A GENERAL MANAGER IS EITHER AN OUTSTANDING INVENTOR OR AN EXCELLENT SALESMAN.
A LEADER KNOWS THE DIFFERENCE

To prepare a common managerial study of a Strategic Business Unit, a SBU, or of each such unit of a corporation, its history and the characteristics of at least four of its main managerial functions have to be considered:

- development and sales management

- operation management

- strategic leadership

- corporate governance

1. History

CISCO Systems started in 1984. Fifteen years later it is listed as no 9 among Business Week’s "The Global 1000". The company sells 80 % of the world’s Internet routers and its top management sees, besides culture and business, the absence of a long history as a decisive success factor. The Economist’s 1999 survey "Business and the Internet" comments: "… companies with stacks of ’baggage’ such as Lucent, Nortel Networks and Alcatel … would all like to become more like CISCO, but may find it hard to get there".

The Swedish telephone company Ericsson, founded in 1876 and known for its "skunkworks™", could be added to the list. In January 2000, however, plans were announced to "ciscosiate" its operations (i a the Flextronics project). General Electric (US) and ABB (Swiss-Swedish), both founded over 100 years ago, started a complete restructuring in 1981. ABB (Barnevik) then introduced a "multidomestic" matrix, followed in 1999 (Lindahl) by a divisional atructure.

2. Development and Sales

A product or an idea has to be invented before it can be sold - "concurrent engineering" implied

- For an operating Strategic Business Unit, a SBU, only one of these two processes at a time, invent or sell, thus can be seen as "critical", i. e. will result in a second order change, which alters the system itself. ("Theory of logical types")

- The other process consequently results in a "first order change", leaving the system unchanged - "plus ça change, plus c’est la même chose". ("Group theory").

- inventors are said to be "right-brained", spatially gifted with an intuitive mind

- sellers may be seen as "left-brained", verbally talented and with an inductive mind

- informal relations are weak across the R&D and the marketing groups (Kotter)

- "Engineers know nothing of sales. They seem to think that price has something to do with cost" (Salesman).

- "When I am going to see a customer I can of course bring a peddler along, provided he sits in a corner and shuts up" (Engineer)

- to reduce the negative effects of such rivalry and accelerate the critical process, special support should be bestowed on the professionals who are active within this area, invent or sales

- inventors are often perfectionists to a degree which is economically unacceptable peddlers may not observe when a well selling product has become obsolete

3. Operations

The General Manager of a SBU, besides possessing pertinent professional and managerial competence, should also be fit for the "critical strategy", i. e. either be a "right-brained" inventor or a "left-brained" salesman. The Functional Manager with his/her staff in charge of the "critical" process - development or sales - will then feel they get special attention and support while the negative effects of rivalry between the two antagonists will be reduced.

- "This company was by tradition run by engineers. You can just imagine how we salesmen plumed ourselves when a businessman suddenly became our boss." (Sales Manager).

- In 1974, when Ericsson’s new electronic telephone system, A.X.E., was ready for the market, salespeople, trained to move the by then antiquated crossbar equipment, were assigned to peddle the new product. Within short all company shelves were filled with obsolete gears and the balance sheets ruined for a decade to come.

- At Ericsson a most qualified telephone system expert was commissioned to start up the company´s new computer business, the EIS. The project ended a failure.

- a highly qualified and strong-willed bureaucrat was assigned to develop a new version of the AXE electronic telephone system.

Another failure followed.

4. Strategy

Like all zealous professionals, a qualified General Manager, whether a "right-brained" inventor or a "left-brained" peddler, is rarely able to determine by him- or herself when a shift of strategy is required. To deal with such decisions, another, still more powerful system is needed, that of the President - the "Leader" in the vocabulary of Zaleznik and Kotter. A competent executive of this kind - certainly of a rare breed - obviously has to be endowed with a Kotter-Hamel / Prahalad " … vision of the future".

Such a "Leader" has to

- observe and interpret incessantly the situation of each separate SBU:

- "We at ABB have some 5000 profit units and an army of of executives, some 20 000". (Percy Barnevik, 1981).

- In 1998 ABB changed its 1981 "multi-domestic" structure into a global network

- "Jack Smith (of General Motors) has done more to dismantle GM’s bureaucracy than his louder predecessor Roger (Smith) ever did. The company’s sacred divisional structure , created by Alfred Sloane in the 1920’s, is being eroded." (The Economist, May 8th, 1999)

 - initiate, when needed, a turn around operation:

"…is only one way to go: get an acceptable profitability before implementing your plans for the future. If impossible: sell or close" (Ulf af Trolle)

- predict for each SBU when a change of strategy is required, from invent to capitalise and vice versa. In venture capital projects this is often the task of the venture capitalist.

- install General Managers, competent to handle the incoming strategy.

- "The biggest accomplishment I’ve had is to find the right people. An army of them. … They are big hitters, and they seem to thrive here". (Jack Welch, CEO, General Electric)

- "What I am most proud of is how we changed the way we recruited managers at Atlas Copco … created an open internal (manager) market … that way we found unknown talents". (Michael Treschow, then President-"Leader" of Atlas Copco)

- During World War II Joseph Stalin gave his generals freedom to act by themselve while those of Adolf Hitler were denied such rights but were made responsible for the Fuerer’s mistakes. The war won and over, however, the returning Russian soldiers found no such liberty whatsoever.

- IT and Internet will facilitate the outsourcing of all kinds of technical and commercial activities.

- CISCO is said to be driven by the fundamental idea: shorten the time between invention and market presentation to an absolute minimum. To reduce capital employed, the projects are outsourced to a multitude of associated, mostly independent companies and specialists (The Economist June 26th, 1999).

- on the "Leader"- President level: ask: "Do I have the right expert", not "Is this expert right?".

- A vice chairman of Ericsson, outstanding as banker, commented five consecutive, abortive annual sales forecasts for the new AXE system: "I … was a member of the board of Ericsson during all these years … (but) could not myself have made any better estimates".

- support released General Managers.

- observe and interpret …

Fig. 1 "A General Theory"

5. Corporate Governance

However successful in the past, a "Leader" himself is not always aware of when age, sickness or other deficiencies have made him or her unfit for the task. To deal with such often extremely intricate and delicate problems, a managerial system of still higher order is required,

competent to carry out meta-governance : "… the use of power or mobilise power to change power" (Rhenman - Carlsson).

- in 1981 Curt Nicolin, then chairman of ASEA (later ABB), managed, against substantial resistance from his predecessor, to install Percy Barnevik as president of the company. The success was undeniable.

- in 1981 Reginald Jones, CEO of General Electric, got Jack Welch appointed as his successor as "Leader".

- "Sir Richard (Greenbury, ’Leader’ of Marks & Spencer) has mismanaged any boss’s most important task - to provide for his own succession". (The Economist, Nov. 17, 1998.) Sir Richard had to resign in June 1999.

In most mature companies a diverse and independent board is seen as a good thing while in many fastgrowing "Valley companies" the number of board members rarely exceeds six, often insiders with huge stakes.

- …the board of Microsoft had just seven members … one (an outsider) just resigned … three (of the remaining) are current or former Microsoft Execs and one … a founding venture capitalist …" (B.W. Jan. 17. 2000, p. 58)

6. A Theory of Hierarchy

To manage efficiently a business enterprise, the principle of "internal consistency" (non-contradictoriness) must be observed: "The construction of a demonstrably consistent, relatively rich theory requires … the construction of the next higher theory". ("Goedel’s Proof". Ernest Nagel; James R. Newman. In James R. Newman: "The World of Mathematics", Simon and Schuster - New York. 1956 p. 1668)

7. Inverted Hierarchy

A General Manager whose competence exceeds that of his or her Leader can do nothing better than find, as fast as possible, another employer .

8. "Skunkworks"

This theory of management, however, does not necessarily imply a conventional decision hierarchy, based on bureaucratic administrative power. Thus, for instance, "Skunkworks" (Lockheed™) teams "generally disdain bureaucracy and authority figures. They seem to work without project plans, executive top-heavy management or excessive waste" (Ronald Joe Record; Alta Vista Internet seek program: "Skunkware").

Some skunk work projects:

- The Lockheed F-117 Stealth Bomber

- The NASA "Modis Airborne Simulator" - MAS

- The Astra-Haessle "Losec", a world known anti-ulcer drug; the project was carried out against strict order from head office to relinquish the whole idea.

- The Husqvarna racing motorcycle; the project was carried out in a remote part of the industry area

- AGA flame-hardening operations

- In 1970 Ericsson, the telephone company, was declared in wide circles as out..Without two "underground" ventures the company might not have existed today as an independent enterprise:

  - The A.X.E. electronic telephone switching system, developed in 1970 -1974 by a separate organisation, ELLEMTEL, located reassuringly far away from the central R&D unit. (Bengt Arne Vedin: "Technical Revolt"; Atlantis, 1992; in Swedish)

  - The mobile telephone system, now the company’s dominating product, was developed in 1983 - 1990, the project carried out sufficiently far away from the company’s HQ. (John Meurling &  Richand Jeans: "The Mobile Phone Book"; © Ericsson in association with Communicationsweek International, 1994)

9. Information

"We want every person in the company to have the same degree of knowledge as the senior management. Even if it is painful and scary as hell". (Henry B. Schacht, then CEO, Cummins Engine; ca 1986.)