Will new leader Allen Leighton introduce Bill Gate’s creative capitalism to the Co-op?

February 25, 2015

Rochdale PioneersSUBSCRIBERS ARE ADVISED THAT THIS POST WILL BE UPDATED REGULARLY

Newly appointed chairman Allen Leighton faces an existential battle at The Co-operative Group which may serve as a case study for the kind of creative capitalism proposed recently by Bill Gates

Bill Gates has recently called for more efforts directed towards creative capitalism. This raises the immediate question: what is it? At very least, there is need to examine institutions such as The Co-operative group which challenged capitalism yet attempted to create structures within the capitalist system rather than seeking its violent overthrow.

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Satya Nadella’s leadership dilemmas at Microsoft begin with Nokia

August 5, 2014

Paul Hinks

Satya Nadella

Satya Nadella

Satya Nadella became Microsoft’s third ever CEO in February 2014. He faces enormous challenges of change to an economic powerhouse

Since its inception 39 years ago, Microsoft has driven change. Its products have shaped and disrupted the IT landscape. Its desktop and server operating systems have become industry standards. Yet, relentless competition demands further changes. The new CEO recognizes the situation.

‘One Microsoft’

A few months into his appointment [10th July 2014], Nadella published an ‘internal memo ‘ in the public domain entitled: ‘One Microsoft’. The document provides insight into the strategic priorities at Microsoft – as well highlighting deeper leadership dilemmas. “The day I took on my new role I said that our industry does not respect tradition – it only respects innovation.” He wrote.

Changing landscapes and Microsoft’s previous success

Cloud Computing and Mobile technologies were focal points in the memo – repeated references to “a mobile-first and cloud-first world” emphasising where he feels Microsoft’s future lies.

A key dilemma and challenge for Nadella is that Microsoft no longer appears to be dominant in shaping the direction of the IT landscape. Microsoft’s desktop and server operating systems provide examples of different franchises that became de facto industry standards. Today we talk about firms such as Apple, Google and Amazon and how their products and services have momentum – the iPad, iPhone, Kindle, Android phones – as well various cloud services.

It isn’t that Microsoft hasn’t tried to succeed in these new marketplaces – it has. It’s just that Microsoft’s success doesn’t mirror the success of its competitors. Microsoft has attempted to break into the tablet market but Apple still leads the way. Windows mobile phones competes against Android phones and iPhones, but they do not enjoy the passionate following that their competition enjoys.

Microsoft Axes 18,000 jobs

The acquisition of Nokia in 2013 provides an example of Microsoft’s efforts. Nokia was itself a market leader in the mobile telecommunications market before suffering a number of setbacks which saw its products fall out of vogue. Some analyst at the time saw merit and synergy in Microsoft’s acquisition. However on Thursday [17th July 2014] the BBC reported that Microsoft was announcing a loss of 18,000 jobs globally – the bulk of the cuts to be at Nokia:

Microsoft pledged to cut $600m (£350.8m) per year in costs within 18 months of closing the acquisition – cuts that were much more severe than the 6,000 initially expected. Is this acknowledgement that the Nokia deal was ultimately a failure? Or is it an example of how knowledge, know-how and patented technology can be bought lieu of ethical leadership and employees’ livelihoods?

The Future direction of Microsoft?

Nadella and Microsoft appear to recognize the challenges ahead. Change is necessary. Cloud Computing infrastructures are maturing; mobile online access is now ubiquitous – Nedella’s memo acknowledges Microsoft’s need to adapt and respond – repeated references to “mobile-first and cloud-first world” provide a clear indication of where he sees Microsoft’s future. Will change at Microsoft result in the progress needed for Microsoft to remain a dominant force?

Bill Gates’ 1990 vision of ‘Information at your fingertips’, and then his keynote speech at Jan 1995 Comdex of ‘information at your fingertips ‘ provide evidence of how Microsoft’s first CEO led the way and helped shape an industry.

Nadella has one of the toughest jobs in the industry, made more challenging by an expectation that Microsoft can remain creative and innovate. Not an easy task.


Alibaba’s Jack Ma goes down the Bill Gates charitable route

May 5, 2014

Alibaba’s Jack Ma and the company’s co-founder Joseph Tsai are following the path taken by Bill Gates and Warren Buffett in creating a philanthropic trust.

An article entitled China’s Carnegie in The Economist, [May 3rd, 2014. P12] outlined this further example of creative capitalism.

The article traces the philanthropic ‘conversion’ of business pioneers and wealth generators from the days of Andrew Carnegie to today’s Jack Ma who has recently [April 2014] announced the formation of a $3 billion trust.

A cynical view of giving

The Economist is suspicious of altruism if a self-interested explanation comes to hand. It tests the ethical orientation of Ma’s actions and implicitly those of Bill Gates by suggesting that a cynical view that might be ‘straight out of a Silicon Valley public relations play-book ahead of Alibaba’s expected public offering this year which could value the company at $150 billion.’ Regardless of such imputed motivation, the initiative could add impetus to China’s efforts at environmental sustainability.

The Gates Foundation

Bill Gates and Warren Buffet have been leaders in a movement for the wealthiest capitalists to pledge sizable proportions of their assets for charitable purposes. The Gates foundation is admirably led by Biil and Melinda Gates.

From Silicon Valley to Shanghai

The movement has spread into other parts of the world including India. Jack Ma is overcoming reluctance of the wealthiest Chinese entrepreneurs to reveal their wealth as the country develops its new mixed socialist/capitalist political economy.


Did Hyman Minsky anticipate creative capitalism?

March 25, 2014

Bill Gates has called for a more creative form of Capitalism. The work of Hyman Minsky is being reappraised as relevant after the 2008 financial crisis

Minsky’s ideas were taken up by Paul Krugman, and later by other influential figures such as Janet Yellen, now head of the US Federal Reserve bank. They offer an explanation for the irrationalities of economic boom and bust, though inherent instabilities rather than temporary distortions. As such it relates to the Animal Spirits of John Maynard Keynes.

What is creative capitalism

Some posts ago I asked what is the nature of creative capitalism. The question arose after Bill Gates called for it, without exactly joining up the dots. My best shot was a suggestion that thinkers about capitalism were rewriting the map to deal with the uncertainties of the global economic climate. Under such uncertainties, creativity in thought and action becomes important. Mr Gates suggested that Capitalism needs to refocus its energy on social issues including the environment. Minsky suggests how this might come about.

Minsky’s destabilization hypothesis

An interesting article on the BBC website [March 2014] and a subsequent Radio Four broadcast outline why Minsky’s ideas might be relevant.

It seems that the relatively unknown Minsky has attracted attention recently for his theory of inherent instabilities of financial markets. Stock Market bubbles are inevitable as turbulent flow of water from a high pressure hose or water boiling in a saucepan on a hob through induction heating.

Minsky’s three stages

Minsky describes three stages within the process. The hedge is the stage in which the innate caution of professional investors dominates. The hedge offers possibilities for more risky gains, and the famous animal spirits kick in. In Wall Street jargon, the animal spirits move from those of cautious bears to those of Raging Bulls.

The ghost of Ponzi

Conventional wisdom is that bears and bulls eventually damp down irrational blips in the market. Minsky argues that after the speculative stage comes a fraudulent stage he termed the Ponzi stage. This honours or maybe I should say dishonours the schemes of Charles Ponzi, [1882-1949] the infamous modern inventor of a huge pyramid-selling scam.

To be continued

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Leadership succession: Tony Blair, Terry Leahy, Alex Ferguson, Lord Browne … and Steve Ballmer

October 7, 2013

Leaders hailed as the greatest by direct comparison with their contemporaries often leave a legacy that is tough for a successor to deal with

This point was examined recently by journalist Chris Blackhurst [October 3rd 2013] in The Independent. He chose four towering figures from recent years, from politics, business, and sport.

He takes as his thesis that succeeding an influential leader is tough. His point is that the departure may be made with more concern by the leader for legacy than for the organisation’s longer term well-being.

The trigger

The article was triggered by the departure of Sir Alex Ferguson of Manchester United football club which was followed by a poor start to the season for the new manager David Moyes. Moyes was very much Ferguson’s chosen successor, one of clearest examples available of a leader’s critical decision over succession.

At Old Trafford, David Moyes has succeeded Sir Alex Ferguson, only to find that last season’s Premiership champions are in poor shape, that the Manchester United squad requires urgent strengthening. As worrying for United’s fans and owners is that Moyes appears to have been put in charge of a team in torpor. They’re no longer playing with the same drive and hunger that so characterised the Ferguson reign.

Blackhurst makes the general point succinctly:

Beware the chieftain who has been in office for a lengthy period; who is used to getting their way, who only needs to snap their fingers and it will be done; who refuses to countenance stepping down, to the extent that no successor is properly groomed; and when they do finally decide to go, it is too late. Quitting while ahead – it’s the best management attribute of all.

He illustrates with the examples of Tony Blair, Sir Terry Leahy of Tesco, and Lord Browne of BP. He touched briefly on Margaret Thatcher, and might have added Steve Jobs of Apple, and [another very recent example] Steve Ballmer of Microsoft. A closer examination suggests that the situations and the leaders are too varied to provide a nice clean theoretical idea. Was internal selection possible or desirable? Did the leader leave without being forced out? Was the evidence of declining personal abilities to do the job?

Sir Alex Ferguson, for example, announced his retirement a few years earlier and the market value of Manchester United plummeted. The evidence is that he retracted and spent the next few years considering how his eventual retirement might be planned more successfully. He did not ‘refuse to countenance stepping down’, although Margaret Thatcher’s political demise was closer to the description offered by Blackhurst.

Tony Blair was successful in winning three elections for Labour, which he had reshaped as New Labour. His legacy is haunted by his military policy in Iraq. Blair tried but was unable to arrange a successor he wanted. Gordon Brown is seen as contributing to Labour’s defeat at his first election. Sir Alex a close confident of Tony Blair seems to have learned from his friend the art of personal retirement planning with an impressive and rapid entry into the lucrative celebrity circuit.

Terry Leahy at Tesco appears to have selected Philip Clarke or agreed with the decision. Mr Clarke found that the company was in near free fall.

Lord Browne, whom Blackhurst suggested stayed to long at BP, left after personal problems. His chosen successor Tony Hayward was engulfed by the greatest disaster to befall the company.

Steve Jobs left Apple for health grounds, but had some say in the appointment of his successor.

Lady Thatcher had no say in the matter, although her departure opened the way to Tony Blair’s successive election victories.

The dilemma of succession

Succession remains a dilemma for a leader, and for those considered candidates as a successor. The issue has been around for nearly as long as stories have been written about leaders. We should at least be aware of the possibility of the ‘hero to zero’ process, as an earlier and over-generous evaluation of a leader is rewritten.

An example of this can be found in an article in Business Week in 2006 hailing the succession planning in Microsoft when Steve Ballmer replaced Bill Gates. Mr Ballmer’s departure this month [Oct 2013] was told in a different way.


Big Pharma’s Philanthropy

June 7, 2011

Drug giants announce a plan to deliver vaccines at cost to the poorest regions of the world. Moral leadership or pragmatic response to protestors?

Tudor Rickards

This week [June 2011] a plan was announced by GlaxoSmithKline (GSK), Merck, Johnson & Johnson and Sanofi-Aventis to cut drug prices through an international vaccine alliance. A week later, Bill Gates and Pime Minister David Cameron got in on the act supporting Gavi.

Gavi

Gavi is a partnership for funding mass vaccination programmes in developing countries. Glaxo CEO Andrew Witty told the BBC about the plan:

If you’re in Kenya or a slum in Malawi or somewhere like that there is no capacity for those people to contribute to [profits to invest in future drugs], so they have to be helped out by the contribution from the middle and the richer (countries).

He struck a balance between the philanthropic benefits of the scheme, and the business model of Big Pharma to generate funds for future investment by maintaining high prices on their proprietary drugs.

Enter Bill Gates and David Cameron

A week later, Bill Gates and Prime Minister David cameron pledged their support to GAVI

The medical plight

The medical plight of many countries is illustrated by the case of Dr Freddie Coker, a pediatrician in Sierra Leone’s capital Freetown. Dr Cocker tells of his fight against diseases which result in child mortality rates of 50% which could be saved by drugs if made available.

“I’m very excited. As a doctor, I usually spend sleepless nights trying to see how much I can contribute to reducing the infant mortality rate among under-fives in my country. I’m quite happy.”About 40% of cases we see are due to diarrhoea diseases. The mortality rate can be as high as 50%.”The earlier a child is commenced on treatment, the better the outcome.”


The next step in a long campaign

Students studying leadership will be familiar with the case of Glaxo Smith Kline’s Jean Pierre Garnier (Dilemmas of Leadership, Chapter nine). The case outlines the dilemmas of morality versus profits.

Some call him a humanitarian. He has been awarded the Legion d’Honneur by the French government. He has indisputably taken GSK several rungs higher on the ladder of altruism than any other drug company. But at the end of the day, he says, he runs a for-profit company. And if people are still dying of AIDS in Africa, it is because their governments are ineffective, or do not care. It is not to do with the greed or indifference of the pharmaceutical companies. His vision is clear. He is willing to supply not just antiretrovirals but other medicines poor countries need for epidemics, such as malaria, at cost, he says. Combivir, [a dual combination AIDS drug], sells at $1.70 a day. For a Malawian woman .., it might as well be the price of a flight on Concorde. His answer is twofold: order from GSK in bulk, perhaps for the whole of sub-Saharan Africa, and the price will drop. Secondly, persuade the rich countries to support the Global Fund so that poor countries will have the money to buy GSK’s drugs.

A moral dilemma

Drug companies face a dilemma between two morally right options. The first is to do everything possible to ameliorate suffering through their medical products. The second is to secure enough revenues to invest in the drugs of the future. Big Pharma receives criticisms for its financial model and its marketing methods for influencing the medical professionals. Is this story a case of moral leadership from within their ranks? Or is it pragmatism, and at least partially a result of protests and stakeholder pressures? And in any case, should the ends be welcomed, regardless of the motives?

To go more deeply

News Medical provided a summary of editorial opinion pieces on this story.