The success of family companies turns much of modern business teaching on its head

18. April 2015

Date: 18-04-2015
Source: The Economist
Subject: Management theory: Survival of the fittest

THE MODERN THEORY of the firm is the theory of the public company: obsessed with questions such as transaction costs but blind to questions of transmitting wealth to future generations. In numerical terms, this emphasis on the public company is clearly a mistake. Its triumph is limited to the Anglo-Saxon world. The economies of most of the rest of the world—developed as well as emerging—continue to be dominated by family-focused businesses that control a wide range of companies, not just individual firms.

It is also out of date. Talk of the triumph of the Anglo-American public company might have made sense in the post-war era when the British empire still had a glow and the American Century was in full swing (though family companies continued to flourish in both countries). It makes far less sense in an increasingly integrated Europe and in rapidly emerging markets. The world’s fastest-growing region, Asia, is dominated by powerful business houses run by families. Though some of these could no doubt benefit from more focus, a significant number are Schumpeterian entrepreneurs destined for success, thanks to a rare combination of risk-taking and long-termism. Read the rest of this entry »

New research hints at ways of making meetings more effective

3. April 2015

Date: 03-04-2015
Source: The Economist: Free exchange
Subject: Meeting up

WORKING life often seems like an endless sequence of tiresome meetings. Catch-ups, kick-offs and reviews litter the calendars of most professionals. Effectiveness around the conference table can determine success in almost every career. Chief executives spend a third of their time in pow-wows of one sort or another, by one estimate. Monetary policy is usually set by committee; juries deliberate behind closed doors before voting. Yet despite our reliance on meetings, most decisions made by committee are subject to serious and pervasive bias.

In 1785 the Marquis de Condorcet, a French mathematician and philosopher, noted that if every voter in a group has a better-than-even chance of choosing the preferable of two options, and if voters do not influence each other, then large groups of voters are very likely to make the right choice.* The bigger and more diverse the group the better: more people bring more information to the table which, if properly harnessed, leads to improved decisions. But ever bigger meetings imply more time spent in them: few workers would welcome that. And even with more people in the room, all manner of behavioural flaws stand in the way. Read the rest of this entry »

BCG: The most innovative companies of 2014

29. October 2014 Most Innovative Companies 2014BCG Most Inn Cover

Enabling Big Data: Building the Capabilities That Really Matter

5. June 2014
BCG Perspectives:
by Rashi Agarwal, Elias Baltassis, Jon Brock, and James Platt
May 13, 2014

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Business Model Innovation: Ten Lessons from Nonprofits

16. August 2013
 by Zhenya Lindgardt, Wendy Woods, Charles Hendren, and Brenda Thickett July 18, 2013

What keeps business leaders up at night? If it’s not their company’s ability to streamline operations and lower costs, it’s whether their teams have the vision to see future opportunities and the flexibility to pursue those opportunities faster and more profitably than competitors.

Companies aim to improve their performance every day, but in many cases, doing business a little better is not enough. Bold, game-changing moves are risky, however, so many companies wait until their backs are against the wall before they start rethinking their business models. But by then, they may lack the cash flow, capabilities, and customer goodwill to turn things around or optimize the value of a growth opportunity.

The good news is that business model innovation (BMI) is a capability that can be developed. BMI involves changing multiple components of a business with the goal of redefining how it operates or delivers value. (See “Value Proposition + Operating Model = Business Model.”) In many cases, looking beyond one’s own sector can provide new insights and inspiration. Private-sector companies can learn much from the social sector because nonprofits frequently need to reinvent themselves in the face of significant challenges and constraints.

Value Proposition + Operating Model = Business Model

Value Proposition + Operating Model = Business Model

In essence, a business model describes how a company operates and delivers its value proposition to its customers. Reinventing that business model can help companies raise the value bar in intensely competitive markets or respond to regulatory or technological shifts that demand fundamentally new ways of operating. BMI can also help businesses compete more effectively in economic downturns by allowing them to lower prices and win share, for instance, or aggressively compete in game-changing ways.

Business models have six components. (See the exhibit “What Is a Business Model?”) The first three—the company’s product or service offering, the market segments the company is targeting, and how the company will make money—are the company’s overall value proposition. The other three components—the company’s value chain, cost model, and organization—relate to the assets and activities the company will own, which it will rent or outsource, and how the company will be organized. These decisions reflect the company’s operating model. BMI involves changing multiple components simultaneously in a coordinated manner, with the goal of delivering a superior value proposition that redefines the company’s basis of competition. Read the rest of this entry »

Management consulting: To the brainy, the spoils

16. May 2013

Date: 16-05-2013
Source: The Economist

As the world grows more confusing, demand for clever consultants is booming

ELITE management consultancies shun the spotlight. They hardly advertise: everyone who might hire them already knows their names. The Manhattan office that houses McKinsey & Company does not trumpet the fact in its lobby. At Bain & Company’s recent partner meeting at a Maryland hotel, signs and name-tags carried a discreet logo, but no mention of Bain. The Boston Consulting Group (BCG), which announced growing revenues in a quiet press release in April, counts as the braggart of the bunch.
Strategy consulting firms
Consultants have a lot to smile about (see table). The leading three strategy consultancies have seen years of double-digit growth despite global economic gloom. In 2011, the last year for which Kennedy Information, a consulting-research group, has comparable revenue numbers, Bain grew by 17.3%, BCG by 14.5% and McKinsey by 12.4%. All three are opening new offices.

Big trends that befuddle clients mean big money for clever consultants. Barack Obama’s gazillion-page health reform has boosted health-care consulting; firms would rather pay up than read the blasted thing. The Dodd-Frank financial reform has done the same for financial-sector work. Energy and technology are hot, too.

Companies are reluctant to talk about their use of consultants, and consultancies are relentlessly tight-lipped. Bain is said to use code-names for clients even in internal discussions. Such secrecy makes this a hard industry to analyse.

It also lets stereotypes flourish. McKinseyites are said to be “vainies” (who come and lecture clients on the McKinsey way). BCG people are “brainies” (who spout academic theory). And the “Bainies” have a reputation for throwing bodies at delivering quick bottom-line results for clients.

In fact, the big three all learn from each other. All three now use their alumni networks to gather intelligence and generate business—something McKinsey is famous for. All three stake some of their fees on the success of their projects, a practice once associated with Bain. And all three show off their big ideas to the wider public, as BCG’s founder was once among the few to do. Read the rest of this entry »