Bear Stearns and the art of making money in tough times

September 13, 2007

joseph-and-his-amazing-wastecoat.jpgTough times bring with them opportunities. Hardly surprising, then, that entrepreneurs invest where and when more cautious souls are scrabbling to escape. Joseph Lewis and his investment in Bear Stearns is a recent example


[An update can be found [March 17th 2008] to the following post]

Doom and gloom in the world’s financial markets. At the core of the problems are those institutes in the so-called sub-prime markets. At the core of the sub-prime business are the American investment and banking giants such as Bear Stearns.

But the principles of entrepreneurship hold. One of these is a calculated approach to risk-taking. Which appears to be what British entrepreneur did recently in investing in Bear Stearns.

Those of us outside the collective frenzy of the trading rooms have to reply on the indicators of expert opinion. The most immediate indicators are that the mighty Bear Stearns organization has been having a particularly tough time. Losses in two large funds seem to have prompted leadership changes.

According to a Bloomberg report

Bear Stearns triggered a decline in the credit markets in June after two of its hedge funds faltered as default rates on home loans to people with poor credit rose. For subprime mortgages turned into securities, defaults hit a 10-year high. The company pledged $1.3 billion to help stem losses in the funds. They filed for bankruptcy protection on July 31, two weeks after Bear Stearns told investors they would get little, if any, money back.

This was followed the removal of senior figures including one of the joint Presidents, Warren Spector, leaving Alan Schwartz, 57, as sole president. Spector was regarded as being groomed to take over from 73 year old James Cayne as CEO. The leadership moves have been seen as attempts by Mr Cayne to reassure markets.

Get out of that place

As a leadership watcher, my impressions recently have been that Credit Markets are a bad place to be in. And Bear Stearns a particularly bad place to be invested in. [Background music of I gotta get out of that place].

But such pessimism swamps awareness of opportunities to be made out of adversity. Step forward the fearless entrepreneur.

This week we learn that Billionaire British investor Joseph Lewis has invested over £400 million to acquire a 7% stake in Bear Stearns

Joseph Lewis. Who he?

A good starting point for billionaire bulletins is the Forbes Rich-List

Turns out that Mr Lewis is a self-made billionaire now happily located in Bahamas, gainfully employed through his Tavistock investment apparatus. There he is also busy building a nice little golfing set-up around the corner with his golfing chums Mr T. Woods and Mr E. Els.

Pausing one day, maybe on a newly leveled tee, he is unable to resist setting up a birdie chance. His route may skirt dangerous ground, but there’s no gain without risk. He makes his selection. A beautiful swing. Faint, Muppet-like cry of ‘in the hole’ from an admiring spectator …

Enough of this golfing metaphor. According to the BBC
Mr Lewis has bought the shares over the past two months through his Florida-based investment firm Tavistock, according to a filing to the US financial watchdog, the Securities and Exchange Commission. It makes him Bear Stearns’ largest individual investor… His other investments include minority stakes in Tottenham Hotspur and Glasgow Rangers football clubs.

To boldly go

What’s the leadership angle? The entrepreneur seems to me to capture the archetype of the heroic leader. In mythology, the hero leaves the everyday world and sets out on a lonely and courageous adventure. Along the way he (usually he) encounters the greatest and most fearful of hazards, before overcoming them, and eventually returning home. In most fairytales the hero is reunited with his love, and they live happily ever after. This seems to be the story of the entrepreneur-hero. Which is also pretty much the case for the business leader-hero, whose courage gains its deserved rewards.

The Greeks tended to include in the story such wrinkles as the way that the hero’s achievements are temporary blips in a final outcome determined by fate, the Gods, or whatever.

In either case, the hero-figure boldly goes where most of us fear to travel.

Eddie Stobart’s M-way catwalk

August 18, 2007


This week a British road haulage firm was involved in what is technically a reverse takeover. Boring? Not when a cultural icon like Eddie Stobart is involved. We look at the business realities behind the brand that turned trucking into a motorway fashion show.

Eddie Stobart is a very English organization with amazing brand recognition. Even more remarkably, that status has been achieved largely not by customer satisfaction, but by non-customer satisfaction. The haulage firm has established itself in the affections of the public by an unrivalled charm offensive.

Eddie’s story

Edward Stobart Jnr took over his father’s haulage business delivering agricultural products to Cumbrian farmers. The firm grew, and Eddie’s imaginative leadership style created a unique business. For example, he personalized each of his trucks with a female name starting with the then super-model Twiggy, and following up with the musical pop idols of the day (Tammy, Dolly and Suzi). Eddie’s business values required trucks and drivers to present shiny clean appearances. As time went by Eddie Spotting became a Motorway pastime. Children kept notebooks with the details of the times they had caught a glimpse of Tammi or Twiggy. A cult was emerging.

According to Wikipedia,

In 2002, following difficulties caused by the fuel crisis, Edward Stobart sold the company to his brother William and his business partner Andrew Tinkler who own a civil engineering company specializing in railway maintenance called W.A. Fans and fantasies

Since 2002, ES has remained a fantasy company in the public eye, symbolized by the thousand or so A-list celebrity models cruising up and down the motorway catwalk. But there was another and hidden side to ES. Fans are generally avid for every detail of what lies behind the glossy exteriors of their fantasies. The ES fan club members were content to tick the boxes, buy the merchandise, watch the TV animation (‘Steady Eddie’). They were not interested in the commercial story behind the fantasy.

Which was?

The trucks were struggling to pay their way. For all the brand recognition, trucking is part of that modern notion a supply chain. And in the retail supply chain, the profit carve-up leaves big retailers with the lion’s share of the goodies, with the worker ants well down the food chain. Truckers are down there with the worker ants, producers and beasts of burden. Less metaphorically, the transport business is at risk from uncontrollable costs, including fuel. As fuel prices rise, so truckers struggle to remain profitable. The owners of those glossy trucks began to look for ways of transforming the business.

As the BBC put it

By the turn of the [20th] century, the Carlisle-based company had a fleet of about 800 trucks, a massive property portfolio and a turnover of some £150m. But although the company was at its peak in terms of size, it made its first loss in 2001 in the face of rising fuel prices, a shortage of trained drivers and tougher demands from its customers.

Now ES is heading for a stock market quotation.

The move follows after the firm announced plans to join with property and logistics group Westbury Property Fund in a complex reverse takeover. While Westbury is paying £138m to buy Eddie Stobart, Stobart’s owners are buying Westbury’s property portfolio for £142m. The merged group will be called Stobart and take up Westbury’s share listing

What happens next?

The deal is expected to be legally confirmed by Westbury later in the year. Overall, the case will offer considerable insights into the outcome of a strategy claimed to be one that will protect and transform a much-loved brand. Beyond that, the story promises more twists and turns. Will the unique branding of the former Eddie Stobart operation have much value in a few years time? Whatever happens, professional investors will take care to distinguish the fantasy from the financials.

A blogger’s question

Blogger Jon Howard asked a question worthy of a business school marketing examination:

Eddie Stobart has created a discrete community of fans whose relationship with the brand has absolutely nothing to do with its core business (and probably never will), and may have little provable impact on the bottom line. But they encourage and support it any way. And it feels like a good thing. So are there other examples of brands who have done something similar?

It’s not similar in one respect, but I mention it anyway. Once there was another British icon on the pre-motorway roads. The firm always had immaculate vehicles and smartly-dressed drivers who saluted. It expanded mightily from its origins. It was the Royal Automobile Club later known as the RAC. It is still a fine organization. Competition and change, however, have also hit the RAC. Do its drivers still salute? Like ES, the RAC was forced into diversification, cross-selling and all that stuff. It is now part of a large insurance group. Its main rival, the AA, has fallen into the hands of a private equity organization.

Royal Mail: Lions led by donkeys?

July 12, 2007

lions_donk_haig_cartoon.jpgA second one-day strike at Royal Mail is announced for Friday 13th of July. Letters are exchanged between the Union and Management. In that curious way of industrial disputes, the letters seem intended to avoid constructive dialog. The battle looks more and more like the Somme, or perhaps Little Big Horn and General Custer’s last stand.

Events at Royal Mail grind forward, painfully slowly. Billy Hayes and Dave Ward are in there somewhere battling for the Union side, Allan Leighton and Adam Crozier also somewhere for ‘Management’.

Sometimes the general shape of a battle-field has old warriors reminiscing of past triumphs and disasters. Two historic possibilities occur to me, one from The First World War, and one from the early days of American History.

Despite rumors to the contrary, I do not have first-hand experience of either, although my father survived the Somme, an experience that stayed with him for the rest of his life. He rarely talked about it. There were no real survivors. Poets and military historians give us a picture of the bloody futility of it all.

Appeals to Patriotism

The first world war was a war of patriotic slogans, sometimes wrapped up in the noble ancient language of the ruling class.. Dulce et decorum est, pro patria mori… Lions led by donkeys. Two or three generations later and there is cultural residue, a nagging awareness in Great Britain, going back to Dr Johnson’s maxim that patriotic rhetoric is the last resort of the scoundrel.

While patriotism remains more desirable and contested ground in the USA, two American journalists are worth mentioning for a modern gloss.

In Dr. Johnson’s famous dictionary, patriotism is defined as the last resort of a scoundrel. With all due respect to an enlightened but inferior lexicographer, I beg to submit that it is the first.”—Ambrose Bierce, The Devil’s Dictionary, at entry for patriotism, The Collected Writings of Ambrose Bierce, p. 323 (1946, reprinted 1973).

H. L. Mencken added this to Johnson’s dictum: “But there is something even worse: it is the first, last, and middle range of fools.”—The World, New York City, November 7, 1926, p. 3E.

Lions led by Donkeys

Historians argue over the origins of the term. Alan Clark wrote a book which helped popularize the expression. A reviewer noted:

The title comes from the German view of the English soldiers who charged into their machine guns and barbed wire: “Lions led by donkeys.” The donkeys were the professional officers of the British army which was destroyed in those battles, officers who were unable to adapt to the awful technology that changed the face of war forever

Back to the Royal Mail dispute

From the outside, events since the last one-day strike are baffling. Maybe they are as baffling on the inside as the battle orders were to the front-line troops on the Somme, or to General Custer’s men.

As the troops hunker down for the next planned push, the generals exchange letters. The tone of the letters is that of civilized beings engaged in diplomatic speak. Dear Allen, Dear Dave they begin.

But are the generals struggling and ‘unable to adapt to the awful technology’?

There is no alternative

Royal Mail claims it needs a billion pounds for the new technology, rather than meeting payclaims they compute as roughly the billion pounds for modernisation. There is no alternative. Or is there? It seems cruel to quote words associated with Margaret Thatcher, a general who waged war with another great Union two decades ago.

Today we have a new generation of political leaders. Dave the toff an open admirer of Tony Blair trying to drag the conservatives to a safe place for their political survival. Gord of the clunking fist is busy recruiting talented capitalist heroes to advise him.

Maybe the outcome will eventually attract more political attention. But for the moment, Dave and Gordon are united in their silence over the Royal Mail dispute. The BBC is curiously uninterested. The business has not yet cast any leader in a particularly heroic light. Creative leadership is at a premium.

Boeing, theater of dreams and Airbus nightmare

July 8, 2007


Boeing launches its much-awaited Dreamliner 787. For Airbus is must seem more like a nightmare. In this fantasy battle, their champion, the Airbus 380, appears to be as potent as Superman in Kryptonite underpants. Can the European aero-dream still turn out all right in the end?

In Seattle they build planes. And, at the moment they are also very much in the Hollywood territory of selling dreams. The fantasy object is the new Dreamliner. High-tech, high-flying, the i-phone of the skies, the flying apple of the mind’s eye.

Meanwhile, some six thousand miles to the East (well within the 8000 mile range of the Dreamliner), Airbus executives put a brave face on for the ceremonies.

The power of the dream

Who can doubt the power of the dream? Who knows what happens if we stop believing, as James Barrie reminds us in Peter Pan, and Terry Pratchett points out in The Hogfather.

The selling of the dream has been a signal success, with press release claims that the 787 is already the fastest-selling commercial airplane in history with over 600 orders valued at more $100 billion at current list prices.

Even those us immune to the romance of the tale know that the 787 is the next giant leap of a line of aircraft of great consequence in the history of civil aviation. The 707 was a first. The 747, affectionately known as the first Jumbo jet. Now the 787, the star in the theater of aero-dreams.

Airbus versus Boeing

From the American side of the Atlantic the battle is a no-contest. Here’s the view of Lance Winslow, a not totally unbiased correspondent assessing the Dreamliner against its most direct competitor the Airbus A-350

Is the A350 really that spectacular? Hard to say, but one thing is for certain it is certainly no match for the robust, daring and dashing Dreamliner of today. Airbus’s attempt to compete with the Free Market Boeing Company has once again earned itself a distant second place or last place in the battle for the sky. The A-350 will use the same fuselage as the A330, but the wings will be made of composite. This is hardly a reciprocal response to Boeing’s cutting edge technology and advancements in design. But we have come to expect mediocrity from Airbus. When flying do you really want to ride in a bus while traveling at 30,000 feet in the Air? Think about it.

The Free-Market Boeing versus EU-subsidized EADS is important issue which will continue to be brought into the debate. The article also gets to another the key factors in the argument, the technical merits of the competing products.

Meanwhile in Europe …

In Europe, the financial press is more preoccupied with the boardroom battles within EADS, the corporate parent of Airbus. The Financial Times suggests that the efforts to restructure its complicated dual-management structure appear to be centering on co-chief executive Tom Enders.

Mr Enders is a controversial figure in France after he publicly criticized political interference from Paris and suggested the possibility of sensitive asset disposals. However, Daimler, the core German industrial shareholder in EADS, is determined that Mr Enders should not be sacrificed in any final deal.

We will continue to follow the twists and turns of this board-room battle. My point here is that persistent stories of corporate infighting may be indicating that the overall position is highly unsatisfactory. Boeing, we may presume, is doing very nicely. So nicely, that there are few rumors of boardroom clashes. In contrast, EADS leadership is forced to attend to the battles over its international border disputes.

The Chequer Board

What if anything can EADS, and more specifically the larger part of the outfit which is Airbus, do to break out of its nightmare? Incidentally, a deadline is approaching (July 16th) which dragged the New French President into the battle.

Let me put a few pieces on the chessboard. Louis Gallois, head of Airbus, is widely admired, and believed to be needed to stick it at Airbus, and see though Power 8, the strategic plan to streamline the business. This is a production and commercial imperative. He is co-CEO of EADS with Tom Enders at present.

Arnaud Lagardère of the media group of the same name is French Co-chairman of EADS . His German co-chair is Rudiger Grube.

Nicholas Sarcozy and Angela Merkel are also in play, with special concerns for their national interests (and for their own political positions). EADS Shareholder DaimlerChrysler has signaled willingness to increase its holding, a positive gesture to Sarcozy who would like to reduce the holding of the French Government. DaimlerChryser’s bid is linked to their interests in keeping Tom Enders in play.

The rumors in the French press

Rumors suggest the game will involve taking Enders off the board. This has been denied emphatically by the company.

The current form of the EADS/Airbus nightmare will be shared more widely in Toulouse after this month’s summit meeting.

The Apprentice

June 27, 2007

350px-tovenaarsleerling_s_barth.pngMy curmudgeonly view of The Apprentice is largely focused on the view that it presents a distorted and undesirable role model for would-be business leaders. However, it can be argued that the series exposes dubious business practices, and that subsequent debate can be healthy.

Why should the owner of a large corporation risk public ridicule while seeking high-profile visibility for himself? In the news at the moment has been Sir Alan Sugar, and his BBC TV show The Apprentice. That other knight, Sir Richard Branson, has an even longer tradition of self-publicity, and would probably also be tempted into TV stardom given the opportunity.

One difference may be that Sir Richard’s publicity stunts have, mostly, been associated with his beloved Virgin Brand. By and large, the restlessly innovative brand and the image of RB seem pretty compatible.

So what about Sir Alan and his business interests? He has stated that he is doing the show because he enjoys it, and because he thinks it worthwhile to communicate the excitement of the world of business.

I note this without recalling the original source, but I can’t recall that he says he is taking part because it’s good for his business interests. On the other hand, it’s a pretty safe bet he doesn’t consider it to be harming his commerical net value.

What’s happened to Amstrad?

AS a matter of record, as Sir Alan’s public visibility has grown, so has the share value of Amstrad. Significantly. Over six times their quoted value in early 2002.

So Sir Alan’s show has helped Amstrad?

Well … it’s not as clear-cut as all that. A few years ago in 2002, the shares had plummeted to a price of 20p, suggesting that the company was a near basket-case.

At present, financial analysts see Amstrad’s main business is in the highly competitive one of selling set-top TV boxes. There is no evidence of great growth there. The vitality and entrepreneurial flair brought to the company in its early days by Alan Sugar seems have disappeared. My scanning of the financial press suggests that the company’s future prospects are not rated highly. [This is a personal view, and not, repeat not advice from a successful share-tipster.]

As part of a strategic response to corporate difficulties, the TV exposure hasn’t worked.

Is The Apprentice a good showcase for business?

Sir Alan says so. The BBC have commissioned another two series, and have increasingly talked-up the status even of those would-be apprentices ejected from the house (I meant, those fired from the programme). As each is evicted (sorry, ‘fired’) he or she has another brief period of celebrity.

By and large a consensus seems to be emerging beyond the vested interests of the BBC that The Apprentice throws as much light on Business as earlier and better-scripted series such as Steptoe and Son, Are You being Served, and Only Fools and Horses.

One article highlighted some undesirable elements if the show was intended to mirror business life.

“I think I would be very uncomfortable being Sir Alan Sugar’s solicitor now,” says Nicholas Lakeland at London law firm Silverman Sherliker. “I wouldn’t say his approach is consistent with what employment lawyers would advise.”

Although at interview you are only protected against discrimination after a year at an office, you can claim constructive dismissal, and where bullying is really bad, protection from harassment. If Sir Alan behaves in his company like he does on TV, warns Lakeland, he could find himself in hot water.

Bullying can prove very expensive for businesses. Last year Deutsche Bank had to shell out £800,000 to workplace bullying victim Helen Green. In 2003 Steven Horkulak was awarded nearly £1m in damages by the courts after months of abuse by his boss, president of brokerage firm Cantor Fitzgerald International. Employers be warned.

My case is, that the omnipotent boss as acted out by Sir Alan Sugar in The Apprentice, is a poor role model for much of today’s business. He illustrates many of the characteristics that have helped him achieve success for a self-made multi-millionaire. The vital ingredients of determination, resourcefulness, energy, single-mindedness are not so obvious as a kind of unthinking and gratuitous bullying. The style is by no means universal among successful business leaders. I have suggested elsewhere that such tyrannical behaviors are most often found concentrated certain industries including the media.

These objections have been raised elsewhere.

Steve Carter, head of recruitment firm Nigel Lynn, condemns the unrealistic “brutality” of the show’s recruitment process. “The idea that people should set about stabbing each other in the back to succeed is not good business,” he says.

To that I would add another misgiving. The episodes are followed by tired radio productions which remind me particularly forceably of the culture of Celebrity Big Brother.

The Case for the Defence

I have been inclined to rant a bit about a programme which I have trouble watching for more than a few minutes. So let me have a go at defending The Apprentice. It has revealed one example of muscular leadership. Wannabe leaders can discuss what they have seen. In pubs and workplaces this is already producing discussion. Maybe this in turn will allow people to figure out ways of coping when they come under fire from a bullying boss. Even better, some bosses may perhaps review their own leadership behaviors towards employees, and consider alternative patterns.

No news is good news in Alliance leadership change

June 17, 2007



Alliance and Leicester make a smooth leadership transition. Insider David Bennett will replace Richard Pym as CEO next month. The move is accompanied by good profit forecasts. The absence of turbulence suggests that the company is under no pressure to signal any change of strategic direction.

The Company makes a leadership announcement

David Bennett, Group Finance Director of Alliance & Leicester plc, will become the company’s Group Chief Executive with effect from 27 July 2007. This follows the announcement in February that Richard Pym, Group Chief Executive, had asked the Board to consider his successor, resulting in an extensive search process which considered a range of internal and external candidates.

[Press Release, 13th JUne 2007]

The transition in leadership checks all the boxes for a company that is progressing nicely. No muscular interventions from stakeholders. Mr Pym, after five years at the helm announced as early as February that he was intending to stand down, after leading the bank for five years. David Bennett had scored considerable brownie points internally last year through his efforts which was seen as thwarting a possible takeover bid from Credit Agricole.

Compare this to the difficulties that the Government had in achieving the transition from Tony Blair to Gordon Brown. Or compare it to the difficulties experienced by companies when a change of leader was forced on them by unwelcome pressures sometimes from outside the company, sometime from inside.

Not without problems

We should not assume that A&L are blessed with a completely calm business environment. The BBC has been following news of the bank’s interest charges. Like other high-street lenders, it has had its share of adverse publicity.

The Alliance & Leicester (A&L) bank has apologized for a letter sent to customers who are trying to reclaim overdraft charges ….In February, the Financial Ombudsman Service criticized the A&L for closing the accounts of some customers who were suing the group for excessive overdraft charges ..

Another signal of robust health?

There are times when bad news can be read as good news. The rumbling stories of the nasty banks bullying their helpless customers have the effect of putting the institutions under the further scrutiny of financial journalists. Any evidence that a bank is in deeper trouble is likely to be revealed. So, to this outsider, A&L seem in good shape.

Boxes to tick

The available evidence in this case suggests a little check-list for an orderly transition of power from one leader to the next. The list has been shaped with private sector organizations in mind:

Outgoing leader makes surprise-free announcement of intention to depart
Announcement of internal successor is surprise-free
No evidence of harmful board-room battles
Profit forecasts in interim period are satisfactory
Media coverage fails reveal deeper problems (extra weight if there is a potential ‘bad news) story

Investor health warning

The check-list seems a useful starting point for evaluating a company’s transition from one leader to the next. With a little more research, it could turn into a nice indicator of leadership transition. This is one indicator of a company’s financial prospects for the future. Which might just be factored in to a decision to buy or hold shares.

On the other hand, there is plenty of evidence that investing to beat the market requires faith in more than a single indicator of corporate health. External ratings present a picture of a solid company with risks mainly around a major deterioration in the UK housing market. Less likely for the Alliance are risks associated with disruptive corporate innovation associated with change of strategy.

The drug pipeline: Is it bust, and if so can we fix it?

June 11, 2007


Since the post, the concept of Open Innovation has become popular. It may well provide the alternative metaphor called for. Original post follows. [Update added Aug 2009]

The big question for Big Pharma: Is the pipeline metaphor for drug discovery and exploitation no longer fit for purpose? And if so, where do we look for a more appropriate metaphor?

For decades, innovation texts have documented the basic process of drug discovery and exploitation as progressing through a pipeline. But it is a very peculiar pipeline, because it has a huge number of ‘things’ entering at one end (ideas), and a tiny number of things (products) emerging from the other end of the pipe.

Think of the pipeline as an ice-cream cone placed horizontally and you’ve got the broad picture to be found in the text-books. The ‘things’ entering in great numbers at the business end of the cone are ideas for active chemicals or leads. The ‘things’ oozing slowly out at the other end are new drugs, of which there even fewer ‘big winners’.

Once strategic considerations have identified a medical opportinity or need the pipeline process begins in earnest. The description offered by AstraZeneca is a generic one:

High Throughput Screening is an automated system for testing tens or even hundreds of thousands of compounds rapidly and is highly effective for eliminating ineffective compounds and identifying potentially useful ones.

But the pipeline model has had its critics :

Ten years ago, high throughput screening (HTS) was being touted as the answer to improving productivity in drug discovery. If screening thousands of compounds a week was good, screening hundreds of thousands would be even better. This led to the boom in Ultra HTS (UHTS), manufacturing-scale systems, and high-speed automation. Today, reality has begun to creep in: HTS and UHTS have not lived up to their hype. R&D productivity is not improving, in fact it may be declining

A model past its sell-by date?

My uneasiness about old mental models is being echoed by pharmamacutical insiders. Mats Sundgren with many years of experience, has successfully completed his doctorate on the need for new thinking in the industry. He argues that over time, research has increasingly accepted the need for rationality in a way that is precluding the possibilities for imaginative (‘creative’) leaps of discovery. Sundgren argues that the management of creativity will be the decisive competitive advantage of the future.

Alexander Styrhre of Chalmers University with Sundgren have further developed an analysis of pharmaceutical companies.

They suggest that the there is a wider need for more creativity, extending far beyond Big Pharma.

Is the pipeline bust, and must we fix it?

The drug pipeline has become such a given for those in the business of drug making and exploiting, that its inherent looseless is now left unchallenged. What might have started as a metaphor borrowed from earlier industrial usage has become a taken-for-granted cliche.

Take for example the press statement of a partnership between AstraZeneca and Bristol-Myers recently. A headline illustrting the industry dialect ran:

‘Deal [is] A Significant Step In Strengthening AstraZeneca’s Late Stage Pipeline Partnership Aligned with Bristol-Myers Squibb Company Strategy’.

You decide. My reading is that it’s time for a change of thinking about how Pharmaceutical comapanies go about their core mission of innovating in the interests of social health.

The drug companies are populated by large numbers of very bright people. I’ve served a bit of time among them, but now I mostly gaze from outside in. But I can still read the public pronouncements. In press releases, I’m still hearing talk as if the issue is to fix the plumbing, keep the pipeline. The mega giants of Big Pharma maintain their great chemical search machines churning away, piling leads for testing into the wide end of the funnel in ever greater numbers; smoothing the flow along the pipeline, to increase the chances of the billion-dollar idea emerging at the other end.

So what?

There are far wider issues to consider beyond the largely technical issues of re-examining the pipeline model of innovation. Widespread concerns of an ethical concern continue to plague the industry. One big advantage for a re-visiting of the pipeline is to see whether ‘pipeline thinking’ can
be challenged, and help in the design of more socially benign and less technologically dominated models and practice.

Managing creativity

Sundgren is suggesting Managing Creativity is one promising possibility. We have opened up the debate on creative leadership in earlier posts on this blog. A forthcoming special issue of the journal Creativity and Innovation Management will offer additional studies into these topics.

Is it too challenging to assert ‘there is no drug pipeline, and we have no need to invent one’?

The Branson Murdoch match: Round Two

May 25, 2007

James Murdoch for Sky TV and Richard Branson of Virgin Media continue to slug it out. Both companies have a capacity to damage the other’s competitive position. As a complete victory for one side seems unlikely, the organizations will have to find ways of co-existing and collaborating, as well of competing.

The dispute

The wider battle was explored by Jeremy Warner for The Independent in February.

It can be traced to the formation in April 2006 of Virgin Media, from the ailing NTL cable company. The move was presented as one which would offer a bundle of services to users. It brought the new company into more direct competition with Sky. Competition in this emerging multi-media context is intricately mixed up with inter-dependence, as services are shared and traded. Sky promptly acquiring a minority stake in ITV. This was seen as a protective strike, as ITV was a take-over target for the newly formed Virgin Media.

It is this move which led to complaints against Sky, and to the decision this week by Secretary of State Alistair Darling to refer the issue to the Competition Commission.


In the last few months the dispute became serious when Sky and Virgin Media failed to resolve a dispute over re-negotiated charges requested by Sky. Customers of Virgin Media were deprived of the disputed bundle of Sky programmes previously accessed through the former NTL cable service.

It is tempting to portray the dispute as a battle between Richard Branson of Virgin Media and James Murdoch of Sky. We can predict Murdoch junior’s actions to some degree. He is unlikely to present himself as anything but the son of superdad Rupert. So tough and mean is likely to be the order of the day. Branson will continue to find ways of representing himself as a benign socially-caring figure.

Meanwhile, the dispute is a bit of a no-brainer. There’s evidence that the combatants have blundered into a messy situation which can turn out badly for all concerned. Corporate attention may be distracted from issues of running creative media organizations to political and legal efforts.

What happens next?

The least violent outcome is a period of increasing lack of progress, followed by some resolution, togther with a bit of cosmetic face-work for the weary warriors. There may even be some creative initiative accompanying restoration of Sky channels for Virgin Media subscribers.

More catastrophic solutions might include a regime change. But recent military history reminds us of the dangers of such a policy. Time-scale for significant developments? Weeks would be possible but unlikely. Months would be unfortunate, and not beyond the bounds of probability. But cash haemorrhaging is a condition which brings even the strongest of egos into line.

Magna under the microscope over Daimler Chrysler

May 14, 2007


Canadian firm Magna comes under renewed scrutiny as a potential bidder for Chrysler through its recent backing from Russian billionaire Oleg Deripaska. As the complex leadership story unfolds, a new suitor, Cerberus appears centre-stage.

Stop Press

The following addressed the Chrysler deal as most commentators saw it in early May. I added the last paragraph as Autoworld blogs began touting a new suitor for Chrysler. By the end of the day (Monday 14th May) the whole post appears to have been overtaken, as I cautioned:

How to make sense of it? It’s worth bearing in mind there may still be other players waiting to enter the drama. There may still be a few more twists and turns before we find out Chrysler’s fate.

The twist came sooner than I expected, with the dramatic news that US private equity firm Cerberus Capital Management is to buy a majority stake in Chrysler

The Original posting follows ..

The future of Chrysler has been the subject of increasing speculation since Dieter Zetsche, Chief executive of parent Daimler Chrysler, admitted recently that the group has started negotiations with a number of parties about its sale.

A firm mentioned as interested in acquiring Daimler is Magna. The firm is a relative newcomer, founded by an Austrian entrepreneur Frank Stronach. Mr Stronach emigrated to Canada in the 1950s, and built up a successful auto-business. One of its interesting features is its Governance structure. According to the company web-site,

In 1971 Mr. Stronach introduced his management philosophy, known as Fair Enterprise, to Magna. Fair Enterprise is based on a business Charter of Rights that predetermines the annual percentage of profits shared between employees, management, investors and society, and makes every employee a shareholder in Magna. These rights are enshrined in a governing Corporate Constitution.

Enter Oleg

There has been substantial investment by a Russian organization Basic Element, headed by Oleg Deripaska. [Photo above by A. Sazonov, from MosNews Archive]. Rated up there with Ambramovitch as one of the world’s richest individuals, Oleg dominates the Russian metals industry through his RUSAL organization.

The story was picked up by Forbes:

A Russian industrial conglomerate will sink $1.54 billion into auto parts supplier Magna International Inc., raising speculation that the Canadian company is generating cash for a bid to buy Chrysler …After the annual meeting, Magna founder and Chairman Frank Stronach said he did not think the investment would have any bearing on the company’s efforts to buy Chrysler, although he thought the Russian partner would make Magna more attractive to Chrysler’s German parent, DaimlerChrysler AG.

While Magna continues to receive attention, the Russian connection, and alleged side-deals leave some doubt that the move will be straightforward.

Leadership issues

The story is replete with leadership issues. This is partly because of the different levels at which it is playing out. Considering the parent company Daimler Chrysler with its celebrated and wealthy leader, Dieter Zetsche broadens it to a global scale. Enter a Russian entrepreneur in cahoots with a Canadian business leader. Then there is Chrysler, still a large outfit, and one of the gang of three ailing American auto-giants, with its increasingly beleaguered leader, Tom LaSorda, a former GM executive.

How to make sense of it? It’s worth bearing in mind there may still be other players waiting to enter the drama. There may still be a few more twists and turns before we find out Chrysler’s fate.

But leadership IS a team role …

April 26, 2007

Employers are increasingly valuing team players over leaders, says a futurologist. But where does that leave team leadership? We look at the claim from a research perspective

In a BBC interview, BT Futorologist Ian Pearson says that employers are recognizing the virtues of interpersonal skills (sometimes called soft skills, and as a differentiator between masculine and feminine behavioral styles).
The impression left by the article, is that team players are becoming more valued than leaders by employers. Also, that women are better team-players, and therefore also more valued by employers than are men. The arguments leading to such conclusions need a bit more examination.

The situation seems to have been reduced to some either-or propositions, such as ‘we either have to chose good leaders or good team players’. It also implies that there is a universalistic recipe out there. If a century of research into leadership has revealed anything, it is the absence of a theory of leadership that provides universal propositions. In other words, we might wish to study the hypothesis

H: team players are becoming more valued than leaders by employers

[Or the form preferred in many research methods courses
H: team players are not becoming more valued than leaders by employers]

Either hypothesis when put to empirical testing will quickly be shown to be highly context dependent. At which stage, the researchers begin to mutter about ceterus paribus , or contingent variables, or in everyday terms ‘other things being equal; or ‘it all depends’ . Unfortunately, empirical research catches popular headlines more easily if it can be reduced to a simple statement. We have to work at the proposal to sort out the factors behind he assumptions. So let’s do a little more work on it.

Are team workers becoming more favoured over leaders by employers?

Yup, you guessed it – it all depends. It depends on what the statement means by leaders, team workers, and even (less ambiguously) by employers. It depends on the sorts of employment, and the sorts of team task. As stated, the issue can be tested. Are employers placing team working skills above leadership skills in making their selection and recruitment decisions? Has that become standard practice in BT, to take the specific case with which Professor Pearson is particularly familiar? What is the evidence that the same applies to other private sector organizations in our global marketplace?

For what it’s worth

For what it’s worth, here’s what I think is going on, and what sense I can make of it.
First, long-held views of leaders and followers have come under some scrutiny. The old ideas was that leader took the decisions, the followers carried them out. ‘Good’ followers ‘obeyed orders’, but you can see where I’m going there. More recently, this view lead to tricky dilemmas of leadership which have not gone away.

Among the most promising of attempts to deal with the dilemma of ‘followership’ was the search for methods of power-sharing, so that followers all had status differentials removed, and all became members of the same team. (I know a very large organization that actually banned the word ‘manager’ in the height of enthusiasm for a team-based approach). With empowerment came motivation, and the end of the economist’s bane, the economic free-rider. From that perspective it was an easy step to develop the idea of distributed leadership.

But what happens to the ‘old style leader’. This is where I think I can make common cause with the Pearson thesis. The weaknesses of the old style leader have been rumbled. The special one has to become a special team player. More than ever, in team work, the leader is nor more, and no less than a team player. And as such, the team player needs those desirable soft skills.