High Performance Companies Successful Strategies from the World’s Top Achievers High Performance Companies Successful Strategies from the World’s Top Achievers Nitin Pangarkar Professor at NUS Business School National University of Singapore Copyright © 2012 by John Wiley & Sons (Asia) Pte Ltd All rights reserved This edition is published by John Wiley & Sons (Asia) Pte Ltd., Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628, on behalf of Jossey-Bass, A Wiley Imprint 989 Market Street, San Francisco, CA 94103-1741–www.josseybass.com No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 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materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher, the editors, nor the authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages Jossey-Bass books and products are available through most bookstores To contact Jossey-Bass directly call our Customer Care Department within the U.S at 800-956-7739, outside the U.S at 317-572-3986, or fax 317-572-4002 Jossey-Bass also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books Library of Congress Cataloging-in-Publication Data ISBN 978–0–470–83010–9 (Hardcover) ISBN 978–0–470–83012–3 (ePDF) ISBN 978–0–470–83011–6 (Mobi) ISBN 978–0–470–83013–0 (ePub) Typeset in 10.5/13 pt Goudy by MPS Limited, a Macmillan Company, Chennai Printed in Singapore 10 I dedicate this book to the three generations who have influenced me tremendously: My (late) parents (Shri V.M Pangarkar and Mrs S V Pangarkar); My siblings (Shobha, Anand and Prakash) and my wife (Ashwini); and My children (Natasha and Anish) Contents Foreword Preface Acknowledgments xi xiii xv My Motivations Introduction and Positioning Seven Concerns Raised by the Content and Approach of Other Books A Book on Strategic Principles: The Idea 11 Approach of the Book 11 Organization of the Book The Final Word 13 15 Discover Diamonds among Coals 19 Resources, Firm Strategy, and Performance 19 Acquisitions Fitting the “Discover-Diamonds-amongCoals” Adage 22 Mittal Steel: Discovering Diamonds among Coals—Consistently! 25 Building a Global Empire through Acquisitions 27 The Recipe for Success 29 How Mittal Polishes Raw Diamonds 34 The Final Word 37 vii viii C ont ent s Build Durable Assets 45 Durable Assets and Performance Tiger Balm: Durable Assets Withstand Twenty Years of Neglect 45 Pawning the Family Heirloom 55 52 Restoring the Tiger Balm’s Roar through Investments in Durable Assets 56 The Recipe for Success 58 The Tiger Balm Case and Its Implications for a Strategy Based on Durable Assets The Final Word 59 61 Focus on Small Wins 69 Big Hits, Big Flops, and Their Performance Implications 69 Small Wins: An Alternative Route to Superior Performance? 72 YKK’s Small Wins Lead to Market Dominance 73 The Lincoln Electric Company’s Small-Wins-Based Strategy 76 Illinois Tool Works: Scoring Big with Numerous Small Wins 80 The Four Cornerstones of ITW’s Strategy 81 The Final Word 89 Integrate to Innovate 97 The Importance of Innovation Innovation Strategies Innovation through Integration SAS Institute: The Consummate “Integrator” Fanuc: Industry Dominance through Integration and Innovation 97 99 101 102 Integration of External Knowledge at Fanuc 110 Internal Integration at Fanuc 113 The Final Word 114 107 Advance (Strategically and Competitively) During a Crisis 121 Crises as Common Events Top Managers and Crises 121 123 Contents ix The Tylenol Crisis and Johnson & Johnson Toyota Fumbles Singapore Airlines (SIA): Proactive Management of Crises 124 127 133 SIA’s Response to the East Asian Economic Crisis 133 The SQ 006 Crash in Taiwan and SIA’s Response 135 The Final Word 140 Beware of the Incremental (Strategic Change)! 149 Importance of Strategic Change and Its Performance Implications Mixed Performance Outcomes of Strategic Changes at Starbucks and McDonald’s Strategic Changes and Their Performance Implications at Tupperware 156 Tupperware’s Social Impact and Performance 156 The Beginnings 158 The Growth Years 159 Innovative Business Model 159 Strategic Changes 161 149 151 Putting the Strategic Changes and Their Performance Impacts in Perspective 165 The Final Word 166 Strategic Principles in a Nutshell 173 Strategic Principles and Their Relevance 173 Simple yet Powerful 173 Applicability Beyond Large Companies 175 Applicability Across Geographies 177 Some Common Themes (and Factors) Across the Examples 179 CEOs and Top Managers Set the Correct Example 179 A Clearly Conceived Strategy That Often Defies Conventional Wisdom 180 Long View 181 Managing Risks 182 x C ont ent s Careful Attention to Execution or Implementation Issues and Management of People Resources 183 In Conclusion 184 Index 189 Foreword I take great pleasure in introducing this book Professor Nitin Pangarkar has distilled the wisdom of many years of academic experience and training into a wonderful set of extremely practical and sensible principles The book is a fascinating read and should appeal to many different profiles of readers Any student of business, executive with an interest in strategy, or general managers with responsibilities for managing a business would find the book useful on a multiplicity of counts I note four of these distinctive counts below First, the book is very easy to read, but with very significant lessons, replete with simple but illuminative illustrations Very often strategy books have a tendency to get lost in jargon This book takes a refreshingly distinctive take on the problem of strategy Rather than developing complex frameworks it focuses on simple, but broadly generalizable principles Perhaps even more important than simplicity is relevance And on that count Professor Pangarkar identifies a set of fairly generalizable “strategic best practices” that are meaningful for most businesses Thus, in the first instance, the book is notable for its combination of simplicity and insight A second feature of the book that I commend is the amazing breadth and depth of illustrations In addition to detailed case studies that form the centerpieces of the individual chapters, every chapter contains many illustrations Even more compelling, is the fact that the illustrations are drawn from a variety of contexts ranging from developed to emerging economies and from well known famous companies to relatively lesser known businesses The book is probably unique in this respect, of drawing from such a variety of contexts In addition to helping ground the concepts of the book for managers these illustrations will serve as a treasure trove for instructors also xi xii Foreword In addition to the wonderful illustrations a particularly useful aspect of the book is the detailed case studies By fleshing out the key concepts through the context of a fairly deep case study, the book helps to really ground the concepts and enable their articulation in a detailed enough fashion that the reader can make a thoughtful attempt at executing the idea This focus on rich detail that is necessary for execution is remarkable A fourth aspect of the book worth noting is the actual content of the principles The principles are valuable not just because they reflect logical, sensible thinking, but also because even though they are fundamental, they are often ignored As an illustration consider Professor Pangarkar’s first principle—buying assets on the cheap It is amazing how simple this is and how commonly it is violated Indeed the history of mergers and acquisitions (M&A) consists of a plethora of violations of this advice The other principles are similarly essential but often underemphasized or ignored But for me to say more would be to hold the reader back from the feast that waits So without much further ado let me hold the door open… Gautam Ahuja Harvey C Fruehauf Professor of Business Administration, Professor of Strategy Stephen M Ross School of Business University of Michigan, Ann Arbor 178 H igh P erforma nce C ompa nies Vale Do Ivai Acucar E Alcool, a distressed asset, for an enterprise value of US$240 million.5 Renuka’s management believed that the transaction was a good opportunity to enter Brazil and also enhance its competitiveness in the global sugar business A durable assets-based strategy, similarly, can work well in developing countries In fact, given the fragmented nature of distribution, a first mover that can create an extensive distribution network may be in an excellent position to ward off challenges posed by later entrants Lenovo’s strategy and results in its home market are instructive in this regard Tang Jie, general manager of Lenovo’s consumer and channel business in China made the following comment about the growth of the emerging market (i.e., towns and villages other than the big cities) within China: “In early 2009, 45 percent of the desktop computers we sold to consumers in China were sold in what we call ‘emerging markets.’ Now it’s 70 percent In notebooks, emerging markets accounted for 30 percent a year ago, and now it’s half.” Since Lenovo started addressing this market before its close rivals (such as HP and Dell) did, Lenovo commands a bigger share (according to its own estimates) of this emerging market than the national average of 30 percent.6 Interestingly, by 2006, Lenovo was trying to adopt a similar secondary cities/ small town focus in India also.7 A brand reputation developed through sustained investments in marketing, providing good quality products and services, or even being a responsible company may similarly result in superior performance in developing countries In a 2010 issue of strategy+ business, Ann Graham called the Tata group “too good to fail.” Tata’s actions following its acquisition of Tetley Tea were cited prominently in Graham’s article When the Tata group decided to shift emphasis from plantations (the “old” Tata Tea business) to the more lucrative global distribution (via the Tetley acquisition), it did not lose sight of its responsibility to the community in South India where it was the largest employer As many as seventeen of the twenty-five plantations were sold to former employees, layoffs were limited to one per family and a group of employees taking voluntary retirement was given enough cash as severance package to buy equity in the new company.8 In 2008, Brand Finance plc, a UK-based consultancy, named the Tata group as the only Indian company in the top 100 global brands, beating some other equally illustrious companies such as Reliance Industries, Infosys, and Wipro Many India-based consultants commented that the Tata group’s brand is based on values such as integrity, human values, and compassion practiced by the group since its founding and it therefore “is not so much a business brand as a governance brand.”9 In 2009, Hewitt Associates’ ranking of the best employers in India revealed Taj Hotels, a Tata company, as the third best 10 Strategic Principles in a Nutshell 179 Some Common Themes (and Factors) Across the Examples Though the strategic principles proposed in this book emphasize different aspects of strategy formulation and execution, five common characteristics can be identified across companies achieving superior performance through following one or more of the principles (see Figure 8.2) CEOs and Top Managers Set the Correct Example The CEOs and top managers of companies cited in this book have set the correct example Though the exact actions through which the CEOs and top managers set the correct example might vary across the company contexts, the signal value of their actions to the employees as well as to other stakeholders was tremendous, and appropriate CEO actions remain the common factor across many cases • In the cases of Johnson & Johnson and SIA, the CEOs, Burke and Cheong respectively, stepped up and became the spokespersons for Management of risks CEO/top managers set the correct example Long view Figure 8.2 Exemplar companies’ strategies Clearly conceived strategy defying conventional wisdom Careful attention to execution/ implementation issues Common characteristics of exemplars’ strategies 180 H igh P erforma nce C ompa nies their companies in the midst of crisis Some CEOs might shy away from facing the press during a crisis either because they have to face difficult questions (as did Toyoda of Toyota11) or because they are not confident in their ability to convey the appropriate message, as in the case of Tony Hayward of BP • In contrast, it is remarkable that Burke and Cheong were able to unambiguously convey what their companies stood for—welfare of the community in the case of Johnson & Johnson and customer welfare in the case of SIA • When faced with a downturn in demand, SIA management cut its own salaries first before implementing the price cut for other employees It also undertook layoffs rather reluctantly, and those too for trainees only The paycuts implemented during the crisis were also restored within twelve months While implementing cost-cutting measures, the SIA management did not lose sight of the fact the demand would return sometime in the future and, despite the skepticism of some industry analysts, the airline undertook a massive overhaul of all service classes in the thick of the crisis.12 The results were quite remarkable, as noted in Chapter Canon’s top management, similarly, stayed true to its strategy of developing cutting-edge products even when the industry was going through difficult times • At SAS, where technology is at the heart of its competitive advantage, CEO Jim Goodnight writes software code himself, which serves to downplay artificial distinctions between technical personnel and management It also is a positive signal about the importance of technology and innovation to all SAS employees A Clearly Conceived Strategy That Often Defies Conventional Wisdom A clearly conceived strategy lies at the heart of superior performance attained by many of the companies used as examples in the various chapters Despite pursuing strategies that defied conventional wisdom, many of these companies had sufficient conviction in their chosen strategies to remain true to their strategy • ITW, for instance, has been an acquisitive conglomerate when conglomerates have become passé and when many conglomerates Strategic Principles in a Nutshell 181 such as ITT or GE are being demerged.13 Beyond the broad categorization as an acquisitive conglomerate, however, ITW’s strategy has little in common with the strategy of such companies as ITT, Textron, or Tyco It shuns the pursuit of size and the resulting scale economies It pursues extreme decentralization and even welcomes competition from larger-scale rivals, counting on its ability to beat such rivals • Mittal Steel’s strategy prior to its merger with Arcelor could have been termed as the epitome of a strategy that defied conventional wisdom It expanded aggressively in an industry that was notorious for excess capacity It bought assets (state-owned companies in highly volatile developing countries) that would not have shown up on the shopping lists of many of its rivals It was the first truly global steel player in an industry known for nationalistic agendas (“strategic industry for national development”), and it was able to achieve tremendous growth in a mature industry where many longstanding players (e.g., US-based steel companies such as Bethlehem steel) struggled to stay afloat • Fanuc’s strategy is remarkable because of its end-user (rather than machine tool companies, its immediate customers) orientation It has acquired such a formidable reputation among end users that though its dominance is resented by machine tool makers, they have little choice but to use Fanuc’s controls Long View The exemplars in the various chapters are also remarkable because of their long-term orientation For instance, Canon’s aim (or strategic intent) of being a top player in optics technology-based products has been discussed in many studies.14 To achieve this objective, it has consistently devoted substantial resources to R&D, paid careful attention to the productive use of those R&D resources and emerged as one of the leading recipients of patents granted by the USPTO over the last eighteen years.15 It has also been able to convert its inventions into innovations in the sense that its products embodying optics technology have enjoyed considerable success in the market place—whether cameras, camcorders, or office equipment such as photocopiers In fact, recognizing optics as the common base of technology across these diverse products, company management had coined the slogan “cameras in the right hand, business machines in the left” as early as 1967.16 It is also interesting that none of the competitors in either the camera industry (e.g., Nikon, Pentax, Kyocera/Yashica, 182 H igh P erforma nce C ompa nies Kodak) or the office equipment industry (IBM, Xerox) had identified a similar strategic thrust—a testimony to Canon’s foresight SIA, similarly, has been a pioneer in airline advertising Though the exact amount of resources devoted by SIA in its early years is not available, we know it spent considerable resources on advertising every year for more than three decades This high resource allocation was supported by a young aircraft fleet, the deployment of the latest hardware and software (e.g., inflight entertainment systems) and consistent delivery of high quality service Together, these elements have created a reputation and brand following that has been extremely difficult for competing airlines to replicate In fact, since 1994, a wax replica of the Singapore Girl, the airline’s advertising icon, has been placed in Madame Tussauds wax museum—the first instance of an icon of a commercial company receiving this honor.17 That the companies used as exemplars also exhibited tremendous continuity with regard to their top management tenures may have helped the adoption of the long view Consider: • Fanuc and YKK have been run by their founders or their sons.18 • In the thirty-eight years since its separation from the MalaysiaSingapore Airlines, SIA has had only four CEOs • David Speer, the CEO of ITW since 2005, has worked for the company since 1978 and has been a member of the top management team (senior vice president or above) since 1993 This management continuity may have played a significant role in the adoption of strategies that had long payback periods and were off the beaten path (and hence required conviction) Managing Risks The companies used to exemplify key strategic principles in this book also share the common characteristic that they have deftly managed risks arising from defying conventional wisdom and following less-travelled strategic paths Here, I am not using the term risks in a financial sense to denote variation in earnings but rather to denote the likelihood of failure (or the downside) • For example, according to conventional wisdom, ITW has a higher likelihood of poor performance because of its strategy of unrelated diversification and shunning synergies across its business units It, however, balances this downside by participating in Strategic Principles in a Nutshell 183 less-glamorous and lower-technology sectors, which typically not attract high-profile players with significant management depth • For the first ninety years of its existence, Lincoln Electric resisted the temptation of either venturing abroad (a smattering of international operations being the exceptions) or product diversification, which could have elevated its risks It remained relatively small yet profitable and successful in the welding equipment arena • YKK managed its risks by following the international movement of its key customers, the garment manufacturers Global contracts with leading manufacturers such as Levi Strauss and Adidas gave it assured volume, and it further minimized its downside by excelling in the manufacturing function, which ensured that few (if any) competitors would be able match it in terms of global delivery, quality, and variety • Fanuc combined its narrow focus on robotics and numerical controls for machine tools by forging a string of licensing deals with high-profile companies such as Pratt & Whitney and Siemens in its early stages of development Later it forged partnerships with key customers like GM, which accounted for a majority of worldwide robotics orders Careful Attention to Execution or Implementation Issues and Management of People Resources The companies mentioned as examples of the strategic principles are especially strong in implementing their strategy through effective management of human resources Interestingly, because of their excellent understanding of incentives and motivating factors for their employees, these companies are able to achieve high productivity without being the best paymasters • SAS Institute has been ranked as among the twenty best companies to work for ever since Fortune magazine started conducting that particular survey Though it provides a nice set of fringe benefits including daycare and healthcare facilities on its campus, being privately held means that it is not able to provide generous stock options, which many of its competitors • The high productivity of Lincoln Electric’s employees and the consequent low costs that the company was able to attain are legendary in the industry Lincoln’s piece-rate system attracted employees who were motivated to work hard and earn more 184 H igh P erforma nce C ompa nies money for themselves To quote one Lincoln employee, “The thing I like here is you’re pretty much your own boss as long as you your own job A lot of new guys come in and leave right away because they don’t want to work hard.”19 • As a proportion of total costs, Singapore Airlines’ staff costs are much lower than the industry average as well as key rivals such as Qantas, Lufthansa, and British Airways—for instance, SIA’s average staff costs for 2008–09 and 2009–10 financial years were 13 percent20 compared to the industry wage costs of 25.7 percent.21 Despite these lower costs which may be partially attributable to lower salaries, SIA is able to achieve high productivity For the five years prior to March 2009 (the end of SIA’s financial year), SIA’s value added per employee jumped from S$179,272 to S$294,666 Though the figure dipped to S$219,678 for the year ending March 2010, this decline was probably due to a 30 percent drop in revenues because of the industry-wide recession.22 In Conclusion Before closing, I must add several caveats to the usefulness of the book and its approach First, the examples cited in the book were intended to illustrate the “value” of principles in attaining superior business performance I did not intend to argue that these companies were either “excellent” or “models to behold” for other companies In fact, these companies have their own blind spots, detractors, and missteps • One such blind spot may be seen in Dr Seiuemon Inaba, Fanuc’s legendary leader, who was known for his demanding and authoritarian management style He also had rather peculiar beliefs and quirks For instance, at Inaba’s insistence, Fanuc factories, offices, assembly lines, and even the worker’s jumpsuits from head to toe are colored yellow The reasons for the color choice seem to range from yellow being the color of the emperor in the orient to Inaba’s belief that yellow promotes clear thinking.23 • Some of the companies have also had dynastic successions At Fanuc and YKK, the sons of the founders each took over the top manager’s job Though the dynastic succession hasn’t resulted in weaker performance yet, it could become an area of concern Strategic Principles in a Nutshell 185 if the person slotted for the top manager’s role doesn’t have the skills and capabilities to lead A second caveat is that even if a company is able to effectively deal with crises, it should proactively try to avoid crises in the first place Though Johnson’s & Johnson’s adoption of a credo, as well as its commitment to pursuing strategies consistent with this credo are commendable, the company has lately experienced too many recalls, suggesting some weaknesses in its manufacturing processes During 2010, it recalled (mostly at the wholesale level rather than the consumer level) 200 million packages of different drugs and another 50 million packages of well-known drugs including Tylenol, Benadryl, and Rolaids in January 2011.24 These exemplary companies have also had their share of failures Canon’s mismanagement of the calculator business had a large and negative impact on its performance in the 1970s It also let a leading position in one type of semiconductor manufacturing equipment (steppers) erode over time and has since become a marginal player in the segment 25 Third, it is quite conceivable that despite having a strategy based on sound principles and a strong track record of high performance, some of these companies might experience weaker performance in the future I have used these companies as mere illustrations of ideas that have sound rationale Even if weaker performance were to occur in the future, it would have little bearing on the soundness or the validity of the principles It is also worthwhile noting that a few of the companies discussed are charting new strategic paths For instance, YKK has diversified its product portfolio, and Lincoln has aggressively expanded abroad, sometimes through acquisitions These subsequent deviations from the strategies ascribed to them in this book would make it difficult to draw any conclusions about future performance—for instance, did the performance suffer because the company deviated from a time-tested strategy or because the time-tested strategy itself had become less relevant, causing the companies to deviate? A fourth caveat is that companies not following the proposed principles may also be able to achieve excellent performance Like other ideas, frameworks, and principles in the business literature, following the proposed principles in this book will improve the odds of achieving superior performance; however, not following them doesn’t preclude alternative routes to achieving superior performance Finally, for the sake of simplicity, I did not discuss environmental conditions that may have helped the discussed companies achieve their superior performance Though environmental munificence played a part (as noted below), I don’t think it was the key factor 186 H igh P erforma nce C ompa nies • SIA, for instance, benefitted from the exponential growth in air travel in general as well as from the excellent economic performance of many Southeast Asian countries, which boosted both passenger and cargo volumes to and from the region.26 It is noteworthy, however, that many other airlines based in the same geographic region (e.g., Malaysia Airways or Thai Airways) were not able to attain performances like SIA’s • Fanuc, similarly, benefitted from the excellent performance of Japanese machine tool manufacturers between the 1970s and 1990s Here, again, other Japanese manufacturers of numerical or robotic controllers did not perform anywhere near as well as Fanuc, suggesting that Fanuc’s strategy was a more important determinant of its performance than the munificence of its environment Before closing, it may be useful to highlight a few key distinguishing features of the book as well as its relevance to achieving high performance In this book I aimed to adopt a novel approach to explaining, and learning from, strategic success enjoyed by high performance companies By proposing a set of “strategic principles,” or rules of thumb, I moved away from a framework-based approach commonly seen in strategy books I strongly believe that the principles-based approach can be implemented more easily by companies without doing a complete strategy redesign as required by many frameworks The strategic principles proposed in this book have wide applicability, across different countries as well as industries The wide range of examples cited in the various chapters certainly support the argument about wide applicability of the principles The strategic principles also may be especially valuable in the evolving global environment As has been widely documented, the locus of growth is shifting from developed to developing countries.27 Many of the principles proposed in this book are useful for multinational companies aiming for success in developing countries (e.g., the principle of building durable assets which can serve as enduring sources of competitive advantage in developing countries) as well as for local companies in developing countries aiming to achieve high performance (e.g., the principle of scoring small wins) To conclude, although there are no silver bullets for achieving high performance, I strongly believe that the strategic principles proposed in this book will help companies around the world make their strategies robust and improve their odds of achieving high performance Strategic Principles in a Nutshell 187 Endnotes David B Yoffie and Michael Slind, “Cola Wars Continue,” HBS case no 706447 (Boston: Harvard Business Publishing, 2009), http://cb.hbsp.harvard.edu/cb/web/ product_detail.seam?E=45972&R=706447-PDF-ENG&conversationId=224983 Pamela Hawkins Williams, Dotcy Isom III, and Tiffini D Smith-Peaches, “A Profile of Dolby Labs: An Effective Model for Leveraging Intellectually Property,” Northwestern Journal of Technology and Intellectual Property 2, no (2003): 81–98 “Small Business, Innovation and Public Policy in the Information Technology Industry,” Working paper by Josh Lerner, HBS, www.oecd.org/dataoecd/ 9/43/2754490.pdf Chen Huifen, “The S’pore Edge in Leather Tanning,” Business Times, Oct 7, 2004 “Shree Renuka Sugars Turns Sour as It Renegotiates Large Brazilian Acquisition,” NDTV Profit, accessed June 17, 2011, http://profit.ndtv.com/ news/show/shree-renuka-sugar-turns-sour-as-it-renegotiates-large-brazilianacquisition-69685?cp Kathrin Hile, “China’s Small Towns Are Big Money for PCs,” Financial Times, August 25, 2010 Ritwik Donde and Chhavi Dang, “Lenovo Eyes Small Towns for Retail Drive,” The Economic Times, December 29, 2006 Ann Graham, “Too Good to Fail,” strategy+business, 58, Spring 2010, http:// www.strategy-business.com/media/file/sb58_10106.pdf Marion Arathoon, “Tata Is Now 57th Most Valuable Brand Globally,” Livemint com, April 22, 2008, http://www.livemint.com/2008/04/22000325/Tata-is-now57th-most-valuable.html 10 “Best Employers Study Asia,” Hewitt.com, accessed June 17, 2011, http://was2 hewitt.com/bestemployers/asia/english/hewitt_be_india2009.htm 11 Initially Mr Toyoda said that he would not be testifying before congress but would send Toyota (North America) chief instead Todd Lassa, “Toyoda Will Not Testify Before Congress, Sends Toyota NA Boss Instead,” blog posted on February 17, 2010, on Motor Trend Homepage, accessed June 17, 2011, http:// blogs.motortrend.com/toyoda-will-not-testify-before-congress-sends-toyota-naboss-instead-2600.html 12 Nitin Pangarkar, “Singapore Airlines: Responding to the Crises,” in Business Strategy in Asia: A Casebook by Kulwant Singh, Nitin Pangarkar, and Loizos Heracleous (Singapore: Cengage Learning, 2010), 241–49 13 GE Money (Singapore) was sold to Standard Chartered in January 2011 “Standard Chartered Buys GE Money’s Singapore Unit: Update,” The Edge (Singapore), January 24, 2011 188 H igh P erforma nce C ompa nies 14 C K Prahalad and Gary Hamel, “The core competence of the corporation.” Harvard Business Review, 68, no (May/June 1990): 79–91 15 “Canon Sets Patent Record in 2010,” Press Release at The-Digital-Picture.com, February 7, 2011, accessed on June 17, 2011, http://www.the-digital-picture com/Press-Release/Canon-Sets-Patent-Record-In-2010-Press-Release.aspx 16 “About Canon: Canon Up to Now” Canon Website, accessed on June 17, 2011] http://www.canon.com/about/history/outline.html 17 Michael Richardson, “The Singapore Girl,” The New York Times, June 8, 1993 18 Though neither Inaba nor Yoshida were founders of the predecessor companies that became Fanuc and YKK respectively, they shaped the companies in their respective visions and the extent of their influence would be quite similar to founders in other companies 19 Norman D Berg and Norman A Fast, “The Lincoln Electric Company,” HBS case no 9–376–028 (Boston: Harvard Business Publishing, 1983) 20 SIA Annual Report (2009–10) 21 “Top Drivers Account for 64.3% of Total Airline Costs,” RajcoAviation: The Winds of Change, accessed on June 7, 2011, http://www.rajcoaviation.com/Air craftEconomicsAirlineCostDrivers.html 22 SIA Annual Report (2009–10) 23 “Fanuc Ltd.,” Funding Universe, accessed June 17, 2011, http://www fundinguniverse.com/company-histories/Fanuc-Ltd-Company-History.html 24 Jonathan Benson, “J&J Recalls 50 Million More Drugs On Top of the 200 Million Recalled in 2010,” NaturalNews.com, January 11, 2011, http://www.naturalnews com/031072_Johnson_&_drug_recalls.html 25 Mark LaPedus, “Can Nikon Regain Its Focus?” News and Analysis on EETimes.com, June 24, 2010, http://www.eetimes.com/electronics-news/ 4200740/Can-Nikon-regain-its-focus- 26 J P Rodrigue, C Comtois, and B Slack (2009), The Geography of Transport Systems, Second Edition (New York: Routledge, 2009) 27 In a recent article, the Economist observes that emerging economies’ share of world income (GDP at market exchange rates) has gone up from less than 20 percent in 1990 to 28 percent in 2010 The same article also observes that the conclusion about the greater influence of emerging economies also holds for other measures of performance such as exports, outward (foreign) investment and capital investments http://www.economist.com/node/21525373, among others “Why the Tail Wags the Dog,” The Economist, August 6, 2011, www economist.com High Performance Companies: Successful Strategies from the World’s Top Achievers By Nitin Pangarkar Copyright © 2012 by John Wiley & Sons (Asia) Pte Ltd Index 3M, 10, 14, 99, 102, 116 3Par, 21 7-Up, 24, 25, 40, 50 80/20 principle, 83, 84, 86, 90 A ABN Amro, 71 acquisition, 20–34, 36, 38, 39, 40, 69, 71, 80, 82, 84, 85–89, 90, 91, 98, 114, 164, 165–167, 174, 175, 177, 178, 185 Adam Brand, 102 Adidas, 74, 75, 183 admired company, 139, 158 advertising campaign, 14, 56, 57, 60, 63 Alcon, 12, 13, 22–24, 38, 39, 40, 41 Aldrin, Edwin, 73 Algeria, 33 alliances, 8, 99, 115, 116, 162, 163 Amazon.com, 150 Anheuser Busch, 24 AOL, 13, 71 Apple, 1, 4, 5, 7, 62, 69, 70, 71, 98, 100, 101, 109, 150 appropriate integration, 38 Arcelor Mittal, 26, 27, 33 Armstrong, Neil, 73 Asian heritage, 59, 60 Asia Pacific Breweries, 55, 58 Asus, 62 autonomy, 76, 81 Aw Boon Haw, 59 Aw Cheng Chye, 45, 54 B barriers to entry, 27, 77 BCG matrix, Bezos, Jeff, 150 Blackberry, 4, 70 blind spot, 90, 184 Blockbuster Video, 3, 6, 167 Blue Ocean, BMW, 130 Boeing, 108, 134, 135 Boston Consulting Group, 97 Boston Scientific, 71 BP, 121, 122, 123, 140, 141, 143, 180 brand building, 59, 60, 62 brand reputation, 10, 20, 46, 52, 54, 59, 60, 62, 175, 178 brand value, 2, 122 Branson, Richard, 122 British Airways, 47, 184 Brownie Wise, 158 Buddies, 137 Buffett, Warren, 38 Burger King, 154 Burke, Jim, 123, 125, 126, 141, 142 business model, 1, 3, 6, 40, 59, 149, 151, 152, 153, 156–161, 162, 163, 165–167, 177 C Canon, 12, 20, 46, 50–52, 61, 174, 176, 180, 181, 182, 185 Cantalupo, Jim, 155 Carolco Pictures, 39 Casio, 98 Central Europe, 32 Challenger disaster, 141 Chambers, John, Charan, Ram, 63, 71 Cheong Choong Kong, 48, 136 Chesbrough, Henry W., 99 Chevrolet, 81 Chia, Jack, 55, 60 Chiang Kai-shek airport, 135, 138 Chrysler, 131 Cirque de Soleil, Cobb, Ty, 73 Coca-Cola, 8, 10, 20, 25, 46, 48, 49, 64 Columbia Pictures, 21, 39, 43, 71, 176 189 190 Index commitment, 36, 63, 76, 91, 123, 127, 131, 140, 142, 143, 155, 156, 185 competitive, 1, 3, 20, 31, 46, 48, 51, 60, 69, 70, 75, 81, 89, 97, 99, 101, 121, 135, 150, 151, 156, 166, 167, 178, 180, 186 competitive advantage, 3, 20, 46, 89, 99, 135, 151, 156, 166, 167, 168, 180, 186 conventional wisdom, 29, 33, 69, 92, 180–181, 182 core business, 39, 60, 69, 77 corporate culture, 89 cost arbitrage, 32 credit rating, 149, 163 Credit Suisse, 46 Credo, 14, 127, 142, 185 crisis, 12, 14–15, 33, 47, 121–143, 175, 180 Crisis Management Centre, 138 customer-focused, 84, 107 customer satisfaction, customer segmentation, 84 D decentralization, 69, 80, 81–83, 91, 181 Dell, 21, 125, 178 Della Femina, Jerry, 125 direct sales, 13, 84, 91, 158, 159, 160, 161, 163, 165, 166 distribution, 8, 9, 13, 45, 49, 50, 52, 56, 57, 58, 59, 60, 61, 62, 64, 113, 163, 175, 176, 178 divisions, 10, 33, 61, 69, 74, 82, 83, 101, 102, 123, 157 Dolby Labs, 176 dominant company, 3, 10, 98 dominant leaders, 40 Dow Chemicals, 71 Dow Corning, 121, 122 DRI technology, 29–30 due diligence, 34, 36 dynastic succession, 184 E early mover, 3, 60, 74 East Asian economic crisis, 121, 133 Eastern Europe, 33 economies of scale, 27, 46, 82, 90, 92 emerging markets, 27, 30, 31, 32, 64, 178 Emirates, 47 employee satisfaction, 89 employee turnover, 63, 87, 103, 104 entrepreneurs, 82 excess capacity, 27, 161, 181 external knowledge, 101, 102, 110–114, 176 Exxon, 121, 140, 141 F F&N Group, 10 Fanuc, 12, 14, 97, 99, 102, 107–114, 115, 116, 174, 176, 181, 182, 183, 184, 186 fasteners, 74, 80, 91 five forces analysis, Florida, Robert, 104, 105 Ford, 7, 8, 98, 127, 130, 131 foreign markets, 53, 108, 164, 166 formulation, 7, 9, 56, 173, 174, 179 Foxconn, 109 Frappuccino, 152 Fujitsu, 97, 108, 109, 113 G Garrard, Jane, 163 Garuda, 134 Gates, Bill, 21 Gatorade, 8, 20 generic strategies, 6, Gettys Manufacturing, 112 Ghoshal, Sumantra, 32 Girolami, Sir Paul, 71 Glass, David, 123–124 Glaxo, 70, 71 global market, 70, 73, 76, 97 global presence, 2, 3, 29, 31–33 Goings, Rick, 157, 161, 162 Goizueta, Roberto, 46, 63 Goodnight, Jim, 104, 180 Google, 1, 10, 14, 104 Greenberg, Jack, 154, 155 Guidant, 71 H Hamburg Stahlwerke, 30 Haw Par, 54, 55, 56, 58, 59, 60, 61, 174 Hayward, Tony, 123, 140, 180 Heng Long Leather, 12, 177 Herculean challenges, 29, 33–34 high-technology, 90, 176 high uncertainty, 40, 175 Hitachi Seiki, 111, 115 Honda, 130, 131 HP, 21, 52, 178 HR policies, 78, 90 hula hoop, 70, 72 Hyundai, 130, 131 I IBM, 20, 21, 50, 51, 52, 149, 182 IKEA, 1, 2, 3, 10, 16 Illinois Tool Works, 12, 14, 69, 79, 80–89, 174 Immelt, Jeff, 8, 71 implementation, 7, 9–10, 29, 30, 34, 36, 80, 82, 84, 89, 90, 100, 101, 106, 153, 156, 158, 167, 173, 175, 179, 183–184 Inaba, Yoshiharu, 109, 110, 112, 113, 184 incentives, 32, 61, 77, 78, 82, 90, 91, 92, 103, 130, 183 incremental change, 149 inertia, 7, Infosys, 178 inimitable, 19, 91 initial public offering (IPO), 22, 23, 33, 92, 152 innovation, 1, 6, 9, 11, 14, 51, 81, 84–85, 87, 90, 95, 96, 97–110, 113, 114, 115, 133, 176, 180, 181 intangible resources, 20 integration, 5, 14, 24, 26, 31, 33, 38, 39, 40, 41, 71, 81, 97, 101–102, 105, 106, 107, 108, 109, 110, 113, 114, 115, 116, 176, 177 Intel, 5, 6, 52, 90, 112, 115 internal knowledge, 97, 101, 110, 113, 114, 115, 116 Index 191 international market, 74, 75, 162 iPhone, 5, 69, 70, 71, 100, 101, 150 Iscott, 26, 34, 36 ISG, 28, 31 Ispat Group, 26 Mikimoto, 98 Miller Beer, 13, 24, 39, 40, 41 Mitsubishi, 111 Mittal Steel, 11, 12, 13, 25, 26, 28, 31, 36, 37, 39, 40, 41, 174, 177, 181 J Jaeger, Durk, Jobs, Steve, 71, 98 Johnson & Johnson, 14, 15, 121, 122, 123, 124–127, 135, 141, 142, 174, 175, 179, 180 joint venture, 10, 55, 56, 86, 111, 113 N NASA, 141 National Highway Traffic Safety Administration (NHTSA), 128, 129, 130, 132 NC Machine, 108, 111, 113 Nestlé, 1, 10, 12, 13, 22, 23, 24, 25, 38, 39, 40, 41, 174 Netflix, 3–4 New York Stock Exchange, 22 Nikon, 46, 182 Nintendo, 6, 70, 72, 98 Nintendo Wii, Nissan, 109, 119n46, 130, 131 Noel Tichy, 63 Nokia, 4–6, 7–8, 50, 70, 150 Normann, Richard, Norton, David, Not-Invented-Here, 33 Novartis, 22, 23, 24 K Kaplan, Robert, Karmet, 28, 30, 31 Kawasaki, 113 Kazakhstan, 30, 31, 33, 177 Key Success Factors, 39, 61 KFC, 101, 106 knowledge sharing, 33, 37, 105 Kodak, 182 Koh Choon Heong, 177 Komatsu, 109 Korean Air, 134 Kyocera/Yashica, 182 L Lafley, A G., lead users, 99, 100, 116 LeGrand, Anne, Lenovo, 178 Levi Strauss, 75, 183 Levitt, Ted, 97 licensing, 55, 56, 110, 112, 113, 183 Lincoln Electric, 12, 14, 73, 76, 78, 79, 167, 174, LN Mittal (LNM), 11, 12, 13, 19, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 36, 37, 39, 40, 41, 64, 177, 181 Loreal, 22 low-technology, 1, 12, 73 Lufthansa, 47, 184 M machine tools, 75, 108, 109, 113, 115, 183 “Made for you” campaign, 154 Makino Milling Machine, 110, 112, 115 Malaysia Airways, 186 management continuity, 90, 182 market capitalization, 64, 69, 70, 80, 84, 92, 176 market share, 4, 14, 15, 17, 24, 40, 49, 50, 52, 62, 64, 74, 75, 76, 78, 89, 108, 113, 116, 124, 127, 128, 130, 164 Matsushita, 39 McCafé, 153, 155 McDonald’s, 1, 12, 15, 69, 71, 79, 101, 151, 153, 154, 155, 161, 174 McKinsey matrix, McNeil Consumer Products, 124 MeeGo Operating System, Mehran Mehregany, 100 MGM, 21 Microsoft, 5, 6, 10, 21, 52, 70, 72, 79, 92, 94, 98, 101, 108 O on-time, 87, 88 open-door policy, 79, 102, 105 open innovation, 99, 100, 101, 114 operational excellence, 69, 76, 81, 83–84 organizational policies, 15, 63, 69, 76, 77, 89, 91, 92, 104, 114, 115, 116 Ovi, P Palo Alto Research Center, 101 Panasonic, 52, 176 Pareto Principle, 69, 83 patents, 20, 51, 52, 61, 62, 84, 181 pay cut, 139, 140 Pentax, 182 Pepsi Cola (PepsiCo), 8, 14, 25, 40, 48, 49, 50, 61, 64, 174, 175, 176 persuasion, 165, 166 PEST, 6, PESTEL, Philip Morris, 24–25, 39, 40, 41, 174 Philippine Airlines, 134 Pioneer, 39 poor performance, 33, 87, 155, 165, 175, 182 Pratt and Whitney, 111 Procter and Gamble (P&G), 9, 99, 100, 101, 117, 161, 162, 165 procurement, 1, 2, 88, 113 productivity, 31, 34, 47, 48, 49, 61, 78, 79, 89, 104, 109, 142, 183, 184 proprietary, 54, 78, 79, 100 public relations, 124, 126, 127, 139, 140 Q QDOS, 21 Quaker Oats, 8, 20 192 Index R R&D expenditures, 51, 63, 176 R&D intensity, 48 R&D/Sales, 51 Ramírez, Rafael, Rangoon, 52, 53, 59 readiness, 7, 121, 123, 135, 136, 138, 139, 142, 143 Recipe for success, 29, 47, 58, 69, 77, 90, 92 regulatory, 56, 132, 150, 155, 156, 164 Reliance Industries, 178 Renuka Sugars, 177 reputation, 2, 10, 15, 19, 20, 22, 26, 46, 52, 54, 59, 60, 61, 62, 71, 75, 87, 98, 121, 122, 123, 124, 128, 135, 139, 140, 142, 151, 154, 159, 175, 176, 178, 181, 182 resale value, 130, 140 Research in Motion/Blackberry, 70 revenue sharing, risk, 7, 8, 9, 14, 15, 31, 32, 34, 36, 69, 71, 81, 92, 104, 110, 115, 129, 135, 149, 160, 167, 176, 182–183 robotics, 88, 97, 107, 111, 113, 176, 183 Rohm and Haas, 71 Royal Bank of Scotland, 71 S salvage value, 14, 60, 62, 63, 175, 176 Sam Palmisano, 149 Samsung, 5, 52, 176 SAP, 101 SARS epidemic, 47 SAS Institute, 12, 101, 102, 114, 115, 116, 174, 183 Schultz, Howard, 151, 152, 153, 167 Seiko, 98 Sicartsa, 19, 26, 28, 34, 175, 177 Siemens, 97, 110, 111, 116, 183 Singapore Airlines (SIA), 12, 14, 15, 47, 48, 49, 55, 57, 58, 61, 63, 121, 122, 124, 133–135, 136, 137, 138–139, 140, 141, 142, 174, 176, 179, 180, 182, 184, 186 Singapore Girl, 57, 182 Slater Walker, 54, 55 small- and medium-size enterprises (SMEs), 15, 63, 99, 112, 176, 177 SoBe, solutions, 51, 84, 99, 100, 104, 118 Sony, 4, 39, 40, 43, 52, 70, 72, 98, 176 South African Breweries, 24 Southwest Airlines, 3, 16 SQ 006, 15, 121, 133, 135–140, stakeholders, 9, 11, 15, 19, 104, 121, 135, 138, 142, 156, 165, 179 Stanley Home Products, 158 Starbucks, 12, 15, 69, 79, 151–156, 161, 166, 167, 174 Stewart, Martha, 65, 157 Suchard, Jacob, 24 Sumner Redstone, superior performance, 1, 3, 6, 9, 14, 20, 26, 32, 38, 48, 61, 72–73, 92, 175, 178, 179, 180, 185 SWOT, synergy, 13, 38, 39, 82, 153, 154 T Taipei, 121, 135, 136, 137, 138 tangible resources, 19, 20 Target stores, 13, 149, 162, 163 tarnished reputation, 121, 123, 140 Tata Group, 12, 81, 178 Tata Steel, 64 technology development, 14, 46, 51, 176 Tesco, Thai Airways, 134, 186 The Fashion Café, 71 Tide, 9, 167 Tiger Balm, 12, 14, 45, 52–61, 62, 174 Time Warner, 13, 71 Toyoda, Akio, 130 Toyota, 10, 12, 15, 69, 121, 122, 124, 127, 128, 129, 130, 131, 132, 133, 140, 141, 143, 174, 175 training, 9, 47, 48, 49, 61, 63, 76, 82, 87, 88, 91, 92, 105, 106, 137 Trust, 78, 79, 113, 125 Tupper, Earl, 158 Tupperware, 12, 15, 149, 155–167, 174 Tylenol crisis, 123, 124, 125, 126, 135, 142 U undervalued resources, 13, 21, 177 unintended acceleration, 132 Union Carbide, 121, 122–123, 141 US Steel, 30 V value disciplines, 6, VC-backed, 176, 177 virtuous cycle, 48, 49, 74, 77, 78, 89 vision, 14, 26, 32, 52, 63, 64, 74, 91, 174 Von Hippel, Eric, 99 W Wal Mart, Walton, Sam, 123 Warner Bros, Warsaw convention, 137 Westinghouse, 77 Wham-O, 70, 72 Wipro, 178 World War II, 45, 54, 73, 77 X Xerox, 98, 101, 182 Y YKK, 12, 14, 73, 74, 75, 76, 79, 89, 90, 91, 92, 174, 182, 183, 184, 185 Yoshida, Tadao, 73, 75, 91 Z Zantac, 70, 71 Zippers, 12, 73, 74, 75, 91 .. .High Performance Companies Successful Strategies from the World’s Top Achievers Nitin Pangarkar Professor at NUS Business School National... for which I am solely responsible NITIN PANGARKAR Singapore High Performance Companies: Successful Strategies from the World’s Top Achievers By Nitin Pangarkar Copyright © 2012 by John Wiley... with good strategies include high profile companies such as GE, Toyota, 3M, Google, Microsoft, and Nestlé Though there is much to learn from these leading companies, less prominent companies might