The Talent Value Chain: Achieving a High Return on Talent
Date: Jun 28, 2002
What every manager wants from a their talented employees is value-added contribution. But few managers know how to achieve this aim. To help reach this goal, Subir Chowdhury presents the concept of the Talent value chain.
We are living in a time when talented people—many of them represented by powerful agents, attorneys, professional associations, or unions—dominate in business, as they have for the past four decades in athletics and entertainment.
In effect, all employees now can be classified as free agents and all fields of labor as performing arts—places where field performance (not politics, popularity, personality, potential, academic degrees, or social pedigrees) matters most, where the value a person adds on the job is recognized and rewarded, where managers and administrators serve as coaches and counselors and either become world-class leaders of talented people or lose their jobs.
For the first time at many business schools, M.B.A. graduates are choosing "talent tracks," performance fields, and entrepreneurial ventures over management positions in large organizations, having witnessed the mass exodus of many managers in merged and downsized companies.
We live in a talent economy. Today's economy is "ideacentric" and talent driven. Good ideas give birth to good products. Innovative ideas are driving the economy, creating wealth, and making people rich. More important, some bold ideas are changing the world for the better.
Providing a climate where people feel free and motivated to cultivate and implement constructive ideas is the challenge of talented leaders. Those who succeed in selling good ideas to others win financially, gain power, and assume a leadership role. Indeed, the only sustainable form of leadership is thought leadership—generating innovative ideas and making market adjustments faster than the competition. Even though the bubble of instant "dot-com" billionaires has burst, we have all been struck by the blinding light of the lasting truth: We live in the age of ideas, and the talented person who generates, implements, and successfully markets those innovative ideas wins exponentially more money, visibility, and credibility.
What every manager wants from a Talent is value-added contribution. But few managers know how to achieve this aim. To explain how to achieve this aim, I present in this chapter the Talent value chain.
Talent Breeds Innovation
Every successful innovation starts with imagination and knowledge.
Imagination + Knowledge 5 Innovation
The imagination and knowledge of talented people breed innovation. Places of innovation are where all talented people want to work—and imagination and knowledge pave the way.
The great scientist Albert Einstein said, "Imagination is more powerful than knowledge." Many of Einstein's theories in his later life are based on his own imagination. He never wrote "proof" of those theories. Scientists are still trying to prove some of them.
Knowledge can be acquired through reading, learning, and doing. But imagination must be cultivated and applied by each individual Talent. Every innovation starts in someone's imagination.
Walt Disney exercised his imagination in creating a fantasy land for kids regardless of cultural or language differences. If people come to Disneyland from Vietnam, South Africa, or India, without speaking any English, these people still enjoy Disneyland. By the end of the day their kids are excited and thankful for so much pleasure. There are no cultural boundaries or language barriers. That is the phenomenal power of the imagination.
Henry Ford mixed imagination with knowledge. He believed that one day every American family would own a car. And he had this belief when there were no paved highways.
Bill Gates, similarly, believed that every American family would want and need a personal computer. "Computers will do micro-surgery within the next 20 years," he predicts. If someone cannot imagine this in the first place, how is it going to happen?
Michael Dell can boast that only one company in the world increased its earnings and revenues at about 80 percent during its first eight years and at 55 percent per year for the next six years—and that was his company, Dell Computer Corporation. He achieved this by avoiding "traditional business thinking" and dealing directly with customers.
We are entering the age of excellence, an age with no geographic boundaries. In this age, every individual, organization, product, and service faces tremendous competition. To survive and grow, each individual and organization must keep improving. Mediocre work will not stand the test of time. Mediocre people, products, and organizations will suffer demise sooner or later. Only high-quality products, services, and strategies will guarantee survival and success. Where there is tremendous competition, you need to do something better and different.
CEO Michael Dell notes: "We surround ourselves with the best talent we can find and structure our business for success, even to the point of dividing up people's jobs. This has now become part of our culture. The first time we did it, some people said, 'You're cutting my job in half.' Six months later, because of growth, their job is the same size it was before, and they say, 'Please cut my job in half again.' We grow our business by dividing and conquering different parts of the market, which also helps us acquire new talent."
Five Links in the Idea-Talent Chain
When we see a good idea from its genesis through to successful implementation, we create a chain of events. Everybody has a good idea, but few ideas are ever brought to fruition. So, what chain of events has to happen?
1. Anticipation
Anyone who wants to win in the marketplace must anticipate the next wave and learn how not only to predict the next wave but also to create the next wave. With the intense competition we have now, people depend more upon innovative ideas—ideas that anticipate the next wave, start a trend, or at least ride a wave started by someone else.
For example, Michael Dell reports: "We strive to anticipate key trends in our business to gain a greater share of a faster-growing market. The Internet is one example. We know that virtually everybody will be buying computers over the Internet in five years. We want to dominate that market and have a leadership position in sales of computers through this new distribution channel. We also look aggressively for add-on businesses. We focus on clearly connected businesses and services that our customers want, such as peripherals in software, integration services, and financial services."
2. Articulation
You may have a great idea, but if you can't articulate it and express it well to others, it will never see the light of day. Everyone knows of great products that have failed because the message was not right.
For example, during the past few years, many entrepreneurs failed because they failed to articulate their vision and mission to themselves or to others. They seemed to focus more on having a successful IPO than on building a business. They failed to develop and articulate their plans for success, and they ruthlessly failed their people.
3. Acceptance
After you come up with an idea, you have to make sure that the people who surround the idea will accept it and embrace it and cherish it. You may have the best idea, but if the people you depend on are not cherishing it, it is useless. If everyone in your environment embraces and cherishes the idea, then you can build a successful organization and win customers' hearts.
For example, when Jeff Bezos started Amazon.com, he made sure that all his people cherished the idea of selling books over the Internet for the first time. At the beginning, many people thought, "I'm not going to buy a book without touching it first." But millions of people are now doing it because somebody believed in the idea and led others to accept it and bring it into reality.
4. Action
Even your best ideas may be obsolete within months, not years. So hurry. Fast action is required. If you have a good idea, you need to turn that idea into a good product or good service. You have to take the idea and make something out of it. Taking "action on time" is an important characteristic of successful entrepreneurs. With the advent of new technology and the growth of information technology and global competition, to become first you have to act fast. Speed is a vital factor in today's success. New products and new strategies emerge almost daily.
For example, hundreds of dot-com companies around the globe are trying to copy eBay's success on the auction business; virtually none is successful. Chrysler's PT Cruiser and 3M's Palm Pilot are still the leaders in their product lines due to "action on time." Many companies may try to copy them, but none has had similar success. The most important step that successful leaders take is "action on time." It is also the step where most ideas die. Almost everyone has good ideas, but how many are acted upon? Commitment to fast action is the key to success.
Proactive actions characterize market leaders. Michael Dell comments: "We've learned that we can't just follow the other guys. That approach won't create a lot of value. We try to find our own way and do things better. We may borrow good ideas from other companies when we see them, but we're not held to convention—and we're not striving to be like other companies. We're not trying to remake our company or merge with other firms so that we can have a different profile. We are building our own path."
5. Leverage
The fifth link is leverage. Leverage the idea, capture market share, and create wealth. The team who surrounds the individual Talent must leverage the idea into something much bigger. Together they enlarge the scope and scale by leveraging the idea through alliances and other means.
As Michael Dell comments: "We will continue to grow our business. Along with our talented team of employees, we plan to take the company to its full potential—for our customers, shareholders, and employees—for years to come."
Talent drives this chain of events to turn good ideas into reality. The combination of these five links yields the innovative product. Ideas die anywhere on this chain if there is not commitment to the idea.
Five Ways to Create Value
As Talent, you can create value in five ways, discussed in the following sections.
Make Sure Your Idea Is Unique, Authentic, and Genuine
Explore the genuineness before you implement the idea. You may have a phenomenal idea, but you don't know whether somebody has already done it or not. For example, when Amazon.com came up with the idea to sell books over the Internet, Barnes & Noble and Borders thought, "This is a good idea." So, they started BN.com and Borders.com. They have had some success but not even close to that of Amazon.
Expose the Idea to the Right People and Involve Those People Intensely
If you have a phenomenal idea, you have to select and involve the right people intensely in implementing your idea. You may need financial help to carry the idea off. You may need the endorsement of key players in the industry, or you may need to gather customers. Regardless, you want influential people to back your idea and a passionate team to implement it.
Ensure That All Information Is Adequate, Accurate, and Free Flowing at All Levels
Management should create an atmosphere that ensures that adequate and accurate information flows freely and fearlessly up, down, and sideways to facilitate the implementation of ideas. If information is held back, or there is lack of commitment, or misunderstandings of goals, then the project will fail.
Provide the Right Resources to People Involved
You may have a phenomenal idea, but if you cannot provide the right resources to the right people, then your idea will never be implemented. Provide the resources to make the product or service the best it can be. Don't take shortcuts that sacrifice a passion for excellence in order to save a few bucks.
Expect Something Unexpected; Many Failures, Surprises, and Setbacks Will Come, So Learn from These
"To invent something, you need a good imagination and a pile of junk," said Thomas Edison. It took Edison thousands of tries to get the electric light bulb to work. He knew that he would get it if he persevered. The movie Titanic was far behind schedule and incredibly over budget. If it had flopped at the box office, Viacom would have been headed for disaster. But Viacom managed to do it right; the rest is history.
The IDEA Value Cycle
On a personal level, gaining self-knowledge and self-confidence is vital to creating value. The "IDEA value cycle" can be spelled out as follows.
I—Invest in Yourself
Determination must be the first impulse toward becoming successful. Before you can find anything, you must find yourself. Soar on your strengths and contain your weaknesses until you can transform them into new strengths. Seek perfection—zero defects—in the product or process by fostering a zero defect philosophy in your people. Invest in them and help them to invest in themselves to gain the self-knowledge and self-confidence needed to help you win. Without investing wisely and regularly in Talent, you can't have great returns.
D—Different Thinking
In the future, there will be tremendous competition for everything, and the only way you can compete is to do a different thing or do a common thing differently. The strong comeback of Apple Computer Company is mostly credited to its founder, Steve Jobs, who characterizes himself as well as his organization with a simple motto: "Think Different." None of the other computer manufacturers had ever thought about using multicolored plastic bodies for personal computers before Jobs's iMac. Its success is not necessarily due to the product innovation or better performance, but rather to the "think different" strategy. Using the same strategy, the United Kingdom's most admirable entrepreneur, Anita Roddick, built her cosmetics empire, The Body Shop. Roddick's bold declaration: "Small chest, flabby thighs, large hips, thick lips, BIG DEAL—love your body." Different thinking creates value for the organization and society. Cultivation of mind produces different thinking.
E—Emotional Commitment
Commitment with emotion is the key to any success. In India it is called sadhana. When the famous sitarist Ravi Shankar was learning sitar from his guru, he didn't leave his room for many days until he learned the basics. He devoted all his time to sitar. That takes emotional commitment. Throughout history, you see the greatest successes coming from those who exhibited undying commitment. Michael Dell, Bill Gates, and Anita Roddick are emotionally committed to their endeavors. Their emotional commitment has helped them succeed. They all love their work. They have their own mission and commitment. Rather than jumping into the dot-com frenzy, they focused on their own beliefs. They want to create organizations that will dominate the economic landscape. They are passionate about making a contribution to society and creating a business culture of enlightenment. They want to create and deliver real value to their customers and shareholders. They have a "love it or leave it" philosophy. They don't do things only because they want to hit revenue numbers; rather, they "just do it" because they have emotional commitment. Michael Dell had a dream to beat IBM while IBM was the giant in the computer market. He succeeded by making the dream come true through his own emotional commitment.
The success of General Electric (GE) is largely credited to retired CEO Jack Welch's leadership in creating an "emotional bond" with employees. GE's Six Sigma initiative is not just a CEO-driven quality initiative. It is a management philosophy from top to bottom. Everyone is learning the same language of Six Sigma's revolutionary five-step process: define, measure, analyze, improve, and control (DMAIC). This philosophy creates an emotional bond among employees. And the results show it: GE reported record results; 2000 earning per share $1.27, up 19 percent; 2000 revenues grew 16 percent to $130 billion; earnings up 19 percent to $12.7 billion. Welch reported: "GE's double-digit increases in 2000 demonstrate the benefits of the company's emphasis on globalization, growth in services, Six Sigma quality, and e-Business."
Emotional commitment makes the difference between workers and fighters. Workers are typical 8-to-5 performers; fighters are reaching for excellence. They want to be winners in everything they do, whereas workers may not have that winning mentality. Workers are contractually obligated to do their jobs; fighters are mentally obligated. Fighters are risk takers, whereas workers are risk adverse. Above all, fighters are always emotionally committed.
Most workers don't have a winning mentality because they don't have a sense of ownership. If you own something, then you don't want to lose it. Profit sharing, reward, recognition, and bonuses are key ingredients to seed ownership within workers. In GE's Six Sigma initiative, "black belts" receive rewards for completing projects successfully and saving GE's bottom line. Contrast this level of commitment with that of many failed dot-coms whose owners admitted to starting a business just to go public or to be bought out.
A—Action
The most important thing that successful entrepreneurs do is take "action on time," as mentioned earlier. The attitude of "Just do it"—the slogan of Nike's founder and chairman, Phil Knight—is necessary for any success. If you have a bright idea, you must act on it; otherwise, someone else will eat your lunch. If you are not an implementer, find a partner who is.
Michael Dell notes: "A lot of favorable economics occur when you take time out of the process. Dell's model has about eight days of inventory. One competitor has 81 days of inventory and 40 more days of inventory in their distribution channel—16 weeks more than our eight days. A competitor with that level of inventory can't compete with Dell and make any money doing it. As a result, our business is growing fast, and our profitability exceeds that of all of our major competitors combined."
The action at Dell is centered on customers, as Michael Dell reports:
We maintain an intense focus on the customer, even as we grow. Today, Dell is still ranked number one in customer satisfaction surveys. Our account teams work face-to-face with all of our large customers. We work with our suppliers to deliver materials on a pull basis. Instead of waiting to build a machine until we have all the materials in the warehouse, and then guessing what people will buy, we focus on how fast the inventory is moving. If we can shorten that time, not only will we save our customers a lot of money, but also they'll get a superior product that meets their precise requirements.
The next frontier of competition is in the area of customer service quality. We're constantly looking for breakthroughs, such as our direct business model, that change the dynamics of the game. Finding a new way to deliver a better customer experience and more value at less cost is a good strategy.
By following the Talent value chain, you, too, can deliver a better experience for employees, customers, and all other stakeholders.
Although Dell admits making mistakes, we learned from them. We've developed overly ambitious products that tried to do everything for everybody—without a focus, they were bound to fail. The answer is not having a brilliant conception of all the best ideas before you start, but rather learning from your mistakes and not repeating them—and making sure that those lessons are passed along. As Dell states:
"There is such a thing as excessive growth that is not only too fast but dangerous. We grew in one year from $890 million in sales to $2.1 billion in sales. It was exciting, but one year later we hit the wall. We had to learn how to understand the profitability of different parts of our business, where our business was succeeding and where it wasn't, and how to anticipate and build an infrastructure to support growth.
When we had to focus on our best opportunities, we adopted the idea that return on invested capital was a great way to measure different parts of our business. If the cost of capital is about 15 percent and a business is earning 20 percent return on invested capital, it is creating value for shareholders.
By segmenting our business, we found the path to grow into an organization that has many different businesses. We have a business selling to large customers, to global customers, to the consumer. And these businesses have different characteristics. You separate those, and you create management opportunities. This approach allows us not only to aggressively bring Talent into the company and grow Talent, but also to get very finely focused on the unique needs of specialized customers and achieve high returns on invested capital."