Tom Peters’

Re-Imagine2006!Business Excellence in a Disruptive AgeInvestec/Mauritius/10March2006

Slides* at …

tompeters.com

*short, long

The Pepsi Challenge …

Re-imagine!

Not Your Father’s World.

THREE BILLION NEW CAPITALISTS

—Clyde Prestowitz

December 9, 2005: “Ogre to Slay? Outsource It to Chinese”

(New York Times, page 1—news section). The “factory”: Fuzhou, China. The workers: youngsters logging 12-hour shifts. Their clientele: youngsters from “Seoul to

San Francisco.” The “work”: The Chinese youngsters are playing the early levels of video games for their affluent “clients,” who want to avoid the pain and time associated with those

annoying first few levels.

“WE ARE BEGINNING TO ACQUIRE … DIRECT AND DELIBERATE CONTROL … OVER THE EVOLUTION OF ALL LIFE FORMS …

ON THE PLANET.”Source: Juan Enriquez, As The Future Catches You

“the metabolically

dominant soldier”

Source: Radical Evolution: The Promise and Peril of Enhancing Our Minds, Our Bodies—and What It Means to Be Human, Joel Garreau

New Economy?

Genentech, Amgen > Merck

New Economy?

Sergey, Larry > Harvard

1. Re-imagine Permanence:

The Naked Emperor Problem!

Pathetic!

“Forbes100” from 1917 to 1987: 39 members of the Class of ’17 were

alive in ’87; 18 in ’87 F100; 18 F100 “survivors” underperformed the

market by 20%; just 2 (2%), GE &

Kodak, outperformed the market 1917 to 1987.

S&P 500 from 1957 to 1997: 74 members of the Class of ’57 were alive in ’97; 12 (2.4%) of 500 outperformed the market from

1957 to 1997.

Source: Dick Foster & Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market

“I am often asked by would-be entrepreneurs seeking escape from life within huge corporate structures, ‘How do I build a small firm for myself?’ The

answer seems obvious: Buy a very large one and just wait.”

—Paul Ormerod, Why Most Things Fail: Evolution, Extinction and Economics

Rate of Leaving F500

1970-1990: 4XSource: The Company, John Micklethwait & Adrian Wooldridge

(1974-200: One-half biggest 100 disappear)

Lessons Learned. GE. Me.

4/40

De-cent-ral-iz-a-tion!

Ex-e-cu-

tion!

Ac-count-a-bil-ity!

6:15A.M.

2. Re-imagine:

Innovateor

Die!!

Not

Optional!

“A focus on cost-cutting and efficiency has helped many organizations weather the

downturn, but this approach will ultimately

render them obsolete. Only the constant pursuit of

innovation can ensure long-term

success.” —Daniel Muzyka, Dean, Sauder School of Business,

Univ of British Columbia (FT/09.17.04)

Resist!

“When asked to name just one big merger that had lived up to expectations, Leon

Cooperman, former cochairman of Goldman Sachs’ Investment Policy

Committee, answered: I’m sure there are success

stories out there, but at this moment I

draw a blank.” —Mark

Sirower, The Synergy Trap

“Almost every personal friend I have in the world works on Wall Street. You can buy and sell the same company six times and everybody makes

money, but I’m not sure we’re actually

innovating. … Our challenge is

to take nanotechnology into the future, to do

personalized medicine …” —Jeff Immelt/2005

There’s “A” and then

there’s “A.”

Scale?

“I don’t believe in

economies of scale. You don’t get better by being bigger. You get worse.” —

Dick Kovacevich/Wells Fargo/Forbes/08.04 (ROA: Wells, 1.7%; Citi, 1.5%; BofA, 1.3%;

J.P. Morgan Chase, 0.9%)

“The slumping giant needs to put more pep in its

funds. … But size remains a

handicap.” —Fortune on Fidelity

Magellan/1128.05 (“There’s a practical limitation to running a fund of that size.”—Chris Traulsen, analyst, Morningstar)

“TOO BIG TO GROW: Why Wall Street has soured on

many of corporate America’s most admired and feared companies”

—headline, Newsweek, 0313.06

Spinoffs perform better than IPOs … track

record, profits … “freed from the confines of the parent … more entrepreneurial, more

nimble” —Jerry Knight/Washington Post/08.05

Different!

Franchise Lost!

TP: “How many of you [600] really

crave a new Chevy?”

NYC/IIR/061205

Beyond the “Pension Problem”

Sedan, Less Than $20,000. Sedan, $20,000-$30,000. Sedan, $30,000-$40,000. Luxury Sedan. SUV, Less Than $30,000. SUV,

More Than $30,000. Pickup Truck. Minivan. Green Car. Fun

To Drive.*

HENEVERMENTIONEDCARS

???????????

Millionaires/Deci-millionaires talk about “shareholder value.”*

Billionaires talk about “product.”**

*BigCo CEOs**Gates, Ellison, Jobs, Smith, Branson,

Buffett, Walton, Schultz, Murthy

“Value innovation is about making the competition

irrelevant by creating uncontested market space. We argue that

beating the competition within the confines of the existing industry is

not the way to create profitable growth.”

—Chan Kim & Renée Mauborgne (INSEAD), from Blue Ocean Strategy (The Times/London)

“[Immelt] is now identifying technologies with which GE

will … systematically set out to build

entirely new industries.” —Strategy+Business, Fall 2005

Great Companies … SET THE

AGENDA. (Period.)

AGENDA SETTERS: “Set the Table”/ Pioneers/ Questors/ Adventurers

US Steel … Ford … Macy’s … Sears … Litton Industries … ITT … The Gap …

Limited … Wal*Mart … Tesco … P&G … 3M … Intel … IBM … Apple … Nokia …

Cisco … Dell … MCI … Sun … Oracle … Microsoft … Google … Enron …

Schwab … GE … Southwest … Laker … People Express … Ogilvy … Chiat/Day … Virgin … eBay … Amazon … Sony …

Genentech … BMW … CNN …

“The difficulties … arise from the inherent conflict between the need to control existing operations and the need to create the kind of environment that will permit

new ideas to flourish—and old ones to die a timely

death. … We believe that most corporations will find it impossible to

match or outperform the market without abandoning the assumption of continuity. … The current apocalypse—the

transition from a state of continuity to state of discontinuity—has the same suddenness as the trauma

that beset civilization in 1000 A.D.”

Richard Foster & Sarah Kaplan, “Creative Destruction” (The McKinsey Quarterly)

“But what if [former head of strategic planning at Royal Dutch Shell] Arie De Geus is wrong in suggesting, in The

Living Company, that firms should aspire to live forever? Greatness is fleeting and, for corporations, it

will become ever more fleeting. The ultimate aim of a business organization, an artist, an athlete or a stockbroker may be to explode in a dramatic frenzy of value creation during a

short space of time, rather than to live forever.” —Kjell Nordström and Jonas Ridderstråle, Funky

Business

“The corporation as we know it, which is now 120 years

old, is not likely to survive the

next 25 years. Legally and financially, yes,

but not structurally and economically.”

Peter Drucker, Business 2.0

Focus!

Scale’s Limitations: “All Strategy Is Local: True competitive

advantages are harder to find and maintain than people

realize. The odds are best in tightly drawn markets, not big, sprawling ones”

—Title/Bruce Greenwald & Judd Kahn/HBR09.05

Big Winners

Lousy industry … Specialty (Ignored/No competition) … Smaller than competitors

4 Traits: Sweet spot … Agility … Discipline

… FOCUSSource: Alfred Marcus, Big Winners and Big Losers:

The 4 Secrets of Long-term Business and Failure

Op-ed. Wall Street Journal. 2 March 2006:

“Boutique vs. Behemoth: Upstarts Steal Market Share

from the Investment Banks.”

The Benefits of … FOCUSED EXCELLENCE

Shouldice/Hernia Repair:

30 min, 1% recurrence.

Avg: 90 min, 10%-15% recurrence.

Source: Complications, Atul Gawande

Easy!

Innovation’s Saviors-in-Waiting

Disgruntled CustomersOff-the-Scope Competitors

Rogue EmployeesFringe Suppliers

Wayne Burkan, Wide Angle Vision: Beat the Competition by Focusing on Fringe Competitors, Lost Customers, and Rogue Employees

We become who we hang

out with!

Measure “Strangeness”/Portfolio Quality

StaffConsultants

VendorsOut-sourcing Partners (#, Quality)

Innovation Alliance PartnersCustomers

Competitors (who we “benchmark” against)

Strategic Initiatives Product Portfolio (LineEx v. Leap)

IS/IT ProjectsHQ LocationLunch Mates

LanguageBoard

Hard!

“The Bottleneck Is at the Top of the

Bottle”“Where are you likely to find people with the least diversity of experience, the largest investment in

the past, and the greatest reverence for industry dogma?

At the top!”

— Gary Hamel/Harvard Business Review

Bold!

“Beware of the tyranny of making

Small Changes to Small

Things. Rather,

make Big Changes

to Big Things.”

—Roger Enrico, former Chairman, PepsiCo

“Reward excellent failures.

Punish mediocre

successes.”Phil Daniels, Sydney exec

Action!

“Execution is the job of

the business leader.” —Larry Bossidy & Ram

Charan/ Execution: The Discipline of Getting Things Done

“Execution is a

systematic process of rigorously

discussing hows and whats, tenaciously following through, and

ensuring accountability.” —Larry Bossidy & Ram Charan/ Execution: The Discipline of Getting Things Done

Relentless!**Churchill, Grant, Patton, Welch, Bossidy, Nardelli (GE execs),

UPS, FedEx, Microsoft/Gates-Ballmer, Eisner, Weill, eBay, Nixon-Kissinger, Gerstner, Rice, Jordan, Armstrong

Measurable!

Innovation Index: How many of your Top 5 Strategic Initiatives/Key Projects

score 8 or higher (out of 10) on a “Weirdness”/ “Profundity”/

“Wow”/ “Gaspworthy”/ “Game-changer” Scale?

Personal!

Step #1: Buy a Mirror!

“The First step in a ‘dramatic’

‘organizational change program’ is obvious—

dramatic personal change!” —RG

The Pepsi Challenge …

3. Re-imagine Organizing: The White-

Collar Tsunami and the Professional Service Firm

(“PSF”) Imperative.

“ ‘Disintermediation’ is overrated. Those who fear disintermediation should in fact be afraid of

irrelevance—disintermediation is just another way

of saying that … you’ve become

irrelevant to your customers.”

—John Battelle/Point/Advertising Age/07.05

Answer: Professional Service Firm/PSF!

Department Head

to …

Managing

Partner, IS [HR, R&D, etc.] Inc.

The

“PSF35”: Thirty-Five

Professional Service Firm Marks of Excellence

The PSF35: The Work & The Legacy

1. CRYSTAL CLEAR POINT OF VIEW (Every Practice Group: “If you can’t explain your position in eight words or less, you don’t have a position”—Seth Godin)2. DRAMATIC DIFFERENCE (“We are the only ones who do what we do”—Jerry Garcia)3. Stretch Is Routine (“Never bite off less than you can chew”—anon.)4. Eye-Appetite for Game-changer Projects (Excellence at Assembling “Best Team”—Fast) 5. “Playful” Clients (Adventurous folks who unfailingly Aim to Change the World)6. Small “Uneconomic” Clients with Big Aims7. Life Is Too Short to Work with Jerks (Fire lousy clients)8. OBSESSED WITH LEGACY (Practice Group and Individual: “Dent the Universe”—Steve Jobs)9. Fire-on-the-spot Anyone Who Says, “Law/Architecture/Consulting/ I-banking/ Accounting/PR/Etc. has become a ‘commodity’ ”10. Consistent with #9 above … DO NOT SHY AWAY FROM THE WORD (IDEA) “RADICAL”

?????

Do good (excellent?!) work

Make a lot of money

Gaspworthy!

The PSF35: The Client Experience11. Always team with client: “full partners in achieving memorable results” (Wanted: “Chimeras of Moonstruck Minds”!)12. We will seek assistance Anywhere to assemble the Best-in- Planet Team for the Project13. Client Team Members routinely declare that working with us was “the Peak Experience of my Career”14. The job’s not done until implementation is “100.00% complete” (Those who don’t “get it” must go)

15. IMPLEMENTATION IS NOT COMPLETE UNTIL THE CLIENT HAS EXPERIENCED “CULTURE CHANGE”16. IMPLEMENTATION IS NOT COMPLETE UNTIL SIGNIFICANT “TECHNOLOGY TRANSFER HAS TAKEN PLACE-ROOT (“Teach a man to fish …”)

17. The Final Exam: DID WE MAKE A DRAMATIC, LASTING, GAME-CHANGING DIFFERENCE?

The PSF35: The People & The Leadership

18. TALENT FANATICS (“Best-Coolest place to work”)

19. EYE FOR THE PECULIAR (Hiring: Go beyond “same old, same old”) 20. Early Opportunities (vs. “Wait your turn”) 21. Up or Out (Based on “Legacy”/Mentoring as much as “Billings”/“Rainmaking”)22. Slide the Old Aside/Make Room for Youth (Find oldsters new roles?)

23. TALENT IS OBSESSED WITH RENEWAL FROM DAY #1 TO DAY #“R” [R = Retirement]24. Office/Practice Leaders Evaluated Primarily on Mentoring-Team Building Skills

25. A “PROPRIETARY” TALENT DEVELOPMENT PROCESS (GE)26. Team Leadership Skills Valued Early27. Partner with B.I.W. [Best In World] Outsiders as Needed and to Infuse Different Views

The PSF35: The Firm & The Brand

28. EAT-SLEEP-BREATHE-OOZE INTEGRITY (“My life is my message”—Gandhi)

29. Excellence+ in EXECUTION … 100.00% of the Time30. “Drop everything”/“Swarm” to Support a Harried-On The Verge Team

31. SPEND ON R&D LIKE A TECH FIRM.32. A PROPRIETARY METHODOLOGY (FBR, McKinsey, Chiat Day, IDEO, old EDS)

33. BRAND MANIACS (Organize Around a Point of View Worth BROADCASTING)

34. PASSION! ENTHUSIASM!

35. EXCELLENCE. ALWAYS.

Static/Imitative

Integrity.Quality.

Excellence.Continuous Improvement.

Superior Service (Exceeds Expectations.)

Completely Satisfactory Transaction.Smooth Evolution.

Market Share.

Dynamic/Different

Dramatic Difference!Disruptive!

Insanely Great! (Quality++++)

Life-(Industry-)changing Experience!Game-changing!

WOW!Surprise!Delight!

Breathtaking!Punctuated Equilibrium!

Market Creation!

4. Re-imagine Business’s

Fundamental Value Proposition: PSFs

Unbound, or Fighting “Inevitable Commoditization”

via “The ‘Gamechanging Solutions’ Imperative.”

Up, Up, Up,

Up

the Value-added Ladder.

$55B

And the “M” Stands for … ?

Gerstner’s IBM: “Systems Integrator of choice.”/BW (“Lou, help us turn ‘all this’ into that long-

promised ‘revolution.’ ” )

IBM Global Services*

(*Integrated Systems Services Corp.): $55B

Planetary Rainmaker-in-Chief!

“Palmisano’s strategy is to expand tech’s borders by pushing

users—and entire industries—toward radically different business

models. The payoff for IBM would be access to an ocean of revenue—Palmisano estimates it at $500 billion a year—that technology companies have

never been able to touch.” —Fortune

The Value-added Ladder/Stuff ‘n’ Things

Goods Raw Materials

The Value-added Ladder/Stuff & Transactions

ServicesGoods

Raw Materials

The Value-added Ladder/Opportunity-seeking

Gamechanging Solutions

ServicesGoods

Raw Materials

“Game-changing Solutions”: Core Value-add Mechanism

PSFs (Professional Service Firm “model”)

+

Wow Projects (“Different” vs “Better”)

+

Brand Yous(“Distinct” or “Extinct”)

5. Re-imagine Enterprise as

Theater: A World of Scintillating “Experiences.”

“Experiences are as distinct

from services as services are from

goods.” —Joe Pine & Jim Gilmore, The Experience Economy:

Work Is Theatre & Every Business a Stage

“Club Med is more than just a ‘resort’; it’s a means of rediscovering oneself, of inventing an

entirely new ‘me.’ ”

Source: Jean-Marie Dru, Disruption

“The [Starbucks] Fix” Is on …

“We have identified a

‘third place.’ And I

really believe that sets us apart. The third place is that place that’s not work or home. It’s the place our customers

come for refuge.”

Nancy Orsolini, District Manager

The Value-added Ladder/Memorable Connection

Scintillating Experiences

Gamechanging SolutionsServicesGoods

Raw Materials

The Value-added Ladder/Emotion

Dreams Come True

Scintillating Experiences Gamechanging Solutions/

Business AdvantageServicesGoods

Raw Materials

Lovemark Dreams Come True

Awesome ExperiencesGamechanging Solutions

ServicesGoods

Raw Materials

Tattoo Brand: What % of users would tattoo the brand name on their

body?

Top 10 “Tattoo Brands”*

Harley .… 18.9%Disney .... 14.8

Coke …. 7.7Google .... 6.6Pepsi .... 6.1Rolex …. 5.6Nike …. 4.6

Adidas …. 3.1Absolut …. 2.6

Nintendo …. 1.5

*BRANDsense: Build Powerful Brands through Touch, Taste, Smell, Sight, and Sound, Martin Lindstrom

6. Re-imagine Excellence I: The

Talent Obsession.

“The Creative Age is a

wide-open game.”

—Richard Florida, The Rise of the Creative Class

Brand =

Talent.

“THE FUTURE BELONGS TO …

SMALL POPULATIONS … WHO BUILD EMPIRES OF THE MIND …

AND WHO IGNORE THE TEMPTATION OF—OR DO NOT HAVE THE OPTION OF—EXPLOITING NATURAL

RESOURCES.”

Source: Juan Enriquez/As the Future Catches You

“The leaders of Great Groups love talent and

know where to find it. They revel in

the talent of others.” —Warren

Bennis & Patricia Ward Biederman, Organizing Genius

PARC’s Bob Taylor:

“Connoisseur

of Talent”

The Cracked Ones Let in the Light

“Our business needs a massive transfusion

of talent, and talent, I believe, is most

likely to be found among non-conformists,

dissenters and rebels.” —David Ogilvy

“intrepid, unprincipled,

reckless, predatory, boundless

ambition, civilized in externals but a savage at heart.”

WellingtonNelsonDisraeliChurchill

MontgomeryThatcher

Our Mission

To develop and manage talent;

to apply that talent,throughout the world,

for the benefit of clients;to do so in partnership;

to do so with profit.WPP

A review of Jack and Suzy Welch’s Winning claims there are but two key differentiators that set GE “culture” apart from the herd:

First: Separating financial forecasting and performance measurement. Performance measurement based, as it usually is, on budgeting leads to an epidemic of gaming the system. GE’s performance measurement is divorced from budgeting—and instead reflects how you do relative to your past performance and relative to competitors’ performance; ie it’s about how you actually do in the context of what happened in the real world, not as compared to a gamed-abstract plan developed last year.

Second: Putting HR on a par with finance and marketing.

Re-imaginePeople Power:

The Talent50

7. Re-imagine

Leadershi: The Passion

Imperative.

Create a Cause!

“Management has a lot to do with answers. Leadership is a function of questions. And the

first question for a leader always

is: ‘Who do we intend to be?’ Not ‘What are we going to do?’

but ‘Who do we intend to be?’” —Max De Pree, Herman Miller

Find ’em!

“Leaders

‘do’ people.

Period.” —Anon.

Make It a Grand

Adventure!

Quests!

Organizing Genius / Warren Bennis and Patricia Ward Biederman

“Groups become great only when everyone in them, leaders and

members alike, is free to do his or her absolute best.”

“The best thing a leader can do for a

Great Group is to allow its members to discover their

greatness.”

Leadership’s Mount Everest

“allow its members to

discover their greatness.”

“The role of the Director is to create a space where the actor or actress can become

more than they’ve ever been before, more than

they’ve dreamed of being.” —Robert Altman, Oscar acceptance, 2006

Try It!

Sam’s

Secret #1!

Demand Action!

“We have a ‘strategic’ plan. It’s

called ‘doing

things.’” — Herb

Kelleher

Dispense Enthusiasm!

“Nothing is so contagious as enthusiasm.”

—Samuel Taylor Coleridge

Excellence. Always.

Cirque du Soleil!

ExIn*: 1982-2002/Forbes.com

DJIA: $10,000 yields $85,000 EI: $10,000 yields $140,050

*Excellence Index/Basket of 32 publicly traded stocks

Avoid … Moderation!

Kevin Roberts’ Credo

1. Ready. Fire! Aim.2. If it ain’t broke ... Break it!3. Hire crazies.4. Ask dumb questions.5. Pursue failure.6. Lead, follow ... or get out of the way!7. Spread confusion.8. Ditch your office.9. Read odd stuff.

10. Avoid moderation!

Nelson’s secret:

“[Other] admirals more frightened of losing than

anxious to win”

Free the Lunatic Within!

“You can’t behave in a calm, rational manner. You’ve got to be out there on

the lunatic fringe.” — Jack Welch

!