whom, when, and where.30The manager becomes a kind of
talk show host. The question of whether one should try to be the Jerry Springer or the Oprah Winfrey of the firm, we leave to you. Funky Inc. is built around forums, virtual and real, where people can meet, rather than boxes and arrows that isolate them in unbreakable silos.
But leveraging is not only a question of transferring skills across levels and transforming competents into competence, it also concerns transforming knowledge into forms which allow the organization to more effectively profit from it. Just as with many materials, any type of knowledge basi- cally comes in three different forms: gas, fluid and solid. Gas is what we have in our minds. Fluid knowledge comes about when we discuss things with others. And solid knowledge is the stuff that is embodied in customer offer- ings, routines and systems. In effect, a car, a PC, a software program, an ice-cream or whatever is in reality nothing more and nothing less than frozen creativity. We get an idea (gas); start discussing it with others (fluid); and finally develop a customer offering (solid).
The more solid the knowledge, the more money one can make. As we begin to freeze creativity, we also create oppor- tunities for greater economies of scale. Remember the CD-ROM? The first copy is incredibly expensive, but then costs drop dramatically. Or take a consultant. Traveling around the world as a free agent he or she can probably make a pretty decent salary if loaded with fluid knowledge. But by writing a best-selling management book, or devel- oping a management information system – freezing the knowledge – he or she can utilize the benefits of more or less costless reproduction.
The problem with frozen creativity is that it is easy for our competitors to pick up a copy, take it to pieces and copy it. The icier it gets, the easier imitation becomes. And no longer can we put our trust in patents. We must rely on our
ability to develop processes that enable us to deep-freeze new pieces of knowledge faster than the others – decreasing the duration of the insight-output cycle. The alternative is to bundle our frozen knowledge with more fluid or gas-like stuff – to sell provices and serducts. Think about GE, Xerox, and IBM where the products are now little more than byproducts. The IT-experts Gartner Group predict that in 2003 services will represent 46 percent of IBM’s revenues.31 But the real
route to enhanced competitiveness is to combine and con- stantly bundle and re-bundle these different forms of knowledge – hyphenation.
How we create and leverage the knowledge of the firm are critically important questions. But increasing internal leverage does not mean creating a department for learning or knowledge management. Many companies in the West are now repeating the mistakes they made when realizing that Japanese firms constantly beat them on quality. The answer then, as it seems to be now when knowledge is concerned, was to set up a department to handle the task. Quality was made into a big thing for a selected few, and we ended up with a bunch of quality engineers or managers running around trying to fix all the problems. Did it help? Not one bit. We must avoid making this mistake yet again. Instead, these responsibilities should be an integral part of every- one’s job. Rather than knowledge management, the key to increasing internal leverage is knowledgeable management.
Industrial leverage
Leverage is not only internal. With a clear focus on their key capabilities, funky organizations also use their core competences and competents to enter new industries. But they do so without trying to control all processes internally.
Think back some 75 years. In the early twentieth century when Ford was founded, the company tried to control all
inputs to the process. As a car manufacturer used metals, you needed mines. The tires were made of rubber, so you invested in a rubber plantation. Ford became a conglomer- ate. It got obsessed with controlling all input materials necessary to make the product, rather than thinking about how its key capabilities could be leveraged into other areas.
The new logic means sticking to your competence, but utilizing these skills in more than one industry. Today, we see at least three different types of industrial leverage.
First, there is attitude-based leverage. Having understood the needs of and targeted a specific tribe, the organization may then use the fit in attitude to supply this tribe with more stuff. But it needs to convey the same vibe. The rap and hip-hop group the Beastie Boys, for instance, not only offers its tribe CDs and concerts, but magazines, T-shirts, and a radio station as well. The group has its own company, Grand Royal, which is also a record company signing new artists. Similarly, rap star Puff Daddy and British group Underworld offer their own lines of designer clothing. They follow the tribe.
Second, many firms engage in brand-based leverage. Marlboro does it. Coca-Cola does it. Disney does it as a pub- lishing, retailing, and theme park operating company. Consider Richard Branson’s Virgin, which is involved in everything from airlines and railways to clothing and cos- metics and from pensions to Internet services. The organization slavishly applies the core values of the brand when deciding whether or not to enter a new industry. At Virgin a new customer offering must be:32
… of the best quality; … innovative;
… good value for money;
… challenging to the existing alternatives; and … add a sense of fun or cheekiness.
Virgin’s management says that as many as 90 percent of the projects it studies are, at least potentially, extremely prof- itable, but if a fit to these values cannot be found, they are rejected.33 Branson and his colleagues understand that a
brand is more than a name or a logo – it is a promise and a contract with each and every customer with whom you are dealing. And if people feel that the offering does not live up to what they expect from the brand, they may well decide to stop buying the other stuff as well.
Third, there are lots of cases of more purely competence-
based leverage. Honda focuses on engines, but utilizes its knowledge to make cars, motorcycles, and so on. 3M is an expert on adhesives. The Japanese company KAO is a major player in the branded packaged goods industry – diapers, shampoos, lotions, etc. A couple of years ago it was also one of the largest producers of floppy disks. Lotions and floppy disks? Well, if you believe that you are an expert in minimizing friction, maybe the logic isn’t that strange. Or look at AT&T, which considers itself an excellent processor of transactions. It has a great brand and customer relation- ships characterized by permanence and trust. Put all this together and the company’s move into the credit card busi- ness can be understood.
International leverage
No surprises, leverage needs also to be international. Funky Inc. is a global corporation. But global does not necessarily mean big. Midget multinationals – like Legshow – are already all around us. The next time you go to the dentist, ask if you can keep the slurp, the disposable saliva sucker. Take a look at it. There is a 50 percent chance that it comes from a division within the Swedish company Bergman & Beving. This unit holds a 50 percent global market share in the slurp industry. How many employees does it have? It
has 85. If you are one of 85 people at a company with a 50 percent worldwide market share, you can really feel that you work in an international organization. Do all 416,000 employees at Siemens feel that way?
While globalization is here, it is often not readily recog- nized in the organization of firms. Although most companies access global markets through exports, and many have their assets internationally dispersed in the form of foreign subsidiaries, few have managed to build global
administrativestructures and systems.
We also see clear differences across geography. To the typical US multinational, foreign usually equals marginal. Well-known international companies such as Microsoft and Intel still generate more than 70 percent of their profits at home.34 At many US firms, non-US business is still rele-
gated to a box in the organizational chart called ROW (Rest of the World). At the traditional Japanese multinational, foreign equals different. Critical decisions are mostly made in Japan, by the Japanese.
But for many European multinationals, and particularly those from small countries such as Sweden, Finland, Holland, and Switzerland, foreign has always equaled “most of it”. Early on, these companies had to come up with ways and solutions to tackle global challenges. The result is usu- ally that the role of headquarters is not as pronounced. Percy Barnevik has described ABB’s HQ as the place where the mail arrives before important letters are faxed to wherever he may be. These companies have many global centers of differ- ent kinds dispersed throughout the world. So if you want to learn more about managing across borders look to European firms such as Philips, Electrolux, Nokia, Heineken, Unilever, TetraPak and Nestlé, rather than Chrysler or Mitsubishi.
And then there is the fourth and most important stage of globalization – attitudes. No company we have ever come across is truly global in attitude. Home-country standards are often
applied relatively uniformly. Key persons usually come from the same country. Products are mostly developed at home with the requirements of the local market in mind. The typical multinational is still parochial and ethnocentric.35 Foreigners
are often regarded as strange. Or, as the Dutch expert on cross- cultural management Fons Trompenaars puts it, “Understanding culture still seems like a luxury item to most managers.”36 Letting one of these managers loose in another
culture is like inviting an elephant to dance in a china store. Yet, only when we have become truly global in attitude can we reap all the other benefits of funkiness. To succeed, we need to move from conflict to reconciliation.37We’re not
saying that it is easy to work in a global organization. Differences in culture and languages and large geographical distances provide demanding challenges. There will be
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