Michele Ferrero (1924-2015): Obituary of a discrete global leader

February 18, 2015

Ferrero-Rocher-PyramidThe notion of servant leadership is open the accusation of self-serving hypocrisy masking as humility and piety. Michele Ferrero’s life refutes such charges in his case

The Guardian noted:

When Michele Ferrero took over his family’s confectionery firm on the death of his uncle, Giovanni, in 1957, he wrote a letter to his employees. “I pledge myself to devote all my activities and all my efforts to this company,” it said. “And I assure you that I shall only feel satisfied when I have managed, with concrete results, to guarantee you and your children a safe and tranquil future.”

Ferrero was an entrepreneur of a kind Italy throws up from time to time, inspired more by the social doctrines of the Roman Catholic church than by any belief in the merits of the free market.

The case of Nutella

Michele’s father Pietro converted a family pastry shop into a chocolate factory with what became a world-beating product in Nutella, a Business School case favourite. Pietro lived in a region south of Turin famous for its natural products including hazel nuts, a key ingredient of Nutella. Michelle demonstrated his flair for confectionery and marketing when he reformulated and re-branded the choconut spread. Today the product takes around 20% of the world’s supply of hazel nuts.

The Ferrero group

Pietro instilled in Michele a passion for confectionery and product innovation. His son converted the local business into The Ferrero group, a global giant, making him one of the wealthiest of the world’s billionaires.

The business he inherited stands alongside other firms with a socially responsible ethos which transcends the structure of a CSR department. There are parallels with the Tata group of India, and various firms founded under the spirit of what Weber called ‘the protestant ethic’  including another confectionery giant, the former Cadburys group.

Its treatment of employees is at very least of high quality and in many aspects best-practice. The firm initiated the practice of collecting and returning employees to their villages. Medical care and other welfare services are of high quality. Ferrero’s workers have never gone on strike. The organization is active in awareness of and sustainability in the developing countries from which it sources its products.

 The iconic praline

The Ferrero Rocher brand has produced one of the most famous of images, that of the gold-wrapped praline product served at the exclusive party to guests of his excellency. When shown at cinemas, the ad always produces a humorous if ironic response at the incongruance between the product and the intended imagery of top-of-the-market tastes in confectionery.

By your acts shall you be known

The actions of Bill Gates and other modern titans of industry have helped us rediscover The socially responsible entrepreneur. We need not look for other-worldly piety. Critics point to Michel Fererro’s decision to leave Italy for Monaco under threat from The Red Brigades. He remained in tax-enlightened exile. He made no efforts to project or protect his public image.

He deserves to be remembered for his contributions to the well-being of his employees, and the satisfaction of consumers of his company’s products.


Tennis bounces into the 21st century. Will Fifa be next?

January 17, 2015

Fast 4 Federer

Tennis has followed cricket by introducing a short format of the game using technology to support it. Football appears to be struggling to do the same

‘It will ruin the game…It will never catch on….’ Listen to the inevitable cries against sporting innovations which have echoed down the ages.

Cricket’s Big Bash

Cricket’s short form is bringing in new audiences to the format of twenty overs per team, with additional rules to permit more control of time, and so better advertising breaks. Technology reduces human errors by umpires. Gambling is promoted as heavily as the cricket. That’s the heady mix given another boost with The Big Bash competition invented in Australia. Brilliant name isn’t it?

Now for tennis, the Fast4 event

Now another Ozzie-inspired sporting innovation in marketing the fast form of tennis. One advertisement for Fast 4 tennis had Federer and Lleyton Hewett bashing tennis balls between to two fast-moving speedboats. Another great marketing image.

Here come the curmudgeons

The innovations bring out the curmudgeonly spirit.

Oliver Brown of The Telegraph was at his most elegant and nostalgic in defense of the slow.

Hitting balls from a speedboat in Sydney Harbour, Federer has been proselytising the message of his friend Lleyton Hewitt’s ‘Fast4’ tennis idea, a format where the first to four wins the set, where deuce games are resolved not by an advantage system but by sudden-death points, and where players are banned from sitting down at a change of ends.

There is much to admire about defenders of tradition. In more optimistic spirit, it might be argued that the new format offer survival chances for cricket which has already moved from timeless test matches to a not very fast five day format. Tennis has abandoned play to a finish five set matches.

Football and Fifa

FIFA is gallantly retaining its traditional administrative format, with Sepp Blatter seeking re-election as President for the fifth time. The forces of modernization are backing young pretenders with creative plans of amber cards and sin bins.

A bookmaker is sponsoring the celebrity footballer David Ginola to stand for election. But will a fighting fund of a few million euros be enough to prevent the long form of the Presidental game being played by the wily Blatter?


Is the Two Pizza team the future for project management?

September 6, 2014

Amazon Web Services believes it has found the recipe for successful innovation in Two Pizza teams which it claims have launched nearly three hundred new services and features this year

A BBC article on innovation [September 2014] pointed to the fate of once-successful companies that had lost the innovation game to more dynamic and younger competitors. It cited Polaroid, Alta Vista, Kodak among the recent casualties.

The article went over ground that can be found in textbooks of innovation management: Innovate or die. One consultant was quoted as saying “Typically, big companies are much more conservative than start-ups and won’t do anything that is untested or could risk future profits”,  It then listed an approach advocated by Amazon Web Services:

Two Pizza teams

The challenge is to find ways of recreating the energy an dynamism of lean start-up operations within larger companies. Which is where Amazon’s Two Pizza teams come in: Perhaps it is online retailer and web services provider Amazon that best exemplifies lean start-up principles in action.
“Keeping teams small enough to be fed by two large pizzas, giving them autonomy and direct access to customers, encourages risk taking and innovation”, says Ian Massingham, technical evangelist for Amazon Web Services (AWS), the retailer’s cloud platform. “AWS has launched 280 new services and features this year – it’s all about making things better for our customers.”

Most commentators accept there is no one way for big companies to innovate, but they all agree that without innovation your days at the top could be numbered.

As simple as that?

Not really. The basic point has been around as lean thinking since the 1980s and a best-selling book of that name by Jim Womack and Dan Jones, founders of the Lean Enterprise Institute and the Lean Enterprise Academy. Lean thinking is a mix of practical advice for project managers with a philosophic (sometimes evangelical) background for overcoming the functionalism and silos of large organisations. The shift is exemplified in the shift from Fordist production lines to Toyota’s dynamic small teams.

Teams shall not live by Pizza alone

But teams shall not live by Pizzas alone. Amazon already had an innovation culture before the Two Pizza concept was announced. As Massingham said, encouraging risk-taking and innovation requires more distributed leadership, and autonomy to workers. Transformation requires more than a smart name.


Is Amazon under control or under the influence?

July 28, 2014

Bezos bullet train
Amazon announces disturbing financial figures. Its charismatic chairman Jeff Bezos will, as ever, be taking the long view

The mighty Amazon – the company not the river – may be in temporary trouble. Its second quarter sales reported on Thursday [24th July, 2014] showed powerful growth in revenues but unanticipated losses. The results worried the numbers people. Shares, already drifting downward, slumped around 10% on Wall Street the following day.

Taking the long view

Its founder and leader Jeff Bezos is famed for taking the long view. He is a business visionary who fitted the bill as a great leader for the near classic story he has helped bring about at Amazon. His leadership style is restless and remorseless.

He is noted for personal involvement and fermenting a culture of creative challenge. He also likes to ‘back-engineer’ strategy from a desired future to reach and deal with imminent decisions.

The immediate future

The immediate future suggests that his enthusiasm for innovation in the interests of that more distant future may have incurred costs for the present. The ideas at times have breath-taking simplicity. Sometimes there is an initial appearance of craziness that often accompanies great creativity. Think Steve Jobs, or Napoleon even.

This week, the craziness appears to be found in the diversity of effort which may suggest a lack of a cohesive plan. The results were timed to accompany the launch of the company’s new smartphone, the Fire Phone. Other recent plans have included grocery delivery, video streaming, and drone delivery of products.

Not to mention The Washington Post

Then there was the recent takeover of the Washington Post, with assurances from Bezos that under his ownership the newspaper will retain its independence, and certainly without influence brought to bear to advance Amazon’s interests.

Bezos is a fascinating business personality. He has created one of the Century’s most successful businesses with a simplicity of its core competence of rapid, safe product delivery at highly competitive prices. Perhaps its strategic trajectory constrains the creative impulses of its remarkable founder.

To be continued

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The Lenovo Juggernaut Rolls on Unabated

June 10, 2014

Dr Pikay Richardson

Chinese personal-computer maker Lenovo Group is looking to acquisition to fuel further growth. The company has great ambitions, and cash to fund its plans. Will it be able to balance innovation and efficiency?

Lenovo recently concluded two deals worth collectively about $5bn. The company has acquired IBM’s low-end server business for $2.3bn and from Google, Motorola Mobility handset operations for $2.9bn. Both were seen as Lenovo’s efforts to diversify beyond PCs into other faster growing areas of the computer industry.

Growing through acquisitions

Lenovo’s foray into other business segments was not entirely surprising. Having beaten HP to become the world’s largest PC maker by shipments, it has been looking for new sources of growth, mainly in smart phones and servers and storage systems. “We will continue to use acquisitions as a means to grow”, Lenovo Chief Executive Yang Yuanqing said after a shareholders meeting in Hong Kong. “Wherever there is a good opportunity, we will grasp it”.

The company has great ambitions, and an extra cash store to match. After paying $4.7bn, it still has $2bn on hand, according to Wang Wai Ming, Lenovo’s chief financial officer. What is more, the current low-interest environment provides opportunity to raise further funds, which Lenovo is considering, according to Mr Wang.

Lenovo’s strong corporate governance regime

Investor confidence is high. On 21st May, Lenovo announced its full-year results in Hong Kong where it has been listed since 1994. Its revenues were 14% higher than the year before, at $38.7bn, while pre-tax profits topped over $1bn for the first time in its history, up 27% on the year before. But this is only part of what is causing the investor euphoria. The other is that, Lenovo unusually for a Chinese Company, claims a strong corporate governance regime, as well as consistently delivering predictable returns.

Lenovo’s ability to turn around the controversial $2.9bn purchase of Motorola Mobility has been questioned. The pioneer mobile phone has fallen on hard times, but Mr Yang has responded to skepticism by saying that he was confident his company will be able to turn around the unprofitable business in four to six quarters, based on a strategy of increasing economies of scale rather than trimming staff.

From losers to treasures

“We have a good track record of turning around money-losing businesses into treasure”, he said, pointing to Lenovo’s first foray into foreign markets when it bought IBM’s loss-making PC business in 2005. Few believed then that an obscure Chinese company could save a Western premium brand, but this is precisely what Lenovo has done. Yang went on “Lenovo is the best company in the world when it comes to balancing innovation and efficiency.”

Whether or not this claim is sustainable is more a matter of “wait and see”.


African Entrepreneurs suffer from venture capital shortage

February 14, 2014

African EntrepreneursLocal Entrepreneurs in Africa are disadvantaged by a lack of venture capital

In an article for Computer World, [November 2013] journalist Rebecca Wanjiku suggests several factors that may be contributing to a shortage of funds for new technology start-ups. There is no parallel with the vibrant venture capital hubs such as Silicon Valley in America or the University spin-off science pars flourishing in Cambridge [American or English versions].

The perceived challenges of businesses operating in Africa as well as the higher costs of due diligence and inexperience of the investors and entrepreneurs in the region have all worked to dampen the growth of venture capital funding for tech start-ups and mid-level businesses on the continent, according to industry insiders.
Local start-ups have held discussions and wondered whether their lack of success in raising big money had racial overtones. Companies run by whites seem to be luckier in securing funds. The problem, however, seems to be more about the perception of inexperience and a lack of contacts than race.
“I don’t think it’s about being white or black, it’s about your network; highly networked Kenyans have an easier time too,” added Erik Hersman, founder of the iHub Nairobi, a co-working space for techies.
“Innovative early stage ventures with the potential to yield high social and environmental impact and requiring less than $500,000 in financing remain the most difficult segment of the SME pipeline to reach,” said Ben White, founder of VC4Africa. VC4Africa is an online portal that brings together 13,000 entrepreneurs, VCs and angel investors interested in Africa. It was kicked off at the annual congress of the African Venture Capital Association in Dakar, Senegal, in 2007. Last year, VC4Africa start-ups secured $80,000 in funding while companies seeking expansion secured an average of $237,000 in funding.
VC4Africa works with entrepreneurs in 40 African countries but the number of start-ups and growing companies seeking funding outstrips the available capital. The lack of in-country funding mechanisms and lack of tech-specific financial facilities from the public sector most likely means that the problems will persist.

Leadership challenges

Leadership challenges abound. The contrast with the developments emerging in China, is stark. A similar sense of the availability of entrepreneurial venture backing is reported in India.


Hollywood blockbusters and the message for Big Pharma

January 6, 2014

AvatarThe business model for blockbusting films is coming under increasing scrutiny. There may be a message for the major drug companies

Last year, [2013] 26 films costing more than $100m each were released by the major Hollywood studios – more than ever before. They are likely to have raked in tens of billions of dollars in worldwide box office revenues as a result. But despite the runaway successes, there are concerns that blockbuster budgets are getting dangerously high.

The business model

The business model works because the large blockbuster is more the visible part of a process than a stand-alone product. The basic plan is to develop a series of movies after an initial demonstrated [financial] success. Each successor is part of marketing campaign now well-routinized of spin-off products and deals.

Only a fraction of revenues come from ticket sales with the bulk coming from television licensing, DVD sales, and assorted merchandising deals. Arguably it is the model for sporting franchises as well.

“There’s eventually going to be an implosion, or a big meltdown,” said Hollywood elder statesman Steven Spielberg in a speech earlier this year. “Three or four or maybe even a half dozen mega-budget movies are going to go crashing into the ground, and that’s going to change the paradigm.”

Spielberg had warned of an “implosion” in Hollywood as In 1980, Heaven’s Gate effectively bankrupted United Artists.

Half full or half empty?

British film academics John Sedgwick and Mike Pokorny have found that blockbuster films become have become more reliably profitable: in the late 80s just 50% of major studio films turned a profit. In 2009 it was 90%. Flops have become rare. Spielberg worries with others who note the changes in the market place. DVD sales are threatened by online streaming services such as Netflix. Studios are seeing profits growing more from their TV interests.

Aesthetic bankruptcy

Others refer to dumbing-down and “aesthetic bankruptcy”. Screenwriting talent is increasingly moving over to television.

Entertainment has flourished on change since silent moves found its voice, and later its glorious in sound and visual transformations. The blockbuster model may well be bust. The challenge to Hollywood is one that also applies to the giants in Big Pharma

A message for Big Pharma?

It is the challenge facing other industries where the early winners face being overtaken by outsiders as the name of the business game changes. Maybe Big Pharma will learn from Hollywood that the days of searching for big blockbusting drugs are over.

What else?

The question may be addressed by the stirrings of interest in new leadership approaches in recent years. The last movement to claim New Leadership was in the 1980s. That involving visions and transformations. Newer ideas are trying to recentre business leadership as utterly concerned with ethics and also with distribution of power and authority. [see here for a more critical view of distributed leadership]. It calls for further rethinking of the ultimate rationale for organizational structures and patterns of behaviour.

We not be able to wait another forty years for such ideas to be applied effectively and globally.


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