Process Thinking

7/29/2019 Process Thinking

1/22

The Return ofProcess Thinking

Making Business

Processes ManageableThe Principles ofScientific Management

ManagementCultures

Why American Businessis That Way

Li & Fung:Confucius MeetsJohn Wayne

Managing a Danish (?)

Bicycle Team

GlobalInterdependence

From Globalization

to InterdependenceAdapting to Change

Fall 2001CSCWORLD

I N S I D E

26 MBAs,Managers,and Change:An Interview with Henry Mintzberg

28 Findings / Getting Smart

30 In Practice / Building a Customer-FriendlyTelcoFast Putting the Internet in Space

36 Review/ Nextby Michael Lewis

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W

With the rest of the world, we watched in horror as terrorists attacked the World Trade Centerand the Pentagon on September 11. This issue was being laid out at the time of the attacks, so it

does not speak directly to the concerns that they have raised. We plan to examine those concerns

in future issues. We are grateful that CSC employees in the targeted areas escaped unharmed.

We mourn the loss of those who were not as fortunate.

hat is good management? What makes a good manager?

These are questions every business magazine tries to address, and we took a

couple of different approaches to them in this issue.

One approach was to go to Henry Mintzberg, the McGill University

professor whose unconventional thinking about management has been getting

increased attention in recent years. He says good managers are not the super-

heroes of business best-sellers. Rather, they are people who have the intuition,

good judgment, and sense of context that come from a deep knowledge oftheir business.

Thinking about context also led us to Charles M. Hampden-Turner

and Fons Trompenaars, who look at the impact of national cultures on business

management. The first of three articles on management cultures is an excerpt

from their book,Building Cross-Cultural Competence. Harvard Business School

Professor F. Warren McFarlan explains how two Harvard-trained brothers went

back to China to modernize their old family company; and Tour de France

winner Bjarne Riis tells us how he manages an international bicycle racing team.

One of the biggest management challenges of recent years was

e-business. In the lead article, Howard Smith, CSCs chief technology officer for

Europe, and Douglas Neal and Lynette Ferrara of CSCs Research Services, explain

why it was so difficult to get e-business right and how it can be made easier.

The answer lies in managing business processes within and across companies.

Then there are those events that are well beyond the scope of

ordinary business management. Kenneth S. Courtis, vice chairman of Goldman

Sachs Asia, discusses the growing interdependence in the global economy.

Theres not much any single company can do about the global economy,

but James Cook, president of CSCs Financial Services Group, tells us how

companies usually react to macroeconomic change.

Finally, we look back at Frederick Winslow Taylor, one of the first

management gurus. His 1911 book on business processes shows just how muchour thinking has changed in the last 90 years.

In this issue, we also look ahead at smart technology, show how

NASA can benefit from putting the Internet in space, see how a business process

approach got a telco startup off to a fast start in the UK, and review Michael

Lewiss latest book.

This is only the second issue of the new CSC World, and wed like

to know what you think. Nearly all the response so far has been positive, and we

want to keep on making our readers happy. Drop us a line at [email protected],

and visit us on line at csc.com/aboutus/publications.

Bob Olivier, Publisher

IN T HI S ISSUE

CSCWORLD


3/22

features

THE RE TU RN O F PROCESS THINKING

Making Business Processes ManageableHOWARD SMITH, DOUGLAS NEAL,AND LYNETTE FERRARRAE-business turned out to be harder than anyone thought. Thats becausebusiness still has trouble managing business processes. Thats about to change.

The Principles of Scientific Management FREDERICKWINSLOW TAYLOROne of the first management gurus did some early thinking aboutbusiness processes in this 1911 book.

MAN AGE ME NT CULTURESWhy American Business is That WayCHARLES M. HAMPDEN-TURNER ANDFONS TROMPENAARSThe role of managers is increasingly to manage diversity per se, whateverits origins in culture, industry, or discipline. An excerpt fromBuildingCross-Cultural Competence: How to Create Wealth from Conflicting Values.

Li & Fung: Confucius Meets John Wayne F. WARRENMCFARLANTwo Harvard-trained brothers bring the family business, founded in theQing Dynasty, into the Internet age.

Managing a Danish (?) Bicycle Team BJARNE RIISHow to manage a racing team whose members speak several differentlanguages and are seldom in the same place at the same time.

GLOBAL INTERDEPENDENCE

From Globalization to Interdependence KENNETH S. COURTISGlobalization is the word everyone uses to describe whats going on in theworld economy. But its actually something broader and more complex.

Adapting to Change JAMES COOKIts always been beyond the capability of companies or industries to affectthe speed and breadth of macroeconomic change. How do they deal withit when it happens?

Computer Sciences Corporation

CSCWORLD

Fall 2001 Volume 1 No. 2

contributors

3

First HandIn an age of grand theory, HenryMintzbergs unconventional wisdomabout the actual job of managing isbeginning to attract more attention.

FindingsA LEADING EDGE FORUM REPORTHere are five smart quotients tohelp you make sense of the newsmart technology.

In PracticeBuilding a Customer-Friendly TelcoFastVANESSA REED How a startup telco got off toa fast start with a company built to last.

Putting the Internet in SpaceEDWARD CRISCUOLO, KEITH HOGIE, RON PARISENASA is experimenting with Internet protocolsas a way to reduce the cost of space missions.

Book Review ROBERT MUTCHIn Next: The Future Just Happened, Michael Lewissays the kids are taking over. But are they?

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departments

JAMES COOKis president of CSCs Financial Services Group.

KENNETH S. COURTIS is managing director and vice chairman of Goldman

Sachs Asia. He also lectures at Keio and Tokyo universities, and is a visiting

professor at the Stockholm School of Economics. He has an MBA from the

European Institute of Business Administration in Fontainbleau, France,

and a PhD from the Institute of Economic and Political Studies in Paris.

EDWARD CRISCUOLO, a CSC engineer, is the backup technical lead on NASAs

Operating Missions as Nodes on the Internet project.

KEITH HOGIE, a CSC engineer, is the technical lead on NASAs Operating

Missions as Nodes on the Internet project.

CHARLES M. HAMPDEN-TURNER is senior research associate at the Judge

Institute of Management Studies, Cambridge University. He also is director

of research and development of the Trompenaars-Hampden-Turner Group,

a cross-cultural consulting and training company based in Amsterdam.

He has a DBA from Harvard and has written 15 books. He is a winner of

the Douglas McGregor Memorial Award.

F. WARREN MCFARLAN is the Albert H. Gordon professor of business adminis-

tration at Harvard Business School, and senior associate dean and director of

the schools Asia-Pacific Initiative. He also sits on CSCs board of directors.

DOUGLAS NEAL is a research fellow at CSC Research Services.

RON PARISE, a senior scientist at CSC, was a payload specialist on the space

shuttle Columbia in 1990 and on the Endeavour in 1995. He is on NASAs

Operating Missions as Nodes on the Internet project.

VANESSA REED is CSCs manager for the ipsaris/Easynet account.

BJARNE RIIS is manager of the Danish professional cycling team, CSC-Tiscali,

which finished 18th in this years Tour de France. A professional cyclist since

1986, Riis won the Tour de France in 1996 and the World Cup in 1997.

HOWARD SMITHis the chief technology officer for CSC in Europe.

He also is co-chair of the Business Process Management Initiative.

FONS TROMPENAARS is founder and president of Trompenaars-Hampden-

Turner Group, an intercultural management consulting company based in

Amsterdam. He has a PhD from the Wharton School at the University of

Pennsylvania and is the author and co-author of several books. He is a

winner of the American Society for Training and Developments International

Professional Practice Research Award.

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CSCWORLD

K. PETER MANERIVice President,

Corporate Communicationsnd Marketing

ROBERT D. OLIVIERPublisher

ROBERT MUTCHManaging Editor

REDSPRITE MARKETING INC.Graphic Design

EDITORIAL BOARD:F. Warren McFarlan, Nicholas Morgan,Howard Smith

Editorial Office:170 Fairview Park Drive

Falls Church, Virginia [email protected]

ubscription Office:

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Computer Sciences Corporationll rights reserved. Reproduction without permissionom Computer Sciences Corporation is prohibited.rinted in the USA.


4/22

It must change, because shareholders

still expect companies to fulfill the

promise of e-business. Companies are

under pressure to perform better,

faster, to do more with less, and to be

super pleasing to customers. This

means changing the way they manage

their business processes, allowing them

to innovate around their own strategic

processes while simultaneously collab-

orating with partners and customers.

WHY SO DIFFICULT?

Many companies tried to make their

business processes more manageable

10 years ago, by reengineering them.

At the time, reengineering typically

meant designing a new process, then implementing it through

a one-time systems and organizational change program.

These efforts were more about redesigning processes than

about making those processes easy to change and combine

with those of partners. This also was the problem with ERP

and other packaged solutions that emerged later. These

packages implemented best-practice processes, but did so by

embedding business processes in the software applications

that supported them. These solutions had all the flexibility of

wet concrete before they were installed and all the flexibility

of dry concrete after installation.

Achieving process collaboration inside the enterprise has

been difficult enough. Getting processes to collaborate across

the networked enterprise is far harder. B2B is an attempt to

create the networked enterprise from the outside in.

What has surprised everyonein the last few years is how

challenging it has been toactually do e-business. One of

the reasons why this is so is that

companies have found it difficult

to manage their business processes,

especially when they stretch

across multiple systems, software

applications, companies and

countries. Thats about to change.

4

BY HOWARD SMITH, DOUGLAS NEAL, AND LYNETTE FERRARA

MAKING BUSINESSPROCESSES MANAGEABLE


5/22

Not all integration problems

are technical. Collaboration

requires sharing processes that

once were proprietary, and this is

not an easy step to take. But if

companies are under pressure to

be better, faster, and cheaper, they

will have to do only what they do

best. Whatever a company doesnt

do well has to be done by some-

one else.

If commerce is to be truly

collaborative, the underlying busi-

ness processes must collaborate,

too, both within and across firms.

This must be achieved at the

business level and from the top

down, leveraging existing systems

in the enterprise. That is, collaboration must start from the

business purpose, not the technical details.

WHAT IS NEEDED

What business needs is not a one-time fix but a connected

systems environment that can flex and recombine as

required by changes in the market. Most companies now

want more control over their own processes, more interaction

between their processes and those of their partners and some

A startup telco in the UK got

started in record time by using

a business process management

approach to building its new

system. That system included

applications from 12 vendors,

some of whom estimated that integrating all the pack-

ages would require 14 months. CSC completed the job

in half that time.

The short development time was made possible by

building a business process engine into the architecture.

The key business processes were extracted from the

component applications and migrated into that engine.

This procedure allowed business processes to be

configurable by a drag-and-drop interface without

being coded into the applications.

The focus on process meant that developers did not

have to integrate the component packages at every level.

They forged links into the packages only at the functional

level, to expose them to the business process engine.

That meant developers didnt have to integrate the

applications user interfaces, reporting mechanisms, or

databases. They used one single user interface across all

packages, an interface that has the brand of the client,

not the application vendor. Extracting business processes

meant less integration and less time for development.

This was top-down development, starting with

the business processes themselves rather than with the

applications that support them. It puts business

processes back in the hands of business users instead

of the IT department.

KING BUSINESS PROCESSES MANAGEABLE

and the connections between data

sets in different applications became

important to the CEO, CFO, and

functional units, it became obviousthat data should be managed outside

of the application architecture.

By allowing a company to manage its data apart from the

applications that use it, the DBMS supports a variety of data

models and data management tasks. Today, no one would

think of building a new system without a DBMS. The IT

industry is largely founded on the DBMS and related capabilities.

B2B participants may have informal

designs for the processes they need

to implement, but as they refine

those designs they also have to

change the technical implementa-

tions that support them. This may

be possible in simple cases, but in

the more complex cases of supply

chains, the project may never be

completed. Upgrading applications

or adding new suppliers or business

units can cause the technical integration activities to escalate

out of control.

In the networked enterprise, collaboration is not restricted

to any one process domain. Collaboration is now 360 degrees,

going on at all points on the compass. This creates a many-to-

many integration

task, and existing

tools and tech-

niques simply are

not up to the job.

IS departments

often try to develop

business processes

by performing

bottom-up techni-

cal integration, stitching together systems components that

never were intended to work together at the business level.

They soon find that these projects denude their budgets

and that delivery time scales are often unacceptable to the

business managers.

control over and monitoring of processes performed on their

behalf by partners. Firms are also seeking to expose discrete

business competencies as processes they can sell to others

or commercialize through channel partners. To do all this,

firms need to understand the processes that underpin their

core business competencies. In short, they need a business

process management capability, not a new suite of

enterprise applications.

The situation is similar to the period before the invention

of the relational database management system. Data used to

be embedded in applications. As the volume of this data grew

76

f commerce is to be truly

ollaborative, the underlying

usiness processes must

ollaborate, too, both

within and across firms.

P R O C E S S T H I N K I N G

Building up from the top down

What business needs isnot a one-time fix but a

systems environment that

can flex and recombine

as required by changes

in the market.


6/22

BPMI is a non-profit organization that empowers

companies of all sizes, across all industries, to develop

and operate business processes that span multiple

applications and business partners, behind the firewall

and over the Internet. The Initiative's mission is to

promote and develop the use of business process

management (BPM) through the establishment of

standards for top-down process design, deployment,

execution, maintenance, and optimization. BPMI

develops open specifications, assists IT vendors for

marketing their implementations, and supports

businesses using BPM technologies. CSC is co-chair

of the BPMI.

For more information, go to www.bpmi.org.

Business Process Management Initiative

9

Its time we did the same thing for

business processes.

One of the key enabling

technologies is Business Process

Modeling Language (BPML). The

first draft of BPML was developed

by a software startup called Intalio,

which worked closely with CSC

and other founders of the Business

Process Management Initiative

(see sidebar). The new language

which, like SQL, has a strong

mathematical foundation is a

standard way to represent any

business process. The new founda-

tion is designed to support process

management, not data management,

and new process-aware applications

will be built upon it. Such applica-

tions will be able to manipulate

business processes as easily as

todays applications manipulate data sets. The processes

they support will be reliable, transactional, and distributed,

and will allow collaboration between processes designed

independently by different organizations.

Strangely, the design of a language like BPML had not

been attempted before. Although other process modeling

CEOs never asked for applications in the first place.

When CEOs speak about business processes, they equate

them directly to their companies business objectives.

The processes literally define a companys competitive

advantage and market differentiation. The last things

CEOs want to hear about are standard processes

supported by standard applications that are

available off the shelf to their competitors.

Even where applications are aligned

with enterprise goals, processes

are ingrained within the software,

inaccessible to change and

unable to be integrated with processes in other applications.

The connection with business objectives means that

business processes are complex, unique, numerous, and con-

stantly evolving.

The complexity of

the processes

drives complexity

in the technical

infrastructure that

delivers process

management. An effective business process management

system will have to support the great diversity of business

practices with a foundation as strong as that of the DBMS.

A PROCESS LANGUAGE

The first step is to make processes explicit by abstracting

them from application software. This is hardly new. Decades

ago, operating systems were created by abstracting memory

management, file access, and graphical user interface from

applications. Database management systems removed both

the management of data and the management of the schema.

8

KING BUSINESS PROCESSES MANAGEABLEP R O C E S S T H I N K I N G

pricing plan. They will sit with

business staff to design, test, and

deploy new business capabilities.

They will do this by orchestrating

fine-grained services and rules to

produce new business capabilities.

When processes fail to perform, thebusiness process architect will sit

with the participants in the process

to review what each needs to do

basedon the data, metrics, and

analytics from the process execution.

To be effective, these new

business process architects will

need deep understanding of their

company. This means that firms

will have to grow their own.

Developing these new business

process architects will require

strong, business-oriented

leadership by the IT departments. The payoff for this effort will

be the ability to deliver on the vision that grabbed management

attention a decade ago with reengineering.

Business processes that areingrained within software

are inaccessible to change.

languages existed, none were designed with the objective of

supporting an enterprise-scale, top-down process manage-

ment capability that could leverage open systems standards

and interoperate across organizational boundaries.

BPML is a business-oriented language designed for top-

down deployment in a process management infrastructure

that leverages existing enterprise and B2B-convergent

standards. It supports dynamic collaboration among partners,

and is more expressive than the process modeling supported

by traditional software engineering paradigms.

REENGINEERING REDUX

Process management is heralding a renaissance in

reengineering, process thinking, and organizational design.

This renaissance is not being driven just by technical

innovation. Just as in the first wave of reengineering in the

early 1990s, tinkering with existing ways of doing business is

not enough. Responding to these new challenges with this

new technology will require two types of people: business

process architects and project managers.

Business process architects will operate at the level of

business concepts, such as implementing a new long distance


7/22

Americans have been very successful in

creating wealth. But they have done that within

a business culture that is different from those

of other countries.

We explored these differences by asking

business managers 46,000 managers from

more than 40 countries a series of questions

designed to reveal the diversity of values. We

measured these values along six dimensions:

universalism-particularism, individualism-

communitarianism, specificity-diffuseness,

achieved-ascribed status, inner vs. outer

direction, and sequential and synchronous

time (see sidebar, page 12).

In the questions we asked our sample of

managers, we presented them with dilemmas

that pitted one value against another. But the

relationships between the two values in each

dimension also can be seen as circular, as com-

plementing as well as contradicting one another.

The fashionable name for this circular thinking

among the business consulting community is

cross-cultural competence. This is what we are

trying to illuminate: the capacity for creating

wealth through reconciling cultural dilemmas.In this article, we will explore only two of the

six cultural dilemmas, univeralism-particular-

ism and individualism-communitarianism.

UNIVERSALISM-PARTICULARISM

Suppose youre riding in a car driven by a

close friend. He hits a pedestrian. You know he

was exceeding the speed limit. You also know

that you are the only witness. If you testify

under oath that he was not exceeding the speed

limit, you will save him from serious conse-

quences. What does your friend have a right

to expect from you?

a. He has a definite right as a friend to

expect you to testify to the lower speed.

b. He has some right as a friend toexpect you to testify to the lower speed.

c. He has no right as a friend to expect

you to testify to the lower speed.

More than 75 percent of American managers

answered b or c; fewer than half of Japanese

and French managers gave the same answers.

Religion may help explain these responses. Of

the top 10 universalist countries, all but two

Ireland and Pakistan are stable democracies

and Protestant. Catholics are, on the whole, less

universalist, and Buddhist countries are more

particularist still. This may be why France and

Japan are at roughly the same place on the

scale as Portugal, Belgium, and Singapore.

One historical reason why American

business managers are universalist is that the

United States itself was created as a New World

or universe, complete with a Declaration of

Independence and a written constitution.

Immigrants to the United States have voluntarily

relegated their ethnic and national identities to

a commitment to a new belief system.

What does this mean for business? The

universalist culture accepts and serves all

comers equally, whether they want citizenship

or hamburgers. Universalism is crucial to mass

manufacturing and mass marketing. The danger

is that quantity is seen as a good thing in itself.

Benchmarking, the comparative measurement of

11

WHYAMERICAN BUSINESS

IS THAT WAY.

BY

CHARLES M. HAMPDEN-TURNERAND FONS TROMPENAARS

AND WHYBUSINESS IN OTHERCOUNTRIES IS NOT.

America has contributed disproportionately to the totalvolume of business studies. So it is crucial to ask:

Do these business studies tell us how to create wealth

anywhere in the world, or do they tell us only how

wealth has been created in America?

M A N A G E M E N T C U L T U R E S


8/22

HY AMERICAN BUSINESS IS THAT WAY

Who is to define a particular form of achieve-

ment as important? One solution is to let

different activities compete in the market for

popularity. Football, boxing, and basketball

are important because their fans make these

sports rich. In achieving societies, markets

define what is valuable.

If markets do much of the ascribing in

achieving societies, achievement can do the

same in ascriptive societies. The French lyce

and the Japanese high school, for example,

are notoriously competitive and achievement-

oriented, hence examination hell. But these

countries bring competitive achieving to an end

relatively early in life. Once you are admitted

to agrand cole or a prestigious Japanese cor-

poration, your ability to achieve competitively

has been discovered and certified. From then

on you are guaranteed status in return for

using your abilities to serve the corporation,

its customers, and the nation at large.

Taken too far, though, ascribed status can

become laughably absurd. In Britain, the habit

of elevating the well-bred was memorably sati-

rized on television as the Race of the Upper-

Class Twits. The focus on achievement also can

be taken too far, allowing winners to eclipse more

creditable performances that did not quite win.

Insisting that varying skills be rank-ordered on

some arbitrary scale best-sellers, for example

places serious biography in the same categoryasHow to Erect a Teepee in Ten Minutes.

VARIED CORPORATE CULTURES

In the real world of business, the cultural

dimensions examined above do not exist in

isolation they interact with each other. We

can illuminate these interactions by crossing

the two axes and creating four quadrants of

corporate culture.

A majority of the worlds corporations are

family-owned, and the family business culture,

on the lower left, is represented by le patron,

who was born into his position. China,

Singapore, Hong Kong, and Thailand produce

the most family-owned companies.

The Eiffel Tower culture also depends on

people in key roles, but has a strong rule orien-

tation. People in these roles may have achieved

in the past, at somegrande cole for example,

but their current authority depends on their

formal position, on their ascribed expertise

rather than on recent successes. This business

culture is found in many countries but is identi-

fied with France and Germany. Both countries

put great stress

on formal

education but

thereafter rely

on an expert

culture, whichtends to be

ascriptive and

rule-bound.

The guided

missile culture

is oriented around teamwork and project teams.

Teams are rule-oriented, but only insofar as

they are trying to achieve set tasks, to generate

new products and systems. NASA pioneered the

use of project groups.

13

the way you really are, even if you dont

get things done. Sixty percent of American

managers disagreed, putting them at the

far achieved end of the status scale,

slightly ahead of Canadians and Australians.

Once again, Japanese and French managers

were on the opposite end. Seventy percent of

the Japanese and 65 percent of the French

managers agreed with the statement.

America is among the highest in achieve-

ment orientation of any national business

culture for historical reasons. An immigrant

nation has great difficulty ascribing status to

persons of varied national origins. (Who cares

that you came from Lithuanian nobility?)

What matters is not where you came from but

what you have done recently and what you

can contribute now. While ascribed status

does not travel well, achieved status can be

demonstrated in the New World for all to see.

Even in an achieving society it is still neces-

sary for individuals to say at some point, This

is worth achieving, but that is not so important.

America is high inachievement orienta-

tion. What matters is

not where you came

from, but what you

can contribute now.

Achieved Status

Incubator Guided Missile

Particular Universal

Person Rules

Family Eiffel Tower

Ascribed Status

Universalism (rules, codes, laws, generalizations)

USA, Scandinavia, Switzerland, Australia

ndividualism (personal freedom, competitiveness)

USA, Canada, Scandinavia, Switzerland

Specificity (atomistic, reductive analytic, objective)

USA, UK, Canada, Netherlands, Australia

Achieved status (what youve done)

USA, Canada, Australia, UK, Sweden

nner direction (personal conscience and convictions)

USA, Canada, France, Australia, UK

Sequential time (race along a set course)

USA, India, Russia, Australia

Particularism (unique relationships, special circumstances)

Russia, China, India, Belgium, Japan, France

Communitarianism (social responsibility, cooperation)

India, Japan, France, China, Singapore

Diffusion (holistic, elaborative synthetic, relational)

China, Japan, India, Singapore

Ascribed status (who you are)

Russia, Japan, China, Belgium, Netherlands

Outer direction (examples and influence from outside)

Russia, China, India, Japan

Synchronous time (a dance of fine coordinations)

Hong Kong, China, France, Sweden

Six Dimensions of Cultural Diversity

Universalist cultures excel in massmanufacturing and mass marketing.

Particularist cultures celebrate

what is unique and incomparable.

12


industrial processes, tends to assume that the

major challenge is doing things right as opposed

to doing the right things.

Particularist cultures celebrate what is

unique and incomparable, such as French

cuisine and couture. Business in these cultures

excel in customization. Products specially made

for certain customers are an important source

of prototype devices. Taken too far, though,

particularist cultures find that intimidation

and conspiracy become more important than

sanctions of legality. Extreme examples are the

Sicilian and Russian mafias.

ACHIEVED-ASCRIBED STATUS

To place managers on this dimension, we

asked them if they agreed or disagreed with this

statement: The most important thing in life is

to think and act in the manner that best suits


9/22

1514

Finally, the incubator culture is achieve-

ment-motivated but oriented to the particular

genius of the entrepreneur or innovator.

Companies in this culture typically are small

startups in Silicon Valley, Taipei, Bangalore,

Cambridge, and so on. The United States, the

UK, and northwest Europe produce most of the

guided missile and incubator cultures, although

Taipei and Bangalore have been at the intersec-

tion of family and incubator cultures.

MEASURING TRANSCULTURAL COMPETENCE

We have just seen that in the real world of

business, corporate cultures are not one-dimen-

sional but are the product of interactions

between different cultural values. It is also true

that business managers do not act

according to only one value.

Our questionnaire gave managers

a straight either/or choice between

two ends of a continuum. Under

normal circumstances, though,business managers dont have to

make such stark choices. Thats why our new

questionnaire gives five choices instead of two.

Respondents can still choose one value and

reject the other; but they can also choose

various combinations of the two values.

The traffic accident question, for example,

now offers these choices:

a. There is a general obligation to tell the

truth as a witness. I will not perjure myself.

b. I will tell the truth. But I owe my

friend an explanation and social

and financial support.

c. My friend comes first. I will not

desert him before a court of strangers

for an abstract principle.

d. I will support my friend whatever

his testimony. Yet I would urge him

to tell the truth.

e. I will testify that my friend was driving

a little over the speed limit but that

it was difficult to read the speedometer.

After administering the second questionnaire to

American, Canadian, and European managers,

we discovered that there is a capacity to deal

with and reconcile values in general. Cross-

cultural competence as measured by our

questionnaire correlates strongly with extent

of international experience and high positive

evaluations via 360-degree feedback.

Interestingly, there is a negative correlation

with assessed technical competence, which

warns us that manipulative logics may impede

us from relating to living systems.

But and here is the surprise the

transculturally competent do not necessarily

put their own cultural stereotype ahead of

foreign values in a logical sequence. For example,

American transcultural competents are as likely

to argue that good communities and teams

generate outstanding individuals as thereverse proposition.

The role of managers is increasingly to

manage diversity per se, whatever its origins in

culture, industry, or discipline. If there is a way

of thinking which integrates values as opposed to

adding value, the implications are far-reaching.

This article is based on our book, Building Cross-CulturalCompetence: How to Create Wealth from Conflicting

Values (New Haven: Yale University Press, 2000).

LI & FUNG:

CONFUCIUS MEETS JOHN WAYNE

BY F. WARREN MCFARLAN

Harvard did not teach Victorand William Fung how tomake a global company outof the family business.

They did that on their own, after earning a

PhD in economics and an MBA, respectively.

But their management training came in handy

once the brothers had successfully rebuilt the

company their grandfather had founded almost

a century ago. The Li & Fung Trading Co. now

combines the business cultures and practices of

old China and the modern West.

HY AMERICAN BUSINESS IS THAT WAY

Cross-cultural competencecorrelates strongly with

extent of internationalexperience, but negatively

with technical competence.



10/22

Internet. When the telephone

came along, the Fung brothers

grandfather was shocked.

But he adapted, just as their

father adapted to the fax. Now

the company has adapted to the Internet.

Unlike some other old-line companies, though,

Li & Fung never entertained the idea of

creating a dot-com division and spinning it

off. To start a pure Internet division is asabsurd as starting a fax division, a division

that exclusively uses faxes, Victor Fung said.

What the company did do was add techni-

cal directors to its board, people who can keep

Li & Fung abreast of technological changes.

Anything to do with information technology

is crucial to us, William Fung said. The

Internet is just another technology that

affects the way information is transferred.

The brothers also had no fear of being

disintermediated by B2B exchanges. Those

Internet trading platforms were, as Victor Fung

put it, a molecule thick and a mile wide,

based on many depthless relationships. The

brothers are convinced that a smaller number

of deep and lasting relationships will ensure

that their company lasts another 100 years.

Victor Fung captures this approach in one

phrase: Think like a big company, act like a

small one.

This article is adapted from Li & Fung: Beyond

Filling in the Mosaic, 1995-1998, #9-398-092,

by Anthony St. George, research associate, under

the supervision of Carin-Isabel Knoop, director,

research and development, executive education,

and Professor Michael Y. Yoshino; and Li &

Fung, #9-301-009, by Fred Young, senior

researcher, under the supervision of Professor

F. Warren McFarlan.

companies. These dedicated teams

of product specialists focus on the

needs of specific customers and

are grouped under a corporate

umbrella that provides centralized

IT, financial, and administrative

support from Hong Kong. This

decentralized corporate structure allows

for rapid reaction to seasonal fashion shifts.

The term little John Waynes expresses

very well the drive and independence ofLi & Fungs managers worldwide.

These relatively independent, customer-

focused divisions are now the companys basic

operating units. We may be a Hong Kong com-

pany with a Chinese view of life, said William

Fung, but we do not ram notions best suited to

Hong Kong down a Thais throat, for example

we tend to let our foreign operations run to the

best local practices.

OLD VALUES

For all its business-school methods,

Li & Fung is very much a Chinese company.

Li & Fung is a company rooted in Chinese

values, said Victor Fung. We do not retrench

an employee. In fact we retain some of the

retirees as consultants. Furthermore, we do

not believe in the trappings of titles and the

attendant hierarchy; we treat employees of

Li & Fung as family.

Another old company value is the nurturing

of deep relationships with a small number of

customers. This strategy had always served the

company well, and the Fung brothers believe

that it will continue to be successful. The old

relationships, the old values, still matter, said

Victor Fung. It makes a difference to suppliers

when they know that youve been honoring

your commitments for 90 years.

It may have been this outlook that explains

why Li & Fung did not feel threatened by the

17

A POSTER-CHILD FOR SHAREHOLDER VALUE

Li & Fung was founded in 1906 as a bilin-

gual broker to match Chinese manufacturers

with English-speaking buyers. By the 1970s,

when the Fung brothers returned from the

United States, it was clear that those days

were over. Li & Fung still calls itself a trading

company and it still is a middleman between

mostly Asian manufacturers and Western

buyers such as Abercrombie & Fitch,

American Eagle, and Levi Strauss.

But now, by managing the entire produc-

tion process from raw materials to finished

product, the company meets its customers

needs by customizing their supply chains.

With 48 offices

in 32 countries,

Li & Fung has a

global sourcing

network that

allows it to

provide value-

added services

across the entire supply chain in a border-

less manufacturing environment.

A down jackets filling, for example,

might come from China, the outer shell fabric

from Korea, the zippers from Japan, the inner

lining from Taiwan, and the elastics, label,

Velcro, and other trim from Hong Kong.

The garment might be dyed in SouthAsia, stitched in China, then sent back

to Hong Kong for quality control,

packaging, and delivery. This supply-

chain customization shortens order

fulfillment, allowing clients to reduce

inventory costs.

Li & Fung does not own any of the

boxes in the supply chain, said Victor

Fung. Rather, we manage and orches-

trate it from above. In recent years,

however, the company has begun to improve

operations by controlling or owning strategic

links in the chain. In some cases, Li & Fung

offered raw material sourcing. In the past,

when clients placed an order, Li & Fung

would identify the manufacturer best suited

to supply the goods, and that factory would

source its own raw materials. But Li & Fung

understood its clients needs better than its

manufacturing plants did. By offering raw

materials to its suppliers, the company

ensured better quality control and saved

money for manufacturers by buying larger

and thus more cost-effective amounts of

raw materials.

The transformation has been very success-

ful. In 2000, Li & Fung outperformed the Hang

Seng Index by more than 75 percent. The

South China Morning Post said the company

could be a poster-child for shareholder value.

LITTLE JOHN WAYNES

While modernizing the old family firm,

the Fung brothers tried to preserve the best of

what their father and grandfather had created.

That meant finding a way to combine a focus

on a few relationships the essence of the

old model with the management of large,

complex systems that was the core of the

new business.

The solution: Create small units dedicatedto serving one or a few customers, and have

them run by entrepreneurial executives called

little John Waynes. People who wanted to

run their own businesses turned out to be the

ideal Li & Fung employees. William Fung said,

We give them the resources, opportunities,

and protection against the downside, making

it more attractive for them to work for us.

Senior managers run 90 small, worldwide

management teams as separate and individual

16

Li & Fung is acompany rooted in

Chinese values.

The Fung brothershought B2B exchanges

were a molecule thick

nd a mile wide.



11/22

And I have to be sure that theyre the

right goals for the team. When Im sure I have

the right goals, then I go for them 100 percent.

AN INTERNATIONAL TEAM

One way that cycling is like business is

that its becoming more international. Team

CSC-Tiscali was founded as a Danish team in

1997 and has been made up mostly of Danish

riders ever since. But almost half the team

members are from other countries: France, the

Netherlands, Sweden, Spain, the United States.

Fortunately, I have a lot of experiencewith such teams. I have been on German,

Italian, French, and other national teams,

which had riders from all over Europe. The

language differences do present some manage-

ment difficulties, but communication still isnt

a big problem. Everyone speaks some English,

so that tends to be the common language on

our team. Most of us speak more than one

language, too. I speak French, Italian, German,

and English, as well as Danish.

Language problems arent a big price topay for getting the best riders. Just like in

business, you dont want to settle for hiring

the top people in one country. You want to

hire the top people, period.

A TEAM THAT TELECOMMUTES

The riders on my team dont just come

from many different countries. They still live

in those countries. None of the teams top

riders lives in Denmark. Laurent Jalabert,

the team leader, lives in Switzerland. Michael

BY BJARNE RIIS

MANAGING ADANISH (?) BICYCLE TEAM

Is managing a cycling teamanything like managing in

business? Probably it is. If Iwant to get the best out of

my riders, I have to be very

clear about what my goals are.

19

King of the Mounatain Team CSC-Tiscalis Laurent Jalabert.



12/22

Sandstd lives in Spain, Tristan Hoffman in

Belgium, and Rolf Srensen in Italy. All four

riders participate in races around Europe and

train at home. Even I dont live in Denmark.

I live in Italy.

Unlike a football team, we cant meet on

the same practice field every morning. How

do I manage a team whose members arent

even in the same place at the same time for

much of the year? Computers. All the riders

have bicycle computers, which provide several

performance measures. After a rider finishes

a training session no matter what country

or time zone hes in he plugs his computer

into a PC and e-mails the data to me. The data

tell a lot about how riders are doing and how

they can improve their performance.

I introduced computers into the team

because Ive been using them for several

years and have had good results with them.

It takes some time to learn how to use these

computers the right way, but they allow us to

design very specific training programs.

STARS AND WARS

When I can, I bring the team together at

my home in Italy. Cycling teams have to be

very close. Bicycle racing can be like war and

the team members have to be willing to fight

for each other. They have to know they can

rely on each other. Every rider has a respon-

sibility to the team, and even the least experi-

enced riders have to know that the team can

fail if they dont meet their responsibilities.

A big part of my job is motivating riders,

building up a team spirit. I find that many

riders dont really know why theyre doing

what theyre doing. I want them to think

about that, to explain to themselves why

theyre sitting on a bike so many hours of the

day. I dont want them to do it just because

its what theyve always done. You shouldnt

enter a race just to win some money. It has to

be what you love doing. I try get riders to find

their own motivation, their own ambition.

The teams top riders have a big role in

keeping the team together, too. Laurent

Jalabert, our star rider, is a complete profes-

sional. They have more experience than the

younger ones and can give them valuable

advice and guidance. By sharing their

experience, they make the team stronger

and the team spirit better.

THE CHALLENGE

The challenge is to build a team that

works well together, and that has clearly

defined roles that still leave lots of room for

Bicycle racing is like war.Team members must know

they can rely on each other.

Bjarne Riis

A professional

cyclist since

1986, Bjarne Riis

rose steadily to

the top ranks of the sport. In 1997, he won

the World Cup in the Amstel Gold Race.

He won the 1996 Tour de France, in which

he wore the yellow jersey for 13 days and

won four stages. He also reached the podium

in the 1995 Tour de France, in which he

finished third and wore the yellow jersey

for a day. He was the first Danish cyclist to

achieve each of these triumphs. He also won

the Danish national championships in 1992,

1995, and 1996.

21

each riders talent and personality.

My job is to make the racing and training

program for the team. I work with my sports

directors to decide who goes to which race. One

week, we send a group of six riders to one race,

a group of eight to another race, while others are

training at home.

The next week it

will be different.

It changes all the

time, which is

why structure is

so important.

Without a struc-

ture, you cant make riders work together, for

each other.

Thats not easy, but I bring a lot of experience

to the job. Ive been a rider in the back of the

pack, Ive been a star, and now Im a manager.

My experience is my strength.

Ibring a lot of

experience to thejob. My experience

is my strength.

NAGING A DANISH BYCYCLE TEAM

Team CSC-Tiscali

This Danish bicycling team was founded

in 1997 and first competed in the Tour de

France in 2000. In the months following

that competition, the team went through

some dramatic ups and downs that led

observers to doubt it could even qualify

for the Tour in 2001.

First, a successful recruiting drive

attracted several experienced riders,

including French star Laurent Jalabert, one

of the top cyclists in the world. Then the

teams ability to pay those new riders was

thrown into doubt when its main sponsor

suffered financial setbacks and had

to withdraw its support.

The teams new manager,

Bjarne Riis, soon found two new

sponsors, Computer Sciences

Corporation and Tiscali, a leading European

Internet communications company. Then the

teams new star, Jalabert, fell from a ladder in

his home and broke three vertebrae.

Fortunately, the recuperative powers of

Jalabert and his teammates were strong

enough to overcome these setbacks. The

team not only qualified for the 2001 Tour

de France but Jalaberts performance in the

Tour ended all doubts about his recovery.

He won two mountain stages, earning him

the polka-dotted jersey that is awarded to

the King of the Mountains.

Jalabert finished 19th overall, 50 minutes

behind winner Lance Armstrong. The team

finished 18th, three hours and 17 min utes

behind Spanish team Kelme-Costa Blanca.

20



13/22

22

FROM GLOBALIZATION TOINTERDEPENDENCE

BY KENNETH S. COURTIS

Globalization is the wordeveryone uses to describe

whats going on in the world

economy. But I think its

something broader and morecomplex. Its the growing

interdependence between

countries around the world.

That interdependence is having a huge impact

on how we all live and interact. And its not just

the big countries that have an impact on the

small countries.

On a Monday afternoon in July 1997,

Thailand devalued its currency. Over the

next few months, that triggered a cascade of

devaluations throughout the emerging markets

that finally led to the implosion of Russia, the

collapse of the currency market in Brazil, and

started to shake the global banking system.

The Bankers Trust went

bankrupt and Long Term

Credit Management was

about to implode and

bring down major insti-

tutions on Wall Street.

It was only the very

quick footwork of global

central banks and mone-

tary authorities that enabled us to back off from

the edge of the greatest financial crisis since the

1930s. That crisis is over, but interdependence

with the vulnerability and potential volatility

it creates is still with us. France, Germany,

the United States, the UK all these countries

are generating huge net negative financial

balances. That means theyre increasingly

dependent on other peoples decisions to

finance them.

Who is making those decisions? Much ofthe financing of Western economies comes

from Japan. Thats no surprise. But China has

invested more than US$225 billion in the US

bond market. There are issues here that need

to be thought through very carefully.

JAPAN. In 1991, Japans debt to GNP ratio

was 51 percent. It made the rest of the world

look totally undisciplined. But today that ratio

is running at around 146 percent of GNP.

Theyve increased debt, government on-balance

sheet debt, by 100 percent of GNP in but a

decade as theyve tried to struggle with this un-

precedented, at least for Japan, economic crisis.

The off-balance sheet claims on the

Japanese state, by the most conservative

estimate, would be 150 percent of GNP, as well.

I think thats the government

statistic. John Maynard

Keynes once said there are

three types of lies. There are

lies we make by mistake,

those we make on purpose,

and there are government

statistics. We estimate that

the off-balance sheet claims

in the Japanese state are somewhere north

of 260 percent of GNP. Total bank loans,

132 percent of GNP as of the end of March.

Other forms of corporate debt bring the total

up to around five times GNP.

Today, its not justthe big countries that

have an impact on

the small countries.

Now, what if you had a client who had debt

that was five times sales? Thats what youve

got here. Someone might say it wouldnt matter

as long as interest rates are at zero, and short-

term Japanese interest rates are at zero. But

its not servicing your debt thats the problem;

its how you pay back that debt.

The core of the crisis is the Japanese

banking system. Last year, we estimated that

bad debt in the system was close to US$900

billion. Theres probably been US$100 billion

added to that since, which makes probably a

trillion dollars of bad debt. That works out to

about 20 percent of GNP. To give you a sense

of how big this is, the savings and loans crisis,

at its peak, was 2.8 percent of GNP.

Theres also a demographic problem. By

2020 Japan will have aged so much that it

will make Florida look juvenile in comparison.

Forty-three percent of the electorate will be

over 60. With this type of debt load, the

government will have to squeeze back govern-

ment spending quite aggressively. How will

they finance pensions, life insurance, and

health care?

But if you cut back spending that aggres-

sively, with this much debt, with an economy

this slow, and a financial sector this weak,

youre very likely to push that economy into

a huge recession. We saw what Thailand

generated. Imagine what this could lead to.

No country has had this much debt and

not seen a major devaluation. Even small

countries that get into this kind of trouble

create large international consequences.

This is the biggest financial crisis that weve

ever known, and its in the economy that

finances a very large part of the US funding

needs every day. We should be prepared for

it both the opportunities and the risks.

CHINA. China is going through a change

of another kind, the kind that happens only


14/22

24

M GLOBALIZATION TO INTERDEPENDENCE

once every 200 or 300

years. The Chinese

are dismantling the

state, going to a

market economy, and

catapulting themselves

into the 21st century.

These changes are so complex because

different parts of the economy are changing at

different rates. Much of the economy in that

country has operated the same way for 400 or

500 years. Theres also a part thats becoming

like that great industrial class that was created

in the West with the development of mass

production. At the same time, another part is

completely integrated in the latest technology.

For example, I was in Beijing recently,

talking with seven people who have created a

young biotechnology company. All seven have

doctorates from East Coast US universities, and

all had worked in US labs. Their company is

starting by doing subcontracting for the interna-

tional pharmaceutical majors. What they do is

hire their old professors as consultants, then

get those professors to give them their best

students. The students work for them for three

or four years, then go work in the United States

for five or 10 years. Then they go back to China

and keep this thing rolling.

Their ambition is to turn their company

into a hugely powerful research organization.

Their research will create breakthroughs, which

theyll license to international companies.

I asked them how they compete with

other companies that do the same type of

thing in the United States and Europe. They

answered that their cost structure is 16

times lower. They dont see any difference

between the quality of work theyre doing

now and the quality of work they were

doing when they worked in the best labs in the

top companies in the United States. But they

have a different cost structure.

But thats only part of whats happening

in China. On the sidewalk outside their office,

theres a guy whos laid out a tarpaulin to sell

garlic that hes carried on the train for two days

from his collective farm. The kind of change

China is going through is extremely complex to

manage. But its a country thats rolling ahead,

in good years and bad. Ten years ago the Chinese

economy was an eighth the size of Japans.

Today its one-fourth. It wouldnt surprise me to

see it double again in the next decade.

Were navigating in a world thats going

through incredibly complex change at all levels.

There are very big risks in the mid-term that

well have to turn our attention to very quickly

if were to prevent them from becoming huge,

destabilizing factors in the world economy.

POSTSCRIPT. The September 11 terrorist attacks

in New York and Washington have altered

substantially the short-term outlook for the

world economy. This year may show the slowest

global growth rate since World War II. But the

determination of governments to fight terrorism

and coordinate measures to revive growth will

support a sharper-than-expected recovery by

the second quarter of 2002. China, however,

still is a bright light. Because China is dependent

on domestic demand, it can expect better than

6 percent growth this year.

Companies have always had to adapt to marketchange. That was true before the era of global

economic interdependence that Ken Courtis

describes. It remains true when the changes that

swirl around a com-

pany can begin with

central bank deci-

sions made halfway

around the world.

And today, as Courtis

points out, even

decisions made in

small countries can

have global impact.

Its always been

beyond the capability

of any company or

industry to affect the

speed and breadth of

macroeconomic

change that includes currency and trade

instability, financial retrenchment, indecision,

and employment uncertainty. That always has

been the responsibility of those same centralbanks and of international monetary authorities.

The inability to affect either the fact or the

pace of change causes some companies to see

these worldwide events as overwhelming.

But others see those same events as presenting

new challenges and opportunities.

Companies tend to respond to change by

choosing one of three paths:

Expansionists will attempt to grow out of any

risk of slowdown by investing in technologies

that expand: distribution capabilities;

portfolios of products and services; and into

new market segments or geographical areas.

Acquirers will buy other companies that

extend their reach, increase their scale,

or expand their offerings.

Conservatives will cost-optimize and hunker

down. They will invest only where the bottom

line value can be justified in the current

climate of economic activity.

Whatever path a firm takes, it must strive

to make change an ally instead of an enemy.

To accomplish this end, the leaders of the enter-

prise must shape a resolute strategy defined by

speed limits. The speed limits will set the pace

of change and the expectations for results and

measurements. These will permit the organiza-

tion to evaluate its success or failure versus the

competition, and to make essential and frequent

mid-course corrections and adjustments.

The merit of this

approach is that it

builds a tolerance

for ambiguity into

organizations.Progress is not

for the faint-hearted.

It never has been.

Risks need to be

taken and IT invest-

ments need to con-

tinue. The substance

and strength of the implementation at each

company will be the measure of winners and

losers in this fast-paced environment.

Whatever path

a firm takes,

it must strive to

make change

an ally instead

of an enemy.

ADAPTINGTO

CHANGEBY JAMES COOK

G L O B A L I N T E R D E P E N D E N C E

China is going through a changeof the kind that happens only

once every 200 or 300 years.

Companiestend to respond

to change by

choosing one

of three paths:

expanding,

acquiring, or

hunkering down.


15/22

Teaching ManagementAgainst the Grain:

AN INTERVIEW WITH

Henry Mintzberg

enry Mintzbergs standing asne of the worlds most important

management thinkers was under-cored by two honors last year:

He received the Distinguishedcholar award from the Academyf Management, and placed seventhn theFinancial Timess list of theop 50 business gurus. According to

Management Todays guru guide,Mintzberg is hotting up fast.

Unlike many other gurus,Mintzberg isnt known for grandheory. His emphasis on the prac-ce of management was evident

n his first book, The Nature ofManagerial Work (1973). One ofhe findings of that book was that

managers spend most of their timeutting out fires, a job that isnt

made any easier by studyingeneral theories of management.

Although much of his writings against the grain of businessterature, Mintzberg has spent hisareer in business education. He

as been teaching managementt McGill University in Montrealince 1968, and is now Cleghornrofessor of Management Studieshere. He also is a visiting scholart INSEAD (the European Institutef Business Administration) inontainbleau, France.

In 1995, Mintzberg put hisriticism of business education intoractice by co-founding thenternational Masters Program inracticing Management (impm.org).

He and Jonathan Gosling of

Lancaster University in the UK,working with business schools inFrance, India, and Japan, createdthe IMPM as the next generationmasters program. He is no longerdirector of the program, but hes stillvery much interested in changing

business education. Hes working ona book titledDeveloping Managers,not MBAs.

CSC World: For a business schoolprofessor, you have been very criti-cal of the most popular businessschool degree, the MBA. What dontyou like about it?

Mintzberg: It trains the wrongpeople the wrong way for the wrongreasons. I dont think you can createmanagers in a classroom. You cantteach management to people whohave never been managers and

dont have much business experi-ence. So instead you teach themabout analysis and other functionsand they walk out thinking theyknow how to be managers.

CSC World: Do you mean thatbusiness schools are providing goodeducation but not the right kind?

Mintzberg: The MBA is goodtraining for analyzing business. If

analyzing business is what youregoing to do, then the MBA is a gooddegree to get. But managers donthave to be analysts.

Good management has to dowith good judgment and under-standing of context. Managers haveto be connected, in a sense. Theyneed to have a deep knowledgeof the business theyre in, andthey wont get that in a classroom.Learning the general principlesof management isnt much helpto people who have to managesomething in particular.

CSC World: And yet there areMBAs in management positions allover the world.

Mintzberg: Companies needmanagers. Organizations of all kinds

need managers,and businessschools tell

them where tofind them. TheMBA is seenas training formanagement. Socompanies hire

people with MBAs. Then they givethem jobs running things they dontunderstand. That goes on all over.

CSC World: Why is there such alarge management literature?Theres nothing like that for, say,high school teachers or engineersor politicians.

The MBA is good training foranalyzing business. But managers

dont have to be analysts.

26 27

Mintzberg:Theres now a cult ofmanagement. The

literature wasnt thatbig several years ago,but its grown enormously. Maybeas much as half of that literatureis very similar to self-help books.How to clean up your psyche, livea happy life. Probably most seriousmanagers dont look much at those

books. But a lot of unserious man-agers who nonetheless have quitea lot of influence do look at them.Theres a lot of good management

literature, too, but it doesnt offerquick fixes or self-help.

CSC World: Why has this literatureexploded the way it has?

Mintzberg: Im not sure why.One of the key things might bethe growth of business schools.Business schools werent verysignificant before 1965 or 1970. Buttheres been an enormous growthsince then. Theres also the obses-sion with finding heroic leadership.MBA programs are training heroes.But business doesnt need heroes.Business needs good managers.

CSC World: We keep hearing thatthe information economy orreengineering, knowledge manage-ment, the Internet will changeeverything. So far, not much seems

to have changed. Why do you thinkthat is?

Mintzberg: I think the notion thatwe live in this great age of change isa crock. Certainly there are thingschanging. Information technologyis changing. But some things arealways changing, and other thingsdont. We drive cars that still useModel T technology. We fly in air-planes that still use Comet technolo-gy from 1952. The French came upwith the metric system 200 yearsago, but America has yet to adopt it

and Britain has only sort of halfmade up its mind to adopt it. So youget in your cars and drive miles andmeasure gallons. We dont noticethe things that dont change.

CSC World: What about the riseand fall of the dot-coms? Wasnt thatan important change?

Mintzberg: The press certainlyhyped the dot-coms. The change ininformation technology was viewedas very dramatic and utterly differ-ent. But maybe it was just anotherone of the many changes that busi-ness always has to incorporate.

Suppose that architectural styleschanged. You wouldnt expect spe-cial companies to grow up becausethey have this new architecture.Thats nota perfectparallel,

but youget mypoint.The oldcompanieswouldntdie. Theyd adapt. We used tocommunicate by letter, then bytelephone, now by e-mail. These

were all changes in informationtechnology and business adaptedto all of them.

The hype was that the dot-coms were going to revolutionizeshopping, but all they really did wasrevolutionize ordering. Shippingwhat people order is no different.Sears has been doing it for decades.

CSC World: Will the increasingimportance of knowledge work

bring about a change in manage-ments role?

Mintzberg: It should, but I thinkits going in the opposite direction.Knowledge workers have to becoordinated, but they dont have to

be encouraged to put out energy.They already know what they haveto do and they dont need to com-municate with each other through asuperior. Knowledge workers needa management style thats engagedand connected. But managers are

becoming less engaged and lessconnected, which makes it hard forthem to deal with people who think.

Hewlett and Packard, forexample, set a different pattern forhow you manage knowledge work.So did Grove at Intel. But now whatyoure getting is a reversion to anoverseeing kind of managing, andI think its going to wreak havoc.

CSC World: Why?

Mintzberg: Because theres a trivi-alization of thewhole sense ofmanagement.Weve drivenout everythingthat makes agood manager intuition,connection,

context. People just float in and outwithout knowing what theyre man-aging. A great leader is supposed todo everything now.

CSC World: And yet the need toattract and keep talented employeesis still high on the business agenda.How should companies do that?

Mintzberg: By treating employeeslike human beings instead ofhuman resources. You dont have toempower people. If you treat themdecently, they empower themselves.Support your employees andencourage them, but otherwise

leave them alone to do their work.

Good management has todo with good judgment and

understanding of context.

Business doesnt needheroes. Business needs

good managers.

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irst Hand


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long as it stays within a

single domain of knowledge.Expert systems are programs

that capture the knowledge ina very narrow field and provide

expert solutions to problems inthat field. Examples are Big Blue inchess and AMOS, the CSC-designed

system that operates NASAs X-RayTiming Explorer satellite.

But maybe the fire making thesmoke is small. Or mostly burnt

out. Computers cant handlenuances like maybe and mostly they prefer yes and no. Fuzzy

logic was invented to allow comput-ers to handle such natural languageproblems. Antilock braking systems,

for example, use fuzzy logic todecide what to do when the car is

going fast or slow, with thosespeeds being determined by circum-stances rather than by a specified

number of RPMs.Another kind of inferring sys-

tem is data mining, which harvestsuseful information from mountainsof data. It differs from traditional

statistics in that statistics forms ahypothesis and validates it against

the data. Data mining, by contrast,discovers patterns in the dataand forms its own hypotheses.

Organizations are excited about datamining because the digital age has

provided them with a wealth of datathey know is valuable if onlythey knew how to use it.

Learning Intelligent systemsimprove through the course oftheir interactions with the world.One learning approach is case-based

reasoning (CBR), which uses acase base of solutions to previous

problems to analyze and solvenew problems. CBR has been mostsuccessful in domains involving

classification (e.g., medical andlegal) and problem-solving

(e.g., help desks, design, planning,diagnosis).

Another approach is neural

nets, which are simplified computerversions of the human brain. Neural

nets are best suited to problemsthat are difficult to describe, such asrecognizing handwriting. Rather

than writing a program for this task,systems are trained by being

provided with handwriting samplesand the correct answer. The system

learns to generalize from the train-

ing set and recognize most peopleshandwriting. Optical character

recognition is one of the mostsuccessful neural net applications.However, most neural nets used in

commercial applicationstoday do not continue to

learn. They are trainedwhen they are designed, but

become static when insert-

ed into broader applications.Genetic algorithms,

another approach to learn-ing, are based on a biologicalmetaphor: survival of the fittest.

This approach works by creatinga large population of candidate

solutions, only the fittest of which

survive. New solutions are createdfrom the survivors, through a

process analogous to breeding. Thisprocess continues through several

generations, with weak solutionsbeing replaced from the ever-stronger population of solutions.

Genetic algorithms are emergingin the pharmaceuticals industry as

computational aids for drug design.They have even been used to createmusic, although opinions of the

quality vary with the listener.

Anticipating The culmination ofsmart is the anticipating system.

Anticipating systems arent directedto solve specific problems; they findproblems, recommend solutions,

and in some cases fix them on theirown. Such systems are not limited

to one domain, but can apply theirknowledge and reasoning acrossmultiple domains. In this sense,

anticipating systems come the clos-est to modeling human intelligence.

Its also true that mature antici-pating systems exist only in theminds of visionaries and science

fiction writers. Nonetheless, theseeds of such systems are present

today in goal-directed robots. Oneof the most impressive of these is

NASAs Nomad robot. Nomad suc-cessfully completed a 200-kilometertrek through Chiles Atacama desert,

and later traveled throughAntarctica, finding and classifying

meteorites and terrestrial rocks.

Smart new world

The technologies that underpinthese smart systems will fundamen-

tally change the way we live andconduct business. Smart systems

will become our skilled assistants,adapting to us as needed and, overtime, disappearing into everyday

life. This change will not comeovernight. But continuing innova-

tion and technology advances willhelp todays smart systems over-come their limitations.

Getting Smart

indings

Computers are not yet as smart,

r as dangerous, as HAL in 2001.ut practical applications of smart

chnology are emerging that willhange our lives. Today, though,

many organizations are wonderingow to recognize and make use of

mart systems. To help organiza-ons understand these systems,SC has identified five attributes

f smart, dubbed smart quotients.

dapting The ability to adapt tosers and the environment tocognize context is one of the

asic attributes of smart systems.Nomadic computing envisions a

me when networks will adapt to

ndividual users by greeting themith their personal environments

hen they log in, no matterhere they are or what device

hey are using.One element of those future

evices is likely to be the human-

ed interface. A still-experimentalxample is one developed at the

IT Media Lab, which is designedexpress emotion. These virtual

ssistants are based on the assump-on that people prefer talking to a

person instead of to a machine. Butits also true that there is a very thin

line between natural, emotion-ladeninteraction and annoying stupidity.

Malfunctioning computers are

another source of annoyance.Researchers are finding ways to

enable networks to adjust todifferent levels of stress withoutrequiring

abandonmentof users by

a wholesaleshutdown.There already

are smart disksystems that

can predict the

imminent fail-ure of a drive

by continuouslymonitoring network components.

In the future, systems will be ableto adapt dynamically to a wide range

of stress situations, such as securityattacks, performance requirements,and component failure.

Sensing Sensing systems acquireinformation from the world aroundthem and respond to it. Some

luxury car makers have incorporat-

ed simple warning and collision-avoidance systems in their vehicles,

and cars will become even smarter

when they are combined withsmart roads. Smart transportation

systems will manage traffic bymonitoring road conditions and

controlling the speed and locationof cars. Advances in this area areslow, though, because the tech-

nology must be absolutely reliableand there are no standards for

systems and interfaces.Improving salmon traffic is the

job of the sensor fish, a mechanical

fish that is sent through hydro-electric dams on the Snake and

Columbia Rivers in the UnitedStates Northwest.Salmon trying to

reach the PacificOcean through

those dams oftenare killed byspinning turbine

blades and

changes in waterpressure. Thesensor fish will

help engineers design safer dams.

Sensors arent just for inanimateobjects. Some forms of deafness

can be cured by tiny implants thatdirectly stimulate the nerves of apersons hearing system.

Inferring If theres smoke, thentheres fire. Computers can do thiskind of simple if-then inferring as

mart systems have always fascinated us.

ince the first practical computers were

onceived, engineers have dreamed of creating

machines that can think like humans.

We havent done that yet.

S

A NASA robot made a200-kilometer trek across

Chiles Atacama desert.

Smart roads will improveauto traffic. Smart fish will

improve salmon traffic.

There is a very thinline between natural,

emotion-laden

interaction and

annoying stupidity.

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30

arconi PLCdidnt want to createst another telco. When the com-

any decided to transformits darkber business, they wanted to do

ore than move up thevaluechainselling managed bandwidth.

heywanted to build thetelcothat

as theeasiest to do business with.Thats not all Marconi wanted.

heyalsowanted theflexibilitytodapt to changing business require-ents without getting lockedintoa

articularset of applications. And itadto be done fast. Marconi want-

dthe new telco tobe ready forusiness in the record time of sevenonths. All these requirements

eremet byusing a formofusiness process management to

uildthe system.

uildinga new companyIn June 2000, ipsaris contracted

ith CSCto design, build,and

ploy all theirbusiness supportstems. The company-to-be beganith a 14-page strategy statement

utliningwhat they wanted to

achieve as a business.At a nine-day business process workshop,

CSChelped ipsaris flesh outthesegoals aswell asthe means for

implementing them.Likemost businesses, they

wanted theflexibilityto adapt to

changing business requirementsandthe scalability to meet future

growthin the business. Unlikemostbusinesses, they understood thatflexibility and scalability, if they

were to last more than a fewyears,hadto be designed into thesystem

architecture. That meantavoidingacommon pitfall of startups:integrat-ing third-party applications in such

a waythat it becomes very costlytoaddor replace themwhen better

products become available.Thesolutionwas to

integratethem from thetopdown,startingwith the

business processes instead

of with the applicationsthatsupport those processes.

Theteam designed anarchitecture around prod-ucts from BEA,Tuxedo,

Web Logic, andELink, anda workflow management

product fromStaffware.Then they selected commercialapplications from 12 leading ven-

dors,including thenew Oracle11isuiteof applications.Developers

abstractedkey business processesfrom these componentsand migrat-ed them into a business process

enginethat was built into the

architecture. This solution enabledbusiness processes to be configured

in onecentral function rather thanhard-coded in manyapplications.

Long-lasting, fast-actingNot hard-wiring the applications

together brought two more benefits.First, it gave ipsaris a systemthatmakes business processes easy to

modify. As thebusinesschangesand grows,it willbe aseasy to

remove existing applications as toaddnew ones, thus reducing thecost of owningthe systemover

time. The transformation team builta systemthat canaccommodatea

great deal of changewithout havingto be rebuilt every fewyears.

Thesecondbenefit was

meeting ipsariss very aggressivedeadline.Not surprisingly, some of

theproduct vendors thought theseven-month timetable was wildlyoptimistic.But the focus on busi-

ness processesallowed theteam to

n Practice

speed up development by not

having to integrate the applicationsat every level.They didnthave tointegrate the applications user

interfaces, reporting mechanisms,or databases. They used onesingle

user interface across all packages,an interfacethat hasthe brand ofthe client, notthe application

vendor. Extractingbusiness process-es meant less integration andless

time for development.In February2001,sevenmonths

after theproject started, thenewsystems hadbeen developedandtested, company staff hadbeen

trained andipsariswas in thetelco business.

The customers experienceBecause ipsaris wanted to allow

its corporate customersto managetheir ownrequirements as muchas possible,self-carefeatures had

been builtinto system architecture.That meant automating as many

processes as possible, and givingcustomers and staff Internet accessto the companys systems.

Customers can orderalmosttheir full suite of services through

ipsaris.com.Standard, catalog-basedservices are almost self-provisioned

because theyare automatedthrough the business processes,ordering canbe done entirely

through the Web. More complicatedrequests onesthat requiredigging

up streets,buildingor acquiringphysical network,and procuringand installing equipment are

handedoff by thebusinessprocessengine as special mini-projects.

To request service and accessthe self-carefunction, customersregister with thecompany at

ipsaris.com. Through the Web site,customerscan then choosetheir

services, get price information, and

negotiate

contractualdetails andservice

provisiondates.They canuse the same

self-carefunctionto check on theprogressof theirservice requestand are automaticallyinformed

when service provision is complete.

After provisioning, customers

receive e-mailsaskingaboutthequality of service. If theres a

faultanywhereon thenetwork,ipsaris automatically e-mails those

BY VANESSA REED

Building aCustomer-Friendly Telco

Fast

The focus on business processesallowed the team to speed up

development by not having to inte-

grate applications at every level.

Flexibility was built intothe system architecture,

so applications can be

added or replaced

quickly and cheaply.

ipsaris Ltd.

In the 1980s, Marconi PLC, Britains biggest telecommunications

equipment maker, laid 1,300 kms of optical fiber along the canal

system in the UK through its subsidiary, Fibreway, a joint venture

with British Waterways. For several years, the only business of that

subsidiary, later named ipsaris, was selling dark fiber. That is, it

sold fiber to other telecom operators who could light it and

provide services over it.

Looking for new ways to boost revenue, Marconi recognized

in mid-1999 that it could improve its investment by turning

ipsaris into a telco and selling direct to corporate customers. At

the time, the equity markets were bullish, so there was a strong

potential for an IPO to enable them to recoup their investment.

That transformation meant creating a company and all the

associated business infrastructure from scratch. Although Marconi

financed th is transformation, it kept ipsaris at arms length from

day one. This meant that an entirely new team had to be

recruited to design every aspect of the new business. A few of

the challenges facing the team were: expanding the existingfibre routes from 1,300 to 3,500 km s, together with the entire

associated infrastructure to house their equipment; designing all

the transmission architecture, which included 10 Gbps SDH and

an 80 DWDM system capable of carrying 500 times the capacity

of Yahoo; and developing a leading edge IP network.

In June, ipsaris was purchased by the smaller telecom and

Internet servic

Documents

Process Thinking