Chief Solutions Officer, Yahoo
We all know about the hidden costs of goods and services -- things like reconciliation and inventory control. They eat away at the bottom line and usually only become visible when we look in the rearview mirror. The lesson is that there's a difference between the price of something and its real cost. Think of it as price plus hassle.
People have a hidden cost too. As much as purchasing and logistics departments have wrung hidden costs out of their operations, management could use the same approach to improve business results.
Consider Kristine, a business-development manager with some of the best numbers around when it comes to closing deals. But Kristine has a terrible temper; she can make life miserable for everyone around her. Her customers can't put their finger on it, but there's something stressful about dealing with her -- a hidden cost to doing business with her. Over time, that cost becomes visible as clients find reasons to justify leaving Kristine and her company.
I challenge managers in 2003 to take an inventory of their team's hidden costs, person by person. Draw up a chart for your talent, with one column identifying added values and another identifying hidden costs. One added value could be "Vast network of relationships in all business units." For hidden costs, "Frequently tardy for meetings." I wouldn't call a person's added value a "strength," and I wouldn't call his hidden cost a "weakness." But somewhere in the middle is a formula of added value versus hidden costs that 21st-century managers must deal with. The problem with hidden costs is that they are hidden -- and the results are often hard to trace. Hidden costs are an important part of the retail, supply-chain, and manufacturing lexicon. Now is the time to make them part of effective management practice.
Executive Vice President and Managing Director, GM Mediaworks and GM Cyberworks
This year, business is poised to go back to basics. Don't worry, all you dedicated innovators out there: We're not returning to a world of time-card-punching company men. Rather, there's a renewed appreciation for the idea that all of our businesses -- new or established, hierarchical or flat -- need to be rooted in business fundamentals.
Consider this the business equivalent of reading the classics. It can be terrific fun to read only mysteries or science fiction, but if we're looking for valuable, timeless lessons, we turn to writings that have stood the test of time.
It's a great adrenaline rush to set precedent or prior learning on its ear. But to do that, we need to know, understand, and respect the knowledge that came before. New ideas multiply their power and potential infinitely when grounded in informed perspective.
Having a grasp of business fundamentals means knowing the history of your company, your business, and your industry. It means understanding how complex companies operate and how each unit within affects other units, as well as the employees, stockholders, and communities in which it exists. It means grounding innovations in research and knowing that opinions are not facts. It means conceding that just because you weren't aware of something before doesn't mean it never existed: Owning the innovation means owning the homework necessary to vet it.
A framework of business basics shouldn't crowd out innovation, or risk taking, or occasional off-the-wall guessing. They should all be additions to the basic black of your business wardrobe. Colors and sequins are very powerful on this frame. But Liberace aside, building a wardrobe that's based on sequins is rarely successful.
The classical canon. Basic black. Whether high culture, haute couture, or pop culture, those concepts provide frames onto which new ideas can be built. Consider your grounding in business fundamentals the leather-bound edition on your library shelf. Surround it with a couple of friendly tomes of equal weight, then add new breakthrough authors, contemporary fiction, maybe even a comic book or two. Don't let innovation be stifled by the basics. But don't forego the precious trove of knowledge that already exists.
Vice President, Mercer Management Consulting
In the weak economic recovery that we're likely to see in 2003, the past decade's blistering growth rates will be history. The traditional growth model -- innovate great products, sell them internationally, buy out your smaller competitors, and consolidate the industry -- is up against its natural limits. Product and brand extensions can no longer grow the kinds of giant companies we have today.
A handful of companies are uncovering and serving new customer needs in the spaces surrounding the product. This new approach, called demand innovation, is jump-starting new growth, even in mature industries. To implement demand innovation, business leaders need to ask a new set of questions: What can I do to help improve my customers' profitability? How can I reduce their costs, shorten their cycle times, improve their differentiation, or boost their sales?
In 2003, the advantage goes to the incumbents who have the knowledge and skills not just to make great products, but also to help improve their customers' economic systems.
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