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Book:The Wisdom of Finance

  I read the Wisdom of Finance last year but finally found a chance to write about this amazing book. I think it’s a phenomenal book to encapsulate the fundamentals of finance without the fuss of the wolves of Wall St. Desai says some last words in the end regarding the growing gap between sciences and art and how humanity could have benefited with a stronger coloration between these two disciplines. So, his book attempts to fill the gap with stories from religion, mythology, movies and novels to engrave the big ideas in your head. This approach definitely makes the concepts of finance clear where terminology and abstractness of finance give people a dizzy head usually. Once we take a look at the best sellers in finance and business, the same books appear over and over again like Rich Dad Poor Dad. Unfortunately, many finance books get lost in the glamour of high life in Wall St., or drowned in the mathematics and graphs where people just want to make sense of the highly financialized world. 

  The book goes along with the evolution of finance. I hadn’t thought about randomness and chance like many people when I heard finance. Somehow, we have an image of finance deep in our heads such that it’s very complicated, and these evil geniuses crack the market and make billions. The chapter about chance is such a good chapter, when it talks about Peirce, you witness the birth of modern statistics, probability and sampling and all of these started with… insurance! Charles Sanders Peirce was the founder of pragmatism, a mathematician and logician where he led many developments, the founder of semiotics and the father of the modern statistics and randomized experiments. In spite of his genius, he wasn’t liked much in academia due to his stormy private life so he was struggling to make a living. Later on, his warmhearted friend persuaded Harvard to let him teach about pragmatism in philosophy department. In his first lecture, he talked only about probabilities and insurance companies and “ used calculus to derive profit conditions for insurance companies in how they set prices for their policies” when calculus wasn’t heard of in economy department let alone philosophy classrooms. His friend thought that Peirce finally lost his mind but he was actually laying the foundation of insurance and finance. Peirce embraced chance and randomness since risk is everywhere and can’t be avoided and ignored but can be managed. The insurance was one mean of managing it. The risky nature of world already gave religions ahead since there was no explanations about random events other than divine forces which we couldn't comprehend. It started changing with the rise of rationalism during Renaissance.However, fatalism replaced by rationalism departed at a new brand of fatalism soon, so called nature of laws. Now, we could determine the future by nature of laws and everything had to obey to them. It was indeed an amazing time and recalling my astronomy lectures how Newton discovered unseen planets and Harley told when the comet would pass by must have been magical for the time(still it is). Peirce said it was not enough and randomness was not so random and had a structure in it. Formidable mathematician Laplace asserted that “all events, even those which on account of their insignificance do not seem to follow the great laws of nature, are a result of it just as necessarily as the revolutions of the sun” after statistics and probability glimpse what’s ahead. Desai points out that actually this mathematical approach kind of misses the point of randomness in our life. Some events are so “random” and we can’t make fit them into a trend.Or maybe we don’t know a way to do it yet.

  The risk and business pair guides us through the following chapters. One remark is that how we get stunned by numerous options, and we don’t make a decision at all. He gives an example of seeking the perfect match in marriage and ending up with nothing in the book. I watched one of his interview, and he drew a similar conclusion from classrooms. He’s teaching at Harvard and students do not go ahead and take risks because they are so obsessed with acquiring options and safety nets(definitely not limited to Harvard students but a general attitude in college).Yet, finance requires risk for value creation and financial value is very different than accounting value. I think of the best description of finance in the book is “finance is completely and ruthlessly forward-looking. The only source of value today is the future” and it’s maybe the ultimate truth of today’s tech market.The promise of the tomorrow is what values Tesla more than GM, not the units sold. Neither missed opportunities nor past victories mean nothing in the financial arena. What could kill a matador then? A strike of debt overhang or under leveraged companies, perhaps?

 Debt doesn’t sound nice. From the front page of newspapers calling “the US debt reached X trillion dollars” or “student debt is crushing millennials” to home mortgages, it’s a frightening word for the most including me. Being debt free is a life long financial strategy for people but debt is sometimes the only way to make unattainable attainable. Even though the college tuitions are out of control in the last two decades, loans are the only way for many people to secure their future, for example. The similar case is valid for buying a house. The book talks about debt and how the young US passed series of acts to motivate growth and innovation by shifting the protection from lender to borrower. The government incentives include tax breaks for interest payments so by using debt, companies and individuals are able to “pay less in taxes and to shift value from the government to yourself.” Desai points out that like many companies the individuals are underlevered. Under leverage results regrets whether they are educational opportunities, romantic connections or taking over a start-up. Debt is an amazing lever in right conditions that makes people achieve things otherwise can’t be thought of. As the book cover depicts Archimedes, he famously said “give me a place to stand, and a lever long enough, and I will move the world.” I don't know if Archimedes ever thought debt as lever but he’d be happy that his idea went beyond the physics classroom. 

  I think the book ends according to its purpose:showing finance is much bigger than it seems and demonization of finance doesn’t benefit the most but the few. I didn’t mention his many examples but Desai does a great job to connect finance and life by using literature and arts. He argues that the big ideas of finance can be used in different parts of life. Finance wasn’t born because some people wanted to make money out of money but human necessities such as pooling risk, investing for retirement etc. gave a rise to finance, and maybe the wisdom of finance can multiply our abilities like Archimedes’ lever.

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Book: Onward

Ice lattes weren’t shaken alone at Starbucks in 2008. The financial crisis was the tip of iceberg as rising water of internal problems was ringing alarm bells for the last life ring. It’s been a while since I finished Onward: How Starbucks Fought for Its Life Without Losing Its Soul by its founder Howard Schultz and it’s perfect time to write about it before classes start. It’s another turnaround story and perspective about business, leadership and branding. Starbucks is unquestionably one of the most recognizable brands on the planet Earth and had turned stones into gold for a long time until the financial crisis hit and revealed covered up mistakes which were bigger than the crisis. It was a chain reaction that needed sacrifices with laying off employees and closing hundreds of stores globally. It’s a coffee company and everyone can start a coffee company. In fact, everyone does. However, it’s a superficial verdict about Starbucks as you turn pages of the book. As the founder clearly states, it’s not a coffee company but a people company that serves coffee. When Shultz wrote a memo to voice his concerns about Starbucks was missing that point, it was leaked and shook up the company. His concerns came true and he finally came back as CEO to turnaround Starbucks. He created the transformation agenda, one page, approachable to grasp priorities. Although it clarifies the priorities to restore the company, I think that he was aware of that intangible business objectives were hard to comprehend even for senior leaders(some surveys show that many executives can’t tell their strategies). He knew that Starbucks lost its way and the faith in it was diminishing from baristas to top managers and they needed to remember the Starbucks history. When growth becomes an operating strategy and for growth’s sake, it’s inevitable to lose a part of Starbucks. Once large numbers of stores captivated the leadership and diverted attention from singularity of a cup of coffee, the vertiginous growth became virulent. Transformation agenda wasn’t a short term tactic to secure elusive market shares but a path for becoming an evolving coffee company. Of course, its effects couldn’t be seen day after while Wall St. exerted a tremendous amount of pressure with nose-dive negative comps. Starbucks made a tough decision. Once a sweetheart of Wall St. was about not to reveal quarter comps which are specious in turnaround natures. It seemed suspicious for many investors who criticized Starbucks for being not transparent during the turnaround. However, it could lift some of the pressure off the team and direct people to the longer run mindset. Some investors had seen it as a different form of one-day store closure that Starbucks closed all stores for a day to train its baristas to pour perfect espresso and show Starbucks’ will to continue being a coffee authority. Starbucks failed to adapt technology. The stores were on an out-dated MS software that people had to waste too much time to learn and take order or manage the inventory. Although they worked too hard, order lanes were too long which was killing a critical part of Starbucks experience. Starbucks needed a more disciplined operation system to maximize earnings and potential. As a result of poor logistics, pastries could be overstocked or out of stocked for example. During the rapid growth era, the main driver factor was to get stuff to stores and any other approach could be classified as details. On another day, Starbucks could run out of ethos water while the city was having a major festival. Shultz admitted that he swept things that he wasn’t interested in or good at under the rug and logistics was one of them. Thereafter, Starbucks decided to empower its partners with updated technology to run the business with minimized waste. It introduced Wifi from Google at its stores. In order to maintain its position in coffee market, Starbucks acquired Clover which is a new breed coffee machine with a complex mechanic structure in it. Starbucks also launched Pike Place which is a medium roast coffee to offer daily at stores and tapped the instant coffee market. VIA, its instant coffee subbrand took shelves at grocery stores and has become a success story for Starbucks. Of course, there’s no success without hopeful attempts. It’s good to remember that there’s no silver bullet to save any organization. For example, a big attempt to create a dessert with imported ingredients from Italy was too costly because of logistics. Simultaneous product launches depotentiated each other.Another decision about eliminating breakfast sandwiches wasn’t right. Another challenge different than internal ones was actually about coffee’s competitive advantage as a product in my mind. Starbucks has resourced its coffee ethically from all over the world. It’s a partner of Conservation International to promote growing coffee with environmental consciousness. Could it be a leverage to survive? It actually leads us to take a closer look at Starbucks. Starbucks was one of few fast-food chains that provide healthcare. Starbucks’ core values lay on humanity in some aspects. The problem was that they weren’t able to tell their story to differentiate themselves from new-coming rivals like McDonald’s. People stop by there almost everyday but Starbucks couldn’t create a viable communication channel on social media. Starbucks was not an active advertiser. Thus, rumors were all over the internet. The missed technology boat could be a savior for that time. During the incidents, one remarkable move stands out. Over communication desire with customers such as the new website called mystarbucksideas.com to submit ideas like reusable cups. It can reduce the waste with saving money while being environmental friendly .Starbucks couldn’t afford to miscommunicate or not communicate and needed to boost its presence on social media. If it has failed about that, the rivals would have defined what Starbucks and competition are. Starbucks had told its story over and over and not played into McDonald’s price orientated game that had a huge marketing fund. After all, the rivals like McDonald’s increased the awareness about coffee. Starbucks launched its reward program to award its continuous customers without discounting. Starbucks positions itself as a premium coffee company and the discount could have been a slippery slope because climbing back is almost impossible with cheapen brand image. Starbucks appeared to compete on quality and service but its values gathered millions behind it. A voluble friend of human, gender and worker rights was in trouble and had to fight to save the iconic third stop. Defensive customers could be more loyal and certain about their purchase decision as multiple studies show. When people feel a threat on the product they purchase, they tend to “rally behind it, buying more and providing more favorable reviews online.”1 Defensive customers and the reward program reinforced each other and secured the core customer who would have cost more to win back if Starbucks had lost them. The story of Starbucks touched people with multiple channels when Starbucks stopped playing defense and aired ads and took full pages on newspaper. Its presence was increasing quickly on Facebook and Twitter and people stood aside with it. Today, Starbuck has millions of loyal customers on social media while it introduces new technologies such as mobile payments, the reward app or wireless charging stations on tables. The transformation was the transition stage of rites of passage that Starbucks learnt new skills about branding, marketing, data management and so on but it wasn't done yet to find its new life. It was a departure ride from the ruin of both global and internal crisis to evolving but staying true in its heritage from Pike Place days. “ 'Onward' was about getting dirty but coming out clean..."

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Innovation

The success of Nokia in late 1990s and early 2000s when it became the world-leader in cell phone market was able to generate 4 percent of GDP of Finland.1 However, Steve Jobs was on the hunt. Motorola and Blackberry were other giants once with significant market shares but their future would not be much different than Nokia. Market places are full of companies like these giants and few companies that change markets dramatically and dominate with their innovations. Innovation ability has become one of the major parts to succeed in markets. So, what does it take to be innovative for companies? Is it enough to have ideas or what does it take to translate ideas into innovations? As companies need to hold their position in markets, there’s no question about innovation’s contribution to competitive advantage. There’s no innovation strategy that fits on every company. Leaders have to create their own unique strategies and execute each strategy carefully. However, we can find some hints from other companies’ experiences and learn what worked and what didn’t work. Innovation starts with idea generation and grow in culture. Later on, companies need to follow-up ideas and quickly prototype and test their ideas. Concertedly, organizations concentrate on new process methods and business models to conduce well-designed technology breakthroughs. Every innovation is a small vessel in ocean with great risks and experiments are currents that take us to safe shores. As we simultaneously engineer our products and services, our action sets ideas free and products begin their journey in the market. Idea Generation The first stage of innovation is idea generation. Although it seems simple because having ideas may delude people that it’s enough. However, companies need to generate ideas along with their strategic priorities, revenue goals and current operations. Recently, we have heard the “minimum viable innovation system” that refers to “the essential building blocks that allow a company to begin creating a reliable, strategically focused innovation function” (Anthony, David and Pontus) Basically, MVIS offers to have two innovation buckets with separation of improving existing products or services and new growth innovation. Companies should clearly define their innovation buckets to improve incremental process and focus on new ideas with new business models to grow in the future. Some companies may choose the first one over the second bucket however it’s essential to realize that companies’ future growth goals cannot be achieved by improving existing products. When organizations have the two buckets, they should assign a few people to work on innovation buckets. They don’t have to hire new employees but they need workers to work on them continuously. It can help us to understand why many start-ups fails before returning a dime to their investor. A good idea is always necessary but not sufficient. Companies should put continuous efforts to innovate. Once they work on new growth innovations (NGI), there’s a question how to pick areas where companies will head. As MVIS proponents usually propose a quick analysis from top executives and innovation leader’s meetings. It’s good not to waste too much time to make decisions as Nokia did for years. Action sets companies free. On the other hand, determining the new markets and customer segments may need additional outside views to have insights. Divergent opinions are valuable to organization and a crucial part of innovation. For instance, companies may hold forums with graduate and PhD students to have outside views about the issue and more importantly, these students can share their experience from their labs and articulate ideas about your innovation topic. Although, it’s unlikely to have a great idea from a forum, it’s possible to combine them and draw a bigger picture where your company’s path appears. There are numerous students and many of them look for financial aid or have some sort of economic difficulties. Organizations can support the students and researchers to enhance the company knowledge and even use forums as CSRs in some aspects. These forums may include psychologists, sociologists, anthropologists, marketers and advertisers to foresee where your markets can head and how people perceive the future. As a series of forums, innovation leaders should pick some ideas and circulate them in the future forums because “a new idea often needs someone other than its originator to move it along”(Mariello). So, you need to mobilize ideas in different groups. Leaders are also responsible to know their attendants who might be extrovert or introvert. Before each forum, the forum moderator, likely the innovation leader should collect ideas from each person to bring it up if necessary. Some outspoken employees or guests may cause missing others’ ideas or lead the forum into their way. Another NGI effort might be having meeting your current customers to be informed their future needs and propose new solutions to do their jobs more easily or cheaply. Noncustomer meetings are also needed to compare what you offer and what you don’t. Noncustomers can be as beneficial as customers to support your expansion in the future. Culture Culture is determinative if innovation can exist. Innovation requires a safe place where ideas can have some space to grow with support from the culture. As it sounds intangible sometimes, it’s possible to see culture differences when we look at silicon valley companies and corporates like GE or GM. So, how can we create a culture where people can create new ideas or is it necessary to have a democratic culture where there’s less restriction and no top to bottom management structure to discourage employees’ ambition? The well accepted innovation culture is an environment where “it was ‘safe to experiment’; where it was possible to ‘pilot’ and ‘test’ ideas before they were subjected to our stringent performance metrics”(Birkinshaw, Cyril and Barsoux). It’s critical to be patient during the innovation process because it’s a long-term investment. Where managers tend to punish employees due to failure of innovation, it’s likely to captive ideas in heads because of the fear of failure. There’s no success without shortcomings again and again. In order to avoid cruel punishment, the culture should be forgiven and eager to create new ideas with lessons from failures. Recently, Google Glass which is a wearable gadget with a little screen on a glass frame with information flow thru internet failed and the company aborted it due to cost and insufficient demand. It went almost viral on internet that Google repelled its product but later on, Google revised its product and will use its experience in the next products. On the other hand, we see a different culture in Chinese companies. It’s true that Chinese companies aren’t the most innovative companies and can be accused of violating worker rights but they are successful. Unlike the previous culture, Chinese companies’ “project goals, budgets and timelines were set by top management and cascaded down through a strong vertical hierarchy” (Williamson and Eden). Although it has some certain risks about a mistake from a small number of managers can be disastrous and such structure is extremely bureaucratic, it can be really quick to initiate innovation efforts and free up resources. Additionally, innovation loves challenges and pushing limits. When there’re limited opportunities, an innovation can emerge to overcome it. Today’s biggest companies were start-ups in garages with limited resources. Creative people find a way out with more than one option. However, it shouldn’t pose that companies keep incentives at minimum to nurture innovation or punish failures as a result of excessive hierarchy. A combination of cultures can avoid lags on projects and crossing over strategic boundaries. At the same time, companies have to be decisive to let projects go or kill them. In a culture where each manager worries about his her position, companies’ innovation capacity could be enough but the culture may exterminate good ideas or keep zombie ideas alive. A strong innovation culture also cares about its innovation resources, people. As I elucidated before, innovation is a long-term investment and requires a strategic commitment. According to the researches, investing in the people “have the greatest impact on innovative performance is developing and fostering human capital”(Rothaermel and Andrew). Companies should educate, train and encourage their employees to learn and have experience in different areas to have a sustainable innovation system. Culture is symbolic. An innovative culture can transform the whole company. For example, Google X’s self-driving cars or Glass, Amazon’s delivery drone or Facebook’s drones to carry internet around the world are actually small departments with a bunch of people. However, its impact is huge. Organization can use their innovation culture to increase their engagement with employees to show that they do great things and employees are a part of this culture. Fast-Prototyping and Experiments Many companies can generate ideas but waste too much time on them. The fast-prototyping stage is where innovation transforms into the first phase of a product or service. During the fast-prototyping stage, companies should start their experiments to shape their offerings and reduce uncertainty. Fortunately, new manufacturing methods have become accessible to wide range of population. When companies pick their ideas and get their OKs to go on, the innovation leader should follow up that ideas translate into products. An idea can be complicated initially and requires excessive resources, more than current funds offer and can take too long. Nowadays, 3D printers and simulators are widely reachable and can be used to prototype quickly. There are many examples of using 3D printers from car manufacturing to medical prosthesis. Another example is advanced computing power. Such as, Formula 1 teams had to use wind tunnels to design and improve car parts more aerodynamically but today, some companies use simulation software to save time and money without any wind tunnel experiments. When Google was working on Google Books, employees were thinking on a complicated algorithm to transform page pictures into digital documents. However, it would take too much time. The Google founder found a camera and took pictures with tripod. The first prototype was ready. Fast-prototyping helps companies to test their ideas and start experiments. According to the former Qualcomm innovation leader, “all business experiments, successful or not, generate three kinds of value”(Furr and Jeffrey). The first one is insight value with testing with customers to learn if they like the product. The second one is option value to follow, change or leave the idea. The third one is strategic value to test the original prototype with potential customers. Although all of them are quite useful for the innovation process, experiments should begin when teams work on prototypes at the same time. For example, companies conduct experiments to learn what their competitors can’t do by testing their products with their customers and noncustomers. There’s no point to dedicate resources and launch a product without any insight on customers. It’s not a risk. It’s a “russian roulette.” Secondly, there might be customer traps. As Henry Ford says, “If I had asked my customers what they wanted, they would have said a faster horse.” Thus, leaders should be cautious not to chase faster horses. Many customers desire faster and cheaper products and this approach can stall NGI efforts. For example, Sony developed its e-reader and asked its customers what they would have in the next product. The customer wanted a bigger and thinner screen. Sony launched a better resolution screen with smaller dimensions. On the other hand, Kindle realized that the problem was lack of e-books and launched its service with Wi-Fi. Kindle has been the market dominator and Sony has nearly no market share. Organization should conduct experiments on noncustomers, too and learn “why they refuse to patronize an industry’s offering”(Kim and Renee). Ecosystem is also crucial on a successful innovation because market or customers may not be ready for your offering. As the Kindle example shows, a product cannot survive by itself. Iphone and Ipod succeeded because of access to millions of apps. Experiments can help to determine if ecosystem exists to survive in the market. Korean SaeHan developed the first MP3 player but Apple filled the gap with ITunes because “all the pieces need to be in place within its innovation ecosystem”(Hayashi) to successfully innovate. Simultaneous Engineering Companies should persuade how they can speed up their innovation efforts and launch their products with improvement spaces. After fast-prototyping and conducted experiments, companies are supposed have enough insights with reduced risk. The leaders ought to decide if resources will truly dedicated to the projects quickly. When teams are ready to work on the product, apply simultaneous engineering over the process to use time more effectively and achieve a successful product launch. When companies work on technology, design, business model and processes (logistic or manufacturing methods), they will increase their chances to succeed. Recently, Buisson and Silberzhan propose a four-step breakthrough model to innovate successfully with reviewing blue ocean strategies (first-mover with market creation) and fast-second mover (targeting new markets to colonize). They took 24 companies as examples and found out that neither blue ocean nor fast-second are potent to explain market domination and success. As a result of their work, they remark four pieces to think about. As companies develop their products, they may create technological breakthroughs but it doesn’t necessarily mean that it will succeed. Dyson was able to make vacuum cleaners without bags after numerous prototypes and designed very well. On the other hand, technological breakthroughs may turn into obsession at organizations. Segway, for example, was a technological breakthrough at that time. However, it was pricey and questionable if we could ride on sidewalks or store it in trunks. A technological breakthrough can succeed if elements of ecosystems are present. Otherwise, it could result negative customer experience and problematic distribution. Design breakthrough is something every company should persuade whether it targets low end or high end. Swatch, for instance, is a low end product in the market with fun designs and is able to differentiate itself without excessive costs. Polaroid developed instant cameras technology and a business model with selling polaroid films. ITunes and Kindle book store are good examples of business models and have significant impacts to complete the ecosystem. Process breakthroughs are crucial for value engineering at low cost in my opinion. Model T, Ford’s mass production car with line assemblies made cars available to everyone. It dramatically cut the costs. Amazon’s PrimeAir can revolutionize its logistic operations. For instance, “Lenovo has managed to cut the cycle in half by applying simultaneous engineering across the entire innovation process, beginning in R&D and continuing through design, manufacturing engineering, quality control, procurement, marketing and service. For every project, team members work on different elements in parallel, under the supervision of one leader. Lenovo overcomes the usual problems of implementation by breaking down its product designs into separable modules linked by standardized interfaces”(Williamson and Eden). Well, it there’s no powerful communication loop, these systems will not generate what you hope. In each stage, there’s a desperate need to communicate. Whether you generate ideas on forums and circulate them into your teams or conduct experiments with potential customers, you have to have strong communication tools and skills to execute innovation process. Each team needs to know what people work on to embrace the idea at initial phases. written by me, please contact me for any correction Bibliography: Anthony, Scott D., David S. Duncan, and Pontus M.A. Siren. "Build An Innovation Engine In 90 Days." Harvard Business Review 12 (2014): 60. Academic OneFile. Web. 11 June 2015. Birkinshaw, Julian, Cyril Bouquet, and J.-L. Barsoux Barsoux. "The 5 Myths Of Innovation." MIT Sloan Management Review2 (2011): 43. Academic OneFile. Web. 16 June 2015. Buisson, Bernard, and Philippe Silberzahn. "Blue Ocean Or Fast-Second Innovation? A Four-Breakthrough Model To Explain Successful Market Domination." International Journal Of Innovation Management 14.3 (2010): 359-378. Business Source Elite. Web. 8 June 2015. Furr, Nathan, and Jeffrey H. Dyer. "Leading Your Team Into The Unknown: How Great Managers Empower Their Organizations To Innovate." Harvard Business Review 12 (2014): 80. Academic OneFile. Web. 8 June 2015. Hayashi, Alden M. "The Inside And Outside View Of Innovation." MIT Sloan Management Review 3 (2013): 39. Academic OneFile. Web. 16 June 2015 Kim, W. Chan, and Renee Mauborgne. "Red Ocean Traps: The Mental Models That Undermine Market-Creating Strategies." Harvard Business Review 3 (2015): 68. Academic OneFile. Web. 8 June 2015. Mariello, Alissa. “The Five Stages of Successful Innovation.” MIT Sloan Management Review. 1 Apr 2007. Web. 28 Jun 2015. Rothaermel, Frank T., and Andrew M. Hess. "Innovation Strategies Combined." MIT Sloan Management Review 3 (2010): 13. Academic OneFile. Web. 16 June 2015. Williamson, Peter J., and Eden Yin. "Accelerated Innovation: The New Challenge From China." MIT Sloan Management Review 55.4 (2014): 27-34. Business Source Elite. Web. 17 June 2015.

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On the campaign trail in Finland this week ahead of Sunday’s general elections, Olli Rehn has been confronted with a new topic: Nokia. Since Wednesday's announcement of an agreed all share bid for Alcatel-Lucent, giving the French company an

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The arrival of the ECB’s big bond-buying plan Monday is forcing investors to prepare for the once unthinkable: paying to hold debt issued by the eurozone’s one-time trouble spots. And the euro is heading toward parity with the dollar.

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What goes around comes around. In September 2010, Guido Mantega, then Brazil’s finance minister, popularised the term “currency wars”. He claimed governments around the world — led by the US — were engaging in competitive devaluations of their

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Book:American Icon

The universe has been around very very long time and we are the lucky ones to witness the peak moments of human history. Probably, every person have a list of breakthrough moments in history. Although it varies by what people prioritize, my list is not long. Discovery of  steam and combustion engines, mass production of cars, landing on the moon and sending the voyager and pioneer out of the solar system…

I read “American Icon:Alan Mulally and the fight to save the Ford Motor Company” by Bryce G. Hoffman last year in a very short time frame and it has been one of the best nonfiction books I’ve read so far. It may seem nonfiction but Ford’s fight to survive might get novelists jealous. Henry Ford’s great vision and his innovative approach in the car industry was one of the breakthrough moments in the industry history. Cars were around at that time which the affluent could afford and the new world was big. “Opening the highways to all mankind” is the way he would venture soon with Ford Model T and changed the car history dramatically. In fact, he made the car history.

Ford had been a victim of its success for many times but it’s not its all fault. The Detroit culture and infamous corporate structure cut off the vein of innovation. As a result of that, Ford couldn’t compete in the US against the Japan manufacturers in the world. Though the Ford Europe has done well, Ford America was a whole different story. It sounds weird but Ford hadn’t developed global products for decades. Ford cars were far away from fuel economy because “Americans like things bigger”. Well, it was once upon a time when you could fuel your gas tank up with $25. On the other hand, the crisis was coming and seemed bad. It would be destructive and Ford couldn’t survive from the 2008 crisis. Bill Ford Jr. was the CEO and he put in effort to change Ford’s culture before things got worse but it wasn’t enough. As a leader, Ford took a step aside, transferred Alan Mullaly from Boeing. The detroit culture wasn’t amiable for a plane guy. Mullaly would prove them wrong and resurrect the American Icon.

It wasn’t an easy decision for Mullaly to leave Boeing which he has built for years but Bill Ford was persuasive and pushed hard to convince him. Bill Ford sent one of Ford’s jets to Seattle many times and got him on the plane to Detroit. It was a tough choice to run Ford because Ford was really having hard times because of leadership, innovation and global economy and many people were predicting that Ford would be a failure soon. On the plane, Mullaly sketched the broad outlines of a plan to save Ford. He started with his goals and wrote “make the best cars in the world” and “profitable growth for all.” Then he added his 4Ps-performance,product,process and people- and listed the key metrics on another page to track in his every week business plan reviews: revenues, expenses, research and development costs, operating costs, earning and cash-on-hand.

Mullaly recognized that Ford’s history is full of success stories and turn-backs but pockets of success aren’t enough to compete and survive for Ford. Mullaly pointed out that Ford had to stick around a new business plan that is universally agreed and understood. It should be a single plan and work for the entire company. Ford had to agree on urgent issues and act in the plan. Everyone had to work together to save Ford otherwise it could be too late for the blue oval. The plan was built around 3 key points. People who are skilled and motivated workforce, products with detailed customer knowledge and focus and productivity for a lean global enterprise. One thing is so clear in the book that Mullaly’s data driven business model. Mullaly started gathering teams nearly every day and show the data on the board by projection. Every project was marked in yellow, red or green to illustrate how Ford’s doing. The Ford culture wasn’t comfortable with these kind of meetings because personal connections could cover up when you screw up. There were a lot of reds and yellows and everyone was reluctant to explain why the process was failing or stalling. It was important to point out problems because you can’t solve a problem until you accept that you have a problem. The other step is to ask who can help about to fix that red or yellow box, step forward to the solution. It took some time and some excs couldn’t get along and left. Mark Field, the current CEO, was one of the first ones who stood up and explained why his box was red and offer help to others if he could do something. Mulally made clear that the global product development and innovation for better fuel economy and driver experience are the keys to focus, compete and win.

Ford was also out of its vision after decades. Ford became a brand pool that from Volvo to Aston Martin to Jaguar. Bill Ford was a proud of having historical brands under Ford roof but the company needed money to continue its researches and developing a global product system. The bigger problem was these brands were losing enormous amount of money although the company was pouring billions in. Ford sold its Volvo, Aston Martin,Jaguar,Land Rover and kept in mind how it could use its experience in luxury brands to improve Ford’s product quality. Another problem was labor costs in the US and Mulally had to find a way to deal with United Automobile Workers. Labor costs are high to compete and create viable business which sustainably grows. Ford was manufacturing more cars than demand and it had to be cut. It was a hard pill to swallow but Ford had to lay off thousands of workers to keep factories in the US. It was also a relief for dealers because unmatched supply and demand caused discounts. It’s contentious in the media at that time but Ford wanted to be only company that could survive without the government bailout. Ford scaled its business to the market and maybe avoid a running-out-of-cash crisis.  

Ford developed ecoboost engines, global products but it was time to tell the difference between Ford and others. Ford was the only company to survive in Detroit without tax-payers money.Ford became profitable again as a result of the plan the team implemented for four and half years. Once Mulally came up with plan, he never doubted that it would succeed. It was a faith of an engineer in numbers because “the data says, if you take these actions, it’ll work.”

Do you have a point of view about the future? Check

Is it still the right vision today? Check

Do you have a comprehensive plan to deliver? Check

If you get skilled and motivated people working together through the process, you’re going to figure it out. But you’ve got to trust it.

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CEOs hired from outside a company tend to spend more money on research and development, while CEOs hired from within are likely to make large, strategic acquisitions, new research from the University of Missouri has found. According to the six-decade study, while 78 percent of new CEOs are selected ...