Value Creation is Changing

The capitalist system is under siege, says Michael Porter, Harvard Business School and the originator of the term Competitive Advantage. Porter talks about how business is a popular choice to play the role of the bad guy in Hollywood and how there is a deluge of opinions about it causing societal problems. Business has tried to take on “Social Responsibility” but this openness and good will seems to have opened up more criticism. Private equity, which has saved thousands of jobs and protected the longevity of companies, is also under fire and being questioned.

This declining trust has caused politicians and market regulators to add more rules and policies to cripple the capitalist system. 

As always, business needs to be the first to step forward in a new direction and look for solutions. Already there are signs that business has been the first to recognize, the business model that worked well ten years ago may now be growing swiftly stale.

One such framework to review is the way business views value creation. It is the short time financial focus in a bubble, while missing customer needs and broader societal influences that determine long term success.

Obviously, those companies who are large enough to have the luxury of participating in round tables and what not, and can take the time to influence and brainstorm the issues. 

Yet in Canada, 80% of company owners run smaller businesses and from the ones I see on a daily basis, they are running on whiffs of fumes. For example, plastic bag manufacturers are having to deal with plastic bags manufactured with logo and all in China and shipped at a tiny cost. How can a small Canadian based company making slim profit margins compete? How can the Canadian government demand more from their taxes, paperwork and health and safety regulations while opening up the door to competitive products not burdened with labour law or higher capital costs?

Secret: Build better products

I valued Ben Horowitz talking about Cloud Technology and how to build a good company. He is so truthful about the 3:00am in the morning fearful meltdowns.
Ben says there is no way to build a new company without a transformational product. What is really important is the product, not the business model, the business plan or hiring MBAs. Innovating and coming up with something way better is key. The big firms have a hard time doing innovation.
Here is Andreeson's other half, Ben Horowitz, taking about how to build a good company. A brief list of Ben's points:

1. When a bankrupt Apple got Steve Jobs back as leader, his new strategy was "build a better product" and it worked. 
2. Skills to win the market are then important. Do you take the market and sell your excellent product?
3. Be a good person as CEO. No one wants to work for a CEO who is a jerk.
4. The key ingredient really is leadership, not management. Leadership is the ability to get people to follow you, if only out of curiosity.

Ben Horowitz was a co-founder of Opsware (formerly Loudcloud), which was acquired by HP in 2007. Earlier, he was vice president and general manager of America Onlines E-commerce Platform division, where he oversaw development of the companys flagship business.

Is Govt Backing of PE Funds Unique to China?

Xie Ping, head of China's Private Equity fund, must be unfamiliar with one of Canada's largest and most influential funds such as OTPP, which was involved in some of the biggest deals in the world. Xie said, 

"China’s private equity industry is unique because it’s dominated by the State and will follow a different path from overseas peers." 

Entities that manage private equity in China and those that invest in such funds are primarily State-owned institutions, China Investment Corp’s Xie said in Beijing.

By having government backing, China’s private equity funds can increase the value of Chinese companies in which they invest, the report cited Xie as saying. This is an aspect of the Chinese market that is different from other countries, he added.The ability to invest directly in private equity is currently limited to a few large State-owned institutions such as China’s national pension fund, the report said.

Bloomberg News reported Tuesday, citing Xie Ping, vice-president at the nation’s $300 billion sovereign wealth fund.

How to Boost Sales

US executives are turning to reality television to repair the battered image of corporate America, turning a show, in which bosses work incognito alongside their most poorly-paid employees into the most successful tool for restoring brand images.

Undercover Boss was responsible for seven of the year’s 10 most effective product placements according to Nielsen, the measurement company, which looked at how well audiences recalled the brand and how much the show improved their opinion of it. Nielsen’s data show a trend towards such extended features on a single company rather than the traditional highlighting of brands in programmes such as American Idol.

"In difficult times, people are interested in watching TV programmes where there is some recognition of the difficulties they face,” says Stephen Lambert, the executive producer behind Undercover Boss and Fairy Jobmother, a UK import about getting the unemployed back to work. “At a time of great insecurity people like watching shows where people end up in a better place.”

Undercover Boss typically ends with the executive setting up a health scheme or taskforce, and rewarding employees with scholarships, holidays or, in one case, a 7-Eleven franchise.

Read more at Financial Times 

Sir James Goldsmith talks about outsourcing to China

Twenty years ago, Sir James Goldsmith talks about how America will kill its own economy. It is quite horrifying hearing Goldsmith accurately predict today's situation as Clinton's trade agreement GATT gets implemented and the long term consequences unfold. Goldsmith talks about how jobs will get obliterated as they are exported from America and the number of jobs reduced sharply.
Goldsmith asks,"What is the purpose of an economy?" He says it is there to serve the needs of society - prosperity and stability. He adds, "Material wealth would solve our problems and we achieved that. We have destabilized society because the economy is no longer serving us."
"Who benefits from these trade treaties? Major corporations benefit. What is good for GM is good for the USA is no longer true. They are no longer linked to the USA. They farm out their production wherever they can get the cheapest capital and labour."
Charlie Rose is stunned at the suggestion that automobile manufacturing or technology industries would move out of America. I would enjoy Charlie Rose doing a "Stupid Things I Said in the Past 20 Years on my Show." This show is almost painful to watch as a wise entrepreneur who can see the patterns of industry tries to get across his correct vision of the outsourcing of American jobs. Clinton's spokesperson does not listen and just shouts him down. She ran the London School of Economics and boy, if this is the type of "thought leader" leading our universities, the type that refuses to listen but shouts down the opponent, it is not a good trend.
Clinton's aid says. "When American jobs are moved abroad, they add jobs here too."
Goldsmith points out that new jobs are part time and lower skilled. This was back in 1992. We have seen that real income has not risen since 1992. Goldsmith saw the future, here is the interview: