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CSC WORLD

The Return of Process Thinking


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Fall 2001

Making Business Processes Manageable The Principles of Scientific Management

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Management Cultures
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Why American Business is That Way Li & Fung: Confucius Meets John Wayne Managing a Danish (?) Bicycle Team

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Global Interdependence
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From Globalization to Interdependence Adapting to Change


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28 30 36

I N S I D E

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MBAs, Managers, and Change:


An Interview with Henry Mintzberg
Findings / Getting Smart In Practice / Building a Customer-Friendly TelcoFast Putting the Internet in Space Review / Next by Michael Lewis

With the rest of the world, we watched in horror as terrorists attacked the World Trade Center and the Pentagon on September 11. This issue was being laid out at the time of the attacks, so it does not speak directly to the concerns that they have raised. We plan to examine those concerns in future issues. We are grateful that CSC employees in the targeted areas escaped unharmed. We mourn the loss of those who were not as fortunate.

IN

THIS

I SSUE

CSC WORLD

hat is good management? What makes a good manager? These are questions every business magazine tries to address, and we took a couple of different approaches to them in this issue. One approach was to go to Henry Mintzberg, the McGill University professor whose unconventional thinking about management has been getting increased attention in recent years. He says good managers are not the superheroes of business best-sellers. Rather, they are people who have the intuition, good judgment, and sense of context that come from a deep knowledge of their business. Thinking about context also led us to Charles M. Hampden-Turner and Fons Trompenaars, who look at the impact of national cultures on business management. The first of three articles on management cultures is an excerpt from their book, Building Cross-Cultural Competence. Harvard Business School Professor F. Warren McFarlan explains how two Harvard-trained brothers went back to China to modernize their old family company; and Tour de France winner Bjarne Riis tells us how he manages an international bicycle racing team. One of the biggest management challenges of recent years was e-business. In the lead article, Howard Smith, CSCs chief technology officer for Europe, and Douglas Neal and Lynette Ferrara of CSCs Research Services, explain why it was so difficult to get e-business right and how it can be made easier. The answer lies in managing business processes within and across companies. Then there are those events that are well beyond the scope of ordinary business management. Kenneth S. Courtis, vice chairman of Goldman Sachs Asia, discusses the growing interdependence in the global economy. Theres not much any single company can do about the global economy, but James Cook, president of CSCs Financial Services Group, tells us how companies usually react to macroeconomic change. Finally, we look back at Frederick Winslow Taylor, one of the first management gurus. His 1911 book on business processes shows just how much our thinking has changed in the last 90 years. In this issue, we also look ahead at smart technology, show how NASA can benefit from putting the Internet in space, see how a business process approach got a telco startup off to a fast start in the UK, and review Michael Lewiss latest book. This is only the second issue of the new CSC World, and wed like to know what you think. Nearly all the response so far has been positive, and we want to keep on making our readers happy. Drop us a line at world@csc.com, and visit us on line at csc.com/aboutus/publications.

Bob Olivier, Publisher

Computer Sciences Corporation

Fall 2001 Volume 1 No. 2

CSC WORLD
features

CSC WORLD
K. PETER MANERI
Vice President, Corporate Communications and Marketing

THE RETURN
4

OF

P RO C E S S T H I N K I N G

Making Business Processes Manageable


HOWARD SMITH, DOUGLAS NEAL, AND LYNETTE FERRARRA

contributors
JAMES COOK is president of CSCs Financial Services Group. KENNETH S. COURTIS is managing director and vice chairman of Goldman Sachs Asia. He also lectures at Keio and Tokyo universities, and is a visiting professor at the Stockholm School of Economics. He has an MBA from the European Institute of Business Administration in Fontainbleau, France, and a PhD from the Institute of Economic and Political Studies in Paris. EDWARD CRISCUOLO, a CSC engineer, is the backup technical lead on NASAs Operating Missions as Nodes on the Internet project. KEITH HOGIE, a CSC engineer, is the technical lead on NASAs Operating Missions as Nodes on the Internet project. CHARLES M. HAMPDEN-TURNER is senior research associate at the Judge Institute of Management Studies, Cambridge University. He also is director of research and development of the Trompenaars-Hampden-Turner Group, a cross-cultural consulting and training company based in Amsterdam. He has a DBA from Harvard and has written 15 books. He is a winner of the Douglas McGregor Memorial Award. F. WARREN MCFARLAN is the Albert H. Gordon professor of business administration at Harvard Business School, and senior associate dean and director of the schools Asia-Pacific Initiative. He also sits on CSCs board of directors. DOUGLAS NEAL is a research fellow at CSC Research Services. RON PARISE, a senior scientist at CSC, was a payload specialist on the space shuttle Columbia in 1990 and on the Endeavour in 1995. He is on NASAs Operating Missions as Nodes on the Internet project. VANESSA REED is CSCs manager for the ipsaris/Easynet account. BJARNE RIIS is manager of the Danish professional cycling team, CSC-Tiscali, which finished 18th in this years Tour de France. A professional cyclist since 1986, Riis won the Tour de France in 1996 and the World Cup in 1997. HOWARD SMITH is the chief technology officer for CSC in Europe. He also is co-chair of the Business Process Management Initiative. FONS TROMPENAARS is founder and president of Trompenaars-HampdenTurner Group, an intercultural management consulting company based in Amsterdam. He has a PhD from the Wharton School at the University of Pennsylvania and is the author and co-author of several books. He is a winner of the American Society for Training and Developments International Professional Practice Research Award.

E-business turned out to be harder than anyone thought. Thats because business still has trouble managing business processes. Thats about to change.
38

ROBERT D. OLIVIER
Publisher

The Principles of Scientific Management

FREDERICK WINSLOW TAYLOR

ROBERT MUTCH
Managing Editor

One of the first management gurus did some early thinking about business processes in this 1911 book.

REDSPRITE MARKETING INC.


Graphic Design

M A NAG E M E N T C U LT U R E S
10

Why American Business is That Way


CHARLES M. HAMPDEN-TURNER AND FONS TROMPENAARS

EDITORIAL BOARD:
F. Warren McFarlan, Nicholas Morgan, Howard Smith Editorial Office: 3170 Fairview Park Drive Falls Church, Virginia 22042 world@csc.com Subscription Office: 2100 East Grand Avenue El Segundo, California 90245

The role of managers is increasingly to manage diversity per se, whatever its origins in culture, industry, or discipline. An excerpt from Building Cross-Cultural Competence: How to Create Wealth from Conflicting Values.
15

Li & Fung: Confucius Meets John Wayne

F. WARREN MCFARLAN

Two Harvard-trained brothers bring the family business, founded in the Qing Dynasty, into the Internet age.
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Managing a Danish (?) Bicycle Team

BJARNE RIIS

COMPUTER SCIENCES CORPORATION


www.csc.com

How to manage a racing team whose members speak several different languages and are seldom in the same place at the same time.

THE AMERICAS
2100 East Grand Avenue El Segundo, California 90245-5098 United States Tel: +1.310.615.0311

G L O BA L I N T E R D E P E N D E N C E
22

From Globalization to Interdependence

KENNETH S. COURTIS

EUROPE, MIDDLE EAST, AFRICA


279 Farnborough Road Farnborough Hampshire GU14 7LS United Kingdom Tel: +44.1252.363000

Globalization is the word everyone uses to describe whats going on in the world economy. But its actually something broader and more complex.
25

Adapting to Change

JAMES COOK

AUSTRALIA/NEW ZEALAND
460 Pacific Highway St. Leonards NSW 2065 Australia Tel: +61.2.9901.1111

Its always been beyond the capability of companies or industries to affect the speed and breadth of macroeconomic change. How do they deal with it when it happens?

departments
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ASIA
139 Cecil Street 08-00 Cecil House Singapore 069539 Republic of Singapore Tel: +65.221.9095

First Hand
In an age of grand theory, Henry Mintzbergs unconventional wisdom about the actual job of managing is beginning to attract more attention.

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In Practice
Building a Customer-Friendly TelcoFast
VANESSA REED
How a startup telco got off to a fast start with a company built to last.

Putting the Internet in Space


EDWARD CRISCUOLO, KEITH HOGIE, RON PARISE

28
CSC World (ISSN 1534-5831) is a publication of Computer Sciences Corporation
Computer Sciences Corporation All rights reserved. Reproduction without permission from Computer Sciences Corporation is prohibited. Printed in the USA.

Findings
A LEADING EDGE FORUM REPORT Here are five smart quotients to help you make sense of the new smart technology.

NASA is experimenting with Internet protocols as a way to reduce the cost of space missions.
36

Book Review ROBERT MUTCH


In Next: The Future Just Happened, Michael Lewis says the kids are taking over. But are they?

MAKING BUSINESS
PROCESSES MANAGEABLE
BY HOWARD SMITH, DOUGLAS NEAL,
AND

LYNETTE FERRARA

What has surprised everyone


in the last few years is how challenging it has been to actually do e-business. One of the reasons why this is so is that companies have found it difficult to manage their business processes, especially when they stretch across multiple systems, software applications, companies and countries. Thats about to change.
It must change, because shareholders still expect companies to fulfill the promise of e-business. Companies are under pressure to perform better, faster, to do more with less, and to be super pleasing to customers. This means changing the way they manage their business processes, allowing them to innovate around their own strategic processes while simultaneously collaborating with partners and customers.

WHY

SO DIFFICULT?

Many companies tried to make their business processes more manageable 10 years ago, by reengineering them. At the time, reengineering typically meant designing a new process, then implementing it through a one-time systems and organizational change program. These efforts were more about redesigning processes than about making those processes easy to change and combine with those of partners. This also was the problem with ERP and other packaged solutions that emerged later. These packages implemented best-practice processes, but did so by embedding business processes in the software applications that supported them. These solutions had all the flexibility of wet concrete before they were installed and all the flexibility of dry concrete after installation. Achieving process collaboration inside the enterprise has been difficult enough. Getting processes to collaborate across the networked enterprise is far harder. B2B is an attempt to create the networked enterprise from the outside in.

MAKING BUSINESS PROCESSES MANAGEABLE

PROCESS THINKING

What business needs is


B2B participants may have informal designs for the processes they need to implement, but as they refine those designs they also have to change the technical implementations that support them. This may be possible in simple cases, but in the more complex cases of supply chains, the project may never be completed. Upgrading applications or adding new suppliers or business units can cause the technical integration activities to escalate out of control. In the networked enterprise, collaboration is not restricted to any one process domain. Collaboration is now 360 degrees, going on at all points on the compass. This creates a many-tomany integration task, and existing f commerce is to be truly tools and techniques simply are collaborative, the underlying not up to the job. business processes must IS departments often try to develop collaborate, too, both business processes within and across firms. by performing bottom-up technical integration, stitching together systems components that never were intended to work together at the business level. They soon find that these projects denude their budgets and that delivery time scales are often unacceptable to the business managers. control over and monitoring of processes performed on their behalf by partners. Firms are also seeking to expose discrete business competencies as processes they can sell to others or commercialize through channel partners. To do all this, firms need to understand the processes that underpin their core business competencies. In short, they need a business process management capability, not a new suite of enterprise applications. The situation is similar to the period before the invention of the relational database management system. Data used to be embedded in applications. As the volume of this data grew

not a one-time fix but a systems environment that can flex and recombine as required by changes in the market.

Not all integration problems are technical. Collaboration requires sharing processes that once were proprietary, and this is not an easy step to take. But if companies are under pressure to be better, faster, and cheaper, they will have to do only what they do best. Whatever a company doesnt do well has to be done by someone else. If commerce is to be truly collaborative, the underlying business processes must collaborate, too, both within and across firms. This must be achieved at the business level and from the top down, leveraging existing systems in the enterprise. That is, collaboration must start from the business purpose, not the technical details.

and the connections between data sets in different applications became important to the CEO, CFO, and functional units, it became obvious that data should be managed outside of the application architecture. By allowing a company to manage its data apart from the applications that use it, the DBMS supports a variety of data models and data management tasks. Today, no one would think of building a new system without a DBMS. The IT industry is largely founded on the DBMS and related capabilities.

Building up from the top down


A startup telco in the UK got started in record time by using a business process management approach to building its new system. That system included applications from 12 vendors, some of whom estimated that integrating all the packages would require 14 months. CSC completed the job in half that time. The short development time was made possible by building a business process engine into the architecture. The key business processes were extracted from the component applications and migrated into that engine. This procedure allowed business processes to be configurable by a drag-and-drop interface without being coded into the applications. The focus on process meant that developers did not have to integrate the component packages at every level. They forged links into the packages only at the functional level, to expose them to the business process engine. That meant developers didnt have to integrate the applications user interfaces, reporting mechanisms, or databases. They used one single user interface across all packages, an interface that has the brand of the client, not the application vendor. Extracting business processes meant less integration and less time for development. This was top-down development, starting with the business processes themselves rather than with the applications that support them. It puts business processes back in the hands of business users instead of the IT department.

WHAT

IS NEEDED

What business needs is not a one-time fix but a connected systems environment that can flex and recombine as required by changes in the market. Most companies now want more control over their own processes, more interaction between their processes and those of their partners and some

MAKING BUSINESS PROCESSES MANAGEABLE

PROCESS THINKING

CEOs never asked for applications in the first place. When CEOs speak about business processes, they equate them directly to their companies business objectives. The processes literally define a companys competitive advantage and market differentiation. The last things CEOs want to hear about are standard processes supported by standard applications that are available off the shelf to their competitors. Even where applications are aligned with enterprise goals, processes are ingrained within the software, inaccessible to change and unable to be integrated with processes in other applications. The connection with business objectives means that business processes are complex, unique, numerous, and constantly evolving. The complexity of usiness processes that are the processes drives complexity ingrained within software in the technical are inaccessible to change. infrastructure that delivers process management. An effective business process management system will have to support the great diversity of business practices with a foundation as strong as that of the DBMS.

Its time we did the same thing for business processes. One of the key enabling technologies is Business Process Modeling Language (BPML). The first draft of BPML was developed by a software startup called Intalio, which worked closely with CSC and other founders of the Business Process Management Initiative (see sidebar). The new language which, like SQL, has a strong mathematical foundation is a A PROCESS LANGUAGE standard way to represent any The first step is to make processes explicit by abstracting business process. The new foundathem from application software. This is hardly new. Decades tion is designed to support process ago, operating systems were created by abstracting memory management, not data management, management, file access, and graphical user interface from and new process-aware applications applications. Database management systems removed both will be built upon it. Such applicathe management of data and the management of the schema. tions will be able to manipulate business processes as easily as todays applications manipulate data sets. The processes they support will be reliable, transactional, and distributed, and will allow collaboration between processes designed independently by different organizations. Strangely, the design of a language like BPML had not been attempted before. Although other process modeling

pricing plan. They will sit with business staff to design, test, and deploy new business capabilities. They will do this by orchestrating fine-grained services and rules to produce new business capabilities. When processes fail to perform, the business process architect will sit REENGINEERING REDUX with the participants in the process Process management is heralding a renaissance in to review what each needs to do reengineering, process thinking, and organizational design. based on the data, metrics, and This renaissance is not being driven just by technical analytics from the process execution. innovation. Just as in the first wave of reengineering in the To be effective, these new early 1990s, tinkering with existing ways of doing business is business process architects will not enough. Responding to these new challenges with this need deep understanding of their new technology will require two types of people: business company. This means that firms process architects and project managers. will have to grow their own. Business process architects will operate at the level of Developing these new business business concepts, such as implementing a new long distance process architects will require strong, business-oriented leadership by the IT departments. The payoff for this effort will be the ability to deliver on the vision that grabbed management attention a decade ago with reengineering.

languages existed, none were designed with the objective of supporting an enterprise-scale, top-down process management capability that could leverage open systems standards and interoperate across organizational boundaries. BPML is a business-oriented language designed for topdown deployment in a process management infrastructure that leverages existing enterprise and B2B-convergent standards. It supports dynamic collaboration among partners, and is more expressive than the process modeling supported by traditional software engineering paradigms.

Business Process Management Initiative


BPMI is a non-profit organization that empowers companies of all sizes, across all industries, to develop and operate business processes that span multiple applications and business partners, behind the firewall and over the Internet. The Initiative's mission is to promote and develop the use of business process management (BPM) through the establishment of standards for top-down process design, deployment, execution, maintenance, and optimization. BPMI develops open specifications, assists IT vendors for marketing their implementations, and supports businesses using BPM technologies. CSC is co-chair of the BPMI. For more information, go to www.bpmi.org.

M A N A G E M E N T C U LT U R E S

America has contributed disproportionately to the total

WHY
AMERICAN BUSINESS IS THAT WAY.

volume of business studies. So it is crucial to ask: Do these business studies tell us how to create wealth anywhere in the world, or do they tell us only how wealth has been created in America?
Americans have been very successful in creating wealth. But they have done that within a business culture that is different from those of other countries. We explored these differences by asking business managers 46,000 managers from more than 40 countries a series of questions designed to reveal the diversity of values. We measured these values along six dimensions: universalism-particularism, individualismcommunitarianism, specificity-diffuseness, achieved-ascribed status, inner vs. outer direction, and sequential and synchronous time (see sidebar, page 12). In the questions we asked our sample of managers, we presented them with dilemmas that pitted one value against another. But the relationships between the two values in each dimension also can be seen as circular, as complementing as well as contradicting one another. The fashionable name for this circular thinking among the business consulting community is cross-cultural competence. This is what we are trying to illuminate: the capacity for creating wealth through reconciling cultural dilemmas. In this article, we will explore only two of the six cultural dilemmas, univeralism-particularism and individualism-communitarianism. limit, you will save him from serious consequences. What does your friend have a right to expect from you? a. He has a definite right as a friend to expect you to testify to the lower speed. b. He has some right as a friend to expect you to testify to the lower speed. c. He has no right as a friend to expect you to testify to the lower speed. More than 75 percent of American managers answered b or c; fewer than half of Japanese and French managers gave the same answers. Religion may help explain these responses. Of the top 10 universalist countries, all but two Ireland and Pakistan are stable democracies and Protestant. Catholics are, on the whole, less universalist, and Buddhist countries are more particularist still. This may be why France and Japan are at roughly the same place on the scale as Portugal, Belgium, and Singapore. One historical reason why American business managers are universalist is that the United States itself was created as a New World or universe, complete with a Declaration of Independence and a written constitution. Immigrants to the United States have voluntarily relegated their ethnic and national identities to a commitment to a new belief system. What does this mean for business? The universalist culture accepts and serves all comers equally, whether they want citizenship or hamburgers. Universalism is crucial to mass manufacturing and mass marketing. The danger is that quantity is seen as a good thing in itself. Benchmarking, the comparative measurement of

AND WHY BUSINESS IN OTHER COUNTRIES IS NOT.


BY

UNIVERSALISM-PARTICULARISM

CHARLES M. HAMPDEN-TURNER AND FONS TROMPENAARS

Suppose youre riding in a car driven by a close friend. He hits a pedestrian. You know he was exceeding the speed limit. You also know that you are the only witness. If you testify under oath that he was not exceeding the speed

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WHY AMERICAN BUSINESS IS THAT WAY

M A N A G E M E N T C U LT U R E S

Universalist cultures excel in mass


manufacturing and mass marketing. Particularist cultures celebrate what is unique and incomparable.
industrial processes, tends to assume that the major challenge is doing things right as opposed to doing the right things. Particularist cultures celebrate what is unique and incomparable, such as French cuisine and couture. Business in these cultures excel in customization. Products specially made for certain customers are an important source of prototype devices. Taken too far, though, particularist cultures find that intimidation and conspiracy become more important than sanctions of legality. Extreme examples are the Sicilian and Russian mafias. the way you really are, even if you dont get things done. Sixty percent of American managers disagreed, putting them at the far achieved end of the status scale, slightly ahead of Canadians and Australians. Once again, Japanese and French managers were on the opposite end. Seventy percent of the Japanese and 65 percent of the French managers agreed with the statement. America is among the highest in achievement orientation of any national business culture for historical reasons. An immigrant nation has great difficulty ascribing status to persons of varied national origins. (Who cares that you came from Lithuanian nobility?) What matters is not where you came from but what you have done recently and what you can contribute now. While ascribed status does not travel well, achieved status can be demonstrated in the New World for all to see. Even in an achieving society it is still necessary for individuals to say at some point, This is worth achieving, but that is not so important. Who is to define a particular form of achievement as important? One solution is to let different activities compete in the market for popularity. Football, boxing, and basketball are important because their fans make these sports rich. In achieving societies, markets define what is valuable. If markets do much of the ascribing in achieving societies, achievement can do the same in ascriptive societies. The French lyce and the Japanese high school, for example, are notoriously competitive and achievementoriented, hence examination hell. But these countries bring competitive achieving to an end relatively early in life. Once you are admitted to a grand cole or a prestigious Japanese corporation, your ability to achieve competitively has been discovered and certified. From then on you are guaranteed status in return for using your abilities to serve the corporation, its customers, and the nation at large. Taken too far, though, ascribed status can become laughably absurd. In Britain, the habit of elevating the well-bred was memorably satirized on television as the Race of the UpperClass Twits. The focus on achievement also can be taken too far, allowing winners to eclipse more creditable performances that did not quite win. Insisting that varying skills be rank-ordered on some arbitrary scale best-sellers, for example places serious biography in the same category as How to Erect a Teepee in Ten Minutes. family-owned, and the family business culture, on the lower left, is represented by le patron, who was born into his position. China, Singapore, Hong Kong, and Thailand produce the most family-owned companies.

Achieved Status Incubator Particular Person Family Ascribed Status Guided Missile Universal Rules Eiffel Tower

ACHIEVED-ASCRIBED

STATUS

To place managers on this dimension, we asked them if they agreed or disagreed with this statement: The most important thing in life is to think and act in the manner that best suits

Six Dimensions of Cultural Diversity


Universalism (rules, codes, laws, generalizations)
USA, Scandinavia, Switzerland, Australia

Particularism (unique relationships, special circumstances)


Russia, China, India, Belgium, Japan, France

Individualism (personal freedom, competitiveness)


USA, Canada, Scandinavia, Switzerland

Communitarianism (social responsibility, cooperation)


India, Japan, France, China, Singapore

Specificity (atomistic, reductive analytic, objective)


USA, UK, Canada, Netherlands, Australia

Diffusion (holistic, elaborative synthetic, relational)


China, Japan, India, Singapore

VARIED

CORPORATE CULTURES

Achieved status (what youve done)


USA, Canada, Australia, UK, Sweden

Ascribed status (who you are)


Russia, Japan, China, Belgium, Netherlands

Inner direction (personal conscience and convictions)


USA, Canada, France, Australia, UK

Outer direction (examples and influence from outside)


Russia, China, India, Japan

Sequential time (race along a set course)


USA, India, Russia, Australia

Synchronous time (a dance of fine coordinations)


Hong Kong, China, France, Sweden

In the real world of business, the cultural dimensions examined above do not exist in isolation they interact with each other. We can illuminate these interactions by crossing the two axes and creating four quadrants of corporate culture. A majority of the worlds corporations are

The Eiffel Tower culture also depends on people in key roles, but has a strong rule orientation. People in these roles may have achieved in the past, at some grande cole for example, but their current authority depends on their formal position, on their ascribed expertise rather than on recent successes. This business culture is found in many countries but is identified with France and Germany. Both countries put great stress on formal merica is high in education but achievement orientathereafter rely on an expert tion. What matters is culture, which not where you came tends to be ascriptive and from, but what you rule-bound. can contribute now. The guided missile culture is oriented around teamwork and project teams. Teams are rule-oriented, but only insofar as they are trying to achieve set tasks, to generate new products and systems. NASA pioneered the use of project groups.

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WHY AMERICAN BUSINESS IS THAT WAY

M A N A G E M E N T C U LT U R E S

Finally, the incubator culture is achievement-motivated but oriented to the particular genius of the entrepreneur or innovator. Companies in this culture typically are small startups in Silicon Valley, Taipei, Bangalore, Cambridge, and so on. The United States, the

Cross-cultural competence
correlates strongly with extent of international experience, but negatively with technical competence.
UK, and northwest Europe produce most of the guided missile and incubator cultures, although Taipei and Bangalore have been at the intersection of family and incubator cultures.

b. I will tell the truth. But I owe my friend an explanation and social and financial support. c. My friend comes first. I will not desert him before a court of strangers for an abstract principle. d. I will support my friend whatever his testimony. Yet I would urge him to tell the truth. e. I will testify that my friend was driving a little over the speed limit but that it was difficult to read the speedometer. After administering the second questionnaire to American, Canadian, and European managers, we discovered that there is a capacity to deal with and reconcile values in general. Crosscultural competence as measured by our questionnaire correlates strongly with extent of international experience and high positive evaluations via 360-degree feedback. Interestingly, there is a negative correlation with assessed technical competence, which warns us that manipulative logics may impede us from relating to living systems. But and here is the surprise the transculturally competent do not necessarily put their own cultural stereotype ahead of foreign values in a logical sequence. For example, American transcultural competents are as likely to argue that good communities and teams generate outstanding individuals as the reverse proposition. The role of managers is increasingly to manage diversity per se, whatever its origins in culture, industry, or discipline. If there is a way of thinking which integrates values as opposed to adding value, the implications are far-reaching.
This article is based on our book, Building Cross-Cultural Competence: How to Create Wealth from Conflicting Values (New Haven: Yale University Press, 2000).

MEASURING

TRANSCULTURAL COMPETENCE

We have just seen that in the real world of business, corporate cultures are not one-dimensional but are the product of interactions between different cultural values. It is also true that business managers do not act according to only one value. Our questionnaire gave managers a straight either/or choice between two ends of a continuum. Under normal circumstances, though, business managers dont have to make such stark choices. Thats why our new questionnaire gives five choices instead of two. Respondents can still choose one value and reject the other; but they can also choose various combinations of the two values. The traffic accident question, for example, now offers these choices: a. There is a general obligation to tell the truth as a witness. I will not perjure myself.

LI & FUNG:
CONFUCIUS
BY

MEETS JOHN WAYNE


F. WARREN MCFARLAN

Harvard did not teach Victor


and William Fung how to make a global company out of the family business.

They did that on their own, after earning a PhD in economics and an MBA, respectively. But their management training came in handy once the brothers had successfully rebuilt the company their grandfather had founded almost a century ago. The Li & Fung Trading Co. now combines the business cultures and practices of old China and the modern West.

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M A N A G E M E N T C U LT U R E S

Li & Fung is a
A
POSTER-CHILD FOR SHAREHOLDER VALUE

Li & Fung was founded in 1906 as a bilingual broker to match Chinese manufacturers with English-speaking buyers. By the 1970s, when the Fung brothers returned from the United States, it was clear that those days were over. Li & Fung still calls itself a trading company and it still is a middleman between mostly Asian manufacturers and Western buyers such as Abercrombie & Fitch, American Eagle, and Levi Strauss. But now, by managing the entire production process from raw materials to finished product, the company meets its customers needs by customizing their supply chains. With 48 offices in 32 countries, he Fung brothers Li & Fung has a thought B2B exchanges global sourcing network that were a molecule thick allows it to provide valueand a mile wide. added services across the entire supply chain in a borderless manufacturing environment. A down jackets filling, for example, might come from China, the outer shell fabric from Korea, the zippers from Japan, the inner lining from Taiwan, and the elastics, label, Velcro, and other trim from Hong Kong. The garment might be dyed in South Asia, stitched in China, then sent back to Hong Kong for quality control, packaging, and delivery. This supplychain customization shortens order fulfillment, allowing clients to reduce inventory costs. Li & Fung does not own any of the boxes in the supply chain, said Victor Fung. Rather, we manage and orchestrate it from above. In recent years,

however, the company has begun to improve operations by controlling or owning strategic links in the chain. In some cases, Li & Fung offered raw material sourcing. In the past, when clients placed an order, Li & Fung would identify the manufacturer best suited to supply the goods, and that factory would source its own raw materials. But Li & Fung understood its clients needs better than its manufacturing plants did. By offering raw materials to its suppliers, the company ensured better quality control and saved money for manufacturers by buying larger and thus more cost-effective amounts of raw materials. The transformation has been very successful. In 2000, Li & Fung outperformed the Hang Seng Index by more than 75 percent. The South China Morning Post said the company could be a poster-child for shareholder value.

companies. These dedicated teams of product specialists focus on the needs of specific customers and are grouped under a corporate umbrella that provides centralized IT, financial, and administrative support from Hong Kong. This decentralized corporate structure allows for rapid reaction to seasonal fashion shifts. The term little John Waynes expresses very well the drive and independence of Li & Fungs managers worldwide. These relatively independent, customerfocused divisions are now the companys basic operating units. We may be a Hong Kong company with a Chinese view of life, said William Fung, but we do not ram notions best suited to Hong Kong down a Thais throat, for example we tend to let our foreign operations run to the best local practices.

company rooted in Chinese values.


Internet. When the telephone came along, the Fung brothers grandfather was shocked. But he adapted, just as their father adapted to the fax. Now the company has adapted to the Internet. Unlike some other old-line companies, though, Li & Fung never entertained the idea of creating a dot-com division and spinning it off. To start a pure Internet division is as absurd as starting a fax division, a division that exclusively uses faxes, Victor Fung said. What the company did do was add technical directors to its board, people who can keep Li & Fung abreast of technological changes. Anything to do with information technology is crucial to us, William Fung said. The Internet is just another technology that affects the way information is transferred. The brothers also had no fear of being disintermediated by B2B exchanges. Those Internet trading platforms were, as Victor Fung put it, a molecule thick and a mile wide, based on many depthless relationships. The brothers are convinced that a smaller number of deep and lasting relationships will ensure that their company lasts another 100 years. Victor Fung captures this approach in one phrase: Think like a big company, act like a small one. This article is adapted from Li & Fung: Beyond Filling in the Mosaic, 1995-1998, #9-398-092, by Anthony St. George, research associate, under the supervision of Carin-Isabel Knoop, director, research and development, executive education, and Professor Michael Y. Yoshino; and Li & Fung, #9-301-009, by Fred Young, senior researcher, under the supervision of Professor F. Warren McFarlan.

LITTLE JOHN WAYNES


While modernizing the old family firm, the Fung brothers tried to preserve the best of what their father and grandfather had created. That meant finding a way to combine a focus on a few relationships the essence of the old model with the management of large, complex systems that was the core of the new business. The solution: Create small units dedicated to serving one or a few customers, and have them run by entrepreneurial executives called little John Waynes. People who wanted to run their own businesses turned out to be the ideal Li & Fung employees. William Fung said, We give them the resources, opportunities, and protection against the downside, making it more attractive for them to work for us. Senior managers run 90 small, worldwide management teams as separate and individual

OLD

VALUES

For all its business-school methods, Li & Fung is very much a Chinese company. Li & Fung is a company rooted in Chinese values, said Victor Fung. We do not retrench an employee. In fact we retain some of the retirees as consultants. Furthermore, we do not believe in the trappings of titles and the attendant hierarchy; we treat employees of Li & Fung as family. Another old company value is the nurturing of deep relationships with a small number of customers. This strategy had always served the company well, and the Fung brothers believe that it will continue to be successful. The old relationships, the old values, still matter, said Victor Fung. It makes a difference to suppliers when they know that youve been honoring your commitments for 90 years. It may have been this outlook that explains why Li & Fung did not feel threatened by the

16

17

M A N A G E M E N T C U LT U R E S

MANAGING A
DANISH (?) BICYCLE TEAM
BY

BJARNE RIIS

Is managing a cycling team


anything like managing in business? Probably it is. If I want to get the best out of my riders, I have to be very clear about what my goals are.
And I have to be sure that theyre the right goals for the team. When Im sure I have the right goals, then I go for them 100 percent. Language problems arent a big price to pay for getting the best riders. Just like in business, you dont want to settle for hiring the top people in one country. You want to hire the top people, period.

TEAM THAT TELECOMMUTES

AN

INTERNATIONAL TEAM

The riders on my team dont just come from many different countries. They still live in those countries. None of the teams top riders lives in Denmark. Laurent Jalabert, the team leader, lives in Switzerland. Michael

One way that cycling is like business is that its becoming more international. Team CSC-Tiscali was founded as a Danish team in 1997 and has been made up mostly of Danish riders ever since. But almost half the team members are from other countries: France, the Netherlands, Sweden, Spain, the United States. Fortunately, I have a lot of experience with such teams. I have been on German, Italian, French, and other national teams, which had riders from all over Europe. The language differences do present some management difficulties, but communication still isnt a big problem. Everyone speaks some English, so that tends to be the common language on our team. Most of us speak more than one language, too. I speak French, Italian, German, and English, as well as Danish.

King of the Mounatain Team CSC-Tiscalis Laurent Jalabert.

19

MANAGING A DANISH BYCYCLE TEAM

M A N A G E M E N T C U LT U R E S

Bicycle racing is like war.


Team members must know they can rely on each other.
Sandstd lives in Spain, Tristan Hoffman in Belgium, and Rolf Srensen in Italy. All four riders participate in races around Europe and train at home. Even I dont live in Denmark. I live in Italy. Unlike a football team, we cant meet on the same practice field every morning. How do I manage a team whose members arent even in the same place at the same time for much of the year? Computers. All the riders have bicycle computers, which provide several performance measures. After a rider finishes a training session no matter what country or time zone hes in he plugs his computer into a PC and e-mails the data to me. The data tell a lot about how riders are doing and how they can improve their performance. I introduced computers into the team because Ive been using them for several years and have had good results with them. It takes some time to learn how to use these computers the right way, but they allow us to design very specific training programs.

Bjarne Riis
A professional cyclist since 1986, Bjarne Riis rose steadily to the top ranks of the sport. In 1997, he won the World Cup in the Amstel Gold Race. He won the 1996 Tour de France, in which he wore the yellow jersey for 13 days and won four stages. He also reached the podium in the 1995 Tour de France, in which he finished third and wore the yellow jersey for a day. He was the first Danish cyclist to achieve each of these triumphs. He also won the Danish national championships in 1992, 1995, and 1996.

STARS

AND WARS

Team CSC-Tiscali
This Danish bicycling team was founded in 1997 and first competed in the Tour de France in 2000. In the months following that competition, the team went through some dramatic ups and downs that led observers to doubt it could even qualify for the Tour in 2001. First, a successful recruiting drive attracted several experienced riders, including French star Laurent Jalabert, one of the top cyclists in the world. Then the teams ability to pay those new riders was thrown into doubt when its main sponsor suffered financial setbacks and had to withdraw its support. The teams new manager, Bjarne Riis, soon found two new sponsors, Computer Sciences Corporation and Tiscali, a leading European Internet communications company. Then the teams new star, Jalabert, fell from a ladder in his home and broke three vertebrae. Fortunately, the recuperative powers of Jalabert and his teammates were strong enough to overcome these setbacks. The team not only qualified for the 2001 Tour de France but Jalaberts performance in the Tour ended all doubts about his recovery. He won two mountain stages, earning him the polka-dotted jersey that is awarded to the King of the Mountains. Jalabert finished 19th overall, 50 minutes behind winner Lance Armstrong. The team finished 18th, three hours and 17 minutes behind Spanish team Kelme-Costa Blanca.

When I can, I bring the team together at my home in Italy. Cycling teams have to be very close. Bicycle racing can be like war and the team members have to be willing to fight for each other. They have to know they can rely on each other. Every rider has a responsibility to the team, and even the least experienced riders have to know that the team can fail if they dont meet their responsibilities. A big part of my job is motivating riders, building up a team spirit. I find that many riders dont really know why theyre doing what theyre doing. I want them to think about that, to explain to themselves why theyre sitting on a bike so many hours of the day. I dont want them to do it just because its what theyve always done. You shouldnt enter a race just to win some money. It has to be what you love doing. I try get riders to find their own motivation, their own ambition. The teams top riders have a big role in keeping the team together, too. Laurent Jalabert, our star rider, is a complete professional. They have more experience than the younger ones and can give them valuable advice and guidance. By sharing their experience, they make the team stronger and the team spirit better.

THE

CHALLENGE

The challenge is to build a team that works well together, and that has clearly defined roles that still leave lots of room for

each riders talent and personality. My job is to make the racing and training program for the team. I work with my sports directors to decide who goes to which race. One week, we send a group of six riders to one race, a group of eight to another race, while others are training at home. The next week it bring a lot of will be different. It changes all the experience to the time, which is job. My experience why structure is so important. is my strength. Without a structure, you cant make riders work together, for each other. Thats not easy, but I bring a lot of experience to the job. Ive been a rider in the back of the pack, Ive been a star, and now Im a manager. My experience is my strength.

20

21

FROM GLOBALIZATION TO
INTERDEPENDENCE
BY

KENNETH S. COURTIS

Globalization is the word


the United States, the UK all these countries are generating huge net negative financial balances. That means theyre increasingly dependent on other peoples decisions to finance them. Who is making those decisions? Much of the financing of Western economies comes from Japan. Thats no surprise. But China has invested more than US$225 billion in the US bond market. There are issues here that need to be thought through very carefully. That interdependence is having a huge impact JAPAN. In 1991, Japans debt to GNP ratio on how we all live and interact. And its not just was 51 percent. It made the rest of the world the big countries that have an impact on the look totally undisciplined. But today that ratio small countries. is running at around 146 percent of GNP. On a Monday afternoon in July 1997, Theyve increased debt, government on-balance Thailand devalued its currency. Over the sheet debt, by 100 percent of GNP in but a next few months, that triggered a cascade of decade as theyve tried to struggle with this undevaluations throughout the emerging markets precedented, at least for Japan, economic crisis. that finally led to the implosion of Russia, the The off-balance sheet claims on the collapse of the currency market in Brazil, and Japanese state, by the most conservative started to shake the global banking system. estimate, would be 150 percent of GNP, as well. The Bankers Trust went I think thats the government bankrupt and Long Term statistic. John Maynard oday, its not just Credit Management was Keynes once said there are about to implode and the big countries that three types of lies. There are bring down major instilies we make by mistake, have an impact on tutions on Wall Street. those we make on purpose, It was only the very and there are government the small countries. quick footwork of global statistics. We estimate that central banks and monethe off-balance sheet claims tary authorities that enabled us to back off from in the Japanese state are somewhere north the edge of the greatest financial crisis since the of 260 percent of GNP. Total bank loans, 1930s. That crisis is over, but interdependence 132 percent of GNP as of the end of March. with the vulnerability and potential volatility Other forms of corporate debt bring the total it creates is still with us. France, Germany, up to around five times GNP.

everyone uses to describe whats going on in the world economy. But I think its something broader and more complex. Its the growing interdependence between countries around the world.

Now, what if you had a client who had debt that was five times sales? Thats what youve got here. Someone might say it wouldnt matter as long as interest rates are at zero, and shortterm Japanese interest rates are at zero. But its not servicing your debt thats the problem; its how you pay back that debt. The core of the crisis is the Japanese banking system. Last year, we estimated that bad debt in the system was close to US$900 billion. Theres probably been US$100 billion added to that since, which makes probably a trillion dollars of bad debt. That works out to about 20 percent of GNP. To give you a sense of how big this is, the savings and loans crisis, at its peak, was 2.8 percent of GNP. Theres also a demographic problem. By 2020 Japan will have aged so much that it will make Florida look juvenile in comparison. Forty-three percent of the electorate will be over 60. With this type of debt load, the

government will have to squeeze back government spending quite aggressively. How will they finance pensions, life insurance, and health care? But if you cut back spending that aggressively, with this much debt, with an economy this slow, and a financial sector this weak, youre very likely to push that economy into a huge recession. We saw what Thailand generated. Imagine what this could lead to. No country has had this much debt and not seen a major devaluation. Even small countries that get into this kind of trouble create large international consequences. This is the biggest financial crisis that weve ever known, and its in the economy that finances a very large part of the US funding needs every day. We should be prepared for it both the opportunities and the risks. CHINA. China is going through a change of another kind, the kind that happens only

22

FROM

GLOBALIZATION TO INTERDEPENDENCE

GLOBAL INTERDEPENDENCE

ADAPTING
once every 200 or 300 years. The Chinese are dismantling the state, going to a market economy, and catapulting themselves into the 21st century. These changes are so complex because different parts of the economy are changing at different rates. Much of the economy in that country has operated the same way for 400 or 500 years. Theres also a part thats becoming like that great industrial class that was created in the West with the development of mass production. At the same time, another part is completely integrated in the latest technology. For example, I was in Beijing recently, talking with seven people who have created a young biotechnology company. All seven have doctorates from East Coast US universities, and all had worked in US labs. Their company is I asked them how they compete with other companies that do the same type of thing in the United States and Europe. They answered that their cost structure is 16 times lower. They dont see any difference between the quality of work theyre doing now and the quality of work they were doing when they worked in the best labs in the top companies in the United States. But they have a different cost structure. But thats only part of whats happening in China. On the sidewalk outside their office, theres a guy whos laid out a tarpaulin to sell garlic that hes carried on the train for two days from his collective farm. The kind of change China is going through is extremely complex to manage. But its a country thats rolling ahead, in good years and bad. Ten years ago the Chinese economy was an eighth the size of Japans. Today its one-fourth. It wouldnt surprise me to see it double again in the next decade. Were navigating in a world thats going through incredibly complex change at all levels. There are very big risks in the mid-term that well have to turn our attention to very quickly if were to prevent them from becoming huge, destabilizing factors in the world economy.

TO CHANGE
BY JAMES

COOK

Companies have always had to adapt to market


change. That was true before the era of global economic interdependence that Ken Courtis describes. It remains true when the changes that swirl around a company can begin with central bank deciompanies sions made halfway tend to respond around the world. And today, as Courtis to change by points out, even choosing one decisions made in small countries can of three paths: have global impact. expanding, Its always been beyond the capability acquiring, or of any company or hunkering down. industry to affect the speed and breadth of macroeconomic change that includes currency and trade instability, financial retrenchment, indecision, and employment uncertainty. That always has been the responsibility of those same central banks and of international monetary authorities. The inability to affect either the fact or the pace of change causes some companies to see these worldwide events as overwhelming. But others see those same events as presenting new challenges and opportunities. Companies tend to respond to change by choosing one of three paths: Expansionists will attempt to grow out of any risk of slowdown by investing in technologies that expand: distribution capabilities;

China is going through a change


of the kind that happens only once every 200 or 300 years.
starting by doing subcontracting for the international pharmaceutical majors. What they do is hire their old professors as consultants, then get those professors to give them their best students. The students work for them for three or four years, then go work in the United States for five or 10 years. Then they go back to China and keep this thing rolling. Their ambition is to turn their company into a hugely powerful research organization. Their research will create breakthroughs, which theyll license to international companies.

P OSTSCRIPT. The September 11 terrorist attacks in New York and Washington have altered substantially the short-term outlook for the world economy. This year may show the slowest global growth rate since World War II. But the determination of governments to fight terrorism and coordinate measures to revive growth will support a sharper-than-expected recovery by the second quarter of 2002. China, however, still is a bright light. Because China is dependent on domestic demand, it can expect better than 6 percent growth this year.

portfolios of products and services; and into new market segments or geographical areas. Acquirers will buy other companies that extend their reach, increase their scale, or expand their offerings. Conservatives will cost-optimize and hunker down. They will invest only where the bottom line value can be justified in the current climate of economic activity. Whatever path a firm takes, it must strive to make change an ally instead of an enemy. To accomplish this end, the leaders of the enterprise must shape a resolute strategy defined by speed limits. The speed limits will set the pace of change and the expectations for results and measurements. These will permit the organization to evaluate its success or failure versus the competition, and to make essential and frequent mid-course corrections and adjustments. The merit of this approach is that it Whatever path builds a tolerance for ambiguity into a firm takes, organizations. it must strive to Progress is not for the faint-hearted. make change It never has been. an ally instead Risks need to be taken and IT investof an enemy. ments need to continue. The substance and strength of the implementation at each company will be the measure of winners and losers in this fast-paced environment.

24

First Hand

Teaching Management Against the Grain:


AN INTERVIEW WITH

Good management has to


do with good judgment and Mintzberg: Mintzberg: It should, but I think Theres now a cult of its going in the opposite direction. understanding of context. management. The Knowledge workers have to be literature wasnt that coordinated, but they dont have to big several years ago, be encouraged to put out energy. and Britain has only sort of half but its grown enormously. Maybe made up its mind to adopt it. So you They already know what they have as much as half of that literature get in your cars and drive miles and to do and they dont need to comis very similar to self-help books. municate with each other through a measure gallons. We dont notice How to clean up your psyche, live superior. Knowledge workers need the things that dont change. a happy life. Probably most serious a management style thats engaged CSC World: What about the rise managers dont look much at those and connected. But managers are and fall of the dot-coms? Wasnt that becoming less engaged and less books. But a lot of unserious manan important change? agers who nonetheless have quite connected, which makes it hard for a lot of influence do look at them. them to deal with people who think. Mintzberg: The press certainly Theres a lot of good management Hewlett and Packard, for hyped the dot-coms. The change in literature, too, but it doesnt offer example, set a different pattern for information technology was viewed quick fixes or self-help. how you manage knowledge work. as very dramatic and utterly differSo did Grove at Intel. But now what ent. But maybe it was just another CSC World: Why has this literature youre getting is a reversion to an one of the many changes that busiexploded the way it has? overseeing kind of managing, and ness always has to incorporate. Mintzberg: Im not sure why. Suppose that architectural styles I think its going to wreak havoc. One of the key things might be changed. You wouldnt expect speCSC World: Why? the growth of business schools. cial companies to grow up because Mintzberg: Because theres a triviBusiness schools werent very they have this new architecture. alization of the significant before 1965 or 1970. But Thats not whole sense of theres been an enormous growth a perfect management. since then. Theres also the obsesparallel, usiness doesnt need Weve driven sion with finding heroic leadership. but you out everything MBA programs are training heroes. get my heroes. Business needs that makes a But business doesnt need heroes. point. good manager Business needs good managers. The old good managers. intuition, CSC World: We keep hearing that companies connection, the information economy or wouldnt context. People just float in and out reengineering, knowledge managedie. Theyd adapt. We used to without knowing what theyre manment, the Internet will change communicate by letter, then by aging. A great leader is supposed to everything. So far, not much seems telephone, now by e-mail. These do everything now. to have changed. Why do you think were all changes in information that is? CSC World: And yet the need to technology and business adapted attract and keep talented employees to all of them. Mintzberg: I think the notion that is still high on the business agenda. The hype was that the dotwe live in this great age of change is How should companies do that? coms were going to revolutionize a crock. Certainly there are things shopping, but all they really did was Mintzberg: By treating employees changing. Information technology revolutionize ordering. Shipping is changing. But some things are like human beings instead of what people order is no different. always changing, and other things human resources. You dont have to Sears has been doing it for decades. dont. We drive cars that still use empower people. If you treat them Model T technology. We fly in airdecently, they empower themselves. CSC World: Will the increasing planes that still use Comet technolo- importance of knowledge work Support your employees and gy from 1952. The French came up encourage them, but otherwise bring about a change in managewith the metric system 200 years leave them alone to do their work. ments role? ago, but America has yet to adopt it

Henry Mintzberg
Henry Mintzbergs standing as
one of the worlds most important management thinkers was underscored by two honors last year: He received the Distinguished Scholar award from the Academy of Management, and placed seventh in the Financial Timess list of the top 50 business gurus. According to Management Todays guru guide, Mintzberg is hotting up fast. Unlike many other gurus, Mintzberg isnt known for grand theory. His emphasis on the practice of management was evident in his first book, The Nature of Managerial Work (1973). One of the findings of that book was that managers spend most of their time putting out fires, a job that isnt made any easier by studying general theories of management. Although much of his writing is against the grain of business literature, Mintzberg has spent his career in business education. He has been teaching management at McGill University in Montreal since 1968, and is now Cleghorn Professor of Management Studies there. He also is a visiting scholar at INSEAD (the European Institute of Business Administration) in Fontainbleau, France. In 1995, Mintzberg put his criticism of business education into practice by co-founding the International Masters Program in Practicing Management (impm.org). He and Jonathan Gosling of Lancaster University in the UK, working with business schools in France, India, and Japan, created the IMPM as the next generation masters program. He is no longer director of the program, but hes still very much interested in changing business education. Hes working on a book titled Developing Managers, not MBAs.

CSC World: For a business school professor, you have been very critical of the most popular business school degree, the MBA. What dont you like about it? Mintzberg: It trains the wrong people the wrong way for the wrong reasons. I dont think you can create managers in a classroom. You cant teach management to people who have never been managers and

Mintzberg: The MBA is good training for analyzing business. If analyzing business is what youre going to do, then the MBA is a good degree to get. But managers dont have to be analysts. Good management has to do with good judgment and understanding of context. Managers have to be connected, in a sense. They need to have a deep knowledge of the business theyre in, and they wont get that in a classroom. Learning the general principles of management isnt much help to people who have to manage something in particular. CSC World: And yet there are MBAs in management positions all over the world.

Mintzberg: Companies need managers. Organizations of all kinds need managers, and business he MBA is good training for schools tell them where to analyzing business. But managers find them. The MBA is seen dont have to be analysts. as training for management. So companies hire dont have much business experipeople with MBAs. Then they give ence. So instead you teach them them jobs running things they dont about analysis and other functions understand. That goes on all over. and they walk out thinking they CSC World: Why is there such a know how to be managers. large management literature? Theres nothing like that for, say, CSC World: Do you mean that business schools are providing good high school teachers or engineers or politicians. education but not the right kind?

26

27

Findings

Smart roads will improve

Getting Smart
A LEADING EDGE FORUM REPORT

mart systems have always fascinated us. Since the first practical computers were conceived, engineers have dreamed of creating machines that can think like humans. We havent done that yet.

Computers are not yet as smart, or as dangerous, as HAL in 2001. But practical applications of smart technology are emerging that will change our lives. Today, though, many organizations are wondering how to recognize and make use of smart systems. To help organizations understand these systems, CSC has identified five attributes of smart, dubbed smart quotients.

Adapting The ability to adapt to users and the environment to recognize context is one of the basic attributes of smart systems. Nomadic computing envisions a time when networks will adapt to individual users by greeting them with their personal environments when they log in, no matter where they are or what device they are using. One element of those future devices is likely to be the humanized interface. A still-experimental example is one developed at the MIT Media Lab, which is designed to express emotion. These virtual assistants are based on the assumption that people prefer talking to a

luxury car makers have incorporated simple warning and collisionavoidance systems in their vehicles, and cars will become even smarter when they are combined with smart roads. Smart transportation systems will manage traffic by monitoring road conditions and controlling the speed and location of cars. Advances in this area are person instead of to a machine. But its also true that there is a very thin slow, though, because the techline between natural, emotion-laden nology must be absolutely reliable and there are no standards for interaction and annoying stupidity. systems and interfaces. Malfunctioning computers are Improving salmon traffic is the another source of annoyance. job of the sensor fish, a mechanical Researchers are finding ways to fish that is sent through hydroenable networks to adjust to electric dams on the Snake and different levels of stress without Columbia Rivers in the United requiring States Northwest. abandonment of users by here is a very thin Salmon trying to reach the Pacific a wholesale shutdown. line between natural, Ocean through those dams often There already emotion-laden are killed by are smart disk spinning turbine systems that interaction and blades and can predict the changes in water imminent failannoying stupidity. pressure. The ure of a drive sensor fish will by continuously help engineers design safer dams. monitoring network components. Sensors arent just for inanimate In the future, systems will be able to adapt dynamically to a wide range objects. Some forms of deafness can be cured by tiny implants that of stress situations, such as security directly stimulate the nerves of a attacks, performance requirements, persons hearing system. and component failure.

long as it stays within a single domain of knowledge. Expert systems are programs that capture the knowledge in a very narrow field and provide expert solutions to problems in that field. Examples are Big Blue in chess and AMOS, the CSC-designed system that operates NASAs X-Ray Timing Explorer satellite. But maybe the fire making the smoke is small. Or mostly burnt out. Computers cant handle nuances like maybe and mostly they prefer yes and no. Fuzzy logic was invented to allow computers to handle such natural language problems. Antilock braking systems, for example, use fuzzy logic to decide what to do when the car is going fast or slow, with those speeds being determined by circumstances rather than by a specified number of RPMs. Another kind of inferring system is data mining, which harvests useful information from mountains of data. It differs from traditional statistics in that statistics forms a hypothesis and validates it against the data. Data mining, by contrast, discovers patterns in the data and forms its own hypotheses. Organizations are excited about data mining because the digital age has provided them with a wealth of data they know is valuable if only they knew how to use it.

auto traffic. Smart fish will improve salmon traffic.

Sensing Sensing systems acquire information from the world around them and respond to it. Some

Inferring If theres smoke, then theres fire. Computers can do this kind of simple if-then inferring as

Learning Intelligent systems improve through the course of their interactions with the world. One learning approach is case-based reasoning (CBR), which uses a case base of solutions to previous problems to analyze and solve new problems. CBR has been most successful in domains involving

classification (e.g., medical and legal) and problem-solving (e.g., help desks, design, planning, diagnosis). Another approach is neural nets, which are simplified computer versions of the human brain. Neural nets are best suited to problems that are difficult to describe, such as recognizing handwriting. Rather than writing a program for this task, systems are trained by being provided with handwriting samples and the correct answer. The system learns to generalize from the training set and recognize most peoples handwriting. Optical character recognition is one of the most successful neural net applications. However, most neural nets used in commercial applications today do not continue to NASA robot made a learn. They are trained when they are designed, but 200-kilometer trek across become static when inserted into broader applications. Chiles Atacama desert. Genetic algorithms, another approach to learnand later traveled through ing, are based on a biological Antarctica, finding and classifying metaphor: survival of the fittest. meteorites and terrestrial rocks. This approach works by creating a large population of candidate Smart new world solutions, only the fittest of which The technologies that underpin survive. New solutions are created these smart systems will fundamenfrom the survivors, through a process analogous to breeding. This tally change the way we live and conduct business. Smart systems process continues through several will become our skilled assistants, generations, with weak solutions adapting to us as needed and, over being replaced from the evertime, disappearing into everyday stronger population of solutions. life. This change will not come Genetic algorithms are emerging overnight. But continuing innovain the pharmaceuticals industry as tion and technology advances will computational aids for drug design. They have even been used to create help todays smart systems overcome their limitations. music, although opinions of the quality vary with the listener.

Anticipating The culmination of smart is the anticipating system. Anticipating systems arent directed to solve specific problems; they find problems, recommend solutions, and in some cases fix them on their own. Such systems are not limited to one domain, but can apply their knowledge and reasoning across multiple domains. In this sense, anticipating systems come the closest to modeling human intelligence. Its also true that mature anticipating systems exist only in the minds of visionaries and science fiction writers. Nonetheless, the seeds of such systems are present today in goal-directed robots. One of the most impressive of these is NASAs Nomad robot. Nomad successfully completed a 200-kilometer trek through Chiles Atacama desert,

28

29

In Practice

Building a Customer-Friendly Telco Fast


BY

The focus on business processes


speed up development by not having to integrate the applications at every level. They didnt have to integrate the applications user interfaces, reporting mechanisms, or databases. They used one single user interface across all packages, an interface that has the brand of the client, not the application vendor. Extracting business processes meant less integration and less time for development. In February 2001, seven months after the project started, the new systems had been developed and tested, company staff had been trained and ipsaris was in the telco business. negotiate contractual details and service provision dates. They can use the same self-care function to check on the progress of their service request and are automatically informed when service provision is complete.

allowed the team to speed up development by not having to integrate applications at every level.
After provisioning, customers receive e-mails asking about the quality of service. If theres a fault anywhere on the network, ipsaris automatically e-mails those

VANESSA REED

of Yahoo; and developing a leading edge IP network. In June, ipsaris was purchased by the smaller telecom and Internet services company, Easynet. Marconi had not yet spun off and sold ipsaris when this merger took place. Because Easynet paid for the acquisition in shares, Marconi, who owned more than 90 percent of ipsaris, is now the largest owner of Easynet. Marconi plans to gradually reduce its holdings in the company.

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achieve as a business. At a nineday business process workshop, CSC helped ipsaris flesh out these goals as well as the means for implementing them. Like most businesses, they wanted the flexibility to adapt to changing business requirements and the scalability to meet future growth in the business. Unlike most businesses, they understood that flexibility and scalability, if they were to last more than a few years, had to be designed into the system architecture. That meant avoiding a common pitfall of startups: integrating third-party applications in such a way that it becomes very costly to add or replace them when better products become available. The solution was to integrate them from the top lexibility was built into down, starting with the business processes instead the system architecture, of with the applications that support those processes. so applications can be The team designed an architecture around prodadded or replaced ucts from BEA, Tuxedo, Web Logic, and ELink, and quickly and cheaply. a workflow management product from Staffware. Then they selected commercial Building a new company applications from 12 leading venIn June 2000, ipsaris contracted dors, including the new Oracle 11i with CSC to design, build, and suite of applications. Developers deploy all their business support abstracted key business processes systems. The company-to-be began from these components and migratwith a 14-page strategy statement ed them into a business process outlining what they wanted to engine that was built into the

Marconi PLC didnt want to create just another telco. When the company decided to transform its dark fiber business, they wanted to do more than move up the value chain to selling managed bandwidth. They wanted to build the telco that was the easiest to do business with. Thats not all Marconi wanted. They also wanted the flexibility to adapt to changing business requirements without getting locked into a particular set of applications. And it had to be done fast. Marconi wanted the new telco to be ready for business in the record time of seven months. All these requirements were met by using a form of business process management to build the system.

ipsaris Ltd.
In the 1980s, Marconi PLC, Britains biggest telecommunications equipment maker, laid 1,300 kms of optical fiber along the canal system in the UK through its subsidiary, Fibreway, a joint venture with British Waterways. For several years, the only business of that subsidiary, later named ipsaris, was selling dark fiber. That is, it sold fiber to other telecom operators who could light it and provide services over it. Looking for new ways to boost revenue, Marconi recognized in mid-1999 that it could improve its investment by turning ipsaris into a telco and selling direct to corporate customers. At the time, the equity markets were bullish, so there was a strong potential for an IPO to enable them to recoup their investment. That transformation meant creating a company and all the associated business infrastructure from scratch. Although Marconi financed this transformation, it kept ipsaris at arms length from day one. This meant that an entirely new team had to be recruited to design every aspect of the new business. A few of the challenges facing the team were: expanding the existing fibre routes from 1,300 to 3,500 kms, together with the entire associated infrastructure to house their equipment; designing all the transmission architecture, which included 10 Gbps SDH and an 80 DWDM system capable of carrying 500 times the capacity

architecture. This solution enabled business processes to be configured in one central function rather than hard-coded in many applications.

Long-lasting, fast-acting Not hard-wiring the applications together brought two more benefits. First, it gave ipsaris a system that makes business processes easy to modify. As the business changes and grows, it will be as easy to remove existing applications as to add new ones, thus reducing the cost of owning the system over time. The transformation team built a system that can accommodate a great deal of change without having to be rebuilt every few years. The second benefit was meeting ipsariss very aggressive deadline. Not surprisingly, some of the product vendors thought the seven-month timetable was wildly optimistic. But the focus on business processes allowed the team to

The customers experience Because ipsaris wanted to allow its corporate customers to manage their own requirements as much as possible, self-care features had been built into system architecture. That meant automating as many processes as possible, and giving customers and staff Internet access to the companys systems. Customers can order almost their full suite of services through ipsaris.com. Standard, catalog-based services are almost self-provisioned because they are automated through the business processes, ordering can be done entirely through the Web. More complicated requests ones that require digging up streets, building or acquiring physical network, and procuring and installing equipment are handed off by the business process engine as special mini-projects. To request service and access the self-care function, customers register with the company at ipsaris.com. Through the Web site, customers can then choose their services, get price information, and

In Practice

customers who might be affected to let them know theres a problem. All billing information is available on line and once initial service is provided customers can increase and decrease their bandwidth automatically without any intervention by ipsaris.

Theres a similar procedure for problems that are reported by customers. The system automatically assigns a job number to the report so the customers can use their login to see whos working on the problem and how close they are to fixing it. When the problem has

Are you here yet?


Providing telco services to corporate customers is a complicated job. The ipsaris transformation team identified 165 steps in the workflow of a request for service. But ipsaris wanted corporate customers to be able to track the progress of a service request in somewhat the same way that individual consumers can track packages they send through the overnight delivery company, Federal Express. FedEx customers can find out where their package is at any time by logging into the company Web site and entering a tracking number. There are big differences between the two services. However challenging it may be to organize an overnight delivery service, the essentials are simple: government provides the infrastructure streets and roads and the company provides the equipment trucks. A telco, however, may have to build its own infrastructure by digging up streets to run cable onto a customers premises. It will have to install equipment both on customer premises and within their own network infrastructure, which means it must purchase equipment thats not already in inventory. To get all this work done, the telco may have to get council permits and contract with third parties. ipsaris has taken the highly unusual move of making each step in the process visible to its customers. Like individuals tracking packages sent for overnight delivery, ipsariss corporate customers can log into the company Web site to track the progress of their service request.

been fixed, the customer gets an e-mail requesting confirmation that service has been restored to normal. Only when the customer confirms does ipsaris close the job. In addition to providing an unusually high level of self-care, CSC helped ipsaris customers get something they always wanted: variable bandwidth on demand. Simply put, ipsaris customers can log on and turn the bandwidth dial up or down themselves, depending on their immediate needs. Right now, ipsaris is one of a handful of providers offering such a feature.

BY EDWARD CRISCUOLO, KEITH HOGIE & RON PARISE

Putting the Internet in Space

Conclusion When competition is intense, the companies that can differentiate themselves by the quality and level of service they provide will emerge as the winners. It becomes increasingly important to provide excellent service by the customers preferred method and at times when the customer requires it, not when its most convenient for the operator. Customers who are dissatisfied with old telcos may attribute their problems to companies that are burdened with legacy systems and outmoded procedures. However, many recent startups are equally burdened by a lack of imagination. Their technology may be brand new, but their business vision is not. Its very difficult to add customer-friendliness after your systems are finished. Ipsariss customer-friendliness was built in from the start.

ore and better science missions at less cost. Thats been NASAs goal for years, and now theres a way to achieve it: by extending the Internet into space.
shortened mission design and development time and reduced costs for operations. Thats the goal of the Operating Missions as Nodes on the Internet (OMNI) project at NASAs Goddard Space Flight Center in Greenbelt, Md.

Using Internet technology to communicate with satellites and other spacecraft will dramatically cut the time and costs involved in designing, developing, and operating future space science missions. One thing that makes missions expensive is the specially designed communications systems used to control satellites and download data from them. NASA started putting satellites in orbit long before the Internet, so it had to invent its own communications systems, building a new system for each new satellite. These custom-built systems were, and still are, very expensive to design, operate, and maintain. By using standardized Internet protocols to control and receive data from satellites, NASA will be able to use more commercial software and hardware to develop and operate spacecraft for scientific experiments. The result will be

The ham radio connection The OMNI project did not have a big budget, though, so could not afford to sing Internet protocols means launch its own NASA will be able to use more Internet-enabled satellite. The commercial software and team began looking for one that hardware on science missions. was already in orbit and could be modified without UoSAT-12 uses high-level data great expense to use Internet link control (HDLC) framing, protocols. What was needed was which is old technology that amaa satellite that used data framing teur radio enthusiasts have been standards that were compatible using for at least 10 years. But its with standard network routers. exactly the kind of framing used

This requirement eliminated most satellites from consideration. However, the OMNI team did find UoSAT-12, a British-built minisatellite that was launched from the Baikonur Cosmodrome in Kazakhstan on a modified Soviet-era ICBM. Surrey Space Technologies Ltd., at the University of Surrey, built UoSAT12 using low-cost commercial technology that was well suited to OMNIs purposes. OMNI found out about the satellite through a team member who had connections to people in the Surrey group through a common interest in amateur space radio.

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In Practice

In January 2001, UoSAT-12 became


by commercial routers. Putting Internet protocol packets on top of that low-tech hardware would allow data to run right into any Internet router. In April 2000, the OMNI team successfully pinged the UoSAT-

Extending the Internet into space


Internet standards are much more flexible, too. Researchers can easily upload new software, new algorithms, and new operations codes. They can even modify the mission itself, having it do things it was not originally designed to do. Sensors aboard one satellite may be used to gather data for other missions. This means that researchers can take advantage of new technologies even after a mission has been launched.

the first Web server in space.


12 satellite. That is, engineers sent ping packets to the satellites Internet address and got a response, which told them that the UoSAT-12s computer was a

functioning node on the Internet the first in space. OMNI reached another milestone in January of this year, when UoSAT-12 became the first Web server in space.

can greatly improve communication with space science missions.


modifications of existing systems. Internet communication using commercial-off-the-shelf products, would eliminate the need for such costly upgrades. It also would permit scientists to do something now done only on the ground: build large arrays of instruments that communicate with each other and deliver data in real time. This is the goal of NASAs Sensor Web concept. For example, scientists could develop sensor webs to study the effects of solar phenomena on terrestrial power grids. Such a sensor web might consist of many in-atmosphere and orbiting instruments that automatically coordinate their observations in real time. A dynamic network of cooperating sensors a sensor web will ultimately enable new science mission concepts to be realized cost-effectively. In these ways and many others, the evolving Internet promises to expand the horizons of scientific research by allowing NASA to spend more of its mission dollars on science and less on communications systems.

Business benefits of using Internet protocols


Mission design NASA can design more complex missions at less cost and with less need for special training. Standardized Internet protocols will make it possible to design multisensor missions, in which several satellites communicate with each other, and will even permit single-purpose missions to share data. The use of commercial software and hardware reduces costs by reducing the need for customized systems. Training costs also will be reduced because engineers and scientists already will have been trained on these systems. Software development Using Internet protocols means using standard, commercial operating systems and program interfaces that already have been tested and documented. There will be much less need to develop mission-specific software with accompanying documentation and interface specifications. Hardware development As with software, using Internet protocols means being able to use standard, commercial hardware with electrical specifications that already have been tested and documented. Standard network interfaces, such as Ethernet and HDLC, can be used in place of specialized interface simulators. Testing and integration Commercial testing equipment can be used in place of custom-built equipment. The time required for integration will be reduced by testing subsystems over the Internet before shipping them to the integration site. That way, problems can be identified and resolved while subsystems are still at the manufacturer. Mission operation Missions designed with standard Internet protocols can be operated with the same software used for testing. It will no longer be necessary to develop new software when moving a mission from the laboratory to flight. Using commercial software also means that NASA can take advantage of new commercial developments that occur after launch. Because mission data will already be in Internet protocol, they will not have to be translated, and can be distributed more quickly to more investigators.

Faster, better, cheaper Deploying Internet-enabled satellites would allow NASA scientists and engineers to design space science missions using commercial software and hardware. In the past, much of the cost of designing missions was in developing customized software and hardware. Communications code, electrical specifications, and testing equipment all were unique to each mission, and required extensive documentation and training. Using commercial software and hardware means using standard operating systems and program interfaces that already have been tested and documented. The need for training on these systems will be reduced because people already will be familiar with them before beginning work on a mission. The transition from testing to operation will be smoother because the same software used to test a system also will be used for flight operations. Quicker distribution of data from science missions would be another benefit. Mission data now have to be patched through to a particular place, and then must be translated from proprietary protocols into Internet protocols to permit wider distribution. Data that were already in Internet protocol could be distributed much more quickly. Missions designed using commercial systems that meet

Gamma rays and large arrays Extending the Internet into space can provide cost-effective messaging among space and ground systems. This will give astronomers increased capabilities to study, for example, the stillmysterious gamma ray burst (GRB) phenomenon. GRB events last only a few hours and occur anywhere in the sky, so instruments would have to be alerted quickly so they could observe the events with minimum delay. Detectors, observatories, and ground stations that communicate in real time using Internet protocols will enable a cost-effective solution for automated sensedecide-act operations for this type of science scenario, as well as many others. Internet protocols will create opportunities for new types of collaborative science by allowing satellites with different missions to communicate and share data with each other. NASA, working with CSC, did succeed in getting solar science satellites to talk to one another a few years ago. But getting single-purpose missions to collaborate required time-consuming and expensive

The satellite in the minivan


However appealing OMNI was as an idea, it meant veering sharply away from the way NASA always had conducted science missions in space. OMNI engineers had to provide proof of concept. So they built a prototype satellite and launched it in a Plymouth Voyager minivan. The prototype consisted of laptop computers, a power supply and a transmitter in a crate behind the front seat, and an antenna and movable cameras attached to a sheet of plywood that was tied to the rack on top of the van. Although constructed with materials lying ready at hand, the result closely resembled the communications and scientific equipment on a real satellite. Using Internet protocols, this satellite was driven around Goddard as it sent Global Positioning System telemetry, weather data (from a weather station on the back of the van) and video images to the OMNI control center. Using a Web browser, controllers were able to maneuver the onboard video cameras. The demonstration was so successful that NASA used the prototype for its Eclipse 99 project, which provided real-time coverage of the 1999 solar eclipse from a ship in the Black Sea.

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Book Review

Next:
The Future Just Happened
Michael Lewis
(New York: W.W. Norton & Co., 2001)

REVIEWED BY ROBERT MUTCH


edge about legal procedures to become the top-ranked criminal law expert for AskMe.com. Granted, the fact that 14-year olds can use the Internet to manipulate the stock markets is a sure sign that something has changed. What happened is that, partly because of the Internet, the people whom the SEC was set up to protect have now caught on to the very financial practices they were supposed to be protected against. One result of that change was that the whisper numbers put out by amateur Web sites had as much credibility with investors as the forecasts put out by Wall Street professionals. he prospect of two, three, Thats new. It also meant many Jonathan Lebeds must be more opportunikeeping a few people up at night. ties for the to unscrupulous fleece the credulous. The only Lebed raked in $800,000 in six thing new there is that kids are months and, at 14, became the now using the Internet to do what youngest person ever nailed by the Herman Melvilles confidence man SEC for stock fraud. At 15, Marcus did on a Mississippi riverboat. Arnold picked up enough knowlIts a new problem for the SEC,

eads up: You may already be a loser. Capitalism is changing fast, and if youre not a kid anymore you may not have what it takes to keep up. This is the grim and not quite believable message of Michael Lewiss otherwise informative and entertaining book. His point is that the Internet is undermining all the old sources of insider power and that kids have the advantage because they get the Internet in a way grownups dont. Which is why two teenaged boys are the main characters in his book. By using the Internet to tout the stocks he bought, Jonathan

though. When the scam artists start coming from the ranks of the suckers, does the SEC come down as hard on them as it would on a professional? It didnt do that with Lebed. It settled out of court and let him keep most of his money. According to Lewis, the SEC backed off because it couldnt prove that young Jonathan wasnt doing the same thing thats done every day on Wall Street. So what happens if there are two, three, many Jonathan Lebeds? That prospect must be keeping a few people awake at night. It also makes this first chapter the strongest support for Lewiss thesis. Big law firms probably are not spooked by the prospect of many Marcus Arnolds. True, Arnold is a case study in how legal knowledge has spread to the masses. But theres not a lot of money in passing yourself off as an Internet expert in criminal law. And Arnold is a latecomer. Ex-cons and ex-cops were handing out useful legal

information long before tour, they organized on the Internet day jobs to pay the rent. That last the Internet. and paid for it themselves. That doesnt fit in with one of Lewiss Then there are the rebels gave the band the idea of becoming main points: that theres no such who arent kids at all, except in their own middleman. They went thing as a true outsider, that their fascination with technology. back to their fans to raise the these high-tech rebels are making The middle-aged guys trouble only as a scheme who created TiVo and to get bought off and Replay have nothing to brought inside. o more prime time. That sent do with the Internet. Thats not new, shivers through the boardrooms They invented little either. Entrenched elites black boxes that allow always have dealt with of network TV companies. people to download challengers by squashing any TV program from them or absorbing them. anywhere. As Lewis Those elites change over describes it, the box does what advance necessary to record anoth- time but unless theyre remarkably VCRs were supposed to do and er CD, then went to the record self-destructive, they dont go away. more. Which mean that viewers company that had ditched them Theres lots of change discussed can not only skip commercials, and gave them a recording conin this book, but it doesnt all fall they can ignore the program tract. It was a very sweet moment. neatly into Lewiss adolescent schedules of the networks and Like Lebed and Arnold, takeover theme. cable companies. No more Marillion used the Internet to What is new is the pace of prime time. That sent shivers redistribute market power. Like technological change that todays through the boardrooms of TiVo and Replay, Marillion sucelites must adapt to, and the fact network TV companies. ceeded by getting better customer that kids are more comfortable So the rebels got the networks information. But thats where the with the technology than adults to invest in the technology. The similarities end. Instead of using are. Given the way technology is networks are investing because high-tech snooping gizmos, the hyped today, its not surprising that the black box comes with a catch: band simply responded to its fans. the whiz kids who rule in the chat Every program its owner watches, But the really intriguing thing rooms should think that experience every click of the remote control, about Marillions revolution is that and maturity are, like, overrated. is recorded and sold to marketing everyone came out ahead. The fans But its hard to believe that Lewis companies. If prime time can no get the music they like, the band really buys that. longer sell mass audiences to mass gets to keep creating marketers, the box can sell niche music, and the arillion used the Internet to audiences to niche marketers. recording company It means big changes in the makes money it redistribute market power way networks, cable companies, wouldnt otherwise advertisers, and eventually have made. and everyone came out ahead. producers do business. So why arent But if this new technology is these guys the going to shift market power away centerpiece of the book? Maybe Does he really think that a 15from elites, TV viewers had better because theyre not kids, theyre year old could, say, write a book on take a look at how fans empowered not techies, theyre not even entrethe social impact of technological a rock band that hadnt had a hit in preneurs, except by necessity, and change? Hmmm. Maybe not almost 15 years. When Marillions their goal isnt to get rich. All they everyone will have to retire at 40. fans learned that the bands record- want is to keep on doing what ing company wouldnt pay for a US theyre doing and not have to get

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THE PRINCIPLES OF SCIENTIFIC MANAGEMENT


BY

FREDERICK WINSLOW TAYLOR

EDITORS NOTE: This article is taken from the book of the same title, first published in 1911. To make it easier to read, we have not followed the standard procedure of using ellipses to mark omitted words and passages.

he principal object of management should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity for each employee. The words maximum prosperity mean not only large dividends for the company or owner, but the development of every branch of the business to its highest state of excellence, so that the prosperity may be permanent. Maximum prosperity can exist only as the result of maximum productivity. It follows that the most important object of both the workmen and the management should be the development of each man to his state of maximum efficiency, so that he may be able to do the highest grade of work for which his natural abilities fit him. In the best of the ordinary types of management, the combined knowledge and skills of the workmen in an industrial establishment is far greater than that of the managers. Experienced managers therefore recognize the task before them as that of inducing workmen, in return for some special incentive, to do their hardest work so as to yield the largest possible return to his employer. It is a rare case in which this end is attained. Under scientific management, managers assume the burden of gathering the knowledge possessed by the workmen and reducing this knowledge to rules, laws, and formulae. In addition to developing a science in this way, they select, train, and develop the workmen, and cooperate with them to insure that their work is done in accordance with the principles of that science.

The most prominent single element in modern scientific management is the task idea. At least one day in advance, managers plan the work of every workman, describing in detail the task which he is to accomplish, as well as the means to be used. And whenever the workman succeeds in doing his task right, he receives an addition of from 30 to 100 percent to his ordinary wages. These two elements, the task and the bonus, constitute two of the most important elements of the mechanism of scientific management. The rules, laws, and formulae of a science replace the judgment of the individual workman. Managers take over all work for which they are better fitted than the workmen. The old-fashioned single foreman is superseded by eight different men, each one of whom has his own special duties. Can an elaborate organization of this sort pay for itself? This question can best be answered by stating the results at the Midvale Steel Company. The number of yard laborers was reduced from 400 and 600 to about 140; the average number of tons per man per day increased from 16 to 59; the average earnings per man per day rose from $1.15 to $1.88; and the average cost per ton was reduced from $0.072 to $0.033. The total saving amounted to $36,417.69. As the whole people becomes acquainted with scientific management, it will no longer tolerate the employer who has his eye on dividends alone. No more will it tolerate tyranny on the part of labor which demands one increase after another in pay while at the same time it becomes less instead of more efficient. It will demand the largest efficiency from both employers and employs.

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CSC WORLD
Computer Sciences Corporation

2100 East Grand Avenue, El Segundo, CA 90245-5098 USA

310.615.0311

www.csc.com

2001 Computer Sciences Corporation

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