The Evolution And Future Of Management | By Dietmar Kielnhofer

INTRODUCTION TO THE HISTORY OF MANAGEMENT
Since French industrialist and management theorist, Henry Fayol in the 19th century defined the meaning of management countless books and articles have been written on this subject. The notion of what should constitute (contemporary) management was a novelty in the 19th century when divisions of labor were in disarray, workers were poorly educated, exploitation was the rule rather then the exception and unity of command did not exist. Then there is another school of thoughts that places the dawn of modern management to Frederick Winslow Taylor, and industrial engineer, who coined the term scientific management. His perseverance in studying improving production lines efficiency, sheer determination and rigor made him famous and he eventually became Professor at Tuck School of Business and Dartmouth. With his time and motion studies and the systematic research he conducted at Bethlehem Steel Taylor made the subject of management a new discipline. And the third in this triumvirate were the famous Hawthorne studies that were conducted over a period of eight years from 1924 to 1932 in the Western Electric Company in Cicero, Illinois outside Chicago. The Hawthorne Effect, as it became known later, illustrated the hitherto unknown fact that motivation and a healthy work environment played a vital role in productivity and efficiency improvements. The most salient observation that could be ascertained form this eight year old study was that human behavior changes once it is monitored and measured for the quality of their output, respectively human beings change their behavior once being observed. As direct result of this study industrial psychologists concluded that product and output efficiency improves dramatically once employees became aware that management takes a serious interest in their work environment and starts caring. And there is German Max Weber, another prolific writer of management’s thesis. Modern management would not be where it is today without the early contribution of Weber’s work to public administration or organizational theory. Weber gave profound insight in what constitutes now modern bureaucratic management.

Where would Human Resource management be without the ground breaking studies of Maslow’s Hierarchy of Needs or Frederick’s Herzberg's Motivation – Hygiene Theory (also known as the Two Factor Theory. Herzberg did groundbreaking research of what motivates employees by determining what factors affecting job attitudes. He divided them in factors leading to dissatisfaction and factors leading to satisfaction and what are the implications for management. The history of famous management scholars would be incomplete without mentioning the name of renowned academic Henry Mintzberg, the Canadian Professor at McGill University in Montreal who asked the perennial question what work managers actually really do? Mintzberg, a vocal proponent of practical management experience, constantly advocates emphasis on real world experience or action oriented learning. Then there is Philip Kotler, Distinguished Professor of International Marketing at Kellogg Scholl of Management at Northwestern University considered the father of modern marketing who brought us the marketing concept that basically stipulates that a company should make good marketing decisions by considering consumer’s wants and needs, the company's requirements, and society's long-term interests. And finaly there is Michel Porter, the father of strategic management and one of the greatest academics of all times. Management scholars love to debate whether it is Prahalad & Hamel’s Core Competence of the Company or Porter’s Five Forces Model that decides on a company’s success path. Whilst Porter’s five forces model is considered the outside-in approach Prahalad & Hamel advocate the opposite approach, focusing on a company's internal core competency (and key resources); the inside-out approach. Porter is a proponent of placing market forces, the competitive environment and the customer at the focal point of its strategy process.

The core competency model states that in the long run competitiveness is derived from the ability to leverage internal competency such as focusing on lower production or service cost, reacting faster to customer demands, having a decentralized command structure emphasizing speedy decision making and a combination of leveraging internal resources such as a vast knowledge base, a special technological know-how and the quality of its management to optimize long-term earnings. Probably there is no correct answer as environmental and socioeconomic parameters keep on changing; and in a volatile environment adapting ones strategy is a key success factor per se. The aforementioned samples illustrate briefly what a beguiling and mesmerizing subject management science can be. An intellectually rewarding subject where there are no winners or losers just different opinions of views. The subject of management, if seriously pursued, gives management access to a variety of multi dimensional views of problem solving techniques.

The paradox of management learning is complex and a dichotomy in itself. Whilst all the scholars and academics lecture on the need the change, the Zeitgeist unfortunately shows no or only marginal progress – this is evident by watching as world wide economies fall in the ever deeper abyss of management failure. A culture of meritocracy does not happen overnight by wishing for it. What these management thinkers of the past advocating is a combination of lateral thinking, stretching the boundaries of imagination and synthesizing on a variety problems before converging on a solution? Management is a progressive function; it is an evolutionary process as Darwin’s origins of species. Like strategic management that is dynamic, action oriented and not a static undertaking once done better be left alone. The parallels between the evolution of management and the age of enlightenment are striking. The Enlightenment or Age of Reason as it was also known was a period of social and religious upheaval in Europe in the 17th and 18th century. It was the time of, inter alia, Descartes, Voltaire, Rousseau and Montesquieu who questioned the source and legitimacy of authority and the prevailing status quo. It became a period of the power of reasoning over dogmatism and conventionalism. These social philosophers saw themselves as bridge builders between the ever widening aristocracy and the bourgeoisie that eventually culminated in the French Revolution.

I refer to these philosophers as historic management thinkers since they propagated fresh ideals and values hitherto only reserved for royalty. They dared to speak out and question past values and mind sets. There was no convergence of competing ideas - on the contrary - these philosophies were often mutually contradictory and divergent – but they were after all different. I would even take the subject of management learning and management philosophy even further and go back in time to the Greek Philosophers of Aristotle, Plato and Socrates. These classical philosophers or early thinkers instilled in human kind values as diverse as ethics, aesthetics and moral. Didn’t they provide spiritual guidance and a sense of moral direction in times of uncertainty? They were revolutionaries in their own right. These values are in strong demand in management behavior in the aftermath of the excessiveness and exuberance of the 90’s. Business skills can be taught but these moral principles and ideals have to be indoctrinated from an early age already; hence the evolutionary process of management learning. The time line below serves as an overview of who were the early thinkers of management from the classical Greek period 2400 years ago to the last decade. The chart is by no means a conclusive and all encompassing list as this subject is too exhaustive to cover every singly management theorist.

The question on everybody’s mind is who will occupy the pantheon of management in the beginning of this new millennium? The theories and applied science of the classical management theorists like Taylor and Fayol will always be relevant and fashionable, but their interpretation and execution of these functions will undergo a major transformation.

THE MANAGEMENT OF CHANGE
The outline of a manager’s job description will not fundamentally change in the 21st century. Leading, controlling, organizing and planning functions will never change or cease to exist. The future can only be understood if we know the past. If I build a house I have to start with the fundament, then I can start building upward and progress. We are currently on the edge of a major management paradigm shift. The full impact of e-commerce on our daily lives and consequently business dealings, unfathomable ten or 15 years ago, has now fully emerged and those who did not prepare to develop a corresponding strategy for this new distribution channel have either been left stranded or severely weakened. Human resource management applications have to be re-thought and generally, the meaning of management will have to re-defined and re-interpreted to be in line with the demands of the third millennium. Managers must have a global perspective in their business dealings. Female managers which were almost non-existent in the past, (HP’s Carly Fiorina was a notable but unfortunately short lived exception), will play a much bigger role in the future as organizations and political parties realize that women are as good (or even better) as their male counterparts. A good example is Carol Bartz who leads the internet juggernaut of Yahoo and Mari Pangestu , the Indonesian Trade Minister.

Companies of the future will be much bigger in terms of market capitalization and market penetration – they will permeate and impact on every level of society. Cross border mergers will be the norm. These mega companies will be however much smaller in terms of permanent employed staff. There will be a core of top line mangers that will be paid according to specialization and their performance. These managers will represent the company and look at it as an extension of their family (something that was common practice in the 70’s and 80’s in Japan). The remaining staff will be employed on temporary basis (contracted workers) thus keeping payroll at a minimum. The most crucial point however is the ability of reading the signs of the market and having a global vision. Understanding market trends and understanding consumer behaviours is vital for success. A major demographic shift occurs right in front of our daily lives and social scientists warn us frequently of dire ramification if not addressed. Business leaders, and that includes the political leadership of a nation too, have to realize that consequences of inertia will have……… Managers must demonstrate the ability to adapt their organization and their teams to the constant market changes that frequently will occur. Successful companies will depend on the vision of the man on the top.

Peter Drucker, the Austrian born father of modern management and self described social ecologist redefined the meaning of management in the 20th century by calling it liberal art and placed the ”human beings” at the centre of the 20th century corporation – thus the birth of the knowledge worker. Drucker’s eminent research into the work methods and culture of General Motors and the, then revered Chairman Alfred Sloan made him a household name among management scientists.

Drucker also advocated the need for decentralised decision making and empowering the workforce – especially mid-level managers who knew more about certain subjects that their bosses yet they had to cooperate with multifunctional teams across various disciplines all to get products to the market place in a timely manner. It was the mind of the "intellectual worker" that intrigued Drucker for most of his early management consulting life. Among his enduring legacies is the notion he created that companies have a social responsibility to the environment in which they operate. His famous question “In what business are we in” was the central question CEO’s had to ask if they wanted to succeed in an increasing competitive market place where the fight for market share, appreciating stock price and profit margins ruled supreme on Wall Street.

The principles, or as I name it, the basic tenets of management did not change since Fayol’s time but what changed is the application under a new set of evolving circumstances and their priorities. For years the question was raised what is management? Art, science or skill? The word “Management” consequently has a different meaning to different people depending where a company operates. A laborer in China might interpret the word “to collaborate or to control” differently than somebody from England or Egypt. Furthermore, to understand the semantics and verbatim in more detail, can often form the difference between failure and success. All these questions and meanings undoubtedly have their legitimacy; the fact of the matter is, management in the 21st century will be totally different to what it was 10 years ago and we better get used to it. One of the indispensable core competencies and responsibilities of a General Managers in a SBU (Strategic Business Unit) is to provide leadership. This is not an abstract to determine the difference between leaders and managers, a plethora of books have been written about this subject. Aside form the generic functional responsibilities a leader has; they are more people centered, concentrate less on systems, procedures and processes but instead focus on people. Inevitably the critical job of a leader is to help their associates to develop their skills and ultimately reach their earning potential.

DECISION MAKING IN AN UNCERTAIN ENVIRONMENT
There is such in inordinate amount of aversion to risk among the higher echelons of management that is scary. Management is about taking risks this is in particular important in time of crisis; management has a duty to rock the boat and question the status quo. Otherwise what is the raison d’etre for managers and why do we have boards? History books are littered with failed companies because the oversight and fiduciary duty of a board was not fulfilled. How can we, as mature society, progress and discover new horizons if we are afraid taking a step into the unknown. We would have never landed on the moon if John F. Kennedy did not provide us with the inspiration to think big; he encouraged us (I would even say he intentionally provoked NASA to try harder and win the space race against time and USSR efforts) intellectually to venture into the unknown and discovers the limits of our curiosity. And that level of risk taking and innovative thinking is so conspicuously absente in modern management. Generation Y appears to be more concerned about the quality of live and work-life balance than gaining work experience. They may be more computer literate than the baby boomers but do they have the stamina and determination to work long hours in order to succeed in a competitive work environment? No great invention in the history of humankind has ever been made that did not involve a great amount of risk. We would not have the luxury of the light bulb or the gramophone if Thomas A. Edison would not have persevered in his unquenchable quest for new discoveries.

As the worst financial crisis since the great depression in the 30’s in the last century unfolds the calamity and seriousness sets in among managers. The present financial crises started in August 2007 when dubious creditors could not serve their mortgages anymore. The subprime mortgage crisis as it became known was precipitated by unprecedented greed, risky speculation and highly doubtful investment decisions by 25 year old hedge fund managers that wanted to make a name for themselves – irrespective of the consequences. Lowering the benchmark rate to currently 0.25 percent will expedite a self feeding downward spiral that could drag the entire free world into a depression not seen since the 1930’s. After all, it was the subsequent run on the banks after the stock market crashed in 1929 that led to the Great Depression – the similarities to what we see now are strikingly similar. Lowering interest rates to historic low levels is not the panacea the Fed expects but will only expose a deeper and more fundamentally challenging problem. Bernanke was an avid student of the cause and effect of the Great Depression in the 30’s. In his respected opinion it was caused by Herbert Hoover’s administration’s failure or inability to provide enough cash to a slowly dying economy and to galvanize spending. Rising inflation and unemployment poses a potential danger of destabilizing America's society and further undermine its economic leadership position. Focus has to be on building confidence in the American economy and publicly advocating a strong dollar policy; and this has to come from within America’s political and economic leadership and the media that feeds on negative news. The treasury department and the Fed need to get engaged in confidence building; a strong dollar is the hallmark of a strong economy. Bill Clinton and his economic advisers knew that. Bernanke and his colleagues in the treasury department should realize that it is the low interest rates from 2001 until 2004 in the aftermath of the dot.com collapse and the terror attacks on September in New York that caused the subprime mortgage collapse in 2007 and the entailing liquidity contraction. It was the availability of cheap money with a dangerous combination of low savings rate and excessive spending on credit that caused the current economic malaise. Economists estimate that U$ 2.2 trillion in new government debt will be issued this year - assuming the stimulus plan is approved. What this means is that inflation will raise its ugly head sooner or later and interest rates will reach double digits again. This self-inflicted crisis of bad debts and inflated balance sheets can only be contained by making some very painful and unpopular decisions that will undoubtedly upset a large portion of American tax payers. Desperate times demand desperate decision and this is now more prevalent than ever. It’s time for the American President to exercise his leadership.

A strong sense of déjà vu prevails in the financial market and it is depressing to realize that the treasury department and the Fed did not learn anything from past precedents. Ben Bernanke and Henry Paulson obviously did not pay sufficient attention to the Asia financial crisis of the late 90’s that caused the currency meltdown in Thailand, Indonesia, Malaysia and Korea before it spread to Russia and south and Central America. It was the availability of heavily discounted, often unsecured credit and lack of collateral that precipitated the currency contagion in Asia that had to be bailed out by the IMF and the World Bank. Now the same happens ten years later to America’s economy with devastating and far reaching consequences. The question here however is more delicate: Why does the rest of the world suffer because of liquidity problems in America and pay the price for reckless spending and a depreciating dollar with (relative) lower returns on dollar denominated assets? Bankruptcies should be contained within the banking sector only but, unfortunately, that’s not the case. The time has come for bold bipartisan decision making cutting across party lines for the best of the nation and the world economy.

This is the type of crisis that gives birth to a new leadership paradigm. A crisis of this dept and magnitude is also the time where opportunities are created equally. Instead of focusing on the crisis and its side effects, leaders must see this as an opportunity where new management thinking is tested and required. It is time for the Fed to demonstrate clear decisive leadership and regulate the banking sector before it is too late. The time for President Obama and his leadership team is now to exercise their decision making authority. The old adage that history repeats itself and those who fail to learn from it are condemned to repeat it is true. Don't we ever learn from the past? The Roman senator and advocate Cicero, got it right over 2000 year ago when he sad: To be ignorant of what occurred before you were born is to remain always child. For what is the worth of human life, unless it is woven into the life of our ancestors by the records of history? So after what we have learned in this decade the time is ready for a management renaissance on a similar scope than what transpired during the age of enlightenment in the 18th century? The global business environment does not allow for complacency and give managers the luxury to reminiscent in past glories. There is no time for nostalgia and denial. Manager or business leaders have to divert yesterday's resources to future success stories of tomorrow. Of all the negative traits that are frequently bestowed on Singapore’s leaderships, complacancy and basking in yesterday success is certainly not among them. The subject of change is not exclusively reserved for business leaders. It affects equality political leaders, from Cuba’s Fidel Castro to the Burmese military junta or to the aging North Korean leadership. If they don’t embrace change transparently all these leaders will have one in thing in common with the dinosaurs – they will all disappear. The failure to adapt to a new climate can have catastrophic consequences for businesses. Brought on us by our one greed or natural disaster – either way, the outcome is the same. All eyes are currently on the unfolding financial crisis in America monitoring the Fed and Treasury executives how to manage this crisis and lead the rest of the world on a more prosperous path.

THE NEW SOCIAL CONTRACT
The success of management has brought us to a surprising paradox: the more we manage the future the less we will need managers to do it. Until recently well managed organisations required managers. Since the Second World War their number grew faster than any other segment of the working population in industry with the effect of creating more and more layers of a hierarchy and spinning off a profusion of specialisation. In the past the manager clearly fulfilled a need. He assumed responsibility and co-ordinated tasks, transmitted information, controlled and collaborated and made decisions (as defined by Fayol in the 19th century). Today, however, these responsibilities are being spread and assimilated throughout the corporate world. The imminent disappearance of managers is a direct consequence of forty years of management learning and management evolution. Their function in an efficient organisation will have to change. The intrinsic meaning of what does it mean to be a successful manager will have be redefined in light of the available knowledge base of the workforce and the changing environment. If managers do not find a new role their decimation will be a forgone conclusion. Traditionally, managers maintained a role of authority in vertical relationships with power centralised in the hands of a few, highly educated, privileged managers. With the emergence of a new management paradigm associates have learned to take responsibility and be in charge of their own destiny. They no longer need to be supervised or need the surveillance of an authority figure they are empowered to make decisions to protect the interest of the company or in favour of the customer and create emotional connections with customers. Among the myriad of responsibilities managers have, one that will be conspicuously dominant is that of a distributors of knowledge and a harbinger of change. Corporations in this century have to undergo a seismic shift of what is management – often considered a less exciting subject to talk about than leadership which is more abstruse. The relationship between employer and employee can be conceptualized as an exchange. The employer provides rewards, salary, benefits and opportunities, and the employee in return provides access to resources in form of skills, specialised information, and time and performance commitment. This psychological, or social contract as I prefer to call it, is essentially a set of expectations – a mutual agreement between two parties. The employee has a set of results that he expects from the organization, results that will satisfy certain of his needs and in return for which he will expend some of his energies and talents. Similarly the organization has its set of expectations and its list of payments or outcomes that it will honour for services rendered. The importance for management to learn from this symbiotic realtionship is three fold:

Most individuals belong to more than one kind of organization, they have multiple social contracts, the loyalty and commitment is not exclusive reserved to one party only. They will have more than one psychological contract. A contract, which is not perceived identically by both parties, becomes the source of dissatisfaction, conflict or litigation. The organization’s view of the psychological contract is often more all-encompassing than the individuals. This may lead to a feeling of exploitation of the individual. The motivation calculus of the individual only becomes predictable if and when both parties view the psychological contract in similar mutual beneficial terms. So how does then the appropriate or perfect social contract look like? Doe it even exist? Based on this it is possible to categorize organizations according to the type of psychological contract which predominates. The individual tends to identify with the goals of the organization and to become creative in the pursuit of these goals (internet and software companies would fall into this category with their strong culture of……. In return, in addition to just rewards, they are given more voice in the selection of the goals and more discretion in the choice to achieve them. In short companies cannot impose a psychological contract on anyone without it coming to be seen as coercive. It is often appropriate for the contract to change as the task changes.

Often, however, the contract changes because the individual manager has different assumptions about the nature of employees in general and the way we go about our motivation calculus. The nature of the contract operating within any one group will often depend on the manager’s assumptions about people in general. The psychological contract lies often at the heart of any change problem. Industrial relations experts tend to categorize company conflicts in three competing frames of reference.

As a result of their position in the work organization and the particular values and beliefs, people tend to adopt a particular frame of reference towards industrial relations. Managements’ view of industrial relations will depend to a great extend on whether they see their organisation as a unitary, pluralist or radical view of the work organization and the wider society.

1. In a unitary frame of reference management view work organizations as unified by a common purpose and with one focus of allegiance. Employees are held to have an obligation of loyalty towards the organization and its leaders, but in return the leaders and the organization are obliged to care for the employees in a way which inspires such continued loyalty and trust.
2. In a pluralist frame of reference management sees the work organization as a coalition of different groups with divergent interest, with no dominant source of leadership or allegiance. Common purpose can exist, but tends to be fragile and conditional. This frame of reference tends to predominate among mangers and trade unionists involved in the day to day conduct of industrial relations, especially in their bargaining roles.
3. The most parochial and potentially most damaging view adopts a radical view of organisations and sees industrial relations as part of a wider structure of inequality in wealth, influence and power in industrial capitalist societies, ultimately dominated by the interest of the employer.
   This frame of reference has wide support within the socialist labour movement (priamarly in the former states of the USSR and thei satellite states, Cuba, North Korea and to a lesser degree in Latin America) and provides the basis of much Marxist / Leninist analysis of industrial relations.

Companies of the future will be even leaner with a flat organisational structure that underscores speedy decision making over prolonged debates. The corporate head office of the future of a multi national company will consist of a small core of highly specialised people coordinating finance, marketing, legal, information and system technology and R&D - but the decision making process will be decentralised to reflect the changing consumer behaviour into several "strategic hubs" close to customers where the action is. Exercising mental flexibility, identifying new consumer trends and financial discipline will be key character traits in these new business leaders. The difference between leadership and management will be even more distinct in the future than what it is presently. Managers have to undergo a metamorphosis into highly educated technocrats with a narrow field of specialisation (it will herald the end of the beginning of generalists) whereas leaders have to emphasise on forming strategic alliances and creating loose partnership without compromising their competitive position. Leaders increasingly have to concentrate on creating sophisticated demand conditions, finding new buyers for their product – domestically and internationally. This new class of inspirational leaders needs to demonstrate intellectual enthusiasm, passion and creativity in dealing with mid to long-term problems in a highly uncertain and volatile environment. These managers and leaders are in a unique position as they posses the breadth and dept of knowledge of creating an exceptional environment that recognises and nourishes talent and brings out their best in their teams. In such a conducive atmosphere people will feel treasured and secure to pursue their deep intrinsic life goals combined with the strategic objectives of a company. Software programmers at Apple computers and Microsoft for instance would fall into this category as well as research specialist for pharmacy and medical companies who have ulterior motives developing cures for the world’s underprivileged. These rare managers are the nucleus of an enterprise and will either have a direct stake in the company they manage in form of share options or they own the company outright (Microsoft and Virgin would be classical examples as they demonstrate innovation and cutting edge guest service). These leaders will be identified by stakeholders as the quintessential company of the next millennium. Without the mental capacity to deal with a variety of complex problems and possessing a curios and inquisitive mind, leaders will be doomed to fail. The moment this flexibility is taken away from an employee (and manager) companies end up sub-optimizing their human performance potential. Managers need the freedom to operate in their respective environments without being controlled or micro managed. Despite millions of dollars being spent in brain research and understanding the cognitive thinking process the human mind is still a mystery and raises more questions than answers. Human behaviour is still misunderstood in a lot of companies as human resource professionals lack either the training in psychology and / or behavioural science that is required to take a company to the next level of achievement.

The macho management style of Albert Dunlop (a.k.a. Chainsaw Al or Rambo in Pinstripes) and Jack Welch (Neutron Jack) of the 80's and 90’s is passé. What this millennium requires are managers who understand the emotional needs of their workforce. Leaders who have an education in liberal arts and the humanities coupled with solid business acumen thus balancing a rational approach with emotional intelligence to problem solving. Through their actions and behaviour they demonstrate better understanding of what motivates employees; they manage with heart and soul and not only with their head. If managers could operate more freely this would result in better bottom line improvements and higher guest satisfaction ratios. The rate and speed of product and service innovation a company brings its products to the market will determine the long-term viability (and survival) of a company. Most of the work of the future will be performed by a pool of equally highly trained professionals without a direct link to the organisation. Their work responsibility will be outsourced and their allegiance will be with a different organisation.

Companies have to renegotiate the social contract with their associates and examine loyalty and ownership that will be based on a quid pro quo relationship. These managers will assume a dual position; that of an inspirational and transformational leader as well as a managerial role in their respective functional discipline. In return they will be highly compensated and well rewarded for their commitment and association with winning companies. Compensation will be based on market share gains and long-term share value appreciation - five to ten years - instead of focusing on quarterly results (more on this subject later). Ultimately, the long-term prosperity of a company becomes a central concern. Does this sound utopian?

Classical examples are software and credit card companies in the west that have outsourced their (expensive) labour intensive operations and processes over the past ten years to the Indian subcontinent. Infosys, the Bangalore based information technology services company is a case in point that thrives on its business model that was originally based on providing services to companies based in the USA and Europe. How would Bangalore, Chennai and Pune emerge without a thriving IT industry? The live blood of these cities depends on the outsourcing proclivity of the western world; either it is interpreting medical data files, translation services, legal work or simple call centres. At the apex of these companies will be CEO’s or company founders with a strong entrepreneurial vision. Hotel companies in Europe and Australia are at the forefront in outsourcing functional expertise such as IT services, specialised maintenance contracts, security, housekeeping and cleaning and even catering services. It is quite common to have celebrity chefs like England’s Gordon Ramsey and France’s Jean-George Vongerichten associated with international hotel chains – all in order to reduce overheads further, increase operating margins and raise the profile and image of a hotel or restaurants. This symbiotic relationship becomes a win-win situation for both parties. Hotels concentrate on their core competency, selling rooms and catering facilities and maximising yield whilst keeping expenses at a minimum. At the same time hotel managers have their restaurants full for lunch and dinner with paying clients that a celebrity chefs almost always guarantees.

In order to meet these news demands on managers Universities and vocational schools and other educational institutes will have to shift their focus from a one dimensional educational system, to a differentiated more specialised field of education reflecting the increasing trend of conducting business in a flat world – to borrow a term coined by Thomas Friedman. Traditionally, US Universities favoured in their curriculum a multi national company's approach to conducting business in different geographic locations. Whilst this model had its advantages in an environment that stresses “think global and act local” it does not prepare executives for the rigour (and inevitably frustration) of conducting business in developing or emerging destinations. It is often said India is the service industry of the world and China is the manufacturing destination of the world. So how well do American business schools prepare their executives to live, lead and conduct business in these flourishing economies? Unless leading universities adapt to the changing business paradigm they loose their reputation and / or become irrelevant.

As a consequence the dominance of US business schools and MBA programs will wane unless teaching methodologies and the syllabus is redesigned to reflect the changing business climate and changing consumer trends. Having access to a well educated labour pool is frequently cited as having competitive advantage. A work force that lacks the basic understanding of key science subjects such chemistry, biology, physics and math is doomed to fail. A basic understanding of math is not good enough anymore in a globalised, interconnected business environment were…..These skills must be augmented by solid IT and social skills. And this is where Asian education systems, most notable in Japan, Korea, Taiwan and Singapore are much more advanced. Political leaders in the west frequently lament about stagnate or nominal growth rates compared to GDP growth rates in Asia, notably in India, Chin and Vietnam. This is a complex subject were economists and social scientists are more qualified to make an informed decision but it is acknowledged that Asians have generally a better work discipline and work ethic than their western counterparts and access to decent education certainly plays a vital part in this equation. They simply have access to a better pool of committed and dedicated labour force. Universities in Asia like the National University of Singapore (NUS) and the Asian based campus of Fontainebleau’s INSEAD University, also in Singapore, and the Polytechnic University of Hong Kong are at the forefront in leading these changes and adapting their curriculum in accordance. Another example of adapting a more contemporary curriculum and reaching out to a wider audience is Nanyang Technological University of Singapore. Nanyang’s reputation is build upon its global perspective where program participates currently comprises 60% international students from more than 20 countries. In addition to that Nanyang has partnered with 50 leading universities around the globe to have a truly global perspective in providing up-to date education for its international participants and exposure them to a dynamic and culturally diverse environment.

THE POWER OF A BRAND OR SUCCESSFUL DIFFERENTIATION
In a market and industry where products and services are all too similar (undifferentiated unfortunately), successful branding can have a significant impact on sales growth and future buying behaviour of what services and products customers will buy. Hotel companies are a classical case in point. They are not selling heads in the beds and anonymous service – they are priding themselves on selling high levels of customized or even bespoke service (selling emotional experience). Successful marketing is tangibilising the intangibility. Consumers in the 21st. century want a hotel with a soul and a character; they want personality and not residing in a box. Brand management is a very time consuming and expensive effort.

It cost money to communicate the values the brand conveys to a larger audience; it is a rather evolutionary dynamic process. Brand management is not a static undertaking once successfully launched it is better to be left alone. The value proposition of a brand changes over a time and skilful marketers know when the time comes to inject a new lease of life into an ageing brand. The old saying still goes, a good product sells itself - a not so good one needs a lot of efforts. Successful product branding is more then just the sum of its logo and name it is the intrinsic values that the brand conveys, values and benefits that the consumer remembers not only for its indented purpose. Hotels are increasingly moving away from generic advertising campaigns and focusing increasingly on their key market segments. Companies realize the importance of selling memories and experiences that, partially, elicit childhood memories of a time long gone – the baby boomer generation is in particular susceptible to this form of target marketing. Spa's and Wellness Centres all over the world capitalize on that growing trend that, statistically proven has the highest disposable income of any demographic segment. Failure to innovate a brand strategy will lead to obliteration that is tantamount to corporate suicide. A company’s true identity lies undoubtedly in its cultural DNA.

That DNA is part of an inextricable culture that cannot and should not be changed. It creates “uniqueness” in a world of brand obsessed consumer behaviour where product and service commodisation is rampant. Once uniqueness is created it has to be leveraged to optimize the earning potential of the brand.

A case in point is the hotel brand Le Méridien (part of Starwood’s brand portfolio). The internationally renowned hotel brand was established in 1972 by Air France to provide a home away from home for its customers. The first Le Méridien property was a 1,000-room hotel in Paris — Le Méridien Etoile. Within two years of operation the group had 10 hotels in Europe and Africa. Within the first six years the number of hotels had risen to 21 hotels in Europe, Africa, the French West Indies, Canada, South America, the Middle East and Mauritius. The group continued to grow and, by 1991, the total number of Le Méridien properties had risen to 58. In late 1994, Le Méridien was bought by UK based Forte Hotels, which in turn was acquired by Granada Group plc in 1996. Through a merger in the summer of 2000 between Forte's parent company, Granada, the media conglomerate and global contract catering giant, Compass Group — and the subsequent de-merger of the two companies in February 2001 — the ownership of the Forte Hotel Group and its three brands passed solely to Compass Group. In May 2001, Nomura International announced the acquisition of Le Méridien Hotels from Compass Group plc for £1.9 billion and Le Méridien was merged with Principal Hotels, which was acquired in February 2001.

It was the inherent brand value and brand equity that made Le Meridien a prime company ripe for four takeovers in seven years! With double digit growth, year after year, customers stayed with the brand for delivering exceptional value for money and investors acquired the company for its earning potential. The hospitality industry is largely dominated by American brands. They have the marketing muscle, the brand power, unequivocal distribution supremecy and the money to leverage their sheer size to achieve better economies of scale. Small hotel operators, unless they are niche players, will not attain sufficient brand awareness and critical mass to compete with these giants. We live in a world that is obsessed with brands - they literally permeate every level of society. Brand conscious behaviour determines the purchasing behavior of our customers and having access to a powerful brand and the consequent distribution channels determine one’s commercial survival. Where would Mal Wart be if not for their all encompassing distribution network? Being aligned with a multi branded company like Marriott, Hilton, InterContinental Hotels and Resort or Starwood for instance puts investors and developers in a strong position to promote their values and have an implicit guarantee on their investment as access to a powerful, well recognized brand and reservation systems is pivotal for success. It is however employees which create enduring loyalty; they are at the frontline delivering the brand promises. It is a combination of all these elements that create the right brand equity, recognition and image that are the envy of many other companies – it is about creating a clear discernable identity. It is about being trend setters and not followers; it is about leading the market and determines where the future benchmarks will be.

The value proposition of a company will not be immediately known - it will rather be defined in the years to come as the company that redefined industry standards and norms for future generations. Product commodization, irrespective of what the customer wants, are the salient features of our industry unfortunately. Successful differentiation starts wit providing service with style and “substance”. The battle for mind share is not won in the architect's or the interior designer's office, it is won in the heart and mind of customers. Branding however is not all about differentiation. It is a combination of strategic fit within its environment, what are the core values of the brand, what is the positioning statement and how does it all get aligned. It is as much about service delivery and style as it is as much about understated luxury.

The high-end watch industry is a prime example of selling understated luxury. The key features of Blancpain, Breguet, Piaget and Patek Philippe are not only outstanding craftsmanship, contemporary design and mechanical excellence; it is more about the privilege to be part of an elitarien society that covets true status and social standing more than anything else. Thus it becomes a sine qua non. The history of some of these watchmakers goes back centuries - in case of Breguet; to the time of Napoleon Bonaparte. Bvlgari and Tiffany cultivate their coveted image as luxury jewellers for the rich and famous for a very long time. These high-end brands sell first and foremost understated luxury and exclusivity, and only then enviable time pieces that are unique with their Tourbillions, complex multiple features and moon phases. Another example would be luxury cars such as Lamborghini, Bugatti, Bentley, or Aston Martin who pride themselves on superior craftsmanship, exclusive interior and world-class motor engineering. Like watchmakers, they serve a small niche of the high-end luxury market who value status and elitism. In the end it is about a savvy marketing, clever product positioning and branding.

Companies have to move away from a system proven "cookie cutter" approach, be more innovative, bold and differentiate their styles. In the past the key question successful marketers asked what is our USP? Successful marketers used this acronym all the time to determine their competitive position. It was the classical language of the 70’s and 80’s. The new buzzword to compete in an internet and web driven world is differentiation. Companies are redefining their positioning and moving away from the service and product driven environment and start positioning them as lifestyle brand companies thereby diversifying their offering range. These intangible features along with high levels of privacy and comfort will be at the forefront of what customers of the future seeks out - and that future has already arrived. Brand loyalty will only lose its appeal as consumers with a low disposable income will gravitate towards a product or service solution that meets their financial expectations and benefits them most irrespective of price and status. Thus a new niche will emerge that will serve this new market segment. I refer to this as the natural evolution of the market place. With instant access to the world wide net, the timely dissemination of information and knowledge, communication skills will play a vital role in educating customers and employees. In Japan, for instance, 80 percent of customers perform product research before committing to a purchase. The same applies for vacationers who perform all their holiday destination research on line prior paying for a leisure trip overseas.

IN SEARCH OF A NEW PARADIGM
Jan Carlzon, the ex president of the Swedish based airline company SAS, declared that the traditional organisational pyramid as it still exist in companies is clearly outdated and should be turned upside down to reflect the changing times that the real decision maker is the customer. In his book Moments Of Truth, Carlzon states when the customer is confronted with a service there is a decision involved. If the decision made is in favour of the customer he continues to give us his business, if he is unhappy, he will go to the competition for better service. Millions of decisions are made each day by employees. Through the decentralisation of organisations, most decisions are now made at the lowest possible level of hierarchy. Business units, think tanks and task force brain storming sessions have mastered the managerial techniques of group decision making and can take responsibility for all but the most strategic of decisions. True managers are those who are on the front line interacting with customers - everyday. Nothing revolutionary so far but in the late 70’s and 80’s this type of thinking was destined to be (almost) heretic. Thus the classical role of a manager has shifted. The management evolution shows how far along we have come in the learning process in improving the efficiency of work. Management is evolving past the models that made it successful. Managers are currently in a state of metamorphosis; they must abandon their past identifications, habits and traditions and acquire the skills of wisdom to transform their experience and knowledge into a new process of learning – thus the birth of the transformational manager. Knowledge becomes worthless if it is not disseminated throughout an organisation and communicated to all employees. All too often we hear companies make public pronouncements about customer service. Many like to think they are customer focused. They pride themselves that their company has customer service reflected in their company philosophy or mission statement but they merely provide lipservice to keep shareholders satisfied. In the age of post Enron, Lehman Brothers, the Madoff Ponzi scheme and a complete financial meltdown in major consumer markets, a high standard of personal ethics, honour, principles and integrity is more important than it ever was. Managers must posses and constantly instil this approach to their associates ensure that a maximum level in output of personalised service is constantly met. Good managers are perceived, heard and seen to be fair to all their staff – nothing new so far. Excellent managers set new benchmarks what constitutes excellence and superior service standards by being consistent in managing people and in implementing the policies of his company without creating suspicion of bias. Great work performance often starts with a frame of mind that something outstanding can be achieved, despite constraints and difficulties. Outstanding managers are sensitive to the destructive role that negative attitudes can play in demoralising teams. Focus will shift increasingly to managers who feel comfortable working in a multi cultural, multi ethic environment that stresses delivering results whilst preserving team diversity and racial harmony.

Classical examples are the Asian cities Singapore, Kuala Lumpur and Hong Kong that comprise of a heterogeneous society consisting of Chinese, Indians, Malays and Caucasian expatriates. A leader in such a diverse environment has a professional and social responsibility to create a positive and conducive working environment and spends time with his associates and induces a positive attitude regarding work. He incalculates an optimistic approach in his employees by being tough minded and persevering through great challenges with a resolute will to succeed. Successful individuals have to be singled out, praised in front of everybody and thereby creating new role models and encouraging others to follow. Managers have to train their employees like a soccer coach is training his team accentuating a healthy team environment. Herein lays the art of moulding a winning team together that dares to venture beyond the average and goes the extra mile that separates the winners from the losers. Good managers are not born they are made with the passage of time. The old adage holds true that a smooth sea does not make a good sailor. Good managers learn from their previous mistakes and errors, they perceive constructive criticism as a tool to improve themselves, they keep an open mind on innovative ideas and above all, demand the highest standard from themselves and their subordinates.

THE HUMAN DIMENSION: THE GREAT UNKNOWN VARIABLE
If a company outperforms its competitors, who have the same technical cutting edge technology and R & D division than it is mainly because it has succeeded in developing its employees to higher degree of allegiance and commitment – it is as simple as that. To allow employees to grow professionally and intellectually, managers must learn to empower people and trust them to take action whenever they deem it necessary without seeking prior permission from their respective department heads and thereby antagonising clients. This means that managers must remove as many barriers as possible to enable their associates to act without restrictions and fear of retributions.

Managers must learn to trust their subordinates who already have the necessary experience, maturity, professional skills and track record to take action and to make decisions on their own; taken for granted in many western societies where management layers and barriers to decision making are at a minimum. This is still a sensitive subject in Asia where business owners have often an arbitrary and centralised view of where the final decision rests. To develop his colleagues and to accept more responsibilities, managers must learn to be courageous enough to relinquish some level of control and share power and authority to enable their direct reports to accomplish their assignments more effectively. Successful companies have managers who involve their people in meaningful work related decisions. These managers share critical information with their work colleagues and encourage input from them to develop a sense of ownership in the things they do for the organisations.

Managerial excellence is often measured from a standpoint of how effectively and efficient managers are able and capable to achieve their organisational objectives. In an environment of mounting competition, increasing customer demands, changing technology, tight deadlines, budget constrains and the pressure of bottom line performance, managers often become so task driven and goal oriented that they tend to forget the importance of developing their employees, and above all, provide a superior level of service. Companies employ managers to plan, organise monitor and lead a group of individuals to accomplice company goals. Without falling into clichés management is the art of getting things done through people; the effectiveness of a manager depends on how well he or she develops and motivates subordinates. Good supervision is the art of getting average people do superior work; which is the chosen function and responsibility of managers. Good managers are the ones who recognise that it is people, not machines, computers, systems or products who make a corporation successful. Outstanding organisations are made of outstanding people or as the old saying goes. “There are no bad people, there are only bad managers”. The performance of individuals is just a reflection of how they are treated by their superiors. In this new millennium managers will have a dual role, that of a manager with high functional proficiency and expertise and that of a mentor who develops people and teams to bring out the best in them. They have to provide the opportunities and a healthy nourishing environment to enable their colleagues (the extinct word will be subordinates) to fully exploit their potential. There are many ways a manager can activate the process to develop his colleagues to achieve peak performance. The first activator is to set a new level of excellence in terms of behaviour, work standards, expectations and value creation, something that every manager owes to his associates in order to bring out the challenging instinct in them. Demanding high standards does not only stimulate growth, it also develops individuals and raises the bar. Great people set challenging but achievable goals.

Likewise, great performance can only be achieved if a manager expects uncompromising standards of performance and unrivalled commitment to quality from his colleagues. This calls for total commitment and the reinforcement of an exceptional high work ethic. Starwood, the American based hospitality giant refers to this as the Service-Profit-Chain demonstrating the relationship between revenue growth, guest satisfaction and associate satisfaction. The equation is very simple: the stronger the links, the better the chain, and the healthier the sales results, the more repeat customers. Differently expressed empirical research indicates that a direct correlation exist between highly satisfied, motivated employees and a high guest satisfaction index. Managers have a corporate and professional obligation to encourage their employees to put their greatest efforts into every piece of work assigned in order to achieve the highest standards. To develop the full potential in associates, a manager must motivate and praise them to move away from mediocrity and develop a culture that desires meritocracy.

Unlike a financial reward or a promotion, which may come at a later stage, praise can be given at the very moment a good piece of work is done. The inspiration behind this is to catch associates doing something right (and not wrong) and reinforce that behaviour with immediate praise. Simple though it may sound, few managers practise it. Sincere praise, given at the appropriate time, gives tremendous satisfaction to the recipient and stimulates him / her to perform even more efficiently. Another effective way to groom and develop associates and increase output is to provide regular and constructive feedback on general work quality. Without an effective appraisal program companies languish near the bottom of their competitors, recording anaemic growth and being burdened with a demoralised, unproductive workforce. Very often, young employees benefit from the leapfrogging learning process in their early working years through on the job training and feedback on their work performance.

THE MEANING OF QUALITY
It is the professional obligation of each manager to reject any piece work which is of substandard quality. In this new millennium managers must have a low tolerance level for work errors or inaccuracies. Managers of the future will indoctrinate in their associates a sense of responsibility and pride in their work. Employees must be trained to improve continuously on their performance through self-correction; they learn to work independently - that process becomes a self propelling feedback loop. What is practiced in Japan under Kaizen, (constant improvements) made Toyota a world class company and the envy of American automobile industry. The customer of today and tomorrow will be able to choose and compare between a wide selection of offers and services a click away on the internet, or, in a rather old-fashioned manner, in the shopping malls of large cities. Customers will expect the best quality available, both in service and product standards at the most competitive price. To meet these demands successfully, marketing executives must have a flexible, open-minded and positive approach and be highly service oriented.

Customers are not as gullible as the media wants them to believe. Following the rapid changes of the world, the increasing global competitiveness of industries, often unpredictable economical up’s and down’s, customer demands have changed and will continue to change. To remain successful in these turbulent times, managers must actively participate in service delivery and monitor the quality of their product, tangible or intangible, closer then ever. The key factor in today’s service industry for maximum success and survival will be to anticipate and speedily act appropriately to guest needs, offering the highest level of personalised service, irrespective how small the request is. Luxury hotels such as Ritz Carlton, Four Season, Peninsula and St. Regis have strict service and product guidelines in place that are considered best in class in the hotel industry in delivering extraordinary high service standards. The differentiation strategy of these companies is based on iconic service delivery; achieving an exceptional high threshold level of service that is extremely difficult to emulate or surpass.

On the other side of the service spectrum are companies that think their customer service is excellent or at least satisfactory as they receive only the few odd complaints. Others believe they have an edge in customer service as they have launched customer service programs without delivering what was promised. Many companies do not live up to their motto of putting customers first or they claim being customer-focused. To take customer service seriously, management needs to constantly stress the importance of customer service and how it affects a company’s business. Once this has been established it has to be communicated to all employees in the company and a rigid follow up program to be instituted to ensure everybody is aware of the new policy. Unfortunately it is rather the norm than the exception that the service provided by a majority of companies does not match up to customer expectations. The best intentions and programs to increase customer or brand loyalty can only be achieved by uncompromising dedication and commitment by each individual to provide an excellent level of service at all times. Few realise what a powerful impact customer service has on their business. A survey conducted by the US News and World report should prove the point.

• only 4% of unhappy customers actually lodged a complaint.
• each unhappy customer tells 10 people about the poor service.
• it costs five times more to win over a new customer than to maintain an existing one.
• those with better customer service charge a premium of 9% on their goods.
• the firms with better customer service improve their market share by 6% per year
• of those customer who complained, up to 95% can be won over again if their problems are resolved quickly and satisfactorily.

Excellent customer service cannot be achieved by delegating responsibility to rank and file associates. For any customer service program to succeed it needs full commitment from senior management. If a company is serious about implementing customer service as a competitive tool, than it must develop a compelling service strategy. Choosing the right people with the right frame of mind and skill set, character and temperament to man the front-line is important in determining the success of the program. A positive disposition towards customers has to be a prerequisite, skills can be taught but not a positive and cheerful attitude to please and serve. All too often we have come across associates who man check-out counters in supermarkets or hotels behaving rudely and treating customers with an attitude of indifference. While training in this respect can be helpful to a certain extent, some of them would be better off by working with machines, join the armed forces or leave the service industry all together. Those people tend to forget that it is not management that pays their salaries - it is the customer who pays the wages after all. An ideal way to measure customer satisfaction is to conduct monthly customer surveys containing key questions pertaining to service standards a company provides to its clients. A random sample of customers can be selected to rate service quality such as efficiency, speed of check in and check out at front desks, effectiveness in solving customer problems and general speed of service provided. Focus groups are a powerful tool to gauge the mood and attitude of customers. Unfortunately many employees feel they get paid the same whether they treat customers well or not. The same employees feel they are not rewarded (enough) to convince customers to stay with their preferred brand so why bother and go the extra mile. Loyalty programs are so aggressively promoted by airlines, car rental companies and hotels as a way to promote enduring loyalty among their client base as a guarantee of steady revenue flow. But the question hear is two fold; are these card holders loyal to the accumulated points they can redeem later or, are loyal to the brand because of location or superior service!

Engendering enduring loyalty is the holy grail of markreting; plenty of companies tried only a handfull succeeded. Few people realise that this is a complex undertaking and achieving successful returns on capital investment takes years. Japanese companies are at the forefront in long-range planning as their priorities are not, at least in the initial stage, concerned with profit maximisation but creating a positive association with their product offering and creating mind share; the elusive concept of creating awareness (Toyota would fall into this category. They stated decades ago that their ulterior objective is to be the largest automobile manufactures in the world. And with the ultimate demise of General Motors, it appears they reached their goal); Creating mind share of a “critical mass” of awareness should take precedent over (short-term) profit realisation. Marketers call it developing "Loyalty beyond Reason".

A prime example is Apple computers. Apple fans follow Stephen Jobs like lemmings. In the eyes of his followers Jobs can do no wrong. To his followers he preaches scripture and he is almost worshipped for his strategic vision, design competence and spotting market trends before anybody else does. The graph below illustrations the five key steps that are required to achieved a loyal crew of followers. Of vital importance is communicating brand equity, a combination of familiarity and conviction that engenders trust and confidence the product is offering. At that stage the product or service engenders a positive association with the buyer that subconsciously leads to a purchasing decision.

Olymp of loyal customer

• Devoted fan of product / company
• Long-term profit contribution
• Life-time value of a customer

4. Advocating and promoting positive brand experience

• Sreading positive word of mouth experience
• Actively converting friends and acquaintances to try product / service offerings

3. Appreciating brand value

• Comparison and favouring the brand over similar products (critically evaluating service offerings vis-à-vis competitors
• First step in decision making in favour of the product / service offering

2. Determining brand equity

• Alargely subconscious undertaking evaluating alternative services/offerings in the market

1. Experimental stage

• determining needs and wants
• critically evaluating service offering
• surveying the market for alternative products

To ensure that people are committed to the high level of service which is demanded from them, some form of compensation and rewards must be tied to the achievement. In the Luxury / upper upscale hotel segment employees are empowered to rebate up to U$ 200 just to keep customers satisfied and returning. The casinos of Las Vegas and Macao are at the leading edge of pampering their high rollers with lavish suites. Some of these panthers are even flown in to Las Vegas in private jets - all in anticipation that a significant amount of the expense are recouped on the baccarat and black jack tables. At the end, the house always wins. Hospitality companies such as Marriott and Starwood, inter alia, leading the way by tying executive compensation to the levels of guest service provided to customers. Customers in return should also be encouraged to highlight to management not only those employees who provide outstanding service, but also those who don’t give a damn and hamper the progress of the company. With the constant changes in the market it has become obvious that companies have to change their philosophy and become more flexible and keep abreast with the changes in consumer expectations.

Companies have to accept the inevitable fact that what was valid and significant many years ago, or even one year ago, may not be relevant anymore. Work itself will constantly be redefined as companies try to reinvent themselves and adapt to the ever shifting consumer demands and purchasing behaviours. Good marketing professionals feel the pulse of the consumer market, nothing special so far, yet, how many companies fail because they do not see the tide of change. The race is not always to the swiftest but to those who adapt to the winds of change and read the signs correctly. Knowing mayor strategic trends and analysing the impact of their implications of these trends are vital for companies to succeed. Design fads come and go but what endure is consistent excellent customer service and an unrivalled passion for quality; this is the success of a marketing driven company. Whose company wants to be transformed against the trend anyway? So the question is not why change, but when to change, change to what how to change and how fast do we change? Putting customer first must become a way of life, a priority in the whole organisation. It has to be made clear that everybody has to serve “somebody” - internal as well as external stakeholders.

In reality many companies are suffering from, as I call it, customer service short sightness or myopia of reality. Most executives in those companies live in their ivory towers almost completely isolated from the realities of truth on the ground; have great illusions of the actual level of service they provide to their customers so it comes to a big surprise to them once they go bust. With the increasing competition and the customer sophistication it is imperative that companies face up to the customer service reality and take the necessary steps to become a purely customer/service driven organisation. The majority of companies have good intentions about customer service and the level of service they want to provide. However, the unspoken truth is that there is a wide gap between the perceptions of what management considers excellence in service and what the paying customer perceives of the (supposedly) high level of service provided. The differences manifest themselves in two vaguely discernable organisations: Namely that of a marketing driven company and an organisational driven company. The typical characteristics of a marketing driven company versus an operational driven company are listed below. This is not meant to be a narrow and conclusive study that only two forms of company philosophies exist however. One can perfectly attribute one, or several operational characteristics (listed below) to either company - they are NOT mutually exclusive but rather complimentary.

MARKETING DRIVEN COMPANY

• Customer centric
• Market share growth oriented
• Balance sheet driven
• High research and development budget
• Values share price appreciation over a long period of time

OPERATIONS DRIVEN COMPANY

• Prides itself on operational prowess
• Concentrates on benchmarking and being best in class
• Income statement driven; high concentration on profit and loss and contribution margins
• Concentrates on share price appreciation on a quarterly basis

The essential difference between an operational driven company and a marketing driven company is that a marketing driven company has at its core philosophy the satisfaction of its customers. This is not to say that an operational driven company does not care about customer service; it sure will not state publicly that it does not pay attention to customer needs. It is more a question of company culture and what is the intrinsic value system of a company.

Another salient point of differentiating these two company’s philosophies is how they value share price valuations. This is particularly relevant depending where a company is based. The quest for (short-term) quarterly share price improvement has to be replaced by a balanced growth strategy where strategic leadership and the sales fundamentals are closer examined than ever before. Corporate ownership has to take on different dimensions. Instead of spreading the risks (and rewards) to million of stock holders the ownership structure should resemble a structure that has been proven successful in Sweden, Germany and Japan. In Germany and Switzerland, most shares are held by institutions for an extended period of time and not traded for short term gains – emphasis is clearly a long term interest in the equity market. Scant attention is being paid to quarterly earnings, which is not to say no attention is being paid! The US capital market is the other extreme. Most shares are held by institutional investors but institutions are measured on quarterly and annual share price appreciation. And this is where the crux of the problem lies; long-term value generation is compromised by short-term gains that undermine the long-term viability and value proposition of a company. In stark contrast are German and other central European banks that have more prudent lending practices in place and display more fiduciary responsibility towards shareholders than their counterparts across the Atlantic. A less aggressive, long-term, growth driven culture certainly makes also a big difference in optimizing the earning potential of a company. Instead of pursuing a strategy of market share growth, as successfully practiced in Japan and Korea, most American companies think in quarters anticipating the conference call with Wall Street analysts with as much precipitation as a visit to the dentist. Stock markets the world over are highly cyclical and unpredictable and forecasting growth patterns accurately became a science and an art in itself - it is not a skill anymore.

The impact of customer service on a company’s business is too risky to second guess what customers really want or leave it to chance. Joseph Schumpeter, the Harvard economists got it right in the 1940’s when he spoke about the forces of (deliberate) “creative destruction”. Companies that survive and prosper adhere to his principles by destroying old processes and creating new ones. If they fail to adhere and adapt the new paradigm of radical innovation it will be just a question of time before a competitor does. Consequently the successful corporation of the next millennium has to reinvent itself constantly like a chameleon changing its skin colour depending on the environment and ever changing circumstances; creative destruction thus becomes a reinforcing cycle that feeds on itself. Failure to adapt to the changes will be tantamount to commercial suicide.

The author of this article lives in HCM City and works as a General Manager for a multi national company headquartered in New York whose stock is listed on the New York Stock Exchange.

The thoughts expressed in this article are those of the author only.