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Swiss Legislation: The Breakdown of the Social Contract Between the Generations

When the legislator seeks to overrule a previous law or decision, it can adopt one of three different approaches (Holland and Webb, 2013):

  1. Approach 1: say that the law becomes [x] and, if that differs substantially from what the understanding of law was until now, then hard luck – it was always [y] but it becomes [x] now. Here, any decision which changes the law from what it was previously used to be operates retrospectively as well as prospectively. It is retrospective in that the parties to the case are caught by the ruling and so are all those who have created leases or contracts on the basis of what used to be the law. Of course this can produce disturbance.
    For example, this year Romania’s President signed into law a bill that enables property buyers to walk away from overpriced mortgages, setting it on a potential collision course with commercial banks, the central bank and the European Commission. What the news conceal, however, is that the banks in Romania (about 90.2% of bank assets are held by institutions with foreign [read: EU] capital) transferred full currency risk to the borrowers, imposing credits in Swiss francs (CHF) instead of Romanian lei (RON). Since the Swiss unpegged the franc from the euro (€), those credits have become a borrower’s trauma.
  2. Approach 2: say that the new law is [x] but, because everyone has organised their affairs until now on the basis that the law was [y], the new view of the law only affects events occuring after the decision. So only contracts or leases formed after the date of legislation would be affected by the new law [x]. Contracts and leases, etc. formed before the ruling would continue to fall under the old law [y]. This is the ‘purest’ form of prospective overruling.
  3. Approach 3: it is possible to come up with other variations (mixtures). For instance, the decision might be held to be prospective as regards everyone not involved in the case but retrospective in its effect as between the parties to the case in which the ruling is given.

This month, the Swiss people will get the final say on reforms to the pension system in a referendum. Instead of a real reform with a flexible retirement age, the set of reforms would see the retirement age for women raised to 65 – it is currently 64 – bringing it in line with men. Secondly, pension payments will decrease from 6.8% of the capital per year to 6%, although salary deductions will go up slightly. That will be compensated with a ridiculous monthly 70 franc bonus in AVS/AHV (state pension) payments for everyone (Giesskannenprinzip). On top of that, the reforms will be financed by a 0.6% increase in VAT, a change to the constitution that will be put to the people – and especially to the young. The whole package is another symptom of the breakdown of the social contract between the generations.

How can politicians make a mark? By creating new laws and regulations. Preferably, these laws carry their names and have such fancy designations as the ‘Dodd-Frank Act’. As Niall Ferguson (2013) puts it: “Among the most deadly enemies of the rule of law is bad law.”

Change and Commitment

The International Isle of Man TT (Tourist Trophy) Race is an annual motorcycle sport event run on the Isle of Man in May or June of most years since its inaugural race in 1907. It is still billed in popular culture as one of the oldest and most dangerous motorsport events in the world, with over 250 fatalities in its history. On the 20 March 1954, when Honda Motor Company was still a small company and less than eight years old, Soichiro Honda made the following announcement to his employees:

“Since I was a small child, one of my dreams has been to compete in motor vehicle races all over the world… I have reached the firm decision to enter the TT Races next year. I will fabricate a 250 cc racer for this race, and as the representative of our Honda Motor Co., I will send it out into the spotlight of the world. I am confident that this vehicle can reach speeds exceeding 180 km/h… I address all employees!
Let us bring together the full strength of Honda Motor Co. to win through to this glorious achievement. The future of Honda Motor Co. depends on this, and the burden rests on your shoulders. I want you to turn your surging enthusiasm to this task, endure every trial, and press through with all the minute demands of work and research, making this your own chosen path. The advances made by Honda Motor Co. are the growth you achieve as human beings, and your growth is what assures our Honda Motor Co. its future.
With this, I announce my determination, and pledge with you that I will put my entire heart and soul, and turn all my creativity and skills to the task of entering the TT Races and winning them. This I affirm.”
(Source: Honda Motor Company)

Opposition by the Japanese Government and difficulties in conforming to TT rules and regulations delayed Honda’s entry until 1958. In that year, Honda won the manufacturer’s prize.

Westley and Mintzberg (1991) differentiate between the different styles of those who spearhead fundamental change. There are idealistic visionaries like Benjamin Franklin. There are entrepreneurs like Soichiro Honda. And there are the transformers who transform existing companies and their products or services from the inside, such as Lee Iacocca and Jan Carlzon of SAS (the Scandinavian Airlines System). The word intrapreneur has been coined to describe those people exhibiting similar behaviours to entrepreneurs but who work within an organisation. Pinchot (1986) offers ten guidelines aimed at circumventing the bureaucracy and getting things done in large organisations:

  1. Come to work each day willing to be fired.
  2. Circumvent any orders aimed at stopping your dream.
  3. Do any job needed to make your project work, regardless of your job description.
  4. Find people to help you.
  5. Follow your intuition about the people you choose, and work only with the best.
  6. Work underground as long as you can – publicity triggers the corporate immune system.
  7. Never bet on a race unless you are running in it.
  8. Remember it is easier to ask for forgiveness than for permission.
  9. Be true to your goals, but be realistic about the ways to achieve them.
  10. Honour your sponsors.

Innovation in Large Companies

The model for organisationally separate development units was Lockheed’s Skunk Works – a product development team established in Burbank, California during WWII to develop innovative new military aircrafts. Today, Lockheed Martin’s Center for Innovation is known as the ‘Lighthouse’ because of the iconic 40 foot recreation of a 19th Century Lighthouse located inside the Center’s expansive atrium. The Lighthouse draws upon the maritime history of Hampton Roads and is a daily reminder that the Center serves as a beacon for explorers on the pathway to innovation.

The Lockheed A-12 was a reconnaissance aircraft built for the United States Central Intelligence Agency (CIA) by Lockheed’s ‘Skunk Works’. The aircraft was designated A-12, the 12th in a series of internal design efforts for ‘Archangel’, the aircraft’s internal code name. Since the Skunk Works program, a number of companies have used advanced development programs in satellite units in order to develop new organisational capabilites:

  • IBM developed its PC at a new unit led by Bill Lowe and located in Florida, a thousand miles from IBM’s headquarters in New York.
  • Xerox’s Palo Alto Research Center (PARC) pioneered many of the technologies that formed the basis of the microcomputer revolution of the 1980’s and 1990’s. However, these were put on the road to success much easier by nearby competitors, such as HP, Apple, Microsoft, and Sun Microsystems than it was to be absorbed by Xerox’s east coast establishment.

When Your Competitive Advantage Walks Out the Door: Gucci and Cavalli

Chairman Domenico De Sole and Vice Chairman Tom Ford had masterminded Gucci’s transformation from a near-bankrupt family firm with an over-diversified brand into one of the hottest fashion houses at the turn of the millennium. As creative director, Tom Ford had established Gucci as a style leader and hired young designers. De Sole’s astute leadership had instituted careful planning and financial discipline, and built Gucci’s expansion in Asia and global presence.

In September 2001, French retailer Pinault Printemps Redoute (PPR) agreed to acquire Gucci Group. In November 2003, the managers and shareholders of the two companies were stunned to learn that De Sole and Ford would be leaving Gucci in April 2004. How great a blow was the departure of the duo to PPR? In theory, a new CEO and a new creative director could be hired. In practice, however, talent of the sort of De Sole and Ford was hard to find; especially a combination of CEO and designer who could collaborate around a shared vision.

The stock market’s reaction was ominous. Gucci was worth US$ 1.2 billion less without De Sole and Ford.

Just this week, Roberto Cavalli CEO Gian Giacomo Ferraris has initiated a comprehensive reorganisation of the company, including store closures and severe cuts to global headcount as Peter Dundas exits. The Italian label will be closing its Milan operations and transferring all functions to its offices in Florence. Production and logistics will be rationalised and the company will close, relocate and sell stores across its retail network. Cavalli, which currently employs 672 people, will eliminate 200 positions. Ferraris expects the company to return to operating profitability in 2018. Roberto Cavalli, like many other luxury brands, faces a challenging climate. In 2015, the global market for personal luxury goods grew to €253 billion (about $284 billion), up only 1 percent on the previous year in real growth terms, according to Bain & Company, a global consulting firm.

Articles in the Financial Times during November 5 – 8, 2003
Business of Fashion]

Weapons of Mass Migration: Forced Displacement as an Instrument of Coercion

Mass migration, it needs to be said, has long been exploited by devious entities as part of a new military genre: asymmetrical warfare.

In a powerful essay published in Strategic Insights, Kelly Greenhill (2010) defined such a tactic under coercive engineered migrations, noting: “those cross-border population movements that are deliberately created or manipulated in order to induce political, military and/or economic concessions from a target state or states.”

Asylum seekers and migrants descend from a large fishing vessel used to transport them from Turkey to the Greek island of Lesbos (? 2015 Zalma? for Human Rights Watch)

Elaborating on her theory she goes on to add: “Coercive engineered migration is often embedded within mass migrations strategically engineered for dispossessive, exportive, or militarized reasons. It is likely, at least in part as a consequence of its embedded and often camouflaged nature, that its prevalence has also been generally under-recognized and its significance, underappreciated. Indeed, it is a phenomenon that for many observers has been hiding in plain sight.”

Greenhill’s insights certainly put Europe’s refugee crisis under a very different light. The real threat pose not the refugees per se, but the games of covert destabilisation so-called friendly nations are waging against each other’s governments. Qui bono?