Monthly Archives: October 2011

Andrew Hill

You know a corporate scandal is serious when prime ministers and heads of state start to mention it. The fact that Japan’s premier Yoshihiko Noda took time in an FT interview on Monday to talk about the problems at Olympus is doubly significant, therefore. As our correspondents Michiyo Nakamoto and Mure Dickie point out, it’s “highly unusual for a Japanese prime minister to comment on events involving a private company”. Here’s what Mr Noda said:

What worries me is that it will be a problem if people take the events at this one Japanese company and generalise from that to say Japan is a country that [does not follow] the rules of capitalism. Japanese society is not that kind of society.

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Whatever the reason for Michael Woodford’s abrupt exit from Olympus (of which more later), everyone can agree that if the board’s chosen chief executive leaves prematurely, something has probably gone wrong.

With hindsight, Michael Woodford foretold his downfall in this year’s Olympus annual report. “It’s a simple word ‘change’, but you have to have an extremely close relationship with the chairman if you are going to be successful in executing that change.”

Andrew Hill

Even Europhile economists must have pricked up their ears at the offer of £250,000 to the person who comes up with the best plan for winding up the euro. Only the Nobel offers a more valuable bounty to the dismal scientists.

But whatever you think of the goal, is the Wolfson Economics Prize – offered by Lord Wolfson, the youthful, Eurosceptic, Conservative chief executive of Next, the UK retailer – the best way to achieve it? These days, bright business ideas often emerge through collaboration, rather than competition. Read more

Under the surface of the current anti-capitalist protests, from Wall Street to the City of London, is a decade-old sore that never healed. On October 16 2001, Enron hosted the earnings call that first alerted the world to the toxicity of its off-balance-sheet arrangements. It triggered a death spiral. By December 2, Enron was bankrupt. Within a year, Arthur Andersen, its auditor, had disintegrated.

John Gapper

Research in Motion’s offer to compensate its users affected by the BlackBerry network failure of the past week with $100 of free applications is a neat idea in that it costs the company far less than the apparent gain to its customers.

Given the zero cost of distribution and the fact that RIM only has to pay the wholesale cost to publishers of games such as Sims 3 – as well as gaining the benefit of hooking BlackBerry users into its ecosystem, it is a modest price to pay. Read more

Andrew Hill

I think most obituaries of Robert Galvin – who helped take Motorola from a family firm to a $11bn leader in mobile phones – understate his contribution to management practice, for he was, at the very least, the godfather of Six Sigma.

The omission is understandable. Six Sigma – which focuses managers obsessively on improving quality and eliminating defects – was the process improvement technique of choice for large companies in the 1990s, but it seems to have faded from public view recently. I spent a day at General Electric’s Crotonville leadership development centre in September and I didn’t hear Six Sigma mentioned once. Yet 15 years ago, when Jack Welch was in his pomp, the air would have been thick with boasts about how many “black belt” leaders of Six Sigma initiatives GE had bred. Read more

With the award of the Nobel for economics to Thomas Sargent and Christopher Sims this week, the US once again took the lion’s share of the annual prizes. Its citizens gained seven awards (including the not-strictly-Nobel economics prize) and its grip on the Nobels shows little sign of weakening.

Andrew Hill

For people unable to communicate easily via BlackBerry, BlackBerry users are making a lot of noise. Faced with a third day of disruption to BlackBerry services around the world, they’re venting their outage outrage on Twitter and in the blogosphere. Many are reaching the same conclusion: this is a communications crisis for Research in Motion.

Well, no. As one of BP’s advisers commented last year when the oil company was being lambasted for its response to the Deepwater Horizon explosion: “It’s not a PR crisis; it’s a crisis.” Read more

That’s it for another year. Monday’s award of the Prize in Economic Sciences in Memory of Alfred Nobel to Thomas Sargent and Christopher Sims brings to an end the 2011 Nobel season. But is there room for one more: a Nobel prize for management?

John Gapper

It is a chastened Reed Hastings who has just decided to ditch his disastrous plan to split Netflix into two businesses – Netflix and “Qwikster” – and stick with what his customers liked in the first place.

Mr Hastings is right to back down – if nothing else, his bold experiment with “disruptive innovation” has mainly disrupted his own company. Its shares have not recovered since he raised prices and announced his plan to turn his DVD rental business into Qwikster while keeping the Netflix name for video streaming.

Unlike the long semi-apology he made last month when announcing the Qwikster gambit, which included a business school-style explanation of why he was separating the rapidly growing star from the cash cow, his missive today is short and to the point:

“It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.

This means no change: one website, one account, one password … in other words, no Qwikster.”

That makes more sense than his assertion last month that:

“Another advantage of separate websites is simplicity for our members. Each website will be focused on just one thing (DVDs or streaming) and will be even easier to use.”

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Andrew Hill

Soon to be available in light blue

The shift of economic power eastwards from crisis-hit developed nations has another milestone: the publisher of Wisden – the annual “bible” of English cricket enthusiasts – is licensing production of an edition tailor-made for the Indian market.

A bit like Hermès, with its recent launch of a range of saris in India, Bloomsbury Publishing and its partner want to recast a western brand for enthusiastic Indian consumers.

The deal – with FidelisWorld FZ, a sports and entertainment management group – comes wrapped in the sort of biz-speak that would make John Wisden, the cricketer who founded the almanack in 1864, shudder. FidelisWorld, says the press statement, “aims to unify the fragmented sectors [of the Indian market for cricket information] into a consolidated whole… thereby achieving synergies and building value”. Read more

Andrew Hill

Among the eulogies to Steve Jobs’ undoubted genius was a back-handed compliment from the markets on Thursday morning: smartphone manufacturers’ shares rose in Asia, apparently on doubts about whether the US company would be able to repeat its innovative success without its founder.

Jobs left his chief executive role in August, but his premature death puts the task of dispelling those doubts firmly in the hands of his successors. It could be a mistake to assume that, because they lack Jobs’ charisma, they won’t be capable of carrying forward his legacy. Read more

On my way to visit the Occupy Wall Street protest this week, I walked along the heavily barricaded street, past the still-pockmarked masonry of the former J.P.Morgan building where Italian anarchists are thought to have detonated a bomb in 1920, killing 38 people. Then I turned right at Trinity Church and up to the camp in Zuccotti Park.

John Gapper

The death of Steve Jobs, announced tonight by Apple, was expected but still comes as a shock. There are very few business people who are truly irreplaceable but Mr Jobs was undoubtedly so.

Like many other people, I heard the news via his products – in my case through Twitter on an iPod Touch — and am writing this on a MacBook Air. Mr Jobs’ original vision of a world of personal computers came truer than even he imagined. Read more

Andrew Hill

No question, for me, about the most interesting business story of the week: the launch in India of a $35 tablet computer called the Aakash (“sky” in Hindi). For perspective, go to the tablet department of, where $35 will buy you – just – a snap-on case for an iPad 2.

For anyone in doubt about the political significance of the announcement, Kapil Sibal, India’s education minister, rammed it home:

The rich have access to the digital world; the poor and ordinary have been excluded. Aakash will end that digital divide.

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Andrew Hill

As a pugnacious Flemish politician and prime minister of Belgium in the early 1990s, Jean-Luc Dehaene earned two seemingly contradictory nicknames – “the bulldozer”, for his bluntness, and “the plumber”, for his ability to reach compromises.

He’ll need to draw on both these skills as chairman of Dexia: the Franco-Belgian bank, pushed to the brink by eurozone turmoil, is contemplating break-up and seeking shelter from both Belgian and French authorities. As one Amsterdam-based analyst told Bloomberg on Tuesday – with admirable understatement – “Dexia is an extremely complicated file.” Read more

It’s gratifying when private corporate disagreements erupt into the open. It confirms the perception that business, often dressed up as a decorous diplomatic dance, is in fact a vicious hand-to-hand battle. It was in this spirit that I welcomed the recent outbreak of hostilities between Oracle – the software group headed by Larry Ellison – and Autonomy, the UK technology company founded by Mike Lynch and now being taken over by Hewlett-Packard.