How Michael Dell is trying to change almost everything about the computer company he founded

Date: 2015-10-07; view: 3670.

Note

VAR— Value-added-reseller (retailer) розничная или посред-ническая фирма, добавляющий ресурсы, функции и/или услуги; Напр., фирма-реселлер, предоставляющая дополнительные возможности и услуги к продаваемым продуктам других поставщиков, обеспечивающая инсталляцию, обучение, техническое обслуживание и сопровождение.

8. Comment on the following statements from the text “What's Dell Doing at Wal-Mart?” Clarify the meaning of the imagery used in the quotes below.

1. The Wal-Mart announcement represents a public shift in philosophy and has therefore set off a round of tongue-flapping and finger-wagging among the digerati.

2. Dell has been courted by every retailer in the world.

3. The good news for Dell in shifting toward indirect sales is that the company finds itself at the right end of a one-way street.

4. When something didn't work, he'd rescind it.

5. This type of thing doesn't square with Dell's efforts to polish its brand image.

6. Wal-Mart bends its suppliers to provide custom packaging.

7. It will be interesting to see which company in this new relationship gets to hold the whip handle and which feels the business end.

9. Explain the following.

· to embrace a tagline

· the company's hallowed mantra

· a Gatling gun approach

· the Be Direct company

· to irk distributors

· to switch to rival suppliers

READING AND SPEAKING (4)

10. Scan the text and discuss the changes Dell made in the company.

Dell's Extreme Makeover

By Cliff Edwards

When a wave of mergers swept the tech industry in 2004, Michael S. Dell promised investors they wouldn't see his computer company anywhere near a negotiating table. "When was the last time you saw a successful acquisition or merger in the computer industry?" he asked at the time. Five years later, it's a different story. Round Rock (Tex.)-based Dell is weeks away from closing its largest acquisition ever, a $3.9 billion deal for tech-services provider Perot Systems. The chief executive says more deals are likely, and this won't be the end of his changes in strategy. "Everything's on the table," he says.

And with good reason. The company Michael Dell started in his college dorm and built into the preeminent personal computer maker has fallen on hard times. As the center of the tech industry has shifted from the PC to the Internet, Dell has struggled mightily to find its place. While Hewlett-Packard IBM, and other rivals transformed themselves in recent years by acquiring new companies and capabilities, Dell long stuck with its old playbook of cranking out PCs as efficiently as possible. It's hard to remember that in 2005 Dell was valued at $100 billion, or more than HP and Apple combined. Today, it's worth $30 billion, less than a third of its rivals' market values.

While such signs of struggle are clear to the public, what isn't apparent is the steady overhaul Michael Dell has been working on since he returned to the chief executive role in 2007. The 44-year-old has been making sweeping changes in everything from personnel and partnerships to acquisitions and distribution. "There's been a pretty ginormous shift in our business over the last several years," says Dell, dressed in a black suit and tieless white shirt in the sprawling conference room next to his office. "We can do, and must do, more."

He has installed an almost completely new management team to help with the turnaround. Seven of his ten direct reports are new to their posts, including veterans from General Electric, IBM, and Motorola. The company has been restructured to sharpen the focus on customers. And it is branching out into services, software, and new hardware categories, including smartphones and tablet-like devices. Sources say Dell is even preparing to add social networking features and music and video services to Dell.com. The old Dell is history, the CEO vows, and a new one is just beginning. "We're not trying to become like our competitors," he says. "We're digging our own path."

It's not at all clear Dell can pull this off. The old Dell succeeded because of its mastery of logistics and the supply chain, allowing it to sell computers directly to customers at prices no rival could match. The new Dell requires completely different skills — flexibility, customer focus, and innovation. Leadership experts say changing a management approach is one of the toughest undertakings in business, particularly for a founder who has had early success. "He's got tremendous challenges ahead of him, because he's in an industry that itself is undergoing rapid, sweeping change," says Warren Bennis, chairman of the Leadership Institute at the University of Southern California Marshall School of Business.

Investors have given Dell virtually no credit for his work so far. The company's stock is off about 40% since the start of 2007, while Apple shares have more than doubled and HP's have risen about 10%.

Dell is convinced he can prove the skeptics wrong. He has already pulled off a more extensive overhaul than most outsiders realize. The business Dell took over in 2007 was floundering. Corporate PC sales were slowing, while HP under the direction of CEO Mark V. Hurd was pulling consumers into stores — and away from Dell — with its stylish notebook PC designs. Dell suffered the consequences. It lost its position as the largest PC maker in the world to HP, and profits tumbled. Dell's net income dropped 28%, to $2.6 billion, for the fiscal year ending Feb. 2, 2007, while revenue inched up 3%, to $57.4 billion.

Dell's first move was to try to stop the bleeding in the consumer business. The head of the division left in February, and Dell started looking for a replacement by working his jam-packed Rolodex. He wanted someone who could cut costs and also guide the company's foray into retail chains around the world.

One name stood out: Garriques, head of Motorola's mobile devices business. Garriques took a step back before moving forward. He killed a line of less-than-flashy consumer PCs Dell planned to introduce, called Mantra, and halted plans to copy Apple by opening more than a dozen Dell-owned stores. "The first order of business was to slow Dell's go, go, go mindset and stop to think about what we were trying to do," he says.

In March 2007, he approached Ed Boyd, a 42-year-old designer at Nike. Boyd had worked on sunglasses and running shoes but didn't have experience in computers. Garriques told Boyd he would have the opportunity to make design matter at Dell; Boyd jumped at the chance.

The changes sent a clear signal to Dell employees. The consumer business, long considered a professional dead end, was going to be a priority.

What's more, Boyd launched experiments that showed it could be an exciting place to work. At one point, Boyd hatched a plan for customers to pay an extra $75 to get certain designs on laptops, which so unsettled Dell's manufacturing team that they balked. Boyd appealed directly to Dell, who green-lighted the move.

Even more far-reaching changes were in store for 2008. Dell knew he wanted to change the company's management culture, to get executives to jump on new business opportunities and take more risks, but he wasn't sure how to go about it. He turned to Brian Gladden, a 20-year veteran of GE, the bastion of modern management.

Gladden quickly slipped into an easy rapport with Dell. But the lack of structure at the massive company surprised him. "The processes, the tools, the culture here didn't support a $60 billion business," Gladden says.

He dove into figuring out how to change that, in consultation with Dell. After months of study, they became convinced the company had to be restructured around customers. It was a radical move: Most tech companies organize around the products they sell, such as computers or software. But Gladden and Dell thought that by focusing outward they could give top managers more responsibility and more flexibility to respond to clients. On Dec. 31, Dell said it would restructure into four customer groupings: consumers, corporations, small and midsize businesses, and governments and educational buyers.

Dell began to gain confidence his company finally had a solid foundation for the future. He saw his executive team quickly take to the new management approach, which was modeled after GE's. Leaders of each division are responsible for meeting financial targets and have broad authority to figure out how to reach them. The main beneficiaries have been the consumer, government, and small and medium-size business units, which in the past often received less attention as Dell focused on large corporations. "[It's] a different dynamic than [Dell] is used to," says Gladden.

Dell is beginning to show improvement in its financial results. In its most recent earnings report, the company handily beat Wall Street's expectations. Dell shares have doubled since their low in February, to $16, as hopes mount that the company will benefit from a surge in PC purchases.

Rivals contend that Dell has waited too long to take the initiative. In an industry undergoing rapid consolidation, companies that haven't already positioned themselves to withstand the cyclical nature of technology will have a hard time thriving over the long term. That means Dell itself may be forced to merge with another company or become takeover bait. "Being a fast follower doesn't work in an industry that is moving faster every day," says Shane Robison, chief technology officer at HP.

Businessweek, In Depth,October 15, 2009

11. Read the text and classify the shifts in Dell's strategy along the following lines. Do you think Dell has waited too long to take those initiatives?

12. Explain the following.

1. to be stuck with one's old playbook

2. the steady overhaul he has been working on

3. ginormous shift

4. direct reports

5. to pull something off

6. the business was floundering.

7. profits tumbled

8. to try to stop the bleeding in the consumer business

9. go, go, go mindset

10. guide the company's foray into retail chains around the world.

11. to green-light the move

12. to slip into an easy rapport with someone

13. to gain confidence

14. beneficiaries

15. become takeover bait

16. being a fast follower

13. Comment on the following statements.

1. The consumer business, long considered a professional dead end, was going to be a priority.

2. Investors have given him virtually no credit for his work so far

3. At one point, Boyd hatched a plan for customers to pay an extra $75 to get certain designs on laptops, which so unsettled Dell's manufacturing team that they balked.

4. But Gladden and Dell thought that by focusing outward they could give top managers more responsibility and more flexibility to respond to clients.

TRANSLATION

14. Translate the text “Where Dell Went Wrong” in writing.

15.Translate the text “What's Dell Doing at Wal-Mart?” orally.

16. Translate the text “Dell's Extreme Makeover” orally.

LANGUAGE FOCUS

17. Study collocations with the words “sensitive” and “sensitivity”, write down the combinations and their definitions.

18. Suggest the Russian for the following.

to undercut rivals; cutthroat tactics; to slash prices; to deflate margins; to cut out the middleman; to break even; a break-even point; to bite off more than one can chew; to lose one's focus; a downward price spiral; increased price sensitivity among consumers; savvy shoppers; to piggyback on smth; the low-end segment of the market; to abandon the direct-sell model; to put the company back on track; perceptions of poor customer service; sluggish sales growth; missed forecasts; core direct selling business; to have unclear return on investment; to embark on a bold long-term initiative; to become an also-ran in the segment; to succumb to complacency; faltering financials; a stroke of genius; single-formula growth; hubris; people-intensive business; once-promising move; to take over the market-share lead

19. Suggest the English for the following.

приступить к внедрению новой долгосрочной инициативы; новая компания; убыточный; основные сильные стороны компании; возобновить рост; самоуспокоенность; обеспечивать конкурентное преимущество; лидеры «новой экономики»; недооценивать конкурентов; перехватить лидерство в доле на рынке; издержки, связанные с товарно-материальными запасами; переориентировать компанию; отказаться от модели прямых продаж; приверженность своей стратегии в бизнесе; обходиться без посредников

20. Complete the word combination and translate them into Russian.

to [______] the middleman; to [______] to complacency; a [______] edge; to broaden one's product [______]; to have a [______] start; an [______]ran; [______] strengths; to sell higher-[______] hardware; to move up the [______] chain; [_______] bench

21. Write a SWOT analysis of Dell Inc.

22. You own a large high-tech distributor in Russia. Can you think of any form of co-operation with Dell Inc.? Make out your plan and discuss it with your management team.

REFLECTION SPOT

Say if the Unit helped you to have better understanding of the management strategies? Did you have an opportunity to develop competencies you might need in your future work?

VOCABULARY

· financials n

· augment v , to augment capital

· outfit n & v

· oust v, oust from office

· flounder, v

· to piggyback on smth

· reinvention n ,syn restructuring, turnaround, overhaul

· sensitivity n, price sensitivity

· sensitive a (products,information, market)

· yield-sensitive capital

· income-sensitive goods

· ego-sensitive product

· also-ran n

· beneficiary n

· single-formula growth

· hubris n (comp arrogance, complacency)

· to put the company back on track

· to beat the market expectations

UNIT 5. QUALITY MANAGEMENT

Competencies § ability to appreciate organizational culture, policies and processes § developing translation skills § enriching interdisciplinary knowledge § critical evaluation of the outcomes of professional practice
	READING AND SPEAKING (1)

· What do you know about the relationship between quality and the customer loyalty?

· What is the difference between quality control and quality assurance?

· What methods of ensuring quality do you know?

· Can you name the three major stages in conventional inspection-based quality control?

· What is the essence of the philosophy of Total Quality Management (TQM)?

· What does “best practice benchmarking” involve?

· What are the basics of the Japanese quality control system?

· What is the Kaizen system?

Cross Cultural

1. Read the following text and explain the title of the article.

Delivering Two Kinds of Quality

By Keith McFarland

Success starts with making products that work. But appealing to a customer's aesthetic taste is also essential in today's marketplace

More than 20 years after the quality craze kicked off in the U.S., quality remains an elusive target for many American companies. Not that we haven't made progress. In 1980 the average car produced by Ford had twice as many product flaws (as measured by J.D. Power's survey of initial quality) as the average Japanese car.

By 1986 the Japanese auto industry lead over Ford had shrunk from 100% to about 20%, as Ford made quality "Job One." But since that impressive initial spurt of progress, many U.S. companies have struggled to keep up on quality, even as the Japanese began building more of their products in the U.S. with American workers.

Innovation curve.The truth is, the Japanese have an unfair advantage. Japanese culture intrinsically values quality and appreciates the small details. In fact, the Japanese expression for quality is atarimae hinshitsu, which can be roughly translated as "taken-for-granted quality.

What do the Japanese take for granted when it comes to quality? They take for granted that things should work as they are supposed to, and they even see an elegance to things working properly — whether it's cars, subway schedules, traditional flower arranging, or the famous tea ceremony.

Japanese manufacturers were so obsessed with taken-for-granted quality that they created a constant stream of innovations that built on renowned quality-management consultant Ed Deming's original concepts: lean manufacturing, just-in-time industry, and design for quality. In today's competitive markets, manufacturers need to be very far along this quality innovation curve — or moving along it very quickly. If they are not, you can take for granted that they will go out of business.

This is true even for small, entrepreneurial companies. The ability to create products and services that work is no longer a source of long-term competitive advantage. It has become just the price of admission to most markets. If the stuff your competitors make works better, your customers aren't going to be customers for long.

Quality zealots. Though much improved, America's quality record still isn't what it might be. Here are some traps I've seen a lot of companies fall into on the road to quality.

1. Faking a commitment. There's no way around it. Whether you're adopting total quality management (TQM), continuous improvement, or Six Sigma, these techniques require everyone in a company to learn how to think and work differently. Too many senior executives grab onto the fad phrases as they come and go — from TQM to lean manufacturing and now Six Sigma — without taking the time to learn what these processes are and how they work. They leave the nitty gritty of quality to the folks below them — a sure way to have a quality program fail.

2. .Letting the quality zealots run wild. On the other extreme, some companies become so quality-process obsessed that quality-management techniques cease to be a tool to improve the company's performance and instead become an end in themselves. Statistical analysis should be used for questions for which a company doesn't readily have a "good enough" answer. Instead, organizations sometimes go through long analytical processes for problems that a little common sense could have solved.

3. Quality-management techniques work very well for certain processes and applications — but their efficacy is less clear in areas like sales. Nothing sours an organization on quality faster than meaningless quality busywork. Perhaps the biggest risk to companies engaged in statistical process-control methods, such as TQM and Six Sigma, is that they may lose sight of the fact that controlling errors is only part of the game.

Modern marvels. That brings us to the second of the two Japanese expressions for quality: miryoku teki hinshitsu, which means "bewitching" or "enchanting quality." This kind of quality appeals not to customer expectations and reliability (that things should do what they're supposed to), but rather to a person's aesthetic sense of beauty and elegance.

But with the hungry competitors in most markets today, taken-for-granted quality by itself may not get the job done.

BusinessWeek, February 15, 2006

2. Explain the following.

2. Why are the Japanese more receptive to quality programmes?

3. What do the Japanese add to the conventional notion of quality?

4. What is the American approach to quality?

5. What are possible snags on the way to quality?

READING AND SPEAKING (2)

3. Read the following article and speak on the importance of international standartization.

The Power of ISO

Yes, the name International Organization for Standardization is enough to put most people to sleep, so why is its acronym held dear?

It is amazing how much three letters can convey. Most people may have never heard of the International Organization for Standardization, but when they see ISO attached to a product or company, they feel more confident. They expect things to be up to standard — nothing shoddy and no cowboy service.

Marketers can only marvel at such "brand" penetration. Without any specific logo, colors or typeface, these three letters consistently give customers a feeling of confidence, even though most of them have no idea about the actual contents of any given standard. But standards are good, and that's all they need to know.

So how has ISO managed to achieve this remarkable penetration? Firstly, there is its heritage. ISO, as we know it today, was founded in 1947. However, although ISO has been around for more than half a century, it was the launching of the ISO 9000 series of standards in 1987 that heralded the evolution of ISO into a household name (or at least a "boardroom name"). Prior to ISO 9000, standards tended to be perceived as highly technical documents, the domain of engineers. ISO 9000 was the first standard of interest to all organizations, everywhere, from small companies to whole government departments.

So despite the 60-year history, it is really the organizations that have been "ISO 9000 certified" that are ISO's most effective marketing tool. Companies, keen to highlight their conformity to the latest version, ISO 9001:2000 (and more recently ISO 14001:2004 for environmental management), spread the word. You can see it on literature, websites, even letterheads. Indeed, the ISO 9000 series is now so well recognized it has become like a passport, the minimum a company must show before clients will even consider buying its products or services.

At the end of 2004, the worldwide total of certificates to the ISO 9001:2000 quality management systems standard was more than 670,000 in 154 countries, while over 90,000 ISO 14001 certificates had been issued in 127 countries.

Yet ISO's logo does not (or certainly should not) appear on any of these certificates; ISO guards its brand assets zealously. Indeed, the trademarked logo of the organization is rarely seen outside of the organization's own activities. Although you can find a plethora of logos on company websites that tell you they are certified to ISO 9001:2000 (or that their products are certified to other ISO standards), these logos should not resemble the ISO trademark. The certificates merely state that the company complies with ISO standards, and bears no seal from ISO itself. The organization's own brand identity is reserved for use by ISO and its members.

José Checa, legal adviser at the ISO Central Secretariat, comments, "ISO actively defends its logo and registered name. For example, we recently scored new successes, preventing the ISO name being misused on the Internet to mislead people into buying products or services that they believe are endorsed by ISO. Numerous actions are also being undertaken at a national level by ISO members, as they have realized the commercial value of the ISO brand and the fact that it is a powerful, additional asset that they can use to the full."

ISO is keen to outline the role it plays: It is "a network of the national standards bodies of 156 countries" that develops and publishes international standards. It does not audit organizations or products for compliance, nor does it issue certificates. This is the work of certification bodies, which can issue their own marks of approval independently of ISO for companies to use.

There are six major certification bodies with an international presence, which compete at a global level, along with hundreds of smaller organizations that tend to work more nationally.

Nicki Hirst, global marketing manager at certification body BSI Management Systems, says, "The BSI brand differentiates us from our competitors because we are synonymous with quality and expertise of service and with pioneering the certification of management systems standards. Even while our brand identity has evolved and been refreshed, our brand is always based on our heritage of independence, integrity, and innovation."

The experience of the European Union's Eco-label also demonstrates the importance of heritage. Created in 1992, this certification scheme aims to help European consumers distinguish greener, more environmentally friendly products and services. But the "Flower" — the symbol of the Eco-label — hasn't yet reached its full potential.

The aim of the EU Eco-label is to reduce environmental impacts of products and increase the environmental awareness of consumers.

Athina Koutroumani, desk officer for the European Eco-label in the European Commission, says that the idea was to develop a voluntary European-wide scheme that consumers would recognize, and understand that it meant a product or service had met rigorous environmental criteria.

But while heritage helps, it is not the only factor that influences the success of brands in the complicated world of certificates and standards. The European Foundation for Quality Management (EFQM) only began in 1989, yet its brand and the EFQM Excellence Award is fast becoming an international mark for excellence in business.

"ISO sets standards on how companies should do things — we look at how a company can surpass expectations," says Melissa Rancourt, head of operations at EFQM. "The EFQM complements ISO standards like ISO 9000.

By Edwin Colyer

Businessweek, March 17, 2006

4. Discuss the following questions.

1. Why are organizations and consumers interested in international standards?

2. What is the role of ISO?

3. Why is ISO trademark rarely seen on products or on corporate web sites?

4. How is the quality of the products certified?

5. What certification schemes were created within the European Union?

6. Are the quality standards mandatory or voluntary?

7. Which of the quality assurance schemes or standards are the most influential?

READING AND SPEAKING (3)

· What do you know about Six Sigma?

· Where does the system come from?

· Why is it described as “Six Sigma”?

· What companies were most successful in introducing and making it popular in the business world?

· Who supported and successfully applied this quality model?

5. Comment on the following quotes.

a. "We are going to shift the paradigm from fixing products to fixing and developing processes, so that they produce nothing but perfection or close to it.” — Jack Welch

b. “You can't know it all. No matter how smart you are, no matter how comprehensive your education, no matter how wide ranging your experience, there is simply no way to acquire all the wisdom you need to make your business thrive.” — Donald Trump

c. “Singleness of purpose is one of the chief essentials for success in life, no matter what may be one's aim.” — John D. Rockefeller

6. Consider the following.

The Nuts And Bolts of Six Sigma

What is it?

An analytical method aimed at achieving near-perfect results on a production line. In statistics, the Greek letter sigma denotes variation in a standard bell curve. One sigma equals 690,000 defects per 1 million. Most companies do not better than three sigma, or 66,000 errors per million. Six Sigma reduces that count to 3.4 defects per million. That saves money by preventing waste.

How does it work?

The tool achieves results by reducing subjective errors in the assessment of problems. First, auditors define a process where results are subpar. Then they measure the process to determine current performance, analyze this information to pinpoint where things are going wrong, and improve the process and eliminate the error. Last, controls are set up to prevent future bugs.

The language of Six Sigma

Black Belt — Leaders of team responsible for measuring, analyzing, improving and controlling key processes that influence customer satisfaction and/or productivity growth. Black Belts are full-time positions.

Green Belt — Similar to Black Belt but not a full-time position.

Master Black Belt — First and foremost teachers. They also review and mentor Black Belts. Selection criteria for Master Black Belts are quantative skills and the ability to teach and mentor. Master Black Belts are full-time positions.

Variance — A change in a process or business practice that may alter its expected outcome.

Process mapping — Illustrated description of how things get done, which enables participants to visualize the entire process and identify areas of strength and weaknesses. It helps reduce cycle time and defects while recognizing the value of individual contributions.

BusinessWeek, 2002

Note

bell curve — колоколообразная кривая, гауссова кривая, кривая нормального распределения

6. Scan the following text and explain the title.

Quality Isn't Just For Widgets

Six Sigma, the quality-control and cost-cutting power tool, is proving its worth on the service side

By Michael Arndt

IN the world of manufacturing, Six Sigma has become something akin to a religion, with none other than John F. Welch as its charismatic apostle. The former chairman and CEO of General Electric Co. came late to this rigorous, statistical approach to quality control. But once he embraced it in 1996, he quickly assembled an unprecedented army of employees to pinpoint and fix problems throughout GE using the number-crunching skills they learned in Six Sigma training.

The results were awesome: In the past three years alone, these troops saved the company $8 billion, according to GE. Little wonder, then, that Welch has won so many converts preaching the cost-cutting power of this methodology.

So what is GE doing with Six Sigma under Welch's successor, Jeffrey R. Immelt? More than ever. The $126 billion conglomerate spent $600 million on Six Sigma projects in 2002 — mostly for the salaries of 4,000 full-time Six Sigma experts, plus 100,000 employees who've undergone, basic training. Altogether, they have a target of finding an additional $2.5 billion in savings in the company.

On top of that, GE is sending out its Six Sigma squads to customers such as Dell Computer and Wal-Mart Stores to help them root out what GE estimates to be more than $1 billion in inefficiencies and waste — and help GE win more business.

GE may be preeminent, but it's certainly not unique in pushing Six Sigma into new corners of its business. Originally conceived by Motorola Inc. as a quality-improvement device in the mid-1980s, Six Sigma soon morphed into a cost-cutting utensil for manufacturers of all stripes. Now, it's fast becoming the Swiss army knife of the business world. Goods producers still make up the bulk of users, who typically rely on statistics to uncover and then reduce product variance in order to boost quality and efficiency. But increasingly, manufacturers are applying Six Sigma to functions as varied as accounts receivable, sales, and research and development.

And their success in these non-factory domains has inspired Six Sigma projects at financial institutions, retailers, health-care concerns, and in other areas of the service sector. Says Gregory H. Watson, a consultant and past president of the American Society for Quality in Milwaukee: "Six Sigma might be the maturation of everything we've learned over the last 100 years about quality."

It's easy to see why Six Sigma works well in large-scale manufacturing. For one, factory processes tend to be both repetitive and easy to track as goods move along the line. Also, companies usually quantify what happens at each step. So, by measuring defects per output, they can quickly assess how a different way of doing things at any stage affects productivity or profits.

Generally the gains add up swiftly as Six Sigma squads discover ways to reduce personnel, capital spending, or overhead. Bosses can then re-deploy staff or take the gain to the bottom line. At Dow Chemical Co., for instance, each Six Sigma project has freed up an average of $500,000 in the first year. In one case the discovery that an additive was causing imperfections in packaging materials enabled Dow to reduce defective items on that line by 70%. Managers claim that in total, such improvements have saved the company more than $750 million since 1999.

Increasingly, however, manufacturers are racking up their big savings far from the factory floor. Dow Chemical, for example, projects it will save another $750 million by the end of next year as it applies Six Sigma to such areas as procurement and sales. And Six Sigma experts at 3M Co. have employed the methodology to reduce inventories and speed up R&D efforts at the company's headquarters. By judging how well employees run fix-it projects, company leaders are hoping to spot their successors.

Six Sigma isn't a cure-all, to be sure. In the first few months of a project, up-front training costs always outweigh any savings. And through the life of the project, the expense of compiling and analyzing data may also exceed what is saved, particularly in areas where a process cannot be easily standardized.

Even GE, which does thousands of Six Sigma projects a year, concedes it hasn't yet made much headway in applying Six Sigma to its legal operations. Companies also stand to lose if top management doesn't buy the program and implement the fixes recommended by its top Six Sigma analysts, known as “black belts."

But that said, GE is still pushing the envelope. Its GE Capital subsidiary recently dispatched a couple of black belts to Dell Computer Corp.'s headquarters in Round Rock, Тех., to analyze its accounts-payable process. After mapping the procedure step by step, they discovered that Dell was getting buried in paper invoices because its just-in-time manufacturing operations required that the company purchase some types of parts as often as 12 times a day. To solve the problem, the GE Capital team moved Dell from its slowpoke manual system to an Internet-based electronic filing setup. Estimated savings: $2.4 million a year.

Although Dell pockets the cash, GE can come out ahead, too. If GE customers are more productive and profitable, GE wagers that the goodwill generated through Six Sigma advice will translate directly into contracts. Jack Welch may have moved on. But to more and more companies, Six Sigma is gospel.

BusinessWeek, July 22, 2002

Note

Swiss army knife— швейцарские армейские ножи славятся качеством и обилием приспособлений, что позволяет с их помощью решать множество разнообразных задач

7. Read the text “Quality Isn't Just For Widgets” and answer the following questions.

1. What group of quality assurance methods does Six Sigma belong to?

2. When and where was the method originally conceived?

3. What is the essence of Six Sigma methodology?

4. What are the possible gains?

5. What are the downsides of the method?

6. How did GE help its customers using its expertise in Six Sigma?

TRANSLATION

8. Translate the text “Quality Isn't Just For Widgets”.

9. Translate the following into Russian paying attention to the words that make the statements more colourful and expressive.

1. Since the salad days of just 18 months ago, worldwide revenues from investment banking have fallen on average by 43% at the big firms, and profits by 49%, according to Boston Consulting Group (BCG).

2. Underwriting initial public offerings (IPOs) of shares is one of the juiciest bits of investment banking.

3. As they wield the axe, the heads of the biggest investment banks hope that they are merely chopping away the forced growth of the past two years, bringing a healthier cost structure back to the industry.

4. Alfa Bank, a leader of the Russian corporate-banking world, is treading water when it comes to individual accounts, growing no faster than the overall market.

5. The latest merger boom may turn out to be just a boomlet.

6. The uninspiring track record of some shipowners is but a squall compared with the storms that may be gathering over the horizon. The recent bumper returns from shipping have prompted a ship-building boom. As a result an armada of new ships is joining the world's fleets just as the rate of growth of world trade may be slowing.

7. The bottom line, Ms Reid said, is that Coca-Cola wants to be as successful with marketing beverages geared toward kids as it is selling carbonated soft drinks to teens.

LANGUAGE FOCUS

10. Give the Russian for the following phrases from the text.

11. Translate the following into Russian.

to undergo basic training; a sales target; to make up the bulk of the users; capital spending; capital gains; public spending; consumer spending; large-scale manufacturing; economy of scale; to rack up profits; to rack up savings; sales reps; procurement and sales; to implement the recommended fixes; just-in-time manufacturing operations; to generate profit; chief quality officer; to spot one's successor; for two successive years; to reduce inventories; to build up stocks of the goods; up-front costs; to outweigh advantages; to push the envelope; to pinpoint and fix a problem; gain in production; to gain ground; public procurement

12. Translate into English.

крупномасштабное производство; панацея (средство на все случаи); накапливать запасы; сокращать запасы; проводить корректировку товарных запасов; приносить прибыль; произвести оценку проблемы; расходы на капитал; отгрузить некий товар
г-ну А; переводить работников на другое место; счета к оплате; счета к получению; накладные расходы; преимущество в конкуренции; назначить преемника; передать управление снабжением поставщику; рост производительности труда; прирост объема производства

BUSINESS SKILLS

13. Try to define quality objectives which might be set by

a. manufacturers of cheap clothes;

b. a big automaker;

c. a bus tour operator;

d. the head of a chain supermarket;

e. a shipping line which offers pleasure cruise voyages.

REFLECTION SPOT

Will you need knowledge of quality management systems in your future work and studies?

VOCABULARY

· product flaws (defects)

· Total Quality Management

· Continuous Improvement

· statistical process-control methods

· expertise n

· lean manufacturing

· procurement n

· widget n

· successor n

· accounts receivable

· accounts payable

· factory processes

· track v

· quantify v

· overhead(s) n

· redeploy v

· gain n

· bottom line

· top line

· rack up v

· just-in-time

· procurement n

· brand identity

· to become an end in itself

· to keep up on quality

UNIT 6. SIX SIGMA vs INNOVATION

Competencies · ability to analyse a subject-specific text · ability to assess and qualify information · synthesizing the contents of an extended text · ability to make inferences · enhancing translation skills · enriching interdisciplinary knowledge · comparing and contrasting

CASE STUDY — GENERAL ELECTRIC

	“The most efficient way to produce anything is to bring together under one management as many as possible of the activities needed to turn out the product.” — Peter Drucker “If change is happening on the outside faster than on the inside the end is in sight.” — Jack Welch
		READING AND SPEAKING

1. Read the text and sum the key points.

The Immelt Revolution

He's turning GE's culture upside down, demanding far more risk and innovation.

I

Despite his air of easy-going confidence, Jeffrey R. Immelt admits to two fears: that General Electric Co. will become boring, and that his top people might act like cowards. That's right: cowards. He worries that GE's famous obsession with bottom-line results — and tendency to get rid of those who don't meet them — will make some execs shy away from taking risks that could revolutionize the company.

Immelt, 49, is clearly pushing for a cultural revolution. For the past three and a half years, the GE chairman and CEO has been on a mission to transform the hard-driving, process-oriented company into one steeped in creativity and wired for growth. He wants to move GE's average organic growth rate — the increase in revenue that comes from existing operations, rather than deals and currency fluctuations — to at least 8% from about 5% over the past decade. Under his former boss, the renowned Jack Welch, the skills GE prized above all others were cost cutting, efficiency, and deal-making. What mattered was the continual improvement of operations, and that mindset helped make the $152 billion industrial and finance behemoth a marvel of earnings consistency. Immelt hasn't turned his back on the old ways. But in his GE, the new imperatives are risk-taking, sophisticated marketing, and above all, innovation.

This is change borne of necessity. The Welch era reached its zenith in the booming, anything-goes economy of the late 1990s. Back then, GE always seemed to beat the consensus forecasts by a penny a share — and investors felt no burning need to figure out exactly how they did it. Immelt has no such luxury. With a slower-growing domestic economy, less tolerance among investors for buying your way to growth, and more global competitors, Immelt, like many of his peers, has been forced to shift the emphasis from deals and cost-cutting to new products, services, and markets. Any other course risks a slow descent into irrelevance. "It's a different era," says Immelt, a natural salesman who still happily recounts the days when he drove around his territory in a Ford Taurus while at GE Plastics. He knows the world looks to GE as a harbinger of future trends, says Ogilvy & Mather Worldwide Chief Executive Rochelle B. Lazarus, who sits on the GE board. "He really feels GE has a responsibility to get out in front and play a leadership role."

II

So how, exactly, do you make a culture as ingrained as GE's sizzle with bold thinking and creative energy? To start, you banish some long-cherished traditions and beliefs. Immelt has welcomed outsiders into the highest ranks, even making one, Sir William M. Castell, a vice-chairman. That's a serious break with GE's promote-from-within past. He is pushing hard for a more global workforce that reflects the communities in which GE operates. Immelt is also encouraging his homegrown managers to become experts in their industries rather than just experts in managing. Instead of relying on execs who barely had time to position a family photo on their desk before moving on to the next executive assignment, he's diversifying the top ranks and urging his lieutenants to stay put and make a difference where they are.

Most of all, Immelt has made the need to generate blockbuster ideas more than an abstract concept. In true GE fashion, he has engineered a quantifiable and scalable process for coming up with money-making "eureka!" moments. While Welch was best known for the annual Session C meetings during which he personally evaluated the performance of GE's top several hundred managers, Immelt's highest-profile new gathering is the Commercial Council. Immelt leads the group of roughly a dozen top sales and marketing executives, including some unit heads such as GE Consumer Finance CEO David R. Nissen. The members hold phone meetings every month and meet each quarter to discuss growth strategies, think up ways to reach customers, and evaluate ideas from the senior ranks that aim to take GE out on a limb. "Jeff has launched us on a journey to become one of the best sales and marketing companies in the world," says Nissen, who describes the meetings as collegial and more experimental than other GE gatherings.

This is no free-for-all, however. Business leaders must submit at least three "Imagination Breakthrough" proposals per year that ultimately go before the council for review and discussion. The projects, which will receive billions in funding in the coming years, have to take GE into a new line of business, geographic area, or customer base. Oh, and each one has to give GE incremental growth of at least $100 million. Such change can be scary stuff for folks steeped in Six Sigma, who were led to believe that if you made your numbers and were prepared to uproot your family every year or two, you had a shot at the top rungs. Now they're being asked to develop real prowess in areas such as creativity, strategy, and customer service that are harder to measure. They are being told to embrace risky ventures, many of which may fail. Immelt's GE can be seen as a grand experiment, still in its early days, to determine whether bold innovation can thrive in a productivity-driven company.

III

To inspire the fresh thinking he's looking for, Immelt is wielding the one thing that speaks loud and clear: money. The GE chief is tying executives' compensation to their ability to come up with ideas, show improved customer service, generate cash growth, and boost sales instead of simply meeting bottom-line targets. As Immelt puts it, "you're not going to stick around this place and not take bets." More concretely, 20% of 2005 bonuses will come from meeting pre-established measures of how well a business is improving its ability to meet customer needs. And while he hasn't exactly repudiated Welch's insistence that managers cull the bottom 10% of their staff, insiders say there's more flexibility, more subjectivity to the process. Risking failure is a badge of honor at GE these days.

IV

To lay the groundwork for an organization that grows through innovation, Immelt took steps early on to rejigger the GE portfolio. He committed to sell $15 billion of less profitable businesses such as insurance, while shelling out more than $60 billion in acquisitions to dive into hot areas such as bioscience, cable and film entertainment, security, and wind power that have better growth prospects. In doing so, he pared the low-margin, slower-growth businesses like appliances or lighting, which he diplomatically calls "cash generators" instead of "losers," down to 10% of the portfolio, from 33% in 2000. Nicole M. Parent of Credit Suisse First Boston is impressed with "the way they have been able to evolve the portfolio in such a short time" and with so little disruption. "This is a company where managers will do anything to achieve their goals."

Good thing, as their back-slapping chief is now looking for "those things that grow the boundaries of this company." He's confident that the new business mix and growth incentives are already paying off. At GE's annual gathering of its top 650 executives in Boca Raton, Fla., in January, he insisted that "there's never been a better day, a better time, or a better place to be [at GE]!" Strong words in a company that stretches back 127 years to founder Thomas Edison.

That in itself may be a stretch of the imagination for now, but Immelt is trying to recast the company for decades to come. He's spending big bucks to create the kind of infrastructure that can equip and foster an army of dreamers. That means beefing up GE's research facilities, creating something akin to a global brain trust that GE can tap to spur innovation. He has sunk $100 million into overhauling the company's research center in Niskayuna, N.Y, and forked out for cutting-edge centers in Bangalore, Shanghai, and Munich.

Globalizing research has allowed GE to get closer to overseas customers. The simple fact is that most of GE's growth will come from outside the U.S. Immelt predicts that developing countries will account for 60% of the company's growth in the next 10 years, vs. about 20% for the past decade. But he is also spreading new practices to lethargic economies such as Germany. After a 2002 meeting with German Chancellor Gerhard Schroder reinforced his notion that GE could be doing more in that country Immelt decided to open the Munich center. By July, 2004, a new center was up, and the results were immediate: the company saw a 22% growth in German-speaking markets last year from 2003.

V

Now that Immelt has repositioned the portfolio and added resources, his main objective is to get more immediate growth out of the businesses he already has. That's where the Imagination Breakthroughs come in. Over the past 18 months, Immelt has agreed to invest $5 billion in 80 projects that range from creating microjet engines to overhauling the brand image of 3,000 consumer-finance locations. The hope is that the first lot will generate $25 billion in revenue next year — cheap, if it works, when you consider what it would cost to acquire something from the outside with that level of sales. In the next year or two, Immelt expects to have 200 such projects under way.

The pressure to produce could not be more intense. Many of the company's 307,000 workers weren't exactly hired to be part of a diverse, creative, fleet-footed army of visionaries who are acutely sensitive to customers' needs. "These guys just aren't dreamer types," says one consultant who has worked with the company. "It almost seems painful to them, like a waste of time." Even insiders who are openly euphoric about the changes under Chairman Jeff admit to feeling some fear in the depth of their guts.

"This is a big fundamental structural change, and that can be tough," says Paul T. Bossidy, CEO of GE Commercial Equipment Financing, who is reorganizing his sales force so that each person represents all of GE to particular customers. Susan P. Peters, GE's vice-president for executive development, even talks about the need for employees to "reconceptualize" themselves. "What you have been to date isn't good enough for tomorrow," she says. Ouch.

VI

To Immelt, the best managers are great marketers and not just great operators. That's a rethinking of GE's long-held bias that winning products essentially sell themselves. Beth Comstock, who was appointed chief marketing officer three years ago with the mission of boosting the company's marketing expertise, says that when she started, a number of insiders were skittish about the new agenda: "Everyone thought, I've got to get into sales and marketing to be relevant in this company?"

Well, yes. Comstock is trying to elevate the role of marketing throughout GE. She has helped develop a commercial leadership program that sends the best and brightest marketers around the organization for two intensive years, much as GE's corporate audit staff has long done on the finance side. The auditors were important to maintaining financial discipline under Welch. Now, GE has initiated new courses in marketing, as well as ones on how to spark idea generation. Some executives have also taken to holding "idea jams," where people from diverse businesses brainstorm. Within GE Energy alone, there are "growth heroes," who are held up as emblematic of where the company wants to go, a "virtual idea box" to spur brainstorming via the Web, and "Excellerator awards" for the development of ideas. The jargon may smack of classic GE, but the approach is novel. "This is about unlocking the curiosity, yet having the rigor stay intact," says Comstock.

In this era, marketing is not just a matter of producing edgier commercials or catchier slogans. It means getting outside the company to understand markets and customers. Among other things, GE's top marketing executives have spent a lot of time examining the practices of companies such as Procter & Gamble Co., which let them spend time last November in "The GYM" where strategies and issues are debated, examined, and maybe even solved. "The idea is to enhance a team's creative thinking," says P&G spokesman Terry Loftus. GE staffers also spent time at FedEx Corp., which has exceptional customer service. Welch did the same thing in benchmarking Motorola Inc. when he delved into Six Sigma, but the external focus is even stronger now.

Immelt wants his managers to lead industries rather than merely follow demand. Take the company's move to create a cleaner coal plant — another Imagination Breakthrough — before its customers were even asking for it. GE initiated the push after acquiring Chevron-Texaco Corp.'s gasification technology business last year. Immelt and GE Energy CEO John G. Rice brought together big power customers and experts on subjects such as climate change at GE's education center in Croton-on-Hudson, N.Y., last July to debate where the industry would be in 2015. James E. Rogers, chairman and CEO of public utilities giant Cinergy Corp., was shocked to hear Immelt talk about the need to generate electricity with far fewer emissions — a touchy subject in an industry that still burns a lot of coal. "He was unafraid to articulate a point of view that his customers might not share,” says Rogers, whose company burns 30 million tons of coal a year.

What convinced Rogers to partner with GE on a cleaner coal power plant was the prospect of having an integrated package managed by GE. Instead of forcing Rogers to license the technology and figure it out himself, GE in partnership with Bechtel Corp. will design and implement the plan. GE's promise: that the cleaner-burning plant will soon become competitive with pulverized coal and that GE will handle any hiccups in the process.

VII

But there's a limit to how much Immelt can transform his own people. A key strategy ¾ and one that amounts to a gut punch to the culture ¾ involves bringing more outsiders. In sales and marketing alone, GE has hired more than 1,700 new faces in the past few years.

Immelt is also looking for more leaders who are intensely passionate about their businesses and are experts in details. No one represents Immelt's vision of what a GE leader should be better than Bill Castell.

Castell is quite unlike the archetypal GE executive. He's totally immersed in his industry, a leading thinker on the future of personalized medicine who will never head up a business based on jet engines or commercial finance. Nor is he pursuing a black belt in Six Sigma or losing sleep over making his numbers. Yet Immelt loves him. "I want managers to have the kind of curiosity that Bill has, his passion for the industry," he says. "He understands where the market is going."

To encourage that kind of expertise and passion in the rest of his organization, Immelt is urging people to stay in place longer to build stronger relationships with customers and markets. GE Energy's Rice ¾ a hotshot who is emblematic of the old system, in which a great GE manager could parachute onto the scene to turn any business into gold ¾ notes that the idea of staying put takes some adjustment. "There was always an impression in the midlevel ranks that if you weren't moving every few years, something was wrong," says Rice. He now says he likes the fact that he has been in one place for four years, because he's developing a deeper knowledge.

Investors are still waiting to see whether GE's evangelizing chairman can truly make his company grow faster than the world around it. Even some of his fans think that GE's new momentum has more to do with the overall economy than with idea generation. Says Steve Roukis of Matrix Asset Advisors, which owns 2 million GE shares: "If you have a revolutionary decade of growth around the world, who's going to be there to capture it? GE."

Capture it? Jeff Immelt wants to shape it, drive it, make it his own. For him, reinventing GE is the only way to make his company dominate this century, much as it led the one before.

2. Explain the statements from the text. Make your commentaries.

1. Instead of relying on execs who barely had time to position a family photo on their desk before moving on to the next executive assignment, he's diversifying the top ranks and urging his lieutenants to stay put and make a difference where they are.

2. In true GE fashion, he has engineered a quantifiable and scalable process for coming up with money-making "eureka!" moments

3. Such change can be scary stuff for folks steeped in Six Sigma, who were led to believe that if you made your numbers and were prepared to uproot your family every year or two, you had a shot at the top rungs.

4. And while he hasn't exactly repudiated Welch's insistence that managers cull the bottom 10% of their staff, insiders say there's more flexibility, more subjectivity to the process.

5. That means beefing up GE's research facilities, creating something akin to a global brain trust that GE can tap to spur innovation.

6. To Immelt, the best managers are great marketers and not just great operators.

BusinessWeek, 2005

3. Consider the following rankings. Is GE a great company?

General Electric

Fortune 500, 2007

Top 20 Rank: 1

Rank among: Electronics: 1

GE's much-publicized "Ecomagination" campaign is aimed at supercharging revenues while doubling its $700 million R&D budget to come up with solar-energy hybrid locomotives, lower-emission aircraft engines, more efficient lighting, and ever more sophisticated water-purification systems. Evidently conservation begins at home: GE cut its own energy bills by about $70 million last year, partly by installing new lighting in more than 100 of its plants, and reduced its greenhouse-gas emissions by about 150,000 tons.

And for sheer adaptability over time, GE is hard to beat. Of the 12 companies Charles Dow chose to make up his original Dow Jones industrial average in 1896, GE is the only one still in the index.

Fortune, 5 March, 2007

Fortune 500, 2010

Rank 4

The house that Jack built ended 2009 by selling a controlling stake in its NBC Universal entertainment unit to Comcast, a deal that valued the new entity at $37 billion. Investors largely shrugged off the deal, but as concerns over its finance unit begin to fade — and talk of a dividend increase start to heat up ― GE stock lately has been on a tear.

GE chief Jeffrey Immelt hopes to keep the momentum going. He's investing $6 billion to develop new medical products and technologies, and is making big bets on green technologies, from fuel-efficient turbines to "thin film" solar panels.

http://money.cnn.com/magazines/fortune/fortune500

TRANSLATION 3. Translate Part 1 of the text “The Immelt Revolution” in writing.

LANGUAGE FOCUS

4. Suggest the Russian for the following.

deal-making; a harbinger of future trends; an ingrained culture; bold thinking; to promote from within; homegrown managers; the highest profile gathering; to take smb out on a limb; incremental growth; to meet bottom-line targets; a badge of honour; to rejigger a portfolio; to beef up a fleet-footed army of visionaries; to be skittish about the new agenda; to spark idea generation; benchmarking; to delve into smth; a public utility giant; a gut punch to the culture; to feel fear in the depths of one's guts; the archetypal GE executive; anything-goes economy;

5. Cross out the odd word.

§ transaction; deal; bargaining; venture; sale; agreement

§ rejiggering; reshuffling; revamping; replacing; restructuring; reorganizing

§ vision; concept; idea; foresight; fancy; perception

§ incremental; additional; gaining weight; augmenting; growing gradually

§ benchmark; reference; standard; judgement; criterion; measure; landmark

6. Read the article below about lean manufacturing.Choose the correct word to fill each gap from A,B,C.D.For each numbered gap (1-15) mark one letter (A,B,C,D).

No One Does Lean Like the Japanese

Take Matsushita. To counter low-cost rivals, it's taking efficiency to new heights

Two years ago, Matsushita Electric Industrial Co.'s factory in Saga, on Japan's southern island of Kyushu, was looking mighty [_1______]. The plant had doubled [_2______] over the previous four years, and machinery stretching the length of the spotless facility could [__3_____] cordless phones, fax machines, and security cameras in record time.

But Matsushita officials still saw [_4______] that could be trimmed. So the plant's managers, Hitoshi Hirata and Hirofumi Tsuru, ripped out the conveyer [_5______] and replaced them with [_6______] of robots. New software synchronizes production so each robot is ready to jump into [_7______] as soon as the previous step is [_8_____]. And if one robot breaks down, the [_9______] can be shifted to others that do the same job. "It used to be 2 ½ days into a production run before we had our first [_10_____] product. But now the first is done in 40 minutes," Hirata says. "Next year we'll try to shorten the cycle even more."

Japan, of course, has long been a global leader in lean production. Japanese companies invented [_11_____] manufacturing, where parts arrive at the [_12______] dock right when they're needed. But now, as these companies face increasing competition from [__13_____] rivals in Korea, China, and elsewhere in Asia, they're working double-time to stay ahead. And to ensure that they produce what consumers are actually buying, they're [_14_____] factories so they can quickly shift gears to make gadgets that are hot, and ease up on those that are selling more slowly. "The real [15_______] for a company like Matsushita is what I'd call the quick in-and-out: Get a product out there earlier than rivals," says M. Y. Yoshino, a Harvard Business School professor who co-authored a case study on Matsushita last year. "Then when the low-cost manufacturers come in and try to beat them on pricing — get out."

By Kenji Hall; BusinessWeeek, July 10, 2006

LISTENING ANDVIEWING

6. Search the Businessweek site for the interactive case study “The Issue: Immelt's Unpopular Idea.” (www.businessweek.com/managing/content/mar2008/)

Listen to Jeffrey Immelt, Chairman and CEO of GE speaking about making an unpopular decision. Sum up what he says in each part. Write down the key words and expressions.

Listen to Noel M.Tichy giving the analysis and make a list of his points.

Proper Names Used

Jacque Nasser; Ford; Firestone

IT MATTERS

7. Search the Internet and make a brief report on the changes in General Electric. Find out the latest data on GE ranking. Comment on the company performance under Jeffrey Immelt. Do you think Jeffrey Immelt is a better CEO than Jack Welch?

BUSINESS SKILLS

8. Mind- map the text “The Immelt Revolution” highlighting the following points:

1. What is the main objective of cultural revolution in GE that Immelt is pushing for?

2. What target did he set for the company's expansion?

3. What external factors and changes in the business environment have prompted this change in the company's strategy?

4. What are the main skills praised under Immelt's leadership?

5. What changes in GE's long-cherished traditions has Immelt implemented?

6. Compare Immelt's vision of the modern successful company with that of Jack Welch:

· personnel management;

· marketing strategy;

· innovation management;

· risk management;

· portfolio reshuffling

9. Read the text and explain the Lean Six Sigma. Write an internal research memo about this quality management programme. Can you state how it is different from other quality programmes? (300-350 words)

Lean Six Sigma – the GUT's of Improvement

By Vince Grant

Many organisations, and particularly those in the manufacturing sector, are looking to integrate their Six Sigma programmes with other improvement activities such as lean manufacturing and TPM (Total Productive Management). Other companies such as those in the service sector have not historically implemented lean or TPM initiatives but are building aspects of this thinking into their approach to Six Sigma. This article contrasts the different approaches to improvement and considers the case for a more holistic approach than any single methodology can bring.

Lean manufacturing was developed in Japan to eliminate waste in manufacturing processes; examples of its application include JIT (just-in-time) to eliminate WIP (work-in-progress inventories) between different manufacturing activities, and value stream mapping to reduce cycle time in processes by adopting a pull (rather than push) system. Unlike Six Sigma, Lean thinking suggests that most manufacturing processes suffer common similar problems (waste) that can be systematically reduced or eliminated through a standard prescriptive approach. The toolkit is heavily centred on process analysis and flowcharting / mapping techniques, rather than being data driven.

TPM (Total Productive Management) was also developed in Japan to optimise the life cycle, productivity and costs of equipment and assets (and then referred to as Total Preventive Maintenance). It has developed into a much extended improvement management system, and organisations such as Volvo Cars Gent — the first winners of the World Class TPM Award — have applied the philosophy and approach to all aspects of management. TPM is based around a number of ‘pillars', one of the basics of which is the elimination of all ‘losses'. Whilst it is initially tempting to translate ‘losses' as ‘defects' in the Six Sigma definition of that word, ‘loss' is much more encompassing — referring to any situation which is not ideal, even if this is not yet causing a ‘defect' to occur. A ‘defect' refers only to the output of a process (and to a non-conformity viewed through the eyes of a customer); by contrast a ‘loss' can refer also to an input or factor in a process — for example a loose electrical lead or fluid pipe, or a frayed wire. Such ‘losses' may eventuate in a problem resulting in a defective output (‘defect'), but TPM requires that these are identified and corrected long before such a defect actually occurs. In essence this is a ‘zero tolerance' approach to problems — the Rudi Guliani style of management. Of course TPM is much more than this — but I hope the reader has some sense of the essence of how it differs from the other approaches.

Unlike physics which has its GUTs — or should I say Grand Unified Theories — of the world the universe and everything, management & leadership theory often seems to be composed of many different practices seen to be rivals to each other. But improvement perhaps has its GUTs too – and this is seen in the trends to develop Lean Six Sigma or other unified approaches to improvement. The best form of cure is prevention, so the best solutions to process improvement are likely to include TPM style approaches. Many initial Six Sigma improvements to business processes – particularly in service and transaction processes – arise from the application of process mapping and analysis techniques to identify root causes (the ‘Process Door' in the Analyse step of DMAIC) rather than from the data collection and statistical analysis techniques (the ‘Data Door' in Analyse); it is only once these ‘low hanging fruit' improvements have been made that the more sophisticated data analysis techniques come into their own. Volvo have gone further and integrated their Six Sigma and TPM systems into an overall approach they term ‘Perfection Focus' – perhaps this indeed is the holy grail of business improvement mechanisms.

http://www.catalystconsulting.co.uk/

Note

Rudy Guliani — Rudolph William Louis Giuliani (born in 1944), an American lawyer, businessman and politician from the state of New York. Formerly the Mayor of New York City, now Mr.Giuliani is running for presidency. Rudy Guliani style — aggressively, ruthlessly

CASE STUDY SIX SIGMA VS INNOVATION

11. Read the texts “Six Sigma: So Yesterday” and “Have it Both Ways and analyse the arguments for and against Six Sigma.

Six Sigma: So Yesterday?

In an innovation economy, it's no longer a cure-all

At Home Depot, ousted Chief Executive Robert Nardelli was devoted to Six Sigma. "Facts are friendly" was a favorite mantra of his, neatly summing up his managerial point of view. Six Sigma was used to streamline the check-out process and strategically place vacuum-cleaner displays, for example. But by-products of the program irritated many at the retailer's stores, who thought its constant data measurement and paperwork sapped time given to customers. The bottom line on Nardelli's tenure: Profitability soared, but worker morale drooped, and so did consumer sentiment. Home Depot dropped from first to worst among major retailers on the American Customer Satisfaction Index in 2005.

Now Nardelli's successor, Frank Blake, another General Electric alumnus, is dialing back on the Six Sigma rigor, giving more leeway to store managers to make decisions on their own. The story unfolding at Home Depot echoes closely what's happening at 3M after James McNerney's reign. There are signs of a similar pullback at many companies, even at GE, where CEO Jeff Immelt is trying to reprogram his management ranks to innovate around a theme of "ecomagination," with mixed success. And at Young & Rubicam, where GE board member Ann Fudge flamed out as CEO after she tried to sell ad execs on Six Sigma.

So has the Six Sigma moment passed? "I think it has," says Babson College management professor Tom Davenport. "Process management is a good thing. But I think it always has to be leavened a bit with a focus on innovation and [customer relationships]." The discipline was developed as a systematic way to improve quality, but the reason it caught fire was its effectiveness in cutting costs and improving profitability. That makes it a powerful tool—if those are a company's goals. But as innovation becomes the cause du jour, companies are increasingly confronting the side effects of a Six Sigma culture.

Six Sigma clearly had a profound impact on the corporate world. According to the American Society for Quality, 82 of the 100 largest companies in the U.S. have embraced it. And that's quickly trickling down: Six Sigma consultants are as busy as ever as the quality-improvement system migrates from its traditional focus on U.S. manufacturing companies to the financial-services industry and abroad. In recent years, companies as varied as DuPont, Textron, Bank of America, and Sun Microsystems have all made Six Sigma bedrocks of their culture. Hybrid formulas have spawned, such as Lean Six Sigma and Design for Six Sigma. WCBF, an organization that organizes conferences about the process, has 14 events planned this year, up from seven last year.

But as its popularity endures, the notion of Six Sigma as a corporate cure-all is subsiding. Once a company has done the requisite belt-tightening, "the strategic needs of a business change," says Robert Carter, a consultant at defense contractor Raytheon. Kick-starting the top line becomes paramount; the best way there apart from an acquisition is innovation. At Raytheon, Carter is leading a Six Sigma effort to promote innovation. But while "most Six Sigma practitioners are very strong on the left brain, innovation very much starts in the right hemisphere," says Carter. Even he, a Six Sigma expert, acknowledges the "define, measure, analyze, improve, control" mind-set doesn't entirely gel with the fuzzy front-end of invention. When an idea starts germinating, Carter says, "you don't want to overanalyze it," which can happen in a traditional DMAIC framework.

Of course, Jack Welch has argued that a leader needs to single-mindedly inculcate Six Sigma into every corner of an organization. Should a CEO hedge and say, "Let's do both Six Sigma and also be creative," employees will tune out the part they don't want to hear. Welch has said that even if the concept is applied in areas where perhaps it shouldn't be, it'll be worth it in the long run. It can always be fine-tuned once the workforce gets it. Call it the break-some-eggs-to-make-an-omelette approach.

Problem is, you don't know which eggs you're going to break. When Steve Bennett left GE in 2000 to take the CEO post at software maker Intuit, he was eager to roll out Six Sigma. But he did it gingerly, pilot-testing the quality-improvement tool in certain groups for a year to prove its worth. He was unsure of how a Silicon Valley company would react, given its associations with Six Sigma—"most of them bad," he says. So he cloaked the move under the benign-sounding banner of "process excellence," deliberately avoiding using the name Six Sigma. Says Bennett, "The term gives me an allergic reaction."

By Brian Hindo in New York, with Brian Grow in Atlanta

BusinessWeek, June 11, 2007

The debate: Six Sigma vs. Innovation

Have It Both Ways

"Ambidextrous" companies can handle incremental change and bold initiatives

By Jeneanne Rae

"I can't stand this," said a senior executive of a Standard & Poor's 500 company recently. "One minute the management team is telling us to innovate, and the next minute they are giving us our marching orders in deploying Six Sigma. It's crazy to tell people they should be focused on becoming more efficient while at the same time you want them to explore untapped growth potential. This is making me nuts."

The objectives of Six Sigma seem noble enough for any organization. So what's the rub with simultaneous efforts to innovate? By its nature, Six Sigma fosters a very low tolerance for risk because risk increases variation.

Innovation, on the other hand, seeks to brave undiscovered, uncertain territory. Such fledgling efforts are inherently inefficient. Innovation requires a tolerance for risk-taking and failure.

A corporate culture dominated by Six Sigma management theory will be inclined toward inwardly focused, continuous, incremental types of improvements in process, customer service, systems, operations. A culture that fosters disruptive innovation will be more entrepreneurial, outwardly focused on new markets, technologies, and business models. You explore big new growth platforms that add significant chunks of revenue and profit.

Given the huge management and cultural implications inherent in each approach, it would be difficult to launch both efforts at the same time. Most organizations, like General Electric, become grounded in one and then attempt the other. In GE's case, Six Sigma came first, and its new innovation initiative, Ecomagination, is now rolling out.

In a Harvard Business Review article, "The Ambidextrous Organization," Charles O'Reilly III and Michael Tushman, business school professors at Stanford and Harvard, respectively, acknowledge the paradox of exploitative vs. explorative efforts. They conclude that smart companies separate the more ambitious efforts at innovation from ongoing efforts at continuous improvement. That allows for different processes, structure, and cultures to emerge within the same company.

An "ambidextrous" organization, they write, has independent project teams integrated into the existing management hierarchy. A tightly integrated senior team makes sure the activities of the right hand don't work at cross-purposes with the goals of the left. Both the traditional business and the fledglings report to the same executive team but are managed under a very different set of rules, depending on where each is in its maturity cycle. Remarkably, in the professors' study of 35 attempts at breakthrough innovation, ambidextrous structures were successful 90% of the time. Other models, such as cross-functional teams and unsupported skunk-works-style groups, were successful less than 25% of the time. Jim Burnick, senior vice-president for quality and productivity at Bank of America and leader of the bank's innovation efforts, says that if managed properly Six Sigma and innovation can go hand in hand. Thanks to Six Sigma, "Paragraph it is now possible for us to think as one organization across fiefdoms and business units to improve every type of customer's experience. This ends up as business-model innovation, which in the banking business is very uncommon."

Here are three strategies for managing incremental and disruptive innovative initiatives simultaneously:

•Separate the efforts. Don't expect people running mature businesses to behave the same as those in charge of startups. Each type has its own incentives, organizations, and talent needs.

•Appoint an ambidextrous senior manager to oversee both efforts. A general manager with responsibility for both traditional and new businesses will foster efficiency by sharing such resources as HR, marketing, and finance, and by promoting integration of the initiatives when the time is right.

•Support both teams appropriately. Don't shortchange one over the other. It kills me to see so much investment in reengineering, training, and employee time being poured into Six Sigma initiatives in the name of cost savings when innovation gets starved for critical research requirements like white-space analysis, ethnographic research, or prototyping. It's as if leadership believes companies can shrink their way to greatness.

Innovation and Six Sigma are different methods that beget different results and require different management styles. They can coexist. Just recognize that each requires its own formula for success.

BusinessWeek, June 11, 2007

IT MATTERS

12. Read more on Six Sigma, innovation and quality management in BusinessWeek http://www.businessweek.com.

HUNGRY MINDS

13. Read the text and discuss the origin of the word, define the concept and speak on the evolution of the idea.

Skunkworks

A skunkworks is a place (or sometimes the people who work in that place) designed to encourage the employees of large organisations to come up with original ideas. It usually consists of a small team taken out of their normal working environment and given exceptional freedom from their organisation's standard management constraints. The name is taken from the moonshine factory in a famous Al Capp cartoon series called “Li'l Abner”.

All skunkworks are modelled on the Lockheed aircraft company's secret research-cum-production facility where, in the 1940s, staff were removed from the corporate bureaucracy and encouraged to ignore standard procedures in the hope that they would come up, in the first instance, with a high-speed fighter plane that could compete with those produced in Germany by Messerschmitt. So successful was the concept that the company continued with it, and its skunkworks came up with a number of other innovative products, including the notorious U2 spy plane.

The idea was soon copied by other large companies, including IBM, by then the largest of them all, although the name “Skunk Works” is a registered trademark of Lockheed Martin Corporation. In 1980 Big Blue used a skunkworks to break free from its suffocating mainframe mentality and join the world of the PC, at a time when many of its rivals were unable to make the switch.

The skunkworks concept fell into disrepute when it began to be seen as just another cost centre—and one with attitude at that. But in the new workplace of the 21st century, where there is a heavy emphasis on teamwork and the right environment for teams to flourish, the skunkworks idea is being revived, but in slightly different guise. Much of Motorola's Razr mobile phone, for example, was developed in a new laboratory that the company set up in downtown Chicago, 50 miles from its main R&D facility in suburban Illinois. With lots of bright colours and no dividing walls, the building and design of the laboratory's workspace were very different from Motorola's main offices.

But the company's expectations of what the skunkworks should produce were also different. It was not left alone to think lofty scientific thoughts, but was regularly kept in touch with marketing, design and accounting folk to keep its feet firmly on commercial ground. The idea is not (as it used to be) that those in the skunkworks emerge at the end of the day with something that makes their competitors say “Wow”. The idea is that they come out with something that makes their competitors' customers say “Wow”.

Some companies have adopted the skunkworks idea more widely. Malaysia Airlines, for example, has set up what it calls “laboratories”, small groups of people brought together on an ad hoc basis to address specific issues—“raising revenues”, for instance. The group stays together for a month or so, until it has fulfilled its agreed-upon “exit criteria”. Working in a laboratory, says the airline's CEO, “is not a job; it's a calling”.

From Economist.com; Aug 25th 2008

14. Make a presentation on one of the topics:

· Six Sigma vs Innovation

· Quality Management Systems

· The Ambidextrous Organization

(Portfolio entry)

REFLECTION SPOT

Do you think this unit was useful for your future studies and work? Write 50 words about your achievements.

VOCABULARY

· (in)organic growth

· deal-making

· to promote from within

· to generate ~profit, money, funds, cash growth, ideas, electricity

· to engineer (a process, meeting)

· collegial a

· productivity-driven

· business mix

· overhaul v&n

· cutting edge (comp state-of-the-art; up-to-date; sophicticated)

· cutting edge research centers

· oust v ~to oust from office

· belt-tightening (syn austerity, retrenchment)

· value stream~value stream analysis

· work-in-progress

· skunkworks

· to turn one's back on the old ways (syn to dial back on)

· to sink money into smth (syn to invest, to tie money up in)

· to beef up (syn augment; reinforce; strengthen)

· tolerance for risk

· to have a shot at the top rungs

UNIT 7. INNOVATION MANAGEMENT

“Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practised. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation".

— Peter Drucker

Competencies § making deductive and inductive inference § developing translation skills § synthesizing the contents of an extended text § enriching interdisciplinary knowledge § enhancing subject-specific skills § describing graphic information § comparing and contrasting § working in team
		READING AND SPEAKING (1)

1. Differentiate between innovation and invention. What inventions of the recent past do you consider to be most essential for mankind?

2. Make a list of the most innovative a) nations; b) companies. Share your views with your peers; substantiate your opinion.

3. Answer the questions:

1. What are the typical reasons for innovating?

2. What are the benefits of good innovations?

3. What are the main stages in innovation process?

4. What are the most common measures of corporate innovativeness?

4. Comment on the following sayings.

a. “Innovation is a whim of an elite before it becomes a need of a public”. – Ludwig von Mises

b. “Every innovation occasions more harm and derangement of order by its novelty, than benefit by its abstract utility”. — Legal Maxim quotes

c. “If you're not failing every now and again, it's a sign you're not doing anything very innovative”. — Woody Allen

d. “A spirit of innovation is generally the result of a selfish temper and confined views. People will not look forward to posterity, who never look backward to their ancestors”.— Edmund Burke

5. Judging by the title “Don't laugh at gilded butterflies” decide what the text can be about

8. Scan the text and mind-map it identifying the main problem, its causes, recent trends and possible solutions

Don't Laugh at Gilded Butterflies

Rather than chasing wonder new products, big companies should focus on making lots of small improvements

The Gillette company's website flashes out messages to the e-visitor: “Innovation is Gillette”, it claims. There are few big companies that would not like to make a similar claim; for they think innovation is a bit like Botox – inject it in the right corporate places and improvements are bound to follow. But too many companies want one massive injection, one huge blockbuster, to last them for the foreseeable future. Unfortunately, successful innovation is rarely like that. Big companies have a big problem with innovation: blockbuster new products are fewer and further between. Truly differentiating new-product breakthroughs are becoming increasingly rare and big companies can do much better if they focus on making lots of small things better.The Oxford English Dictionary defines innovation as “making changes to something established”. Invention, by contrast, is the act of “coming upon or finding: discovery”. Whereas inventors stumble across or make new things, “innovators try to change the status quo,” says Bhaskar Chakravorti of the Monitor Group, a consulting firm, “which is why markets resist them.” Innovations frequently disrupt the way that companies do things (and may have been doing them for years)“Disruptive innovation” – simpler, cheaper and more convenient products that seriously upset the status quo – can herald the rapid downfall of well-established and successful businesses. This is because most organizations are designed to grow through “sustaining innovations” – the sort that do no more than improve on existing products for existing markets.

When they are hit by a disruptive innovation – as IBM was by the invention of the personal computer and as numerous national airlines have been by low-cost carriers – they are in danger of being blasted out of their market.

Big companies have been learning important lessons from the history of innovation.

Consider, for example, that in general they have both cut back and re-directed their R&D spending in recent years. Gone are the droves of white-coated scientists surrounded by managers in suits anxiously awaiting the next cry of “eureka”. Microsoft is a rare exception, one of a few big companies still spending big bucks on employing top scientists. This will prove to be a wise investment by Microsoft only if its scientists' output can be turned into profitable products or services.

Indeed, the record shows that small companies have dominated the introduction of smallinventions and radical innovations – independent inventors come up with most tomorrow's clever gizmos, often creating their own commercial ventures in process.

But big companies have shifted their efforts. They have been forced by competition to focus on innovation as part of normal corporate activity. Rather than trying to make money from science, companies have turned R&D into an “internal, bureaucratically driven process”. Innovation by big companies has become a matter of incremental improvements within the process that constitute daily operations.

In some industries, cutbacks in R&D reflect changes in the way that new products travel down the “invention pipeline”. These days there is less money going into venture capital, and a new method of outsourcing R&D is on the increase. More and more of it is being shifted to cheaper locations “offshore” – in India and Russia, for example.

Companies need to resist the feeling that it is not worth getting out of bed for anything other than a potential blockbuster. Product cycles are getting shorter and shorter across the board because innovations are more rapidly copied by competitors, pushing down margins and transforming today's consumer sensation into tomorrow's commonplace commodity. Firms have to innovate continuously and incrementally these days to lift products out of the slough of commoditization.

Another factor to take into account is the fragmentation of markets. Once-uniform mass markets are breaking up into countless niches in which everything has to be customized for a small group of consumers. Looking for blockbusters in such a world is a daunting task.

Today no innovation is an island. Each needs to take account of the network of products into which it is launched.

Companies that fail to come up with big new headline-hitting blockbusters should not despair. There are plenty of other, albeit less glamorous, areas where innovation can take place. Management thinkers have identified at least three. Good companies are using IT “to reinvent their business processes from top to bottom”.

Reinventing, or simply trying to improve, business processes can offer surprising benefits to firms that do it well. The software that runs many business processes has become an important competitive weapon. Some business processes have even been awarded patents. These are controversial and, because they may stifle rather than encourage the spread of new ideas, are probably not in the wider public interest.

Nevertheless, there is no doubt that, patented or not, “operational innovation” can add to shareholder value. In an article in the April issue of the Harvard Business Review, Mr. Hammer, who was once a professor of computer science at MIT asks why so few companies have followed the examples of Dell, Toyota and Wall-Mart, three of the greatest creators of value in recent times. None of them has come up with a string of revolutionary new products. Where they have been creative is in their business processes.

Companies are being encouraged to embrace other forms of innovation too. In a recent issue of the MIT Sloan Management Review, Christopher Trimble and Vijay Govindarajan, two academics from Darmouth College's Tuck School of Business, recommend that they try a little “strategic innovation”. The authors point to examples such as Southwest Airlines, a low-cost American regional carrier, and Tetra Pak, a Swedish company whose packaging products are handled at least once a day by most citizens of the western world. Such companies succeed, they say, “through innovative strategies alone, without much innovation in either underlying technologies or the products and services sold to customers.”

Tetra Pak's strategic innovation involved moving from the production of packages for its customers to the design of packaging solutions for them. Instead of delivering ready-made containers, the company increasingly provides machinery for its customers to make their own packages: the fishing rod, not the fish.

But customers can then use only Tetra Pak's own aseptic materials to make their containers. This strips out all sorts of transport and inventory costs from the production process, for both Tetra Pak and its customers. It also makes it very difficult for the customer to switch suppliers.

In his recent book, “How to Grow When Markets Don't” (Warner Books, 2003), Mr Slywotzky and his co-author Richard Wise recommended another form of innovation. “A handful of far-sighted companies”, they claim, have shifted their focus from product innovation to what they call “demand innovation” which means earning profits not by meeting existing demand in a new way but by “discovering new forms of demand” and adapting to meet them.

In his latest book, “The Innovator's solution”, published last year, Clayton Christensen, a Harvard Business School professor, argued that established companies should try to become disruptive innovator themselves.

There are, says Mr Christensen, things that managers can do to make such innovations more likely to happen within their organizations. For example, projects with potential should be rapidly hived off into independent business units, away from the smothering influence of status quo. The ultimate outcome of any one disruptive innovation may still be unpredictable; the process from which it emerges is not.

In the end, though, no single innovation conveys lasting advantage. Innovation and, yes, invention too, have to take place continually and systematically.

The Economist, April 22^nd, 2004

7. Explain the following.

1. innovators try to change the status quo

2. to travel down the “invention pipeline”

3. product cycles are getting shorter and shorter across the board

4. venture capital

5. to transform today's consumer sensation into tomorrow's commonplace commodity

6. to lift products out of the slough of commoditization

7. once-uniform mass-market

8. to reinvent business process from top to bottom

9. operational innovations can add to shareholders' value

READING AND SPEAKING (2)

8. Read the article, sum up the key points and give the message.

Get Creative

The Knowledge Economy as we know it is being eclipsed by something knew – call it the Creative Economy. Even as policymakers and pundits wring their hands over the outsourcing of engineering, software writing, accounting and myriad other high-tech, high-end service jobs – not to mention the move of manufacturing to Asia – U.S. companies are evolving to the next level of economic activity.

What was once central to corporations – price, quality, and much of the left-brain, digitized analytical work associated with knowledge – is fast being shipped off to lower-paid, highly trained Chinese and Indians, as well as Hungarians, Czechs, and Russians. Increasingly, the new core competence is creativity – the right-brain stuff that smart companies are now harnessing to generate top-line growth. The game is changing. It isn't just about math and science anymore. It's about creativity, imagination, and, above all, innovation.

What is unfolding is the commoditization of knowledge. The new forms of innovation driving it forward are based on an intimate understanding of consumer culture – the ability to determine what people want even before they can articulate it. The “unmet, unarticulated” needs of consumers are fast becoming the Holy Grail of innovation. Working in what is still the largest consumer market in the world gives U.S. companies a huge edge. So does being able to think outside the box.

For managers, the biggest challenge may be making the leap from their Six Sigma process skills to new ways of thinking. For corporations, transforming themselves will require new sets of values and organizational principles. Have you heard of design strategy? It's probably the Next Big Thing after Six Sigma. How about consumer-centric innovation? It may be the most powerful way to raise a company's innovation success rate. Teaching elephants to dance is never easy, but that's the task ahead if you want your company to prosper.

There is, in fact, a whole new generation of innovation gurus. They are not the superstars of the ۥ90s who focused on what might be called macro-innovation – the impact of big, unexpected new technologies on companies. The new gurus focus more on micro-innovation – teaching companies how to connect with their customers' emotions, linking research and development labs to consumer needs, recalibrating employee incentives to emphasize creativity, constructing maps showing opportunities for innovation. When creative mojo gets going, it can explode into innovation.

Think out-of-the-box consumer experiences, and you get the idea of paradigm shifting. The evolution of the economy toward creativity has been underway for some time. Steve Jobs, of course, has turned Apple into the paradigm of the creative corporation. Companies throughout the world are deconstructing Apple's success in design and innovation, and learning the lessons.

Today all kinds of blue-chip CEOs are signing on to creativity. A.G.Lafley, P&G's CEO, and Jeffrey R.Immelt, GE's CEO are at the corner of the new movement. Lafley started it when he took over in 2000, but Immelt's conversion to creativity when he became chief executive in 2001 is giving creativity more momentum. Because of GE's size and scope, when it moves, the economy moves with it. The vocabulary of business may be changing as well. It's hard to imagine former GE boss Jack Welch saying: “Creativity and imagination applied in a business context is innovation,” as Immelt recently did. Or “we're measuring GE's top leaders on how imaginative they are. Imaginative leaders are the ones who have the courage to fund new ideas, and lead people to take more educated risks,” as he added. That's a sea change from rewarding GE managers for a career of floating from operation to operation, massaging the process for incremental improvements.

When the history of the transition from Knowledge Economy to the Creativity Economy is written, these two will probably get much of the credit.

To understand why the creativity movement is becoming so important, you need to go back to its roots at P&G. By harnessing the power of design, P&G has transformed itself from a stagnant brand manager into a model of innovation efficiency that outperforms industry rivals.

Before Lafley, P&G's volume growth was basically flat. The company cared more about how its products functioned than it did about how customers felt about them.

Lafley turned to design. In 2001 he established a new executive post: vice-president for design, innovation, and strategy, naming Claudia B.Kotchka to fill it. She and Lafley knew they couldn't change P&G's culture without fresh eyes from the outside. So they made a major decision: Even as P&G began laying off thousands of top executives, middle managers, scientists, and others, it quadrupled its design staff. For the first time it hired a legion of designers who had worked at other companies and in other industries.

In a second crucial decision, Kotchka dispatched designers to work directly with R&D staffers to help to conceive new products. This changed P&G's entire innovation process, making it consumer-centric rather than driven by new technology. To open up the company further, P&G started hiring different kinds of consultants.

To build a design infrastructure, Lafley also established what he calls his innovation “gym,” a place to train managers in the new design thinking. And he created a Design Board of non-P&Gers who provide an independent perspective on products, brand extensions, and marketing.

Jeff Immelt inherited one of America's most successful companies. GE's incredible process culture, which brought so much to the bottom line in the ۥ90s, was no longer enough to maintain its leadership in the 21^st century. Like Lafley, Immelt needed to create an innovation culture quickly. One of his major goals was to raise GE's average organic growth to 8% from the 5% of the past decade. The skills Jack Welch prized – cost-cutting, efficiency, the continual improvement of operations – couldn't deliver that.

Immelt launched a series of what he calls Imagination breakthrough projects, investing more than $5 billion in 80 initiatives that take GE into new markets, product areas, and industries. He told his managers to connect with consumers, learn to take risks, and place big bets. GE is already reaping major benefits from previous bold moves. Its latest quarterly profit surge of 24% is due in part to reframing the idea of power generation. The company expanded it from gas turbines to wind and solar, which paid off.

Also like Lafley, Immelt is pushing to change the corporate structure to spur creativity. He's bringing in many of the same design and innovation gurus Lafley uses so effectively. And GE being GE, has its new acronym, CENCOR (calibrate, explore, create, organize, and realize) for its innovation process. Call it CENCOR, creativity, or imagination, GE is doing it.

What is the methodology of the new design strategy that Lafley, Immelt, and others are adopting? The basics are simple. They start with observation – going out and directly seeing customers shop at malls, families in restaurants, or patients being treated in hospitals. Trying out lots of ideas fast by making models or videos (prototyping) is the next step. This lets managers visualize concepts, make decisions on which to improve and which to discard, and launch products faster.

The final ingredient in design strategy is building an organizational process that does things all the time. This kind of change can be wrenching for a company, but the payoffs are enormous.

The new gurus have emerged from the depths of the late ۥ90s meltdown and the shock of Asian competition to show CEOs a path beyond the Knowledge Economy to an even higher-value-added business model. They say they have found a way to play a high-margin game in a low-priced world, a means of differentiating products in a commoditized marketplace and methodology for staying ahead of Asian rivals. They are the keepers of creativity in a world awash in technology, the champions of innovation in a globe drowning in commodities.

There is a lot of talk about America becoming a 97-pound weakling. But the naysayers don't get the strength inherent in a truly Creative Economy. This revolution has barely begun, and building creative, innovative companies is the great task ahead.

BusinessWeek, August 8/15, 2005

9. Answer the questions.

1. What is the core of the Creative Economy?

2. What is the main distinction of modern innovation gurus from the superstars of the '90-s?

3. What companies and personalities are named to be at the corner of the new innovation movement? What changes did Jeff R. Immelt and A.G.Lafley make in their respective corporate cultures to spur creativity?

4. What are the basics of the new design strategy pursued by Immelt and Lafley?

5. What accounts for the ever-growing importance of innovation in the modern world?

10. Explain the following.

§ Knowledge Economy

§ to generate top-line growth

§ the Holy Grail of innovation

§ commoditization of knowledge

§ to think out of the box

§ the late ۥ90 meltdown

§ organic growth

§ blue-chip CEOs

§ to play a high-margin game in a low-priced world

§ to differentiate products in a commoditized marketplace

11. Read the text and decide whether the author shares the views expressed in the previous article.

A Dark Art No More

Like management methods before it, innovation is turning from an art into a science

“WHAT matters gets measured.” That is one of the basic tenets of corporate strategy taught at business schools. As driving growth through innovation is today at the top of corporate agendas you would expect to find managers treating it like a science. After all, manufacturing philosophies such as “total-quality management” (a process of continuous improvement) and “Six Sigma” (which uses statistical methods to eliminate variations and defects) were quantified and widely deployed a long time ago, often with good results.

Yet innovation remains a frustratingly fuzzy notion. Many bosses think it is essentially a creative process. Some anoint “chief innovation officers”, bring in consultancies or set up secret “skunk works” to tease out the ideas they fear their own bureaucracy might squash.

Jorma Ollila, non-executive chairman of both Nokia and Royal Dutch/Shell, argues that it is a mistake to measure innovation by the number of patents issued by a company or the extent to which new technologies are introduced. He suggests that the most fertile area of innovation today can be found in management.

One reason why bosses might not want to be too obsessive about creativity is that generating ideas is the easy part. Exploiting them has always been harder. As Thomas Edison, one of America's greatest inventors, put it, genius is 1% inspiration and 99% perspiration. But many managers are reluctant to take the same hard-nosed approach they use in other parts of their business and apply it to fragile creative types.

Despite difficulties trying to define it, the innovation process is steadily becoming a practical science to be measured, taught and managed.

All managers can be taught how to nurture innovation, but there is no one-size-fits-all strategy. Bosses have to appraise the strengths and weaknesses of their firms honestly and continuously to take account of rapidly evolving competitive threats.

For a start the debate over creativity versus execution should be put to rest: firms need to do both. But that does not mean they have to do it all themselves. On the contrary, the double act is best managed with a loose and open approach during the wild and woolly idea-generation phase, and a tighter, more concentrated one to turn ideas into products or services.

P&G is a good example of an inward-looking firm that has embraced creativity and openness with some success.

On the flip side, a firm known for emphasising execution over creativity is GE. GE's strength is not in breakthrough inventions but in a highly structured process that involves a mix of management training, increased exposure to outside ideas. The company's focus on the practical application of new ideas, rather than invention itself, goes all the way back to its founder, Edison. Indeed, he commercialised but did not invent the light bulb. The acceptance of failure is an integral part of the effort, as long as it is “fast failing.”

In fact, the more ideas a firm comes up with, the more important it is for bosses to decide early on which of them to kill off. This is to avoid heading down countless and costly dead ends.

That is why failing fast and learning from those failures is so important for companies.

Turf wars are often an obstacle to fast failing. Employees in one part of a company sometimes reject ideas and advice from a different part.

Even if firms can overcome the stigma of failure, how exactly are bosses to know which potential innovations to kill? Mr Christensen, author of “The Innovator's Dilemma”, says it can require unlearning some of the things that managers often accept as golden rules. The chief one is the belief in listening and responding to the needs of your best customers.

This seemingly sensible strategy can be a dangerous siren song, Mr. Christensen argues. His influential book shows how even successful firms can get into trouble by trying to please their best customers. Because there may be only a handful of highly profitable, high-end buyers who want and can afford more features and better performance, firms can invest heavily in trying to deliver what this elite group wants even though the resulting products may end up beyond the reach of the majority of their customers.

That, argues Mr Christensen, allows upstarts to enter the market and offer inferior (although perfectly adequate) technologies and products at much cheaper prices and push incumbents into ever smaller niches—and ultimately out of business altogether. He cautions this “disruptive” innovation is not the same thing as “radical” or “breakthrough” innovation, although the notions are often conflated.

Mr Christensen's alternative innovation strategies include watching out for new technologies or new business models which are designed to attract customers who may not be using your product today because it too expensive or too complicated.

He also thinks it is better to make things simpler and easier for the bottom and middle of the market, as personal computers did, rather than add needless bells and whistles for the handful of top customers who can afford and demand them. And he says companies should act decisively to co-opt or pre-empt disruptive ideas themselves, even if it threatens their core businesses in the short run.

The Economist, October 11th, 2007

12. Using the context infer the meaning of the following expressions.

costly dead ends, turf wars, a dangerous siren song, to add bells and whistles

13. Explain the following.

1. innovation remains a frustratingly fuzzy notion

2. to tease out ideas

3. to squash ideas

4. the most fertile area of innovations

5. to take hard-nosed approach

6. to nurture innovation

7. one-size-fits-all strategy

8. to take account of rapidly evolving competitive threats

9. wild and wooly idea-generation phase

10. the debate should be put to rest

11. an inward-looking firm

12. fast failing

13. to overcome the stigma of failing

14. to commercialise an idea

15. to push incumbents into smaller niches

16. to co-opt and pre-empt disruptive ideas

14. Agree or disagree with the following statements.

· “A lot of innovation is anti-Six Sigma. You want a lot of variance.”

· “Creativity is maybe 2% of the innovation process. It's a vanishingly small component, and it's the part you can acquire from outside the firm.”

· “Innovation is a loser's game, as we know most initiatives fail. But the truly innovative companies know how to deal with losing.”

· “It is no longer appropriate to speak of discontinuous (radical, disruptive) innovation and continuous (incremental) innovation. To do so implies that one comes out of thin air and the other has less value. Disruptive innovation is an oxymoron. Innovation is always continuous, a never-ending sequence of problems to be solved."

15. Think of examples of the companies that were too short-sighted to view change as an opportunity – not a threat, and went bust

READING AND SPEAKING (4)

16. Read the article and get ready to speak on the benefits of the open approach to innovation and the risks that companies hiring freelancer researchers are exposed to.

Ideagora, a Marketplace for Minds

Ideas and innovations are increasingly coming from outside company walls—and Web-based virtual talent pools are stepping in to fill the need

by Don Tapscott and Anthony D. Williams

As the late-19th century chemist and microbiologist Louis Pasteur famously said, chance favors the prepared mind. The same could be said of innovation. Companies face tough dilemmas everyday for which there is, somewhere, a uniquely prepared mind—someone with the right combination of expertise and experience to solve the problem. Conventional wisdom says companies should find those people, hire them, and retain them with money or perks.

But today, a growing marketplace for ideas, innovations, and uniquely qualified minds is changing the long-standing rules of innovation and talent management. Companies seeking solutions to seemingly insoluble problems can tap the insights of hundreds of thousands of enterprising scientists without having to employ everybody full-time. This shift is rippling through Corporate America and changing the way companies invent and develop products and services.

Today's competitive reality is that mature companies can't keep up with the speed of innovation or the demands for growth by relying on internal capabilities alone. For a $70 billion company like P&G, organic growth of 6%, for example, would require building a profitable new $4 billion business every year!

For years, companies pursued acquisitions, alliances, joint ventures, and selective outsourcing in the quest to please shareholders. But today, these conventional tools are simply too rigid, and not scalable enough, to drive growth and innovation at a level that will make companies truly competitive.

In contrast, ideagoras - places where millions of ideas and solutions change hands in something akin to an eBay for innovation - create a vibrant marketplace of connections in which companies can leverage other people's talents, ideas, and assets quickly and move on. What's more, the pool of talent at their disposal vastly exceeds what one company could hope to marshal internally.

The second reason is the changing talent landscape. The talent required to lead path-breaking innovation will increasingly reside in locations such as Brazil, China, India, and Eastern Europe, largely because a seismic demographic transition unfolding today places the locus of growth in the global economy (both in terms of consumer demand and the supply of highly skilled knowledge workers) squarely in these developing markets.

What's more, many of the brightest researchers want to work outside the confines of traditional enterprises. P&G figures that for every one of the 9,000 top-notch scientists inside its labs, there are another 200 outside who are just as good. That's a total of 1.8 million people whose talents it could potentially tap into. So smart companies are treating the world as their R&D department and using ideagoras to seek out ideas, innovations, and uniquely qualified minds on a global basis.

Though today's nascent ideagoras have yet to reach eBay-like proportions, companies such as InnoCentive, yet2.com, Nine Sigma, YourEncore and many other new marketplaces that link problems with problem-solvers, have planted the seeds for a sea change in innovation. They could arguably spur even more profound changes if services such as InnoCentive looked and behaved a little bit more like the open source software community. For the time being, InnoCentive solvers don't naturally coalesce into large groups focused on collaborating to solve a single problem. Nor does InnoCentive offer the openness and transparency of open-source software. Seeker businesses can cloak their identities, and solvers may never get personal credit for their contributions.

Indeed, where innovation problems are highly integrated, it may be preferable to offer problems to skilled external teams rather than, or in addition to, posting them in an open market.

Ideagoras like InnoCentive and TopCoder offer companies access to a wealth of new ideas and uniquely qualified minds, but learning how to tap the potential of a global ideagora means turning the R&D organization on its head. Companies would no longer invent first and ask questions later. They would ask, "What do our customers really need?" and then scout the "eBay for innovation" for the necessary inventions and technologies.

R&D labs would be ambidextrous: building on core capabilities internally, while acquiring the greatest, most complementary ideas externally. The deep-rooted "plan and push" modality would give way to a new approach to innovation in which companies engage and co-create with the best available talent.

These changes won't be easy or automatic. For starters, companies need new capabilities to create, transfer, assemble, integrate, and exploit knowledge assets. Sensing external opportunities is just the beginning. The really hard work starts with conceiving the ultimate customer offerings, and then executing smart decisions about acquiring intellectual property and partners to design, assemble, and deliver the final value. As P&G's Larry Huston reminds us, "Once an external idea gets into the development pipeline, it still needs R&D, manufacturing, market research, marketing, and other functions pulling for it."

It's no surprise that smart people remain as valuable as ever, if not more so, in today's economy. But for smart companies, the notion that you have to motivate, develop, and retain all of your best people internally is old. Of course, you will still need great internal talent. But increasingly, assume that many of the best people are to be found outside your corporate walls. With an eBay for innovation, however, a massive reservoir of talent would be a few clicks away.

BusinessWeek, February 15^th, 2007

17. Explain the following.

8. chance favors the prepared mind

9. conventional wisdom says

10. mature companies

11. something akin to eBay for innovation

12. to leverage other people's talents

13. locus of growth

14. to tap into the pool of talent

15. to cloak one's identity

16. R&D labs would be ambidextrous

17. the deep-rooted "plan and push" modality

18. Suggest your definitions for

§ outsourcing -

§ opensourcing -

§ crowdsourcing -

TRANSLATION

19. Translate text 2 “Get Creative” into Russian in writing (up to the words “Today all kinds of blue-chip CEOs are signing on to creativity.”

20. Translate text 3 “A Dark Art No More” into Russian in writing.

21. Translate text 4 “Ideagora, a Marketplace for Minds” into Russian orally

22. Render the text in English.

Инновации Сегодня — Не Такие, Как Вчера

Распространено мнение, что инновации — сфера высоких и сверхточных технологий. Это суперкомпьютеры, Кремниевые долины, ученые в белых халатах, наукоемкие разработки, большие капиталовложения. Отчасти это действительно так. Но в первую очередь это нововведения и творческий подход к определению даже самых простых производственных решений. Плюс мобильность и гибкость бизнеса.

Компания IBM объявила о новой стратегии в области инноваций в сфере бизнеса и технологий. В IBM отмечают, что в быстро меняющемся современном мире само понятие «инновация» претерпевает изменения. «Инновация — это социальный, а не технологический феномен, он возникает на пересечении изобретательства и познания сути бизнеса», — говорит глава IBM Сэм Пальмизано. Это подтверждают и результаты проведенного опроса глав предприятий IBM Global CEO Study 2006, в котором приняли участие 765 руководителей ведущих компаний всего мира, представляющих 20 отраслей экономики.

Только 14% руководителей указали на внутренние научные исследования как на источник новых идей. 41% основным их источником считают собственных сотрудников, 38% — бизнес-партнеров и 36% — клиентов.

Еще два года назад в ходе аналогичного исследования большинство руководителей отметили, что основное внимание в их компаниях уделяется не снижению затрат, а созданию условий для роста и увеличения прибыли. Однако сделать это прежними методами вряд ли возможно. 65% участников опроса этого года заявили, что их фирмам нужны радикальные перемены.

Усиление конкуренции на рынке ведет к снижению прибыльности продуктов и услуг — так, цена за новую модель мобильного телефона в среднем за год снижается на 40%, а рост числа авиакомпаний приводит к снижению доходов, получаемых компаниями с каждого пассажира. Большую роль играет снижение лояльности потребителей — чем больше информации о продуктах и услугах им доступно, тем чаще они «изменяют» тем поставщикам, чью продукцию обычно приобретают. Потребителям требуют все больше дополнительных услуг — так, более 56% пользователей сотовых телефонов хотят иметь в этом устройстве камеру, почтовый клиент, чаты, календарь, музыку и даже фонарик. А каждый восьмой пользователь (12%) готов платить 10 долларов ежемесячно за телевизионные сервисы на мобильном телефоне.

Все это, принимая во внимание непредсказуемость ряда факторов, влияющих на мировой рынок (например, цены на нефть), приводит к ужесточению рыночных условий для каждой конкретной компании. А выживает и остается прибыльным, как известно, сильнейший, что означает умение максимально быстро находить все новые конкурентные преимущества, прежде всего, на ниве инноваций.

Что же мешает компаниям становиться инновационными? 35% опрошенных главной преградой называют недостаточный уровень корпоративной культуры и несоответствующий корпоративный климат, а в числе внешних помех 32% указали на правительственные и правовые ограничения.

Почти половина опрошенных компаний хочет быть инновационными в области продуктов и услуг, треть — в области организационной структуры, бизнес-процессов и бизнес-моделей. При этом анализ результатов деятельности различных компаний, по данным IBM, показывает, что наиболее экономически выгодными оказываются инновации в области бизнес-моделей компаний, что позволяет значительно увеличивать прибыль, в то время как традиционные инновации в продуктах, услугах и поиске новых рынков позволяют только сохранять уровень прибылей стабильным.

Оказалось, что компании, наиболее быстро увеличивающие свою операционную прибыль, уделяют вдвое большее внимание таким инновациям. Исследование выявило, что наиболее эффективный путь — развивать инновации в области бизнес-моделей через стратегическое партнерство.

На практике инновации в бизнес-моделях компаний чаще всего (67%) оказываются изменениями в организационной структуре и налаживанием стратегических отношений с партнерами (52%). Общение с внешним миром оказывается самым эффективным источником новых идей — так, компании с более высокими доходами на 30% больше идей черпают у партнеров и клиентов, нежели их менее успешные конкуренты.

Что же предлагает IBM? В области менеджмента IBM советует обратить внимание на изменение, по сравнению с 90-ми годами прошлого века, самой стратегии развития бизнеса. Децентрализованное производство, сетевые технологии, аутсорсинг, мобильность сотрудников — все это меняет понятие о том, что такое компания.

Так, еще совсем недавно считалось правильным выделить ключевые и непрофильные направления деятельности и концентрировать усилия на ключевых, отдав остальные, например, на аутсорсинг. Сейчас в условиях быстро меняющегося рынка более выгодным оказывается «разбиение» компании на ряд специализированных единиц, которые относительно свободны, могут взаимодействовать между собой и быстро реагировать на изменения. Такая гибкая и дифференцированная структура оказывается более стабильной и устойчивой к кризисам.

От менеджера в новых условиях требуются умение быстро учиться и адаптироваться, находить нестандартные способы поведения в различных ситуациях, не забывать о том, что в наибольшей степени повысить производительность труда любого работника может его отношение к работе как к увлекательной игре.

И, наконец, главная идея — шире смотреть на само понятие инновации и не рассматривать его как синоним научно-исследовательских изысканий. Инновации — это экономически выгодные творческие идеи

CRN/RE («ИТ-бизнес») № 7 (252), 6 мая 2006

LISTENING AND VIEWING

23. Listen to the interview with Vijay Vaitheeswaran of The Economist and answer the following questions.

1. What is the real essence of innovation process?

2. What are the driving forces of innovation?

3. What external factors are pushing innovation in car industry? In what way is this innovation process disruptive? What economic interests are at stake?

4. What other examples of disruptive innovations are mentioned by the speaker?

5. What countries are named as disruptive innovators of the developing world and why? What is their impact on innovation processes in multinationals and companies of developed economies?

6. What part does the government innovation policy play nowadays?

7. What does the open approach to innovation imply? What are its main causes and effects?

8. What is the speaker's definition of innovation notion?

9. How should the filtering process in an open model be arranged? What is meant by “fast failing”?

24. Listen to the group of executives discussing a new product. Make sure you understand the meanings of the following idioms. You may need to consult your dictionary.

§ to come up with a winner

§ a blockbuster

§ bells and whistles

§ to fast track a project

§ stocking stuffer

§ a big win

§ to make a killing

§ to keep something under wraps

§ mum's the word

§ to get wind of

§ to rip off

§ game plan

§ to get something off the ground

Here are some more idioms commonly used to speak about innovations. Match them with definitions and use in the sentences of your own.

LANGUAGE FOCUS

25. Make up a list of collocations Verb + Adjective + Noun; Verb + Noun; Adjective + Noun

26. Suggest the Russian for the following word combinations.

truly differentiating new-product breakthroughs; disruptive innovation; sustaining innovations; to be blasted out of the market; incremental improvements; product cycle; continuous innovation; to stifle the spread of new ideas; to add to shareholder value; to embrace new forms of innovation; to strip out transport and inventory costs from the production process; to hive off a project into independent business; to harness creativity; to generate top-line growth; commoditization of knowledge; to think outside the box; consumer-centric innovation; paradigm shifting; to outperform industry rivals; to conceive new products; to improve the bottom line; organic growth; to place big bets; to spur creativity; to visualize concepts; to discard concepts; basic tenets of corporate strategy; to anoint chief innovation officers; to nurture innovation; incumbents; to co-opt and pre-empt disruptive ideas; expertise; to leverage ideas and assets path-breaking innovation; top-notch scientists; to get personal credit for one's contribution; to fast track a project; bells and whistles; a blockbuster; to foster creativity; a think-tank; Knowledge economy; human ingenuity; a zero-sum game; in-house R&D; network innovation; open source innovation; serendipity.

27. Match the synonyms.

28. Fill in the blanks with appropriate words and word combinations.

What is innovation? Although the term is often used to refer to [_________] many innovations are neither new nor involve new technology. The self-service [_________] of fast-food popularised by McDonald's, for instance, involved running a restaurant in a different way rather than making a technological [________]. However, innovation can involve plenty of clever [________].

One way to arrive at a useful definition is to rule out what innovation is not. It is not [________]. New products might be an important part of the process, but they are not the essence of it. These days much innovation happens in processes and services. [_________] of some sort does matter, although it might involve an existing idea from another industry or country.

The OECD, a [_________] for rich countries, says innovation can be defined as “new products, business processes and [________] that create wealth or social welfare.”

According to [________], innovation is something that men wearing white coats in laboratories do. And that's the way it used to be. Companies set up vertically integrated [_________] and governments fussed over innovation policies to help them succeed. This approach had successes and many companies still spend pots of money on [________]. But firms are growing increasingly disenchanted because the process is slow and insular.

Now the centrally planned approach is giving way to the more democratic, even joyously anarchic, new model of innovation. Clever ideas have always been everywhere, of course, but companies were often too closed to [________] them. The move to an [________] to innovation is far more promising.

So why does the [________] of ideas matter so much? Studies show that a large and rising share of growth—and with it living standards—over recent decades is the result of innovation. Innovative firms also tend to [________] their peers. With manufacturing now barely a fifth of economic activity in rich countries, the [_________] is becoming more important. Indeed, rich countries may not be able to compete with rivals offering low-cost products and services if they do not learn [________] better and faster.

But even if innovation is the key to global competitiveness, it is not necessarily a

[________]. On the contrary, because the well of [________] is bottomless, innovation strategies that [________] hitherto neglected [________] and connect it better with financial capital can help both rich and poor countries prosper.

29. Explain the meanings of the following terms

§ break-through inventions

§ incremental innovation

§ sustaining innovation

§ disruptive innovation

§ radical innovation

§ blockbuster new products

§ operational innovation

§ strategic innovation

§ user-centric innovation

§ in-house R&D

§ network innovation

§ open source innovation

HAVE YOUR SAY

30. There are many mistaken views about how innovation works. Here are some of the most pervasive. Suggest your counterarguments.

1. Innovation is all about technology.

2. Innovation is about crazy creativity.

3. More resources equal more innovation.

4. Innovation is expensive and takes time.

5. Only a big bang / a hot new product counts as a success.

6. Innovation – and the growth that results from it – is serendipitous and unpredictable.

7. Innovation is intrinsic and can't be taught.

8. You need hundreds of ideas because the failure rate for innovation is high.

It matters

31. Search the Internet for some successful examples of

32. Write a 150 word report to describe the information given in the charts. You are not asked to give your opinion. (Portfolio entry)

Use two standard opening sentences to introduce the graph and your report. These opening sentences should make up the first paragraph. Sentence one should define what the graph is about, that is the date, location, what is being described in the graph etc. Notice that in a single line graph we say “the graph shows…” but with several lines we can more accurately say “the graph compares…” Sentence two might sum up the overall trend: “It can be easily seen from the chart that….”

The body of the report will describe the graph or graphs in detail. Line graphs usually present information in chronological order and so the most logical order for you to write up the information would also be from earliest to latest. Bar graphs, pie charts, etc are organized in different ways and so you need to decide on the organization of each one. Your report should end with one or two sentences which summarise your report or draw a relevant conclusion.

Pie charts generally show figures in percentages and your language in writing the report should reflect this. You will probably talk about “percentage”, “proportion”, or “share”. You may also use the expressions “to account for” or “to make up”. Use comparatives and superlatives to compare and contrast.

33. Write an argumentative letter to The Economist editor nominating some new blockbuster and its developer for The Economist Annual Innovation Award in one of the following categories. (Portfolio entry)

· Bioscience (pharmaceuticals, biotechnology, agriculture)

· Business processes: enabling compounds, products, technologies or methodologies which underpin product discovery, design, or manufacturing, as well as fulfillment processes

· Energy and the environment: includes energy, transportation, automotive

· Social and economic innovation: novel technologies and business models that improve everyday lives (eg, microcredit)

· Computing and telecommunications: includes hardware, software, security, telecommunications

· Consumer products: may include the product, process, media or design

· “No boundaries”: technology-based products or services that don't fit neatly into any of the above categories (this includes materials science, nanotechnology and other emerging fields, eg, blue-violet laser)

Mention the main characteristics, functions, selling points, possibility for customization, comparison with competitors' products.

34. Make mini-presentations on the following topics. (Portfolio entry)

1. The age of mass innovation. Consumers as creators.

2. In-house vs. open-source innovation.

3. The most innovative company of our days.

4. Smart companies take on “intrapreneurial” spirit (lessons from Apple).

5. Kaizen Blitz: a powerful tool for operational innovation.

6. The yin and yang of discipline and imagination (efficiency vs. creativity).

7. Reaping rewards from Linux.

HUNGRY MINDS

35. For further information on the recent trends in corporate innovation process read 1) The Economist Special Report “Innovation”, October 11^th 2007 2) Business Week Special Report “Wikinomics”, February 15^th, 2007.

GET REAL

36. Read the following article and express your own opinion on the issues raised in it. Find the like-minded fellows among your group peers. In groups of three or four do a 5-minute brainstorming session to come up with recommendations on how to manage the creatives. Suggest your comments on the headline.

Wielding the Velvet Hammer

by Jack and Suzy Welch (abridged)

Do the creatives in an organization need special handling?

Leading people who often don't think of themselves as employees of anyone or anything is an art, drawing on all sorts of soft skills, like empathy, an ability to nurture, and ad hoc psychological counseling. You don't want your resident out-of-the-box thinkers running for the exits. With their fresh ideas and unique perspectives, they can be, and often are, the reason for breakthrough products and new ways of working, and even the impetus for whole new businesses. The conventional wisdom about managing creatives runs that writers, editors, artists, software designers, engineers, research scientists, and even a few particularly inventive investment bankers should be left alone. They're different from you and me, the thinking goes: deeper, more mysteriously wired, more fragile. Treat them like worker bees, and they sting. Treat them like hallowed Yodas , and their wisdom flows. On the other hand the most creative people can often be intellectually complex and emotionally delicate. They can be odd or prickly. Some are quite antisocial. Many started hating the status quo in grade school and have never stopped. Who knows whether those traits are due to the way their brains work or the way most societies allow (and even encourage) artistic types to act. Regardless, true creatives do seem to shut down when squeezed into normal strictures, and good managers need to be wary of that.

But too often, companies also contain those who are so exquisitely talented that their buck-the-system behaviors get a pass. The brilliant scientist who treats his young associates like serfs. The award-winning art director who scoffs at corporate pleas for cost-cutting. The ingenious video game designer who won't talk to the marketing department. They seize upon any opportunity to break from the corporate herd. People start working when and where they want, which usually means alone. They stop sharing ideas with mainstream "grunts." Often, they start sniping at each other over, of all things, creative differences.

Outrageous behaviors, yes. But when the creatives displaying them are good enough, many managers look away. Who wants to drive off the goose that lays the golden eggs? This often leaves leaders in a unique, but not irresolvable, bind.

BusinessWeek, September 24^th, 2007

What would you do under the circumstances?

Note

Yoda is a fictional character from the Star Wars universe. Yoda is portrayed as a wise and powerful Jedi Master. Yoda's race has never been stated in any media, canonical or otherwise, and he is merely stated to be of a "mysterious species"

REFLECTION SPOT

Has the newly acquired information enlarged your knowledge? Is it relevant to your future business career?

VOCABULARY

· incremental innovation

· radical innovation

· disruptive innovation

· operational innovation

· strategic innovation

· consumer-centric innovation

· technological expertise

· breakthrough n

· cutting-edge technology

· open-sourcing

· to blast out of the market

· venture capital

· to issue a patent

· tease out v

· to squash ideas

· to hive off a unit

· evolve v

· harness v

· discard v

· to stumble across smth

· tap v

· to tap into smth

· foster v

· nurture v

· to conceive new products

· to reap benefits

· anoint v

· incumbent n&a

· to co-opt and pre-empt disruptive ideas

· nascent a

· to think out of the box

· to take hard-nosed approach

· to add bells and whistles

· blue-sky thinking

· to make a go of something

· to leverage ideas

· think-tank n

· serendipity n

· path-breaking innovation

· blockbuster product

UNIT 8. BRAND MANAGEMENT

"A product is something made in a factory; a brand is something that is bought by the customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless".― Stephen King, WPP Group, London

Competencies. · grasping the gist of an extended text · developing translation skills · synthesizing the contents of an extended text · enriching interdisciplinary knowledge · extracting detailed information · making predictions and suggestions. · making presentations · searching the web for specific information · developing team-work skills

READING AND SPEAKING (1)

1. Suggest your definition of a brand. What are the main components of any brand? What's brand equity & brand value? What's the difference between them?

2. Differentiate between brand image and brand identity; brand awareness and brand recognition.

3. What makes a successful brand? Name the companies that, in your opinion, have achieved an iconic status. What perception do their brands communicate to consumers? What are the possible measures of brand leadership?

4. Read the article, sum up the key points and give the message. Say whether you share the author's view on the importance of brands.

The Decline of Brands

Sure, there are more brands than ever. But they're taking a beating - or, even worse, being ignored. Who's to blame? A new breed of hyperinformed superconsumers. (That's right —- you!)

By James Surowiecki

The world, it seems, is disappearing beneath a deluge of logos. In the past decade, corporations looking to navigate an ever more competitive marketplace have embraced the gospel of branding with newfound fervor. The brand value of companies like Coca-Cola and IBM is routinely calculated at tens of billions of dollars, and brands have come to be seen as the ultimate long-term asset — economic engines capable of withstanding turbulence and generating profits for decades. So companies spend billions on brand campaigns and try to indelibly mark everything in sight.

Since 1991, the number of brands on US grocery store shelves has tripled. The average American sees 60 percent more ad messages per day than when the first President Bush left office.

And yet there's something strange going on in branding land. Even as companies have spent enormous amounts of time and energy introducing new brands and defending established ones, Americans have become less loyal. Consumer-goods markets used to be very stable. If you had a set of customers today, you could be pretty sure most of them would still be around two years, five years, ten years from now. That's no longer true. A study by retail-industry tracking firm NPD Group found that nearly half of those who described themselves as highly loyal to a brand were no longer loyal a year later. Even seemingly strong names rarely translate into much power at the cash register. Another remarkable study found that just 4 percent of consumers would be willing to stick with a brand if its competitors offered better value for the same price. Consumers are continually looking for a better deal, opening the door for companies to introduce a raft of new products.

Marketers may consider the explosion of new brands to be evidence of branding's importance, but in fact the opposite is true. It would be a waste of money to launch a clever logo into a world of durable brands and loyal customers. But because consumers are more promiscuous and fickle than ever, established brands are vulnerable, and new ones have a real chance of succeeding — for at least a little while. The obsession with brands, paradoxically, demonstrates their weakness.

The single biggest explanation for fragile brands is the swelling strength of the consumer. We've seen a pronounced jump in the amount of information available about goods and services. It's not just bellwethers like Consumers Union and J.D. Power, established authorities that unquestionably shape people's buying decisions, but also the crush of magazines, Web sites, and message boards scrutinizing products. Consumers have also become more demanding: Even as the quality and reliability of products have generally risen, satisfaction ratings have not budged, and in some cases they've actually fallen. Businesses are now dealing with buyers who are armed with both information and harsh expectations. In this environment, companies that slip up — even if it's simply failing to match customer tastes — can no longer count on their good names to carry them through. And consumers have become far more willing to experiment with products, because the amount of information out there makes taking a chance far less risky. This gives nascent brands an opportunity to succeed, but it also makes staying power a lot harder to come by. Welcome to the What Have You Done for Me Lately? economy.

Some industries are suffering more than others. In consumer electronics, quality has risen across the board, making product differences harder to discern. Manufacturing has commodified: Most of today's computer equipment, television screens, and stereos are made by a small handful of contract manufacturers and then slapped with a logo before hitting store shelves. That doesn't mean that making a better gizmo no longer matters — offering genuinely innovative products is, more than ever, the best way to capture market share. But savvy consumers are no longer willing to pay a high premium for an otherwise identical product just because it has a fancy nameplate.

Undoubtedly, there are strong brands that can still command a premium. In one recent survey by Landor Associates, 99.5 percent of people said they'd be willing to pay more for a Sony. But the size of that premium is smaller than ever. Five years ago, Sony charged 44 percent more for its DVD players than the average manufacturer. Today, Sony DVD players cost just 16 percent more than the average. And yet, even though the price of Sony's most expensive DVD player fell 60 percent between 1999 and 2003, CyberHome, maker of absurdly cheap DVD players, has knocked off Sony to become the biggest DVD-machine seller in America. Similarly, in the fashion industry, a stronghold of brand identity and obsession, prices fell an average of 9 percent between 2001 and 2003. At least part of the reason is the uptick in private-label sales, which now account for almost half the market. The rise of retailers like Zara and H&M, which make their own cheap but nice designer knockoffs, and the emergence of a high-low aesthetic (in which top designers no longer dictate taste) have weakened the power of fashion brands and fragmented the industry into myriad small ones. Sure, superbrands like Louis Vuitton and Prada can still command a hefty price premium. But they're increasingly the exception.

Marketing types either don't see this trend or choose not to talk about it. In the words of advertising legend Jim Mullen, "Of all the things that your company owns, brands are far and away the most important and the toughest. Founders die. Factories burn down. Machinery wears out. Inventories get depleted. Technology becomes obsolete. Brand loyalty is the only sound foundation on which business leaders can build enduring, profitable growth." Similarly, in the new book Brands and Branding, Rita Clifton, chair of Interbrand UK, puts it this way: "Well-managed brands have extraordinary economic value and are the most effective and efficient creators of sustainable wealth." These assertions claim that while factories, source code, and patents are ephemeral, brands are real. But in fact, their long-term value is shrinking. They're becoming nothing more than shadows. You wouldn't expect your shadow to protect you or show you the way. It only goes wherever you do.

Annual rankings of brand value are littered with examples of firms that watched billions of dollars in supposed "brand equity" vanish — not because they messed with their identities, but simply because they didn't make a product or deliver a service that people needed. Even genuinely powerful brand association is no longer a guarantee that a company will make money. TiVo has revolutionized television, and even introduced a word into the consumer vernacular. But it hasn't made a dime in profit. In the past year, the company has cut prices sharply to try to compete with the cheap DVRs coming to market from cable and satellite companies. Similarly, Apple has had to continually introduce better variations on the iPod — and cut prices — to fend off copycats.

Marketers aren't completely deceived (or being deceiving) when they argue that customers make emotional connections with brands, but those connections are increasingly tenuous. If once upon a time customers married brands — people who drove Fords drove Fords their whole lives — today they're more like serial monogamists who move on as soon as something sexier comes along. Gurus talk about building an image to create a halo over a company's products. But these days, the only sure way to keep a brand strong is to keep wheeling out products, which will in turn cast the halo. If a company must constantly deliver new value to its loyal customers just to keep them, those customers aren't loyal at all. Which means, save for a few perennials like Coke, brands have little or no value independent of what a company actually does. "Brands have run out of juice. They're dead," says Kevin Roberts, CEO of advertising giant Saatchi & Saatchi and author of the new book Lovemarks. "Now the consumer is boss. There's nowhere for brands to hide."

This is all, of course, a bad thing for marketers. A brand is supposed to provide a haven from competition, offering what Nokia CEO Jorma Ollila calls insurance against missteps. But the disappearance of loyalty means that insurance is vanishing, too — which is great for consumers. When companies can't count on their reputations to carry them through, they're forced to innovate to stay alive. The erosion of brand value, then, means heightened competition — and everything we know about economics tells us that the more competition, the better off consumers will be.

The truth is, we've always overestimated the power of branding while underestimating consumers' ability to recognize quality. When brands first became important in the US a century ago, it was because particular products offered far more reliability and quality than no-name goods. Similarly, many (and arguably most) of the important brands in American history — Gillette or Disney — became successful not because of clever marketing, but because they offered something you couldn't get anywhere else. Marketers looked at these companies and said they were succeeding because their brands were strong. In reality, the brands were strong because the companies were succeeding.

Over time, certain brands came to connote quality. They did provide a measure of insurance — which in turn made firms less innovative and less rigorous. (Think of the abominable cars General Motors, Ford, and Chrysler made in the late 1960s through the 1970s - remember the Pinto? — in part because they assumed that they had customers for life.) That sense of protection is eroding in industry after industry, and instead of a consumer economy in which success is determined in large part by name, it's now being determined by performance. The aristocracy of brand is dead. Long live the meritocracy of product.

The Wired Magazine, Issue 12.11 November 2004

5. Answer the following questions.

1. What makes the author think that brands are losing traction with consumers?

2. How does he account for the trend?

3. What industries does the author consider to be most vulnerable?

4. What challenges do brands encounter nowadays?

5. What are the benefits of a strong brand? What, according to the author, is the only way to keep a brand strong these days?

6. What is the author's view on brand value?

7. What accounted for the strength of brands in the past?

8. What impact is the erosion of brand value likely to have on manufacturing?

9. What is your view on the matter of brand vitality? Are brands important to you personally?

6. Paraphrase the following.

· to navigate an ever more competitive marketplace

· to embrace the gospel of branding

· to translate into power at the cash register

· to stick with a brand

· a good value for money

· nascent brands

· fragile brands

· the fashion industry, a stronghold of brand identity and obsession

· the up-tick in private-label sales

· cheap designer knockoffs

· to command a hefty price premium

· to fend off copycats

· create a halo over a company's products

· brands have run out of juice

· to provide a haven from competition

· brands connote quality

7. Suggest the Russian for the following.

brand value; brand campaign; ad message; to stick with a brand; durable brands; loyal customers; fickle consumers; the obsession with brands; to scrutinize products; to match customer tastes; nascent brands; an established brand; a bellwether; savvy consumers; to command a price premium; up-tick in private-label sales; designer knockoffs; depleted inventories; obsolete technologies; brand loyalty; annual rankings of brand value; to mess with the brand identity; brand equity; to build a brand image; the erosion of brand value; no-name goods

8. Explain the following statements.

1. The obsession with brands, paradoxically, demonstrates their weakness.

2. Manufacturing has commodified.

3. Customers make emotional connections with brands, but those connections are increasingly tenuous.

4. The aristocracy of brand is dead. Long live the meritocracy of product.

9. Comment on the following citations.

a. "Of all the things that your company owns, brands are far and away the most important and the toughest. Founders die. Factories burn down. Machinery wears out. Inventories get depleted. Technology becomes obsolete. Brand loyalty is the only sound foundation on which business leaders can build enduring, profitable growth".

b. "Well-managed brands have extraordinary economic value and are the most effective and efficient creators of sustainable wealth".

have your say

10. Many CEOs view branding as a domain of consumer goods producers. Does it make sense for B2B companies to take a cue from consumer companies and invest in brand awareness?

READING AND SPEAKING (2)

11. What is branding? Does branding equal marketing?

12. What are the most popular branding policies? What are the advantages and limitations of each of these policies? What are the main tools of branding campaigns?

13. Suggest your definitions of brand dilution and brand extension.

14. Read the article and convey the main message. How does the author define brand accretion?

The Case for Brand Accretion

If you want to create a solid brand, you need to invest steadily and consistently in the process. Patience and fortitude will pay

by Steve McKee

Marketing is an investment, not an expense. You've heard that before, of course. But it's one thing to invest in marketing when times are good, and quite another to continue spending at a steady clip when things are getting tight. Before you cut your budget or rush headlong into an all-new approach, consider brand accretion.

What? Brand accretion. The dictionary defines accretion as the process of growth or enlargement by a gradual buildup. With respect to branding, accretion is the simple principle that the more you invest—and the more consistently you invest—the better your long-term returns will be. Everybody accepts the principle of accretion when it comes to real estate, the stock market, and even collectibles. Invest in solid assets, hang on to them, and watch the value of your holdings grow over time. (The mortgage meltdown notwithstanding, real estate has historically been a good long-term investment.) Accretion is the opposite of dilution, something nobody wants—for their balance sheet or their brand.

Branding is a process

Unfortunately, many companies neglect the power of brand accretion. They treat marketing as if it were just another expense, valued only for the benefits it can provide today. That's foolish. Expenses are about immediate gratification—that "new car smell," a high-definition picture, or a faster computer—but the value of those assets declines over time. Investments, however, are different. Investments provide long-term impact that matches and often outweighs their short-term benefits. Investments should be evaluated differently than expenses.

In a branding context, accretion means that none of your marketing efforts exist in a vacuum. Sure, you want them to have an impact today, but they also add to, and are interpreted within, the context of your past and future efforts. Think of branding as a process, not a static point in time; if your message is steady and consistent, you can build significant brand equity. If, however, you continually change your approach, carelessly cut your budget, or seek only short-term benefits, you'll be compromising your own long-term interests.

When I set aside money in my retirement fund, I get some measure of satisfaction that I'm saving for the future, but it's nowhere near the pleasure I'd get from a vacation in the Bahamas. Still, it's a smart thing to do. In the same way—rain or shine, good times and bad—you can always find a Tiffany ad on page A3 of The New York Times and The Wall Street Journal. Tiffany's small-space newspaper ads are almost as iconic as the now-famous blue box it introduced way back in 1837. Tiffany is an iconic brand because it has leveraged the power of accretion.

Learn from your losers

Marketers who judge their efforts only by the immediate gratification of the hits, visits, or sales they quickly generate fail to see the big picture. James Gregory's marketing firm, Core Brand, has conducted years of research about the long-term effects of marketing investments. He says it's rare for even a one-year surge in advertising spending to generate measurable results in image development; it's usually at least three years before you see real change. That's a long time if you're starting from zero, but if your efforts are continuous, the power of accretion will continually work on your behalf.

Branding is like baseball: You may throw a bad pitch, but it's a long season. If you execute steadily and consistently, the statistics will work in your favor. That's why Anheuser-Busch creates dozens of commercials to determine which six or eight will make the cut to appear during the Super Bowl. They run the commercials in test markets in the weeks leading up to the game, determining which ones perform best. Those that don't make it aren't a waste of money; they're part of the company's investment in a better final product.

It's likely that your company has neither the century-plus history, nor the marketing budget, of Tiffany or Anheuser-Busch. That makes the principle of accretion even more important to you. The smaller your brand-equity nest egg, the more important it is that you invest in it steadily and consistently. Any knowledgeable investor knows that changing your investment strategy willy-nilly is ill-advised, and that every dollar that remains uninvested is a dollar that can't benefit from the power of accretion. The same thing is true for branding.

Note

the Super Bowl is the championship game of the National Football League (NFL)

15. Explain or paraphrase the following.

· to continue spending at a steady clip

· to rush headlong into an all-new approach

· mortgage meltdown

· immediate gratification

· to build significant brand equity

· an iconic brand

· to leverage the power of accretion

· to generate measurable results in image development

· brand-equity nest egg

· to change the investment strategy willy-nilly

READING AND SPEAKING (3)

16. Theodore "Ted" Levitt of Harvard Business School set the marketing world abuzz in 1983 with a bold prediction: Globalization had arrived, and before long global companies would be selling products and services in the same way everywhere on earth. Levitt's forecast was compelling -- and more than a little daunting for executives wondering how they would go about adapting to this brave new world of monolithic brands. Now, 25 years later, has his prediction come to pass?

17. What are the main features of a global brand? Is building a global brand an end in itself for a global company? Do global companies always need to create one-size-fits-all global brands just because the world appears to be shrinking? What are the advantages of global branding? What are the limits? What are the key elements of creating a global brand leadership? What are the possible ways of communicating brand identities and effective brand- building?

18. Read the text and say how brand builders are trying to adapt their branding strategies to the changing business environment. What tools do they use nowadays to communicate their brand identities to consumers?

Global Brands

BusinessWeek/Interbrand rank the companies that best built their images – and made them stick

Ad-zapping consumers pose an enormous challenge these days to marketers trying to build new brands and nurture old ones. To get a reading on which brands are succeeding — and which aren't — take a look at the annual BusinessWeek/Interbrand ranking of the 100 most valuable global brands. The names that gained the most in value focus ruthlessly on every detail of their brands, honing simple, cohesive identities that are consistent in every product, in every market around the world, and in every contact with consumers.

The best brand builders are also intensely creative in getting their message out. Many of the biggest and most established brands, from Coke to Marlboro, achieved their global heft decades ago by helping to pioneer the 30-second TV commercial. But it's a different world now. The monolithic TV networks have splintered into scores of cable channels, and mass-market publications have given way to special-interest magazines aimed at smaller groups. Given that fragmentation, it's not surprising that there's a new generation of brands, including Amazon.com, eBay, and Starbucks, that have amassed huge global value with little traditional advertising. They've discovered new ways to captivate and intrigue consumers. Now the more mature brands are going to school on the achievements of the upstarts and adapting the new techniques for themselves.

So how do you build a brand in a world in which consumers are increasingly in control of the media? The brands that rose to the top of ranking all had widely varied marketing arsenals and were able to unleash different campaigns for different consumers in varied media almost simultaneously. They wove messages over multiple media channels and blurred the lines between ads and entertainment. As a result, these brands can be found in a host of new venues: the Web, live events, cell phones, and handheld computers. An intrepid few have even infiltrated digital videorecorders, devices that are feared throughout the marketing world as the ultimate tool for enabling consumers to block unwanted TV ads.

Some marketers have worked to make their brand messages so enjoyable that consumers might see them as entertainment instead of an intrusion. When leading brands are seen on TV they're apt to have their own co-starring roles — as Toyota Motor Corp. did in reality show The Contender — rather than just lending support during the commercial breaks. All are trying to create a stronger bond with the consumer.

It's no accident that most of the companies with the biggest increases in brand value ranking operate as single brands everywhere in the world. Global marketing used to mean crafting a new name and identity for each local market. America's No. 1 laundry detergent, Tide, is called Ariel in Europe, for example. The goal today for many, though, is to create consistency and impact, both of which are a lot easier to manage with a single worldwide identity. It's also a more efficient approach, since the same strategy can be used everywhere. An eBay shopper in Paris, France, sees the same screen as someone logging in from Paris, Texas. Only the language is different. Global banks HSBC and UBS, up use the same advertising pitches around the world. "Given how hard the consumer is to reach today, a strong and unified brand message is increasingly becoming the only way to break through," says Jan Lindemann, Interbrand's managing director, who directed the Top 100 Brands ranking.

Possibly no brand has done a better job of mining the potential of these new brand-building principles than Korean consumer electronics manufacturer Samsung Electronics Co. Less than a decade ago, it was a maker of lower-end consumer electronics under a handful of brand names including Wiseview, Tantus, and Yepp, none of which meant much to consumers. Figuring that its only shot at moving up the value chain was to build a stronger identity, the company ditched its other brands to put all its resources behind the Samsung name. Then it focused on building a more upscale image through better quality, design, and innovation.

Beginning in 2001, the newly defined Samsung came out with a line of top-notch mobile phones and digital TVs, products that showed off the company's technical prowess. By vaulting the quality of its offerings above the competition in those areas, Samsung figured it could boost the overall perception of the brand. Besides, consumers form especially strong bonds with cell phones and TVs. Most people carry their mobile phones with them everywhere, while their TV is the center of the family room. "We wanted the brand in users' presence 24/7," says Peter Weedfald, head of Samsung's North American marketing and consumer electronics unit. Now that strategy is paying off. Over the past five years Samsung has posted the biggest gain in value of any Global 100 brand, with a 186% surge. Now, in a nod to Samsung, Korean electronics concern LG Electronics Inc. has followed its rival's playbook.

Some of the older brands are clearly struggling to remake their marketing and product mix for a more complex world.

Sony's moves into films and music put it into areas where its brand adds no value. Worse, those acquisitions made Sony a competitor with other content providers. VW faces different problems. It has attempted to move up-market with the luxury Touareg sport-utility vehicle and Phaeton sedan models; but that has left car buyers, who associate VW with zippy, affordable cars, confused. Similarly, Levi's introduction of its less pricey Levi's Signature line in discount stores means it now competes on price at the low end, while trying to fend off rivals like Diesel at the upper end with its core "red tab" brand.

Of course, defining the essence of a brand is only part of the battle. Communicating it to the consumer is the other. On this front, there has clearly been a divide between newer brands that use traditional advertising as just one tool in an overall marketing plan and older ones that grew up with it. Sony, for example, far outspends Samsung on traditional advertising in the U.S. on electronics products. Many young brands that scored big gains in value, like Google, Yahoo!, and eBay, depend on their own interactive Web sites to shout about their brands. Now some older brands, like Coke and McDonald's are decreasing traditional ad spending. Most of the shift has gone to online advertising. What's evolving, then, is a model in which most brand builders use a variety of marketing channels. HSBC has branded taxis to carry customers for free. And although eBay spends most of its marketing budget on Internet advertising, it also relies on TV to some extent to boost simple brand awareness. "With fragmentation and ad evasion, you can't count on one medium," says Tom Cotton, president of Conductor, a branding strategy firm.

Marketers who do turn to TV are trying to make brand messages as engrossing as the programming.

Nor are TV and movies the only target. Coke, McDonald's, Smirnoff, BMW, Pepsi, and KFC are among brands striking deals to plant their brands in video games and even song lyrics. In an echo of Procter & Gamble Co.'s creation of the soap opera on radio and then TV, some brand builders are taking control of the programming themselves and creating content that tries to draw in ad-allergic consumers. BMW, turned out a series of popular short films on the Internet starting in 2001. The seven-to-ten minute films starred BMW cars and were produced by A-list Hollywood directors like John Woo. The German auto maker has moved onto comic books based on the films aimed at Bimmer-aspiring teens and adults alike. BMW has also embraced the enemy, TiVo, the television-top gadget that consumers use to skip ads altogether. Since last year, BMW has produced short films and long-form ads accessible through TiVo's main menu page. BMW fans are alerted to the films in the on-demand video menu when a BMW ad runs.

Still, none of these marketing ploys are sure bets in a world where old-school advertising means less. That's why more marketers are investing in design as a fundamental way to distinguish their brands and to stay on the leading edge of technology. "Design isn't just the promise of a brand, like TV advertising — it's the reality of it," says Marc Gobe, chief executive of design consultancy Desgrippes Gobe. Samsung has tripled its global design staff while Motorola and Philips Electronics have boosted design spending.

Good design implies more than just good looks. It's also about ease of use. Apple demonstrated this with its iPod. Users can pick songs or download music from the iTunes music bank with the swipe of a finger. That's blunted sales of Sony's Walkman MP3 player, which has been criticized as too cumbersome.

The era of building brands namely through mass media advertising is over. The predominant thinking of the world's most successful brand builders these days is not so much the old game of reach (how many consumers see my ad) and frequency (how often do they see it), but rather finding ways to get consumers to invite brands into their lives. The mass media won't disappear as a tool. But smart companies see the game today as making bold statements in design and wooing consumers by integrating messages so closely into entertainment that the two are all but indistinguishable.

BusinessWeek, August 1^st, 2005

16. Explain or paraphrase the following

1. ad-zapping consumers

2. to hone cohesive identities

3. to achieve global heft

4. mature brands are going to school on the achievements of the upstarts

5. to blur the lines between ads and entertainment

6. a single worldwide brand identity

7. to move up the value chain

8. to show off the company's technical prowess

9. to form strong bonds with consumers

10. to vault the quality of offerings above the competition

11. the strategy is paying off

12. to follow the rival's playbook

13. to move up-market

14. a core brand

15. sure bets

17. Suggest the Russian for the following.

to build a brand image; to nurture established brands; to hone cohesive brand identities; to captivate and intrigue consumer; to unleash a brand campaign; to create a stronger bond with consumers; a single worldwide brand identity; advertising pitch; a unified brand message; to ditch the brands; to remake the marketing and product mix; to define the brand essence; to boost brand awareness; ad evasion; to skip ads; marketing ploys; to stay on the leading edge of technology; private labels; to woo consumers

TRANSLATION 21. Translate the text “The Decline of Brands” in writing. 22. Translate the text “The Case for Brand Accretion” orally. 23. Translate the text “Global Brands” in writing. 24. Translate the text “Microsoft and GE: Not Old & In the Way” orally.

LISTENING AND VIEWING

18. Listen to columnist Karen E. Klein interviewing Roger Sametz of Sametz Blackstone Associates, a Boston-based strategic communications firm, on how small companies can brand and reposition themselves effectively and answer the following questions. (http://www.businessweek.com/mediacenter/podcasts)

What's in a Name?

1. What are the four possible drivers for changing a corporate name or repositioning a brand?

2. Is repositioning always accompanied by renaming or is it optional to change the name?

3. What goes into repositioning and renaming a whole branding process?

4. What are the different kinds of company names?

5. What techniques do Sametz Blackstone Associates use in their practice?

6. What do the two examples of the company's experience mentioned by the speaker illustrate? How did renaming help improve company performance?

7. What is the basic instrument of any branding campaign that is frequently underutilized by companies? How can communication of particular actions be brand building and strategic?

Explain what the following word combinations actually mean.

1. to reposition a brand

2. to rename a business

3. to reengineer an organization

4. to realign a message

5. to reinvigorate the brand identity

6. to reinforce the brand equity

7. to rejuvenate a corporate brand

8. to redefine a company logo

9. to reshuffle brand portfolio

HUNGRY MINDS

26. For further information on the origin of brand names read the article by Amanda Baltazar “Silly Brand Names Get Serious Attention” in The Brandweek Magazine, dated December 3rd, 2007

LANGUAGE FOCUS

27. Make up a list of verbs which collocate with the following nouns; compare your list with that of your peers.

· brand

· brand identity

· brand image

· brand equity

· brand value

· branding strategy

· brand awareness

· brand extension

· rebranding

· brand recognition

· brand portfolio

· generic

· copycat

· private label

28. Fill in the blanks with one of the suitable branding terms.