We Need 21st Century Management

Annika Steiber and Sverker Alinge wrote an important book a few years back (2015, I think), called The Silicon Valley Model. Dr. Steiber has since written a variation on that: Management in the Digital Age: Will China Surpass Silicon Valley?

One of the premises in both books is that many large corporations get stuck with the old rules of management, particularly "maximize shareholder value." Moreover, these corporations have a chain of command that tends to emphasize goals put in place by top management, with every manager underneath then judged on how well they fulfill those goals. 

Thing is, organizations get pretty efficient doing that. So efficient that it becomes a self-fulfilling prophecy. If you want to study what happens when that management style eventually breaks, take a look closely at what happened with General Electric. 

Nikon is also a very good example or 20th Century management. Nikon is management-from-the-top, by consensus, and in protection of shareholder value. That last part comes because of the shareholders themselves, about half of which are Japanese banking/insurance/investment firms who see Nikon as a way to make more interest/earnings than they can get from the Japanese Central Bank. Indeed, even though Nikon's free cash flow went negative this year, the stock dividend was not cut. I wonder if those financial firms realize that those dividends are now coming from loans and bonds they gave Nikon? (Don't worry, Nikon borrowed more than they needed. They've got plenty of cash sitting around.)

I'm just going to throw out a few of the ideas about what 20th Century management is all about: defensive, building moats, vertical authority, output targets, employees work only for money/stability (a few manage to climb the chain and promulgate the same management style). 

Recently I wrote about NikonUSA trying to push Z5 boxes. That's "output targets." I'm not sure that just setting output targets and then hitting them is even possible in a severely contracting and competitive market such as cameras.

But more to the point, what are you doing for the customer?

In one of the Silicon Valley companies I ran we had a framed statement on the wall that went something like this: customers first, employees second, shareholders third. Not exactly in those words—and there was a fourth pillar that's not important to this discussion—but that's what I was managing the company to. 

Why? 

Because if customers are happy, we're selling products and upgrades. They're telling other folk how good our products are, how easy it is to get hold of us and lobby for possible additions or changes, how well we support that customer when something went wrong, and they also found that we were using our own products, so saw the customer angle very clearly. 

Employees came second, because they're the ones creating those products and interacting with those customers. Those two things actually go hand in hand. Interaction with customers always helped our products long term. 

The trick, of course, is explaining to shareholders how it all works out for them. 

Would you believe Trickle Up Economics? ;~) That's right, good ole Laffer got it backwards. It's not that everything trickles down from investors, thus you must reward the investors first—which, by the way, there's not been any proof that this works, let alone is efficient—it's that the hard work of the employees coupled with the customers appreciating it that is what creates value, and that value does indeed flow up to the investor. 

As much as all of us complain about something or another in Apple products, everyone at Apple uses Apple products, the company is remarkably customer-friendly for its size, and both those things inform how to fix, modify, improve, or replace products. Did investors get shut out from all that Silicon Valley management going on in Cupertino? Heck no. If you create more value for customers, profits inevitably follow. 

I sort of understood this long before I got to Silicon Valley, and it's been reinforced in me over and over each time I took a time-out stint to work in media, as well. Magazines (and newspapers), think that they sell pages to advertisers. Nope. They sell the quality of their audience to advertisers. Screw up the content (product) and the customers go away, and eventually so do the advertisers. I've watched quite a few media companies start screwing up their product, and the inevitable result is that they start losing money and something bad happens to them. Any time you see a media company cutting content-producing staff, that's a Sign of the Apocalypse. 

Here's the thing: you can perfectly execute 20th Century Management and still find yourself sliding backwards. No system works forever, because the challenges, speed, and other variables change over time. You have to change with it. 

I don't really see that happening at the camera companies. Sigma tends to be more entrepreneurial and risk taking, but it's unusual in that for Japan. Sony, being a somewhat more global company due to its investments over the years (think Hollywood and Nashville, among others), has had to break free from some of the shackles of classic Japanese CES thinking. But frankly, they're all vulnerable as long as they manage the way they have been. RED was a really good example of just how vulnerable the stale video makers had been. GoPro another. And, of course, cameras in smartphones (which ironically, started in Japan but is not dominated by Japanese companies).

Twelve years ago I started writing that the camera companies were falling behind in technology, particularly when it came to ecosystems and communications. Today, I'm going to add this: the camera companies are falling behind in management practices, particularly when it comes to customers, the very thing that they're losing at the moment. 

How many things do these companies need to fall behind on before they go the way of the horse-pulled carriage?

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