HBR: The best companies know how to balance strategy and purpose

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The conception of developing a well-rounded strategy will lead the company to successful growth is false. The truth is, when the strategy doesn’t connect with a company’s purpose, it only achieves operational efficiency. The company may sustain a huge dominance over a market in the short-run due to its efficient approach toward its demand; however, in the long-run will face rivalry from business who tells the consumer the WHY they should purchase their product. In this 4-page HBR article, the author touches on several important points on why connecting strategy with purpose is crucial to a company’s success. Additionally, it also includes several examples on how company loses their competitive advantage when failing to integrate strategy and purpose.

One interesting example that the article outlined is that how Nokia fail to convey its purpose when the company is being very efficient in executing its strategy. In 2006 alone, Nokia introduced 39 new mobile-device models, acquiring huge market shares worldwide. However, much of its models are regarded by the consumer as different in styles and essentially the same function: nothing is new. Few years after, when Steve Jobs introduces iPhone with the primary purpose of “connecting people” by means of creating a mini-laptop inside your pocket, Nokia has lost the battle. Another few years after, Nokia was acquired by Microsoft.

Developing strategies and pushing forward initiatives should always not be the first step. Instead, the company must convey its purpose to their employee at first hand. In my opinion, large corporation often might fail to convey its purpose to their employee. Namely, the employee might lose track of the reason why they want to work for the company as well as what the company’s purpose is. Since the organizational structure is often too large to manage, employee’s conception of the company’s purpose may tie directly to simply market shares and profit. Such is evidenced by Uber, who over the past year was involved with many different scandals due to poor management.

The golden circle is something I learnt from a business Tedtalk made by Simon Sinek, entitled “start with why”. The golden circle begins from the center – why, how, what – and maps out why some organizations like Apple and Amazon are different from their competitor. In comparison, most people goes from outside (the clearest thing) into center (the fuzziest thing). An employee may know the tactics, the value proposition, but very often they don’t know what the company’s purpose. And this is precisely why I chose this blog: it teaches me what the best company do – think, act, communicate in the exact same way.

Word Counts: 430 words

Reference

Mesnard, L. C. (2017, November 07). The Best Companies Know How to Balance Strategy and Purpose. Retrieved November 12, 2017, from https://hbr.org/2017/11/the-best-companies-know-how-to-balance-strategy-and-purpose

Just a few days ago, the CEO of Amazon Jeff Bezos, became the richest person in the world with a net worth of $93.1 Billion, a $3.1 billion margin over Bill Gates. In recent years, Amazon is recognized for its bold moves to expand: a $13.4 billion acquisition over Whole Food Market as a way to increase its online sales, Amazon Prime Air which allows drone – instead of human – deliver your online shopping goods at a much efficient rate to your living space, and just a week ago its announcement of Amazon key, which let Amazon staff to unlock your front door to deliver your package or even to offer house cleaning services. From an investor perspective, this massive conglomerate giant seems to want every piece of opportunities, which diversifies its risks but also attracts bigger competition at the same time. Other potential worries also include anti-trust action: what if Amazon becomes an e-commerce monopoly in the near future? These audacious acts reflect Amazon’s goal to expand globally and to position themselves in the new market. In this blog, I would like to emphasize the value of thinking long-term.

Figure 1.1. Statistics of Amazon’s Revenue and Net Income from 1997 to 2015.

In a business era where Investors focuses on short-term results, Amazon plays its game long-term. Jeff Bezos once said that its ultimate goal (or BHAG) is to make it ‘irresponsible’ to not be a Prime Member. On the surface, Amazon has already achieved at satisfying customer needs: an online engine that offers a bucket list of items. Below the surface, they are investing in new technology (20% more than Google), opening new warehouses as a way to expand its distribution channels, dumping a 5$ million investment in India for digital payment technology, and so on. However, Instead of setting growth goals quarter by quarter, Amazon plays it much more slowly but ambitious. Every strategic initiative is not a move to merely generate profits so that they can receive more funds from the investor, but a potentially revolutionary change to the existing environment. Not only are these moves long-term oriented, but they are also creating a loyalty cycle: every strategic expansion Amazon purses are in support of its BHAG of making a consumer more willing to purchase Amazon Prime Membership. From a value proposition perspective, Amazon’s long-term oriented moves are transforming their business model into an infrastructure of the massive marketplace, from e-commerce, payment and finally to logistics. Although this strategy may require Amazon to invest more times in R&D, every piece of Amazon’s technologies will become part of their comparative advantage.

 

While Amazon has already established itself as the fifth most valuable company, most investors believe Amazon’s value will increase even more as the room for growth is still huge.

Figure 1.2. Room for internet uses growth 2016.

 

Word counts: 450

Bibliography

Reuters, T. (2017, October 26). Amazon sales surge after Whole Foods acquisition, busy Prime Day. Retrieved October 29, 2017, from http://www.cbc.ca/news/business/amazon-earnings-1.4374005

Vinton, K. (2017, October 27). Bezos’ $10 Billion Day Boosts Net Worth To Record High, Cements Him As No. 1. Retrieved October 29, 2017, from https://www.forbes.com/sites/katevinton/2017/10/27/bezos-10-billion-day-boosts-net-worth-to-record-high-cements-him-as-no-1/#5f81c980454e

Why investors are so keen on Amazon. (2017, April 03). Retrieved October 29, 2017, from https://www.economist.com/blogs/economist-explains/2017/04/economist-explains

Alibaba and Amazon look to go global. (2017, October 28). Retrieved October 29, 2017, from https://www.economist.com/news/special-report/21730539-e-commerce-giants-are-trying-export-their-success-alibaba-and-amazon-look-go-global

Comments on Kameel’s blog

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Upon reading Kameel’s blog on the topic of ethics, I not only strongly agree with his agreement but I also think this is a great example of a full-marks blog. A primary reason why his blog is full-marks arises from his coherent structure and effective resources. His writing is easy to follow and is backed up with evidence and a lot of personal opinions. At heart, I was really convinced by Kameel’s pragmatic argument that business needs to focus on business ethics because it directly correlates to its brand image and profit.

In his blog, Kameel argues that business should aim at more than simply increase shareholder value and backs it with an interesting example of Volkswagen’s emission scandal. One thing to note is that he only uses one small paragraph to summarise the news, which allows him to focuses more of his writing on his opinions. As for his evaluation of the news, he ties it to concepts from the Performance Management lecture. He notes that Volkswagen’s fast-growth oriented goals were one of the reasons why the scandal occurred. Additionally, Kameel’s blog also spurred up my thought on how short-term oriented business often fail to add any values. In Volkswagen’s case, focusing enormously on hitting the quarterly goal would ultimately disrupt its management culture. If Volkswagen were to focus more on long-term oriented directions, such as investing in electric and self-driving cars that are aligned with their value proposition, they would be much likely to be successful. Another thing to note is that when reading students’ blog is that their image isn’t effective. Often, other students use image of a brand logo/products, which is related to their chosen news, but not to their argument. For Kameel, his image is simple and direct: a diagram that shows Volkswagen’s stock plunge after the scandal. From the diagram, it shows that ever since the plunge Volkswagen was unable to recover and it also highlights the practical effects of undermining business ethics.

Another reason why I admire Kameel’s blog is the relevance of the topic. Recently, the Japanese corporate giant Kobe Steel admits falsifying data on 20,000 tonnes of metal, which has serious effects on many other businesses that rely heavily on metal (Boeing, Toyota, Ford and more). Although no accidents have yet occurred, Kobe Steel’s market shares dropped by a third, which is around $1.6 billion US dollars.

Figure 1.1. Kobe Steel market shares plunged after accusation of falsifying data.

These types of scandal occur more often than we expect. To me, the recurring theme seems to be a result of misleading short-term goals and transparent leadership.

Word Counts: 450 words

Citation

Kameel Ladak’s blog link

https://blogs.ubc.ca/kameelladak/2017/09/13/a-lesson-in-business-ethics-volkswagen/

Kobe Steel admits falsifying data on 20,000 tonnes of metal. (2017, October 12). Retrieved October 15, 2017, from https://www.economist.com/news/business/21730244-it-latest-long-list-scandals-have-befallen-corporate-japan-kobe-steel-admits

Image

https://finance.google.com/finance?q=TYO:5406

BLOG#2 Government and Business: Uber under threats

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The wide popular American ride-hailing company Uber is a huge success: from offering its service to 633 cities and setting up its ambitious vision of the driverless car industry, it has been always recognized as one of the fastest growing technology company from the Silicon Valley. However, recently Uber’s position in the market plunged due to a set of governmental regulations in both London and Quebec. Consequently, Uber’s CEO Travis Kalanick resigned from his position.

In London, since Uber’s approach to safety regulations are under heavy concerns, Uber’s license has been taken away by the Transport for London and its service will officially end at the end of September. Due to this scandal, last week the Quebec government announced that Uber drivers must go through 35 hours of mandatory training, in addition to have a criminal background check on the Uber drivers carried out by the police. As I dig more information from the Guardian news source, I found out that the past two years occurred many more scandals such as sexual harassment, underpaying the drivers, self-driving pilot failure, and the list goes on. Not only do these seriously challenge Uber’s competitive market advantage but also does it begs the question: what happened to Uber internally?

In today’s world, many businesses pursue fast-growth at the cost of ethics. This extreme short-sighted vision is one of the reasons why Uber’s London license has been taken away: increase the total number of drivers as fast as possible at the cost of safety. One example is that Uber used a software named Greyball, to help drivers avoid being caught when violating local regulations. Frankly, this fast-growth ideology is perfectly aligned with Uber’s business model: letting an ordinary person to earn money with its ordinary vehicles. Investors want the fast-return so they asked CEO to implement Uber into as many markets as possible, while most drivers also want fast cash. Without getting through the process as other taxi drivers did, such as paying licensing expenses, Uber can charge the customer less. Nonetheless, I think this fast-growth ideology is the reason why there occurred so many scandals during the past three years. This inevitably corrupts the management structure of the company. As a company wants to expand too quickly, its mismanagement of human resource leads to many obstacles. Now as Uber wants to expand into many other industries such as the driverless car industry, I am afraid it may run into more obstacles.

Ultimately, what does this short-term ideology reflects about Uber? I believe, frankly, that Uber may be found on the principle of illegality.

 

Word counts: 430

 

Bibliography

Levin, S. (2017, June 27). Uber’s scandals, blunders and PR disasters: the full list. Retrieved September 26, 2017, from https://www.theguardian.com/technology/2017/jun/18/uber-travis-kalanick-scandal-pr-disaster-timeline

Kassam, A. (2017, September 26). Uber threatens to leave Quebec in protest at new rules for drivers. Retrieved September 26, 2017, from https://www.theguardian.com/technology/2017/sep/26/uber-threatens-leave-quebec-drivers

Khan, S. (2017, September 22). Uber deserved to lose its licence – Londoners’ safety must come first | Sadiq Khan. Retrieved September 26, 2017, from https://www.theguardian.com/commentisfree/2017/sep/22/uber-ban-london-safety

Uber is facing the biggest crisis in its short history. (2017, March 25). Retrieved September 26, 2017, from https://www.economist.com/news/business/21719509-can-ride-hailing-giant-stay-fast-lane-uber-facing-biggest-crisis-its-short

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http://www.huffingtonpost.ca/jerry-dias/uber-canada-controversy_b_9252656.html

After finish reading and understanding both Friedman and Freeman’s argument toward business ethics, I personally favor the latter while I possess a strong doubt over Friedman’s static interpretation on Capitalism. In Friedman’s six-page essay on the social responsibility of business, he argues that in acting social responsible outcome, the CEO violate the contract to their shareholder, undermines the work of government (taxation without representation), and might not even have a clear picture of how to contribute back to the society. To attack Friedman’s argument, I think today’s business does not follow a singular direction, what if the CEO discusses his socially responsible project with the shareholders? In fact, a business operates on the basis of this process. Moreover, I believe the work of Corporate Social Responsibility is not even a political one. If we are to speak of the air we breathe or the water drink, it is essentially the welfare of the people. Even though Friedman’s argument may be true in many cases, I feel pure capitalism might not be sustained only from the angle of maximizing profit. Instead, my understanding of Corporate Social Responsibility is that it is not an act of the socialist, but in fact, a necessary and feasible action that may make business more profitable in the contemporary society. So in this blog, I would like to ask the question, can ethics be a part of a business model?

Upon researching on Toms Shoes, a for-profit company based in California that focuses on Shoes and Clothing, I found out that a company’s business model can be indeed installed with ethics. Toms Shoes is famous for its “One for One” model, which for every one shoe sold the company would deliver a pair of free shoe to children who are in need. So far Toms Shoes has already given away 60 million shoes worldwide and has also expanded its mission to provide free water and restore eyesight for people in need in the developing countries. (Shana Lebowitz) In this context, the importance of ethics in regard to attracting consumer and leveraging brand image is obvious: it provides the consumer strong incentives to purchase their product. As the awareness of the role of ethics spreads in today’s world, more and more people are increasingly attracted to this kind of promotion. The consumer is now part of something that is more than a transaction, or as the most would call it as the “caring capitalism”. (Shana Lebowitz) Linking this example back to the stakeholder theory, with the rise of information technology, businesses are assessed from multiple aspects: especially their contribution toward Corporate Social Responsibility. If any business wants to be successful, it must start with ethics.

 

443 Words.

 

Bibliography

Lebowitz, Shana. “On the 10th Anniversary of TOMS, Its Founder Talks Stepping down, Bringing in Private Equity, and Why Giving Away Shoes Provides a Competitive Advantage.” Business Insider, Business Insider, 15 June 2016, www.businessinsider.com/toms-blake-mycoskie-talks-growing-a-business-while-balancing-profit-with-purpose-2016-6.

 

Image

http://blog.hennaart.ca/2012/11/toms-one-for-one.html

https://www.linkedin.com/pulse/20140324130510-6418773-expanding-one-for-one-to-coffee/