "Where Did Time Fly," include concepts that can be paraphrased as "Less is More," which de-emphasizes the importance of squeezing every minute of your time, as suggested in traditional time management schemes.
In recent years, several authors have discussed time management as applied to the issue of digital information overload, in particular, Tim Ferriss with "The 4 hour workweek", and Stefania Lucchetti with "The Principle of Relevance"
 Time management and related concepts
Time management has been considered as subsets of different concepts such as:
* Project management. Time Management can be considered as a project management subset and is more commonly known as project planning and project scheduling. Time Management has also been identified as one of the core functions identified in project management.
* Attention management: Attention Management relates to the management of cognitive resources, and in particular the time that humans allocate their mind (and organizations the minds of their employees) to conduct some activities.
* Personal knowledge management: see below (Personal time management).
 Conceptual effect on labor
Professor Stephen Smith, of BYUI, is among recent sociologists that have shown that the way workers view time is connected to social issues such as the institution of family, gender roles, and the amount of labor by the individual.
 Personal Time Management
Time management strategies are often associated with the recommendation to set personal goals. These goals are recorded and may be broken down into a project, an action plan, or a simple task list. For individual tasks or for goals, an importance rating may be established, deadlines may be set, and priorities assigned. This process results in a plan with a task list or a schedule or calendar of activities. Authors may recommend a daily, weekly, monthly or other planning periods associated with different scope of planning or review. This is done in various ways, as follows.
Time management also covers how to eliminate tasks that don't provide the individual or organization value.
 Task list
A task list (also to-do list or things-to-do) is a list of tasks to be completed, such as chores or steps toward completing a project. It is an inventory tool which serves as an alternative or supplement to memory.
Task lists are used in self-management, grocery lists, business management, project management, and software development. It may involve more than one list.
When one of the items on a task list is accomplished, the task is checked or crossed off. The traditional method is to write these on a piece of paper with a pen or pencil, usually on a note pad or clip-board.
Writer Julie Morgenstern suggests "do's and don'ts" of time management that include:
* Map out everything that is important, by making a task list
* Create "an oasis of time" for one to control
* Say "No"
* Set priorities
* Don't drop everything
* Don't think a critical task will get done in spare time.
Numerous digital equivalents are now available, including PIM (Personal information management) applications and most PDAs. There are also several web-based task list applications, many of which are free.
 Task list organization
Task lists are often tiered. The simplest tiered system includes a general to-do list (or task-holding file) to record all the tasks the person needs to accomplish, and a daily to-do list which is created each day by transferring tasks from the general to-do list.
Task lists are often prioritized:
* An early advocate of "ABC" prioritization was Alan Lakein. In his system "A" items were the most important ("A-1" the most important within that group), "B" next most important, "C" least important.
* A particular method of applying the ABC method assigns "A" to tasks to be done within a day, "B" a week, and "C" a month.
* To prioritize a daily task list, one either records the tasks in the order of highest priority, or assigns them a number after they are listed ("1" for highest priority, "2" for second highest priority, etc.) which indicates in which order to execute the tasks. The latter method is generally faster, allowing the tasks to be recorded more quickly.
* Another way of prioritizing compulsory tasks (group A) is to put the most unpleasant one first. When it’s done, the rest of the list feels easier. Groups B and C can benefit from the same idea, but instead of doing the first task (which is the most unpleasant) right away, it gives motivation to do other tasks from the list to avoid the first one.
* A completely different approach which argues against prioritising altogether was put forward by British author Mark Forster in his book "Do It Tomorrow and Other Secrets of Time Management". This is based on the idea of operating "closed" to-do lists, instead of the traditional "open" to-do list. He argues that the traditional never-ending to-do lists virtually guarantees that some of your work will be left undone. This approach advocates getting all your work done, every day, and if you are unable to achieve it helps you diagnose where you are going wrong and what needs to change.
 Software applications
Modern task list applications may have built-in task hierarchy (tasks are composed of subtasks which again may contain subtasks), may support multiple methods of filtering and ordering the list of tasks, and may allow one to associate arbitrarily long notes for each task.
In contrast to the concept of allowing the person to use multiple filtering methods, at least one new software product additionally contains a mode where the software will attempt to dynamically determine the best tasks for any given moment.
Many of the software products for time management support multiple users. It allows the person to give tasks to other users and use the software for communication
In law firms, law practice management software may also assist in time management.
Task list applications may be thought of as lightweight personal information manager or project management software.
 Attention Deficit Disorder
Excessive and chronic inability to manage time effectively may be a result of Attention Deficit Disorder (ADD). Diagnostic criteria include: A sense of underachievement, difficulty getting organized, trouble getting started, many projects going simultaneously and trouble with follow-through.
* Prefrontal cortex: The prefrontal cortex is the most recently evolved part of the brain. It controls the functions of attention span, impulse control, organization, learning from experience and self-monitoring, among others. Some authors argue that changing the way the prefrontal cortex works is possible and offers a solution.
 Dwelling on the lists
* According to Sandberg, task lists "aren't the key to productivity [that] they're cracked up to be". He reports an estimated "30% of listers spend more time managing their lists than [they do] completing what's on them".
* This could be caused by procrastination by prolonging the planning activity. This is akin to analysis paralysis. As with any activity, there's a point of diminishing returns.
 Rigid adherence
* Hendrickson asserts that rigid adherence to task lists can create a "tyranny of the to-do list" that forces one to "waste time on unimportant activities".
* Again, the point of diminishing returns applies here too, but toward the size of the task. Some level of detail must be taken for granted for a task system to work. Rather than put "clean the kitchen", "clean the bedroom", and "clean the bathroom", it is more efficient to put "housekeeping" and save time spent writing and reduce the system's administrative load (each task entered into the system generates a cost in time and effort to manage it, aside from the execution of the task). The risk of consolidating tasks, however, is that "housekeeping" in this example may prove overwhelming or nebulously defined, which will either increase the risk of procrastination, or a mismanaged project.
* Listing routine tasks wastes time. If you are in the habit of brushing your teeth every day, then there is no reason to put it down on the task list. The same goes for getting out of bed, fixing meals, etc. If you need to track routine tasks, then a standard list or chart may be useful, to avoid the procedure of manually listing these items over and over.
* To remain flexible, a task system must allow for disaster. A disaster occurs constantly whether it is personal or business-related. A company must have a cushion of time ready for a disaster. Even if it is a small disaster, if no one made time for this situation, it can blow up bigger, causing the company to bankruptcy just because of poor time management.
* To avoid getting stuck in a wasteful pattern, the task system should also include regular (monthly, semi-annual, and annual) planning and system-evaluation sessions, to weed out inefficiencies and ensure the user is headed in the direction he or she truly desires.
* If some time is not regularly spent on achieving long-range goals, the individual may get stuck in a perpetual holding pattern on short-term plans, like staying at a particular job much longer than originally planned.
 Techniques for setting priorities
There are several ways to set priorities.
 ABC analysis
A technique that has been used in business management for a long time is the categorization of large data into groups. These groups are often marked A, B, and C—hence the name. Activities are ranked upon these general criteria:
* A – Tasks that are perceived as being urgent and important,
* B – Tasks that are important but not urgent,
* C – Tasks that are neither urgent nor important.
Each group is then rank-ordered in priority. To further refine priority, some individuals choose to then force-rank all "B" items as either "A" or "C". ABC analysis can incorporate more than three groups.
ABC analysis is frequently combined with Pareto analysis.
 Pareto analysis
This is the idea that 80% of tasks can be completed in 20% of the disposable time. The remaining 20% of tasks will take up 80% of the time. This principle is used to sort tasks into two parts. According to this form of Pareto analysis it is recommended that tasks that fall into the first category be assigned a higher priority.
The 80-20-rule can also be applied to increase productivity: it is assumed that 80% of the productivity can be achieved by doing 20% of the tasks. Similarly, 80% of results can be attributed to 20% of activity. If productivity is the aim of time management, then these tasks should be prioritized higher.
It depends on the method adopted to complete the task. There is always a simpler and easy way to complete the task. If one uses a complex way, it will be time consuming. So, one should always try to find out the alternate ways to complete each task.
 The Eisenhower Method
A basic "Eisenhower box" to help evaluate urgency and importance. Items may be placed at more precise points within each quadrant.
All tasks are evaluated using the criteria important/unimportant and urgent/not urgent and put in according quadrants. Tasks in unimportant/not urgent are dropped, tasks in important/urgent are done immediately and personally, tasks in unimportant/urgent are delegated and tasks in important/not urgent get an end date and are done personally. This method is said to have been used by U.S. President Dwight D. Eisenhower, and is outlined in a quote attributed to him: What is important is seldom urgent and what is urgent is seldom important.
 POSEC method
POSEC is an acronym for Prioritize by Organizing, Streamlining, Economizing and Contributing.
The method dictates a template which emphasizes an average individual's immediate sense of emotional and monetary security. It suggests that by attending to one's personal responsibilities first, an individual is better positioned to shoulder collective responsibilities.
Inherent in the acronym is a hierarchy of self-realization which mirrors Abraham Maslow's "Hierarchy of needs".
1. Prioritize - Your time and define your life by goals.
2. Organizing - Things you have to accomplish regularly to be successful. (Family and Finances)
3. Streamlining - Things you may not like to do, but must do. (Work and Chores)
4. Economizing - Things you should do or may even like to do, but they're not pressingly urgent. (Pastimes and Socializing)
5. Contributing - By paying attention to the few remaining things that make a difference. (Social Obligations).
Thursday, September 29, 2011
Entrepreneurship Aids the Economy
Most economists agree that entrepreneurship is essential to any economy
Entrepreneurship Aids the Economy
Most economists agree that entrepreneurship is essential to the vitality of any economy, developed or developing.
Entrepreneurs create new businesses, generating jobs for themselves and those they employ. In many cases, entrepreneurial activity increases competition and, with technological or operational changes, it can increase productivity as well.
In the United States, for example, small businesses provide approximately 75 percent of the net new jobs added to the American economy each year and represent over 99 percent of all U.S. employers. The small businesses in the United States are often ones created by self-employed entrepreneurs. "Entrepreneurs give security to other people; they are the generators of social welfare," Carl J. Schramm, president and chief executive officer of Ewing Marion Kauffman Foundation, said in February 2007. The foundation is dedicated to fostering entrepreneurship, and Schramm is one of the world's leading experts in this field.
Others agree that the benefits of small businesses go beyond income. Hector V. Baretto, administrator of the U.S. Small Business Administration (SBA), explains, "Small businesses broaden the base of participation in society, create jobs, decentralize economic power, and give people a stake in the future."
Entrepreneurs innovate and innovation is a central ingredient in economic growth. As Peter Drucker said, "The entrepreneur always searches for change, responds to it, and exploits it as an opportunity." Entrepreneurs are responsible for the commercial introduction of many new products and services, and for opening new markets. A look at recent history shows that entrepreneurs were essential to many of the most significant innovations, ones that revolutionized how people live and work. From the automobile to the airplane to personal computers - individuals with dreams and determination developed these commercial advances.
Small firms also are more likely than large companies to produce specialty goods and services and custom-demand items. As Schramm has suggested, entrepreneurs provide consumers with goods and services for needs they didn't even know they had.
Innovations improve the quality of life by multiplying consumers' choices. They enrich people's lives in numerous ways - making life easier, improving communications, providing new forms of entertainment, and improving health care, to name a few.
Small firms in the United States, for instance, innovate far more than large ones do. According to the Small Business Administration, small technology companies produce nearly 13 times more patents per employee than large firms. They represent one-third of all companies in possession of 15 or more patents.
According to the 2006 Summary Results of the Global Entrepreneurship Monitor (GEM) project, "Regardless of the level of development and firm size, entrepreneurial behavior remains a crucial engine of innovation and growth for the economy and for individual companies since, by definition, it implies attention and willingness to take advantage of unexploited opportunities." The GEM project is a multi-country study of entrepreneurship and economic growth. Founded and sponsored by Babson College (USA) and the London Business School in 1999, the study included 42 countries by 2006.
International and regional institutions, such as the United Nations and the Organization for Economic Cooperation and Development, agree that entrepreneurs can play a crucial role in mobilizing resources and promoting economic growth and socio-economic development. This is particularly true in the developing world, where successful small businesses are primary engines of job creation and poverty reduction.
For all of these reasons, governments may wish to pursue policies that encourage entrepreneurship.
Entrepreneurship: Glossary of Terms
(The following glossary is taken from the U.S. Department of State publication, Principles of Entrepreneurship.)
Angel investors: Individuals who have capital that they are willing to risk. Angels are often successful entrepreneurs who invest in emerging entrepreneurial ventures, often as a bridge from the self-funded stage to the point in which a business can attract venture capital.
Assets: Items of value owned by a company and shown on the balance sheet, including cash, equipment, inventory, etc.
Balance sheet: Summary statement of a company's financial position at a given point in time, listing assets as well as liabilities.
Breakeven point: Dollar value of sales that will cover, but not exceed, all of the company's costs, both fixed and variable.
Bridge finance: Short-term finance that is expected to be repaid quickly.
Browser: A computer program that enables users to access and navigate the World Wide Web.
Business incubator: This is a form of mentoring in which workspace, coaching, and support services are provided to entrepreneurs and early-stage businesses at a free or reduced cost.
Business plan: A written document detailing a proposed venture, covering current status, expected needs, and projected results for the enterprise. It contains a thorough analysis of the product or service being offered, the market and competition, the marketing strategy, the operating plan, and the management as well as profit, balance sheet, and cash flow projections.
Capital: Cash or goods used to generate income. For entrepreneurs, capital often refers to the funds and other assets invested in the business venture.
Cash flow: The difference between the company's cash receipts and its cash payments in a given period. It refers to the amount of money actually available to make purchases and pay current bills and obligations.
Cash flow statement: A summary of a company's cash flow over a period of time.
Collateral: An asset pledged as security for a loan.
Copyright: Copyright is a form of legal protection for published and unpublished literary, scientific, and artistic works that have been fixed in a tangible or material form. It grants exclusive rights to the work's creator for a specified period of time.
Corporation: A business form that is an entity legally separate from its owners. Its important features include limited liability, easy transfer of ownership, and unlimited life.
Depreciation: The decrease in the value of assets over their expected life by an accepted accounting method, such as allocating the cost of an asset over the years in which it is used.
E-commerce: The sale of products and services over the Internet.
Entrepreneur: A person who organizes, operates, and assumes the risk for a business venture.
Equity: An ownership interest in a business.
Home-based business: A business, of any size or type, whose primary office is in the owner's home.
Income statement: Also known as a "profit and loss statement," it shows a firm's income and expenses, and the resulting profit or loss over a specified period of time.
Intangible assets: Items of value that have no tangible physical properties, such as ideas.
Internet: The vast network of networks connecting millions of individual and networked computers worldwide.
Inventory: Finished goods, work in process of manufacture, and raw materials owned by a company.
Joint venture: A legal entity created by two or more businesses joining together to conduct a specific business enterprise with both parties sharing profits and losses.
Liabilities: Debts a business owes, including accounts payable, taxes, bank loans, and other obligations. Short-term liabilities are due within a year, while long-term liabilities are due in a period of time greater than a year.
Limited partnership: A business arrangement in which the day-to-day operations are controlled by one or more general partners and funded by limited or silent partners who are legally responsible for losses based on the amount of their investment.
Line of credit: (1) An arrangement between a bank and a customer specifying the maximum amount of unsecured debt the customer can owe the bank at a given point in time. (2) A limit set by a seller on the amount that a purchaser can buy on credit.
Liquidity: The ability of an asset to be converted to cash as quickly as possible and without any price discount.
Marketing: The process of researching, promoting, selling, and distributing a product or service. Marketing covers a broad range of practices, including advertising, publicity, promotion, pricing, and packaging.
Marketing plan: A document describing a firm's potential customers and a comprehensive strategy to sell them goods and services
Networking: (1) Developing business contacts to form business relationships, increase knowledge, expand a business, or serve the community. (2) Linking computers systems together.
Niche marketing: Identifying and targeting markets not adequately served by competitors.
Outsourcing: The practice of using subcontractors or other businesses, rather than paid employees, for standard services such as accounting, payroll, information technology, advertising, etc.
Partnership: Legal form of business in which two or more persons are co-owners, sharing profits and losses. . Patent: A property right granted to an inventor to exclude others from making, using, offering for sale, or selling an invention for a limited time in exchange for public disclosure of the invention when the patent is granted.
Small Business Administration (SBA): Created in 1953, it is an independent agency of the U.S. federal government that aids, counsels, assists, and protects the interests of small business.
Small Business Development Centers (SBDC): SBA program using university faculty and others to provide management assistance to current and prospective small business owners.
Service Core of Retired Executives (SCORE): A non-profit organization dedicated to entrepreneurs' education and the success of small business. It is sponsored by the SBA to provide consulting to small businesses.
Search engine: A computer program that facilitates the location and the retrieval of information over the Internet.
Seed financing: A relatively small amount of money provided to prove a concept; it may involve product development and market research.
Server: A computer system to provide access to information or Web sites.
Social entrepreneur: Someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change. Social entrepreneurs often work through non-profit organization and citizen groups, but they may also work in the private or governmental sector. Many successful entrepreneurs, such as Bill Gates of Microsoft, have become social entrepreneurs.
Sole proprietorship: A business form with one owner who is responsible for all of the firm's liabilities.
Start-up financing: Funding provided to companies for use in product development and initial marketing. It is usually funding for firms that have not yet sold their product commercially.
Trademark: A form of legal protection given to a business or individual for words, names, symbols, sounds, or colors that distinguish goods and services. Trademarks, unlike patents, can be renewed forever as long as they are being used in business.
Unsecured loan: Short-term source of borrowed capital for which the borrower does not pledge any assets as collateral.
Variable costs: Costs that vary as the amount produced or sold varies.
Venture investors: An institution specializing in the provision of large amounts of long-term capital to enterprises with a limited track record but with the expectation of substantial growth. The venture capitalist also may provide varying degrees of managerial and technical expertise.
World Wide Web: The part of the Internet that enables the use of multimedia text, graphics, audio, and video.
Corporate foresight is an ability that includes any structural or cultural element that enables the company to detect discontinuous change early, interpret the consequences for the company, and formulate effective responses to ensure the long-term survival and success of the company.
The motivation to develop the corporate foresight ability has two sources:
- the high mortality of companies that are faced by external change. For example a study by Arie de Geus of Royal Dutch Shell came to the result that the life expectancy of a Fortune 500 company is below 50 years, because most companies are unable to adapt their organization to changes in their environment.
- the continuous need for companies to explore and develop new business fields, when their current business fields become unprofitable. For this reason companies need to develop specific abilities that allow them to identify new promising business fields and the ability to develop them.
Corporate foresight to overcome three major challenges
There are three major challenges that make it so difficult for organizations to respond to external change:
- a high rate of change that can be seen in (1) shortening of product lifecycles, (2) increased technological change, (3) increased speed of innovation, and (4) increased speed of the diffusion of innovations
- an inherent ignorance of large organizations that results from (1) a time frame that is too short for corporate strategic-planning cycles to produce a timely response, (2) corporate sensors that fail to detect changes in the periphery of the organizations, (3) an overflow of information that prevents top management to assess the potential impact, (4) the information does not reach the appropriate management level to decide on responses, and (5) information is systematically filtered by middle management that aims to protect their business unit.
- inertia which is a result from: (1) the complexity of internal structures, (2) the complexity of external structures, such as global supply and value chains, (3) a lack of willingness to cannibalize current business fields, and extensive focus on current technologies that lead to cognitive inertia that inhibits organizations to perceive emerging technological breakthroughs.
Need for corporate foresight
In addition to the need to overcome the barriers to future orientation a need to build corporate foresight abilities might also come from:
- a certain nature of the corporate strategy, for example aiming to be "agessively growth oriented"
- a high complexity of the environment
- a particularly volatile environment
 The five dimensions of the corporate foresight ability
Based on case study research in 20 multinational companies René Rohrbeck proposes a "Maturity Model for the Future Orientation of a Firm". Its five dimensions are:
- information usage describes the information which is collected
- method sophistication describes methods used to interpret the information
- people & networks describes characteristics of individual employees and networks used by the organization to acquire and disseminate information on change
- organization describes how information is gathered, interpreted and used in the organization
- culture describes the extent to which the corporate culture is supportive to the organizational future orientation
To operationalize his model Rohrbeck used 20 elements which have four maturity levels each. These maturity levels are defined and described qualitatively, i.e. by short descriptions that are either true or not true for a given organization.
http://futureorientation.net/2010/07/29/what-is-organizational-future-orientation/ Please read all 5 Responses to What is Organizational Future Orientation (visit each and every response).
What is Organizational Future Orientation
As our first blog entry I would like to introduce Organizational Future Orientation. We define OFO as:
Organizational future orientation (OFO) is the ability to identify and interpret changes in the environment and trigger adequate responses to ensure long-term survival and success.
To tackle the questions how companies become future oriented and thus ensure long-term survival and success, scholars have worked on different levels (see figure below). Some have done research on
- foresight methods such as scenario technique, delphi analysis, etc., that allow us to explore the future, identify alternative futures or make predictions and
- others have worked on corporate foresight as a process. These scholars imply that there is a corporate foresight function, possibly also a corporate foresight unit that generates insights into the future and channels these to other corporate functions such as innovation management, strategic management, corporate development, marketing, or controlling.
- When we talk about organizational future orientation we appreciate that this ability can be build upon a corporate foresight unit, that utilizes foresight methods, but we also include the possibility that a firm builds its future orientation upon other means, such as encouraging all employees to look for external change and empowering them to respond to this change with individual initiative, possibly through corporate venturing schemes.
Are winning companies building future orientation on people or process?
As discussed in our first blog post, we believe that future orientation can be attained both by
- foresight and strategic management processes and by defining responses top-down and
- by encouraging all employees to be on the lookout for external change and empower them to take personal initiative to drive change.
In our last blog post we reported on a case study where we a company had a long track record of successfully reinventing itself repeatedly, thus displaying clearly a high future orientation. But this company has very limited corporate foresight capabilities.
In our new poll we would like your opinion on what is the stronger mechanism to build future orientation: (1) structured process or (2) empowered people.
We are looking forward to your view and if you have example we would love to hear about them. Please share them by leaving a comment to this post.
Organizational Future Orientation at the Academy of Management
This years Academy of Management Annual Meeting in Montreal has attracted over 9000 scholars from around the world. Given the size of the conference there were multiple tracks that touched Organizational Future Orientation.
My paper was discussed in the Organizational Development and Change (ODC) track. For presentation of the findings within the round table presentation I was asked to provide a handout which you can download here. It gives a brief overview of our research and shows our Maturity Model on Organizational Future Orientation and the barriers and process model how weak signals are translated in managerial action.
I also want to express my gratitude to the ODC division for honoring our research with the Rupe Chisholm Best Theory to Practice Paper Award.
Theoretical foundation: Dynamic Capabilities
The dynamic-capabilities theory has been introduced by David J. Teece as an extension of the resource-based view of the theory of the firm. The resource-based view proposes that the ability of a firm to create and maintain a competitive advantage is based on a certain set of strategically relevant resources, which are (1) valuable, (2) rare, (3) difficult (if not impossible) to imitate and (4) non substitutable. Teece observed that in changing environmental conditions, like for example a technological disruption, companies will have to adapt their portfolio of resources.
Take the example of Kodak which was clearly the dominant firm in the imaging market when the market was still based on chemical processes rather than digital image processing. With the change to digital photography Kodak was still well equipped with the needed resources to create a competitive advantage when competing on selling film or processing the printing of images on paper. In the digital world however different resources were needed to provide the customer with a superior imaging experience.
Technologically wise there was the need to develop sensors to translate an image into a digital signal, write software that allows treating digital images and create digital photo albums so that customers can store, share and show their images.
Most likely the needed resources for the digital world would also have included managerial abilities such as forming and managing alliances with partners that can contribute complementary assets, such as software companies or companies that can play complementary roles in the new value chain.
Teece proposes that companies that are in a situation similar to Kodak’s need to have the:
(non-imitable) capacity [...] to shape, reshape, configure, and reconfigure assets (resources) so as to respond to changing technologies and markets[...]
In our view of organizational future orientation we agree with this assumption and add a particular emphasis on the role of the manager to enable and sustain the dynamic capabilities of a firm. As we pointed out in our post on technology scouting the success can only be assured if individuals drive the process that combines intelligence gathering and acting (for example acquiring the needed technologies).
Likewise we do not believe that the process steps of dynamic capabilities proposed by Helfat et al. (2007): (1) search & selection, (2) decision making, (3) configuration & deployment, and (4) implementation can be judged or managed independently, but rather propose that they have to be driven by committed and capable individuals along the whole process.
We therefore propose that for advancing the future orientation of a firm we have to study closer the role of the manager – a view also advocated by strategy-as-practice scholars – who should be able to:
- identify external environmental change
- integrate and interpret different perspectives
- recognize the need to reconfigure the portfolio of strategic resources of the firm
- take action, orchestrate and drive the renewal of the resource portfolio
Theoretical foundation: Strategy as Practice
In our last post on theoretical foundations we described dynamic capabilities. While the dynamic capability perspective can be regarded as the main-stream view in strategic management research, we want to present today an emerging stream: strategy as practice.
The dynamic-capabilities perspective deals with resources and capabilities that organizations have. The strategy-as-practice perspective deals with what actors within organizations do, it deals with rationality, action, interaction and habituation. Strategy as practice is also more open about the outcome. While the traditional strategic management research is ultimately always after organizational performance the strategy-as-practice view recognizes also other achievements such as creation of common goals or change of mental models as outcomes in their own right.
We therefore think that strategy-as-practice view could be more appropriate for research on organizational future orientation and also produce insights that are more actionable and that have higher practical relevance.
Strategic Issue Management – an ability of Organizational Future Orientation
Ansoff introduced the concept of “Strategic Issue Management” in 1980. A strategic issue is “…a forthcoming development, either inside or outside of the organization, which is likely to have an important impact on the ability of the enterprise to meet its objectives.” (Ansoff, 1980). As he adds, an issue can be an emerging opportunity in the organization’s environment or an internal strength, as well as an external threat or an internal weakness, respectively.
A Strategic Issue Management system is described as “…a systematic procedure for early identification and fast response to important trends and events both inside and outside an enterprise” (Liebl, 2003)
Liebl (2003) identifies four functions of a Strategic Issue Management system:
- Early detection of trends and issues in the environment
- Understanding the discontinuities which are imminent because of the trends and issues
- Assessment of the resulting strategic implications
- Taking measures
While Environmental Scanning primarily deals with the identification of issues, the concept of Strategic Issues Management puts more emphasis on monitoring issues and reacting to them. The issue life cycle was introduced by Downs as a model for the development of an issue throughout time (Downs, 1972). A common visualization of the issue life cycle is shown in the figure below, which characterizes the issue from its emergence until its disappearance.
It is shown that the opportunity for an organization to react upon an issue (freedom of action) decreases throughout time in several aspects:
- time pressure for effective communication or strategic realignment increases.
- the range of possible activities for influencing the events at hand – a legislative procedure, for instance – decreases.
At the same time, the organization’s costs of responding increases over time (Liebl, 2000) In addition a interest curve can be defined that reflects public interest in an issue. The rapid increase of the curve is due to the fast dessimination of information and opinion through the various media channels. The public attention than puts pressure on policy makers to take actions such as launching legislative initiatives. However the attention also decreases rather fast as public interest is difficult to maintain for long over time (Liebl, 2003)
For Organizational Future Orientation we hypothesis that issue management inside an organization follows a similar sequence. That could mean that corporate foresight activities would help to detect the emergence of an issue early. But at the same time corporate foresight needs also to interprete the impact of the issue and propose an adequate response to it while the attention of internal stakeholders is still high. If the attention is already starting to drop the risk is that no action will be taken.
This blog article builds on the master thesis of Sebastian Knab.
Re-visit your questions that followed reading the Masi Center Learning Perspectives- part 1 and part 2 in unit 3 (full document was attached). You studied the strategic learning approaches described throughout the two chapters of the Masi book and now is the time to assess how can answering the questions you posed help you in achieving a corporate insight. One example of such a question that you could copy from the text was: What problem were we trying to solve? An example of a question that you might have wanted to pose was: What were we trying to avoid? What other questions did you ask? What are your responses now?
Re- visit http://www.forbes.com/2010/04/20/global-2000-leading-world-business-global-2000-10-intro_2.html and choose one company (Mac Donalds, for instance) and list at least three corporate foresights based on Forbes analysis (provided or at least eluded to in the text).
The World's Leading CompaniesScott DeCarlo, 04.21.10, 06:00 PM EDT
This comprehensive report analyzes the world's biggest companies and the best-performing of these titans.The Forbes Global 2000 are the biggest, most powerful listed companies in the world. These global giants usually reorder themselves at a glacial pace, but sometimes--as with the volatile financial sector of late--with more abruptness.
Extreme vagaries of business or poor performance can take them off the list entirely. In any case, our composite ranking is the best snapshot of just how these titans compare. As we show, the corporate dominance of the developed nations is steadily receding. With respect not just to size but to what investors care most about, see our Global High Performers, an elite list of companies that set the pace in their respective industries.
Forbes' ranking of the world's biggest companies departs from lopsided lists based on a single metric, like sales. Instead we use an equal weighting of sales, profits, assets and market value to rank companies according to size. This year's list reveals the dynamism of global business. The rankings span 62 countries, with the U.S. (515 members) and Japan (210 members) still dominating the list, but with a combined 33 fewer entries.
The World's Leading Companies
- In Pictures
- Featured Companies
This year, the following countries gained the most ground: mainland China (113 members), India (56 members) and Canada (62 members). Even Oman and Lebanon are now Global 2000 members. Also gaining a significant presence on our list this year are corporations from Ireland, South Africa and Sweden.
In total the Global 2000 companies now account for $30 trillion in revenues, $1.4 trillion in profits, $124 trillion in assets and $31 trillion in market value. All metrics are down from last year, except for market value, which rose 61%.
An analysis of the Global 2000 shows that despite the turmoil in the financial sector, banks still dominate, with 308 companies in the 2000 lineup, thanks in large measure to their asset totals. The oil and gas industry, with 115 companies, scores high in sales, profits and stock-market value, yet these sectors were not the leaders in growth over the past year. Insurance companies (up 27%) led all sectors in sales growth, while the leaders in profit growth were drugs and biotech firms (up 20%).
Our full list is rich with industry leaders who are making strategic moves to help navigate through these tough economic times. Among them you will find Taiwan's Acer, aiming to become the biggest seller of laptops and netbooks by 2011, and Danish biotech Novozymes, finding new uses for enzymes.
For the past few years we have also identified an important subset of the Global 2000: big companies that also have exceptional growth rates. To qualify as a Global High Performer, a company must stand out from its industry peers in growth, return to investors and future prospects. Most of the 130 Global High Performers have been expanding their earnings at 28% a year and 20% annualized gains to shareholders over the past five years.
Both Acer and Novozymes are on our Global High Performers list, and 77 of the 130 companies on this select list have headquarters outside the U.S. Our list includes global brand names, such as Belgium's Anheuser-Busch Inbev ( BUD - news - people ), H&M ( HNNMY - news - people ) (Sweden) and Honda Motor ( HMC - news - people )(Japan), as well as foreign companies with lower profiles, such as Australian drug company CSL ( CMXHF.PK - news - people ).
To find these global superstars, we analyzed 26 industries of the Global 2000 (we excluded trading companies) and gave each company respective scores for long-term and short-term sales and profit growth; return on capital; debt-to-capital (the lower the better); and total return over five years. Other requirements for the global high performers list: shares traded in the U.S. or Depositary Receipts, positive equity and sales of at least $1 billion.