Leadership you can wear

August, 2004

NewsLeader

Year 2, issue # 6 


Alfredo Behrens
Editor

This is a space for quick conversations on management and society. 

Our interests gravitate around issues of leadership, management of workteams, technology, creativity, emotional intelligence and most issues which should be shared to shape a better world. 

Our approach brings thorough  perspectives into real-life situations and seeks awareness rather than complience

Your comments will be most welcome.
  

 

"Peruvians can" read the banner high in the Lima football stadium during the final for the America's Cup. Who had said "Peruvians could not" What was the purpose of that banner during a final match between Argentina and Brazil?  That is the issue.

 

Throughout Latin America self esteem runs at a low. Two decades of economic stagnation and the high inflation levels that followed a decade of military rule have left a sense of despair. Yet I argue that this sense of low-self esteem has deep historical roots that have found their way into the style of economic development and that have reinforced themselves in the region's institutions and the people's social behaviour.

 

Others claim that the current low-ebb of self-esteem is only transient and show, sustaining their argument, high points of achievement in yesteryears, normally up to the fifties, a time of high commodity prices. If these arguments were right, Latin Americans may be prompted to wait out this phase of stagnation.

 

Yet if I were right, these societies need salient gestures of change. Banners such as the ones seen in the Lima stadium help, but it is not enough. Placing a few white-collar crooks in jail- throught Latin America - should help more to start putting the countries back on track; for an enhanced appreciation for the rule of law would reward honest work, unleashing creativity and stamping out deleterious rent-seeking behaviour. Read more in the Feature article below, in some Spanish. Unfortunatelly we were still unable to reproduce in this blog any of the special characters of that language. We apologize for this but feel that some dissemination is better than none.

 

Technological innovation goes hand in had with creativity, but how do you harness innovation in corporations and how to you retain the creativity within them? It may seem a far-fetched concern for the Latin American region; but it is not. Making the best use of the region’s more scarce and expensive technological talent is paramount to stepping-up the people’s productivity. Read below, in Management Insights, a discussion based on the work of business strategists and marketing people.

 

Henri Cartier-Bresson passed away this month and surely you have been exposed to much of his great photographic art in the last few weeks. NewsLeader chose to celebrate Cartier-Breson's life by bringing to the fore the work of another of his contemporaries, the also great Mexican photographer Manuel Alvarez Bravo. By order of appearance Manuel Alvarez Bravo’s pictures are:  "La Tierra misma" 1930s; "El dia de Todos los Muertos" 1933; "Tentaciones en casa de Antonio 1970; "Los Agachados "1934; Parabola Optica" 1931.

 The Editor

 

 

 

 


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Sex, Lies and Innovation.

 

 

Alfredo Behrens

editor@newsleader.com.br

 

 

 

 

The corporate organization cannot come up with radical innovation nor deal with it when it does. Branding strategies also recommend separating the new product from the old. What, then, can a large corporation expect from its billionaire R&D divisions?

 

For the last many years, business gurus have cajoled large corporations to become more nimble, arguing that this would unleash their creativity and inventiveness; and hopefully help large corporations retain their competitive edge.  There is some strength in this line of thought, but it does not address the better part of the story.

 

Professors Geroski and Markides, of the London Business School, came up with a new picture by connecting the same dots in a more creative way. Yes, radical innovations are more frequently than not brought about by small organizations; but it is large corporations that transform the innovation into products or services that can be sold to the mass market. In due course, the radical innovators are washed away and forgotten. IBM is widely credited with having given us the mainframe; though it was UNIVAC who released the first commercial mainframe in 1953. A year later it was UNIVAC that held a share of the market eight times that of IBM; but in only six more years the market shares had reversed; and all but business historians have forgotten UNIVAC.

 

There is some radical innovation in Geroski and Markides' proposal as well. They have taken a longer view and seen that most of the corporations that hold us in awe today did not actually invent the products we credit them with. Those corporations came in second, or even later, when the innovation flurry was settling down and the market focusing on a design standard that large corporations may build a market on.

 

This holds for Pampers as well as for IBM and the big pharma corporations. Even if it may not hold as well for Hewlett-Packard, the new point of view does have a lot to add.

 

Geroski and Markides' arguments rely on relative effectiveness and competencies. Small organizations led by technical people are more likely come up with the radical innovation. But they are less market savvy than they need to. Radical innovators tend to stress on products that may be too good and too expensive. Larger corporations bring the financial clout; the marketing knowledge and the distribution channels that deliver innovative products the consumer can use and is willing to pay for. Neither type of organization can beat the other at what they are best at. Further, Professors Geroski and Markides argue that they should not even try to; for they are organizationally incompetent to do the work the other does better.

 

Pop and daughter Al and Laura Ries also ground their arguments on science and technology; this time on the science of evolution. Picking on Darwin, the Rieses argue, in their Origin of Brands, that radical departures better adopt a new stance, including a new brand, rather than attempt to bundle new products under an old umbrella.

 

Motorola introduced the cell phone but it was Nokia that became associated with it, partly, one may add, because few outside Finland knew that Nokia was previously associated with stolid galoshes and tires. The Rieses also argue that new brand Dell consistently oversold IBM's PC. Interestingly enough this happened despite IBM having sent its development off to Boca Raton; in a bow to Geroski and Markides, who also argue that if a radical innovation is to survive within a large corporation; the new better be separate from the old, despite synergy losses.

 

So, following Geroski, Markides and the Rieses, a new product better be separate from the old in the consumer's mind as well as in the organizational chart, and physical location!

 

Interestingly enough the Rieses and Geroski, Markides, from very different angles, come up with similar arguments. Divergence, in the Rieses' Darwinian jargon; or radical innovation, in Geroski and Markides' own, seems to create the opportunity for a new product. The Rieses focus on the role of branding to make that product succeed. Geroski and Markides take the analysis further and deeper and contend that a product being a divergence, or a radical innovation, is not near enough to assure success. Yet both arrive at similar recommendations: separate the underling from the mammoth.

 

The close to 5% of revenue that large corporations dedicate to their proud R&D divisions would only assure improvements on known products. Even if those corporations came up with a radical innovation like Xerox's PARC frequently did, the corporate organization would not know what to do with it.

 

The layers of middle and upper levels of management end up frustrating R&D scientists. Joseph Kim, scientist, left Merck to start VGX, a biotech. How can the large corporation hope to retain a technical competitive edge? Geroski and Markides suggest that there is something to be learned from the entertainment industry. There, transient teams are assembled around a project with a chance of success. An impressive array of talents, not least among which the funding ones, are put together while necessary and a world-class product is occasionally delivered. Soderbergh's (1989) "Sex, lies and videotape" could be one of many entertainment industry examples.

 

Hovering the entertainment industry are investors with a nose for business success and invest accordingly. These could be called the venture capitalists of the entertainment industry, and they occasionally pick on a winner, like Soderbergh's. Perhaps large corporations should do the same, rather than burden themselves with the scientists on their R&D payroll. This is what big pharma corporations are doing. Even Votorantim, the Brazilian cement manufacturer, is doing the same. It may work better for diversification than to retain competitive edge in a field; for it was when Hollywood had the artists and screenwriters on the payroll that studios made the most money. Nowadays Hollywood studios' return hover around 5%, not much above an American Treasury bill, and with a much higher risk.

 

Marketing and strategy views would seem to dissuade a large corporation from investing in radical creativity.  For not only would large corporations be less apt than their nimbler and more creative competitors; they would also be quite inept at developing what it takes to bring an early radical innovation to become a mass product. A predator's attentive watch would seem to pay-off better: hang around until the time is right to enter and buy-out the winning product design; and then separate it from the rest, for the blending-in of new products is better left to those products regularly churned out by a frightfully expensive R&D division.

 

Read further:

 

Geroski, P.A. and Markides, C. "Racing to be Second: How to conquer the industries of the future" forthcoming, 2005.

Markides, C and Geroski, P.A., "The Art of Scale" in Strategy + Business, issue 35

Al and Laura Ries, "The Origin of Brands", Harper Collins, 2004

James Surowiecki, "Hollywood's star system, at a cublicle near you" The Financial Page, The New Yorker, May 28, 2001.

 

 

 

 

 

 

 

 

 

Los peruanos Si podemos. Pero, quien fue que dijo que no podian?

 

Entrevista con Alfredo Behrens[1]

Por Ivan Moiseeff y Mariano Repetto

para

The Sponsor Mision

www.thesponsormission.net

 

 

Brasil y Argentina disputaban la final de la copa America en Lima. No habia peruanos en campo pero el gobierno sabia que habría muchos viendo la final. Tal vez fue el gobierno que puso el banner rojo con letras blancas que leia a lo alto del estadio: "Los peruanos Si podemos."

 

Por que alguien habria de querer reafirmar la potencia de los peruanos que no disputaban la final? Es facil de comprender por que. En realidad todos los latinoamericanos estamos de capa caida hace ya casi dos decadas. La de los ochenta dio por llamarse decada perdida. La de los noventa ni nombre tuvo. Es natural que precisemos de exhortaciones llamando a la esperanza. Pero no creo que la desesperanza sea apenas pasajera, hay raices profundas en las heridas a nuestra auto-estima, que vale conocer para poder manejarnos mejor.

 

Exhortaciones publicas como la de la final de la copa América en Lima sirven para colocar al desnudo nuestra lastima; ya es algo, pero no resuelven el problema.

 

 

TSM           Por que se te ocurrio pensar el problema de la autoestima en relacion con los negocios de Brasil?

AB                         Brasil deja de ser un pais rural y necesita aumentar el valor agregado de sus exportaciones para emplear su mano de obra urbana. La exportacion de tecnología emplea los egresados de las universidades, aumentando la participacion femenina y contribuyendo a modernizar la sociedad.  Pero algunos empresarios no se creerian capaces de competir internacionalmente, vendiendo software, por ejemplo.

 

TSM           Por que te parece importante recurrir a disciplinas que exceden el campo economico para entender y potenciar el perfil comercial de Brasil?

AB             Por formacion y por moda los economistas menospreciamos el significado de lo que no es cuantificable. Asi fuimos ganando capacidad de comprension en algunas areas, como en el combate a la inflacion, y perdiendo relevancia en la explicacion del proceso decisorio de los empresarios; especialmente cuanto más fronteriza es la decision del empresario. Por ejemplo, al decidir embarcar o no en una empresa exportadora, el empresario se encuentra en una situacion de frontera decisoria en la cual sus competencias emocionales juegan un papel aun mas significativo que en sus decisiones cotidianas.

 

TSM           Cuales son los principales obstaculos psicologicos de los brasilenos en su comercio con el mundo?

AB             Son de dos tipos: en primer lugar esta el llamado Country of Origin Effect (COE, en ingles) en segundo lugar la propia historia brasilena y la forma como esta ordena la actividad productiva. El COE discrimina contra las soluciones tecnologicas brasilenas porque en el exterior no se creeria que en el Brasil se podrían desarrollar soluciones de ese tipo. Es duro pero es asi y exige del brasileno, al vender tecnologia en el exterior,  una actitud mas persistente de la que su cultura afable le permite. En segundo lugar, durante el siglo XX el Brasil se ha ido aislando del mundo y perdiendo contacto comercial. La tasa de extranjeros residentes en el Brasil cayo 90% en los ultimos cincuenta años. Del Brasil se llama por telefono al exterior tanto cuanto de la India y 40% menos que desde la China. El aislamiento creciente induce al brasileno a depender de intermediarios.

 

TSM           De que manera influye la percepcion externa e interna que tiene Brasil de si

            mismo en su comercio?

AB             A la discriminacion de la que es objeto hay que sumarle la falta de familiaridad del brasileno con el mundo exterior. Esta, aliada la baja auto-estima en asuntos tecnologicos,  socava la efectividad del brasileno en el proceso de venta, por ejemplo, en las ferias comerciales. En estas es escaso el tiempo disponible para establecer una relacion personal en la que el vendedor brasileno se sentiría comodo. Asi se refuerzan mutuamente la discriminacion contra el Brasil y la cultura brasilena, que redundan en un fracaso comercial en las exportaciones de tecnologia.

 

TSM           Cuales son las raices historicas de esta conducta?

AB             Podrian atribuirse a la violencia originaria de la conquista que nunca habria eclosionado en un pacto social aceptable. Asi al conquistador voraz le sucedio el esclavizador. Los primeros habrian llegado al Brasil, una tierra exenta de interdiccion paterna, para imponer su Ley. Las heridas al nivel simbolico - por ejemplo, la ilegitimidad de la Justicia y la frustracion recurrente -  habrian llevado al Brasil a desarrollar una cultura cinica, personalidades susceptibles y a una falta de confianza en el otro que disuadiria el comercio social. El espejo institucional de esta cultura es una justicia morosa y una policia indolente. Como la impunidad campea, el aparato productivo responde integrandose verticalmente para no depender de terceros, frente a los que no tendria proteccion judicial eficaz en un plazo comercialmente util. Al integrarse y crecer, los conglomerados limitan las oportunidades de los empresarios pequenos y medianos, acentuando la asimetria de fuerzas en la sociedad. El individuo, privado de derechos de la cuna a la tumba, responde a su sofocamiento con un comportamiento social deletereo: el oportunismo; expresion cinica de una constelacion afectiva que refleja la baja auto-estima del ciudadano.

 

TSM           Cual es la importancia del problema?

AB             La auto-estima del empresario es una variable que, en mi investigacion, fue fundamental para explicar la decision empresarial de desarrollar una estrategia para exportar o de simplemente venderse a quien le ofrecio algo. Ilustre con tres casos de baja auto-estima, inclusive en empresas de buen tamano, que tan solo exportaron cuando invitadas por empresarios extranjeros que fortuitamente pasaban por el Brasil y percibieron la oportunidad. En un cuarto caso, un pequeno empresario con alta auto-estima, desahuciado por la subsidiaria brasilena de la gran empresa americana, se apersonó a la matriz de esta en los EUA y cerro un negocio que a la matriz le abrio un mercado de US$6 billones. La India, con exportaciones de US$8 mil millones por ano, exporta 40 veces mas software que el Brasil.

 

TSM           De que manera puede esta divulgacion ayudar a corregir estas patologias psiquicas? 

AB             Tengo mas preguntas que respuestas y quisiera invitar a mis colegas, economistas, sociologos, psicoanalistas, juristas, historiadores; y a los empresarios, para que conversemos; para entender mejor la forma como la interpretacion de movimientos historicos pueden ayudar a iluminar la comprension del proceso de decision empresarial y a apuntar soluciones. Esta comprension nos ayudara a formular politicas publicas mas eficaces y a articular mejor la investigacion universitaria con el aparato de produccion, nacional o extranjero.

 

Mi interes en enfocar el tema de la tecnologia es porque el area engloba los servicios de nuestra inteligencia. Estos servicios emplean el talento universitario urbano que forman nuestras universidades; abren caminos para el empleo femenino y modernizan nuestras sociedades. Aprender a persuadir a los extranjeros de nuestra capacidad para resolver sus problemas es esencial; como tambien lo es el comprender cuales son las trampas que nos hacemos nosotros mismos. Esto es imprescindible para entender mejor los costos implicitos de nuestras opciones políticas de desarrollo, tales como la tolerancia de la impunidad y su impacto sobre la organizacion productiva y la auto-estima del individuo.

 



[1] Ivan estudio Letras en la Universidad de Buenos Aires. En el area editorial trabaja como secretario de redaccion de la revista PLAN V (politica, economia, cultura). En el area de publicidad, trabaja en redaccion creativa para distintas agencias de manera independiente. 

 

Mariano Repetto es politologo. Actualmente trabaja como editor de la revista PLAN V (politica, economia, cultura, futuro) y como director de proyectos de la FUNDACION ODISEO, organizacion que impulsa un dialogo fructifero, intersectorial e intergeneracional para estimular el intercambio de ideas, la identificacion y promocion de nuevos liderazgos. Tambien se desempeno como director del semanario politico y economico INFORME UNO y dirigio la revista INTROSPEJO, orientada a la busqueda y difusion de nuevas miradas y herramientas de cambio social, politico, economico y cultural.

 

 

 

 


Provocative insights under 400 words long will receive our attention more rapidly. Larger pieces may be abridged without consultation with the author. Guest authors may wish to submit contributions in English, Spanish, Portuguese, French or Italian. Please use Arial 12 font and  with each submission and include a statement indicating the work submited is your own. Please also submit your affiliations, email address and CV or Oxford Muse-like self portrait.  Authors will only be notified when their contributions are selected for publication.

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Copyright 2004: Authors retain copyright of their work. Alfredo Behrens is entitled to all other rights concerning NewsLeader, except the template design. You are encouraged to make use of the views and information provided herein, as long as you appropriately give credit to the author and quote this Newsleader's issue number and date.

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Alfredo Behrens
editor@newsleader.com.br 
Phone +55 11 38713363
Sao Paulo, SP
Brazil


Alfredo Behrens is an economist. He holds a PhD by the University of Cambridge, has lectured at Princeton’s Woodrow Wilson School, at FSU and at PUC-RJ and is now an adjunct faculty member of the Centre for New and Emerging Markets at London Business School. He has broad experience in advising high public officials, shareholders and board members of banks and other large corporations on issues such as: governance, corporate relations with governments, M&As and strategic planning focused on the internationalization of companies. He has worked in or with the private and public sector in the Americas, East and Western Europe and Southern Africa. He was awarded the MacNamara Fellowship by the World Bank, the Hewlett fellowship by Princeton University and the Jean Monet Fellowhship by the European University, Fiesole, Italy.

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