Year: 2007

Corporate Governance: Mission Accomplished?

Stop the presses. The president launched a “corporate fraud prevention” task force. 

Another mission accomplished? 

Now, back to reality! 

This press release is no different than others coming out of a government body – high on process; low on results. The record of “accomplishment” is an exercise in “creative writing” – where are these 150 criminals? 

This raises two fundamental questions:

  • What role, if any, does the government have in corporate governance? 
  • Why are the shareholders asleep at the wheel?
  • Aren’t they supposed to be taking care of their own investments? 

In a free market economy, the only protection of property is inherent in the fundamental that drives such an economy – self interest. If shareholders do not pay attention to their own investments, this or any other government will certainly not. First, there is an issue of scale – no government is big enough to know what is going on in a $14 trillion economy! Then there is the issue of competence – when was the last time you saw a brilliant bureaucrat? 

And we promise not to discuss the issue of intent – governments are put in place by people who take money from other people to get elected. These other people are usually ones who represent corporate interests and want something in return – remember, this is America and nothing is for free. 

Corporate governance is the responsibility of every shareholder. If you do not demand it, you will not get it. 

P.S.: Oh yeah, lest we forget, now check the date on the press release! How did this task force do over the past 5 years?

eStrategy: Looking Outside the Box

Over the past decade – yes, it has been that long – eBusiness has come a long way. Not far enough but admittedly a long way from where we were a few years ago. Some of you have finally realized that eBusiness is not IT. (For those of you who have, please give a shout out to Gartner who haven’t got that memo) Some of you are saying it out loud. Is it time to take one more baby step?
Let us call this looking outside the box. Thinking outside the box is much abused. But there are other reasons. Read on!
Since eBusiness is, well, “business,” one must look at it as such! A business is nothing without customers. Customer demographics and psychographics dictate a business’ actions. The genesis of a business is when it answers: who is my customer? It sustains if and only if it finds an answer to: how can I serve them profitably?
As luck would have it customers do “live” online. Yippee! Unfortunately, their lives are multi-faceted so they visit more than one “web site”. Go figure! Next I am going to tell you that there is no Santa Claus. How much more of this can you take?
Not just “web sites” in the same industry but from different genres. For example, let us say your business caters to CEOs. A CEO can bank at Bank of America, drive a Lexus, shop at Neiman, get utilities at Con Ed, read Wall Street Journal, buy drugs at CVS…you get the picture?
Hopefully, your website is one of the sites they visit regularly. But that is a discussion for another time! We need to recognize this simple fact if we are to be effective in eBusiness: The game is not just to get the customer to your website; it is to be where the customer is!
Behavioral marketers have figured out this simple fact. So you visit an online car dealer and then go to your favorite news site. What ads do you see there? You guessed it: car ads. You buy nike online; what ads do your friends see on their Facebook page? Nike of course! (Facebook is curtailing this form of advertising as we speak)
Advertising is an obvious choice when it comes to leveraging our newfound knowledge. What else can you do to help your online cause? Well, that is where men will make money and boys will go home!
Yet another timely reminder: When thinking eBusiness, do not think website; think customer!

eStrategy: You are welcome; but you not so much!

Whether you like it or not, you are living on the “animal farm.” Is it time your eStrategy reflected Orwellian thinking?
Strategists often focus on web traffic and for good reason. However, not all visitors are created equal – some are more equal than others. So a single minded focus on traffic without analysis of specific visitors is, more often than not, a wish and a prayer not sound strategy.
Before you spend time and energy, not to mention shareholder dollars, barking at the moon, think!
Organizations spend a lot to get traffic to their website. Advertising dollars are spent; websites created; systems integrated without thought on how they will generate value. In a business world driven by “differentiation” we fail to differentiate between visitors. In an attempt at customer service we serve everybody – the same way.
This futile attempt at getting value from the web drains dollars and delivers disappointment. But there is a more dangerous unintended consequence – we tick off our “valuable” visitors. For they visit us to be served and we fail to serve them properly with our “socialist” eBusiness model where everyone is served the same way. Our message is not focused and the net is that we do not convert visitors into “maximum” dollars – again, a single minded focus on converting “visitors” into “customers” without regard to how much value each customer delivers to our bottom line comes in the way.
Here is a simple rule of thumb: each visitor delivers different value to your business. Apply the 80-20 rule with the zeal of a bigot. Differentiate between visitors and make it obvious. Go to the extreme – actively engage valuable visitors and push, yes push, the less “desirable” ones to your competitors. Believe me, they might not like it but they will understand. They live in this capitalist society too!
Your business model dictates which visitors are more valuable than others – check your levers of competitive advantage to make sure. If a customer visits often and buys nothing then you are better off without that traffic. If they visit often and call more then get rid of them. If they buy lots then provide means to give them personal service. If they buy higher margin stuff then put a bow on the package – if you know what I mean!
Be Orwellian, without shame or guilt, and modify your customer service mantra – all customers are created equal but some are more equal than others.
Go after valuable visitors with your advertising, but more importantly, with everything that your website, nay operations, are all about. Valuable visitors should feel welcome. They should want to interact with you. They should want to buy more from you. And this should be evident from every aspect of your existence not just your website.
Know what they want and deliver it. Ask them if they liked what they saw – passionately kick out what they did not like. Ask them what more can you do for them and deliver it.
Analyze visitor traffic to isolate which ones are more valuable than others. This analysis should start with web log analysis should not end there. An integrated capability – again, a data warehouse is an important component of this capability but not an end all – that separates the wheat from chafe is critical to your success.
If you do not have this capability then you are still playing in the little league. Expect pee wee results. You deserve them.

IT Strategy: Is a trend your friend?

Or foe? 2008 predictions are in; some are in the works. Which one are you going to follow
Tis the season for predictions and trends. My email has its share of notes from editors wanting my opinion on the trends that will shape IT in 2008. Try this one on for size: In 2008 CIOs will stay away from trends and do what is best for THEIR circumstances.
CIOs find themselves in hot water because they follow like sheep the latest trend or quickly ape what others are doing. The old saying: Monkey see, Monkey Do is missing a critical line. So here is the complete version: Monkey see, Monkey Do, So Monkey screw. Yes, an independent survey has made this prediction that blindly following others – aka trend setters – leads to more screw ups than previously reported.
OK, so I made up the survey but hope you get the point.
First, most of these trends are not statistically accurate – they are like those cute surveys/advice in the “10 things to turn on your man” genre no intelligent woman should follow; least of all someone capable of being a CIO.
Second, even if statistically valid, they should not be followed for statistical reason. If you do what the “majority” or “large percentage” or “80%” of the people are doing then are you not relegating yourself to mediocrity? What else is the definition of mediocrity if not following the average?
Third, the whole idea behind business is competitive differentiation – that is how value is created. Period. If your strategy is the same as everyone else’s then how are you getting that differentiation?

So stop following the trends for there is nothing magical about being in the magic quadrant. Follow cold hard facts as they confront you in your environment. If there are lessons to be learnt from others then so be it – but that means learning, analyzing and then applying NOT following.

Is it time to cancel your membership of the “flavor of the month” club?

eStrategy: Have you seen my page?

First it was letters. Then it was the phone. Emails took over where the phone left. The web – flicr et. al. – were then the “visit to grandma’s” for Gen X. You ain’t seen nothin yet!

First it was letters. Then it was the phone. Emails took over where the phone left. The web – flicr et. al. – were then the “visit to grandma’s” for Gen X. You ain’t seen nothin yet!

Granny is on You are all invited to view her page. She updates it regularly with jokes and videos but do not despair – she has your and your children’s pictures too! So bookmark this page because your visits to grandma are going to be the courtesy of Facebook. With $100/barrel oil, these virtual visits are here to stay!

The question is: how do you leverage this fact?

Well, these are the days of Grandma on the web but you cannot use your Grandpa’s web strategy to leverage this trend! The boys are using banner ads and the like to get to their demographic. The men? They are finding ways to create ways to create viral marketing pieces.

Seen a funny video lately? Chances are it was forwarded to you by a friend or you saw it on their Facebbook page. Well, that video is pollinated across the web – i.e. sent to hundreds of thousands of people – by willing bees who charge you nothing. The best part? It is read by almost everyone who gets it in their email because someone they know sent it!

This is just one example of viral advertising on the web. There are many more. So as Facebooks of the world take over the web, you need to polish that web strategy. For Granny’s got a page and she is not afraid to use it. She needs content and where else is she going to get it if not for you?

Governance: Is Transparency Better for Business?

Yes! Even our friends overseas have got this message.
“SOX is killing us” is the usual cry from corporate circles. My question has always been: why do we need a law to do something we ought to be doing in the normal course of business? I mean the least management can do is to provide accurate reports to the owners!
There is plenty of evidence that SOX and its resulting transparency has had a positive impact on companies and their bottom lines. This article once again hits on the issue of the positive affect of governance on corporate profits – yes, it is an intended consequence of governance but sometimes we have to say it out loud!

The New IT Organization

The new CIO is being born. Would you like a new IT organization with that?
There is lot of discussion on the emerging role of the CIO. This discussion is long overdue. Some CIOs thought their role was to implement technology. That would be accurate to the extent that the role of a Chef is to cook. But the key to a CIOs success is in knowing “what to cook!”
While you adjust your puffy hat and get ready to take the heat in the kitchen, you might want to focus one eye – yes, you will look cross eyed when you do but this is all for a good cause – on the design of the kitchen. Yes, I am referring to your organization.
What does the IT Organization look like when the CIO grows up? Can the IT Organization help the CIO grow into their new avatar? Should the IT Organization grow up with the CIO?
All great questions but seldom discussed, as they say, in the “mainstream” media. Not sure who would want to be characterized as “anti mainstream” but to me that would be either innovators or nuts – often they are one and the same. But we digress!
There are three things that will characterize the IT Organization of the future:
  1. It won’t be an IT Organization. CIOs will have to create a business organization that looks, feels, tastes, behaves – you get the picture – as an organization a “business” leader would lead.
  2. It would be a process focused organization. As my teenager would put it, function based organization are, like, so yesterday!
  3. It would comprise of skills organized as “centers of competence” – groups of people with a skill category led by a subject matter expert.The term often used is center of “excellence”; till I see something excellent, I will have to go with competence. I know that is still a stretch but what the heck this is the season to be jolly!
  4. The days of management are over; the days of leadership have begun. Soon this mantra will get off paper and be put in practice
  5. The manager will be transformed into project manager – you lead and initiative with a team cobbled together for that initiative with members picked from the centers of competence. Initiative over means team disbanded.
  6. The key management skill will be vendor relationship management. Every organization will get strategic depth – and yes, cost savings – from outsourcing. The management will remain in-house and the “work” will be performed outside. So your skills, unless you are one of the vendors doing the work, will be in managing vendor relationships. Note that I did not say “managing vendors.” Big difference between the two.
  7. The days of employees are over. Employees, who are units of capacity, will be replaced with subject matter experts who are units of capability. Bye bye life long employment.
So when is this revolution coming? Somewhere around 2050. Till then, management gurus have money to make talking about this new IT organization much like the new CIO. As they say time is money. Ciao!

Is Excessive CEO Pay Hurting Business?

If the average CEO’s pay is 364 times the average Joe’s pay, does it signal a fundamental breakdown in governance?

When we think of governance invariably our mind goes to the negative – stopping, preventing, punishing etc. Rarely do we stop to think of the need for positives such as rewarding good behavior when governing.

It is for this reason that I believe that governance and leadership compensation are inextricably linked. Rewarding good leadership behavior is critical to meeting the primary objective of good governance – creating shareholder value.

However, when does this reward get to be a liability for governance? When it is disproportionate.

How do we know when we have stepped into disproportionate territory? As justice Stewart once commented on the definition of obscenity: “I know it when I see it,” disproportionate is often at display to an impartial person. If the CEO makes 364 times the average worker, I consider it disproportionate. If the CEO gets a bonus while the company’s stock is going down, I consider it disproportionate.

Quite often the board – especially the compensation committee – are happy to give their friend and benefactor the CEO an open check book. Shareholders take notice of this. Employees take notice of this. The immediate direct reports of the CEO take notice of this.

Read the report>>

Born Again Corporations

When it comes to governance, an apology is a good thing. Its impact however depends on its sincerity!

It happens.

Michael Vick – ex-falcons quarterback – likes to torture dogs. He met Jesus recently as he was putting in a guilty plea. As expected, the good lord does visit the scum to help them through what they have done to others – in this case hapless animals who never did anything to Mr. Vick. One must applaud Mr. Vick’s newfound piety but it would have helped had he sought the good lord before starting his gulag in West Virginia.

Senator Vitter is a “family values” man. Only his family values are cheating on his wife with prostitutes. Prostitution is illegal in this country so Mr. Vitter may have also broken the law. His piety awoke when he got caught in the DC Madam scandal. If Mrs. Vitter is a woman of her word then by now Mr. Vitter is “member less”, if you know what I mean. One can only expect a “humbled” – in all senses of the word – Mr. Vitter getting his “massage” at home and keeping his hypocrisy there as well.

To borrow his own words, Larry Craig “has been a bad boy. He has been a naughty boy. He has been a nasty, naughty, bad boy.” You see, the Senator from Idaho is also a “family values” champion. His family values are on display in public rest rooms soliciting other men. Unfortunately, in a Wisconsin airport restroom he solicited an undercover officer. Then, after almost a month of being booked, he pleaded guilty to the charges. He is cheating on his wife and being a hypocrite bashing gays while being one himself. And the cherry on top? Breaking the law? Not really. Mr. Craig shamelessly stands there, in the face of overwhelming evidence, and presents defenses – one more preposterous than the other!

These cases are many and they will continue till we launch a war on hypocrisy. (if there is any money to be made, you know who will sign up immediately!)

Well, some corporations have their own awakening after their stock plunges 28% because of bad governance. Meinl Land did not disclose stock buybacks in advance and investors punished them where it hurts the most – the pocket book!
Now, the company is going to improve governance and transparency. Their new spokesperson? They have a choice between Mr. Vick, Mr. Vitter or Mr. Craig.

Coincidentally, they are all going to be looking for a new gig soon.

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Born Again Corporations

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