A U S T R A L I A N G R A D U A T E S C H O O L O F M A N A G E M E N T M A G A Z I N E ISSUE: 3 � 2003

Nothingventured...Insiders’ views of private equity

BACK TO SCHOOLFormer McKinsey boss joins AGSM

COVER: Jonathan Kelly by Frank Lindner.

AGSM Magazine is a publication forsupporters of the Australian GraduateSchool of Management, a School of both the University of New South Wales and the University of Sydney.Editor: Debra Maynard Design: Mayfly GraphicsCopy editor: Richard Podmore Bush telegraphcorrespondent: Don TaylorSEND Magazine contributions to: magazine@agsm.edu.auAdvertising enquiries:Sarah PontonTel: (02) 9931 9488Circulation enquiriesTel: (02) 9931 9240AGSM contact points:Media and communicationsTel: (02) 9931 9240Alumni servicesTel: (02) 9931 9499/9284Executive programsTel: (02) 9931 9333MBA programsTel: (02) 9931 9412Main switchboardTel: (02) 9931 9200Web site: www.agsm.edu.auPublished for the AGSM by Debra Maynard & Associates Pty Ltd, 93 Bream StreetCoogee NSW 2034 Australia, Tel: (02) 9665 7182,Fax: (02) 9665 7186.ISSN 1441-5437

Contents

Copyright © AGSM 2003. All rights reserved.This publication may not, in whole or in part,be lent, copied, photocopied, reproduced,translated or reduced to any electronicmedium or machine readable form without the express written permission of the publishers. While the publishers have taken all reasonable precautions and make allreasonable efforts to ensure the accuracy of the material contained, articles express the personal opinion of the author and notnecessarily that of the publishers or the AGSM.

NEWS2 Back to school

The AGSM welcomed Rob McLean as its new dean and director on 13 October.

4 Measuring up A Forbes survey measuring MBA graduates’return on investment ranks AGSM in the top 10 of non-US business schools.

4 Keeping the cupMBA students walked the talk in the Deloitte Consulting Cup.

6 Letters competitionHave your say for a chance to win books from McGraw-Hill Professional to the value of $100.

DEPARTMENTS2 Upfront

25 Alumni at large

26 Bush telegraph

29 Faculty news

30 Books31 Publications

& papers32 Corporate

partnersMORE THAN RELEVANT The organisational behaviour research of (from left) professors LexDonaldson, Philip Yetton and Robert Wood has been rated among the most influential in the world.

See page 29

FEATURES7 Why smart executives fail

Sydney Finkelstein asks what accounts for dramaticbusiness failures.

8 A healthy appetite for risk Gillian Biscoe reflects on her career and having the courage to take risks.

9 Survival of a message-maker The AGSM’s Shayne Gary talks to the iconoclastic speaker and author Tom Peters.

10 Risk and rewardInsiders’ views of private equity.

15 The J-curve of change Humphrey Armstrong explains how to manage the loss and gain sides of change.

19 More than a phone call The increasing complexity of call centre management is not well understood.

20 Fighting price wars with game theoryUse game theory to better understand pricing dynamics.

RESEARCH16 How well trained are your customers?

New-economy purchasing is changing the shape ofcustomer management.

22 Brand strategies in emerging markets How are global brands interpreted in China and India?

ISSUE: 3 � 2003

How well trained are your customers? See page 16

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Rob McLean’s approachto business is said tobe somewhat like theprinciple of Occam’s

Razor: that one should seek thesimplest explanation of aphenomenon, or find the endgame that requires the fewestleaps of logic.

In other words, the AGSM’snew dean “articulates a wonder-fully insightful conclusion in asimple way”, says Adam Lewis(McKinsey & Company’s man-aging partner,Australia and NewZealand) about his former boss.

“Our clients would often call and say: ‘I need someonelike Rob who can cut throughthe complexities and give us a simple, clear and practicalanswer’.”

McLean spent eight years inthe top job at McKinsey, leadingthe Australian and New Zealandpractices through a significantgrowth phase.Then in 1997 heturned 50 and clocked up 25years with the global consultingfirm, which triggered hisdecision to retire to find newchallenges.

“I had had a terrific run atMcKinsey, I wanted to stay inAustralia, and I felt that it wastime for me to do other thingswhere I would learn – and thosethings were a combination ofbeing on corporate boards,getting involved in privateequity investing and giving back to the community through

not-for-profit involvement,which I really hadn’t had the time to do at McKinsey,”says McLean.

He became a director of CSR,Pacific Dunlop and GS PrivateEquity, as well as president andchairman of the BenevolentSociety and chairman ofAustralian Landscape Trust. Hewas an investor with the now-defunct angel investment group,Tinshed, through which he putmoney into start-ups like award-winning Plantic™ – whichmakes biodegradable packaging.

He is currently not servingon any Australian companyboards, but he remains adirector and co-founder ofinvestment company WMCapital with Australian publisherKevin Weldon. “It’s a vehicle forputting our own money intodeals and, yes, it’s the kind ofbusiness you only stay doingwhile you’re having more thrillsthan spills!” he says.

He was a founding share-holder of US-based TicketmasterOnline Citysearch that wentthrough a successful IPO in1998.With Kevin Weldon hemanaged a successful buy-inand subsequent $56 million saleof Australian Media Holdings in2000 to global SportsworldMedia Group.

Deanship certainly heralds adifferent path for a managementconsultant, company director,venture capitalist, conservationist

and social welfare leader who“had never thought about doinganything like this before I wascalled and asked would I be in-terested in applying for the role”.

“We all have a sense in thebusiness community that wewant this school to be successfuland relevant to business inAustralia,” says McLean.

“As I talked to a few peopleabout the school I started to seeit as both exciting and achallenge … and it also camealong at a time when I wantedmore structure around thethings that I was doing.”

When asked to reflect on themeaning of leadership in thecontext of his new role, McLeanrecounts a meeting he had sometime ago with John Gardner, anadviser to US presidents andleaders in business andcommunity. “He emphasised therole of energy, stamina andvitality in leaders, andpopularised the notion of self-renewal as a strategy for leadersto avoid stagnation.

“I think Gardner’s notion ofself-renewal is an important onebecause it outlines a process thatpermits leaders to rejuvenatethemselves in changing circumstances and to redefinethe path forward.

“Self-renewal in people isnot well understood: it comesfrom aspirations, what I think ofas the wellspring of leadership,”says McLean.

McLean has an MBA fromColumbia Business School inNew York, a school renownedfor its investment theory leader-ship through professors like BenGraham of value investmentfame. Its alumni include the US’sfamous investor Warren Buffetand leveraged buyout leaderHenry Kravis.

“There were big ideas put infront of us – my financeprofessor Sam Hayes laterbecame Harvard’s first professorof investment banking – andyou just felt that you were in a hothouse of ideas that were going to have their day,”says McLean.

“The notion I’ve always hadof an MBA is that it’s just anextraordinary experience inpreparing business leaders.”

So what does he say to recentcritics of the value of an MBA –people like Stanford University’sprofessor Jeffrey Pfeffer?

“To my mind, the debateabout whether MBAs are worthit, or whether there is a futurefor MBAs, is just an absolutelynonsense set of discussions.

“Whether you are talkingabout the AGSM, Harvard,Stanford or Columbia [business

Back to schoolAt age 57, Rob McLean brings impressively wide experience to the top job in Australian businesseducation. Debra Maynard reports.

LEADERSHIP“The notion of self-renewal is an important one.”

NEWS UPDATE KEEPING YOU IN TOUCH WITH WHAT’S GOING ON AT THE AGSM

upfront

schools], their programs areattracting some of the mosttalented people there are in ourcommunities, and the MBA putsthem through a set of experi-ences, both academic andpractical, to prepare them asbusiness leaders.

“Now that sounds to me likesomething that is a fairly soundproposition and I just don’t seethat notion going away.

“If the point is thatemployers want to see morevalue for the cost of hiringMBAs, then that’s a goodchallenge to schools like ours totake up.

“A Forbes survey [13 October,2003] concludes that the bestbusiness schools, including theAGSM, provide a payback ofthree years or less on [MBAgraduates’] investment.That’s a return of over 30 per cent per annum.

“So much for questioning thevalue of an MBA!

“Ironically, in Australia I thinkthe issue is a different one. It’smore to do with communicatingthe transforming experience theMBA programs provide foroutstanding students to buildMBA recruiting into more

corporate recruiting programs,”says McLean.

“How many of our largeemployers really understand thekind of skills and roles thatMBAs can play in their organisa-tions? How many have tried anorganised program rather than aone-off hiring? How many haveassessed the results of suchprograms, in terms of buildingtheir management team andfuture leaders?” asks McLean.

“So I will be interested to seewhat is required to have morecompanies like Boral with MBAplacement programs that seemto work well.”

COUNTRY ORIGINSThe AGSM’s new dean has alwaysstruck McKinsey’s Lewis as aman “of intense intellect …always pushing for the really biginsight … and he will work

with people and make themaspire to things that are beyondwhat they would have gone intoa meeting thinking.

“But he’s also a down-to-earth, Broken Hill kind ofbloke,” says Lewis, referring toMcLean’s Silver City origins.Born in 1946, McLean went toBroken Hill High School. Hewon scholarships to study at theUniversity of New England inArmidale, NSW, where hegained a Bachelor of EconomicStatistics (First Class Hons.) anda Fulbright award to the UnitedStates to attend Columbia.

“In some respects, BrokenHill was a harsh place to live, butit was also a supportive environ-ment because emerging businessleaders of the time – people likeCRA’s John Ralph, whosupported me – encouragedyoung people.”

He says there were great rolemodels because the miningtown had organisations thatturned out business captains likeMIM Holdings’ Sir James Footsand CRA’s Sir Russel Madiganand, more recently,Vince Gauciof MIM, Newcrest’s Tony Palmerand John Pascoe of GeorgeWeston Foods.

OTHER VENTURES“Rob is driven to make a differ-ence, and as a leader he is verythorough in the way he thinksthrough strategy and the wholebusiness model,” says JaneSchwager, chief executive of theBenevolent Society.

McLean has been chairman ofthe Benevolent Society since1997, where he helped createSocial Ventures Australia, whichbrings venture capital disciplinesand funding to social enterprises.He has made a significantcontribution to “making senseof the choices and leverage thatwe can best get from theresources we invest in socialprograms”, Schwager says.

McLean’s other not-for-profitinterest is conservation (he is aformer director and chairman ofAustralian Landscape Trust andwas chairman of EarthwatchAustralia from 1985 to 1990).He set up the McLeanFellowships and Projects inConservation to promote privateconservation. He says a highpoint was convincing The NatureConservancy of the US to cometo Australia.Already it hasresulted in commitments ofseveral million dollars, peopleand skills towards developingprivate conservation in Australiain partnership with local organi-sations like Bush Heritage andAustralian Wildlife Conservancy.

Unique challenges appear tobe something McLean seeks inlife. He walked the toughKokoda Trail in Papua NewGuinea this year, following in hisfather’s WW2 footsteps. Headmits to feeling “a veryyouthful 57” and says that all hislife he has felt he wanted to runto work.Whether it has beenconsulting, investing or not-for-profit work – or, for that matter,climbing Tanzania’s MtKilimanjaro in 2000 – “I’mdriven by that great sense offeeling that you can dosomething and shape things.” ✪

The debate about whether

MBAs are worth it . . . is nonsense.

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Measuring up If you missed it, check out the US’s

Forbes magazine (13 October2003), which published the resultsof its biennial survey into thepayback of doing an MBA. Itconcluded “B-schools paid backquite nicely for the class of 1998 –that worked through the boom andbust since graduation” based onsurvey responses from more than5000 graduates of 85 businessschools worldwide.

The survey found that the averageclass of 1998 graduate almosttripled his or her salary five yearsout of school.

The AGSM placed ninth (out of18 non-US business schools ranked) for return on investment. It was theonly school in Australia and the Asia-Pacific region included in thesurvey, which acknowledges theachievements of the AGSM’s alumni and the contribution theschool makes to graduates’ careeradvancement.

AGSM graduates’ average five-year gain, according to Forbes, was$US79,000, and it took an averageof three years for graduates torecoup their investment (tuition fees and forgone salary).

The Forbes findings call intoquestion the controversial paperpublished last year by StanfordBusiness School’s professor JeffreyPfeffer and Christina Fong thatclaimed there was little or noevidence that an MBA degreeincreases a person’s later earnings.

The initial recommenda-tions of the review of

the AGSM joint ventureagreement between theUniversity of New SouthWales and University ofSydney strongly support its continuation.

The purpose of thereview was to assess the first five years of the joint

venture, covering a fullrange of issues and arrange-ments, including gover-nance, funding and theAGSM’s contribution to itsshareholder universities.

“Continuation of thejoint venture presents uswith an opportunity forgreater collaboration withour parent universities.

“We want to find waysto work together that addvalue to our shareholderuniversities’ programs andmake the AGSM a strongerand more interesting place,”said AGSM dean RobMcLean.

Completion of thereview is expected by theend of the year.

MBA (Executive) students raised more $20,000for Oxfam Community Aid Abroad and the

Leukaemia Foundation at their inaugural head shavingchallenge on one of the final nights of theirexecutive-year residency at the school’s Little BayConference Centre in October.

It was the main event of the EY Charity Challenge,which saw 15 executives succumb to the razor.Others paid up to $800 to avoid losing their hair, andsome students not brave enough to bare all raisedmoney on the night by dying their hair.

“We gained incredible support for this, includingparticipation from people outside our EY group,” saidNigel Bedford, one of the instigators of the challenge.Two of his colleagues at Agility Management andAGSM PhD candidate Michael Collins also shavedtheir heads to raise funds.

The charity challenge organisers are planning anadditional fundraiser at their graduation in 2004.They hope to pass the baton to a new crop ofexecutive year students in 2004 and encourage thoseinterested to contact: ey2003charity@agsm.edu.au.

Close shave for charity

Keeping the cup The debating skills of four full-time

MBA students have kept theDeloitte Consulting Cup at the AGSMfor another year.

Tony Chappel, Zain Moloobhoy,George Argy and Colin McLelland firstwon selection with the AGSM’s studentSpeaker’s Club before representing theschool at the annual Deloitte ToucheTohmatsu debating event.

The team was coached by Justin DiLollo (MBA ’00), and a support teamof about 20 MBA students travelled toMelbourne to cheer them on.

And the winning strategy? “It was our consistency and capacity to corrupt MBA frameworks intoarguments for our position,” said team member Tony Chappel.

In another annual business schoolevent, the Boston Consulting Group’sstrategy competition, this year’s AGSMMBA team won the regional finalagainst Macquarie Graduate School ofManagement and other universities inthe state.That put them into thenational final, where they came third.The team members were NunoBrissos, Markus Svensson, PedroReynoso, Carlos Vasquez Fernandez,Matthias Heinzelmann and Tony Chappel.

International consultant on workplaceplanning and design, John Worthington of DEGW, spoke to an AGSM audience inSeptember about how companies couldbetter understand and use organisationaland building design to communicate andshare knowledge. His lecture was made

possible by a legacy in memory of NeilHanson, who designedthe AGSM’s café andcourtyard and wasstudying for an MBA(Executive) when hedied in 2001.

Design talk From left: Zain Moloobhoy, Colin McLelland,George Argy and Tony Chappel.

MBA (Executive) student Tom Windeyer of Telstra.

JOINT VENTURE AGREEMENT

To see Worthington’s lecture in PDF format, go to: www.agsm.edu.au/worthington.

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2004

1–3 March Understand and explorethe value of emotion in workplace

communication in EmotionalIntelligence and Leadership, SydneyRandwick campus.

4–5 March Hone your peoplemanagement skills in Managing

People for Performance, a two-dayresidential program led by the AGSM’sDr Anne Lytle, Sydney CBD campus.

8–9 March Learn how to judgewhether an alliance is right for

your company with the US’sprofessor David Wilson in Creatingand Managing Successful StrategicAlliances, a two-day non-residentialprogram, Sydney CBD campus.

21–26 March Designed specifi-cally for general and divisional

managers responsible for deliveringperformance, the General ManagerProgram updates executives withnew skills in vital business

disciplines. It is a one-weekpremium management program led by professor Philip Yetton at the Sydney Randwick campus.

28March A great way to stay connected is to attend

your alumni reunion. If you are a member of the MBA class of 1979, 1984, 1989, 1994, 1999 or 2002; or MBA (Executive) class of 1993, 1994, 1999 or 2002,put this date in your diary.If you would like to help with the event contact:alumni@agsm.edu.au.

29–30 March Discover how to negotiate your way to a

better result in Negotiation andConflict Management, a two-daynon-residential program, SydneyCBD campus.For details on any of the aboveexecutive programs, call client services on: (02) 9931 9333, or e-mail: enquiries@agsm.edu.au.

For your diary

With the excitement of the Rugby World Cup stillresonating, it seems appropriate to reintroduce the

AGSM Wombats Rugby Club and outline its plans for 2004.The AGSM Wombats teams represent Australia at Duke

University’s World MBA Championships, and with this inmind we aim to do a great rugby nation proud by takingaway a very strong team to next year’s competition(scheduled for early April).We are seeking more involve-ment from MBA (Executive) students and alumni.Weneed players, both men and women, for the tour to theUS, and people willing to join the Wombats committeeto help organise the tour and associated events.

We are now seeking sponsorship for our 2004 tour to Duke from companies that would like to form arelationship with the AGSM and gain brand exposure inthe international business school environment. Log on to www.agsm.edu.au/wombats for sponsorship opportunities, tour dates and event information.

We aim to host an inaugural Australasian MBAchampionship during the June long-weekend in 2004,inviting participation from business schools in the Asia-Pacific region. For more information, contact:Chris.Tziolis.03@student.agsm.edu.au – by Chris Tziolis

IN BRIEF

Keeping the ball in hand

International forum

The AGSM hosted the firstaccreditation seminar held in

Australia by the US-basedAssociation to Advance CollegiateSchools of Business (AACSB) inAugust.The seminar attractedparticipation from 14 Australianuniversities and business schoolsand 20 institutions from China,Germany, Hong Kong, Japan,New Zealand, Pakistan, SaudiArabia,Taiwan,Thailand and theUS. In 2002, the AGSM was thefirst Australian business school to be awarded internationalaccreditation by the AACSB,

WINNERSThe AGSM’s touchfootball team at Dukein the US this year:(back row, from left)Elina Winnel, NicoleCowell, ElizabethHarvey, Jenny Bondand Monique Ridley;and (front row fromleft) Caroline Ong,Alex Birrell and Susan Copeland.

which is widely recognised as asymbol of quality in world-classmanagement education.

Top rankings

The AGSM retained its positionas the top business school

in Australia and one of the best in Asia, according to Asia Incmagazine’s 2003 MBA rankingspublished in August.The schoolalso ranked in the top band ofbusiness schools in Australia for the second consecutive yearin the Australian Financial ReviewBOSS magazine MBA rankingspublished in September.

Hong Kong program

Professor Mark Hirst has been appointed director of

the Hong Kong MBA program,spearheading the AGSM’sincreased commitment to Hong Kong and the region.

From 30 November, theHong Kong-based admin-istration and marketing of the program will transfer toNewSouth Global, the interna-tional education, training and consultancy arm of theUniversity of New South Wales.

The AGSM Hong Kong office will be managed by Liddy Korner, who is chair of the Australian Chamber of Commerce education committee and a member of the Hong Kong BusinessCoalition on Education. ✪

Networking: Don’t miss an opportunity to meet the school’s dean anddirector Rob McLean at Christmas functions around the country for alumni,students, faculty and instructors.All functions will be held 6pm–8pm;dates and locations as follows: 26 November, Melbourne (The Naval and Military Club); 1 December, Brisbane (Vino’s Restaurant & Bar);2 December, Canberra (The Boat House by the Lake); 4 December,Sydney (AGSM CBD campus, limited space); 8 December, Perth (AGSMPerth Office); 9 December, Adelaide (The Chapel Café).

Is there a management or business issue getting under your skin?

Have your say in AGSM Magazine bywriting a letter to the editor and you

could win business books from McGraw-Hill to the value of $100.

The best letter submitted to the editorby 31 January (for publication in theMarch issue) will receive the prize

courtesy of McGraw-Hill Professional.

Please keep letters to a maximum of 200 words and include all

your contact details.

E-MAIL: debram@agsm.edu.au MAIL: The Editor, AGSM Magazine,

Australian Graduate School ofManagement, UNSW, SYDNEY

NSW 2052 FAX: (02) 9931 9539

L E T T E R SC O M P E T I T I O N

LEADERSHIPSYDNEY FINKELSTEIN,

professor, Tuck School of Businessat Dartmouth College, US

ENCOURAGING ARROGANCEMany of the executives whose businesses westudied were not only arrogant – they wereproud of it. People who dealt with GeneralMotors and IBM in their glory daysremember vividly the condescension withwhich these companies regarded everyoneoutside their ranks. Saatchi & Saatchi had areputation for arrogance in the world ofadvertising.Webvan, eToys and most of theother dotcoms made little secret of theirdisdain for traditional businesses. Cabletron,Motorola and Wang believed they had theonly technology in their industries worthyof being taken seriously.

RELYING ON PAST FORMULAS Executives often revert to harmful orinappropriate strategies as the result of a‘defining moment’ earlier in their careers.It’s usually the one thing they are mostknown for, and the thing that gets themtheir subsequent jobs. Unfortunately, oncepeople have passed this professionalmilestone, they tend to let it define them for the rest of their careers. For WilliamSmithburg of Quaker, the defining momenthad been his successful promotion ofGatorade.Yet when it came to Snapple, a‘cult’ drink that relied on entrepreneurialdistributors, his choice to repeat thetextbook marketing and warehousing distribution strategy of Gatorade could nothave been more unsuccessful.

All of us know that it is important tolearn from mistakes, but how often do wetake the time to do so? Those who runorganisations are subject to the same biases,pressures and misjudgments that all of usare, yet the price they pay for thesemistakes can be immense. If we do notlearn, we are destined to fall into the sametraps. An understanding of why smartexecutives fail offers a real opportunity tochoose a different path. ✪

Sydney Finkelstein, a professor at Tuck Schoolof Business in the US, is the author of WhySmart Executives Fail (Portfolio, 2003). He willteach the AGSM’s Strategic Leadershipprogram, 24—26 November. To buy his book,go to: www.amazon.com.

WHY SMART EXECUTIVES FAIL

Why is it thatseeminglysuccessfulexecutives

running thrivingcompanies sometimesstumble and fail? What canaccount for the dramaticbusiness failures that we seeevery year, in different industries,and even in different countries? Whattypes of mistakes do these managers andbusiness owners make, and how can they beavoided? These are some of the questionsthat a research team at Tuck School ofBusiness set out to answer six years ago.

Some of the answers uncovered were assurprising as the sudden fall from grace ofmany of the business leaders studied. In fact,many of the qualities that sound like theattributes of a dream enterprise turn out tobe the basis for a business nightmare. Formanagers, many of the qualities we aspire toemulate, or feel guilty for not having, turnout to be ones we are better off without. Forinvestors, many of the signposts of successthat we strive to identify turn out to bemarkers for failure.

The real fiascos can be blamed on surprisingly few causes.And these causesalmost certainly apply to businesses inAustralia as much as they do to companies in the US,Asia and Europe.

CHOOSING TO IGNORE CHANGECompanies that have been successful in thepast often let their history and culture takeover – a combination that closes down newideas.When the mobile telephone businessshifted from analogue to digital, forexample, formerly dominant Motorola wasslow to respond.With a fortress-likementality, engineers who believed they knewmore than their customers ignored theoverwhelming demand for digital.Theresult: Nokia became the market leader, aposition it still holds today. Remarkably,Motorola and other companies in the study,such as Rubbermaid and Wang Labs, werefully aware of how the market was shifting butchose not to do anything about it.IL

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FULFILLING THE WRONG VISIONOne of the biggest management strategyideas that came out of the 1990s was thenotion of strategic intent. In principle,strategic intent is a powerful and seeminglystraightforward idea. In practice, peoplejust seem to get in the way.What looks likea logical intent often breaks down whenexecutives let themselves get caught up in‘the one big idea’ fallacy without regard forthe limits of logic. A good example of astrategic misintention is the advertising groupSaatchi & Saatchi in the mid-1980s. For theSaatchi brothers, being No. 1 was the onlyacceptable outcome, leading it to makeacquisitions in businesses where it had noreal capability.When the company provedunable to manage its too-diverse empire,the losses piled up and the two founderswere forced to resign.

IDENTIFYING TOO CLOSELY WITH COMPANIESWhile most investors and employees wouldlike their leaders to be fully committed totheir jobs, some of the most egregiousmistakes occur when executives are tooclosely connected to their companies.Such executives treat the company as anextension of themselves, and actaccordingly. For example, Samsung’s chiefexecutive Kun-Hee Lee decided to enter theautomobile industry simply because heliked cars, despite the industry alreadysuffering from overcapacity. Surprisingly,everyone we interviewed at Samsungpointed out how chairman Lee’s predilec-tion for autos eventually drove the companyto a $3 billion mistake.

You’re so lucky. How do I get to do what you do?”When peoplesay that to Gillian Biscoe, sheusually observes, like golfing great

Gary Player, that the harder you work, theluckier you get.

She rarely talks about herself but madean exception for the AGSM’s DistinguishedSpeaker lecture series. Her subject was riskand how it helps chief executives get to thetop. Knowing an opportunity when you seeone is part of the secret, says one of the firstwomen in Australia to be appointed ahospital CEO.

Biscoe, who began her career as a nurse inthe mid-1960s, has worked to make the mostof life’s opportunities. She was the youngestever deputy director of nursing at a teachinghospital in Australia. Her later appointment tothe federal Department of Health in Canberraled to her becoming the first womansecretary of a health, then human services,department in Australia. In turn, that led toher current career as a consultant to theWorld Health Organization (WHO),governments and non-government agencies.

TAKING THE RIGHT TURNSEvery life has turning points, Biscoe says.“Turning points come along and peoplemiss them,” she says. “Or we recognisethem and get scared. In which case don’texpect great things, because you’ll neverget there if you don’t take some risks.”

One of the career chances Biscoe tookwas accepting the job of assistant secretaryof the Department of Health in 1985. Sheknew whether or not national healthpolicies worked where it counted – inhospitals and community-based healthservices – but she had limited experience indeveloping them. Even so, it turned out tobe a natural step. “Sometimes you take risksthat others perceive as a risk, but you don’t[see it that way] because you’re ready forthat next step.” Biscoe also points out thatthose with the power to appoint you alsotake a chance. She says she is grateful to theDepartment of Health executives for takinga risk on her and for their subsequent andongoing mentoring.

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A healthy appetite for riskHaving the courage to take chances and the aptitude to follow through are part of the secret to a great career. Karen Hunt* reports.

appointed a charge nurse in her early 20s.She then studied part-time to gain aBachelor of Health Administration.

After that she chose to do a mastersdegree in the US, thanks to two friends whoinsisted she apply for a Kellogg Fellowshipto study for the degree. She did so, despitewondering whether she could successfullycompete against “those clever Americans”.

“My two friends led me towards asignificant turning point, the impact ofwhich I only fully realised on reflection,”says Biscoe.

“Having the encouragement of mentorswas vital,” she says. “It helped me overcomewhat I now perceive as an early, somewhatself-limiting attitude to potential careeropportunities.” Her director of nursing atthe Royal Hobart had faith in her,appointing her as deputy director over moresenior applicants and, in later years,suggesting she be considered for the job atthe Department of Health in Canberra.

REACHING CLARITY Biscoe acknowledges a talent for management– and that her various bosses saw she hadwhat it took and were willing to take a riskon her. “I do not believe you can teachsomeone to be a good manager,” she says,“unless they have certain innate qualities thatcan be released and built upon.”

So what are the essential qualities formanagers? “Courage, lack of pomposity and a bit of humility for a start,” says Biscoe.“You also need enough skills in peoplemanagement and procedures, systems and processes for people to give their loyalty to you.

“You have to provide an enablingenvironment for staff, bridging andintegrating management and leadership.”

How does Biscoe make the big decisions?“Most of the time I use both experience andintuition, along with factual data.” Reachingclarity, she says, is a bit like going throughthe process of assessing tender bids – acontinuous process of assessment andmaking judgments.” ✪

* Karen Hunt is a writer with the Editor Group.

Luck has also played a part. In 1987 aDepartment of Health journalist, who wasdetermined to liven up the departmentalmagazine, persuaded Biscoe to tell herstory. She couldn’t have known it, but thejournalist sent the magazine around theworld, where it landed in a WHO tearoom.

Meanwhile, Biscoe had been seconded asthe chief executive of Canberra Hospitaland then appointed the senior changeconsultant and deputy director-general ofthe Ministry of Health in New Zealand. Itwas there that she received a call out of theblue (it was 1989) from the WHO. Couldshe come to China for six weeks? Shejumped at the chance. It was the first in aseries of WHO consultancies that led to hertaking up consulting on a full-time basis.

SEEKING KNOWLEDGEAlong with turning points, being inspiredby others has been important, says Biscoe.She trained at the Royal Hobart Hospital,where a nurse she admired as a clinicianand manager had taken qualifications inintensive care and open-heart surgery at St Vincent’s Hospital in Melbourne. Biscoefollowed her lead and as a result was

8 | AGSM I S S U E 3 • 2 0 0 3

“

Hewlett Packard …Wal-Mart … 3M.

Q: You mentioned youare under no illusionthat in the next 10years the role you playin speaking to manage-ment audiences is likelyto become obsolete. Areyou thinking aboutchanging the processyou use?A: Not necessarily.On the one hand I’m still doin’ booksbecause that’s what thehell people do, but on

the other hand I’m at least as comfortablewith the Web, and that’s obviously the waveof the future.

Q: How do you define ‘management guru’in this increasingly Web-based age?A: I define management guru as some 21-year-old who says interesting things.As I said, I am on a perpetual hunt for thepeculiar, wherever I can find it. I think themanagement guru thing, the whole idea,is an artefact associated with a period ofuncertainty, and I think people werelooking for the idea makers.

Q: Who inspires you at the moment?A: If I give you the answer to that I’mgoing to get in so much trouble in so manyplaces, starting at home with my wife … I am not arguing that I agree with many,many, many things that he does, but themost inspiring change agent to me rightnow is Don Rumsfeld. I didn’t say policy!I’ve been around the Navy all my life, andthere’s no more recalcitrant bureaucracythan the military, and Rumsfeld is actuallychanging it. And I find people who changeenormous, unchangeable institutions to beutterly intriguing. ✪

Tom Peters spoke to business executives inSydney on 22 August. * Shayne Gary is a seniorlecturer in general management at the AGSM.

www.agsm.edu.au AGSM | 9

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Q: If you’re reflective about the termmanagement guru, or thought leader,how do you add value and contribute to managerial practice? A: By provoking people, period.There’s no premium on being right at all.

Q: So, not normative prescription?A: Absolutely not, it’s to piss them off, toannoy them, to challenge them with ideasthat appear to be patently absurd but maybearen’t. No, I have never run much toprescription. But, again, I believe the wholeprocess is about good storytelling. Andfinding good stories and transmitting themin memorable ways – that’s the essence ofleadership, fundamentally. Man was neverconvinced by charts and graphs. I tend todeal with relatively senior audiences, andit’s to find a way, without turning peopleoff, to take them pretty far beyond theircomfort zone. I think people are way shortof the kinds of radical moves that I suspectare going to be required for survival.

Q: We’ve seen a number of managementfads come and go; how does that reflect onwhat you do?A: I figure caveat emptor – let the buyerbeware. If you have a lot of ideas, then bydefinition you’re going to have a lot of shittyideas.And it doesn’t matter. I mean, that’swhat the CEO gets paid for, to sort ’em outand figure what applies and what doesn’t.I would much rather have a world of athousand ideas in which 997 were lousy,than have a world of six ideas in which all six where blah. Roughly, the right ones will catch on.And the other piece ofthat is some people take an idea and apply itright and some won’t. I’m not looking forwall-to-wall wisdom.

Q: What process do you use to bringtogether new management ideas, to stay at the forefront of management thinkingand practice?A: Right near the heart of the matter,which I realise is incredibly pedestrian, isjust an insane amount of reading. I’malways looking for the peculiar, somebody

who’s doing something differently. And,frankly, what I discover with the Forbeses, theFortunes, the Business Weeks and the businesssection of The New York Times is they basicallygrab hold of ideas long after they’ve proventhemselves. And yet, somebody out there isliving in the year 2013 in 2003 and youhave to find it.

The secret is not secret. Jim Collins – theBuilt to Last guy – looks at huge reams ofdata and digs stuff out. I’ve always beencompelled by the little story that tells ofsomething going on that’s very peculiar.To my mind, on some level, by the time itmakes its way into a database it’s too late tobe interesting.The issue is the pre-databasecompanies, if you will.

Q: How has the way you work changedover time, since you published In Search ofExcellence in the 1980s?A: In Search of Excellence: we didn’t start outwith some race through tonnes and tonnesof data.We went around to McKinseypartners and university professors and wesimply said: ‘Know anything interesting,any interesting companies?’ So we did it inthe reverse of the normal route. Once wehad gotten a bucket of companies that size,we put them through a data screen andweeded out the ones that didn’t work. Now,as hard as it is to believe, perhaps, in 1983,nobody had written one word about

Survival of a message-makerProvocateur, guru or management boom strategist? In Search of Excellenceauthor Tom Peters invites all tags. He spoke to the AGSM’s Shayne Gary.*

TOM PETERS SHAYNE GARY

DR GEOFF WARING:

“Only 244 companiesreceived private equityfunding in the year to June 2002”.

PROFESSORJEREMY DAVIS:

“A venture capitalistis only as good as his or her last deal”.

INVESTMENT MANAGERJONATHAN KELLY:

Getting hired “boils downto who you are as anindividual; you need to be a generalist and verycommercial”.

10 | AGSM

If you have ever yearned for a professional life rich inabstract thinking, full of the thrill of risk and freedomof flexibility that can deliver huge financial rewards –you may have considered the life of a venture capitalist.

But considering that there are no more than 200tightly held positions across Australia, the chances of

breaking into this industry are slim. Indeed, with just $1 billionin funds under investment for early-stage expansion acrossAustralia and very few recognised players in the industry, thereare not a lot of open doors.

Unlike the consulting industry, where firms such as McKinsey& Company or Boston Consulting Group may hire 20 graduates a year, venture capital (VC) firms can go for several years withouttaking on any new blood.When VC firms do hire, a single new employee may represent a 25 per cent increase inheadcount, given that many operate with an average of just four, predominantly male, investment professionals.

Many on the outside looking in believe that becoming aventure capitalist is a matter of serendipity.The truth is morecomplex than that. Being a venture capitalist is as much aboutbeing at the right place at the right time as it is accruing theright combination of skills and pure perseverance.

As a seasoned observer of the VC industry, professor JeremyDavis, quips: “The harder I work, the luckier I get”. Davis is theAMP professor at the AGSM and deputy chairman of AMWINManagement, which is responsible for a $40 million early-stagefund under the federal government’s Innovation InvestmentFund program. He says the old joke reflects how little can be left to chance to succeed in the volatile and competitive venturecapital industry.

Nevertheless, becoming a venture capitalist is an attractiveenough proposition that some are willing to wait in the wings foryears for an opportunity to enter.There are several reasons for this.

Riskandreward

Helene Zampetakis* takes a look atrecent trends in an industry that hasnotoriously few openings for new players.

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For a start, it’s a potentially highlylucrative field.The rule of thumb is that afund’s seniors, or general partners, earn abase of roughly 2 per cent of committedcapital each year for the life of the fund and about 20 per cent of the carriedinterest, or capital gain (the ‘carry’ as it iscalled) when the firm exits investments at a profit.The remainder goes back to theinvestors (limited partners). “The generalpartners get that without putting up anymoney.That’s not a bad reward for skill,”says Davis.

Second, equity investment is slowly butsurely growing, heralding new opportuni-ties. In the 12 months to June 2002,VCfunds invested in Australia grew by 13.5 percent to $2.5 billion, and new funds raiseddropped only marginally (by around $200million) compared to a dramatic plunge inthe US from about $75 billion to $30billion in VC investments for that period.1

Most investment in Australia now focuseson the safer options of expansion capitaland management buyouts.

Third, there is a shortage of critical skills in the industry, especially for early-stage ventures, so when a door opens entry can be swift if your expertise fills a crucial gap.

Finally, and perhaps most compelling,the profession is regarded as a deeplysatisfying one. AGSM senior lecturer, DrGeoff Waring, attributes this to the richnessof life as a venture capitalist.

“People do MBAs and get intoinvestment banking or consulting and can feel unfulfilled.They write reports that they may not have an opportunity to

see through, or they make recommenda-tions that their clients may not follow,”says Waring.

In contrast, venture capitalists: “work invery small firms where there’s a high levelof trust and more flexibility; they are moreinvolved with their investees, and they’remeasured on results rather than on the timethey spend at the office.

“I’ve met unhappy investment bankersand consultants, but I’ve never met anunhappy venture capitalist,” he says. Howthen do you become one of the select few?

Generally, firms rely on trusted sourcesfor referrals to people with a specific set ofskills that fill gaps in their portfolio.

Sometimes they advertise vacancies:this year, CHAMP Ventures advertised forone analyst.

However, investment manager at CHAMPVentures, Jonathan Kelly (MBA Exec ’01),says: “Hiring is not a regularprocess; we generally onlylook for additional people as we expand and expansiononly occurs over time as our funds undermanagement grow”.

Nevertheless, getting a jobin the VC industry is not ashopeless as it appears. Kellysays he knows “people who were geologistscoming straight from university”.

STRATEGIC MOVES Rarely, however, will high intelligence aloneopen doors to the industry. Insiders say it iswiser to prepare for a VC career with anumber of strategic moves. Davis suggests

acquiring skills that potential employerswill notice. A degree from a top-tierbusiness school and some industryexperience on your resume will help youstand out.

The chief executive of the AustralianVenture Capital Association (AVCAL),Andrew Green, says: “I would aim to leavethe AGSM asking, ‘What business can Istart?’, not ‘Who will I work for?’”

Experience with an entrepreneurial,VC-funded company can provide insightinto the start-up’s perspective and give you credibility with other entrepreneurs,as well as delivering profit and lossaccountability, says Green.

Gaining credibility with entrepreneurs is vital to success. Anthony Kongats (MBA’87), chief executive of supercapacitormanufacturer cap-XX, a successful investeeof capital, says deep operational or

functional skills help here,together with an ability to take both short- and long-term views of the enterprise and bringnetworks to the business.

By all accounts, networkingis crucial as a venturecapitalist. Davis recommendsfinding ways to introduce

yourself to the key decision-makers andraising your profile by writing articles andtaking AVCAL courses. Sending a CV into afirm can help. If it raises the interest of thedecision-makers, they may file it away untilthey need it.

Waring also commends experience incommercialising a product developed by a

Firms rely on trusted sources forreferrals to peoplewith a specific set

of skills.

Venture capital is long-term,hands-on equity investment inhigh potential companies by

professional investors, for theprimary purpose of growth of thecompanies’ valuations.1

In Australia, the term venturecapital (VC) often includes lessrisky investment classes such asmezzanine (pre-initial publicoffering) finance, expansioncapital, funds investing in otherfunds and buyouts. In the US thisbroader definition is called privateequity because it excludesinvestments in public equitymarkets. In the future, venturecapitalists are likely to expand

their scope. Forexample, there isa proposal inAustralia to allow venturecapitalists toinvest in listedcompanies suchas ‘pennydreadfuls’ –

small-cap listed companies thatneed the turnaround skills ofventure capitalists as analternative to liquidation.

Information means powerPrivate equity, by its very nature,is one of the least transparent

investment sectors, and the limited accessibility of informationinevitably generates power for aselect few. However, the AustralianVenture Capital Association and VC research firm, VentureEconomics, have been working toimprove access to information bysurveying industry members.

Nevertheless, the superannua-tion funds, which are the largestsource of VC money (36 per centin 2002), still rely on an elitegroup of asset consultants tochoose which VC managers toinvest with. The funds do thisbecause there is such a bigvariance in returns across VCfunds and over time, and alsobecause funds are all privately run

and many lack transparency. Forexample, internal rates of returnto June 2002 for 53 funds formedbetween 1988 and 2001 rangedfrom –77 per cent to +82 per cent!This illustrates what can be atstake in choosing a VC manager –a fact that partly explains a recenttrend of new VC firms beingestablished solely for puttingcapital into other VC firms, ratherthan taking a bet on directlyinvesting in companies.

Venture capital’s cyclical naturepartly drives this volatility inreturns. Following the globaltechnology bust in 2000,Australia’s VC industry movedtowards more conservativeinvestments in terms of dollars,

VENTURE CAPITAL IN PROFILE

www.agsm.edu.au AGSM | 13

big multinational company, such as Intel orIBM.This delivers an added bonus of goodcontacts with prospective customers.

Clearly, it also helps to have skills that arein short supply.Waring says one of thebiggest skill shortages is an ability to staycalm and focused on the value propositionwhen short-term, ‘hairy’ obstacles arise.

He also cites advanced negotiation skills, effective use of personal networks in investee industries, credibility withentrepreneurs and a willingness to be aconsultant and sounding board for start-upbusinesses.

VC investment managers also needspecialist financial skills such as knowinghow to structure deals and monitoringfinancial accounts, as well as an ability todiagnose problems and evaluate new deals.“A combination of all these skills is hard tofind,” says Waring.

Waring has conducted courses that trainpeople in these areas. As well as his entre-preneurship course at the AGSM, eachMarch he helps AVCAL put together acourse taught by practitioners that uses aseries of exercises that simulate typical

problems in the VC cycle. But while thesecourses may help you to brush up onpractical skills, success will depend on core capabilities.

Kelly cites people skills and the ability toforge relationships with entrepreneurs andprofessional peers as essential (in additionto financial and analytical skills) to workingas a venture capitalist. Beyond that, “it allboils down to who you are as anindividual,” he says. “You need to be ageneralist and very commercial.”

Kelly himself trained as an engineerbefore beginning an MBA at the AGSM. Hewas taken on by CHAMP Ventures two-thirds of the way through his degree withno solid financial background. Part of theCastle Harlan Australian Mezzanine Partners(CHAMP) group, the firm focuses onexpansion investment and managementbuyouts, investing up to $20 million ineach opportunity.

Kelly is part of a team of six that alsoincludes former chartered accountants andlawyers, and is responsible for identifyingand assessing new investment opportunitiesas well as portfolio management and exitplanning.

He says there is no typical careerprogression within the industry.VC firmstend to run small teams with fairly diversebackgrounds but with strong financialknowledge.

“The job is very broadly based in termsof skills. It’s not the case that you relystrictly on accounting or financialknowledge or that you’re a technical expert– all of these are important.” However, headds: “Obviously it is hard to get away

from the need for core finance skills andcommercial know-how”.

Kelly does not use technical knowledgefrom his engineering background on a day-to-day basis: “Normally the companies wework with have a wealth of technical ability– they tend to have business problemsrather than technical ones”.

Nevertheless, some technical expertisecan be very important. Michael Panaccio,investment principal at Starfish Ventures,says: “It’s almost mandatory to have twotypes of qualifications – that is, a mix ofskills with one being technical”.

Starfish, a relatively new firm, is establishing a technology fund investing in early- to middle-stage companies,predominantly in the high-growth areas ofinformation technology, communicationsand life sciences.The firm includes twopeople with science-based PhDs and five MBAs.

Panaccio says technical knowledge canhelp venture capitalists select promisingtechnology-based companies by helpingthem determine whether the technology is world-class and how it ranks against allpossible alternatives.

As much as 50 per cent of early-stageventure capital goes into life sciences,including biotechnology, and some of these may be very risky undertakings,says Panaccio.

“These companies have around a 0.1 per cent chance of making it all the way.

“Even when it works in the lab, it maynot be approved by the regulatoryauthorities, it may not be preferred by themarket and so on.

stage of development andindustries. There was less newcapital raised (the year to June2002 saw a 28 per cent decline onthe previous year). More capitalwent into later-stage investments(almost 70 per cent of the $2.3billion invested in the year to June2002 went into acquisitions, whileexpansion-stage investmentsreceived 19 per cent). Capital wasalso directed to relatively stableindustries such as consumergoods (almost half) and health.Only about one-third went to themore risky high technology areasof computers, communicationsand biotechnology.

Sydney-based AMWINManagement’s experience

illustrates the sector’s volatility.While it made a $256 million profiton Looksmart, it also invested $20million (with others) in the dotcomDstore, which was later sold toHarris Scarfe for only $3 million.Equally, the highly visible successof investments in medicalequipment firms such as ResMedand Cochlear are contrasted withfailures – such as Colonial FirstState Private Equity’s loss of $5.8

million on shoe retailer Solesbury,and the forced sale of ImpulseAirlines to Qantas when US dollar-denominated fuel costs rose asthe Australian dollar sank.

Banks, insurance companiesand corporations are also biginvestors in VC funds. They havenot historically done well investingdirectly themselves owing to theirinability to offer their seniorinvestment managers the kind ofgovernance systems andincentives that match those inboutique VC firms. For example,corporations invest for strategicreasons (to help their corebusiness) for which returns can besacrificed. Banks have difficultyretaining successful investment

managers who can raise a fund of their own. These institutionaldisadvantages are unlikely tochange, creating a clear niche forboutique VC funds.

A fragmented market

Venture capital brings great gainsto society, and some groups, suchas VC partners, their serviceproviders and technologyconsumers. However, others, at the very early stage, bearexcessive risks for their returns. I know one prominent angelinvestor, at the seed-capital stage,who saw himself as a charity giventhe difficulty he faced extracting a return on his investments.

Following the global technologybust in 2000, Australia’s VC

industry moved towards moreconservative investments.

WEEKLY ACTIVITY DAYS

Sourcing deals 1.0

Assessing investments 0.5

Monitoring 1.0

Advising 1.0

Recruiting resources 1.0

General administration 0.5Source: Chris Golis, Nanyang Ventures

HOW VC MANAGERS SPEND THEIR TIME

(continued on page 14)

“You need that understanding at theearliest possible stage,” says Panaccio.

Failure to anticipate these kinds ofproblems can spell disaster for buddingventure capitalists, who are measured bythe return on the investments they back.

“A venture capitalist is only as good ashis [or her] last deal,” says Davis. “Theprincipal form of failure is when you raisemoney for an investment and the return isnot very satisfactory, so when you try toraise extra funding people say, ‘No thanks’.”

Failure rates are high – typically, one in10 investments work really well, two returna reasonable profit and the rest make a lossor simply recoup the funds invested.

It can take years before a venturecapitalist knows if his or her hard work haspaid off.The profit is only reaped at the endof the investment cycle and even then itmay not measure up to expectations.

“I work with five people on a dailybasis, on what can be very complexproblems with high stakes,” Kelly notes.“Things get tense sometimes and you needto develop a strong relationship with yourcolleagues so the team can achieve its goals.”

Venture capitalists typically spend thefirst four years of a fund investing. Kellysays firms generally pick out three or fourinvestments a year that will deliver veryhigh rates of return out of the 300 or 400proposals they receive each year.The focusthen shifts to managing the portfolio andselectively realising each investment asvalue is maximised over the life of thefund, which is typically 10 years.

The firm will then look to raise the nextfund – competing largely for equityallocated by the main investors: the pension

fund managers, as recommended by theirasset consultants, who are known in theindustry as ‘the gatekeepers of power’.Domestic pension funds are the singlelargest contributor to the VC industry(accounting for about $2.7 billion of the$7.4 billion in private equity undermanagement at 30 June 2002). However,private equity still accounts for only 0.5 per cent of total pension funds undermanagement (worth about $550 billion at 30 June 2002).

Winning funding largely depends ondemonstrating a good track record acrossmultiple funds; only around 70 per cent ofventure capitalists in the US get follow-onfunding. “People don’t go bankrupt fromthe first [capital] raising – failure comesfrom not raising subsequent funds,” notesDavis. He says a venture capitalist’sreputation may be undermined if he or shetakes on too much and is unable to meethis or her obligations. Many venturecapitalists struggle with the more mundaneprocessing tasks and outsourcing thesefunctions may emerge as a trend in thefuture. Indicative of this is that law firmsare establishing VC practice areas to handleVC firms’ legal work – a sign that theindustry is maturing.

SIGNS OF AN UPSWINGIn the US and Europe, private equityaccounts for a much bigger percentage ofGDP than in Australia, partly owing to thefact that the main supporters of the VCindustry, particularly in the US, are theendowments and foundations.

Nevertheless, the asset class is increas-ingly winning the confidence of the main

investors. “There’s a very orderly build-upof funds due to our conservativeapproach, which makes a strong case forAustralia,” says AVCAL’s Green.

Even during the dotcom boom years,when US VC firms were liberal to anextreme with funds, “very few deals weredone in Australia because the expectationswere so unrealistic”, notes Green.

But the industry’s prospects overall areimproving following a ruling in 2002 inwhich capital gains tax was abolished for awide class of offshore investors, puttingAustralia on par with the US and Europe inits treatment of various classes of offshoreinvestors, who can now conduct businesson the same terms as Australians. As aresult, up to $1 billion in foreign capital isexpected to pour into Australia over thenext five years, according to Green.

This should bring in more venturecapitalists and create new opportunities byopening new fields in investment andgenerating ‘deal flow’, says Green. Itsuggests that the industry is poised for an upswing.

Confidence has also been lifted by aspectacular success this year – Atlas Steel,which delivered a 580 per cent rate ofreturn in 18 months to its investor,Quadrant Capital. As prospects for theindustry improve, so too will the chancesfor aspirant venture capitalists. “A risingtide lifts all boats,” says Green. ✪

* Helene Zampetakis a freelance writer.

FOOTNOTE1 www.ventureeconomics.com. Venture

Economics is a leading world authority on venture capital.

COVER STORY

Entrepreneurs feel they have toolittle power as venture capital isvery hard to get and venturecapitalists are not readily available.A reason for this is the sheernumber of business plans that hitventure capitalists’ desks (300 ayear can be normal). Venturecapitalists have adjusted to thesedemands by becoming less availableand relying more on their personalnetworks to source deals. Only 244companies received private equityfunding in the year to June 2002,and half of these were follow-oninvestments from previous years.

Universities invest heavily inresearch but are not equipped to

take on the commercialisationrole. Their commercialisationarms lack the results-orientatedincentives of boutique VCmanagers. Venture capitalists andthe government have soughtinnovations with the pre-seedfunds to address the incentive andrisk-allocation problems, but newinvestment vehicles are needed.

Signs of maturingThe Australian VC industry isgrowing and, at the same time,showing signs of maturing. Thereis an increasing importanceplaced on reputation. This shouldsee the role and power of asset

consultants diminish as venturecapitalists develop reputationmechanisms such as brands andmore transparent performanceratings. This greater emphasis onreputation means new entrantsand poorly performing funds havehad difficulty attracting investors.

This is reflected in fewer newfunds relative to follow-on funds.There were only 17 new fundscreated in the year to June 2002,compared with 47 in the previousyear. Of the 17 new funds, 13 ofthem were follow-on funds,whereas new-entrant fundsusually dominate the mix.

There is a saying that in astrong wind (such as the dotcomboom), even a turkey can fly. Butwhen the wind drops you find allthe turkeys.

* Geoff Waring is a senior lecturerat the AGSM. He teaches anentrepreneurship course at theAGSM and helps AVCAL designVC skills courses.

FOOTNOTE1 The source for this definition and

the statistics in this article is theAVCAL 2002 Yearbook. Seewww.avcal.com.au where copiescan be downloaded.

VENTURE CAPITAL IN PROFILE

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made to an organisation’simage and reputation. Beingvalued for what we havecontributed helps most of usto let go of the old andencompass the new –especially if we also know and understand why thechange is needed.

Equally, in the neutral‘confusing’ zone, when old systems and procedures are being dismantled andreplacements installed, regularface-to-face communication isoften vital to pick up potential

glitches and oversights. Resistance is a natural(and potentially valuable) reaction that is sooften underpinned by the very real andpractical concerns of experienced people.

ACKNOWLEDGE ENDINGSUnlike in personal grief counselling, wherethe expression of feelings can be beneficial,in organisational change accurate acknowl-edgment is often all that is needed.

Both the downside and upside of thechange curve need to be carefullyanticipated and managed. Sometimes it can be useful to have separate processplanning teams managing the operationaland transitional aspects of a major organisational change.

Sometimes an appropriate ritual to marka significant organisational ending can,within the space of a few hours, swing awhole division through the downside andinto the upside of change.

Todd Jick of Harvard University hasastutely observed: “… resistance is asnatural as self-protection and can be vitalenergy to work with”.2 The important point is not to ignore it.To do so is toalmost guarantee a journey down throughthe J-curve of change. ✪

FOOTNOTES1 Dr William Bridges, ‘Both Change and Transition

must be Managed’, HR Monthly, p. 14, AHRI,Sydney, May 1996.

2 Professor Todd D. Jick, The Recipients ofChange, Harvard Business School, Boston,December 1990 (Ref. 9-491-039).

Have you ever been really surprisedby the negative reaction aseemingly minor organisationalchange can generate – such as a

proposal that individual offices be replacedby modern, open-plan workstations?Equally, you might have puzzled over why awell-planned and well-communicatedchange generated virtually no response andsimply fizzled out.

What you may have experienced is the J-curve of change (illustrated at right).Thiscurve reflects the common experience ofthings often getting worse before they getbetter in circumstances of change.

Most change has a loss as well as a gainside. Even positive changes like apromotion or an opportunity to do a morechallenging job in a new organisation canhave their downsides – such as the loss oftrusted colleagues and staff.

Of course, unexpected and traumaticchanges such as a sudden merger orretrenchment can generate much strongerresponses, including shock, denial, loss and anger.

Generally, the messier and more disorganised the change, the deeper andmore prolonged the disturbance curve.

For some people, change can also triggerold memories and attached feelings.This iswhy seemingly small changes can generatesuch big reactions – the responses are, infact, emotional echoes from the past andcan lead to immediate dips in performance– the downward part of the J-curve. Insome highly traumatic change situations,feelings of betrayal, humiliation and/orshame can push people down into a muchmore prolonged and destructive damagecycle. In contrast, the upward side of the J-curve is usually driven by feelings ofhope, optimism and curiosity.

MANAGE ALL PHASES OF CHANGESo how can loss of performance duringorganisational change be minimised andthe upside maximised?

The American change practitionerWilliam Bridges believes there are twoprocesses in change, both of which need tobe planned for and managed.1

First comes physical or operationalchange, characterised by moving offices or merging with another organisation.Such change is generally external,situational, event-based and defined by outcome. It often occurs quickly.

Next are the emotional responses or,as explained by Bridges, the ‘transition’processes of change.These tend to beinternal, psychological, experience-basedand defined by process.They always take time.

Some organisational changes arepredominantly mechanical in nature (forexample, system upgrades) and cause fewtransitional effects. However, structuralchanges, which involve people and disturbestablished relationships, job relativities andreward systems, can create intense andlong-lasting transitional reactions.

Bridges believes transitions have threedistinct phases: endings, neutral zones andnew beginnings.The endings phase leads todisengagement; the neutral zone is a kindof fallow time when old habits are extin-guished; and the new beginnings period iswhen people really buy in, get on boardand feel at home with the new.

It is important, says Bridges, to providefor each phase, especially when people’sjobs or the way things are done arechanging. For example, in the initialendings phase it may be important tosymbolically recognise the valuable contribution that previous knowledge,skills, processes and structures may have

STRATEGYHUMPHREY ARMSTRONG, director,

Lifelong Learning Systems

THE J-CURVE OF CHANGE

CHANGE

LOSSES(shock, denial,

mourning,anger)

ENDINGS

LOW

HIGH

The J-curve of change

NEUTRAL ZONE NEW BEGINNINGS

Per

form

an

ce

Time

DISTURBANCE CYCLES

DAMAGE CYCLE(betrayal, humiliation,

shame)

GAINS(hope, optimism,

curiosity)

Source: Lifelong Learning Systems

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RESEARCH

It is commonly thought that focusingon overall customer satisfaction is thebest way to develop a large andcommitted customer base. However,

AGSM lecturer Markus Groth’s new researchcontends that this is not the only, or eventhe best, way to think about or deal withcustomers – particularly in the serviceindustries. Groth’s research examines “thegrowing trend for customers to be increas-ingly involved in producing the servicesthey purchase, and the impact suchbehaviour has on service outcomes”.

Of course, customer involvement inproducing services is not a newphenomenon.Think of customers visitingtheir doctors or fitness studios – the serviceoutcome, in part, depends on howaccurately the patients or clients candescribe their symptoms or stick to theirexercise schedules. Banks have developedcustomer involvement through ATMs, andthe new economy of online purchasingrequires customers to do the majority ofwork – from booking their plane tickets topurchasing books.

Groth refers to this involvement as‘customer co-production’ and describes itas the basic tasks that are required ofcustomers to purchase a service.

Groth also examines another aspect ofcustomer involvement he refers to as‘customer citizenship’, which describes“helpful voluntary actions that a customermight undertake as part of the service

delivery”. Examples of these voluntaryactions include submitting a book reviewafter purchasing a book from, say, Amazon,recommending an accountant to a friend orgiving feedback on a Web site.These typesof actions benefit a company, but they arenot things a customer must do in order topurchase a service or product.

Groth’s research investigates howcompanies might use customer co-production and citizenship behaviours tobe more profitable.

“Understanding and managing suchbehaviour allows organisations to reducecosts and improve the service experiencefrom the customer’s point of view, whichultimately increases an organisation’sbottom line,” he argues.

Customer co-production has been onthe radar screen of managers in businessessuch as self-service petrol stations andbanking transactions via ATMs or theInternet – where customers perform tasksthat were traditionally carried out byservice employees. It is a trend that hasincreasingly blurred the lines betweencustomers and employees, and companiesare treating highly-involved customers like partial employees or organisationalhuman resources.

However, what is less understood,according to Groth, are the drivers andconsequences of customer citizenshipbehaviour and how they affect organisa-tional effectiveness.

Customer co-production relies oncustomers understanding the tasks requiredof them. One example is where a customerdissatisfied with a bank’s service is stilllikely to fulfil the customer tasks that arerequired (such as supplying accountnumbers at an ATM), but will not performextra voluntary tasks such as recommend-ing the bank or giving helpful feedback.

Groth’s research shows: “Voluntarybehaviours are dispensed at the discretionof the customer and, therefore, are morestrongly linked to service satisfaction.

“It is important that companiesdistinguish between the tasks that arerequired of a customer to purchase aproduct or service and those tasks that arenot, so as to allow managers to identifythose behaviours that customers perceive as mandatory and others they perceive as discretionary.

“By understanding the different driversand consequences of these two types ofbehaviour, managers can motivate customersmore effectively to increase desiredbehaviours and decrease undesired actions.”

Groth explains that customer behaviourcontributes to the overall success of theservice organisation, given that customersare often physically present and activelyparticipate in the delivery process. Forexample, consultants are not able to deliveruseful reports unless their customersactively participate in providing necessaryinformation and data. From another point

How well trainedare your customers?New research examines how new-economy purchasing is changing the shape of customer management. Kirsty Harris* reports.

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of view, customers can give helpfulfeedback to consultants regarding theirmethods and results.

“Crucially, customers can provide intellectual and physical resources, whichincrease organisational productivity: theycan be a source of new ideas for business

strategies, help train other customers andshare their purchasing experiences withmanagement,” says Groth.

“Even dissatisfied customers can be avaluable source of feedback,” he says. Forexample, Lufthansa Airlines conductsregular focus groups and personal

interviews with its mostcomplaining customers.These sessions, internallyknown as ‘horror day’,provide valuable feedback for identifying problems and discussing requiredchanges from the customerperspective.

CUSTOMER SOCIALISATIONManagers often face thechallenge of encouragingtheir customers to purchaseservices in more cost-effective ways – such asmoving to the Internet tomake their purchases. Forcustomers to feel comfortableabout adopting newpurchasing methods theyneed the ability to performnew tasks, but they also needto understand and feelconfident about what isexpected of them.

Customers vary greatly inthe degree to which they haveboth the knowledge andability required for successfulservice delivery, especially onthe Internet. Less informedcustomers often use upvaluable organisationalresources (such as incompleteor incorrect orders, special orunreasonable requests andfrequent calls to customerservice hotlines).

“Poorly ‘trained’customers are a main source of unsuccessful co-production, a problem that is often not correctlyidentified by organisations,”says Groth.

Managers are quick toblame unmotivatedcustomers, whereas the

problem lies often in a lack of customertraining, not a lack of motivation.

This training or socialisation ofcustomers can be accomplished throughincentives, company literature andpurchasing environment cues, or simpledevices such as informative signs or

Lufthansa Airlines conducts regular focus groups and personal interviews with its most complaining customers. These sessions,

internally known as ‘horror day’, provide valuable feedback.

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brochures, timely instructionsand realistic service previews.

Many of the most successfulInternet businesses have veryclear instructions, making thepurchasing tasks simple tocomplete. For example,furniture store IKEA, known forits self-service retailing concept,publishes a ‘how to shop’section on its Web site to explainin great detail to customers ‘theIKEA way’.

This kind of detailed servicepreview can be an effective way for organi-sations to prepare their customers. “Byproviding realistic expectations as to what toexpect and what not to expect, companiesinvariably increase customers’ knowledgeabout their role as co-producers,” saysGroth. For example, a realistic servicepreview may be useful for first-timecustomers of no-frills airlines who, throughtheir past experiences, may have come toexpect seat assignments, loyalty programsand meals and drinks, even on short flights.

Socialisation is an ongoing process inwhich customers learn the skills necessaryto effectively purchase a service or product.

Similar to management research thatshows that well-socialised employees arebetter performers, Groth’s researchindicates that customers who have beeneffectively socialised are better co-producersand hold more favourable perceptions ofthe organisation.

However, Groth points out thatcompanies should not make the mistake ofexpecting customer satisfaction to be apredictor of effective co-production. Otherfactors come into play – such as environ-ments where customers are constrained inthe tasks they are able to perform whenpurchasing a service or product. Forexample, to successfully complete a banktransaction, a customer must fill out thenecessary forms, regardless of his or hersatisfaction with the service.

On the other hand, Groth warnscompanies not to assume that wellsocialised and effective co-producingcustomers are necessarily satisfiedcustomers, because there is a difference.“My research shows that an ability andfamiliarity with required co-productiontasks are unlikely to increase a customer’spropensity for citizenship behaviours suchas referrals,” he says.

In one research study,Groth used a randomsample of people (obtainedfrom juror lists in Arizona,US) to analyse purchasinghabits and decision drivers.In another study heanalysed the behaviour ofonline retail shoppers.Results show thatcustomers differentiatebetween two distinct typesof behaviour: requiredpurchasing tasks (customer

co-production), and discretionary voluntarybehaviour (customer citizenship).The twocategories of behaviour have differentdrivers and consequences, so it is importantfor companies to manage customers’purchasing experiences accordingly.

PRACTICAL IMPLICATIONSGroth’s research indicates that in theservices sector, where customer co-production plays an important role,managers should socialise customers toperform the necessary co-production tasks.His results imply that merely pursuing agoal of ‘complete customer satisfaction’ canbe misleading in that satisfied customers are not always effective co-producers,and vice versa.

Managers need to decide where and howto best channel their customer relationsactivities to achieve the results they need.Many organisations fail to offer adequatesocialisation, forcing customers to acquireknowledge of service delivery processes byobserving others.The clear disadvantages ofthis are customer imitation of undesiredbehaviour or even rejection of an organisa-tion’s services altogether.

“An investment in socialisation results ina pay-off,” says Groth, “because correctlyeducated customers will exhaust fewerorganisational resources in the long run (as a result of fewer queries, correctly filledorders and the like), and this will lead to anincrease in profit margins.

“Customer socialisation plays an evenmore crucial role in Internet purchases,where customers have only electronic help.Confused or frustrated customers end updeserting their virtual shopping carts – not for want of choice but because,metaphorically, the cart’s wheels get stuck.Customers then make no purchase becausethey are unclear about what tasks they

need to perform to get to the checkout,”explains Groth.

USING CUSTOMERS FOR STRATEGIC ADVANTAGE“Organisations should not assume that thebehaviours they think of as co-production areperceived as such by customers,” says Groth.

For companies to gain the most out oftheir customers, they must match theirexpectations of customer behaviour to whatcustomers believe are their requiredpurchasing tasks. By assessing howcustomers perceive their service deliveryrole, managers are able to better managetheir customers’ perceptions about theservice delivery process.

“Changing customers’ expectations, sothat behaviours they initially perceive asvoluntary are subsequently perceived asexpected, gives managers great opportuni-ties to make their service delivery moreefficient and cost-effective,” says Groth.Some organisations even hire people tomasquerade as customers to performdesired behaviours in front of othercustomers, hoping that regular customerswill adopt these behaviours and think ofthem as an expected part of service delivery.

“My chief recommendation is that acompany must understand the uniquefeatures of its service delivery process andthe extent of customer involvement in thatprocess so that it can strategically managecustomer behaviour. Once that aspect isunderstood, focus then needs to move totraining customers as if they are newservice employees joining the organisation.This should encompass all desired customerbehaviours, in particular task-related actionsrequired to purchase a service, but alsoorganisational values and beliefs.

“Communication of what customers arerequired to do in their role is crucial andmust be made simple and clear. Only thencan a company successfully boost customerengagement if, in fact, it determines thatadditional voluntary (or citizenship)actions would benefit overall profitability.”

Groth concludes that the best way tomanage customers as ‘partial employees’to achieve profitable outcomes for bothcustomers and providers is to pursuedevelopment of the customer as a corporatecitizen … not simply a denizen. ✪

* Kirsty Harris (MBA ’02) is the AGSM’s actingmanager, corporate relations.

Focus needs tomove to trainingcustomers as ifthey are new

service employeesjoining the

organisation.

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The call centre industry in Australiahas suffered a poor reputation inthe past, plagued by media andunion criticisms of its

management.What critics have failed toacknowledge are the considerable difficul-ties, complexities and challenges that callcentre managers face, owing to the rapidevolution and growth of the sector.

The Australian call centre industry iscurrently worth $9.7 billion a year, and hasbeen growing at an annual rate of 20 percent, with an estimated 3850 call centresemploying about 220,000 people.

The industry handles about 70 per centof all organisations’ customer contact, and26 per cent of call centres in Australia nowhandle customer contact services in morethan one country (ACA Research, 2002).

Despite this considerable growth andobvious importance to business, themanagement of call centres is not wellunderstood by those outside the industry.

MANAGING MULTIPLE CHANNELSThe evolution of the call centre began withthe development of airline reservations and directory assistance services – whichsought a cheaper alternative to face-to-facecustomer service.

Along the way, call centres have beenviewed rather simplistically and negatively asplaces where managers do little else butsupervise phone operators taking customercalls.This notion of operational simplicitycould not be further from the truth.

First, the idea that call centres deal only with telephone calls no longer holds.Many centres have the capacity to interactwith customers via voice technology,e-commerce,Web sites, e-mail, fax, postand face-to-face contact. Others supportmulti-channel contact via text chat, pagepush (where agents ‘push’Web pages byusing the touch-tone buttons on theirtelephone keypads),Voice over InternetProtocol (VoIP) and speech recognition.

Apart from managing these multiplechannels, managing a call centre for peakperformance requires the understanding

and application of mathematical formulas,laws and phenomena.

The primary mathematical formulas thatgovern call centre operations are theQueuing theories developed in 1909 byDanish engineer A.K. Erlang. Call centres usethe formula known as Erlang C to helpcalculate staffing requirements.The formulacalculates the predicted waiting times of callsbased on three factors: the number of agents,the number of callers and the average callhandling time to serve the customer. It alsodetermines, among other things, thenumber of staff required, the average speedof answering calls and the average number ofdelayed calls.Another formula, Erlang B, isused to gauge the trunks (phone lines)required to carry the calls.

Call centre managers rely on thesemathematical formulas to plan resources,forecast, budget, schedule and allocatework, and conduct campaigns. Somecentres, such as the NRMA’s facility, arecapable of using the science to makeaccurate and highly specific predictionsabout service demand and supply. Forexample, Erlang’s theories make it possibleto predict the number of calls a centre willreceive, and the number of staff needed tohandle calls, on a Monday at midday, at aparticular hour in a month’s time, or evenon a rainy day. If the science is not correctlyapplied or understood by managers, callcentre efficiencies will not accrue andcentres will not be competitive.

More than a phone callThe increasing complexity of call centre management is not well understood, writes Catriona Wallace.*

KEEPING UP WITH TECHNOLOGY The other key issue facing call centremanagement, perhaps more so than otherbusiness unit managers, is the rapid changein, and obsolescence of, technology.Managers in the call centre industry arefond of saying “a call centre year is aboutthree months”, inferring that wheretechnology in a traditional business maybecome obsolete in a year, in a call centrethis is likely to happen in just three months.

The range of technologies call centresuse is considerable and may includecomputer telephony systems (CTI),automatic call distributors (ACD), hostservers, interactive voice response units(IVR), workforce management and callquality monitoring systems, predictivediallers (that make outbound calls andonly connect a call to a service representa-tive when they detect an individual on theline) and fax and speech recognitiontechnologies. An effective call centremanager needs to understand all availabletechnologies, including their functionalityand interdependence, how they interfacewith existing technologies and what theirreturn on investment is likely to be.

With the continued growth andevolution of call centres and theirincreasing importance to business, theindustry’s imminent challenges includebalancing the technological and scientificmanagement of the centres with humanresource management.

It is high time the dubious notion ofcall centres as customer contactsweatshops had its day – as businesses and customers increasingly rely on theability of call centre managers to effectivelyadminister complex technologies andpeople management systems to serve their needs. ✪

* Catriona Wallace is a PhD candidate at theAGSM and co-author of The Complete Guideto Call and Contact Centre Management,Pearsons, Sydney, 2003. To order the book,go to: www.callcentres.net.

If someone asks you to choose anumber between one and 100, youface a straightforward choice andthere are no major implications in

choosing one number over another.But change the rules slightly and it

becomes a strategic calculation, as partici-pants in two seminars on pricing dynamicsin the wine industry discovered in Junewhen the AGSM’s professor Robert Marksposed the ‘two-thirds’ game to illustrate thestrategic interactions involved in settingprices in the marketplace.

Marks offered a prize of $20 to theperson who chose a number closest to two-thirds of the average number chosen by thegroup.You would expect the average to bearound 50 (and two-thirds of that is 33 or34). But with everyone else making thesame calculation, perhaps two-thirds of 33or 34 would win the money.

For the record, the $20 went tosomeone who chose the number 23, aresult which showed that almost everyonein the group had gone through at least twocycles of strategic thinking.

“The point is that the exercise introducesus to the idea of trying to anticipate whatother people are doing as they are trying toanticipate what we are doing,” explained

Marks. “It’s a good example of a strategicinteraction and a good way to introduce astrategic way of thinking.”

This process, he said, is an integral partof pricing dynamics as sellers try to second-guess which price points are sustainable.

Marks likened the two-thirds game tothe ‘beauty contest’ proposition used byJohn Maynard Keynes in his 1936publication, The General Theory. Referring tothe stock market – with the 1929 crash stillfresh in his mind – Keynes likened profes-sional investment to “newspaper competi-tions in which the competitors had to pickout the six prettiest faces from a hundredphotographs”.

According to Keynes, this led to aprocess where competitors did not choosethose faces they personally found theprettiest, “but those which they thinklikeliest to catch the eye of the othercompetitors, all of whom are looking at theproblem from the same point of view”.

Marks used the two-thirds game and theKeynes beauty contest analogy as an illus-tration of how to use game theory to betterunderstand pricing dynamics.

The seminars were part of thePricewaterhouseCoopers (PwC) LifelongLearning Series at the AGSM, and PwC’s Jay

Horton put Marks’ introduction intocontext by outlining some of the forces thathad driven the recent push for discountingin the wine industry.

He said consolidation through mergersand acquisitions had maximised availableeconomies of scale and reduced productioncosts. At the same time, high inventories,excess capacity and the growing retailmarket share of the big grocers –Woolworths and Coles Myer – had createdan “imbalance of market strategy andprofitability for wine producers”.

Despite strong industry growth, brandvalue had been under a major assault since2001. Forecasts of grape oversupply madein 1999 had become reality.The result wasthat PwC’s wine capital index, which tracksthe market capitalisation of winecompanies relative to the All Ordinariesindex, began to take a steep dive afterreaching its height in 2001.

The wine overhang, said Horton, alsocoincided with an explosion in the numberof wine brands competing in the retailmarket, with about 700 different brandsnow fighting it out for shelf space, whileretailers themselves were involved in a fightfor market share.

The end result had been disastrous for

20 | AGSM I S S U E 3 • 2 0 0 3

POSING PRICING QUESTIONS Oyster Bay Wines’ Jessica Macpherson and professor Robert Marks.

Fighting price wars with game theoryWhen the heat is on to cut prices, use game theory’s strategic calculations to determinesustainable price actions. Lachlan Colquhoun* reports.

FEATURE

Australia’s wine industry, with both large andsmall players taking a hammering on profit.

MAINTAINING BRAND EQUITYMarks pointed out there was nothing likediscounting to highlight the fragility ofbrand equity. “Brands create market powerbut they are costly to build and easy todamage,” he said.

“If you have a good brand, you are inthe box seat because supermarkets willwant to stock you. It also means you mayhave consumer loyalty and that it wouldcost money for your competitors to launch their own brands to lure yourcustomers away.”

But the current situation of the wineindustry – where most producers havefaced the problem of excess inventory – has been producing a strong momentum to cut prices.

“This could be a good thing if threeconditions hold,” said Marks. “It’s good ifyou can do this without sparking a pricewar as your rivals retaliate, if you can do itwithout damaging your brand equity, and ifyou are able to do it without changing theexpectations of your customers.

“Maybe in the future you want to getprices back up, but if people expect thisparticular brand at a lower price you’ll findresistance and people will stop buying yourbrand and start buying another which ischeaper than the price you wanted tocharge at the end of the cycle.

“While some people will know that adiscounted wine is good quality at a good

price and will stock up, others may take thelower price as a signal that the wine is notsuch good quality – and if they are lookingfor a wine to impress, they may well go toanother brand.”

Not only can this damage brands, it canlead to a fall in revenue. “If enough peopletake the lower price as a sign that thequality is not what it was, there is a riskthat you will lose brand equity, and whenyou reverse things by putting the price backup, you don’t bring the customers withyou,” explained Marks.

“So if the market remembersdiscounting, it may be difficult to changeperceptions, and you would then have to go through the expensive exercise of re-launching the brand.

“Which means that buying market shareby cutting prices, and having a short-termfocus on retail relationships while ignoringlonger-term strategies, may not be good inthe long term,” said Marks.

While it was possible to win in adiscount war in the short term,it was often a gamble if yourcompetitors were able to adaptto the change in pricingstrategy, resulting in the lowerprices being sustainable overlonger periods.

Marks said there were threefactors in creating sustainablemargins. “The first is productdifferentiation and that meansbrand, the second is economiesof scale, and the third isbarriers of entry – things which might stopnew brands such as the scarcity of supplychain, in particular the scarcity ofsupermarket chains or shelf space.”

Southcorp’s average operating costsbefore the merger with Rosemount wereabout $60 for each case of wine but hadcome down to $45 since the merger.

With average operating costs ofcompetitors also hovering around the low$40 a case, it looked as though winemakershad “pretty much exhausted” the potentialfor further economies of scale with theexisting technology – which made brandequity even more important.

DETERMINING STRATEGIC PRICING“Instead of across-the-board discounting,you might use selective price actions suchas bundling your brands,” said Marks.

“You might want to use quantitydiscounts, loyalty programs or even develop

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‘fighting brands’ – some of which havebeen developed to sell for less than $10 abottle.

“It may be that you cut prices in certainchannels – so-called ‘stealth marketing’ – ormaybe sell through wine clubs.”

The seminars also featured a winemaker’sperspective, inviting Jessica Macphersonfrom Oyster Bay Wines in New Zealand totalk about her experience breaking into theAustralian market.

“In my job, I live in fear of peoplediscounting my wine and it’s the last thingI want a retailer to do after I’ve set a pricepoint to defend,” she said.

“The best way to damage a brand is todiscount. A difference between a short-termpromotional price deal and an across-the-board discount, like the Southcorp strategy,is immense, and if not managed properlycan really damage a brand.”

Macpherson said that a $20 sparklingwine brand would return four times thegross margin of a $9 wine.

“Premium wine is wherewine companies need to bemoving and to do that theyneed to build brand andsustain those price pointsover a long period,” shesaid.

But while consumersmake decisions based onbrands and prices, howinformed are theirdecisions?

The seminar concludedwith a ‘blind tasting’ exercise, whichproved that consumers’ tastes in a winedon’t always correlate to reputation orprice.This emphasised the importance ofthe company communicating a brand’svalue to consumers, so that any purchasingdecision will balance the perceived qualityof the wine and its price.

Participants were asked to sample fourdifferent wines and rank them according towhich price category they thought theyshould be in – up to $10, between $10 and$20, between $20 and $30, and $30 ormore. Barely a third of participants in thetwo seminars correctly assessed the winesin their correct price brackets.

The tasting, said Marks, showed onceagain the complex dynamics of pricing andpreferences, and that – when it comes to wine– it’s not just a straight beauty contest. ✪

* Lachlan Colquhoun is a freelance writer.

A strategic way of thinking is an integral part of pricing

dynamics.

Tastes don’t always correlate to price.

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Western marketers traditionally think of theconsumer decision-making process as anindividual, independent one – where aconsumer decides he or she has a need,goes out and investigates the alternatives,decides what attributes are important andmakes a final choice.This does not includethis interdependent context of how aconsumer’s peers might evaluate his or herbrand choice or what a consumer’s familymight think.

HOW DOES AN INTERDEPENDENTCULTURAL CONTEXT INFLUENCEBRAND ADOPTION?Some of my colleagues and I have foundthat social and interpersonal contextsinfluence how consumers attributemeaning to a brand. For example, whoChinese consumers are with when they go to McDonald’s affects how they perceivethe brand.

When we asked consumers about diningat McDonald’s with their extended families,we received more negative brand interpre-tations to do with the foreignness of thefood and the brand. Many respondents saidthey would go to McDonald’s for a changefrom their regular food. On the other hand,they felt it was too foreign and not anappropriate place to go for a meaningfulevent like interacting with family members.

In contrast, when we asked consumersabout dining at McDonald’s on a date, wereceived very different responses. Onegentleman described how he loved to takehis girlfriends there because McDonald’soffered an opportunity to experience Westernthings.The notion of foreignness becamesomething positive in this situation where

a consumer was trying to impress a peer.Generally, brands are understood at a grouplevel in China, not at an individual level.

In China, the most important things tounderstand are: ‘What social context do youexperience my brand in?’ and ‘How doesthe brand relate to those interpersonalrelationships that happen while you areexperiencing the brand?’

Our findings suggest that whendeveloping brand-building marketingactivities in this interdependent context, itis more beneficial to focus on the social andinterpersonal contexts of brand experiencerather than specific product benefits.

Heineken is a beer brand that has beenvery successful in doing this. Part of itsglobal positioning focuses on the quality of a premium, imported beer. But in theAsian context, the premium proposition is more about who drinks Heineken beerand the social context that surrounds its

WHAT IS DIFFERENT ABOUT BRANDINTERPRETATION IN EMERGINGMARKETS LIKE CHINA AND INDIA?

In emerging markets consumers havenot been exposed to brands for a longperiod of time and are not sure abouthow to interpret them or what these

brands mean in their lives.This is especiallytrue in China and India, where there hasbeen limited exposure to global brands.This means there is a lot of variance inwhat brands mean to different people.

One study I have done on howMcDonald’s is interpreted in China showsthat no matter how much you globaliseyour brand or product consumers willinterpret it at a local level. For example, myresearch data shows that women who gointo McDonald’s in Shanghai or Beijing andorder by themselves find it an empoweringexperience.This is because men usuallyorder for the table when people eat outtogether in China.Their experience issomething quite different from whatMcDonald’s would say the brand means at a global level.

Another aspect of brand interpretationin emerging Asian markets, particularly in acountry like China, is that you see an inter-dependent cultural orientation as opposedto a Western-style independent one.Thosewith some knowledge of Chinese culturemight be familiar with this in terms of thedifferences between collectivism andindividualism.

When you have an interdependentcultural context most consumptiondecisions and attitudes towards productsand brands are made with other people andimportant relationships in mind. However,

Dr Giana Eckhardt teaches international marketingand her research interests include culture andconsumption, and marketing and globalisation.

Brand strategies in emerging marketsTheodore Levitt’s classic globalisation of markets theory predicted aworldwide consumer convergence of tastes. But AGSM marketing expertsGiana Eckhardt and Julien Cayla are finding few signs of the globalvillage in the brand perceptions of consumers in China and India.

www.agsm.edu.au AGSM | 23

RESEARCH

consumption, rather than the quality ofthe beer itself.

LOCAL VERSUS GLOBAL BRANDPERCEPTIONS A case study I worked on in India looked at an Indian pizza company called Pizza Point, which was set up to capture themarket share that the global brands were not meeting.

Consumers in India have formed their impressions about pizza primarilythrough global brands like Pizza Hut and Domino’s in the market. A lot ofconsumers we talked to knew about pizzathrough television shows like Friends onStar TV, and from hearing about theseglobal brands in urban areas or tryingthem if they lived near an outlet.

Pizza Point estimated that two-thirds of the market could not afford the globalbrands, so it developed a local brand tocapitalise on this desire and awareness of pizza. It would use the flexibility thatcomes with being a local brand to offer a cheaper price and more localisedproduct.

However, to a large extent, Pizza Pointfailed in its branding exercise. Its pricepoints were lower and it localised theproduct.The problem was thatconsumers’ interpretations of Pizza Pointwere much more in line with their ideasabout Pizza Hut and Domino’s, and theyhad a difficult time differentiatingbetween the local and global products.

Consumers said: ‘I won’t go to eat atPizza Point except for very specialoccasions because the price is way tooexpensive, I could never afford that’. Infact, getting a pizza that would serve twopeople was the same as getting a take-away curry and the price was not out ofreach. Even though Pizza Point’s productswere virtually unrecognizable as pizza in the Western sense, consumers still said: ‘The food is too foreign, it’s notIndian food’.

The lesson here is that the perceptions,attitudes and behaviour of consumers in emerging markets towards productcategories that are considered foreign or new are based on the productcategory, not the specific brand. It is, infact, very difficult, if not impossible, toestablish a brand image that goes againstthe way the category itself is perceived.

Dr Julien Cayla’s research has examined the contribu-tion of advertising agencies to the adaption andlearning of multinational companies in India.

Ispent about a year-and-a-half in India,most of my time in an advertisingagency looking at how foreigncompanies adapt to the Indian market.

I think the ability of companies to learn isprobably the key to performance, nationallyor globally, especially their ability to transferand interpret knowledge from one countryto another. But while knowledge aboutconsumers is a key asset, many companiesdon’t know how to use it very well.

WHAT ARE SOME OF THE MARKET-ENTRY LESSONS OF CONSUMERGOODS MULTINATIONALS IN INDIA?My first example looks at the market-entryexperience of the Italian car maker Fiat. Itentered the Indian market in 1997 in ajoint venture with Premier Automobiles.Before that Premier had a licence to sell Fiatcars, which were mainly used as taxis. Sothere were already brand perceptionproblems for Fiat because of the image ofthe Fiat taxi as a cheap car.

Fiat tried to sell the Uno in 1997 on the platform of ‘a secure and reliableworkhorse’. It applied some learning fromits experience in South America, assumingthat India was probably the same and itcould market the Uno in the same way.

One of the things Fiat did not understand early on was that only a minority of Indians can afford cars.The size of the car market today is around600,000 a year and the total number of cars in the country is only 11 million for a billion people. Cars, therefore, are status

symbols, which means you can’t market acar as a reliable workhorse.

My second example involves US cerealsgiant Kellogg. It entered the Indian market atthe beginning of the 1990s. It did so on theassumption that middle-class Indians wouldswitch to convenience products, eventuallybecoming more like their Western counter-parts in their willingness to pay a price forconvenience.They expected to sell packagedcereals like cornflakes to India’s middleclass. But they made the mistake ofexpecting that Indians, or consumers from developing countries, would rapidlyupgrade to foreign premium products.

Three years after entering the Indianmarket, their revenues were just $A20million. One of the things they didn’tunderstand was that time was not viewed asa commodity. In addition, they didn’t takesufficient notice of how differently Indiansconsume breakfast cereals – for example,unlike most Western consumers, about 61per cent of Indians preferred to eat theirbreakfast cereals with warm milk. Sincethen, however, Kellogg has made a radicaldeparture and launched a line of biscuits,one of the largest convenience foodcategories in India.

Procter & Gamble’s experience in Indiais another example of mistakes relating to expectations that consumers in anemerging market like India will upgrade to premium Western products, and that you can easily transfer learning from onemarket to another.

P&G entered the market in 1984through its subsidiary Richardson Vicks,and today the Vicks brand still accounts for 40 per cent of the company’s turnover.P&G has faced many problems trying to sell products that were successful in othercountries, such as the soap Camay,Tampaxor even detergents like Ariel which, despitegreat image ratings, still fail to generatelarge revenues.

P&G constantly uses its ‘search and re-apply’ technique, grouping similarcountries and trying to apply insights from one country to another. A majorproblem is that we still do not know how to apply learning from one market to another in an effective way. P&G nowfocuses on upper-middle class urbanconsumers, who are more likely to buytheir premium-priced products likeWhisper or Ariel.

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WHAT HAVE THESE COMPANIESLEARNED?First, they have learned that India is aradically different market and that it isdifficult to apply what you know fromanother market. For example, in a Westerncontext you have a low income variability,whereas in a developing country you have a large income variability and a largernumber of segments and product offerings.

Think of Colgate in India: it is probablyone of the only markets where you have thewhole range of solutions for oral care –from the tooth powders such as Cibaca Top,specifically launched to attract the ruralmarket, to brands of toothpaste that wehave in the Australian market. Colgate andUnilever are two foreign companies thathave been successful at matching productsto the variety of segments in the market.Thinking about what segment you cantarget, given your core competencies andwhat revenues you can expect from thatsegment, is critical in emerging markets.

Second, labour is cheap in emergingmarkets, so it is going to be difficult to baseyour offering on the fact that your productis convenient. In India, upper-middle classhouseholds, which are the primary targetfor time-saving products, are also verylikely to have a maid at home.

UNDERSTANDING OTHER MARKET DIFFERENCES The majority of the population lives in ruralareas so it is no surprise that the biggest

brands in India belong to companies with astrong rural presence such as Asian Paints,Colgate, Unilever and ITC. But these ruralconsumers are very difficult to reach. Most ofthe rural households don’t have televisions,and companies like Unilever and Colgatehave tried to tackle that problem by puttingvideo vans on the road to show local movieswith advertisements for their products.

Another thing about the rural market isthat if you want to achieve significantmarket share like Unilever and Colgate youneed to occupy the lower price pointsbecause that’s where the volumes are.

A BETTER PROCESS FOR LEARNINGSo how do international companies usuallylearn about emerging markets? They readmarket research reports and draw uponlocal managers and joint-venture partners –people who they think will help them adaptto a new context.

There are problems with this approach.Reading market research reports will onlyprovide a limited cultural understanding of a market. Drawing upon local personneland joint-venture partners can also beproblematic.Your local personnel willquickly be socialised into your company’sassumptions and you definitely needsomeone who will challenge yourassumptions in a new cultural context.

Finally, joint ventures, while a classicform of entry into India and China, are quiterisky. One of the problems I witnessed is thata lot of joint-venture partners in India are

still used to the old economy, pre-liberalisa-tion.Their ethos and corporate culture doesnot necessarily fit with the rapidly changingenvironment.There are exceptions, ofcourse, but overall, foreign companiesshould make that decision very carefully.

HOW CAN WE IMPROVE THE MARKET-ENTRY EXPERIENCE?It is very important for foreign companiesto adopt a fresh perspective. Before youchoose to apply learning from one marketto another, try to understand the marketwithout looking at what you know frompast experience.That’s hard, because asindividuals and companies, we are almostwired to draw upon past experience tothink about a new problem.

Managers need to test their assumptionsabout the local market and select partnerswho will challenge their perspective on themarket and consumers. In the case of Fiat, theadvertising agency played a key role inchallenging the company’s assumptions aboutconsumers.There is a lot to say for the valueof disagreement and constructive argument,especially in a new cultural context. ✪

FURTHER READINGArjun Appadurai, Modernity at Large: Cultural Dimensions of Globalization, Minneapolis: University of Minnesota Press, 1996.

N. Dawar and A. Chattopadhyay, ‘Rethinkingmarketing programs for emerging markets’, LongRange Planning Journal, vol. 35, pp. 457–474, 2002.

C.K. Prahalad and Kenneth Lieberthal, ‘The end ofcorporate imperialism’, Harvard Business Review,vol. 76 (Spring), pp. 69–79, 1998.

Fiat tried to sell the Uno in 1997 ... but there were already brand perception problems because of the image of the Fiat taxi as a cheap car.

The Fiat taxi in Mumbai, India.

– I headed up ING New Zealandand BT Funds Management inNew Zealand – and in some waysthe roles and the challenges are thesame, although this has the extradimension of passion for theproduct. My key challenge is toimprove the club’s off-fieldperformance by growing the

www.agsm.edu.au AGSM | 25

THE AGSM ALUMNI BULLETIN BOARD

alumniat large

JAMES KIRBY (MBA ’80),CHAIRMAN, HUNGERFORDHILL WINES

Q: Is owning a renownedvineyard as enviable as it sounds?A: It certainly has its benefits.There are rewards and they’re notjust the wines.The people in thisindustry are very open andwelcoming and cooperative,so there are a lot of positives.

Q:What are the best and worstparts of your day? A: The best part of the day iswhen I have a lunch or a winetasting out on the estates withothers in the industry, whether it’sa winemaker or a customer.I have a New Zealand distributor

Q:What are the key challengesof the business?A: Distribution. Looking for distributors in all the mainmarkets is tough when you’re a new winemaker.They can bevery choosy and just getting their attention is very hard.There are also a lot of challengeswith planning because you’re

DREAM JOBS

coming over this weekend and I’mlooking forward to that.

The worst part? It would haveto be board meetings. It’s themundane stuff that everyone hasto do to be accountable.This is abusiness like any other and youhave to go through the figures andjustify all your costs. It brings youback to earth.

dealing with a productthat has a two- to three-year cycle.

This is a much moredifficult industry thanmany others.There’s anoversupply of wine andprices are softening. Butwe have an extensiveventure capital portfolioinvesting in wineries thathave the potential to turnaround and make a profit,so this was a venturecapital investment, not alifestyle investment.

Q:What are the surprises?A: It’s a lovely surprise towin a gold medal.We’ve

won two and we’ve won a fewawards and trophies over the past12 months.

Q: And the best perks?A: That’s simple – tasting thewines.And the travel.This year Iwent to Verona in Italy withAustrade to a wine fair. I enjoy thetravel – although my family doesn’t!

in the stadium recently, about 40per cent were going to their firstAFL game.The Sydney Swans is thebest-kept secret but it won’t be forlong – the Swans play in a veryexciting way.

Q:What are your key challenges?A: I came from a corporate world

revenue base and the number of sponsors, bydoubling the members andimproving opportunities to merchandise.

Q: How much fun do youhave? A: A lot – and we do more than just have fun as a corporate value.We followthrough.

But it’s not all fun andgames. It’s a very demandingjob and the timecommitment is significant,including working onweekends. In the off-season,

you don’t have your feet up; youhave to sign up sponsors for nextyear. And I don’t go to the footy as a spectator any more. But I got lucky, I’ve been blessed, so I’mdetermined to make it work for the club and myself. ✪

by Helene Zampetakis

MYLES BARON-HAY (MBA’88), CEO, SYDNEY SWANSFOOTBALL CLUB

Q: Is it a ‘football fan dies andgoes to heaven’ kind of job?A: Yes, I pinch myself most daysbecause for someone who’spassionate about Aussie Rules thisis probably as good as it gets.

Q: Day-to-day, what do youenjoy most and least?A: The thing I enjoy most is theinteraction with the people andthe buzz I get working with them.I’m looking to create anenvironment where people have asense of purpose and fulfilment.There’s not much I don’t like. Ifanything, from time to time thereare politics to navigate.

Q:What don’t we know aboutthe Swans? A: A lot of people know verylittle.When we got 70,000 peopleP

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26 | AGSM I S S U E 3 • 2 0 0 3

MBA

2002Joseph Lai and Leila Yang (MBA’99) got married on 6 July 2003 in The Tearoom, Queen VictoriaBuilding, Sydney. “Thanks everyonewho attended the wedding formaking our special day sowonderful and unforgettable!Contact: Joseph.Lai@morganstanley.com;Leila.Yang@BTFinancialgroup.com.Edmond Lau has joined HongKong-based ZONE Ltd (a member of the e-KONG group) as associate director. Contact:edmondl@zone1511.net,Tel: (+852) 2969 7180.

2001Daniel Tracton reports that he isworking as the Lens and ContactLens manager (based in Sydney)for the OPSM group, whichoperates 619 stores. In May, hiswife Michelle had their first baby,Ariella Miriam.Colin Ng has moved from the roleof project accountant withStandard Chartered Bank tomanagement information andmarket analyst with PrudentialCorporation Asia. Contact:colin.ng@prudential.com.hk,Tel:(+852) 9470 2805.

2000Yong Zeng has left Korn/FerryInternational to join ESRassociatesas managing consultant. Contact:yongzeng@esrasia.com,Tel: (+86 10) 6503 2173.

1999Karen Beck is getting married toPhilip in Venice on 18 December,and is having an extended holidayand honeymoon in Europe for six weeks.Carlos Jimenez has moved fromthe role of director with CalebVentures to corporate adviser withLeadenhall Australia. Contact:cjimenez@leadenhall.com.au,Tel: (02) 9262 9022.Christopher Cheung and Dan Ma(also MBA ’99) were married

on 1 November.The wedding andreception was in Sydney and asecond reception was held in China.Chris works for CyberU and Danworks for Deloitte Consulting in LosAngeles in the US.

1998Yoshie Miyake has moved fromthe role of Oceanean equity salestrader with Nikko Securities(Australia) to financial applicationssupport specialist with ReutersAustralia. Contact:Yoshie.Miyake@reuters.com,Tel: (02) 9373 1551.Richelle Geelan writes:“I am now a manager withPricewaterhouseCoopers New York,working in the media and enter-tainment section of theassurance/business advisoryservices division. I am based pre-dominantly in New York, but stillreturn to Sydney at least once ayear to stay in touch with family,friends and the Australian businessenvironment and culture”.Jono Herrman writes: “My wifeCaroline and I had our secondchild, Emmanuella, on 30 July.Theday before, I exchanged on a newbusiness – manufacturing andrepairing hydraulic cylinders formaterials handling machinery. Andto ensure there’s enough stress, thefamily’s moving home to Sydney’snorth at the end of the year,driving there in the new familystation wagon!”Linda Chuk reports that shereturned from Germany in Apriland has started a new job as serviceenablement project manager (Asia-Pacific) for AT&T. Contact:linda.chuk@ap.att.com,Tel: (02)9855 6011.

1996Alan Sapsford is now living in thesouth of France with his wife andtwo children where he is studyingFrench full-time at the UniversityPaul Valery III.Ian Hounslow reports: “I recentlybecame a partner in a small (threepartner) chartered accounting firmin Sydney’s CBD.The firmspecialises in providing accounting

bushtelegraphTHE AGSM ALUMNI BULLETIN BOARD

and taxation services to small- tomedium-size businesses. My wifeand I still live at Ingleburn and wenow have three children: Megan,seven years old; Cherie, five; andMichael, 15 months. Contact:ian@arw.com.au.Katie Harris (nee Lechner) andSimon are pleased to report thatEmily Lexington Harris was bornon 10 August.Wolfgang Muller and his wifeDaniela have had a baby boy,Sebastian.Bruce Josephs writes: “DVDInfinity (of which I am a partowner) has opened its first retailstore at 79 Alexander Street, CrowsNest, Sydney.We are having greatsuccess in generating businessfrom around the world for ourunique DVD movie film packagesas well as our corporate DVDpackages”.Tel: 0412 016 568.

1994Sonny Navaratnam hascommenced a new consultingventure in partnership withAndrew Hyland, named BluntSolutions.The enterprise focuseson assisting companies to improvetheir bottom lines, in a sustainablemanner, on a reward-for-performance basis. Its clients varyfrom one-person businesses tolarge corporations. Contact:navaratnams@blunt.net.au,Tel: (02) 9238 6883.James and Leonie Duck are “verypleased to announce the birth oftheir second child, Hannah, in lateJuly. Hannah has been managingboth her parents and her brother,Alex, very well”.William Chong has left MayneNickless to join LogisticsInformation Network Enterprise (a member of Hutchison Port Holdings) as head ofoperations. Contact:william.chong@line.net,Tel: (+852) 3161 2176.

1993A decade on from completing hisMBA, Rick Tarvin reflects on hisserendipitous 10-year journey –from gardener to assetmanagement business owner.“Following completion of myMBA, I moved to London to seekbusiness opportunities. After muchapplication I managed to secure afull-time position as a gardener at

the illustrious Hyde Park Gardens.This was a revelation as I wasfinally able to assess the practicali-ty of many sit-on lawn mowers,for which I have always been fond.Following the chance meeting of a woman in a bar and thesubsequent meeting of one of herfriends, I established a partnershipdeveloping financial tradingsoftware for the next two years.Wethen raised some capital, tradedthe software and shortly after soldthe business.With another woman(made through the same contact) I started my next business in 1996called Fortune Asset Management.In the following year we launcheda second company called GlobalFund Analysis and combined theseinto an FSA-regulated groupstructure.The core competence ofthese companies is the evaluation,management and seeding of hedgefunds.The company’s head officeis based in Mayfair (FortuneHouse) with additional offices inNew York,Tokyo and Geneva. Ihave 35 employees and $US600million under management, andowing to first-mover advantageour company is one of the leadinghedge fund groups in Europe.Other shareholders in Global FundAnalysis include a private Swissbank, a Japanese brokeragecompany and another UK assetmanagement firm. My partnerAbby and I remain the majorityshareholders, and we are nowmarried with two children, Oscarand Louis. I am still in regularcontact with Steve Walter (MBA’93) and Tim Deyzel (MBA ’93).”

1988Michael O’Rourke has moved fromthe Department of the PrimeMinister and Cabinet to theDepartment of Health and Ageing(Canberra-based) as director,portfolio business unit. His workinvolves advising the minister andsecretary of the department, as wellas the chief executives of the variousstatutory agencies in the portfolio,on governance arrangements andperformance reporting. Contact:michael.o’rourke@health.gov.au.

1986Margot Cairnes has a new bookout: Staying Sane in a Changing World. Contact: jane@changedynamic.com,Tel: (02) 9908 2831.

www.agsm.edu.au AGSM | 27

Tony Ritchie and Tara Hannon hadtriplets this year! Tracey, Angelinaand Grace, known as the TAG team,are all in good health and growingrapidly.Tony is vice-president,strategy and product developmentJ/APA, at American Express.Tel: (02) 9271 1969.

1984Lynn Wood writes: “I wasfortunate to be awarded aCentenary Medal last month forservice to Australian societythrough business and finance (agood follow-on from the MBA!)”.See: www.itsanhonour.gov.au.Michael Cheah has leftGuangzhou-based BaxterHealthcare to join GlaxoSmithKlinein Tianjin (Tianjin Smith Kline & French Laboratories) as vice-president and generalmanager. Contact:michael.p.cheah@gsk.com,Tel: (+86 22) 2470 0271.Grace Leung has taken up the roleof HR projects manager withRohm and Haas China Inc.Contact:graceleung@rohmhaas.com,Tel:(+86 21) 6230 6366 (ext. 185).

1980James Kirby has acquiredHungerford Hill Wines in theHunter Valley and is now spendingmost of his time researching thewine industry! “It’s a tough life butsomeone has to do it!” he says,adding, “if any alumni are visitingthe Hunter Valley, please call in atthe new cellar door at 1 BrokeRoad, Pokolbin and taste some ofthe award-winning wines”.

1979Ingrid Jackson reports that changecommunication is a major focus ofher consulting firm ExecutiveManagement Solutions. Havingspent a year implementing com-munications for a major redesignprogram at Commonwealth Bank’scorporate banking, she is nowadvising on internal and externalcommunications for the bank’sTransformation Program. Contact:grasmere@bigpond.net.au.

1978Jackie Liew has relocated fromSingapore to the US. “I amattending a two-year full-time

baking and pastry arts program atthe Culinary Institute of America inHyde Park, New York. Hyde Park isapproximately one-and-a-half hoursby train from New York City. Someof you may be familiar with theInstitute – it has very goodprograms and is considered thepremier culinary school. I still have my home in Singapore, but for now until the end of 2004, I can be reached as follows:johnkoeneman@alum.MIT.edu,Tel: (+1 845) 4546 053.”

MBA (EXECUTIVE)

2002Simon Andrews wishes to advisethat he has recently joined TelstraSmall Business Awards finalist Apis Consulting Group(www.apisgroup.com.au),which provides specialist projectmanagement and related profes-sional services to private andpublic sector clients throughoutAustralia and overseas. Simonwould be happy to hear from anyalumni whose organisation is inneed of innovative projectmanagement or change implemen-tation services or support. Contact:simon.andrews@apisgroup.com.au,Tel: (02) 6295 7230.Mark Haskett is working astreasury dealer for BankSA, part ofthe St.George group, in Adelaide.Contact:haskettm@stgeorge.com.au.

2001Stuart Jacquet has joined LafargeGypsum as vice-president, salesand business development.Tel: (+33 4) 3244 4430.Paul Fisher has been promoted toAsia-Pacific general manager,Hewlett-Packard Australia.Contact: paul.fisher@hp.com,Tel: (03) 9275 3489.Michael Graf has moved from therole of principal with IBM GlobalServices Australia to A/NZ businessunit executive with IBM Australia.Contact: mgraf@au1.ibm.com,Tel: (02) 9478 8272.Lee Baxter has moved from therole of business manager withMarblized Products to PPPcontracts support executive withLondon Underground. Contact:Lee.Baxter@thetube.com,Tel: (+44 20) 7027 8412.

After travelling through South andCentral America for six months,Dan Walsh “and the beautifulSimone” have landed in London.Dan reports that he is still withBrambles and is now a participanton CHEP’s global leadershipdevelopment program. His first 12-month rotation is inEurope, where he is leading negotiations with major retailerson the introduction of a newservice offer. Contact:daniel.walsh@chep.com.

2000Dr Peter Devine was awarded aCentenary Medal for distinguishedservice to the business of biotechnology.Phillip Robinson has left DDCPacific to join Bishop Austrans asmarketing and commercialisationmanager. Tel: (02) 9844 6700.

1999Paul Steinwede has moved fromthe role of New South Walesoperations manager, contaminatedsite solutions, at EnvironmentalResources Management Australia,to New South Wales manager, siteinvestigation and remediation withEnvironmental ResourcesManagement Australia. Contact:paul_steinwede@urscorp.com,Tel: (02) 8584 8863.

1997Lenny Fallon writes: “I am takinga deep breath, by myself, on abush property on the New SouthWales southern coast. I intend tospend about two years growingorganic vegetables. Any classmates

who want to have a bit of achinwag, watch a bush TV (openlog fire), catch some falling stars,maybe do a spot of fishing, maybeshare a hard day’s yakka in the dirtor share a quiet Bundy or a cup oftea are welcome to catch up withme via my e-mail address at theAGSM: len.fallon.97@alumni.agsm.edu.au.”Bill Richards travels a lot “in mycurrent role as HR director Asia-Pacific for Bio-Rad Laboratories –to India, China,Taiwan, SouthKorea,Thailand, Singapore,Malaysia,Vietnam and thePhilippines. I also travel to NewZealand. I would welcome theopportunity to meet for a drink orchat with any MBA (Executive) orMBA alumni in these countries”.Contact:bill_richards@bio-rad.com.

1996Kevin Peesker has left his adoptedcountry of Australia to pursue careeropportunities with Dell Corporationin Toronto, Canada. Kevin moved hisfamily to the land of ice hockey inJanuary to join the executive team ofDell Canada. In his new role ofdirector, software and peripherals,Kevin is leading a key strategicgrowth initiative of Dell Canada andis establishing the Canadian IBU.Although he has purchased a homein Canada, Kevin says he has retainedhis property in Mosman and golfmembership at Avondale to ensureescape from Canada’s cold winters.“Australia will not be forgotten,” hesays. (Kevin also reported that heand Karen were expecting their first-born in late June.)

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28 | AGSM I S S U E 3 • 2 0 0 3

Anthony McMahon has moved toa new role as vice-president, Asia-Pacific and Japan (direct andteleweb) with Hewlett PackardSingapore. Contact:anthony.mcmahon@hp.com,Tel: (+65) 6361 7311.

1995Grant Rosewarne is nowmanaging director, DouweEgberts, in the United Kingdom.Adam Grimley has leftPricewaterhouseCoopers to join Accenture as associate partner. Contact:adam.e.grimley@accenture.com,Tel: (+65) 6410 8000.Paul Nelson has moved from therole of CFSP commercial portfoliomanager at Jones Lang LaSalle tonational director. Contact:paul.nelson@ap.joneslanglasalle.com,Tel: (02) 9220 8438.

1994Brian Walkington has beenappointed managing director ofGrimwood Heating, which is amanagement buyout of theelement and tube operation ofElectrolux Home Products.

GDM

1999Mark Chaston has left Aldwick(WA) to join CommonwealthFinancial Planning as financialconsultant. Contact:

marka.chaston@cba.com.au,Tel: (08) 9482 6396.

1996Steve Bowler-Donington reflectsthat completion of his GDMhelped him to launch a private-sector career after 30 years in thefederal public sector. He initiallyworked for Morgan & Banks,where he gained the experienceand confidence to start a business partnership – ITS People Solutions in 1999 in Western Australia; see www.pvspeoplesolutions.com.au.“At the outset, the vision of ITSPeople Solutions was to form anational company. Our dreamcame true in July last year whenwe formed The Donington Group– a company providing clientswith a fully-integrated careertransition and outplacementservice throughout Australia andNew Zealand. I am chairman andexecutive director of Donington (a group of 50 highly-experiencedspecialists and their supportteams), and we have affiliates inEurope, Asia and the US(www.donington.com.au).”

GCM/GMQ

1999Arif Haque reports that he hasformed Australian MedicalTreatments (AMT) to assistoverseas residents access first-classmedical services as full fee-paying

patients in the Australian privatehospital system. “Just as Australianeducation is being exported (withoverseas students coming to studyin Australia), AMT is exportingmedical services by using theexcess capacity in the Australianprivate healthcare system. AMTliaises with the relevant specialistsand hospitals, guides patientsthrough the Australianimmigration requirements, makesall the necessary medical andpersonal arrangements, assistswith on-arrival and departurearrangements and attends to anyother personal requirements. Fromthe target markets’ perspective,Australia provides a uniquedestination, high standards ofmedical services, competitivemedical costs and exchange-rateadvantages, a comfortable climate,easy lifestyle and friendly people.The provision of medicaltreatments is an industry sectorthat AMT believes will gainprominence with the ageingdemography and an increase inlifestyle diseases. It provides apotential similar to the educationexport sector, which is expected togrow to a $40 billion industry by2025.” For further details visit:www.medtreat.com.au. Contact:arif.haque@medtreat.com.au,Tel: 0419 499 707.

1997David Roberson has left JonathenWren (Australia) to take up theposition of general manager forMelleuish (trading as The BottlePeople). Contact:david@bottlepeople.com.au.

1995Chris Firth reports that he has lefthis role as CEO of Julia FarrServices in Adelaide to take up theposition of director, UrbanRegeneration-Westwood, in theDepartment of Human Services,also located in Adelaide.

1994Glenn Carter has moved from therole of head of knowledgemanagement with Nokia Networksto learning and developmentmanager with NewcastlePermanent Building Society.Contact: glenn.carter@newcastlepermanent.com.au.

1992Barry Allen has moved from therole of customer services managerto business manager withConcurrent Software. Contact:barry.allen@seqos.com,Tel: (02) 9790 8328.

GCCM

2003Angela Diamond has left ANZ tojoin Diamond CommunicationServices as director. Contact:angela@diamondcomms.com.au,Tel: (02) 9332 4100.

DPM/SMDP

2000Peter Gow has moved from therole of chief manager withSt.George Bank to director withCreative Capital. Contact:petergow@creativecapital.com.au,Tel: (02) 9223 2144.

1995Bob Redston has moved from therole of general manager (carton-boards New South Wales) atAmcor Cartons, to generalmanager (Veolia services, Austral-asia) with Veolia Environment.Tel: (02) 8572 0488.

1989Phil Simmons has moved fromthe role of director with SimmonsAdvisory to managing directorwith RGA Reinsurance Companyof Australia. Contact:psimmons@aus.rgare.com,Tel: (02) 9290 7900.Susan Peatfield reports that afterworking for almost five years asthe HR director for one of themajor law firms in Sydney, in1998 she set up her ownconsulting company, SusanPeatfield Consulting HRD, withclients in both legal and financialservices. She also works as a trainerfor the Australian Institute ofManagement in New South Wales.In September 2002, Susan marriedprofessor Jim Taylor (deputy vice-chancellor, Global Learning at USQin Toowoomba). “While nowbased in sunny Queensland, I stillmake regular trips to Sydney for work and to catch up with friendsand family.” ✪

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The published research ofthree AGSM academics hasbeen rated by an Academy of

Management Learning and Educationstudy as among the world’s mostinfluential organisationalbehaviour theories.†

The AGSM’s professors PhilipYetton, Lex Donaldson andRobert Wood are the onlyacademics presently working inAustralia to be included in the listof significant researchers.They areranked alongside distinguishedacademics like Harvard BusinessSchool’s Chris Argyris (known forhis theories on personality and theorganisation), as well as pioneerslike Frederick Taylor (author of thetheory of Scientific ManagementFormulations known as Taylorism)and Elton Mayo (conductor of thegroundbreaking Hawthornestudies in the 1930s).

A worldwide panel of 95academics selected a top tier of 73theories and ranked them on

facultynews

INFLUENTIAL THEORISTS (From left): Lex Donaldson, Philip Yetton and Robert Wood.

extent of recognition, usefulnessto management practice andscientific validity.

Professor Philip Yetton – afounding academic at the AGSM –was cited for his research withVictor Vroom on a model ofleadership decision-making(Normative Decision Process),

which is widely regarded aspioneering work in the area.

Professor Lex Donaldson madethe ranking for his work on organisational structure. HisStructural Contingency theorylooks at the ways the structure of an organisation needs to fitfactors such as strategy, size and

Teamwork wins grantThe AGSM’s professors EddieAnderson and Bob Marks havejoined forces with University ofNew South Wales electricalengineering academics, HughOuthred and Iain MacGill, to win athree-year Australian ResearchCouncil (ARC) discovery grantworth $252,000.

The aim of the research projectis to achieve a better understand-ing of the operation of wholesaleelectricity spot markets byanalysing how the physical system,industry structure, marketmechanism and participantbehaviour determine systemoutcomes.

“In particular, we want tounderstand the ways in which themarket structure influencesparticipant behaviour, and the circumstances that lead to non-competitive results,” says Anderson.

Anderson has been workingwith AGSM PhD candidate, Doan

Hoang Cau Thai, on the use ofartificial intelligence methods tomodel emergent, implicitcollusion.This is behaviour thatcan occur when generators decideto be less aggressively competitivethan would be expected.

“Aggressive bidding today maywin more market share in the spotmarket and be good for short-termprofits, but it is likely to lead tolower returns for all the generatorsin the long run,” explainsAnderson.

New facultyKevin Clarke has been appointedsenior lecturer in finance andaccounting. Clarke spent the firstsix months of this year at the AGSMas a fellow (while on leave fromthe University of Western Sydney).For several years he has been asuccessful adjunct teacher for theAGSM in the full-time MBA andthe MBA (Executive) programs.

He brings to the school

outstanding teaching experienceand extensive connections withthe professional accounting andfinancial management businesscommunities. Clarke has aBachelor of Business from NepeanCAE and masters degrees inaccounting, finance and taxationfrom Macquarie University andthe University of Western Sydney.He is presently working tocomplete his PhD with professorJack Flanagan.

Dr Benoit Julien will join theAGSM as senior lecturer ineconomics in late-2003. He has amasters degree in economics and a PhD from the University ofWestern Ontario, and has helduniversity positions in Canada,New Zealand and the US, mostrecently at the University ofMiami. His special area of researchis applied microeconomics, with aparticular focus in recent times onthe role of asymmetricinformation in labour markets.Benoit has been published in a

number of international journals,and has won research grants inNew Zealand and the US tosupport his work.

Award winner The American MarketingAssociation’s Technology andInnovation Special Interest Group(TechSIG) has given AGSMmarketing lecturer Dr KristenRotte its annual award for bestdissertation. She was also therunner-up this year in theAcademy of Marketing Science’sbest dissertation award.

These awards follow on theheels of recognition from the US’sMarketing Science Institute for bestdissertation proposal last year.Rotte’s research looks at howcompanies detect and managecustomer uncertainty whenmoving existing customers from acurrent product, service or channelto a new one – what she calls“forced migration initiatives”. ✪

World’s most influential theoriesinnovation for an organisation to be effective.

Professor Robert Wood wascited for his research with TerenceMitchell and Steve Green on anAttributional Model of Leadership.Their work explains how leadersdiagnose and respond to followers’work behaviour, and how leaders’judgments and behaviours impactfollowers and their performance.

Of all the business schoolsrepresented in the study, the AGSMcame second only to the US’sStanford Graduate School ofBusiness for the number of workingacademics cited. Stanford has fouractive researchers, followed by theAGSM with three, Harvard withtwo, and Yale and the University ofMichigan with one each.

† ‘The rated importance, scientific validity,and practical usefulness of organizationalbehavior theories: a quantitative review’,John B. Miner, Academy of ManagementLearning and Education, vol. 2, no. 3, pp.250–268, September 2003.

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REVIEWS AND NEWS OF BUSINESS BOOKS

BOARDS THAT WORK: A NEW GUIDE FOR DIRECTORS by Geoffrey Kiel and GavinNicholson (McGraw HillAustralian Business Books,2003)

Reviewed by Meredith Rogers, PhDcandidate (corporate governance)

Sir Adrian Cadbury stated thatunderperforming boards are agreater threat to companyperformance than dishonestboards (at the launch of theUniversity of Technology, Sydney’sCentre for Corporate Governancein March 2003).

Kiel and Nicholson’s book is atimely primer to assist Australianpractitioners improve boardperformance.

The book is structured around the authors’ CorporateGovernance CharterTM, which hasfour stages: defining governanceroles, improving board processes,key board functions andcontinuing performance.

After introductory chapters on the charter, the history of corporations and the relevantAustralian legal framework, eachstage of the charter is developed ina separate chapter.The finalchapters provide guidance on the preparation of a charter foryour organisation, and futuredirections in corporategovernance.

The book’s format aids access bybusy practitioners.The charterprovides an effective framework,and the many diagrams and comprehensive index facilitatequick reference.The charter for thefictional ABC Limited, included asAppendix 3, provides a goodsummary of the authors’ recom-mendations.

Other strengths of the bookinclude its Australian focus, theexplanation of the multiple rolesboards can play and therecognition of the differing needsof listed, unlisted and not-for-profit organisations.The book’smain weakness is that it occasion-ally reads like a sales pitch.

The authors’ extensive academicand consulting experience have combined to provide an extremely useful reference for practising directors.

THE LEADER AS COMMUNICATOR by Robert Mai and Alan Akerson(AMACOM, 2003)

Reviewed by Alan Valvasori

Quick quiz: think of any threesuccessful business leaders andchoose the one attribute that

CONQUERING CONSUMERSPACE by Michael R. Solomon (AMACOM, 2003)

Reviewed by professor John Roberts

This book is something of a tour deforce. It contains something foreveryone and includes a wide varietyof exciting marketing flavours.

One can detect Aaker’s writing onbranding, Faith Popcorn’s work onenvironmental trends, von Hippel’sstudy of sources of innovation,Blattberg and Deighton’s ideas on theage of addressability and Sawhney’sstrategic insights in e-business.Thesethemes are bundled together in away that is humorous, accessible,stimulating and well-written.

The book is replete with practicalexamples of the points thatSolomon is making. I canthoroughly recommend the book as a terrific update of contemporarytheory, a refresher for marketingphilosophy in the digital world or ameans of breaking out of tired waysof thinking. It is short and wouldalso make a good bedside read.

Such praise begs the question as towhether there are any downsides tothe book.While Conquering Consumerspaceis full of ideas, they do tend toemerge as a stream of consciousness.The structure of the contents is weak,leading to a bit of a hotchpotch ofstories and principles.The thread thatdraws this patchwork of modernmarketing challenges together couldhave been pulled more tightly. Ideasabout brand communities, newproduct development approaches,customisation and addressability, andbrand meaning keep bubbling up allover the place. However, this is asmall price to pay for a book thatdares to break conventional formatsand approaches.

WHY NOT? HOW TO USEEVERYDAY INGENUITY TOSOLVE PROBLEMS BIG AND SMALL by Barry Nalebuff and Ian Ayres(Harvard Business School Press,2003)

Reviewed by Pierre Richard,PhD candidate

Why Not? is a practical guide tocreativity and innovation.Verymuch in the spirit of Edward deBono’s Lateral Thinking, it opens upand investigates the black box ofcreativity (though the authors areat pains to point out that creativethinking itself should be outsidethat other box of acceptedpractice). Why Not? is easy readingand filled with practical examples.It is not a step-by-step guide orreference on how to innovate andestablish new ventures; instead, itis a thought-provoking discussionof how to open our eyes to new ideas.

Why Not? highlights creativity onan individual level. Instead offocusing on organisational taskslike building the right cross-functional teams, Nalebuff andAyres endorse the creativityresident in everyone, outlining

four simple heuristics that canunleash that potential.The authorsadvise us to consider economicallyunconstrained ideas; think of howto internalise imperfections causedby market externalities; applysolutions to other problems;and reverse accepted ways of doing things.

Their argument is thatinnovative ideas are not solely thedomain of scientists and experts,but something we can all work towards.

Importantly, the authors success-fully link creativity to economicreality.Yale professors inmanagement and law respectively,Nalebuff and Ayres drawextensively on their ownexperiences – in their academicwork as well as their participationin entrepreneurial ventures.Thetools they present are founded onstrong economic reasoning and asophisticated appreciation of thenature of commerce.

Overall, Why Not? provides avery effective sketch of how wecan access our own creativecapacity.The authors clarify thenature of existing problems,provide a guide to what elementssolutions might contain, andadvise how best to channelcreative energy, which makes thebook informative and, moreimportantly, inspirational.

books

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publications &papersPUBLISHED WORK AND RESEARCH PRESENTATIONS

BOOK CHAPTERS

Professor Eddie Anderson and H.Xu, ‘Nash equilibria in electricitymarkets with fixed price points’, inP.M. Pardalos and V. Korotkikh(eds.), Optimization and Industry: NewFrontiers, Kluwer, Dordrecht, 2003.Associate professor Sharon Parker,N.Turner and M.A. Griffin,‘Designing healthy work’, in D.A.Hofmann and L.E.Tetrick (eds.),Health and Safety in Organizations:AMulti-level Perspective, pp. 91–130,Jossey-Bass, California, 2003.

JOURNAL PUBLICATIONS

Dr Elizabeth George, ‘Externalsolutions and internal problems:the effects of employment externalisation on internal workers’attitudes’, Organization Science,vol. 14, pp. 386–402, 2003.Alison Davis-Blake, Joseph P.Broschak and Dr Elizabeth George,‘Happy together? How usingnonstandard workers affects exit,voice, and loyalty among standardemployees’, in The Academy ofManagement Journal, vol. 46,no. 4, August 2003.Dr Marc Orlitzky and J.D.Benjamin, ‘The effects of sexcomposition on small-groupperformance in a business schoolcase competition’, Academy ofManagement Learning and Education,vol. 2, no. 2, pp. 128–138, 2003.Associate professor Sharon Parker,‘Longitudinal effects of leanproduction on employee outcomesand the mediating role of workcharacteristics’, in Journal of AppliedPsychology, vol. 88, no. 4, pp.620–634, 2003.

PhD candidate Geoff Warren,‘Interval and sampling variation inBeta estimation: an educationalnote’, Accounting Research Journal, 2003.PhD candidate Paul Yau, professorRobert Kohn (UNSW) and DrSally Wood, ‘Bayesian variableselection and model averaging inhigh-dimensional nonparametricregression’, Journal of Computationaland Graphical Statistics, vol. 12, no. 1,pp. 23–54, 2003.

CONFERENCE PRESENTATIONS

PhD candidate Catherine Collinsand associate professor SharonParker, ‘Big five personalityfactors, collective outcome andprocess efficacy: a longitudinalstudy’, in S. Gully, ‘Exploring thenomological network of collectiveefficacy: recent findings, newdirections’, at the Annual Meetingof the Academy of Management,Seattle, US, August 2003.Dr Markus Groth, D.P. Mertens andR. Murphy, ‘Customers as goodsoldiers: examining citizenshipbehaviours in service deliveries’,presented at the Annual Meeting ofthe Academy of Management,Seattle, US, August 2003.Professor Murray Kemp, ‘Non-lump sum redistribution’ at theInternational Trade and FactorMobility Symposium, KansaiUniversity, 1–2 July 2003; andkeynote address, ‘Lump sum versusnon-lump sum compensation: asecond glance’ at Recent Advancesin International EconomicsConference, City University ofHong Kong, 28–29 August 2003.Dr Dan Lovallo and professor

Daniel Kahneman, ‘Delusions ofsuccess: how optimismundermines executives’ decisions’,Harvard Business Review, July 2003.Associate professor Sharon Parker,keynote speech, ‘Making workdesign work: challenges andopportunities’; (with H.M.Williams and N.Turner),‘The interactive effect of surface-and deep-level dissimilarity inpredicting within-team perspectivetaking’ in PhD candidate CatherineCollins and associate professorSharon Parker (chairs), ‘Creatingeffective teams through closerattention to cognitive and motiva-tional outcomes’; and (with J.MacCormick), poster presentation,‘Exploring paradox: the joint effectof internal and externally-focusedpractices on perceived organi-sational effectiveness’ at the 5thInternational Industrial andOrganisational Psychology Con-ference, Melbourne, June 2003.N.Turner and associate professorSharon Parker, ‘The effect ofteamwork on safety processes andoutcomes’, in N.Turner and E.K.Kelloway (chairs), ‘Psychosocialfactors and safety: making sense ofthe latest research’, at the 5thWork, Stress and Health Con-ference,Toronto, Canada, March2003.

CONFERENCE PROCEEDINGS

Associate professor Sharon Parker,‘Proactivity and adaptability atwork’ in W. Noble (ed.), CombinedAbstracts of 2001 Australian PsychologyConferences,The AustralianPsychology Society, Queensland,Australia. ✪

makes them stand out fromtheir peers. Brilliant strategist?Astute visionary? Wilypolitician?

Chances are that ‘great com-municator’ is not top of the list.On the face of it, communica-tion is the easiest of leadershipattributes but, as we all know, itis often the hardest to executeconsistently well.

Mai and Akerson make astrong case for why failure tocommunicate is the persistentflaw among leaders, accountingfor aimless direction, faultyexecution and poor morale.

Leadership communicationgoes far beyond simplydelivering information or slickpresentation skills.The authorsargue that, at its core, leadershipcommunication is aboutbuilding and nurturing relation-ships.While this might not benews, what is of note is theauthors’ interpretation of themany manifestations ‘relation-ship building’ demand.Theauthors describe 10 communi-cation roles that leaders, as chief communications officers,must assume to build effectiverelationships.

Perhaps the most challenging of the 10 communication roles is the CEO as storyteller. Much has been written recently aboutthe role of storytelling in organisations and how it can be used to create meaning,coherence and trust.

The purpose of storytelling is for a CEO to “build a sense of belonging and a reason toaffiliate” in his or her organisa-tion.While the theory soundsfine, one can’t help but feel thatyour average Australian CEOmight scoff at the idea.

Nevertheless, the bookpresents case studies and plentyof strategies showing howleaders can shape the communications climate oftheir organisations.The authorsinvite leaders to step back fromthe daily grind and reflect onhow communication is both an instrument of strategy and a strategy in itself. ✪

Recommended readingThe business of being US management guru Tom Peters involves an “insane amount of reading”, he says. Some of the books he recommended to a Sydney business audience in August (during a presentation on the theme of reinventing management practices for the 21st century) included:

� Creative Destruction: Why Companies That Are Built to Last Underperform the Market by Richard Foster and Sarah Kaplan

� Out of Control and New Rules for the New Economyby Kevin Kelly

� Funky Business: Talent Makes Capital Dance by KjellNordström and Jonas Ridderstrale

� The Rise of the Virtual State by Richard Rosecrance� Why We Buy: The Science of Shopping

by Paco Underhill

� Marketing to Women by Martha Barletta� EVEolution: The Eight Truths of Marketing

to Women by Faith Popcorn and Lys Marigold

� Smart Mobs: The Next Social Revolutionby Howard Rheingold

� Beyond Disruption: Changing the Rules in the Marketplace by Jean-Marie Dru

� Age Power: How the 21st Century Will Be Ruled by the New Old by Ken Dychtwald

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smartest of the old-economy CEOs are tryingto figure out how to have more of them thananyone else, and what they are rapidlydiscovering is that they are having to gooutside to find them.

The old army-style command and controlmodel, which has provided business with its management framework for so long, isvirtually useless in an ideas culture – peoplewith shared experiences and values willalways tend to come up with similar ideas.

So to be a successful ideas companydiversity is not just important, it is essential.

Drawing on my experience in women’sissues, let me respectfully make the pointthat having one of everything does notconstitute diversity.

At Saatchi & Saatchi, we have given a lot ofthought to how to recruit ideas people, andwe believe the greatest indicator of an ideasperson is intuition.We value intuition morehighly than intelligence, and we test for it.

We look for people who can talk in anabstract way about big ideas.We invite themto speculate about what the future mighthold.We look for people who can makeleaps in logic – who can spot the gap, and

imagine what might go there.And we accept, absolutely, that for us to be

successful recruiters and, more importantly,retainers of ideas people, we have to beprepared to abandon every ingrainedprejudice and embrace the notion, as amatter of pure logic, that good ideas cancome from anyone – not just people like us.For us the task is urgent because ideas are all we have to sell, but that is true for anyservice organisation.

In an age of parity products, where almostany service or product can be replicated in a matter of months, the speed with whichwe can get ideas to market will define allsuccessful companies – whatever thebusiness they are in.

Obviously not everyone from a differentculture or background is an ideas genius, justas every middle-class middle manager is notnecessarily totally bereft of ideas. But if wewant to give ourselves the greatest numberof opportunities to capture new ideas thenwe need to be sure that we’re drawing on the knowledge and skills of our diverseworkforce to capture new markets both inour immigrant communities and overseas.

If Australia is to become a truly globalised,new-economy country then we need theskills to operate in other languages andcultures. Our multicultural heritage is astrategic tool that gives us a significant edgeover monocultural countries such as Japan or China. Our failure to exploit this strategicadvantage is costing us money.

Productive diversity is a great place tobegin because it provides a useful frameworkfor business, but I hope it can be more thanthat. I hope it can be a springboard for a broader debate about the sort of future we want for this country we love so much.I hope also that the ideas generated by ourexposure to all the benefits of diversity leadus to the development of a new economyand a new consciousness of the value of the contribution of all its participants. ✪

* Sandra Yates is the chairperson of Saatchi &Saatchi Australia and a member of the AGSM’sadvisory council.

CORPORATE PARTNERS

There is now widespread discussion of the notion of ideas as the currencyof the future, an idea articulated withsome passion by the legendary Jack

Welch, who emphasises that ideas-drivenorganisations will be the new-economywinners.

Now, knowledge, in and of itself, is not theanswer to anything. It is the transformativenature of ideas applied to knowledge thatcreates change.

Our ability to discriminate betweenuntested ephemera and useful knowledge,and then to kick-start ideas based on theanalysis of that knowledge, is what willdistinguish tomorrow’s business leaders.

What has this to do with productivediversity? Everything, I would argue.

One of the most intriguing aspects of thedotcom revolution was that its foot soldierswere very young, both male and female and,in Silicon Valley at least, a disproportionatenumber of them were Indian or Asian. Noneof these groups had been widely representedat the top levels of business in the past.

This group of people – who seemed not toown a suit between them – managed tocreate the most amazing stock market bubblethe world has ever seen, and a whole bunchof middle-aged men in blue suits could notwait to pelt them with money.

The men in suits weren’t wrong to do this– they recognised that what this rag-tag bandhad in abundance was ideas – something thesuits did not have a lot of, but could stillrecognise when they saw it.

It was Jack Welch who pointed out that thejob of management in the new millenniumis to recruit, train, promote and keep ideasleaders. Ideas leaders will rarely be CEOsbecause management is not what they aregood at. Ideas leaders are wealth creators;they are catalysts for change.

And here’s the thing about ideas – goodideas can come from anyone, anywhere, butthey are least likely to come from those whohave been socialised into conventionalbusiness behaviour.

If ideas are the currency of the future, asJack Welch asserts, then you can bet that the

Ideas leaders are wealth creators;they are catalysts for change.

IDEAS AND PRODUCTIVE DIVERSITYFailure to capture new ideas by harnessing the advantages of our social diversity could cost us money, writes Sandra Yates.*

SANDRA YATES