Steve Gall at Walden University - Recently Updated Pages

About Steve Gall

SteveGall — Tue, 17 Mar 2009 20:28:21 CDT

Steve’s Bio

I live in Mill Creek Washington, which is about a 40 minute drive north of Seattle. I moved to Washington from Santa Cruz California in 1990.

Work Life

I work as a business process architect, specializing in designing custom work flow automation applications.

I mostly work in the Seattle metro area, but I am also a road warrior on occasion.

Perspective

I believe the ability to manage business processes using a new generation of software automation applications (currently coming on the market) is the next area where organizations will find the greatest cost savings and strategic advantage, rebuilding capabilities for long-term growth and preparing for the 21st century economy

I believe that today, many companies are at a cross-road

What I like most about my profession is when the managers and business users I work with begin to realize the new insights they gain about how their business functions. They suddenly realize that they can have much more accurate conversations about how they do business both internally and with clients.

I also enjoy envisioning the future

Contact information

Email: gallinfo@gmail.com

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Home

SteveGall — Sat, 03 Mar 2007 22:14:27 CST

Welcome to Steve Gall's Portfolio Project Wiki

Here you will find all of Steve's portfolio papers that were completed as part of the Bachelor of Science in Business Administration program at Walden University.

Profile of Steve Gall

Classes Completed

MGMT 100 Developing Student Portfolio

MGMT 1000 Success Strategies in the Online Environment

MGMT 3001 Management in the twenty-first century

MGMT 3002 Marketing

MGMT 3003 Human Resources Management

MGMT 3004 Financial Management

MGMT 3005 Information Systems in Enterprises

MGMT 3101 Ethical Leadership

MGMT 3102 Dynamics of Change

MGMT 3103 Knowledge Management and Organizational Learning

MGMT 3104 Accounting

MGMT 3105 Global Business in the twenty-first century

MGMT 3106 Entrepreneurship/Small Business

MGMT 3107 Critical Thinking & Decision Making

MGMT 5101 Business Capstone Project

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Business Capstone

SteveGall — Thu, 22 Feb 2007 21:19:25 CST

Bachelor of Science in Business Administration Program
MGMT 5101: Business Capstone Project

Stephen Gall

Walden University

Professor John Craddock Ph.D., Instructor

February 21, 2007

Lessons Learned from the Program and the BSG Simulation

On Entering the Program

I entered the program specifically to address the problem of not having a degree in a profession where academic qualifications are considered one important criterion for gaining access to the types of jobs I am otherwise qualified for and which I perform on a daily basis. As a consultant in the technology industry, a basic four-year degree is considered a standard benchmark for beginning one’s career. Even though I was 55 years old, a time when some people consider retiring, I recognize that it was essential for me to finally obtain my degree, especially if I expected to keep working in my field. Preceding my entry to the program, I had been divorced five years earlier, and having relinquished all of my assets, I found myself still struggling to regain a solid financial foothold. I realized that I was not going to be retiring anytime soon. Fortunately, I have very good health, feel great and have a lot of enthusiasm for my ability to continue to contribute in the job market. Consequently, I began the program.

My performance and self-evaluation

I approached the learning process by realizing that I would need to conserve my energy for the long-run; stay organized, don’t get behind, stay on a strict schedule, and constantly monitor my ability to apply time and energy to the various tasks that encompass my lifestyle. On entering the program, I recognized that striving to learn everything possible that was available would not be practical; and perhaps trying for straight-A’s was beyond what I should try to achieve. Indeed, I did not endeavor to pursue the type of learning experience that someone younger and dedicated to a full-time university experience would be able to enjoy. I had many responsibilities including full-time work, raising a daughter, and managing other family and social responsibilities and many things I enjoyed would have to be relegated to ‘second’ place, including exercise, social activities, and relationships. I had to reprioritize much of my life in order to achieve academic success.

On Leaving the Program

I will be leaving the program with the degree that has long eluded me. Will it make a difference in my career? A degree will be a doorway to being able to obtain other professional certifications. Education rarely makes all the difference, but it can be an important difference.

My experience at Walden did not significantly affect my personal growth however. For me, the Walden experience was a reaffirmation of what I already know and believe. With a life-time of experiences already behind me, my personal growth has a much different focus than for those still in their youth and consumed with worldview that comes with youth.

The BSG Simulation

Our ‘team’ consisted of me and one other person. We worked collaboratively by talking on the phone almost every night. I feel the online environment is not really conducive for collaborative work, especially for the type of collaboration needed to be successful at establishing strategy and business decisions; but in a few years it might.

Areas where the SIM was weak as a learning tool:

Our virtual companies could not have real strengths and weaknesses
There were no unique marketing opportunities
There were a limited number of strategies to pursue
There was no customer focus

One theme that ran consistently through the various courses at Walden was that students should learn how to run large multinational corporations, and this idea was reinforced by the simulation. However, this idealized fantasy, that of acting in the role of a big-time corporate executive, does not really prepare students for the realities of the workplace in the twenty-first century, and it may actually do the student a disservice, in my opinion.

My challenges for the future

As a society, we face some big challenges in our immediate future. Some of these challenges are the consequences of the following conditions:

A post-peak oil economy,
A growing cultural divide, due to divergent worldviews, in the U.S. and globally,
The consequences of global warming,
The consequences of unbridled globalization, and the shrinking middle-class.

Americans generally tend to ignore problems until they become a crisis; and because we are a culture of people who view the world with unbridled optimism, no matter what the facts are, it doesn’t look like we are going to be addressing our real issues until they become real crisis. Unfortunately, we have become a people that rely on faith instead of critical thinking and science.

My challenges for the future are not much different than the challenges we all face: staying healthy and affording health care, having enough income to maintain a modest lifestyle, and meeting family responsibilities. My challenges in business include establishing my independence as a consultant, creating a network of clients and referrals, and enhancing my reputation in the industry.

Conclusion

As I’ve gotten older, I am no longer interested in many of the pursuits and goals that my youthful counterparts find so compelling. Of course, we all seek a happy ending to the story, and want to experience a sense of achievement and fulfillment. But the way those needs are met seem to change over time.

I have come to believe that everybody can do at least one thing well, usually a few things pretty-good, and most things bad; same for companies. The key is to recognize one’s limitations, and either work to overcome those limitations, or stick to doing what one does well. But that means giving-up opportunities that seem within reach when in reality, those opportunities may be meant for someone else.

I didn’t actually discover what I was good at until I was 52 years old and was given the opportunity to help model a complex business process. I discovered that I was actually gifted at that endeavor. Consequently, I decided to build a professional career around designing business processes. I decided that, if I was ever going to be successful I would need to specialize in my single core competency; and that meant giving-up other promising opportunities. One interesting aspect of adopting this line of reasoning is that I don’t feel that I have to compete anymore; I just have to execute, in order to be successful. The outcome is that the market tends to recognize my core competency, and because my competency resolves a compelling customer need, I’m able to pay the mortgage.

I have also come to believe that for every person who claims to have used a carefully crafted strategy to find their way to success, there is a person who would admit that luck was as much or more a factor in their success. Actually I have nothing whatsoever against planning as strategizing; I spend more time doing it that almost anyone, but as Bruce Lee once said, “no amount of land swimming prepares you for the water.” Learning to execute effectively is perhaps even more important than having the perfectly defined strategy, I believe.

One can certainly plan the big things like getting a college degree for example, and then work to achieve that goal. But the seemingly mundane decisions we make every day can also have a tremendous impact on our lives. I believe it’s those daily decisions and their execution that over the long-haul makes us successful.

Business decisions are harder. How does one for see the outcome of taking business risks? At some point in everyone’s career or life, we get opportunities to risk our time and money on a business venture. Using the techniques we have learned throughout the Walden program, we can choose to be prepared to plan our way to success. But we shouldn’t forget to also plan for failure, because statistics aren’t on our side.

I think it’s a very good idea to have a grand strategy to one’s life, and the younger you are at figuring out what that is, the better. I didn’t get started until I was in my 50’s so I have some regrets in that regard. What is my grand strategy you may ask? It is to stay as healthy as possible for as long as possible so I can take advantage of life-extension therapies if and when they become available. For me, I don’t care how mundane any given day is, I love life so much I can’t imagine facing the inevitable. With that as my grand strategy, every move I make is made to increase the probability of succeeding at it. Therefore, my strategy is based on thinking long-term and then planning and executing accordingly. Good strategy should be a roadmap to day-to-day decisions, which add-up to long term success. Each of us, to be successful, has got to find that something that motivates us to look toward our grand strategy, and get up and get going each morning!

Thank you for the experiences at Walden.

Regards,
Steve Gall

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Critical Thinking and Decision Making

SteveGall — Tue, 13 Feb 2007 21:29:32 CST

Stephen Gall

Bachelor of Science in Business Administration Program
MGMT 3017
Critical Thinking and Decision Making

Walden University

Professor, Jerry Griffin Instructor

January 13, 2007

Introduction

This paper will argue that Wikipedia, the first iteration of a global knowledge base, represents a fundamental new way to create and manage information. When the academic community dismisses Wikipedia as a valid information resource, it is reverting to avoidance behavior, which is a typical reaction when experiencing something that requires a paradigm shift.

Change happens constantly, but revolutionary change often demands a paradigm shift in thinking in order to understand and adapt as times change. This is especially true with technology changes, because technology changes create new ways of experiencing the world, previously unimagined. Consider how the light bulb, the automobile, or airplanes affected life at the beginning of the twentieth century. These types of technology changes had profound impacts which eventually demanded a paradigm shift in thinking about the world. The technology changes we are experiencing at the beginning of the twenty-first century will be even more disruptive and revolutionary in nature and also require new paradigms.

Certainly the Internet (the Web), which suddenly appeared during the late 1990’s has turned-out to be an extremely disruptive, world-changing technology. Like the car, electric light, and other technologies of their time, the potential consequences of the Internet were only perceived by a few people who could grasp the far reaching consequences that were about to occur. These early adaptors were telling us things we didn’t want to hear. For the rest of us, the Internet was viewed as a curiosity, but just as similar previous technologies, we are all now aware of how the Internet is changing our world, demanding a paradigm shift in thinking about all aspects of both business systems, and the personal and social constructs the Internet affects.

Consider how people normally react and adapt to world-changing events. When we finally recognize the discontinuous, disinter-mediating change happening all around us, and finally realize what it might mean to us in real terms, we change our paradigms to match the new reality; this is a natural adoption mechanism. Paradigms allow us to create a working mental abstract of our reality, and these abstractions are vital it we are to adapt to a changing environment.

The need for new Paradigms

For most of human existence, technology changed slowly. In the past, paradigms were only required by inventions such as fire, the wheel, steal, gunpowder, and mechanical systems. The acceleration of technological change, which became dramatic during the 20th century, required the adoption of many new abstract paradigms. Today’s world is undergoing rapid technological change due to the microchip, the Internet and new scientific discoveries, all of which force us to re-examine our view of the world and how we interact with it. And as in the past, technology changes also often create new ways of using the new technology which were previously unimagined, which compounds the problems associated with rapid technological changes.

There are two factors at play today: 1) the number of disruptive changes brought about by all forms of rapidly-changing technologies, combined with 2) the apparent acceleration of the rate of these changes, i.e. change seems to be changing faster and faster. Rapid change is a phenomenon that puts each of us, as individuals, at risk of losing the ability to understand the consequences of the changes happening around us. As a natural response, we become defensive and may refuse to accept the consequences of the technology. We find it comfortable and convenient to hold-on to our current paradigm, or world-view. Why is it important to recognize and adopt to change? A person’s worldview or paradigm determines how successful one is at adapting; it determines if one is going to be left behind on the adoption curve, and lose the ability to cope well with their environment.

This need for new paradigms also affects communities and groups. Perhaps, the biggest risk to communities who continue to apply pre-paradigm criteria and logical constructs to post-paradigm environments are that those in the community fall behind the adoption curve and eventually fall victim to negative coping mechanisms.

The Acceleration of Change

We often think of change as linier, progressive, and even over time. But if change itself is actually accelerating [Smart, 2007], then we are all at risk of experiencing events and technologies we don’t understand by becoming defensive instead of learning to adopt. Is accelerating change real? Authoritative researchers, such as Ray Kurzweil, postulate that change itself is accelerating. Kurzweil’s research [Kurzweil, 2007] has shown that we are beginning to experience a dramatic acceleration in change, where the nature of change itself becomes exponential. If Kurzweil’s theory is true, then we are currently beginning to experience an era of accelerating technological change that is so unprecedented and disruptive that its disinter-mediating consequences will eventually affect even the most progressive of thinkers, among them scientists and those in the academic community.

Although there is no way of predicting the impact of future technological changes, we are already witnessing so many disruptive events, that it is increasingly difficult to keep all these events in context. In fact, for most of us, many technologies have already become too complex to understand, especially in the area of computer science and information technology.

The Changing Internet Paradigm and Web 2.0

In the context of this discussion, the Internet represents the greatest disruptive new technology which demands a paradigm shift in thinking about our world. The Internet has been around just long enough that even late adaptors are finally accepting many of the changes it brings. But the Internet is evolving rapidly, and there are technologies and usage patterns emerging out of the Internet already that are causing yet another disruption in the Internet paradigm, just when people were growing comfortable with it’s current state. Starting in 2005, a new phenomenon called Web 2.0 [O’Reilly, 2005] emerged with many new disruptive aspects; including both technology factors, and usage factors.

Web 2.0 was a term that was coined to describe the dramatic new infrastructure and software changes that were creating an environment quite different from the standard Web model. Web 2.0 was driven by a convergence of technologies including environmental, social, and informational aspects.
Environmental factors included:

Broadband (high-speed) internet access, which has become ubiquitous
Wireless connectivity is becoming widely available and commonplace
Server farms and high-speed routers, coupled with new operating systems are allowing very fast access to huge data sources
Communication devices (cell phones, PDAs, etc.) are adopting and taking advantage of low-cost TCP/IP
Google, and other providers, have created a giant search mechanism to find web pages that is virtually free to anyone with Internet access

Other factors were creating big changes in business and social usage of the Web:

Web page creation tools are providing people and companies the ability to create a Web presence simply and cheaply
The number of social Websites is expanding rapidly, and software as a service (SaaS) solutions are becoming technically feasible and usable, challenging traditional packaged software
New low-cost information management tools such as weblogs and wikis have negated the need to use traditional office software solutions
People are interacting by using Internet portals, and by joining social groups, and making business transactions online
Companies are moving their IT strategy toward a portal solution (all applications through a Web portal) to gain a strategic advantage
Users are discovering the ability to communicate in a real-time environment that allows non-co-located participation, which is accelerating new forms of social and business interactions

In many ways, the first iteration of the Internet, ‘Web 1.0,’ was an extension of the previous pre-Web paradigm, whereas Web 2.0 finally demands its own paradigm. How does the Web 2.0 model disrupt the pre-Internet and Web 1.0 models?

Pre-Internet and Web 1.0	Web 2.0
The 8 ½ x 11 ‘page’ is the standard for information presentation (still used today in MS Word documents, PDFs, etc.)	The Web page, which has no limits except screen size.
The ‘book’ is the standard format for delivering very large documents about a subject	The Web topic, which can include an endless amount of links to other topics, including multimedia.
The ‘library’ is the standard place to store and find information	A good search engine allows access to the vast resources of the Internet
Newspapers, and journalists	Weblogs, and user-generated content
Definitive/authoritative source	Wisdom of the crowds
Limited number of communications channels	Endless number of communication channels

Open Systems and Wikis

As part of this environmental and usage revolution, a concurrent paradigm is forming around open systems development and free information sources. In his seminal paper, The Cathedral and the Bazaar [Raymond, 1998], Eric Raymond contrasted the differences in paradigms between closed systems and open systems thinking. One of results of open systems thinking is the wiki, the blog, and the search engine. In combination, these tools have caused a dramatic shift in thinking about how systems and information can be created and used. Over the last 10 years, these concepts have evolved and are undeniably successful. [Weber 2004]

Everyone agrees that wiki’s are far from perfect. [Davies, 2004] In fact, their advocates readily admit that their use comes at a cost; there is a lot of ‘slack in the present system.’ But their advocates also recognize the great potential in their justification, and realize that their growing influence will require thinking differently about information.

Wiki technology provides the ability to write to the Web in real-time, which changes the way information can be created.
A wiki combines the ability to leverage real-time communication and information sharing across a global community.
With so many contributors the volume of information grows quickly and becomes vast in volume and depth.
And one of the interesting properties of a wiki is that information added to this collective knowledge base has the property of being self-correcting and self-organizing.
With contributions from so many varied sources, the value proposition of information is quickly moving from closed, controlled environments to open, shared networks, made freely available, and which can be searched and updated in real-time.
This has made the Web more conversational in nature, as people learn to share and communicate in real time. As this environment evolves, a new trust model is also beginning to emerge.
The vast community of users is rethinking and redefining what is meant to be a definitive source, or even an authoritative source in a global environment where contributors are not co-located.
The community is discovering that it can rely on the wisdom from the crowds to determine what can and should be accepted and used. New theories in information technology and information aggregation are emerging.
Using wiki software, people around the world can create and share their knowledge with projects such as Wikipedia.

Conclusion

Wikipedia is the first iteration of an important new type of global knowledge base [Waldman, 2004], one that has vast and far-reaching consequences, and is part of a greater paradigm shift related to the forces of disintermediation caused by the internet. When the academic community dismisses Wikipedia (out of hand), without understanding its long-term ramifications, it is displaying a clear case of mass avoidance behavior, and, in doing so, the community puts itself at risk of falling-behind.

During the second half of the last decade, the Internet seemed to suddenly emerge It is a technology that is driving a new era in globalization, creating new social networks, transforming communication and media, and disinter-mediate every known business model. We have reached an inflection point, a tipping point, or we are about too, in regards to how we conceptualize and use information and tools related to it. This new paradigm has suddenly come upon us, and how we respond to it will determine, each of us, our ability to find success in almost every endeavor that uses information resources.

Will the academic community be able to accept this new paradigm? Many in the academic community seem stuck in pre-internet information usage paradigms. The evidence is that many in the community cannot accept, explain, or understand the success of global wikis such as Wikipedia, when direct analysis [Terdiman, 2005] confirms its accuracy and influence, nor even begin to understand Web 2.0 technologies, usages, or even terminology.

Therefore, we can explain some of the reaction as classic avoidance behavior, where we first lose the ability to understand the nature of the change, and second, when we don't understand the nature of the change, we become defensive, and try to hold-on to our current paradigms and world-view.

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Bibliography

Smart, John, "Brief History of Intellectual Discussion of Accelerating Change," Accessed Jan. 2007, Acceleration Studies Foundation, http://www.accelerationwatch.com/history_brief.html

Kurzweil, Ray, "The Law of Accelerating Returns," Accessed Jan. 2007, KurzweilAI.net, http://www.kurzweilai.net/articles/art0134.html?printable=1

O'Reilly, Tim, "What is Web 2.0 - Design Patterns and Business Models for the next Generation of Software, Sept. 2005, O'Reilly,
http://www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/30/what-is-web-20.html?page=1

Weber, Steven, "The Success of Open Source, Harvard University Press, April 2004, ISBN: 0674012925, http://www.amazon.com/Success-Open-Source-Steven-Weber/dp/0674012925

Raymond, Eric, "The Cathedral and the Bazaar," First Monday.org, 1998, http://www.firstmonday.org/issues/issue3_3/raymond/

Davies, Jonathan, "Wiki Brainstorming and Problems with Wiki Based Collaboration," Dept. of Computer Science, Univ.of York, 2004, http://www-users.cs.york.ac.uk/~kimble/teaching/students/Jonathan_Davies/wiki_collaboration_and_brainstorming.pdf

Waldman, Simon, "Who Knows?" Guardian Unlimited, Oct. 2004, http://technology.guardian.co.uk/online/news/0,12597,1335892,00.html

Terdiman, Daniel, "Study: Wikipedia as accurate as Britannica," CNet news.com, Dec. 2005, http://news.com.com/2100-1038_3-5997332.html

Entrepreneurship

SteveGall — Tue, 13 Feb 2007 21:17:20 CST

Stephen Gall

Examples of Intrapreneural Success

Management 3106 – Entrepreneurship and Small Business

Professor Jim Smucker, Instructor

Walden University

November 14, 2006

Examples of Intrapreneural Success

Intrapreneural Traits

Instead of leaving a company to achieve entrepreneurial success, individuals can create innovation inside an organization. Innovating inside an organization can have advantages over going it alone, including financial safety for the contributors, easier access to start-up capital, support from internal experts, and access to all the required business tools and software needed to start a business.

The big challenge is facing resistance to change that the project may imply, especially if the company’s culture does not value risk. To face this challenge, the intrapreneur needs strong executive sponsorship.

Intraprenueurs tend to share some characteristics of entrepreneurs; they are willing to try new ideas, learn, and adjust accordingly. Also, intrapreneurs want to make a difference, feel a sense of purpose, and a need to improve the customer experience. But unlike entrepreneurs, intrapreneurs are usually not required to commit to personal risk. [Fantiman, 2002]

Examples of Intrapreneural Success

Sun Microsystems – Java
Sun Microsystems actively encourages intrapreneurship through its Advanced Development software division. When a project or a promising idea is proposed, a senior manager is specifically tasked with putting together an intrapreneural team specifically with the task of brainstorming ideas and identifying issues.

Visionaries at Sun are encouraged to come forward and share ideas, create mindshare among coworkers, and get support from management. It is often the case that intrapreneurs who have had success and a proven track record within Sun are able to get their projects funded quickly. [King, Jan. 2004] Ideas often lead to significant funding and the formation of a company in startup mode for bringing the ideas to market.

One way Sun encourages intrapreneurship is to post articles on its web site about how to be successful and develop intrapreneural qualities, such as: how to explain the technology to the non-technical, how to submit papers and present ideas and gaining visibility, how to get others involved, and, interestingly, how to reigning-in one’s passion.

Sun also allows fledgling projects to operate outside established product development rules, which might otherwise handicap a startup effort. [King, Mar. 2004]

Sun's most famous project was the development of the Java programming platform led by James Gosling and Patrick Naughton. Their original task was to figure-out what would be the next big change in computer programming languages. The project, code-named Oak, started small with limited resources, but quickly grew to 15 people. In just over a year, the group had completed and delivered a prototype and a project plan. [Gosling, 2006] [Feizabadi, 1998]

Boeing Company – The Phantom Works
In 1997, Boeing and McDonnell Douglas merged. McDonnell Douglas' Skunk Works was by then famous for producing advanced military prototypes. Boeing decided to continue the tradition by creating the Phantom Works and assigning a president with the mission of converting visions of the future of flight into reality. Boeing allowed the Phantom Works to develop into one of the most respected research and development organization anywhere. At any given time, there may be as many as 500 or more project in progress. Although many of these projects are never destine to become commercialized products, they often provide input to improving current production processes and improvements to current airplane design, or assembly techniques. Phantom Works is successful because it encourages futuristic thinking throughout the organization. [Volker, 2000]

One of the Phantom Works' key success components is collaboration with (Boeings’) business units, partners, government, and academic support, especially by encouraging technology transfer and sharing. Another key success factor is Boeing's Leadership Center, where managers can obtain entrepreneurial training and learn about how to encourage intrapreneurship.

Phantom Works' 4,000 workers are dedicated to creating breakthroughs in all areas of airplane design, performance, quality and cost. The Works wants to be known for innovation, and looks to develop or implement methods and technologies that help the organization meet that goal. [Bell, 2004]

The Works has demonstrated some amazing aircraft including unmanned air vehicles such as the X045A, the Bird of Prey, the Blended Wind Concept airplane such as the X50A Dragonfly, and the X43 Hyper-X space plane. [Cawthon, 2002]

3M – Culture of Innovation, the Post-It
3M Corporation makes over 55,000 products. It is a company that relies on innovation and therefore fosters a culture of creativity, risk taking, and trying new ideas. 3M also promotes the idea of persistence as a key component to innovation. In fact, 3M believes that it must be the world's most innovative company to ensure its very survival.

Key components of 3M’s success are employee satisfaction coupled with a climate of respect that encourages new initiatives. 3M uses the term 'inventorpreneurs' to describe a culture that recognizes that many new ideas must be tried before one idea leads to success. Therefore, 3M recognizes that failure must be tolerated.

Employees are encouraged to share ideas across projects and departments. This concept is what led to the creation of the Post-It note, when one co-worker overheard a group talking about an adhesive that failed to stick properly. The co-worker recognized an unintended application for the adhesive that wouldn’t stick properly, and it lead to the Post-It that 3M is known for today. [Gundling, 2000]

Apple Computer – The iPod
According to Steve Jobs, Apple Computer CEO, one key to success is saying 'no' to most ideas to concentrate on the really important things. Jobs must know because he has been at the forefront of technology, working with other innovators inventing the personal computer, the graphical user interface, and recently, the iPod.

For many years, Apple's culture was focused on finding breakthrough ideas. But often Apple then failed to capitalize on those ideas. Consequently, competitors moved-in before Apple could react. Apple realized that it takes more than just having the ability to develop product ideas; those ideas must be turned into products. Apple's 'heedless reverence for innovation' was actually limiting its ability to follow-through, and product successful products. Apple found itself in the unique position where an over emphasis on creativity was leading to pointless innovation. [Frey, 2003]

Although Apple has always relied on a product-oriented culture with a strong central focus that brings ideas together, Apple now concentrates on single-minded focus once a direction is chosen. Apple has recognized that if too many ideas are pursued, then focus can be lost. Apple also puts engineering and product focus ahead of marketing and sales. Apple takes a disciplined approach to solving specific problems by fostering a climate of innovation and formulating new ideas, and as long as the focus stays 'on track,' thinking 'different' (a previous Apple motto) is highly encouraged. [Burrows, 2004]

Intrapreneural Success Factors

What are some of the factors that lead to intrapreneural success? Using a survey from InfoPool [InfoPool, 2006] and the article, "On the way to creativity: engineers as intrapreneurs in organizations," [Aaltio, 2006] we can identify the following factors:

Intrapreneurs have a clear vision of the future, where the company is headed, and what the company is trying to accomplish. The organization tends to think well into the future. For the intrapreneur, their innovation has a context in which they can direct their efforts.
The organization tolerates risks, mistakes, and even failure. The organizational culture understands the learning process from experience, so mistakes are not covered-up; rather, learning from mistakes is encouraged.
Intraprenuership is encouraged and intrapreneurs are seen as visionaries who can turn ideas into profits. Their leadership is valued.
Intrapreneurs find support, protection, resources and even coaching from management.
The organization is willing to support cross-disciplinary project teams to enhance the probability of innovation and success. Teams often include people from marketing, engineering, and technical subject experts.
Decisions remain within the intrapreneural team and are not pushed up the organizational chain.
Intrapreneurs are given the discretionary time that is needed to explore their ideas without needing permission
Intrapreneurship can be self appointing, and intrapreneurs can recruit other team members. People aren't appointed to innovation roles.
There is a hands-off policy such that intrapreneurial project knowledge is not given to other professional managers who then run the project
Innovators can cross organizational boundaries without interference from bureaucratic management
There is a strong sense of organizational community as a whole, and this community provides a support base, viewing innovation as a worthwhile end
The corporate culture is driven by a sense of constantly improving customer service, understanding the customer, and better meeting customer needs, as opposed to internal politics
The organization is willing to find ways to provide essential services and resources to projects, even if it needs to rout around blocking issues
The organization is willing to develop new performance measurements and metrics that match the type of innovation being tried
Information flows freely among the team and is not bottlenecked or restrained by unnecessary constraints, rules, or management practices. Truthful communication and openness is encouraged.
Innovators, as all employees, are treated with loyalty and feel safe in providing input to innovation
The organization has a strong commitment to ethical responsibility, and attracts employees who have a commitment to serving customers and improving the world
The organization is willing to provide support to innovation that leads to small successes, and is not always looking for home runs

Bibliography

Fentiman, Faye, "Why you don't have to leave the organization to become an entrepreneur," Women Entrepreneurs in Science and Technology Newsletter issue # 2, Oct. 2002, http://westorg.org/nl/featured_articles/intrap_ff_102202.html

King, Carla, "Intrapreneurship: Heady Business," Sun Developer Network, Jan 2004, http://developers.sun.com/toolkits/articles/intrapreneur.html

King, Carla, "Intrapreneurship: From Incubation to Spin Out," Sun Developer Network, Mar. 2004, http://developers.sun.com/toolkits/articles/intrapreneur2.html

Gosling, James "A brief History of the Green Project," 2006, bolgs.sun.com, http://today.java.net/jag/old/green/

Feizabadi, Shahrooz, "History of the World Wide Web," WWW Beyond the Basics, Prentice Hall, 1998, http://ei.cs.vt.edu/book/chap1/java_hist.html

Thomalla, Volker, "Boeing's Phantom Works," Flug Revue Online, 2000, http://www.flug-revue.rotor.com/FRHeft/FRH0010/FR0010f.htm

Bell, William, "Boeing's Phantom Works Works," High Performance Wire, Vol. 13, No. 48, Dec. 2004, http://www.taborcommunications.com/hpcwire/hpcwireWWW/04/1203/108896.html]

Cawthon, Bill, "The Phantom Works: Where Dreams Take Flight," Promotex Online, Nov. 2002, http://www.promotex.ca/articles/cawthon/2002/11-01-2002_article.html

Gundling, Ernest, "The 3M Way to Innovation: Balancing People and Profit," Kodansha International, Jan. 2000, ISBN: 4770024762, http://www.amazon.com/3M-Way-Innovation-Balancing-People/dp/4770024762

Frey, Chuck, "Apple Computer and the Limits of Innovation," Innovation Weblog from Innovation Tools, Dec. 2003, http://www.innovationtools.com/Weblog/innovationblog-detail.asp?ArticleID=334

Burrows, Peter, "The Seed of Apple's Innovation," Business Week Online, Oct. 2004, http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_db083.htm

InfoPool, Innovation Climate Questionnaire, 2006, http://infopoll.net/live/surveys/s27054.htm
Aaltio, Menzel, Ulijn, "On the way to creativity: engineers as intrapreneurs in organizations," Eindhoven Centre for Innovation Studies, The Netherlands Working Paper 06.06, Department of Technology Management, Technische Universiteit Eindhoven, The Netherlands, March 2006, http://72.14.253.104/search?q=cache:olL4N9BmOkYJ:fp.tm.tue.nl/ecis/Working%2520Papers/Eciswp145.pdf+intrapreneurial+success&hl=en&gl=us&ct=clnk&cd=21

//

Marketing

SteveGall — Tue, 13 Feb 2007 21:09:57 CST

Student: Stephen Gall

MGMT 3002 – Marketing

Instructor: Dr. Jim Skertich

October 13, 2005

Walden University

Microsoft in Transition

Introduction

Bill Gates’ vision was to empower personal computers by providing the software that made them work. Bill and Microsoft were at the right place and time with the right product, and Microsoft soon dominated the emerging market segment of personal computer software. Today, Microsoft has global monopoly power, [1 & 2] unlike any other company, owning 98% of the global market for operating systems and desktop software. In fact, most people have never seen or experienced a different computing environment that the one provided by Microsoft.

Organizational Structure

Microsoft still holds to its vision of empowering the desktop computer as the company restructures to respond to industry changes. Recently, Microsoft announced that the company will soon restructure around the following three divisions [3]:
1. Microsoft Platform Products & Services Division -- Includes the Windows Client Group, the Server and Tools Group, and the MSN Group
2. Microsoft Business Division -- Includes the Information Worker Group and the Microsoft Business Solutions Group
3. Microsoft Entertainment and Devices Division -- Includes the Home and Entertainment Group and the Mobile and Embedded Devices Group
Microsoft envisions that this restructuring will succeed through 1) better product and geographic segmentation, 2) better tactics to compete against Linux (a competing operating system and environment) and 3) continued growth in emerging markets.

Business Unit Structure

Currently, Microsoft is divided into the following business units:

Business Unit	Marketing Focus [4]
Client (includes versions of the Windows operating system)	The Client business unit is focusing on market segmentation and piracy prevention for revenue growth. To better serve emerging markets, the Client business unit recently launched pilot programs in Southeast Asia in which Microsoft works with governments to distribute Windows XP Starter Edition, a lower-cost, easier-to-support version in an attempt to recapture a large piece of the market that is lost due to piracy.
Information Worker (includes various versions of Microsoft Office)	This unit is focused on geographic segmentation in an attempt to recapture overseas markets. New products include: the English Writing Assistant, an add-on to the Chinese version of Office providing (Web-based) guidance on English usage; and a forthcoming Japanese product called Office Interconnect.
Server and Tools (includes software for building databases and running server computers).	The focus is to propagate Microsoft's .NET (Dot-Net) platform at the expense of Java and open-source competitors such as Linux. Part of the strategy is to craft messages such as Microsoft's "Get the Facts" campaign, which highlights the advantages of Microsoft platforms.
MSN (includes Microsoft’s online subscription services).	Although dial-up subscribers are leaving the service for broadband access from other providers, Microsoft is focusing on advertising revenues and cost-cutting measures. Up to now, MSN has struggled to find its niche. Once positioned as a competitor to AOL, MSN has seen the most changes in strategy of any business unit.
Home and Entertainment (includes games and Xbox, with a focus on competing with Sony).	This business unit continues to be Microsoft's most expensive, with losses of more than $1 billion in each of the last three years—primarily due to the fact that Microsoft loses money on each Xbox sold. The business unit will probably be the last to become profitable perhaps by FY'07. Microsoft is working to establish partnerships and build well-known game franchises.
Business Solutions (these include enterprise applications for managing large amounts of data and business transactions).	Oracle, PeopleSoft, SAP, and Salesforce.com are seen as Microsoft’s main competitors in this space. This business unit is squarely focused on small and mid-size businesses. Microsoft’s entire enterprise resource planning (ERP) product lines having major releases scheduled for FY'05.
Mobile and Embedded (provides an operating system for embedded microprocessors found in mobile devices).	Microsoft’s smallest business unit is also its fastest-growing, and is focused on addressing new technologies and devices in the mobile and embedded industry.

Culture in Transition

Microsoft is considered a decentralized organization that allows its employees the freedom to decide how to get their work done with little oversight and control. [5] It is, however, becoming a company of competing cultures. While working at Microsoft, I have noticed at least four interacting cultures:

Employees who believe in the Microsoft vision, and faithfully support Microsoft’s management decisions, no matter what criticism the company attracts.
Employees who recognize that Microsoft has problems and would like to see structural changes, including a top management change. [6]
Contractors and consultants who don’t really care about Microsoft policies, preferring a steady paycheck. Most outsiders don’t realize that a majority of the day to day work is done by contractors, not employees.
H1B workers such as WIPRO employees (an Indian corporation providing software engineers) who are focused on Indian culture and values.

Microsoft has two internal opposing leadership bases represented by 1) Steve Ballmer – president of Microsoft, and 2) Robert Scoble – Microsoft’s product evangelist. These diverging leadership bases highlight the different culture within the company. Recently, Steve Ballmer earned the nickname ‘monkey-boy’ for his wild antics at company rallies, where his extreme acting-out has been known to shock his staff. [7] Ballmer is also known for his famous temper, and is known to scream and yell during meetings. He has been known to throw office equipment, such as chairs, across the room after hearing bad news. Many of his subordinates are actually physically afraid of him. [8 & 9]

Many people turn to Robert Scoble for the inside scoop on what Microsoft is doing, [10] and many employees actually consider him the de facto thought leader of Microsoft. Robert Scoble was a famous Web-log writer (blogger) before joining Microsoft, and had a large following among computer aficionados. He was brought on board to bridge the growing divide between Microsoft and the development (software writers) community.

Product Marketing and Differentiation

Microsoft’s flagship product is the Windows operating system and Office applications, which are widely used and most familiar to consumers. Because the products are so common and the installed base so large, Microsoft is actually competing with itself whenever the company introduces newer products. Part of the challenge is to appeal to customers that see the Microsoft products they currently have as already good enough. Microsoft differentiates its product mainly by upgrading the functionality and user interface of the Windows operating system and by changing options and menus mainly in its Office applications. Although Microsoft is always working to make the programs run more efficiently, most people upgrade simply to obtain a more enjoyable user interface experience.

Microsoft often presents a variety of licensing terms and pricing to the consumer to differentiate the product offerings, especially the business consumer in an effort to get them to upgrade. For example, Microsoft has different versions of its Professional Office Suite offered through a Software Assurance program, as a way for users to gain discounts, incentives and rewards for upgrading to current versions and releases. [11]

For corporate customers, Microsoft uses a sliding scale based on delivering more software performance in a "buying up" strategy, which is standard practice in the software industry. In this model, corporate users must obtain a license for individual users, or ‘desktops,’ where the service agreements are based on the number of licenses purchased. Microsoft also differentiates its server products and enterprise applications based on various configurations, features, and performance. [12]

Marketing Issues – Customer Perception and Innovation

Until the mid-1990’s, Microsoft was widely seen as the "good guy" in the computer software market. This was especially true when the company was new because they provided an inexpensive desktop alternative to expensive mainframe systems. But over time, Microsoft has lost its good guy image. Many pundits in the software industry have renamed Microsoft "the Borg" after the fictional race of aliens in Star Trek. It reflects the perception that Microsoft tends to acquire technology from competitors rather than developing products in-house, as well as to Microsoft's ability to overwhelm its opponents by leveraging vastly superior resources. Microsoft is also frequently accused of using trademark law and patent law to control a technology. Microsoft has also been accused of using propaganda under the appearance of being neutral and unaffiliated in an attempt to spread fear, uncertainty, and doubt about its competitor’s products.

Recently, Microsoft's networking- and Internet-related products have become the subject of intense criticism following several high-profile security lapses. [13] The end result is that many business users are starting to distrust Microsoft with their personal data because of the large number of security bulletins and patches that Microsoft has had to issue for its Windows product lines. Because of its size, Microsoft also inherits general negative feelings that the Web itself is inherently insecure, which affects how users react to Microsoft’s Web development platform (.NET) and applications built using it. [14]
Because of these issues, Microsoft often studies how customers perceive the company. Microsoft realizes that it can run all the ad campaigns and road-shows it likes, but if its users keep having to patch their systems because of security breaches, that's what the user will remember. [15]

Meanwhile, Microsoft is having trouble getting customers, especially enterprises, to upgrade to the most recent versions, including Windows XP, Windows Server 2003, and Office 2003. This is troubling because Microsoft is about to release a new version of it’s operating system and Office applications under the name Vista.

Because of image issues, reputation for inflexible pricing models, and security problems, the market may be ready to move away from Microsoft. If that is true, then Microsoft must rebuild its image, or the product benefits simply won't have the impact that Microsoft seeks. [16] Therefore, Microsoft must address customer perception on three fronts, 1) upgrading current applications, 2) security and 3) competition from open source products, which are available for free over the internet. [17]

Consumers often associate Microsoft with innovation. Although Microsoft lays claim to being an innovator and certainly spends a great amount of money on research, the company is actually known in the industry for its lack of innovation. Instead, Microsoft is known for buying smaller innovative companies and integrating those products and services into the Windows world. [18] Microsoft also has a history of buying competing software companies and then aggressively marketing those ideas and products as their own. When Microsoft does produce something truly innovative, the company struggles with successfully matching the product to the market. For example, the Tablet PC was a great innovation that was never able to catch-on. [19]

Product and Business Lifecycle

Microsoft, like most software development companies, determines the direction of software development depending on the business demands of their users. The software lifecycle includes constant upgrades due to changes in technology and customer demands for new features. In this way a solid business case must be made before software changes are made. Microsoft views a software product’s lifecycle in terms of the number of years the company will continue to support the product in a way that allows the product to function with other supported products, and also in terms of providing customer support for the product. If the installed base is very large (for a given product) and Microsoft wants to eliminate the product or come out with a newer version, then Microsoft simply phases-out its custom support. This is especially the case for legacy products more that 10 years old. If there is sufficient customer demand, especially for enterprise applications, Microsoft will offer custom support packages for these products. [20]

Channels of Distribution and the Distribution Process

There are two basic types or methods that are currently used by Microsoft (and other software manufacturers) to distribute its software products: 1) virtual (downloaded), and 2) physical (CD-ROM or packaged). The advantage of virtual delivery is that it is inexpensive for both the provider and the user. The advantage of physical delivery is that the provider (Microsoft) has more control over who receives a copy. Because software is digital of course, there are no real production costs or inventory issues associated with making copies. Issues related to physical products are evident with CD-ROM production and distribution, but they are minor compared to other industries.

Microsoft uses the following distribution channels [21 & 22]:

Internet downloads from the Microsoft Web site
Internet ordering of CD-ROM and delivery via shipping
OEMs (original equipment manufacturers, like Dell computer, etc.), which provide software that is pre-installed by the manufacturer
IAPs (internet access providers), which bundle software with other internet services
ISV’s (independent software vendors), which are vendors acting as a third-party on the behalf of Microsoft and other software manufacturers
(VARs – Value Added Resellers), which are retail stores providing packages software to the public

Microsoft is concerned with licensing [23] of software as a means to control distribution. Microsoft software licenses generally come with one of two kinds of agreements which specify how the purchaser may use the software. [24] The first kind, most familiar to users, is an End User License Agreement (EULA). If you have ever acquired a license for software from a retailer or purchased a new computer with software already installed, then you have probably seen and accepted the terms of a EULA. The EULA generally either comes in the box (on paper or cardstock) or, more commonly, pops-up onscreen when you install new software. You typically must accept the terms and conditions before the software will install. The second agreement type is termed Product Use Rights (PUR) and is similar to the EULA except that it pertains to software licensed through a Microsoft Volume Licensing program. This licensing program is preferred by large corporate users.

As an end-user, you never actually purchase the software, simply the rights to use it. Under the agreement, a user agrees to use rights only, not the right to resell. Because software can be copied and shared so readily, illegal copying, downloading, and copyright infringement issues are a major problem. Microsoft loses millions of dollars each year due to copies that are obtained without the user purchasing a license. For example, most of the software in Asian markets is illegal (unlicensed) copies of Microsoft software. Peer-to-peer internet networks, which also allow illegal copying, are a major concern to Microsoft. Copying of CD-ROMs is also very common. Therefore digital rights management (DRM) is very important to Microsoft.

When it comes to licensing, corporations are much less of a problem. Microsoft allows corporate customers to configure a server to automatically download software from Microsoft based on a service agreement. This form of distribution allows corporations to keep programs updated and add or remove software as use and licensing needs change.

Microsoft has many business partners who use Microsoft tools to build custom software programs that address both general and specific corporate needs. These custom software packages are often made accessible to Microsoft’s corporate partners through the Microsoft network. When distributing enterprise software, configuration issues can be a roadblock to successful implementation. Installation and support, therefore, become important components and are usually part of the service agreement.

Promotional Mix

Throughout the company’s history, the marketing strategy was driven by product launches or major release cycles. Although the general marketing effort is focused on successful product releases, the marketing message is now organized around an annual “go-to-market’ campaign [25], which aligns the message that is communicated from the different product groups, with Microsoft’s general business goals. Using this strategy a GTM can be subdivided into other specific or related GTMs. GTMs are usually designed to be broad in scope, so that sub-GTMs can then be designed to fit a specific vertical market. Microsoft also depends on partners and third-party providers to help with the sales and management of the GTMs. GTMs are owned by the particular product group heading the product launch.

The components of the GTM are:

A broad advertising campaign targeting a specific audience to raise awareness of the specific product and its benefits
Specific marketing aimed at target customers who have an expressed interest in the solution
Training and consulting offered to the target audience, especially if the product requires pre-deployment activities, such as solutions that are implemented within a large IT organization
Targeted project guides and documentation prepared for clients who have previously committed to deploying Microsoft products exclusively, to ensure that projects can be budgeted correctly, and that the possibility of a bad experience is greatly minimized
Special promotions and incentives such as upgrade opportunities and rebates for certain products

Using the Go-To-Market framework, each business unit addresses a unique market and designs its promotional mix accordingly.
Microsoft's own broad promotional message is: "Your potential, our passion,” which is designed to promote the mission of: "unleashing the potential in every person, family, and business, not just to unlock the potential of today's new technologies." This idea of bring dreams and passions to life using Microsoft products is explored through both TV [26] and print [27]. The 2004-5 campaign featured six major TV spots, and eight print advertisements, each delivering a targeted message toward a broad audience. As Microsoft prepares for the release of its latest operating system and upgrade to its Office suite, the company is planning a massive ad campaign that will run for 15 months throughout 11 countries. [28]

Advertising and Promotion Issues

Microsoft is often criticized for misleading advertising. For example, Microsoft has been accused of spreading false rumors about its competitors such as Linux by releasing press statements quoting studies that show how superior the Windows operating system is to Linux when in fact no studies actually existed. Microsoft has been accused of funding studies that are designed to ‘prove’ false claims. A classic example of misleading advertising occurred in 1999. With the Y2K problem looming, Microsoft urged email users to switch to MS Mail because the competitor, Lotus, was not Y2K compliant (which was not true). Those who switched to MS Mail then discovered that MS Mail was in fact not compliant and had to upgrade to MS Exchange. [29]

Because of these deceptive practices, Microsoft has lost a great deal of credibility among many in the software development community. To combat this issue, Microsoft has recently encouraged its employees to blog [30] about how and why Microsoft cares deeply about the software development community. Last year, (2004) Microsoft even hired Robert Scoble, a blogger with a huge following among the technical astute, to evangelize Microsoft’s position on issues in an attempt to win back the trust of the developer community. Mr. Scoble’s role is to converse with the technically-minded public to show that Microsoft wants to listen and collect feedback on a variety of issues. Mr. Scoble is free to explore the issues as he sees them, and so far it has met with good success.
Microsoft is always looking for ways to leverage the internet to get its message out. A good example is the Microsoft Press Pass Web site [31], which is constantly updated with company and product information, including FAQs (frequently asked questions), interviews, discussions, and demonstrations.

Pricing Strategies

Consumers don't really know how to judge the value of software. Therefore, the price of software, which has very little to do with the actual cost of production, is based on its perceived value. Microsoft has created a whole science to software pricing, and actually has a Pricing Group which monitors and evaluates the pricing of all software. Unfortunately for the industry as a whole, Microsoft has been accused of using pricing to stifle competition and increase its monopoly.

Microsoft has always used cleaver pricing tactics. When Bill Gates first modified and marketed DOS, Microsoft’s original operating system, he sold it for $5 to establish market share, then increased the price over time to $25 as competition faded. When a competitor arose, Microsoft quickly dropped the price again. In the 1980's a competitive market for operating systems developed and prices were falling by about 8% a year. But when Microsoft finally gained a monopoly in the 90's, prices started rising by about 13% a year. Microsoft has also used a 'bundling' strategy coupled with predatory pricing to get equipment manufacturers to not use competing products. This predatory pricing practice has gotten Microsoft in trouble with the Department of Justice more than once. [32]

Microsoft also uses differential pricing depending on the country it is selling into. Differential pricing may benefit Microsoft but it does so at the cost of worsening the competitive situation of Microsoft's U.S. customers who pay much more for the same software. [33] Microsoft often gains a huge pricing advantage because users tend to view Microsoft as the default standard for software, making Microsoft products the default choice. By dominating the market, Microsoft can set prices much easier then competition. Because their installed base is so large, consumers also view them as the "safe" choice. This view is propagated in the corporate world due to Microsoft’s software integration with other corporate software systems. A final important factor is the time that must be invested in learning how software products operate. People would need a good reason to take the time to learn a different system. Microsoft has other pricing advantages such as their ability to distribute development costs over so many more customers, coupled with the fact that they also have a huge global marketing machine.

Competitor’s Pricing Strategy and Revenue Model

Microsoft has virtually no competition in the desktop operating system and desktop applications space. However a new form of competition is gaining ground and it is based on a concept called ‘Web as Platform,’ also called Web 2.0. The movement’s leading company is Google. Google and other similar or emerging companies have, so far, not competed directly with Microsoft for a share of the desktop market, and they probably never will. Instead, these Web-based companies are leveraging emerging technologies that undermine the need for a desktop solution. In the Web 2.0 scenario, the Internet itself becomes a giant operating system. Based on the open standards of the internet, a company is free to use this platform to develop applications that build upon previous applications, known as Web services, which pundits claim will have a snowball effect.

Web services also use a completely different revenue and pricing model. Although no clear revenue model has yet emerged some of these models include a fee for service such as monthly fee, usage fee, or subscription fees. The best revenue model is the directed advertising model pioneered by Google. This pricing model is based on the number of visitors that access a specific sponsored link to an advertisement or Web site, and which can be targeted to a specific audience. This model allows a company to give away the actual service and charge advertisers instead of the product users. The paying customers become the advertisers not the service or software users. Because these models are still in their infancy, Microsoft doesn’t have to worry yet. The Linux operating system however, which is developed by a worldwide body of independent software contributors and given away for free, and which is the preferred operating system of the internet, is causing Microsoft to really worry. Microsoft hasn’t developed a pricing model to compete with free software, so the company responds by trying to convince potential Linux users that the Windows operating system is superior, but unfortunately Microsoft seems to be losing this battle.

Emerging Business Models

Three distinct internet-based business models [34] have emerged that represent both challenges and opportunities for Microsoft:

1) Connectivity providers – companies that connect people and businesses to the internet, such as internet service providers (ISPs)
2) Applications providers – companies that provide Web utilities or Web services (search, advertising, and e-commerce)
3) Content providers – companies that provide information or information services

In the 1990s, AOL Time Warner was the only company that tried to provide all three services, and its model failed. So far, successful companies have moved back to providing one business model. However, the latest trend is toward again becoming a hybrid. For example it appears that:

Google and eBay are focusing on both infrastructure and applications
Yahoo and News Corp. are focusing on applications and content
Cable operators, wireless providers, and Telcos are moving toward infrastructure and content
Apple and Sony are focused on devices and content

Where does that leave Microsoft? Because the internet is still in its infancy, Microsoft has had to expend little effort to respond to these market dynamics until very recently. But Microsoft, because of its size, power, and resources, is actually in a position to provide any combination of these services.

Strategic Issues Caused by Emerging Technologies

Emerging and changing technologies are also pressuring business models to change rapidly as companies begin to view themselves as potential competitors in new markets; examples include:

Google has recently announced that it is willing to provide free WiFi access to all of San Francisco, with other cities to follow. This free service would ruin the business model of internet service providers (ISPs) currently serving the region.
eBay has recently acquired Skype, an internet-based (free) “phone” service, putting it directly in competition with wireless and telephone providers.
The major Telco’s are putting together a multi-channel video service to compete with cable operators.

These companies, although they have conceded the desktop to Microsoft, no longer fear Microsoft in these profitable new sectors, and their aggressive moves show that they are willing to take big risks to gain market share.

Microsoft has long worried that the Web itself would become a platform for both software use and related services that negate the need for users to obtain their own personal copies of software. This Web model would ruin the ‘cash-cow’ that Microsoft has long depended on. In the worst-case scenario for Microsoft, the internet itself becomes a software development platform and the need for the Windows operating system vanishes. Even though Microsoft knew that this scenario was possible, it still chose to move forward with its next generation of Windows applications instead of repurposing itself for a transition to the Web. Microsoft still seems to be waiting for a clear strategy to emerge, but the consequences are that it has allowed competitors such as Google, eBay, Yahoo, Apple and others, to gain a strong foothold in emerging markets. In a sense, Microsoft has missed this next wave of innovation, and will now be forced to play catch-up.

Microsoft’s new rivals have also found a different and perhaps a better way to bring software solutions to market, by developing software that inter-connects with other components quickly using open standards. This is the opposite of how Microsoft develops its software. For example, the Windows operating system is now challenged by a world-wide community of developers who donate their time to enhance the Linux operating system, which is freely available. Google, Yahoo, EBay, Apple and others are building platforms that rely on the connectivity of the internet to provide user solutions, and this environment is now preferred by third-party software developers. Microsoft is rightly worried. [35]

Microsoft seems to be faced with a classic innovator's dilemma. Over time Windows has grown bigger, more complicated, and harder to update. To make the situation even worse, nearly all of Microsoft's Web technology development is tied to the Windows platform. So far, Microsoft hasn’t been hurt financially. From fiscal 1997 to the end of fiscal 2005, annual revenues have grown from $11.36 billion to $39.79 billion, and net income has nearly tripled to $12.25 billion annually. But will the burden of success blind Microsoft to the next generation of technology?

Final Recommendation

Microsoft should break itself apart, and split into three separate companies. This would dramatically give the stockholders a new shot at fabulous stock growth, something the company has not seen in recent years. Each company could get back to lean and mean. Another advantage would be that Microsoft would not be under constant oversight by the Justice Department. Yet another advantage would be that both users and developers would view the separate companies in a new light. Each new company would be free to innovate and move forward at a faster pace to meet their new competitors.

According to John Dvorak, this is how it should happen. [36]

1) The Windows part of the company would retain the name Microsoft and own Windows XP, Vista and anything related to operating systems, including the new mobile and embedded OS space
2) The Office suite and all the applications would be spun off into a new corporation with a new name
3) The third company would be focused on the Xbox, including games and hardware

Conclusion

Consider the fact that 15 years ago you could not see pictures on the Web; that ten years ago you could not listen to speech or music on the Web; and that five years ago you could not automatically post and respond using a browser. Today you can do all those things and more. Like a changing tide, things are quickly migrating to the Web. Today, people seem to be using their desktop to create content, and their browsers to consume and share content. Also today, there are some applications that make sense as being internet-based, but many applications still don't fit the internet model. The trend, however, is that soon all applications may be integrated with the internet. Consider also that in between the two worlds of desktop and internet lay a whole new emerging market in mobile computing devices (cell phones, PDAs, etc.) which are quickly changing the habits of how people use both the internet and view the desktop. The internet is dramatically reshaping how we as consumers view and use software and computers and is no doubt changing the market dynamics related to how we will view desktop software produced by Microsoft. Even if the web is the future of software, Microsoft will no doubt be part of that change.

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27/ "Current Corporate Advertising Campaign, 2004 Print Advertisements," Microsoft About Microsoft, Feb. 2004, <http://www.microsoft.com/mscorp/ads/print.asp>

28/ Ina Fried, "Microsoft plans massive Windows ad campaign," CNet News, Business Tech, Apr. 2005, <http://news.com.com/Microsoft+plans+massive+Windows+ad+campaign/2100-1016_3-5674137.html?>

29/ Adam Bisby, "Lotus, Microsoft duel for e-mail crown," Computer Dealer News, Oct. 1998, <http://www.findarticles.com/p/articles/mi_m3563/is_n38_v14/ai_21269503>

30/ Staff, "Chief Humanizing Officer," The Economist, Feb. 2005, <http://www.economist.com/printedition/displayStory.cfm?story_id=3644293&fsrc=RSS>

31/ Microsoft PressPass Information for Journalists <http://www.microsoft.com/presspass/default.mspx>

32/ Graham Lea, "MS pricing strategy exposed – cheap when there's competition, but…", The Register, Jan. 1999, <http://www.theregister.co.uk/1999/01/13/ms_pricing_strategy_exposed_cheap/>

33/ Andrew Watt, "Is Microsoft pricing strategy exporting American Jobs?" Reflecting on Microsoft - tfosorcim.org, Mar. 2004, <http://www.tfosorcim.org/archives/000190.html

34/ Kevin Werbach, "The Great Internet Transformation," Emergic.org, Sept. 2005, <http://www.emergic.org/archives/2005/09/23/index.html#the_great_internet_transformation>

35/ Jim Kerstetter, "Microsoft's nightmare inches closer to reality," CNET News.com, Sept. 2005, <http://news.com.com/2100-1012_3-5877197.html>

36/ John Dvorak, "Microsoft: Prelude to breakup?" MarketWatch, Sept. 2005, <http://www.marketwatch.com/news/story.asp?guid=%7B4AA02389-CC09-40A2-B9D0-A6E3C27BFC9A%7D&siteid=mktw&dist=>

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Management in the 21st Century

SteveGall — Tue, 13 Feb 2007 21:06:49 CST

Stephen Gall

Management Principles in the 21st Century

(MGMT-3001-08)

August 24, 2005

Walden University

Executive Summary

Document Overview

This document briefly describes the Nike Corporation, one of America’s leading shoe and apparel manufacturing companies. It discusses Nike’s humble beginnings from a running track in Oregon to its handling of issues related to factory workers in over 700 factories around the world. The document describes Nike’s economic condition, leadership, corporate culture, diversity practices, and prospects.

During Nike’s growth years, it has faced restructuring issues, industry overcapacity problems, globalization and expansion issues, as well as changes in technology. Nike’s founder, Phil Knight has navigated the company successfully and now the Nike management team is focused on improving fiscal responsibility and instilling strong codes of ethics and conduct throughout its factories worldwide.

Conclusions

Phil Knight’s strong entrepreneurial drive has been instilled in a strong management team that is now poised to take the company into the future, even as Nike retains its sports-based cultural mentality. Design and marketing continue to be a core component of their success. The company’s financials are also strong as Nike moves to incorporate the management of multiple apparel, shoe, and sports brands in an attempt to even-out the changing economies of the sports-apparel industry.

Nike has listened and responded to concerns about workers in low-wage factories, especially in Southeast Asia. Nike’s corporate responsibility practices will continue to shape the working environment and conditions in apparel factories in emerging economies. Nike continues to innovate both technologically and in the implementation of new business practices.

The Nike Corporation – Embracing the Twenty-first Century

Introduction and Background

Nike is the proverbial all-American company that started as a dream and grew to an industry giant. Driven by its leader Phil Knight, it has faced issues with growth and globalization, but has managed to remain a growing force in its industry.
Phil Knight, Nike’s founder, was a University of Oregon accounting major in the 1950s. He was also a middle-distance runner being coached by Bill Bowerman, Oregon track coach who was known for his toughness and dedication. After graduating, Knight attended Stanford Business School, but his mind was on making better running shoes. In 1962, Knight went to Japan to convince Tiger Shoes (now known as Asics) to allow him to be their first U.S. distributor. The name of Knight’s company was Blue Ribbon Sports, and he asked his old coach and friend to be his co-founder. Bowerman is also known for his 1967 book “Jogging” which is attributed with inspiring America’s running craze.

After starting Blue Ribbon, Knight kept his day job as a CPA for Price Waterhouse and found people who cared about his running shoe import business to handle the details. [8] In 1971, Tiger Shoes tried to take over his market and cut Knight out of the U.S. shoe market. Knight responded by creating Nike. Nike’s beginnings include the folk legend and true story of Bowerman using his wife’s waffle iron to fashion the soles of their new running shoes (actually occurred in 1970), and of Knight and Bowerman traveling to running races and selling shoes from the trunk of their car. [8]

Economic Condition

Corporate Scorecard and Employment Numbers

Nike went public in 1980. Sense 2000, the company has grown from $9.5 billion to $14 billion. Sense 2002, stock prices are up about 75%, with a current market cap of $23 billion. Nike is in the best financial position it has been in a decade. [3] Nike’s 2004 revenue was $12 billion with earnings at $1 billion, a 27% increase over 2003. Nike’s annual turnover is $9 billion with net profits of $571 million. [6]

Nike directly employs more than 22,000 people worldwide, with 5,200 people based in Beaverton, Oregon, Nike’s headquarters. Nike products are manufactured in more than 700 factories employing in excess of 550,000 people in over 50 countries. About 40 factories in 8 countries manufacture Nike shoes alone. (Murray & Mathew, [1], p. 3) Nike provides a larger staff to oversee global production, with a staff of over 1,000 global production managers dedicated to production issues. Nike has 70 full-time corporate responsibility managers and inspectors, of which 40 are focused on compliance with the Nike code of ethics.

Market Position

Nike has 40% of the U.S. athletic footwear market and 34% worldwide. Fifty-two percent of sales are outside the U.S. Apparel makes-up one-third of Nike’s business but requires over 600 factories due to U.S. import quotas. (Murray & Mathew, [1], p. 3)
Most of Nike’s expansion and activity into new countries has been driven by the U.S. quota system which places caps on the number of factories allowed to import from a given country. WTO Agreements, due to begin taking effect this year, should dramatically change this dynamic, and will probably cause a restructuring in the apparel manufacturing supply chain as Nike seeks to cut the number of its apparel manufacturers. (Murray & Mathew, [1], p. 4)

Leadership and Organizational Structure

Rough Sailing at Nike

Things have not always been smooth sailing at Nike however. For example, Nike missed the aerobics craze of the early 1980’s, and by 1985 Nike’s revenues had dropped 6%. [8] Knight, who left the company to travel in 1983, felt he had to return to Nike to shake-up the management team and get his company back on track. Traditional business theory would argue that Knight still had a traditional base of management power (command and authority), but he also had the vision and values to respond to crisis by acting as a change agent. (Dessler, [11], pages 19-20)

In the 1990’s, Nike’s revenue was up again, however its profits were lower. It seems that by 1997 the company had hit a plateau due to what the fashion industry terms as an ‘industry overhang,’ that is, too many $100+ sneakers on the market. Nike again missed the slowing trend in sneaker sales. According to business theory, Nike needed to develop a unifying framework for better planning. (Dessler, [11], p. 91)

In 1998, Knight once again left but was back a year later and this time his primary goal was to restructure his management team and provide new focus. Would Knight restructure Nike around products, customers, marketing channels, geographic areas, or refocus on the current matrix organization? (Dessler, [11], pages 136-141)

Management Shake-up

Knight choose to strengthen Nike’s matrix organization. One of Knight’s most important management decisions was to hire Don Blair, who was recruited to be Nike’s CFO. Nike had been without a CFO for two years, from1997 to 1999. Blair was brought on to build a stable fiscal model to balance the boom to bust to boom cycles the company and the industry often experienced, and which caused stock volatility. Blair quickly recognized that he needed to install discipline within a culture that lacked strong fiscal management. At the time, Nike had a reputation as being ‘spend-happy.’ Nike’s culture was oriented toward designers and marketers, not finance and operations. Blair understood the cultural lean toward the creative and wanted to balance it with dose of discipline and financial responsibility. He recognized that the current Nike attitude was not the attitude that goes over well on Wall Street and Nike was loosing credibility in the financial arena. Blair sought to bring: “discipline, higher profits, and steady growth.” [4] But he also quickly realized that he could never totally smooth-out the business cycles due to the fact that Nike is in the fashion business. Instead, he sought steadiness. According to business theory, Blair’s style was to fit the organization to the task and to promote an organic organization because the environment was not stable. (Dessler, [11], page 157-158)

Knight also recognized that the company lacked real discipline in other areas such as operations and supply chain management. Knight’s task was to reorganize senior management to meet these challenges, as well as the social challenges and cultural problems that Nike faced by being a global manufacturer.

William Perez replaced Knight as CEO in 2005. Perez, 57, comes from a privately held company that produced such products as Glade air freshener, Drano, Pledge, Raid, Windex, and Ziploc. [5] The company, S.C. Johnson & Son, under Perez was known for its social responsibility, an area which Nike is working hard to improve. Perez has experience running a portfolio of brands, which is exactly what Nike wants to do by expanding beyond its current single brand recognition today. He is expected to bring process to creativity, and management to multiple brands in many global markets. [5] Nike’s other key executives include Charlie Denson and Mark Parker, acting as Nike’s co-presidents, Dusty Kidd, VP Corporate Responsibility, who’s vision is to ensure that Nike meets its cultural responsibility. His stated goal for the twenty-first century is ‘people, planet and profit.’ (Murray & Mathew, [1 ], p. 6) According to business theory, this cosmopolitan team will no doubt help Nike in its global marketing and staffing (Dessler, [11], p. 36), and refocus Nike around core functions (Ibid., p. 135), within an overall matrix organization. (Ibid., p. 141)

Nike Culture

Phil Knight the Pragmatic Leader

Phil Knight, the company’s founder, who still controls 27% of the company and has an estimated net worth of $6.2 billion [8] is idolized, almost as much as his co-founder Bowerman, who was Knight’s coach and source of inspiration. Bowerman died in 1999 at age 88.

Knight is considered a visionary for many of the company’s breakthrough designs and marketing strategies, and is also thought of as an advertising pioneer. He is known for being very private and even introverted. His office, for example, is rarely visited by anyone inside or outside the company. It is his sanctum fashioned in Japanese style where shoes are forbidden, even Nike shoes. [8] According to business theory, Knight is a transformational leader because his style allows him to implement major changes in attitudes and assumptions. (Dessler, [11], p. 215)

“Knight is not a people person in anyone’s book. And yet he manages to do three things better than just about anyone in the business: hire good people, shuffle them around, and inspire them.” Knight can also be forward and direct. For example, he introduced himself to his ad agency by telling them that he doesn’t believe in advertising. [8] According to business theory, Knight is a creative decision maker who welcomes input but does not rely on a group decision process. (Dessler, [11], p. 83)
Knight founded his company’s culture based on allowing its executives to maintain the freedom to make their own decisions and take the company in new directions. For most of Nike’s existence, the company lacked a truly cohesive internal structure. “One competitor likened Nike’s internal structure to the Winchester Mystery House.” [8] Its against Knight’s nature to step-in to his manager’s decisions. According to business theory, Knight is the kind of leader who sets strategy and objectives, and then lets his management team decide how to meet those objectives. (Dessler, [11], p. 100)

Nike’s People Cultural

In the Nike culture, rebels and creative types are celebrated. [8] “People who don’t get the culture don’t stick around very long. They know they don’t fit. That’s it.” “In the Nike culture, people tend not to flinch at the prospect of change.” [9]
Nike often rejects new managers at the senior level, especially if they don’t have an athletic background. [6] In fact, most Nike executives have a sports-related background. Perez, Nike’s new CEO, fits nicely within Nike’s established culture, as he’s run 11 marathons with a best time of 3:34. On the other hand, Blair, Nike’s CFO, came from PepsiCo and is not a marathon runner or a sportsman. But he has worked hard to earn the respect of the company’s designers and marketers, and his desire to support the creative process is recognized by those groups.

Handling of Diversity and Labor Practices

Responding to Brand Backlash

Nike has been strongly associated with wider problems of global manufacturing, especially issues with low-wage factories and poor working conditions. The sign of the ‘swoosh’ is the most recognized brand representing: ‘athletic excellence, hip authenticity, and playful self-awareness.’ [2] But Nike has been so successful that there is brand backlash in the form of an international anti-Nike movement based on ethical practices in foreign factories. According to business theory, Nike should, and is responding by refocusing and redefining organizational ethical practices throughout its sphere of influence. (Dessler, [11], p. 49)
Much of this displeasure with Nike focuses on working conditions in the apparel and footwear industries. Nike has been severely criticized for not responding to the plight of the workers in third-world sweat-shops, the use of child labor, slave labor, and environmental factors related to the manufacture of its shoes and apparel.

Nike has been taken aback by the overwhelming response to these issues, and the power of the anti-Nike movement. In response according to business theory, Nike should, and has gone all-out to reposition itself as a good corporate citizen by creating ethics policies and codes and ethics programs. (Dessler, [11], pages 50-51)

Refocusing on Corporate Responsibility

Over the previous 20 years, Nike’s business strategy has been to expand into new countries that can provide cheap labor, and also provide stable leadership, a pro-business and liberal trade policy, along with a decent infrastructure. (Murray & Mathew, [1], p. 9) But Nike is now also considering labor factors in their expansion plans, and is highly focused on better corporate responsibility and improved social, ethical, and environmental conditions related to its factory workers. But the problems are really endemic to globalization issues related to manufacturing in general, and are not easy to solve. Today, Nike is committed having the best labor practices in the world, and, realizes that its corporate reputation is on the line. Nike seems determined to instill its core values of trust, teamwork, honesty, and mutual respect to all its factories and partners worldwide. According to business theory, Nike faces many challenges due to cross-cultural practices, different values, as well as language and customs differences. (Dessler, [11], pages 34-35)

Part of the management performance review, directly related to a manager’s financial rewards system, includes the implementation and management of corporate responsibility issues and guidance given in the areas of improved labor practices at the factories. Nike uses a software tool, called SHAPE, for managers to track and evaluate performance, labor, safety, diversity, environmental, and other related factors. The results are audited and reported on by Nike’s external auditor, PricewaterhouseCoopers (PwC). (Murray & Mathew, [1], p. 8) Part of the process is regular interviews of factory workers. PwC reports to a regional compliance manager and the results are taken seriously. If a factory or company is not in compliance, the factory must submit and follow an action plan to come back in to compliance. Nike has also implemented a ‘Transparency 101’ public reporting website (nikebiz.com) to keep the public apprised and informed of health and safety standards and violations. Nike plans to post all factory audit results to this website. It’s Nile’s intent to push these practices down to even the lowest outsourcers and contributing factories, especially in China. Nike is also very focused on improving the labor practices of its suppliers and factories. But unless it has more control over their contractors, Nike has less influence over this type of change.

Health and Safety

Nike is committed to implementing Occupational Safety and Health Administration (OSHA) standards as part of its global policies. A recent audit found that Nike “has reduced the use of petroleum-based chemicals in footwear manufacturing by 87.6% in five years.” (Murray & Mathew, [1], p. 8) Nike is also a founding member of the Fair Labor Association, the Global Alliance for Workers and Communities.

Company Prospects and Future Trends

Strategy

Nike wants to reduce its dependence on the Swoosh brand by acquiring and managing other brands. Recently, Nike has acquired brands representing casual shoes, hockey skates and equipment, skateboard fashions, as well as other sneaker brands and other diverse brands. Nike believes that more brands will help reduce its overall volatility and help the corporation become an even more global company. This new path is the focus of new CEO Perez, who is experienced in multiple markets and multiple brands. [6] According to business theory, Perez is building a modern organization that can quickly refocus its business model as required. (Dessler, [11], p. 15)

Nike is also focused on digital marketing and the use of the internet as a way to enhance brand image. [7] NikeLab.com has been built to showcase Nike’s product innovation and products and to develop a conversation with Nike’s passionate customers. Nike is keenly aware that today’s media environment is fragmenting and moving away from the traditional television advertising model as a way to present its brand. Nike also realizes that the line between advertising and content is blurring. In response, Nike is using NikeLab.com to leverage and understand how to use the internet to better advertise and connect with consumers. When it comes to advertising, according to business theory Nike is using a diversification strategy to leverage its differentiation. (Dessler, [11], pages 115 and 117)

Issues and Challenges

Nike continues to face the problem of overcapacity in shoe and fashion manufacturing and retail, as well as a general decline in overall profitability throughout the sector, and greater competition. In response, Nike is restructuring, closing plants, and reducing workforce to bolster profits. One of Nike’s strategies is to become the exclusive customer of its international suppliers, in an attempt to prevent competitors from learning about new products or leveraging/learning manufacturing techniques. However, at the same time, suppliers are moving their business model away from exclusivity and toward their own diversification.
Nike has also experiencing ‘brand-backlash,’ because Nike is now so big that the brand is no longer considered ‘cool,’ among young athletic types, Nike’s key demographic. Nike is seeing their core demographic gravitate to other or lesser-known brands. Nike has also realized that their overconfidence has caused them to miss market opportunities and trends.

Nike is working to develop a new vision as markets and their position in the market changes, and as they move from a growth company to a sustaining company. Nike realizes that ‘brand broadening’ is not a good strategy in an era needing ‘brand narrowing.’ This is one reason Nike is more interested in acquiring and managing other brands.

Innovation and Change

Nike has an R&D unit called Innovation Kitchen located on its main campus in Beaverton Oregon. The main focus of the Kitchen is to keep astride of the technology battle among shoe makers. Recently, the Kitchen has had to respond to innovations like Adidas’ shoe with a computer chip that automatically adjusts the fit during use. Nike innovations include its Shox technology cushioning system.

Besides shoe innovation, Nike is focusing on the entire product design. Sarah Severn, director of Corporate Sustainable Development, seeks to bring intelligent design to Nike. Sarah believes that “intelligent design can eliminate waste, resolving the conflict between nature and commerce.” [9] Sarah’s division will focus on designing materials that support a sustainable ecology, and take responsibility for the ecological impact of materials and designs throughout the product’s life cycle.

Nike has also focused on improving its IT infrastructure to keep pace with important developments in the supply chain management. In the past, Nike has struggled with 27 separate unconnected computing systems worldwide, which has impacted its ability to coordinate statistics and Nike’s vast supply chain. Nike has recently spent $500 million on a new integrated system. [3]

Marketing and Image

Nike has had a reputation for ‘spend-happy’ designers and marketers, but that’s changing. Nike is well known for changing the marketing landscape in the 1980s when it began handing out huge endorsement contracts and implemented what was described as a brash form of advertising. [3] Although Nike is trying to tone-down its high-flying endorsements, recently, Nike signed LeBron James to a $90 million contract. [3] Under its new management structure, Nike is now paying closer attention to spending on marketing and endorsements.

Nike also seeks to present an image that blends the themes of “empowerment, transcendence and irreverence and make the ‘swoosh’ synonymous with sports culture.” [2] Nike was one of the first companies to recognize that Western culture relies heavily on signs and images, and tries to leverage these beliefs by using theories in psychology, sociology, culture, and semiotics to create images and messages that promote the Nike image.

Conclusions

Phil Knight’s enigmatic leadership style shaped the company’s direction and culture. His strong entrepreneurial drive has been instilled in a strong management team that is now poised to take the company into the future. Nike is also extremely focused on sustainability and corporate leadership in a global market, and seeks to bring its code of conduct to factories worldwide.
Nike, now the 800 lb. gorilla in the sports apparel market, has finally recognized that it doesn’t need to behave like a start-up. Nike’s new focus is to use its strength and position to diversify beyond the Swoosh in an attempt to even-out the boom-bust cycles in a volatile industry.

Nike is still dedicated to the sporting life, which is summed-up by Bill Bowerman’s quote: “If you have a body, you are an athlete.” [10]

Bibliography

1. David F. Murphy & David Mathew, "Nike and Global Labour Practices," New Academy of Business Education for Responsible Enterprise, January 2001, <<http://66.102.7.104/search?q=cache:kB2yrI7_IAgJ:www.new-academy.ac.uk/publications/keypublications/documents/nikereport.pdf+NIKE+global+status&hl=en>>
2. Robert Goldman, Stephen Papson, Nike Culture The Sign of the Swoosh, Sage Publications Ltd., Pub Date: 02/1999 <<http://www.sagepub.com/printerfriendly.aspx?pid=6515&ptype=B>>
3. Stanley Holmes with Aaron Bernstein, "The New Nike" BusinessWeek Online, Sept. 20, 2004, <<http://www.businessweekasia.com/magazine/content/04_38/b3900001_mz001.htm>>
4. Stanley Holmes, "A Jog with Nike's Numbers Man," BusinessWeek Online, Sept. 20, 2004, <<http://www.businessweekasia.com/magazine/content/04_38/b3900010_mz001.htm>>
5. Theresa Howard, "Perez to succeed Knight as CEO of Nike," USA TODAY, 11/18/2004,
<<http://www.usatoday.com/money/industries/manufacturing/2004-11-18-nike-knight_x.htm>>
6. Stanley Holmes, "Nike: Can Perez Fill Knight's Shoes?" BusinessWeek Online, NOVEMBER 19, 2004, <<http://www.businessweek.com/bwdaily/dnflash/nov2004/nf20041119_0931_db016.htm>>
7. Brad Berens and Dawn Anfuso, "Nike’s Bryan Finke," IMedia Connection, Feb. 03, 2003, <<http://www.imediaconnection.com/content/1349.asp>>
8. Daniel Roth,"Can Nike Still Do It Without Phil Knight? KicksGuide, Apr. 4, 2005, <<http://www.kicksguide.com/articles/featured/phil-knight/phil-knight-by-daniel-roth.asp>>
9. William McDonough & Michael Braungart, "From Inspiration to Innovation," Green@Work, July-August 2002
<<http://www.mcdonough.com/writings/inspiration_innovation.htm>>
10. Nike Home Page <<http://www.nike.com/nikebiz/nikebiz.jhtml?page=3>>
11. Dessler, Gary, (2002), Management: Leading people and organizations in the 21st Century, (Activebook version 1.0), New Jersey: Prentice Hall

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KMandOrgLearning

SteveGall — Tue, 13 Feb 2007 21:05:32 CST

Stephen Gall

Bachelor of Science in Business Administration Program

MGMT 3103: Knowledge Management and Organizational Learning

Walden University

Professor Kelley Lovati, Instructor

July 12, 2006

Creating the foundation for knowledge management at TCS

Overview of this document

The goal of this document is to tie together five key principles of KM with a strategy and plan to actually change KM practices at TeleCommunication Systems, Inc. The five KM principles supporting second generation KM include:

1. Valuable organizational knowledge does not simply exist – people create it. [McElroy, 2001, page 9]
2. The social pattern of organizational learning and innovation is largely self-organizing and has regularity to it. However, this social learning must be strongly supported by leadership and integrated with everyday business processes. [Ibid.]
3. KM is a management discipline focused on enhancing knowledge production integration and use. [Ibid., page 11]
4. KM is not an application of IT – it uses IT to help it have impact [Ibid., page 16]
5. KM can only have indirect impact on knowledge process outcomes; impact on business outcomes is indirect. [Ibid., page 19]

Overview and Description of the Organization

TeleCommunicationSystems (TCS) [http://www.telecomsys.com/] headquartered in Annapolis, Maryland, is a public company since the autumn of 2000 and is traded on the NASDAQ as TSYS. TCS also has an office and network operations center in Seattle (TCS-West). TCS provides the logistics, software, and databanks that are used to appropriately route emergency (911) calls that are made with cell phones, to the nearest emergency services providers. TCS also provides other related VOIP and cellular services. TCS-West has at about 200 engineers and another 100 support personnel and management staff, while TCS-East in Annapolis also has about 300 on staff.

Strategy for implementing KM practices at TCS

Without an overall strategy, any KM approach can become subject to organizational behaviors that get the project sidetracked. Therefore, good project management principles are required to be successful, even though there are facets of implementing KM which are unlike a typical project. Using good project management principles supports principle #2 because it recognizes the role of good business processes as a success factor.

According to these practices, the opportunity, scope, risks, assumptions, costs, and most importantly, the relationship of the project to the overall corporate objectives – should be documented and approved by an executive sponsor. This also supports principle #2 by recognizing the role of leadership as a success factor.

Moving forward with the project management theme, the next best practice is to determine what precisely is being implemented or delivered, and what the phases or milestones are, at least generally. It is also a good idea to include an ‘as-is’ analysis of the current situation, because it’s hard to envision a path to the ‘to-be’ environment without this analysis. This supports principle #2 because it recognizes that organizations tend to create self-organizing patterns, and recognizing these patterns can be a valuable indicator of how the organization is likely to view and use any new knowledge management activity.

The next strategic objective is to educate the business unit’s (divisional) managers about how a knowledge management change program will impact their businesses. But even before that, it’s a good idea to have a frank discussion or ‘reality check’ on how KM impacts organizations generally, how information assets contribute to learning, and the role of KM in the organization. This helps set the stage for success because it starts the conversation about KM within the organization, demonstrates action, and get the process started. Because KM projects can seem overwhelming in scope at the beginning, it’s important to stop procrastinating, and start doing something. [Collison and Parcell, 2004, pages 65-71]

At some point, the organizational leadership must decide on how to deliver on the promise of KM. For TCS, we chose to implement a Knowledge Base (KB). We chose a knowledge base because it can be used as a catalyst for other KM activities in the knowledge lifecycle, especially because a KB can support the knowledge validation process and the development of new knowledge processes. [IBM principle, 1999, page 2]. The KB also supports principle #1 because it recognizes that people must create knowledge, and the process of entering knowledge into the KB strengthens the codification process in the KM lifecycle.

Even during the early analysis phase, before any action items are assigned, it’s good to keep the conversation going. Meeting with the managers to discuss various strategy options and how they relate to corporate objectives, including addressing any initial concerns of the managers, further solidifies the belief that the organization’s executive leadership is ‘getting on board’ with a KM program. This supports principle #2 by addressing the fact that social patterns and beliefs need to change starting with management, and also supports principle #3 by helping managers realize that knowledge production, integration, and use is going to require changes to activities which must be supported by both senior and middle management.

Finally, according to good project management practices, a solid implementation plan should be developed, and this should include specific milestones, dates, roles/responsibilities, and most importantly, the actual deliverables. There should also be a plan to test measurable outcomes. We, as implementers, asked a lot from the organization, what did they get in return? Asking (helping) managers to identify KM success metrics, supports principle #5 because it forces managers to connect indirect effects with the KM initiative.

Stepping back a moment, it’s important that the executive sponsor knows who is in charge of the project, and is willing to provide the necessary leadership that supports the KM implementation and the project. Executive sponsorship and management participation is a key success factor that is needed in order to reinforce and position ongoing KM activities if those activities are to succeed in creating a true learning environment. [Bixler, 2002, page 1]

It can be an advantage to use a team that is experienced with KM implementation projects, and who can use that experience to avoid any pitfalls and roadblocks before they derail the effort. It is helpful if the team doesn’t have political alliances to worry about. The unbiased, critical eye of these analysts can also map a strategy that helps the organization move toward more mature KM processes and activities. Using an unbiased professional team also supports principle #2 because it deals directly with issues related to social patterns of learning that are often difficult to address by people who are inside or integrated to those social patterns that may need to change.

Plan to Redesign KM practices at TCS

Organizational Goals and Business Strategies

How was the need for a KM project recognized? Where would the initiative fit-in to other initiatives already underway? Was the organization eager to implement a KM strategy, or where they overwhelmed with other initiatives? What was the IT department thinking? Was there already a vision or long-term strategy in place? Answering these questions first was critical to positioning the initiative and getting support.

At TCS a vision was in fact already established, and various components of that vision were being implemented in other projects. For example, TCS has decided to move to a portal-based computing interface for all applications. How would that impact the KM initiative? Could a KM initiative be integrated into this vision?

Because this vision was based on implementing web-enabled software (application) solutions using a portal strategy, it supported the use of a corporate Wiki as a knowledge base (application) solution. It was agreed that this would be an ideal place to begin a KB initiative. This decision also supports principle # 4 because it integrated IT’s (Information Technologies’) vision, strategy, and resources in support of the applications development that would be needed for a successful KB initiative.

Business units impacted

According to best practice, any project must have bounded scope. At TCS, it was determined that eighteen separate business units would participate in the Phase 1 roll-out of a knowledge base system, including: Deployment, Systems Engineering, Network Engineering, Technical Communications, Data Services, Provisioning, Billing, Network Operations, Operations Analysis, and Project Management, among other business units typically found in a high-technology organization.

Phased Approach

After getting agreement and support for the overall strategy and deliverables for the KB initiative, the project was divided into the following phases:

Table 1: Phases and Milestones for implementing a Corporate Wiki Knowledge Base

Phase	Milestone
Design and Development	Create a proof-of-concept wiki system installed as a sandbox for testing and analysis of system functions and feasibility.
Analysis phase 1	Prepare an ‘as-is’ report of current documentation practices using a documentation survey, and include any unique requirements. The survey was to be completed by each business unit. This analysis was a basis for a plan for transitioning information to the new knowledge base.
Analysis phase 2	Populate the sandbox with topics from a selected business unit to test and demonstrate use and functionality issues. (We choose the network operations center)
Analysis phase 3	Write test cases and test for proof-of-concept system issues and usability issues
Deployment phase 1	Implement the information transition plans (per business unit). Write the KB administration guide and documentation on installation, maintenance, administration, and other relevant information. (Document the system)
Training	Develop a training plan, training documentation, and provide training on use of the knowledge base application
Deployment phase 2	Begin adding topics to the knowledge base according to the plan. Monitor to ensure that the plan is working
Post-deployment	Perform an initial analysis, metrics, and usage report. Update process, procedure, and policy documentation to ensure that KB use is integrated with other organizational activities

Conclusion

The implementation of a knowledge base is seen as an important step in creating an overall knowledge management solution because it addresses many of the issues with creating and finding information. However, the goal of second-generation KM is to create a continuous learning organization. [IBM principle, 1999, page 2] With that in mind a life-cycle approach that recognizes continuous process improvements that enhance learning behaviors, and also recognizes the maturity level of those processes, will best address benefits, costs, and outcomes, and have the greatest chance for success.

Bibliography

McElroy, Mark, “Second-Generation Knowledge Management,” Macroinnovation Associates, Oct. 2001, macroinnovation.com, http://www.macroinnovation.com/images/McElroy_On_2ndGenKM.pdf

IBM principle, “The Second Generation of KM,” Destinationkm.com, Oct 1999, http://www.destinationkm.com/print/default.asp?articleid=751

Bixler, Charles, "Applying the four pillars of knowledge management," George Washington University, Jan. 2002, KMWorld, Vol. 11, Issue 1

Collison and Parcell, “Learning to Fly,” Capstone Publishing, 2004, ISBN #1-84112-509-1

InfoSystems

SteveGall — Tue, 13 Feb 2007 21:02:47 CST

Stephen Gall

Bachelor of Science in Business Administration Program

MGMT 3005: Management Information Systems

Walden University

Professor Angela Perry, Instructor

Walden University

February 18, 2006

E-business Systems Analysis of Salesforce.com

Salesforce and Web 2.0

Salesforce.com (Salesforce) is a Web 2.0 company and its business model is very disruptive. What is a Web 2.0 company and is Salesforce really a different type of e-commerce company? This paper briefly describes how Salesforce works and why it represents a complete shift in thinking about how organizations use software, and how organizational data is maintained.

Until recently, organizations have always bought and maintained their own computing and data infrastructure components. This entire infrastructure required an information technology (IT) staff to maintain the whole system, despite huge costs.

In retrospect the era up to the 1990’s was dominated by a data-centric viewpoint, and the corporate driver was IBM. Starting in the late 80’s, a workgroup-centric viewpoint became dominant. This era, which is coming to a close today, was started by the personal computer revolution and the corporate driver was Microsoft.

Today, we are moving toward a network-centric viewpoint; the corporate driver being Google. The difference between the two models is seen in the strategy; in the workgroup-centric model the strategy is to capture the desktop, in the network-centric model the strategy is to occupy the internet.

Salesforce delivers a Web service via the network-centric model, allowing companies to access both the software and infrastructure behind it. This service model makes the large support infrastructure of an IT department redundant. In contract to this Web service model, it is estimated that in the workgroup client/server model 50% of current IT corporate costs go to supporting the infrastructure itself, and in the software management side, 50% of application costs go to integration issues. [Strassman, 2005] If Salesforce can show clients how to dramatically reduce these costs, the company will continue to gain market share.

Market Position

Salesforce has more than 276,000 subscribers at well over 9,800 companies worldwide. Functional areas include: sales, customer service, product and project management, executive management, and human resources. "Salesforce reported first quarter 2006 net income of $4.4 million, compared with income of $437,000, for the same period in its fiscal 2005. The company increased its overall revenue to $64.2 million, compared with $34.8 million for the same period last year. Salesforce said it has added 40,000 new customers in 2005." [Hines, 2005]

Hardware, Software, and Networks, and Related Components

Salesforce is quick to give advice on how the network configuration of its clients should be configured to support quality of service (QoS), security, access, and up-time, which are critical to the success of any web-based service delivery system. Only insiders actually know what the configuration of Salesforce’s back-end network looks like today. We can say that the configuration has been effective so far. But will it scale? In network-centric systems, the use of workgroup-centric technologies based on the standard client-server model may not be the best long-term solution. As discussed in the Proposals and Recommendations section, Salesforce must ensure that it has chosen the right network infrastructure architecture. We do know that Salesforce is very focused on managing its data centers. “(In 2005) Salesforce has introduced two new datacenters worth $50m to support the service.” [Clarke, 2006]

Operating Systems, Applications Software and User Data

Salesforce is built on the software-as-a-service (SaaS) model. The Salesforce motto is "no software." What’s so different about Salesforce? Salesforce provides an operating system environment called AppExchange OS. Clients can use AppExchange to configure their own working environment that includes components for collaboration, reporting and data sharing. Clients are encouraged to configure their own system’s user interface and data relationship model (database). AppExchange includes administration tools so IT departments can more easily deploy access to end-users, and for auditing and monitoring the system’s use.

AppExchange is also the basis of a completely different model for building and delivering software services. Instead of a grand design, Salesforce monitors the use patterns of its customers in real-time, looking for ways to change the model every day based on user feedback. Adam Bosworth, VP of Engineering for Google, calls this model ‘intelligent reaction.’ [Bosworth, 2005] This model is in contrast to the grand plan model commonly used to deploy client/server software, where a group of engineers determines what customers might want and then builds a set of API’s upon which developers can develop applications. In the ‘reaction’ model, a basic application is quickly built and deployed, and then the API is developed only when there is customer demand to extend the application.

Concurrently, Salesforce helps customers and third-party developers build applications for other customers. Salesforce allows third-party developers to offer their applications through AppExchange. In this way, Salesforce is becoming the arbiter in a new type of service market, offering a common look-and-feel to online software applications, as well as providing the basis for a common data model. Salesforce also helps developers gain a reputation of trust in this new market.

Salesforce, which does a major release of AppExchange every 3 months, is also launching new environments to support their model. Sandbox is an application that will allow companies to download these new applications and test them with their own data before going live. "Sandbox is a full parallel copy of a company's production environment to be used for testing, development and end-user training. Sandbox becomes a contained and safe environment where IT departments can test integration with back-office applications and customizations as well as train employees on a new piece of functionality without having an effect on live data." [Schwartz, 2005] Multiforce, another new environment built on top of AppExchange, allows third-parties to deploy applications so that clients can use and share functions to demonstrate how the web service works.

Salesforce uses a bi-directional approach to sharing data and functionality. For example, other companies are allowed to leverage Salesforce functionality and data into their own applications to cross-extend functions in an entirely different type of application. For example, recently Salesforce blended Google's street mapping software allowing clients to generate a map of a customer’s office using data from their CRM data. [Hines, 2005] Using a service from a provider called StrikeIron, clients can now "add live business demographics, data verification and cleansing capabilities, as well as receive real-time connections to instant telephone number lookups, address verification and enhancement via USPS, live sales and use tax rates for calculating sales tax on-demand, live business demographics from a myriad of data sources, the ability to send an SMS message worldwide, and online verification of email addresses." [Colin, 2006]

Developer Experience

Analysts who understand the SaaS model are impressed with Salesforce. "Like Microsoft, Salesforce hopes that by allowing independent software developers to build on top of its basic software, it can keep customers happy." [Kuchinskas, 2006] Certainly developers who have moved to the Saas model are happy that Salesforce provides an open platform for sharing applications and services, and a method for finding new clients.
User Experience

Salesforce provides lower risk to customers because the customer doesn’t need to purchase and support a large software package and the infrastructure behind it. Salesforce is also highly configurable in terms of the database and the user interface. As long as Salesforce can ensure quality of service and address client security issues, it will continue to win new customers.

On December 20, 2005, Salesforce experienced a major system outage. This event shook the entire user community and caused a lot of notice in the press. Salesforce has been keenly aware of the issue of downtime risk; “. . .the more partnerships and engagements, the higher the degree of downtime risk: 97 percent uptime with Salesforce.com and 97 percent uptime with just one partner mean a potential 6 percent downtime window.” [Caton, 2006]

Salesforce is also very security conscious. Salesforce is accessed through a secure log-in using a SSL connection; URLs use the HTPPS access method. Also, Salesforce has a strict privacy policy and does not view or share its client’s data unless there is a support request.
Proposals and Recommendations
Deploy the right Infrastructure

Salesforce should adapt Google’s network-centric systems design model in order to ensure that its network scales. Google’s great strength is that it has mastered the infrastructure behind the network-centric model. Their infrastructure model is briefly described below: [Strassman, 2005]

Google’s network acts as one parallel supercomputer
The basic unit is called a cluster; there are well in excess of 2,000 clusters, perhaps more than 300,000 separate servers in the Google system
A cluster is comprised of custom-built commodity servers using the following configuration (per cluster):
359 racks
31,658 machines
63,184 CPUs
126,368 GHz of processing power
63,184 Gb of RAM
2,527 Tb of hard drive space

Salesforce should also implement the operating system and components of Google. In Google’s system:

Software operating system is a highly modified version of Linux
All computers share the same configuration
Files are broken into 64 MB chunks for 2000+ MB/second read/write load; all file chunks at least triplicate for safety; response time monitored to assure <0.25 second latency
Processing a single query may involve 1000+ servers
Dynamic indexing, (Google indexes over 8 billion pages and over 1 billion images)

This description of the Google environment is similar to the one SalesForce should be building because it will allow them to scale their service and ensure uptime. As you can see, it creates an environment unlike any client/server model previously built. The efficiency and effectiveness of this system far surpasses any other architecture. It is estimated that when comparing cost per CPU cycle (needed to) process a single transaction that this system is 4 to 6 times the price advantage of the second best architecture, that used by Sun Microsystems. [Strassman, 2005] Competitors such as Yahoo and Microsoft, which still deploy using a client/server model, do not have the architecture to truly compete based on system costs. Will Salesforce? This network-centric environment will ensure that Salesforce is well positioned to leverage an architecture and model that meets the demands of an infinitely scalable solution.

Deploy the right Infrastructure

All business models, even one so advanced as Salesforce are subject to the encroachment of cold technologies. The future might include the these disintermediating events for Salesforce:

Small vendors may begin to make their applications available independently. As long as there is the ability to provide a common data model (and XML provides this ability) portals like Salesforce might find themselves redundant
Search sites like Google or technologies like RSS may allow customers to easily find these small vendors and the appropriate application for their needs without the need to integrate applications through vendors like Salesforce
Independent networks using the Google (network-centric) model may allow web services to be delivered securely and to run seamlessly, bypassing the need to portal-based
Customers may find it easier to build their own custom suite of small independent applications, and skip the need to use the larger integration vendors

Reflections

We have learned that Salesforce is leveraging a new type of software solution based on the Web 2.0, or Saas model, where software is delivered as a service via the internet. This model is highly disruptive to the current practice based on the client/server workgroup model, which require organizations to purchase software and then build, maintain, and support their infrastructure.
Applications

Currently, most organizations are steeped in the client/server or workgroup model. However, solutions like the one Salesforce offers seem to be the future of software delivery. Therefore, organizations should rethink how they deploy and use software to support business functions. As business managers, we must engage our IT departments in a discussion of how and when to move to this new service delivery model. Not only can the service be significantly less expensive, it drastically reduces the need for the organization to support and maintain a large IT department. [O’Brien, 2005. page 113]

Bibliography

Strassman, Paul; “Google: A Model for the Systems Architecture of the Future” Lecture, George Mason University, December 2005 (video presentation 1 hour) <<http://www.strassmann.com/>>

Bosworth, Adam; “Intelligent Reaction: The Salesforce Model” (a 20 minute video presentation) at: <<http://salesforce.breezecentral.com/intelligentreaction/>>

Hines, Matt; "Salesforce.com's new gamble"; CNET News.com; July 2005; <<http://news.com.com/Salesforce.coms+new+gamble/2100-1012_3-5804017.html>>

Adam, Colin; "StrikeIron Introduces Web Services via Salesforce.com’s AppExchange," webservices.org; January 2006 <<http://www.webservices.org/categories/development/interoperability/strikeiron_introduces_web_services_via_salesforce_com_s_appexchange>>

Schwartz, Ephraim; "Salesforce to launch full production testbed," ComputerWorld, Dec. 2005; <<http://www.computerworld.com/softwaretopics/crm/story/0,10801,107010,00.html>>

Kuchinskas, Susan; "Salesforce: The New Microsoft?" Enterprise - Internetnews.com; January 2006; <<http://www.internetnews.com/ent-news/article.php/3578791>> SAP vs Salesforce: http://www.businessweek.com/the_thread/techbeat/archives/2006/02/sap_vs_salesfor.html

Clarke, Gavin; "Salesforce pitches to become the 'iTunes' of enterprise apps;" Channel Register; Jan. 2006; <<http://www.channelregister.co.uk/2006/01/17/salesforce_appexchange_launch/>>

Caton, Michael; "The Salesforce.com Domino Effect;" eWeek.com; Jan. 2006; <<http://www.eweek.com/article2/0,1895,1911628,00.asp>>

O’Brien, James; Introduction to Information Systems, McGraw-Hill, 2005, ISBN 0-0711121-X

//

Human Resource Management

SteveGall — Tue, 13 Feb 2007 21:02:05 CST

Stephen Gall

MGMT-3003 - Human Resource Management

Instructor: Dr. Susan Jespersen

Date submitted: November 23, 2005

Walden University

Executive Summary

Background and Introduction

This paper discusses the issues related to the use of the stack ranking method in conjunction with the employee performance review for promotions and benefits. The paper analyzes the problem situation, identifies issues affecting performance, and proposes alternatives to the way the method is currently used.

Main Conclusions

The stack ranking system, if not implemented carefully, can result in legal issues being raised

The use of the stack ranking method may have value as an internal tool for Human Resources when used as a tool to evaluate the effectiveness of the overall employee review system, but as a performance measurement that is shared with individual employees, it is shown to have far-reaching unintended consequences. Employees are smart, and they quickly figure-out how to manipulate the system to their least disadvantage.

Stack ranking provides questionable value as to insight into an individual’s actual job performance. Its use highly politicizes an organization. The rank number is most often based on unsubstantiated subjective judgment by an evaluator who may feel pressured to respond according to a narrow set of guidelines.

Recommendations

Stack ranking results should not be used in the performance review process or shared with employees. If used at all, stack ranking should be well documented using the 360 degree feedback method, where a variety of stakeholders provide input into the ranking based on objective (or using the least amount of subjective) criteria. Results are best used to evaluate the performance review process itself.

Stack Ranking in the Performance Appraisal at Microsoft

PROBLEM SITUATION

Stack Ranking Defined

What is Stack Ranking? The concept behind stack ranking, or forced-choice rating, is to rank the people on a given team from "most valuable" to "least valuable” without the use of all the data available from performance review scores, ladder levels, and other appraisal data.

The Forced-choice rating system is now the fourth most commonly used appraisal technique among the 75% of U.S. companies that now have performance appraisal programs. Stack ranking is actually an offshoot of the forced-choice method, which requires the rater to rate individuals based on best fit to least fit. As an appraisal technique stack ranking is the 8th most common technique. [Oberg, 2005, http://www.unep.org/restrict/pas/paspa.htm]

Where did the idea of stack ranking come from? Stack ranking has been a project management technique used for years, to prioritize and manage to-do lists, lists of features, actions, and (non-human) resources. It is a tool for identifying those items that are most important to the project and to prioritize items accordingly.

Business Case for Stack Ranking

Stack ranking is proposed as a method to deal with inflated employee rating where everyone is rated as superior due to a failure to differentiate. It is believed that a forced ranking exercise guarantees that managers will differentiate talent, and provide an insightful view of employees in relationship to one another over that offered using conventional performance appraisals.

It is believed that forced ranking also causes the company to articulate success criteria for the organization, and to regain focus. The system produces an interesting set of data for spotting talent, purportedly across departments, as well as helping to identify the bottom 10% and under-performers. [Grote, 2005, http://hbswk.hbs.edu/item.jhtml?id=5091&t=organizations]

Unintended Consequences of Stack Ranking at Microsoft

What are the consequences of using the stack rank system as part of the employee evaluation? One of the consequences has become apparent at Microsoft, where very smart people have now figured-out how to subvert the stack rank system to such an extent that the review process has been completely politicized. In fact, the issue around the practice of stack ranking at Microsoft has become quite vocal and there is much resentment against HR for its use. Many of the rank and file employees are calling for the removal of senior management who support the practice. Why has it become such a contentious issue?

PERFORMANCE STANDARDS

How Stack Ranking Works at Microsoft

The members of a given team are divided into columns of high, medium, and low rated individuals and then each column is given a person-by-person relative ranking. These relative ranking positions are negotiated by the group managers (where a group can consist of multiple teams) who argue over the merits of their people. One technique is to ask: "if the team was on a sinking boat and we had to decide who we would put on the life-boats, who would be included?" The best way to get a better position relative to one’s peers is to be defended by not only one’s group lead but by other group leads as well who are involved in the process. A person's popularity among team leads is very important.

To apply stack ranking, a given peer group is graded on a curve. But the rating is more like being placed into one of 4 buckets; 1) 4.0 - the bucket everyone wants, 2) 3.5 - the bucket that is acceptable but not preferred, 3) 3.0 - the bucket that means you are at risk of getting fired, 4) a 2.5 is effectively the career-ending kiss of death.

By requirement, each product team needs to provide 25% of its members as 3.0s. This means trouble if the group is made-up of super stars. To placate the group, members are told that a 3.0 rating is peer-relative; but no one believes it. Managers feel stuck: "As a lead, it's one of the most painful experiences at work to have to give a review back to someone and say ‘you worked hard last year and accomplished great stuff...I can't tell you how much I personally appreciate it. However, the review model came back down the chain and the best I could do is get you a 3.5 (or *shudder* a 3.0)’. Nothing kills morale faster." [Mini-Microsoft, 2005, http://www.minimsft.blogspot.com/]

Rank and Yank

Stack ranking fits into the dark side of performance appraisals. Jack Welch, CEO of General Electric, popularized stack ranking when he said that if you want a high-performing company, you should fire the bottom 10 percent of your employees each year come performance appraisal time. [Daniels, 2001, http://www.entrepreneur.com/article/0,4621,290720,00.html] Is a low rank number just a way to justify poor performance prior to the firing process?

The Stack Rank system is often used to identify poor performers who can be given a short time to either improve or to leave the company. Some companies, such as Microsoft, use a forced curve, so that some employees, no matter what the circumstances, must be rated in the bottom 10%. These 'underperformers' may face a bleak future. Microsoft, like other organizations using the stack rank system, views the forced ranking approach as a way to create a continuously improving workforce. It's interesting to note that Enron, a leading proponent of the practice just before its collapse, was praised as "a hotbed of overachievers" partly due to the use of stack ranking. [Dell, 2005, http://www.performance-appraisal.com/news.htm]

Issues Raised

What are the issues associated with the use of stack ranking? The stack rank system creates an environment that is not conducive to high employee moral and team performance. By ranking employees there becomes a sub-optimization in terms of team unity because it singles-out the performance of some at the expense of those who provide the daily support that is necessary for the team effort.

What follows is a listing of some of the issues and some postings in response to a dialog about the technique’s use at Microsoft. These postings are found on a Web site, run by an anonymous Microsoft employee, which has recently gained high visibility both within Microsoft and among a wider audience.
Some of the problems are:

It kills morale and is demoralizing. One employee wrote [Mini-Microsoft, 2005, http://www.minimsft.blogspot.com/]:

“AAAHHH!@!! "Why bother? I'll get the same review no matter what I do."
I killed myself one year. I mean the whole year; just one giant death-march Ho-Chi-Minh nightmare. Shipped. Accolades from customers....drumroll..3.5; because "You went dark". Yeah, no s*** Sherlock, I was working not preening. And I know it wasn't that I "went dark"; I really felt for my manager at the time, because he just wasn't a forceful enough person to push for a better ranking. He just flat fell down against a much more experienced manager in the peer team. Anyway I left. The phenomenon you describe is known in psychology as "learned helplessness", and I did not want to become one of those depressed rats...now I'm a happy rat employed where there's no curve ranking.”

It creates an environment where employees can feel discouraged and bitter. One employee wrote [Ibid]:

“Anyway, the whole kerfluffle over Gretchen's blog entry got me to thinking: she brings the candidates in telling them they're geniuses, and then we feed them into the review meat grinder, and some come out 3.0s. No wonder people start to feel bitter. Microsoft is not a very healthy psychological environment. We create this horrible environment of mixed messages where even the smartest people get told "that's the stupidest thing I've ever heard," by the chairman as a way to motivate them.”

It’s Political and breads bad Politics. One employee wrote [Schofield, 2005, <<http://radio.weblogs.com/0133184/2005/09/29.html>>]

“It's an incredibly difficult exercise, and every time I've had to do it, there's always been a LOT of arguing, which I think is healthy. When you're finally done (whew), you go back and put all that other information -- review scores, levels, promotions... next to each name. Things immediately jump out at you; you see people who are ready (or nearly ready) to be promoted. You see people who are at a high level but are just not delivering compared to their peers, or people chronically under-rewarded despite blowing away all of their peers. You see when one manager gives systematically higher review scores for the same level of work, or when people in one group are at higher levels than people doing equivalent work in another group. You see people hired in two years ago being paid less than someone who just started because the initial salaries needed to get more competitive but the internal compensation system is lagging behind. And you get an opportunity to tweak and correct things, to fix injustices, before all the numbers are final.”

Another employee wrote:
I could share stories of less competent IC’s who climbed the ladder to management in a Machiavellian manner and then pushed out those they felt could threaten them while surrounding themselves with yes-men lieutenants (who get automatic 4.0s), but it is best just to ask this question. If those in charge of ranking individuals have priorities that take precedence over and are at odds with the greater goals of the company, will forced (stack) ranking still be as effective?

It makes employees distrust management and want to unionize, and may even drive the best employees to want to quit. One employee wrote [Mini-Microsoft]:

“I've worked in a startup in boom and bust times, and you know what? If this forced 3.0 business is about the money, people can live without the cash. But tell them - I know you earned an A, but I've got to give you a B. Not based on merit. It's our policy. And to be honest, you really almost got it, but Jane Doe just knows how to kiss ass better than you do. Learn to toss some salad, and you might get what you earned next year. That's a great way to make a 3.5 start skewing towards a 3.0 for the next FY, or walking out the door. Do people not realize that Google has moved down the street and is ready to snap up good people who've become disenchanted?”

It promotes competition, not cooperation, because it pits employees against each other. One employee wrote [Ibid]:

“There is also the problem with team members competing with each other on teams. By making team members compete with each other, we weaken teams. On my last team, team members would withhold information from other team members in order to slow them down in their work and make it easier to beat in the stack rankings (as I said, there was a lot of work and any delay in getting things done could impact the deadline).I don't think the merit system is working. I'm not sure what they could replace it with, but making employees compete against each other certainly is not the way to go.”

It creates the perception of unfairness. One employee wrote [Ibid]:

“The worst about a review is being promoted late in year (e.g. March) and being told you're reviewed on your new level instead of the old one. Somehow my review score magically dropped from a 4.0 to a 3.5 that way. Funny enough this year I was facing the same possibility of a promotion before the annual review, and my (same) manager gave me the opposite spin that I'd be rated on my old level. Way to admit that I got screwed last year. Even better is that my group rates people based on how many bugs they resolve (oh yes, this sounds bad already). Never mind people can go into product studio and jack up their stats...the managers in my group have never cared. They've even admitted it was a possibility, but didn't want to tread any further. Want a 4.0, just cheat...that's what this company is about (or maybe just my group).”

It destroys intrinsic motivation because employees respond to rewards tied to short-term goals instead of working toward the overall success of the company. One employee wrote [Ibid]:

“what if you really have seven 4.0 performers but the model says you can only give three 4.0 review scores? ...most get pissed but stay anyways and now join the ranks of disgruntled employees who are no longer passionate about their work.”

Another employee wrote:
“The culture within MS is just plain stupid. A culture that rewards people (the 4.0s) for taking risk and punishes the people (the 3.0s) who cover the asses of the first group, is just silly. I would not want to own a company of exclusively 'type A' highly motivated risk takers. You need a balanced and diverse employee base to make a successful company.”

It creates the perception of impossibility because the curve only allows for a few to be singled-out as exceptional performers. One employee wrote [Ibid]:

“I remember in the early days of the IE team, an ad appeared in the Micronews: "Are you a consistent 4.0 performer? Come join the hottest team at Microsoft!" And I thought to myself, either this team is exempt from the curve, or these 4.0 performers are going to doom their review scores by all getting onto one team together. Mini has a different way of putting it: if you get rid of the low performers, who get the low scores next time? Your answer seems to be -whoever stumbled because they were distracted by going through a divorce."

Many of these issues are not new, and were also recognized by the management theorist, Deming, who opposed the ranking system. "Deming opposed ranking because it destroys pride in workmanship, and he opposed merit raises because they address the symptom, rather than the causes of problems." Deming believed that “the only way to improve a product or service is for management to improve the system that creates that product or service. Rewarding or punishing individuals trapped in the system is pointless and counterproductive.” [W. Edwards Deming Institute, 2005, http://www.deming.org/theman/articles/articles_gbnf04.html]

Is Stack Ranking Defensible?

If stack ranking works at all it is only when it is not part of the shared performance review system. Instead, it can be used as one way to look at the results of the review system and find mistakes and trends. But it is one of many ways to do that. Although not directly linked to the performance review in practice, Microsoft employees have come to recognize the stack rank as the review that really matters when determining bonus and career path. Is this practice legally defensible?
Figure 1: Comparing the use of the stack rank method to criteria for surviving a court test [Mathis, Jackson, 2006, p. 335]

Needed to be Legally defensible	Meets Criteria? Y/N	Potential legal conflict? Y/N
Criteria based on job analysis	No	Yes
Absence of disparate impact and evidence of validity	No	Yes
Formal evaluation criteria that limit managerial discretion	No	Yes
Rating linked to job duties and responsibilities	No	Yes
Documentation of appraisal activities	No	Yes
Personal knowledge of appraised individual	Yes	No
Training of supervisors conducting appraisal	Yes	No
Prevents action from controlling employee’s career	No	Yes
Counseling to help poor performers improve	No	Yes

ALTERNATIVE SOLUTIONS

Legal Suggestions

AHI's (Alexander Hamilton Institute) Employment Law Center suggests proceeding carefully before rating employees as "poor performers." [Dell, 2005, http://www.performance-appraisal.com/news.htm]
The following guidelines are suggested:

Ensure that there sufficient evidence to support the claim that an employee's performance is genuinely substandard, and that evidence is properly documented
Ensure that there is no perceived or credible argument that any action or poor review can be viewed as retaliatory or discriminatory
Ensure fairness; Have other's received such a rating (or been discharged) for similar circumstances?
Are, or can the ratings be confirmed by an objective third party reviewer?

If the stack ranking practice continues, companies will have an increasingly difficult time showing a significant difference between the first person being fired and the lowest scoring person not fired. [Daniels, 2001, http://www.entrepreneur.com/article/0,4621,290720,00.html]

Proactive Career Management (or how to Subvert the System)

Employees are smart, and they quickly figure-out how to manipulate the system to their least disadvantage. Microsoft employees who understand how the stack ranking system works heed to the following advice to ensure that they receive a high rating: [Mini-Microsoft, 2004, http://minimsft.blogspot.com/2004/07/microsoft-stack-rank-as-popularity.html]

Do what is necessary to get increase visibility in the group. This means ensuring that everyone in the group understands what projects you are working on, your role, and your accomplishments.

Get a mentor - someone who is well-versed at playing the stack-rank game. It is always a good idea to find someone, preferably a manager well-versed in the process, to advise and coach you on how to manage your career and get a good stack rating.

Always know when the stack ranks are because they occur at different times for different groups. It’s best to be prepared and that means having completed a checklist that ensures you the greatest visibility and support, as well as being sure that any looming deadlines are completed, before your boss attends the stack rank meeting. If your successes are fresh in the mind of your boss, then he/she is probably more likely to support a high rating for you.

Set-up a skip level one-on-one meetings. This means to meet with other managers, leads, and even your bosses’ boss to expose your value to the company by discussing your projects and accomplishments. During the stack rank meeting your boss may need the support of other managers, and it doesn’t hurt if your bosses’ manager knows of you and your contributions to the group.

Become a resource for other team members and especially team leads. Lend a hand to those who can support your cause and help you be a success.

Constantly seek feedback and modify your efforts based on this feedback. You want to make sure that your efforts are in total alignment with the group, the boss and company objectives. Never assume that you are doing a good job; verify it early and often.

Make sure your boss knows why you are so great. Use every opportunity to promote yourself to your boss.
Of course, this advice can apply to any employee in any company, but when employees start spending increasing amounts of time promoting and politicizing their work and themselves, less actual work get done.

IMPLEMENTATION

Use of the 360˚ Evaluation Method in Stack Ranking

If used at all, stack ranking should be well documented using the 360 degree feedback method, [Mathis, Jackson, 2006, p. 342] where a variety of stakeholders provide input that is then separately evaluated by HR who performs the actual ranking, and then uses the results to evaluate the performance review process itself.

Find Alternatives to Stack Ranking

Poppendieck makes some strong recommendations as clear alternatives to stack rank in relation to merit pay [Poppendieck, 2004, Compensation.pdf]

Establish a clear and fair promotion system instead of a merit pay system where merit pay is the primary way to make more money. Merit systems always become contentious. De-emphasize the merit pay system but not at the expense of an unfair promotion system.
One way to de-emphasize merit pay is to tie profit sharing to economic drivers, which foster a team oriented approach.
Instead of creating competition for rewards by singling-out individuals, reward teams and groups for taking responsibility and meeting those economic drivers.
Promote intrinsic rewards instead of money, such as achievement recognition and more control over one’s work.

Revising Appraisals and Monitoring Results

Revise the role of appraisals so that they help develop a highly motivated workforce instead of creating an environment of conflict. Appraisals should be part of a strategy to accomplish the following [Coens, Jenkins, 2001, http://www.winstonbrill.com/bril001/html/article_index/articles/501-550/article532_body.html]:

Create a compelling vision that connects the employees' contribution directly to the organization's service or product, so that employees understand their value. Appraisal Monitoring: Any employee at any level should be able to give a 'walking tour' of the organization and be able to explain the organization's value proposition.
Recognize that everyone's interests are different, so give employees the ability to choose the work that aligns with their interests and abilities by allowing employees to exercise their discretion and judgment.

Appraisal Monitoring: Offer employees challenges if they seek challenges, and work with the employee to design the appraisal criteria.

Most importantly, create a climate of people working together.

Appraisal Monitoring: Open communication channels where employees feel free to contribute opinions and ideas without retribution, for example, the use of internal weblogs designed for such purposes. Then respond and address issues quickly.

Bibliography

Mathis, Robert L. & Jackson, John H. (2006). Human Resource Management. (11th ed.). Cincinnati, OH: Thomson South-Western. ISBN: 0-324-28958-8

Mary Poppendieck, "Unjust Deserts?" StickyMinds.com, July 2004, <<http://www.poppendieck.com/pdfs/Compensation.pdf>>

Winston Oberg, Professor of Management at the Graduate School of Business Administration, Michigan State University. "Make performance appraisal relevant," United Nations Environment Program, 2005, <<http://www.unep.org/restrict/pas/paspa.htm>>

Author is Anonymous, Mini-Microsoft Weblog, 2005, <<http://minimsft.blogspot.com/>>, search term: “stack rank”

Mini-Microsoft, "Microsoft Stack Rank as a Popularity Contest," Mini-Microsoft Weblog, July 2004, <<http://minimsft.blogspot.com/2004/07/microsoft-stack-rank-as-popularity.html>>

Aubrey Daniels, "Appraising the Performance Appraisal," Entrepreneur, July 2001, <<http://www.entrepreneur.com/article/0,4621,290720,00.html>>

Christine Dell "Performance Appraisal, the complete online guide," Archer North and Associates, 2005, <<http://www.performance-appraisal.com/home.htm>>

"Out of the Crisis - Quality, Productivity, and Competitive Position," W. Edwards Demming Institute, <<http://www.deming.org/theman/articles/articles_gbnf04.html>>

Tom Coens and Mary Jenkins, "Abolishing Performance Appraisals" Innovative Leader, v. 10, N. 7, July 2001, <<http://www.winstonbrill.com/bril001/html/article_index/articles/501-550/article532_body.html>>

Dick Grote, "Forced Ranking: Making Performance Management Work," Harvard Business School Working Knowledge, Nov. 2005, <<http://hbswk.hbs.edu/item.jhtml?id=5091&t=organizations>>

Kevin Schofield, "Curves and Stack Ranking Are Not Evil," Kevin Schofield's Weblog, Sept. 2005, <<http://radio.weblogs.com/0133184/2005/09/29.html>>

//

Financial Management

SteveGall — Tue, 13 Feb 2007 20:53:51 CST

Stephen Gall

Management 3004 – Financial Management

Professor Jason Ma, Instructor

Walden University

January 7, 2006

Financial Management – Bonds, Financial Markets, and Right-Sizing

Bonds

How Bonds Provide Financing

How do bonds provide financing to corporations for their capital projects?

Bonds can be issued whenever the corporation recognizes a need to raise additional capital. Bonds allow the corporation to raise capital in amounts that match the estimated capital required to complete a given project, as well as control the length of time until maturity. Bonds allow corporations to finance projects without selling additional equity because the debt does not create ownership interest. Bonds have a tax advantage, because the bond is considered a cost of business and therefore interest payments are tax deductible. Capital projects that offer significant assets as collateral make bonds more attractive to creditors. [Ross, 2004, page 164]

Key Differences between Bonds and Stocks

What are the key differences between using bonds to finance capital projects and issuing stock for that purpose?

Bond interest payments are pre-tax, whereas dividends to stockholders are not tax deductible. On the other hand, equity does not need to be repaid and the corporation does not need to pay interest or dividends. Because bondholders can legally claim assets to cover nonpayment, bonds have the risk to the corporation of forcing liquidation of assets, or even bankruptcy. Stockholders, on the other hand, as owners of the corporation and cannot liquidate the company to cover stock loss. One key difference is that bonds allow the corporation to raise a known amount of capital, while stock offerings raise a non-specific, although significant one-time amount of cash. Bond offerings can be tailored to match a certain cash requirement, and can be issued for any reason, whereas stocks cannot be reissued.

Bond Valuation

The value of a bond is dependent, primarily, on two factors. Name and explain those two factors.

The value of a bond is dependent on the value of its cash flow in terms of: 1) the Present Value of the Coupon Payments (the annuity present value), plus 2) The Present Value of the Par Value (time value of money of the bond’s price). [McCracken, Dec. 2005]

The present value of the Coupon changes according to the current interest rate because the coupon payment is fixed to the rate stated at time of bond issuance. When the current interest rate rises above the bond’s coupon rate, the present value of the Coupon Payment falls, concurrently when the interest rate falls lower than the Coupon rate, the value of the bond’s Coupon Payment rises. The length of payments remaining before maturity is also a factor as it represents a greater or lesser portion of the value equation.

A bond’s Par Value (face value) is also measured in terms of its present value, which again is affected by the interest rate.

The current value of a bond (present value) therefore, is always measured against the going (current) interest rate. If the bond pays higher interest than the going rate, the price of the bond will be greater than the par value, or lower if the bond pays a lower interest rate than the current interest rate.

Bonds contrasted to Stocks

Compare and contrast the characteristics of stocks and bonds.

Bond Characteristics	Stock Characteristics
Value rises and falls depending on interest rates	Value rises and falls depending on the value that the stock trades at on any given day
Interest payments are tax deductible by the corporation	Dividends are not tax deductible
Equity is not lost through issuance	Stock issuance is based on transference of equity
Unpaid debt is a liability	Loss of stock value creates no liability
Can be issued at any time for any reason	Can only be issued once
Creditors have no voting power	Equity owners can control the company via voting power

Using Commercial Paper

What is commercial paper and when is it typically used by a corporation?

Commercial paper refers to a short-term note (short maturity of a duration not to exceed 270 days), issued directly to the creditor. Commercial paper with a maturity less than 270 days (nine months) does not need to be registered with the Securities and Exchange Commission (SEC). Corporations issue commercial paper because they can do so at an interest rate that is less than the rate on a traditional bank loan [Ross, 2004, page 491] and is usually offered at a discount (a rate lower than par value). Banks and finance companies use commercial paper as well. The note is typically unsecured, so their use is usually restricted to institutions with very high credit ratings. [Ross, 2004, page 513]

Commercial paper is used to finance deficit cash positions when demand for current assets is high, especially during peak seasonal demand or due to other demand cycle periods, or for financing accounts receivable.

The proceeds from this type of financing can only be used on current assets (inventories) and are not allowed to be used on fixed assets, such as a new plant, without SEC involvement. [Investopedia, 2005, search term “commercial paper”]

Financial markets

Purpose of Financial Markets

What are financial markets and what is their purpose in our economy?

A financial market is a virtual place “for raising capital, transferring of risk (in the derivatives markets); and promoting international trade (in the currency markets). Financial markets are used to match those who want capital (borrowers) to those who have it (lenders). Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends.” [Wikipedia, 2005, search terms “financial markets”]

Broadly, there are two major markets, one for government securities and another for corporate securities. The financial markets can be divided into subtypes:

Capital markets
Bond markets
Commodity markets
Money markets
Derivatives markets
Futures markets
Insurance markets
Foreign exchange markets

Role of Exchanges

What is the role of exchanges within the financial markets? Within the futures markets?

An exchange is: "a market in which securities, commodities, options, or futures are traded." [Investopedia, 2005, search term “exchange”] The primary function of an exchange is to connect buyers and sellers and provide liquidity to shareholders, and some protections (through the enforcement of rules and by providing oversight) to investors. An exchange tracks the flow of orders and the flow of pricing and trading actions, and provides real-time reporting.

The role of the exchange in the futures market is to provide structure to trading of futures contracts which is extremely liquid, risky, and complex.

Physical exchanges are under threat from electronic-only exchanges that eliminate human intermediaries and are more efficient and cost-effective.

Roles of Cash and Futures Market

The cash market and the futures market serve different purposes for investors. How do their roles differ?

The cash market allows investors to purchase an actual physical commodity, or stock, while the futures market allows investors to purchase or create a (futures) contract. A futures contract is a type of derivative instrument used by two parties to agree to buy or sell a stock or physical commodity in the future for a particular price. In essence, the buyer is agreeing to buy something, for a set price, that a seller has not yet produced. Buyers and sellers in the futures market do so to hedge risk or to speculate, as compared to buyers and sellers in the cash market, who do so to exchange physical property or stocks.

The futures market is primarily used by hedgers and speculators. The futures market for hedgers provides a way to manage price risks. A hedger buys or sells in the futures market to secure the future price of a commodity, either to be sold at a later date in the cash market, or for some other use. This helps the hedger protect against unanticipated price increases. While hedgers want to minimize their risk no matter what they're investing in, speculators want to increase their risk and therefore maximize their profits. Because of the unknown nature future events, the futures market is extremely liquid, risky, and complex.

Effects of Chairman’s Comments

What is the effect of a speech by Alan Greenspan, Chair of the Federal Reserve, on the financial markets?

Allan Greenspan, an accomplished saxophone player who once attended Juilliard, and who believes in the gold standard and yet also supports Any Rand's philosophy of unfettered capitalism, has articulated a purview of monetary policy strongly linked to fiscal and political matters traditionally left to lawmakers, in his often sited testimony before Congress. [Wikipedia, 2005, search terms “Greenspan”] His comments are followed closely by market makers and investors/traders, who struggle to interpret his somewhat rambling missives to find clues into the future movements of interest rates and the general health of the economy. Recently, Greenspan’s comments have helped cool what he calls “irrational exuberance” which refers to unsustainable bubbles leading to short-term boom-bust cycles that seem to be common in today’s markets.

Impact of E-Commerce and Electronic Trading

Electronic trading in the financial markets has captivated public interest. What do you think the impact of e-commerce and electronic trading will be in the future on our financial markets?

Figure 1 show where we have been and where we are headed, relative to the acceleration of knowledge and technology. [Stephen Gall, 2006]

Figure 1: What lies beyond the Information Age?

Age	Dates	Length	Description
Scientific	1490 - 1770	380 years	The age of scientific discovery
Industrial	1770 – 1950	180 years	The industrial revolution
Information	1950 – 2020	70 years	Information is added to products; globalization begins, Web 1.0 – 3.0 (semantics integration begins via metadata)
Symbiosis	2020 – 2050	30 years	The semantic Web, linguistic user interface, distributed networks, the internet becomes the datasphere, birth of AO (Autonomous Observer – an overreaching AI integrated into the internet/datasphere)
Autonomy	2050 – 2065	15 years	AO’s extensive reach, intelligent agents, software that can self-construct internal modifications
Convergence	2065 - 2073	8 years	General systems intelligence. Human-machine convergence
Transvergence	2073 – 2077	4 years	Things are getting weird! Expanded human/machine intelligence
Singularity	2078 – ?	Unknown	Unknown; possibly cumulating in a second big-bang, where super-intelligence explodes out into the universe at the speed of light.

Here’s what is going to happen. As the information age winds-down we are already seeing and experiencing the effects of online trading. It’s easy to envision all financial markets moving online by 2015 and certainly by 2020. Google has recently announced the ‘google’ as a form of currency. It is likely that new financial instruments and currencies such as the google will continue to gain momentum and become quite acceptable and even targeted toward certain financial markets and situations. Under normal circumstances this shift would cause a chaotic trading environment, however, thanks to ever more sophisticated software these instruments will be quite stable. The shock will be to traditional investors who are not willing to learn and accept new forms of trading. They may find themselves victim of future shock, just as the majority of people are missing major technology shifts and trends today, technology integration into the financial markets will only accelerate. Finance managers who understand these instruments and trading methodologies will be well rewarded.

The next shock to the financial markets that will happen early in the age of Symbiosis is the rise of robot software programs designed for analyzing markets and even performing trades based on triggers. These programs will be orders-of-magnitude in their complexity and ability to analyze a trade when compared to the simplistic trading bots we see today; they will have (be integrated with) extensive knowledge bases combined with thousands of business rules, allowing them to interpret data and events in almost real time and will be able to not only advise on financial decisions but make them! Their ability to trade will eclipse that of their human counterparts. Human traders will accuse these programs of being unfair, as they find themselves competing with software programs, not other humans, in the financial markets trading arena. Your Bot (robot) may become your best friend!

By 2030, I see two possible paths based on competing trends; basically we will start gaining control of global events and systems, or we will start to lose control due to chaotic events on a global scale (war, disease, global warming, etc.). Right now it’s a very close call; I am not an optimist, but I do think that we might be passing a threshold that will allow us to gain control. And we will figure out that we gain even more control by turning the management of major systems, including financial systems, over to an artificial intelligence system called the Autonomous Observer (AO). By the age of Autonomy, AO will have well over a billion rules in its primary database, and sub-systems may allow it to access a trillion rules (many of these rules will be machine created). It’s likely that AO will manage and modify a global financial system based on rules and regulations that allow the seamless flow of money between and among people and organizations.
Beyond the age of Symbiosis, financial markets, systems, and monetization methodologies as we know it today will cease to exist. We will be in a new economic era. And we’ll still have 30 or more years to go before the singularity!

Right Sizing

Definition of Right Sizing

We often hear the term ‘downsizing’ in corporate finance. This term has a negative connotation since we have come to associate it with layoffs, lower wages, and other seemingly negative effects. What is the definition of ‘right-sizing’ and what is its ultimate goal?

The US financial system was built upon an ever modernizing industrial base. But in 2000 that base began to seriously erode due to competition from low cost providers, especially in Asia. The concept of downsizing and right-sizing arose out of the first shock-waves in the West due to the forces of globalization. In response, corporations began to rethink their human resources requirements in relation to the issues of outsourcing and overseas production operations. I have spent the last 10 years of my career as a business process analyst and systems engineer, helping companies figure-out what they can downsize, outsource, offshore, or automate, and I fear a second wave of right-sizing just over the horizon; just as we saw in the manufacturing sector, I believe that many types of knowledge-related jobs are, or will soon be at risk; to be sent to low wage but highly-capable providers due to advances in communication technologies. Many jobs are going to be automated also. In this light, I believe that the term right-sizing is a moving target; one that is accelerating.

Actually, the value proposition of the corporation entity itself is being redefined. Here’s what right-sizing means for corporations:

Becoming global in scope relative to markets and suppliers
Becoming managerially optimized by focusing on business processes not people
Becoming optimally resourced (use of human resources) per the mix of specialists and generalists
Becoming as automated as is cost effective

As business models churn due to a variety of forces, especially technology, the need to even have employees at all is in question. I envision corporate entities in the near future with very few actual employees; choosing instead to outsource to specialists. This market shift is happening today, as many corporations use temporary help and consultants who can provide specific, targeted services to better ensure a project’s success. The individual nature of work is changing; the ultimate right-size is when you work for yourself, and that may be the true definition and ultimate goal of right-sizing.

Unintended Effects of Right Sizing

What are some often unintended effects of right sizing a company?

Cultural shift as employees start to mistrust management (loss of shared values)
Loss of knowledge assets as employees who perform business processes (held as tribal knowledge) are downsized or leave the company
Non-optimized restructuring, leading to increased costs
Reliance on outsourced services that fail to deliver
Reliance on economic assumptions and drivers that fail to occur
Failed company initiatives
Disorganization and paralysis within the management structure including a loss of strategy and vision among senior executives
Loss of trust in the community and in the customer base
The organization begins a slow blood-letting as top performers decide to leave the company for other opportunities
Recovery becomes long and painful; and cumulates with a mass turnover at the executive level

Restructuring to Increase Efficiency and Effectiveness

After sale, how was ABTCo restructured to increase its efficiency and effectiveness?

ABTCo was restructured from a centralized functional organization (whatever that means), to a decentralized divisional management organization (whatever that means). In other words, the new owners cut management staff in a central office and off-loaded management tasks to the divisional managers. They also implemented a new inventory management software system, which probably allowed them to restructure using a decentralized model. On one hand, senior management reduced the work force, cut wages, froze benefits, and reduced inventory. On the other hand, employee incentive programs were implemented that were tied to productivity gains and employee stock options were offered to offset the wage and benefit cuts. Management also looked for new product offerings.

As a side note, I think they stumbled on to the vinyl siding business (discussed below), and that’s why there profits soared. You’ll notice that vinyl siding is their core business today. I don’t think that the management actions, to increase efficiency, would have necessarily saved the company, important as they were.

What Happened to ABT Company?

To whom was ABTCo sold and why? What happened when, a year after sale, the company issued an IPO? Why do you think this happened?

ABTCo was sold to a small group of former industry specialists acting in conjunction with a venture capital firm. This group of industry insiders had a vision of right-sizing based on a dramatic restructuring of the company’s human resources, software systems, and inventory. They recognize that the company was run by inefficient and ineffective management.

What really happened? ABTCo was a vinyl siding manufacturer with a very acceptable siding product in its lineup. However, at the time of sale, the vinyl siding market segment was small but steady. (It was off the radar so to speak). Then, the 800-lb. gorilla, Louisiana-Pacific, was involved in a massive class-action lawsuit when its wood siding products began to fail. (About 5 years after installation, the siding bubbled and began to fall-apart). Suddenly, vinyl siding became very hot. ABTCo was there, and everybody wanted a piece of the vinyl siding market, and the lemmings, I mean investors, rushed-in to buy the stock.

Barriers to Entry

What does the term ‘barriers to entry’ mean in business finance? How does this term apply to ABTCo?

An entry barrier refers to a minimum amount of capital or the ability to obtain a resource that is needed to begin or sustain a project. In business finance it usually refers to cash flow, capitalization, or access to other needed resources such as technical expertise, raw materials, and machinery as well as office or production facilities.

Investopedia defines barriers to entry as: "The existence of high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business." [Investopedia, 2005, search term “barriers to entry”] Other barriers to entry include: industry regulation, patents, special or unusual business processes, brand identity, and switching costs for customers.

Conclusions and Summary

Capital markets pay an important role in financing corporate projects. Both the bond and the stock market rely on traditional financial analysis and valuation mechanisms as a basis of pricing. Bonds have traditionally been considered safer than stocks because the future values of cash flows are known and interest rates are the biggest variable. With stock valuations, not only are there more variables, but perceived value also makes it more difficult to accurately value a stock.

There are many new financial instruments for trading, and electronic trading is changing the investment markets. In the future, we are likely to see this trend accelerate.

Bibliography

Ross, Westerfield, Jordan, Essentials of Corporate Finance, 4th edition, McGraw Hill, 2004, ISBN 0-07121507-7

McCracken, Mark, Bond Valuation, Dec. 2005, <http://www.teachmefinance.com/bondvaluation.html>

Investopedia, 2005, <http://www.investopedia.com/>

Wikipedia, 2005, <http://en.wikipedia.org/>

//

Facets of Leadership

SteveGall — Tue, 13 Feb 2007 20:53:22 CST

TOPIC: Excellence in Leadership

TITLE: The Facets of Leadership and the Crucible Experience

Stephen Gall

Instructor: Professor Rebecca Graham

Course: MGMT 1000

Current as of: July 8, 2005

Many people can point to a time in their life when they were challenged by some event or experience, which, in their view, explains how they ended-up where they are today. Sometimes, experiences provide opportunities for people to become leaders, especially for those who have developed the personality, habits, and response mechanisms that prepare them for this role. When faced with certain key events or opportunities, these people respond by having a crucible experience, which can change their lives and compel them to display qualities of leadership.

There is little doubt that our habits, traits, and personality underlie our responses to all types of events, and even shape the probability of future events and responses, as over time, our experiences and responses provide feedback that further refines our response mechanisms. Our habits, attitudes and tendencies, developed throughout our lifetime and ingrained in our personality, directly influence our personal management style [3].

Some of these personality traits and learning habits can define and strengthen our leadership traits [4]. Many leadership traits, such as the ability recognize and ignore irrelevant issues, apply different perspectives to an issue, or keep extremely focused, give people the ability to respond to events by taking a leadership position [5]. People who take-up leadership roles also develop the ability to adapt to changing circumstances while staying personally centered and focused [8], and many times, take a course of action even when faced with overwhelming criticism [7]. The ability to develop trustworthiness is also a key personality trait of leaders. Peter Drucker gives the example of Harry Truman who was described as having a bland personality, yet people trusted him because he always did what he said he would do. Drucker proposes that trustworthiness may be the single most important component of continued leadership [12].

Besides these personality traits and the life experiences that help people craft their leadership style, there are factors that influence the quality of their leadership. These leadership quality factors include the ability to command attention, shape the discussion, and make the right decision.

Knowing how to manage attention behavior is a key factor in influencing others and being a successful leader. In our busy lives, and in an economy where capital, labor, and information abound, human attention is in short supply. Often, attention is the missing link between confusion and action [10]. For those in a leadership role, the ability to command attention often relies on the ability to display authenticity and show a willingness to listen. This ability to give and get attention can establish an important emotional connection with listeners and supporters [6].

Shaping the discussion, another key component of quality leadership, is more than just presenting a persuasive argument. Shaping and defining the discussion involves inspiring and motivating others by presenting a course of action that is both credible and focused. Leaders who are most effective at shaping and presenting often develop a ‘presence’ which is compelling to follow [9].

We often associate leadership with the ability to make a decision and stick to a course of action. But timing itself may be the key to making decisions work. Among key leadership traits, (including focus, authenticity, courage, and empathy) the single most critical trait may be a sense of timing; knowing when to make a decision. Getting the timing wrong can even nullify the power of all other leadership traits [1].

A crucible experience happens when a person experiences a defining and memorial moment in which they decide to take a leadership role. The crucible experience is often associated with a need for some form of real change. Sometimes this change may even require crisis conditions, because only then is the organization willing to provide the attention to leadership ideas that were previously considered odd or irrelevant [2].

Some people begin a leadership role based on a single vision or goal. In the article, Crucibles of Leadership [11] Bennis and Thomas present us with examples of people whose experience compelled them to display qualities of leadership.

Although Sidney Harmon developed personality traits of leadership in his youth, he did not take leadership action until he was focused on a crucible event in his factory. Prior to the event, he certainly wasn’t a visionary when it came to running his factory; it was in bad shape. The actual crisis leading to his crucible experience was not a large one, but it allowed him to gain the focus he needed to recognize a solution, implement it, and become a proponent of a new management technique.

Liz Altman used her crucible experience to learn to ignore cultural assumptions when making decisions, and was able to use the skill of unbiased evaluation in other facets of her career.

Crucible experiences can be very individualized. Muriel Siebert used her personal beliefs and ethnicity as a tool to help herself stay focused. Many people find focus in this way, turning their differences into a personal cause (“me vs. the world”) which helps them gain the needed strength to carry-on in the face of adversity.

Some crucible experiences provide a path to self-actualization and personal leadership. Sidney Rittenbery spent 16 years in a Chinese prison. But he learned to block out abstractions to keep his focus, and his sanity. His personal leadership skill allowed him to survive where others were unable.

Nathan Jones was first provided with leadership, but as a young man, he had the personality traits that allowed him to listen, learn, apply, and grow throughout his career and eventually rise to the top of his profession. Throughout his life he worked to develop personal and professional leadership skills. Like the others he displayed a high degree of adaptive capacity.

The crucible experience can be a catalyst for leadership action, but the force of that leadership and its success, is based on our life experiences and opportunities, coupled with key personality traits and habits, which shape our responses to those events.

BIBLIOGRAPHY

THE KEY FACETS OF LEADERSHIP. By: Ochalla, Bryan; Ward, Brian. Credit Union Management, Jun 2002, Vol. 25 Issue 6, p6, 2/3p, 1c; (AN 6766890)

CONTEXT AND ACTION IN THE TRANSFORMATION OF THE FIRM. By: Pettigrew, Andrew M.. Journal of Management Studies, Nov87, Vol. 24 Issue 6, p649, 22p; (AN 4554258)

MIRROR, MIRROR. By: James, David. BRW, 4/7/2005, Vol. 27 Issue 13, p71, 1p; (AN 16851728)

EXTRAORDINARY LEADERSHIP. Management Services, Dec 2001, Vol. 45 Issue 12, p3, 1/2p; (AN 11577465)

LENSE ON LEADERSHIP. By: Glen, Paul. Computerworld, 6/6/2005, Vol. 39 Issue 23, p45, 4/5p; (AN 17231163)

NEW WAYS TO LOOK AT LEADERSHIP. By: Zielinski, Dave. Presentations, Jun 2005, Vol. 19 Issue 6, p26, 6p, 2c; (AN 17296957)

FIVE MARKS OF A GREAT LEADER. By: Johnson, Paul; Yew, Lee Kuan; Zedillo, Ernesto; Weinberger, Caspar W. Forbes Global, 5/9/2005, Vol. 8 Issue 8, p14, 1p; (AN 17156495)

BALANCED LEADERS. By: Dixon, Diane L. Leadership Excellence, May 2005, Vol. 22 Issue 5, p 19, 2/3p; (AN 17442081)

PRESENCE: WHAT ACTORS HAVE THAT LEADERS NEED. Super Performance.com – Human Performance and Achievement Resources, Web address: “http://www.superperformance.com/excerptleadershippresence.html”

THE ATTENTION ECONOMY: UNDERSTANDING THE NEW CURRENCY OF BUSINESS. Thomas H. Davenport, John C. Beck; Harvard Business School Press; 2001

CRUCIBLES OF LEADERSHIP. Bennis, Warren G., Thomas, Robert J.; Harvard Business Review; Sep. 2002, Vol. 80 Issue 9, p 39, 7p, 2c

DRUCKER ON LEADERSHIP. Forbes.com; Rich Karlgaard, 11.19.04; “http://www.forbes.com/2004/11/19/cz_rk_1119drucker_print.html” (see also “http://blogs.salon.com/0002007/2005/01/07.html”)

EthicalLeadership

SteveGall — Tue, 13 Feb 2007 20:52:34 CST

Stephen Gall

Bachelor of Science in Business Administration Program

MGMT 3101: Ethical Leadership

Walden University

Professor Marc Lyncheski, Instructor

April 14, 2006

Apple Computer and its Enigmatic Leader: Steve Jobs

History and Company Position

Steve Jobs was born in 1955 in Los Altos California. He attended Reed College in Oregon but never graduated. He returned to the San Jose area and briefly and went in business with his friend Steve Wozniak building 'blue boxes' which allowed hackers to make long-distance calls over AT&T phone lines for free. [Wikipedia, 2006, search=Steve Jobs]

Jobs left the Silicon Valley scene in 1975 and went backpacking with a friend throughout India, and when he returned he continued to shave his head and wear traditional Indian clothing. He took a job at Atari computers and soon after, again hooked-up with Wozniak to build his vision of a personal computer which they called the Apple 1. The Apple 1 was a prototype which quickly became the Apple 2, the computer that changed the world. [Ibid.]

Apple Computer was founded in 1976. Apple's beginnings are by now legendary as the two Steve's (Jobs and Wozniak) began as a garage operation assembling the original personal computer, and starting the personal computer revolution of the 1980s. By 2005 Apple employed 14,800 people, with revenue of $13.93 billion. Apple still uses a vertically integrated business model, which is unique to the standard industry model. Apple also relies on its closed and propriety systems, also unique when the industry is moving to open systems. The company’s structure is based solely on Jobs’ vision. [[Wikipedia, 2006, search=Apple Computer]

Mission, Vision, and Values

The company has been criticized for being 'personality-driven' by Jobs, and some regard the company as having cult-like features. But Jobs hasn’t always been at the helm.

Sense 1977, Apple has had six CEOs. By 1985, Apple began to lose market share to Microsoft’s Windows and many new competitors, and layoffs had to occur. This caused Steve Jobs to lose a power struggle with John Sculley who was the CEO Jobs had brought to Apple from Pepsi. The company under the tutelage of John Sculley, Apple CEO from 1983 - 93, was as much or more about marketing as about technology. [Wikipedia, 2006, search=Corporate affairs]

Jobs left Apple to start NeXT computers, which had limited success in the marketplace. But in 1997, Apple bought NeXT computer and Jobs was back at Apple, but only peripherally. Apple got in trouble again and Gil Amelio, the CEO at that time, was ousted in another power struggle, this time replaced by Jobs who became the interim CEO. Jobs began a restructuring of the company, introduced a series of new products, and started making strategic acquisitions, all of which got Apple back to profitability.

A large part of the Apple culture is radical customer devotion and brand fanaticism. Although Apple had a disruptive business model due to its introduction of the graphical user interface display, Apple also used a marketing strategy, introduced by Guy Kawasaki, which went beyond traditional marketing to what Guy dubbed ‘evangelism.’ Guy created a core constituency of Apple followers who loyalty to the Apple brand is still legendary. [Wikipedia, 2006, search=Apple Computer]

Apple’s current mission statement is: “Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.” [2006, Apple.com/investor]

No one disputes that Apple is lead by its powerful CEO’s vision, and focus. It is said that Jobs is so fanatical because he deeply believes in Apple Computer and his personal mission is “do it right.” Jobs believes that by making the best quality products possible that sales and stockholder value will follow. [Mercer, 2003] Because of Jobs, Apple is known today for its innovation and style, and many Apple products such as the iPod and iTunes are considered so innovative they have spawned micro-industries.

Leadership Style

No matter what anyone says about his personality or management style, there is little doubt that Jobs is one of America's great entrepreneurs and a bona fide visionary. He is personally responsible for introducing the personal computer with a graphical user interface and mouse. His vision extends beyond computers. After leaving Apple he bought Lucasfilsm's graphics division and turned it in to Pixar. Recently, Jobs became the de facto leader of Disney. His more recent vision includes the Apple iPod.

As a boss, Jobs has been described as both brilliant and intimidating. He is known to be a perfectionist. He is constantly pushing his workers, sometimes setting impossible deadlines. Jobs has even been charged with berating employees before the entire company. Some of his workers have even stated that they are afraid of him.

BusinessWeek has an interesting story that demonstrates Jobs passion:
[…] Minutes after Amelio left the room; Steve Jobs entered and began grilling Jim McCluney, head of Apple's worldwide operations. "O.K., tell me what's wrong with this place," Jobs said. After some mumbled replies, he jumped in: "It's the products! So what's wrong with the products?" Again, executives began offering some answers. Jobs cut them off. "The products SUCK!" he roared. "There's no sex in them anymore!" [Burrows, 2006]

Jobs seems to define the charismatic leader in the Silicon Valley; that of an 'aggressive egotist' who drives development teams using zeal and fear. Jobs can lead through times of ambiguity by focusing the team on his vision of reality. [Berglas, 1999]

"Jobs has earned many awards for the services he rendered to the computer hardware and software industry. He received the National Medal for Technology in 1985 and The Jefferson Award for Public Service in 1987. He was named the Entrepreneur of the Decade in 1989 by Inc magazine. He was also placed 39th on the Advertising Age 'Top 100 Advertising People' list. In 2000, the College of Journalism and Communications honored him with the 'Millennium Award' in recognition of his 'singular professional leadership, vision and creative achievement.' Jobs is a celebrated leader for thousands of people who used Apple products." [ICFAI, 2006]

Culture

As Jobs has matured however, he has started to become more of a consensus manager and team player. He still maintains his passion for creating the types of products that consumers love. "The great thing about Steve is that he knows that great business comes from great product," says Peter Schneider, the former chairman of Disney's studio. "First you have to get the product right, whether it's the iPod or an animated movie."[Helm, 2005]

If Jobs has a formula it starts with a narrow focus on his vision for a product and a faith in his strategy. Jobs has never seemed to worry about Wall Street or if his decision to discontinue or change a product will impact a quarter’s profits. When Jobs returned to Apple, for example, one of the first things he did was discontinue all product lines and focus on just four. "Our jaws dropped when we heard that one," recalls former Apple chairman Woolard. [Ibid.] Jobs insists on creating products that will be the market leader and his belief that ‘killer products bring killer profits.’ Jobs believes hitting a home run is better than being merely a competitor. He maintains a fixation on quality.

Jobs also believes that a small talented team can always beat a larger pool of less talented people, and always tries to recruit top talent. His true talent seems to be in the way he combines technical vision with a feel for what consumers want, combines with a unique and effective marketing style.

Because of Jobs, Apple has built a culture of innovation and remains an incubator of great designs. "Idealism is a major part of Apple," says Andy Herzfeld, an original Macintosh team member. "The company operates for artistic values rather than for commercial purposes." [Ibid]

To complete the circle, Apple isn’t afraid of risk, and often makes final decisions based on personal feel for what the market wants. This risk taking mentality is passed down the ranks as workers are empowered to make decisions at the lowest level. "I learned a lot about empowering people [at Apple] -- pushing responsibility down as far as you can...and letting people loose" says Larry Tesler, a user interface guru who worked at Apple from 1980 until 1997. "You'd show Jobs something and he might look at one part and say that just sucks -- but he never said 'make that button bigger.'" [Ibid]

Ethics and Corporate Social Responsibility

Apple Computer's corporate governance guidelines are focused on the responsibilities of members on the board of directors. Some of those responsibilities include the charter of a corporate governance committee to oversee the functioning of the board. [Corp. Governance Guidelines, 2006] There is little indication that corporate governance is part of Apple Computer's day-to-day business process.

Apple Computer supports a supplier diversity program lead by corporate procurement under Apple's CFO executive sponsorship. The program is monitored by a program board and is subject to internal audit. [Apple Supplier Diversity, 2006]

Apple Computer is keenly aware of human rights violations related to the lack of labor standards in using foreign suppliers, especially in the high-tech and garment industry. Apple has not adopted a code of conduct to address these issues, but does reference the United Nations core labor standards and responsibilities and Apple references a code compliance program that includes independent monitoring and public reporting. We can assume that this would be part of their 302 statement on the annual Sarbanes-Oxley report. [Labor standards, 2005]

Apple Computer acknowledges that computers and components represent a significant threat to the environment. Apple has instigated a responsible recycling program for all of its products. However, the Computer TakeBack Campaign has criticized Apple for not doing enough in this area. Apple is not an industry leader in the area of recycling. [2005 Computer Report Card, 2005]

Apple posts a statement of ethics [Ethics – The way we do business worldwide, 2005] which states in general terms the legal and ethical boundaries that Apple is compelled to follow. Apple's stated policy includes expectations in the following areas:

to maintain high standards of business conduct

to be ethical in business dealings
to avoid conflicts of interest
to respect confidentiality
to conduct business within the law
to conduct business which benefits communities

The Apple statement refers employees to its internal human resources policies and procedures for detailed information. According to Fortune's Most Admired Companies of 2006, among computer companies, Apple is ranked second to IBM, and eleventh overall. [Fortune America’s Most Admired, 2006]

Bibliography

Wikipedia, 2005, http://en.wikipedia.org/wiki/

Apple Computer web site: http://www.apple.com/find/sitemap.html

Mercer, Richard, Dec. 2003, "The Steve Jobs Factor, Jim Hill Media, <<http://www.jimhillmedia.com/article.php?id=812>>

Burrows, Peter, Feb. 2006, "Steve Jobs' Magic Kingdom," BusinessWeek online, <<http://www.businessweek.com/magazine/content/06_06/b3970001.htm>>

Helm, Burt, Sept. 2005, "Apple's Other Legacy: Top Designers," <<http://www.businessweek.com/technology/content/sep2005/tc2005096_1655_tc210.htm?campaign_id=nws_techn_sep16&link_position=link11>>

ICFAI, "Steve Jobs - The Silicon Valley Pioneer," 2006, Center for Management Research, <<http://icmr.icfai.org/casestudies/catalogue/Leadership%20and%20Entrepreneurship/LDEN018.htm>>

Berglas, Steven, "What You Can Learn from Steve Jobs," Oct. 1999, Inc. Magazine, <<http://www.inc.com/magazine/19991001/13575.html>>

"Corporate Governance Guidelines of Apple Computer, Inc." 2006, Apple.com, <<http://media.corporate-ir.net/media_files/irol/10/107357/corpGov/CorpGovGuidelines.pdf>>

“Apple Supplier Diversity,” 2006, Apple.com, <<http://www.apple.com/supplierdiversity/documents/asdppolicy.html>>

"Labor Standards 2005 - Apple Computer" 2005, Apple.com, <<http://www.iccr.org/shareholder/proxy_book05/CONTRACT%20SUPPLIER%20SYSTEM/APPLE%20VENDOR%20STDS%202004-05.HTM>>

2005 Computer Report Card, 2005, Silicon Valley toxics Coalition, <<http://www.svtc.org/cleancc/>>

"Ethics - The way we do business worldwide" 2005, Apple.com, <<http://media.corporate-ir.net/media_files/irol//10/107357/corpGov/Apple_Ethics.pdf>>

"Fortune America's Most Admired Companies 2006," CNNMoney.com, 2006, <<http://money.cnn.com/magazines/fortune/mostadmired/snapshots/114.html>>

//

DynamicsOfChange

SteveGall — Tue, 13 Feb 2007 20:51:24 CST

Stephen Gall

Bachelor of Science in Business Administration Program

MGMT 3102: The Dynamics of Change

Walden University

Professor Art Johnson, Instructor

May 27, 2006

Moving to Service-based Security and Software Applications for Data and Information Management

Problem Statement

This proposed solution addresses the following issues:

1/ We must get a handle on electronic intrusions and ensure our own network security. There is a growing demand on IT resources to ensure a secure network, yet we have not reached an adequate confidence level.

2/ We must reduce our IT costs, which are too high and growing too fast:

Maintaining software and perform upgrades, including version control and compatibility issues
Managing our network and intranet
Maintaining a fully-staffed IT department
Managing the computing requirements of a fully-dispersed workforce

3/ We must address vendor lock-in in regards to our data and information. Every time IT updates a system or implements a new software version, we must undergo a data conversion analysis and data conversion project, which creates risk to our data integrity.

4/ We must address the needs of our expanding mobile workforce by providing a collaborative workspace that extends beyond our corporate office walls and takes advantage of new technologies and devices. Our recent survey discovered that the workforce (including partners, consultants, and third-parties requiring access to our data) is increasingly working ‘off the internal network’ with laptops and devices, and requires a web-based solution that is not in place today.

We are under increasing pressure to provide remote access and functionality to our applications, data, and information. Also, our users do not want to download files to their laptops when they leave the office on travel or to work off-site. They continually ask IT to provide remote access to the network. We will not be able to scale our current solution for much longer. Finally, we need a technology solution that allows us to implement much better search tools.

Business Need and Market Drivers

Discussion

We are facing communication channel and content management issues as the environment grows increasingly more complex. If we want to realize a strategic advantage in this environment we must move to adopting edge technologies that will allow us to build, integrate and manage new data and dynamic information systems. We need a technology solution that allows us to move our islands of data away from proprietary database and document formats. We must address the growing demand for information in video. We also need to provide better search results that span the entire spectrum of corporate information resources.

Today, our software and information systems strategy is based on the client/server model that is thirty years old. This model does not scale well in a world of wireless networks, VoIP, distributed networks with low-cost data storage, open-source operating systems, open-source data standards, desktop alternatives, as well as real-time (transaction based) media using the Internet. Our organization needs to take advantage of technologies that leverage this new distributed internet model. Most importantly, these internet technologies can greatly help us reduce IT costs and better meet our needs.

Recommended Change and Goals

The following strategic goals and changes are recommended:

1. Outsource security activities to a vendor that specializes in secure network access. Specifically, engage a partner to manage our VPN (virtual private network) access to our own (and other) networks [Browne, 2001]

2. Lease, instead of purchase, our software applications. We can begin the transition from the managed applications model and move to the software-as-a-service (SaaS) model. [Pallatto, 2005] [Blozan, 2005]

3. Switch to a common data format. Use XML exclusively to structure all data and information
4. Create and manage collaborative workspaces using Web 2.0 technologies such as RSS [Kirkpatrick, 2006], wikis and weblogs [Wood, 2005] [Hall,
2002]

Discussion

The major change that allows us to implement service-based software applications and new web-based technologies will be our adoption of a standardized data and information format using XML. Although this data formatting model has been slow to gain acceptance, today it is becoming the overwhelming choice as a method to manipulate and share data and information. Advances in network architectures, faster broadband, and decreased costs of storage capacity have removed the final barriers to its adoption.

Alignment with Organizational Strategy

We have two important strategies which this change recommendation addresses:

To use IT solutions to gain a strategic market advantage
To use third-party providers for processes and activities that are not strategic to our business model

Discussion
We want to be enabled by software, however, we do not want to be in the software business. We envision the following organizational advantages by moving to a service-based model:

We will not need to purchase software upgrades to our current applications, or require versioning and configuration of Microsoft Windows
We will reduce the burden of our InfoSEC (information security) team when responding to network security issues and alerts
We will not need to maintain the configuration and security of personal computers, which today takes up a great deal of IT staff time
We can reduce the size and complexity of our data center
Employees will not be required to use an office computer located in one of our facilities in order to access corporate applications, data and information, because they will be able to work from any location where internet access is available

Implementation Steps and Key Milestones

General Implementation Plan

Assign a project manager to manage the technology selection and transition process, vendor selection process, and implementation process
Prepare an initial cost assessment and budget

Security Plan

Prepare a security needs analysis which identifies the various networks that require security and the type of security that is required
Prepare and update a list of users by job role and name, and requirements for access to the various networks (for assigning security access levels)
Create a security matrix for assigning access to data and information based on our data governance program
Research and identify the leading security vendors, then create a RFS (request for service) and ask the leading vendors to respond with an initial estimate of recommended services and costs. Select a vendor.
Work with a consultant or the vendor to create a transition plan. (This activity will be done in conjunction with our infoSEC team)

Software Services Plan

Have SalesForce.com [SalesForce, 2006] present aproduct demonstration onsite for the executive and management team
Identify the major application services vendors in the application categories that match our application requirements
Prepare a SaaS analysis, transition plan, and project plan

XML Transition Plan

Create an XML schema library based on our data dictionaries and documentation schemas, including managed spreadsheets and forms
Determine which data and documents to transition to the new format
Implement this schema-based format for service-based applications and documents prepared using the new collaborative workspace solutions

Collaborative Workspace Plan

Develop an RSS strategy [Kirkpatrick, 2005]
Implement various solutions such as wikis and weblogs in a ‘sandbox’ for demonstrations, training, and practice
Demonstrate the new functionality to our user community and encourage users to begin using these tools

Issues and Implementation Barriers

This plan will require careful transition management planning especially by IT
Unit managers will need to be kept abreast of impacts to their specific applications and how any changes will affect specific business requirements and specifications for new software improvements or changes
Users will need to understand how they will actually gain functionality from these new tools

Communication and Monitoring Plan

Part of the proposed solution will be used as a key component of the communication mechanism. From the internal web site, a link will be provided to a weblog, where daily posts discussing the project as it progresses will be made. Employees will be encouraged to post comments. There will also be a link to a primary wiki, which will be the main portal to project plans, files, resources, milestones and mission statements, and other project-related collateral. All deliverables will be accessible from the project wiki.

The senior project manager or representative shall also hold a series of demonstrations for each business unit, where new security measures and practices, training of new software interfaces, and the use of collaborative workspaces will be discussed.

Bibliography

Brian Browne, Cindy Lewis, Rich Hamilton and Woody Weaver, "Best Practices For VPN Implementation," March 2001, Business Communications Review, [http://www.bcr.com/management/management_strategies/best_practices_vpn_implementation_20010301662.htm]

John Pallatto, "SaaS Emerges as Long-Term Rival to Packaged Software," May 2005, eWeek.com, [http://www.eweek.com/article2/0,1759,1820691,00.asp]

Nick Blozan, "Service-Oriented Architectures and Software as a Service"
05/2005, ebiz, [http://www.ebizq.net/hot_topics/soa/features/5899.html]

Marshall Kirkpatrick, "Using RSS to SMS for rapid notification of emerging information" MobileActive.org, 2006, [http://www.mobileactive.org/node/1521]

Marshall Kirkpatrick, "Introduction to RSS Syndication, 2005, Marshall Kirkpatrick's weblog, [http://marshallk.com/introduction-to-rss-syndication/]

Lauren Wood, "Blogs & Wikis: Technologies for Enterprise Applications?" The Gilbane Report: Volume 12, Number 10, March 2005, [http://gilbane.com/gilbane_report.pl/104/Blogs__Wikis_Technologies_for_Enterprise_Applications.html]

Michael Hall, "Give Your Users the Power of the Press With Weblogs and Wikis", 12/2002, Intranet Journal, [http://www.intranetjournal.com/articles/200212/ij_12_16_02a.html]

SalesForce software home page, 2006, [http://www.salesforce.com/]

//

Accounting

SteveGall — Tue, 13 Feb 2007 20:49:31 CST

Stephen Gall

PCAOB Executive Summary

Management 3104 – Accounting Principles

Professor Glenn L. Pate, Instructor

Walden University

October 6, 2006

PCAOB Executive Summary

The Sarbanes-Oxley Act

The passage of the Public Company Accounting Reform and Investor Protection Act of 2002 (also known as the Sarbanes-Oxley Act), was a direct response to hearings held by Congress on the Enron and WorldCom accounting fraud scandals. It was realized that oversight of large auditing firm appraisers' and auditors' was not strong enough to assure that the public interest was being protected. It was felt that by establishing a system of controls and regulations that were effective at reducing corporate fraud, the public’s confidence in stock market could be regained.

Before the Sarbanes-Oxley Act was passed, discussions about internal controls where only a topic of interest to internal audit committees at some companies. However, the Sarbanes-Oxley Act has changed all that, and now an independent auditor must confirm that an organization maintains effective internal controls over the entire spectrum related to financial reporting, including financial controls, information systems controls, and corporate governance.

PCAOB Mission

The Public Company Accounting Oversight Board (PCAOB) is a private, non-profit corporation that was established in accordance with Sarbanes-Oxley under Section 101 of the Act. The PCAOB, under the direct supervision from the Securities and Exchange Commission (SEC), was established in response to this need to establish an auditing function that provides oversight and regulation of reporting activities of publicly-traded companies. The PCAOB’s mission is to review the work of auditing firms and monitor how these firms evaluated the financial health of their (publicly traded) clients. The PCAOB’s stated mission is to "protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports." [Wikipedia, 2006]

Prior to the establishment of the PCAOB, the accounting industry was self-regulated through the Public Oversight Board which was directly controlled by members that were appointed by the audit industry itself.

PCAOB Membership and Structure

The PCAOB has five members which are appointed by the SEC. Two members, but no more, are required to be CPAs (certified public accountants). It is also a requirement that the chairperson must not have practiced as a CPA for at least five years. Interestingly, when the auditing community was asked to respond to the structure and scope of the PCAOB, this requirement raised the biggest concern. The auditing community felt strongly that board members should all be required to be CPAs. [Hill, 2005]

The Board is provided an annual budget, subject to approval by the SEC, of approximately $100 million, which is funded by fees collected from stock and bond market issuers. The PCAOB board oversees a staff of over 300. Headquartered in Washington D.C., the PCAOB also has regional offices in Atlanta, Dallas, New York, Irvine, Chicago, Denver, San Francisco, and in Ashburn Virginia.

The first chairperson was William H. Webster, former director of both the FBI and the CIA. Because of irregularities in Webster's past relationships with large high-tech companies that were under investigation at the time of his appointment, he resigned soon after. The current chairperson is Bill Gradison, who has a doctorate from Harvard, and an extensive background in both business and in the public sector.

PCAOB Functions

The functional role of the PCAOB is to:

Register public accounting firms who prepare audit reports for public companies
Set standards for auditing practices, quality, ethics, and any function related to preparing audit reports
Conduct inspections and examinations of its registered accounting firms
Conduct Investigations into allegations of fraud or misconduct.
Enforcement of standards and laws, including disciplinary action (including lawsuits) and impose sanctions for misconduct when identified in one of its registered accounting firms.

Registered firms are categorized as being big and small firms

Big firms are those having more than 100 issuers as clients. These firms’ documented records are inspected on a yearly basis.
Small firms are those will fewer than 100 issuers as clients. The PCAOB reviews these firms’ documented records every three years.

Inspections include the review of Sarbanes-Oxley audit documentation that has been prepared by auditing firms to show how their clients comply with the Sarbanes-Oxley Act. PCAOB documentation standards are now considered the de facto standards for all accounting documentation, especially on how to document the effectiveness of internal controls and their assessment.

Power and Authority

The PCAOB has been granted the authority by the SEC to conduct audits and review records of companies that are located anywhere in the United States without being subject to state or municipal law. Non-US public accounting firms that prepare audit reports for US public companies must also be registered with the PCAOB as of 2003. [Deloitte, 2006]

As part of its investigative powers, the PCAOB can acquire documentation and/or testimony from auditing firms at will, and has the power to suspend or bar individuals and companies from practice of public company accounting if the PCAOB can verify justifiable cause. Even if a company is not required to be registered with the PCAOB that company may still be subject to investigation via the right of the PCAOB to request the authority to investigate from the SEC. If there are issues raised from an inspection, the PCAOB has the authority to report accounting irregularities to the SEC, or to request a restatement. Penalties can include sanctions, fines, or deregistration. [Marlais, 2006]

The PCAOB Board is required to conduct inspections of registered accounting firms to establish that each firm is complying with the Sarbanes-Oxley Act and PCAOB Board rules, and is also meeting professional standards and audit performance criteria. Monitoring and punishment of unethical behavior has long been held to be the problem, not the lack of ethical standards. [Hill, 2005]

The PCAOB is required to annually inspect any firm that provides audit reports for 100 or more clients, and inspect tri-annually all other registered firms. Each inspection is documented in a report that is then made available to Commission and State regulatory authorities. Some parts of the reports are also made public (subject to disclosure rules). [PCAOB, 2006]

Recognizing Issues

The PCAOB is aware of issues that both public companies and their auditing firms face, related to complying with Section 404 of the Sarbanes Oxley Act, especially about the issues of cost and cost-effective auditing. Many public company executives have complained about overreaching audits, to which the SEC has held roundtables to identify the problems. The PCAOB has recently announced that it will audit its member firms for judicious use of auditing techniques to control costs. [Reason, 2006]

In a recent interview with the PCAOB's chief auditor, Douglas R. Carmichael, Carmichael emphasized that the PCAOB has the responsibility to listen to its stakeholders, including organizations, businesses, and individuals, before setting mandates. Under Carmichael the PCAOB has encouraged an open dialogue.

Carmichael also emphasized the need to reassess auditing standards, including audit effectiveness. Because of this effort by Carmichael, the PCAOB has received many recommendations for improving standards and processes, which it hopes to incorporate as (the PCAOB) reassesses its auditing role. In conjunction with this effort to listen to stakeholders, the PCAOB is focused on providing updated information on accounting standards and guidance, and provides online forums on many topics of interest for its members.

The PCAOB, however, remains focused on addressing major areas of long-standing concern with accounting fraud, including: 1) management overrides of the accounting system and journal entries, 2) the inability to confirm or validate account balances, 3) issues related to revenue recognition and lost revenue.

The PCAOB is also concerned with the ability to validate audit fairness and quality control. [Colson, 2004] To address this issue, the PCAOB has its own Internal Oversight and Performance Assurance Assessment to review its own performance and key program operations. A summary of the report is made public. The latest results of the review conclude that the PCAOB is succeeding in efforts to collect, assimilate, and analyze risk-related information, even though awareness and expectations of the program are still not clear to not only those who the program affects, but also internally. Even with all the efforts made by the PCAOB it is still recommended that additional resources are dedicated to communicating risk assessment information. [Office of Research and Analysis, 2006]

Managing Controversy

Until the PCAOB became empowered, auditing standards were set by the American Institute of Certified Public Accountants (AICPA). The AICPA has often been criticized for creating weak auditing standards and for being too accommodating to its membership in major accounting firms who are more interested in protecting accountants from liability in malpractice lawsuits than in providing and enforcing accounting standards that enforce accountability to shareholders. The AICPA must now pass it’s authority to set auditing standards to the PCAOB, which will focus on standards that are more in the public interest, not in the protection of auditors or their firms.

The establishment of PCAOB power is not without controversy. Recently, the Free Enterprise Institute, and its chief counsel, Kenneth Star, issued a lawsuit against the PCAOB charging that the PCAOB is an unconstitutional body, and further that its creation acts to hinder competition. The basis of the lawsuit is centered on the authority of a private corporation (the PCAOB) to oversee other private corporation's activities and enforce compliance. The lawsuit claims that the PCAOB must be a government entity and subject to Senate approval. The lawsuit aims to enforce accountability to a government agency. [Meyers, 2006] For their part, the PCAOB is asking that the lawsuit be dismissed on the grounds that the argument should be taken to the SEC, the government organization overseeing the PCAOB. Eventually, all agree, this checks-and-balances process will be worked-out.

Another area not yet free of controversy is the registration of foreign firms. From the perspective of foreign firms, it appears that the U.S. is unilaterally imposing regulatory requirements without having negotiated an equitable agreement with foreign governments and foreign firms.

Another area of concern involves disclosure requirements of auditor misconduct and criminal offenses no matter how unrelated to the auditor’s ability to perform an auditing function.

There are other issues mainly related to broad definitions of powers and authority. Eventually these scoping issues and control issues will be addressed in the interests of fair and effective oversight. And of course, the PCAOB inherits many of the ongoing issues related to actual accounting practices that arise as they are discovered.

Final Thoughts on SOX

An incredible amount of time and effort has been spent on understanding and complying with the Sarbanes-Oxley Act (SOX). Preparing for a SOX audit, however, can be an opportunity if the enterprise stops thinking in terms of minimum requirements and starts thinking about maximizing benefits. As part of an overall company strategy, SOX can be a catalyst for reducing waste, creating more efficient business processes, and for implementing new technologies, business models, and related business/social architectures.

Moving the focus to a process-based, control-based environment can be difficult. It means managing business processes as well as people, and knowing how to follow documented business processes instead of following ad hoc procedures. This is turning-out to be a significant change for many enterprises.

Surviving in today’s markets means that the organization must manage in an environment where stockholders and customers are becoming smarter and are doing business faster. Business success may depend on having smarter conversations, which starts with having the right conversations. By analyzing and documenting business processes and integrating controls into those processes, the organization will be able to have better, more precise and smarter conversations about how it does business, both internally and with stockholders and customers.

The accounting profession has shifted dramatically from self-regulatory to direct government oversight. There is little disagreement that the importance of the PCAOB will continue to grow as the inspection process and enforcement measures are increased. Today we are only at the first round of PCAOB inspections, and the issues related to preparing documentation, auditing, and inspecting are still being discovered. All participants agree that the PCAOB is essential to the health of the public company accounting and reporting process to ensure that investors are presented with fair and accurate accounting information. [Farrell, 2005]

Bibliography

Wikipedia, 2006, search term “PCAOB” http://en.wikipedia.org/wiki/Public_Company_Accounting_Oversight_Board

Hill, McEnroe, and Stevens, "Auditors' Reactions to Sarbanes-Oxley and the PCAOB," The CPA Journal Online, Nov. 2005, http://www.nysscpa.org/cpajournal/2005/1105/special_issue/essentials/p32.htm

Marlais, Don, "Sarbanes-Oxley, Revisited One Year later, an Update," American Bar Association Annual Meeting, 2003, http://www.abanet.org/adminlaw/annual2003/SarbanesOxley.pdf

PCAOB, “Inspections,” PCAOB.org, 2006, http://www.pcaobus.org/Inspections/index.aspx

Deloitte Touche Tohmatsu, "Registration of Foreign Public Accounting Firms," IAS Plus, 2006, http://www.iasplus.com/restruct/pcaob.htm

Reason, Tim, "PCAOB: Auditor Judgment under Scrutiny," CFO.com, May 2006, http://www.cfo.com/article.cfm/6878293

Colson, Robert, "Auditing Standards in Transition," The CPA Journal Online, Sept. 2004, http://www.nysscpa.org/cpajournal/2004/904/infocus/p20.htm

Myers, Stephanie, "Lawsuit Challenges Constitutionality of PCAOB," The Trusted Professional, vol. 9, # 5, March 2006, http://www.nysscpa.org/trustedprof/306a/tp2.htm

Office of Research and Analysis, PCAOB Performance Review, Sept. 2006 (IOPA-2006-003), http://72.14.253.104/search?q=cache:XAVFYIOLbZ0J:www.pcaobus.org/About_the_PCAOB/Internal_Oversight/Review_Summaries/2006/Office_of_Research_and_Analysis.pdf

Farrell and Shadab, "The Focus of Future PCAOB Auditor Inspections," The CPA Journal Online, June 2005, http://www.nysscpa.org/cpajournal/2005/605/perspectives/p9.htm

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future vision

SteveGall — Sun, 14 Jan 2007 14:04:58 CST

From the Internet to AO

We are currently experiencing a convergence of technologies and paradigms:

In the Information Age, we added digital information to products and services; we are now in an era characterized by adding information to information (metadata), and this will eventually allow software to “understand” the semantic meaning of unstructured data.
Network architectures will soon be able to move terabits over a massive network.
Internet Protocols will replace proprietary and analog systems.
The problems associated with table updates, domain server names and addressing will be resolved.
The problems associated with PC obsolescence: file storage, RAM, disk space, and legacy applications, will all but disappear.
The value of any device will be its ability to access the network.

The consequences are that the computer will become ubiquitous as it becomes part of any device that can access this new 'datasphere' from anywhere that a connection can be made. This datasphere and the many new devices communicating with it will allow the vast majority of humans, even the disenfranchised billions at the bottom in today’s world, to acquire a new level of information sharing ability, reshaping the human to human and human to machine experience.

In the near future, you will have the option to interact with the datasphere using voice commands (via a Linguistic User Interface) or even through a direct neural connection. Intelligent systems will “understand” the context of a question or query, and be able to respond via a 'persona' that can understand the context of the question. These personas will be able to create the appropriate links to depth and detail, cross-references, and links to other information of potential interest, or to human contacts.

You will interact with a robots and personas to answer to a question, make a decision, commit to action, or carry out a procedure. Through the datasphere, you will buy or order a products and services directly from the manufacturer; middle-persons will not be required. Electronic funds transfers will occur seamlessly, in real-time.

The always-on network will also mean always-with-you. For most of us the pace of work will quicken as response times fall. A network of intelligent agents may even begin to compete with their human counterparts.

As the datasphere takes shape, it will be characterized by multi-sensory information in real time - video, audio, and data, that is totally dynamic and in three-D. In fact, high-resolution flat-panel displays of all sizes from hand-held to huge screens are already appearing. We will have the ability to make the display information conform to the parameters of our viewing device, and other personal viewing preferences.

The flow and function of information and interaction within a the datasphere will become more intuitive as better user interfaces emerge. The degrees of freedom to interact with software agents and personas will reduce the need to use complex applications with pre-determined functionality.

In the next few years, a television viewer will be able to interact with, or change the content of a broadcast through a concurrent Web site, or take part in an interactive simulcast. Viewing a movie, “broadcast,” or a streaming media event will be equally enjoyable on either a TV or a computer. The experience will not be distinguishable. In fact TV as we know it will soon become part of the internet using a 'dot-TV' extension.

Soon you will be able to open and use a software application, listen to music, watch a video, or read a book, all through the datasphere, and simply makes a micro-payment for use of intellectual property.

The Autonomous Observer Network

Autonomous Observer (AO) is the artificial intelligence life form that will emerge from the “datasphere.” AO will be the software construct that manages billions of business rules, knowledge bases, databases, laws, social networks, distributed (software) systems, agents, and robots, products and parts, meetings and appointments and the entire digital world. The Internet will begin to act as a coherent, cognitive network. Whereas human intelligence provides the vast majority of today’s Internet, AO will coordinate the machine intelligence that will enhance it.

AO will allow a global society to survive and thrive, integrating the technologies that will continue to grow exponentially. AO will, in real-time, ensure system functionality, but also the privacy, impartiality, fairness, and attention to circumstance for billions of people.

To begin building AO, we must engineer business rules to describe complex processes. Documenting business processes and the organization’s intellectual capital will be a key component to codifying both context and semantics. Eventually, the software will become sophisticated enough to begin building its own rules and software based on the probability of various outcomes. Perhaps this will be the beginning of Ray Kurzweil’s Singularity.

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Developing a Portfolio

SteveGall — Sat, 13 Jan 2007 21:47:47 CST

Student Portfolio
Walden University

Statement of Originality:

Except where otherwise noted, this site will be
licensed under a Creative Commons Attribution 2.5 License

Statement of Purpose

Describe the purpose of your student portfolio by considering these questions:
What is the purpose of your portfolio?
Why are you creating a portfolio?
What are your academic goals?
How do you plan to accomplish those goals?
How will your portfolio demonstrate what you have learned?

Statement of Purpose

The purpose of my student portfolio is:

1. To manage all my writing projects while at Walden University.

2. In conjunction with my business and personal Weblog, the purpose is to explore new ideas and techniques in information management using state-of-the-art information management, search, and social software tools.

My academic goal is to complete my degree, and the portfolio is not directly related to that goal, except that it is also a requirement.

My student portfolio needs to be able to answer any questions anyone might have about my work and studies at Walden. The portfolio will be a conversation between me and those who choose to visit or use the site.

The portfolio will demonstrate what is possible with Web-based, open-source technology, and I will use the creation and management of the site it explore and learn these technologies.

Intended Audience

Describe the Intended Audience for your student portfolio by considering these questions:

Who will see or use your portfolio?
How will the members of the audience use your portfolio and what do they expect it to contain?
How will the contents of the portfolio meet the expectations of the intended audience?

Intended Audience

I know for sure that teachers and fellow students will be encouraged and welcome to visit my portfolio. At first, I will be the primary audience, because I’m going to use the portfolio to manage my school work, as I explore some ideas in creating dynamic documents based on emerging technologies. I hope to surprise anyone who comes to the site, by demonstrating new methods in information management.

The site will be a conversation; that is, I expect visitors to participate in the discussion and shape how the site is presented.

I may invite open audience participation, including friends, business experts I know or would like to know.

Method of Organization

Describe how you will organize your student portfolio by considering these questions:

How should the portfolio contents be organized?
What is the rationale for choosing one way rather than another to organize the portfolio?
How does the method of organization support the overall intent of the portfolio?

Method of Organization

1. I’m going to use a basic weblog to start organizing the materials. Right now, I haven’t selected a style or format.
2. I may add a Wiki as a repository for papers and other information, and use the Wiki search engine functionality.
3. Eventually, I’m going to store all data and documents in native XML and use extensive metadata elements and RSS.
4. I will definitely ask the audience to participate so ‘comments’ will be turned-on.
5. I want to explore the concept of dynamic documents (documents created on the fly based on search criteria). I’ll work with some programmers to write XSLT style sheets that generate the documents based on various criteria.
6. I want to move from hierarchical, confined, and pre-defined organizational structure, to a dynamic structure where, “information will find you.”

List of Work Samples

MGMT 3001 Portfolio Project

Review the MGMT 3001 Portfolio Project description. The document is located in the Lesson 5 folder within Course Documents.
You do not have to complete the MGMT 3001 Portfolio Project now. You will do this project when you take that course. For the purposes of this assignment simply write one or two sentences describing the project and what you think the purpose is of this project.

List other work samples (if you have them) that you would like to include in your portfolio.

Samples
Besides everything I write I’ll include the following information:

A daily history, and will act as an ongoing workbook
All of my writing projects, including daily drafts of work as I complete the assignment
Personal logs and feelings about my schoolwork (what was I thinking?)
Links to other weblogs, articles, or anything of interest
Correspondence and feedback
Anything else I can think of that I want to track, including video

Reflective Evaluation

For each work sample write a brief statement that considers these questions:

Why is it included in your portfolio?
What did you learn?
How does what you learned help you achieve your academic goals?
How can you apply what you have learned to future assignments?
Are there elements of the assignment that you can improve?

Since you may not have any existing work samples, comment on the MGMT 3001 Portfolio project. Consider these questions:

Why will you include it in your portfolio?
What did you think you will learn from the assignment?
How do you think the assignment will help you achieve your academic goals?

Professional Work Samples and Reflective Evaluation

For business and professional reasons, I will not be including any work samples in my student portfolio.

For personal and professional reasons, I will not be adding reflective evaluation to the completed assignments.

Success Strategies

SteveGall — Sat, 13 Jan 2007 21:30:02 CST

There is no abstract available for this page revision.

globalBusiness

SteveGall — Sun, 27 Aug 2006 20:56:51 CDT

Global Business in the 21st Centruy -- Portfolio Project term paper

Subject of Paper

Introducing Gallinfo Media's video podcast productions to the Japanese Market

Introduction - Gallinfo Media's Business Model

Gallinfo Media has decided to introduce their unique media product, which represents an entirely new genre, into the nascent video podcast market in Japan.

Executive Summary
In terms of market size, wealth, potential viewers (consumers) when measured against costs and risks, the Japanese market is attractive. Gallinfo Media’s (GM’s) greatest advantage may be the established cultural tastes for this type of genre. Further market research must be done to determine the potential for advertising revenue generation, before the Gallinfo Media market entry. As with any foreign company doing business in Japan, it will be critical to establish trusting relationships with advertising agencies and their clients.

Introduction

Subject of Paper: Introducing Gallinfo Media's (GM) video podcast productions to the Japanese Market.

Perspective

The strategic planner addressing the CEO and BOD
Discussing critical issues for establishing a new business venue, affecting policy drivers
Addressing theories and concepts in course materials

Gallinfo Media's Business Model

Gallinfo Media (GM) has decided to introduce their unique media product, which represents an entirely new genre, into the nascent video podcast market in Japan.
Gallinfo Media’s podcasts use unique situational content to make a compelling viewer experience, while strategically placing products within the story-line, thus creating an alternative to the traditional advertising model. This combination of video podcasts, short-duration themes, and customized product placement -- represent new genera in entertainment.
These professionally produced video podcasts, lasting from 5 to 15 minutes in length, can be streamed or downloaded to any viewing device, and are:

standardized on unique themes -- Themes can be targeted to fit the cultural tastes of a small audience, or to satisfy a broader appeal
targeted to short attention-span viewing -- perfect for watching while taking a quick work-break
written and produced to integrate product messages -- so as not to be viewed as a traditional (TV-type) advertisement

There are three components to the GM business model:

Production services, which includes the production of the content of the actual video podcasts
Web services, which includes the management of the web site, and the hosting and streaming of podcasts
Marketing services, which includes the establishment and management of the brand, and relationships with potential partners and advertisers

Critical Success Factors

Addressing Product and Brand Characteristics: Although GM eschews direct sexual content or nudity, some of GM’s content does rely on the use of partial nudity, displaying men’s and women’s bodies in semi-erotic themes. Would these messages be culturally acceptable? Would advertisers be opposed to associating their products with the erotic themes we use? How should our character profiles be changed to target Japanese cultural norms; are the characterizations acceptably compelling to a Japanese audience?
Before approaching the market or determining a course of action, we recommend hiring a firm which specializes in Japanese-American relationship-building, to research and address these issues.

Responding to Cultural Differences

Social structure and religion

Issue: Does the Japanese social structure and religious preferences create cultural difference which affects product decisions?
Relationship to business model: Relative to the GM business model, the Japanese share many social and cultural values and traits with their U.S. counterparts. Although social class remains a distinct reality in modern Japan (Brinton, 2005), the podcasts do not address class issues, and therefore should have wide appeal among both men and women regardless of class. Religion and other potentially restrictive social philosophies, which would affect the how Japanese viewers receive our themes, does not play a major role in decisions about the ethics of sex (Japan guide, 2006) or, consequently, its use as an advertising mechanism.
Strategy: Social and cultural differences should not create blocking issues for using the same formula for developing character models and plot lines that are employed in the U.S. In Japan, GM will not face broad cultural issues with class, religion, and economic differences that may impact acceptance of its genre.

Language, education, and folkways

Issue: Are there language, education or folkway differences that block the acceptance of our product?
Relationship to business model: In many ways, everyday life in Japan is even more structured around urban lifestyles and its integration with technology and media when compared with the U.S. or other countries. Also, the Japanese view themselves as fashion trendsetters. [Japan-zone, 2006] Popular culture is highly evolved and represents many opportunities. [Miyao, 2005]
Education levels are comparable or higher than in the U.S. The English language is considered a second-language and is also often used as the language of business. Business relationships in English are common.
Strategy: These cultural similarities can all be leveraged to create the modern, hip, fashionable, and trend-setting themes that are already part of the GM strategy. But when it comes to language, all our business will be done in spoken Japanese, using interpreters with extensive business experience in cross-cultural relationships. There are just too many code words in the Japanese for foreign executives to master or even understand. [DeMente, 2002]

Popular culture and workplace culture

Relationship to business model: The Japanese entertainment industry is highly evolved and in many ways on-par with the U.S.
Strategy: Although GM does not use a traditional workplace model using employees, preferring instead to outsource all production and other functions, all three components of the GM business model will need to respond to cultural differences and tastes in regards to working relationships:

Producing content that is appropriate for a Japanese audience, such as using characterization, action, themes, and correctly interpreting the leading fashion and social trends
Communicating with both advertising agencies and their clients, and with Japanese videographers and screenwriters to create trusting relationships and actionable work agreements

Labor, staffing quality, and availability

Relationship to business model: The video production industry and advertising/media markets are well established in Japan. Our research has shown that there are many leading-edge videographers and screenwriters that are eager to establish a working relationship with GM.
Strategy: The recommended strategy is to rely-on and use (established) Japanese writers, producers, and videographers to produce content for the Japanese audience. Always strive to ensure that cultural issues are seamlessly integrated into any product message.

Political, economic and legal issues

Political and economic philosophy

Relationship to business model: Japan’s political structure is very stable and Japan’s economic policies support the second strongest global economy. Business relationships between Japan and the U.S. have never been stronger. Japan is an exceptional country in which to do business.
Strategy: Japan was chosen as a launch country on the basis of its economic and political stability.

Legal and intellectual property issues

Relationship to business model: Japan has an excellent legal system that supports intellectual property law. Contract law is well established and parallels U.S. law. Even though law pertaining to racism, immigration, and human rights issues is still not as well managed as in the U.S. court system, [Maciamo, 2004] Japan has made great strides in patent and intellectual property law. [Takenaka, 1999]
Strategy: The GM strategic position on intellectual property is to avoid any reliance on IP rights usage, and instead promote the copying and wide distribution of GM videos without restriction. Contract law is an important component that ensures our somewhat complex service agreements will be respected.

Infrastructure and competitive factors

Infrastructure

Relationship to business model: Japan’s internet infrastructure ranks among the world’s best. At a time when the U.S. is falling behind the rest of the world in number of homes with broadband internet access, [Bleha, 2005] Japan is building an internet infrastructure that will strongly support video podcasting. [Ito, 2005]
Strategy: Coupled with increasing demand, we can expect that the infrastructure is well established to support cutting-edge video podcast concepts.

Competition, demand and market/brand positioning

Relationship to business model: The viewer appeal of podcasting in Japan has already captured the interest of marketing and advertising companies. [E-Commerce Times, 2005] Coupled with the well established interest of Japanese viewers in unusual podcasts the brand positioning and demand should be well received if it is localized correctly, because Japanese brand localization can be extremely important.
Strategy: Some of the technology decisions by podcast aggregators (a business model of competitors) are not as strategically placed for advertising success (as the GM strategy), and leaves a wide opening that allows the GM technology and advertising strategy to quickly and effectively be adopted.

Foreign exchange, finance and accounting

Relationship to business model: GM has the flexibility to structure the Japanese investment to take full advantage of leveraging the finance, tax, and exchange situations.
Strategy: The Japanese tax system is as complex as that found in the U.S. To be a tax-efficient company, GM must invest in a good Japanese accounting firm, and plan to re-invest profits in Japan. Strategies to move cash off-shore must be carefully planned.

Pros and Cons of Investment Strategies

Strategy	Pros	Cons
Direct Export	This strategy is already used indirectly because viewers can access the content over the internet, and do. As part of the initial entry process, the first step will be to translate the language (to Japanese). The only cost will be translation. Ultimately, we also want to use a Japanese source to stream the video starting within Japan; currently it is streamed directly from U.S. servers. This is a good, low-cost approach to gauging general product acceptance. GM may choose to use U.S. resources in web development.	The downside to direct export of U.S. content is that it is not optimized for the Japanese advertiser, which is directly related to the business model. Although the viewer may be just as entertained regardless of content, the whole point is to provide an avenue for advertisers to get their message out.
Indirect or piggy-back export	At first this would seem like it doesn’t apply, but there is a way to piggy-back on Japanese anime video sites as an entry point to the market. This may be a good strategy, especially as the product is already using anime in the videos.	The downside is becoming closely associated with another website or genre, polluting our own brand image.
Franchise	None	We do not have any components of the business which can be franchised. We could lose control of our brand quality by allowing others to copy our techniques. The model of ‘more outlets’ or more ‘producers’ does not add value to the business model.
License agreement	This is the preferred method of doing business. We want to contract all the business functions to professional producers, including: ad agencies, videographers, writers, actors, web services and accounting. In this way, GM can maintain the absolute minimum staff on hand in Japan (perhaps less than 5 people to run the whole show, not including sales staff).	The downside of using all ‘outsourced’ services is that costs may be slightly higher then using employees. The management of contracts (legal fees, contracts consulting fees, extra accounting, etc.) will also add cost.
Foreign direct investment	GM does not need to invest in manufacturing, retail or other hard resources. GM will use profits to reduce costs. The first investment will be in the factoring of borrowed money. (Note: Today GM factors their receivables to manage cash flow issues). After we can factor our own capital needs, GM will turn to streaming infrastructure, and may build its own server farm and network ops center.	There is no downside to using FDI to reduce costs, as our accounting practice already assume that foreign exchange issues are to be avoided by keeping profits within the invested country.

Conclusions

In Japan, GM will not face broad cultural issues with class, religion, and economic differences that may impact acceptance of its genre. GM's trend-setting themes will play well to a Japanese audience. Strong localization of themes and use of Japanese sub-contractors will help ensure that advertisers find value in the genre.
Political, legal, infrastructure, finance, and intellectual property issues should not affect our market entry. License agreements should be the preferred method of establishing a profitable business model.

Bibliography
Brinton, Mary C. "Class Structure in Contemporary Japan (review)" The Journal of Japanese Studies - Volume 31, Number 1, Winter 2005, pp. 146-149. Located on the web at: http://muse.jhu.edu/cgi-bin/access.cgi?uri=/journals/journal_of_japanese_studies/v031/31.1brinton.html

Religion in Japan, Japan-guide.com, 2006, http://www.japan-guide.com/e/e629.html

Modern Japan, Japan-zone, 2006, http://www.japan-zone.com/modern/index.shtml

DeMente, Boye, "Interpret thinking, not just words," Japanese Etiquette & Ethics in Business, Sept. 2002, Available at the following website: Asian business Code words, http://www.apmforum.com/columns/boye55.htm

Miyao, Takahiro, Notes from the Stanford Seminar on Japanese Pop Culture, Activity report # 57, March 2005, http://www.glocom.org/special_topics/activity_rep/20050302_miyao_stanford/index.html

Maciamo, "Badly needed reforms for the Japanese legal system," Japan Reference, June 2004, http://www.jref.com/society/japanese_backward_legal_system.shtml

Takenaka, Toshiko, "Comparison of U.S. and Japanese court systems for patent litigation," University of Washington School of Law, autumn 1999, http://www.law.washington.edu/Casrip/Symposium/Number5/pub5atcl6.pdf

Bleha, Thomas, "Down to the Wire," Foreign Affairs, May 2005, http://www.foreignaffairs.org/20050501faessay84311/thomas-bleha/down-to-the-wire.html

Ito, Joi, "Japan internet stats," Impress 2005 Internet white paper, 2005, http://joi.ito.com/archives/2005/06/14/some_japan_internet_stats.html

"Podcasts opening new ad markets in Japan," E-Commerce Times, March 2005, archived at Podcasting News, http://www.podcastingnews.com/archives/2006/03/podcasts_openin.html

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