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Bmwn Fall 2013 Classes 69 ENGN 1010 Course packet sales are nonrefundable All sales final Cohen List of Articles Eng 1010 Fall 2013 Classes 69 Class 6 O OOOOOOOOOO OOOOOO OOOOOOOO Cash Cows Hamburger Joints Call Them Heavy Users But Not To Their Faces Practically Everybody in Dunn NC Reads the Daily Newspaper Fresh Marketing Tactics Help Writer Push His Thrillers to Mass Audience Christopher amp Banks Shuns Trends in Fashion Targets Mothers in 403 High Court To Hear Nike Case Involving Commercial Speech Everybody s Business How to Sell a Mustang or Anything Else lass 7 Do You Need an Expert on Widgets to Head a Widget Company Taking on Titans Trustbuster Joel Klein Once Viewed as Timid Faces a Very Full Plate Bertelsmann Taps Attorney Klein for a Top Post The New Schools Chancellor Jack on Jack HBS Update Lennar Corp Thrives as Residential Builder With Oddball Culture Shackleton s Techniques For Surviving Antarctica Inspire Business Leaders Kay Graham Deserved a Pulitzer for Management Too How Much Is Your Time Worth Principles of Personal Management Keeping Your Financial Footing at 22 So You Can Buy That House at 32 How to Boost Your Credit Score Psst Human Capital lass 8 What is Strategy How Competitive Forces Shape Strategy US Government Fishes for Answers to Outbreak of MicroOrganisms Hurting Seafood Industry Class 9 O O O OOOOOOOO If You Can t Get A Man With a Gun Big Bucks Might Work Why Startups Fail Levin Faces Biggest Challenge of Long Career Case s Plan Managing From EMail Distance AOL Shakes Up Its Management as New Media Makes Way for Old Failed Effort to Coordinate Ads Signals Deeper Woes at AOL AOL Time Warner s Steve Case Resign Amidst Intense Pressure The Spoils of War in Kabul Now Include Thai Restaurant The Tiger Fund is Gone Who s Next How the Soros Fund Lost a Game of Chicken Against Tech Stocks Buffett Turns Wary on Rise of Stock Prices Warren Buffett and How He Does It Finding Bargains in Good Times and Bad Dow Jones Publicattions Library Page 1 of8 Dow Joiners lnteractlvie Publications Library 4 V V 3 39 f Em 117quot r Article l of 1 Cash Cows 1Hanibturyger Joints Calil Tlim 39llleavy Users But Not to Their Faces For Fast lFood Ci39li1lll i Dilicrs Like Movers Bill amp Phil Are the iSpeeial Sauce a A Triple Q tl1l l39tr P0U dEl By Jennifer 0r doriez Staff Reporter of The Wall Street Journil 0 l122000 The Wall Street Jiouimoli Page A1 Copyright C 2000 Dow lottes S Cot39ripiity line CHICAGO were the ehiiefexeeuitivei of MefDonaldi39s Corp present at Bill amp Phil Moving 8 Storage he would be on the edge of his seat Phil Sheridan an owner of Bill amp Phil is tliinltirig about dinner and he is torn He craves a cheeseburger u Qttnrter Founder with Cheese Oh my Godquot39 says Mr Sheridan But Mr Sheridan is on a diet lie waiits to feel srvelttei when he hits the beach on an upcorning vacation in Catietiti Mteitieo Which will pxrevail diet or clteesebuirgerZ For McDonald39s this isn39t just about a burger in the vernacular of the fast food industry Mr Sheridan is a heavy user The heavy user accounts for only one of live fastfotod patrons ph but about 60 of all visits to fastfood restaurants By this die nition the Ilieavy user aceountied for iroughly 66 billion of the SI I0 billion the National Restayurarit Assotiation says was spent on first food last year in the US Dtet nitiotns of the l1 et1t39y user vary but by any meusuirentettt Mr Sheridan stands out He spends as much as 40 at day at fastfood restaurants He sometimes llSlIS thern more than 20 times a month a qualifying number for hieavyuser status according to a survey done by marketing Porter Noveilltiii A strict diet could cost the industry one of its best customers Moreoveri as an owner of Bill amp Phil Moving amp Storage he wields in uienice over other iheatry users This autumn the staff of Bill amp Phil consisted of four hieavy users if Mr Sheridan abstains might the other three folltow suit Television comrrtercials for McDonald39s Burger King and only ioecasionally hint at the industry39s dependence on this narrow user group Commercials often show farnilies with children and elderly rnartried ctouples biting into juicy burgers lcquot39 C Dorunienits arid SEllIilquotlgyH Sllillckd Ltieal Setttiiigs tTL lTIp quottquotSi Mi Ettlli7Jttdilltlil It l7 Zl ll Dow Jones Publications Library page 2 0f 3 ln fact the heavy user is most often a single male and the industry privately acknowledges the weakness of its grip on him quotWe used to have this great sign around here that said something like Marriage and kids are bad for your businessquot PR says 39iiliiie Brevver senior dil39l L39iUfl39 of consumer insight for Trieon Internatiomil il lil39S unit quotThe nurnbers wliat the heavy user bt1ys are pretty astonishing says Peter O39Hara vice chairman of Checlers Drive In Restaurants lnc Clearwater Fla a 450iunit hamburger eliain whose top managernent in September went on a two day retreat to brainstorm how to better attract this valued customer quotMaybe because of the perceived heavy user image the big chains are afraid to appeal to him Ronald McDonald is not heavy userquot Hetavgr users says Barry Seltwartz llurger King39s director of brand research and analysis quotcome more often they spend more money and that39s what ntaltes the cash registers r39ingquotquot But he adds quotthey39re in our restaurants alreadyquot The company39s marlzeting dollars more often are spent trying to convince light users that they want a burger in the first place he says The founders of Bill 8 Phil Moving amp Storage Phil Sheridan and Bill Krantrz are qllil ttrSSElllIlEli heavy users Both are 27 years old and single and they don39t know how to eoolsi Tliey played fototball togetIl nr at New Trier High Sehooil in the upscale Chicago suburb of vVil1lltfliVLl After practice every day Mr Sheridan observed Mr Krantz sitting outside a convenience store a dou39bleirstufled sub in one hand and a srtuffedpizza slice in the other They started eating together and a friendship developed Five years ago having dropped out of college they started Bill 8 Phil Both had worlszed as movers They liked the iphysieal challenge of transporting heavy goods Now they like running their own company Although they no longer do the heavy ilfllllg their jobs are E 41illlJ5iil39y demanding and ap39pe39titer imlueing quotlhey ivorilt long hours and IE i39t39L work farnished They often lack the tiine for sit down res taurants quotTire heavy user uses quieltservice restaurants as an applianeequot39 says Charles llieolas a spokesman for Burger King Corp a unit of Great Britain39s Diageo PLC But their l39asthood patronage isn39t all about convenience They love the food It brings them comfort quotAt the end of the day if you39ve had a difficult customer you39re like quotGive me a No 2 with cheese and make it a Biggie F Says Mr Sheridan describing the Sr46 Wendy39s Classic Double combo meal and extra large portions purehasablle for only 39 cents more t391le C Doeuments and Settings slruelcde Local Settingsquot Tempquot WSllTist39t7mniJlitm ll l39 39f1ltll g Dow Jones Publications Library Page 3 Of 3 A couple of good burgers can leave them feeling not just full but indulged A Wendy39s Deluxe Cheieseburtger quotThat39s livingquot Mr Sheridan says its no accident tltat the other workers at Bill 8 Phil are heavy users too lille wine quotlovers and Corvette El lilllUtlLl5lfS they like to share llllt39 passion with otliers Mr lirantz gets upset when his coworlters snuclt adoring the morning leaving him with no equally farnishecl lunch partner quotI expect someone to save their appetite for mequot he says Fast food played a role in the hiring of their receptionist Wanda Vazquez One day almost two years ago Messrs Sheridan and lirantz had just tired their receptionist and were frantically trying to run their business while answering their own calls At noon fElmlS l39lt tl Mr Krantz riecalls quotl said 39Pliil forget it We39re locling the door and going to eat quot At lohn39s a l10t lUg stand down the street Mr lrantz sPled Ms Vazquez quot1 was watching to see what she would order because i really like girls who can eat I think it tells a lot about a personquot Mr Krantz says Ms Vazquez ordered a gyro and fries As she stepped away from the counter quotthey just wallted up to me and asked ifl wahteol a jobquot recallls Ms Vazqtuea who is 20 trim and single She started that week quotDispatcher Kenny Frantz may be the quotheaviest user His purchases during a recent Monday through Friday ve eheeseburgers 20 pieces of fried chickeinz two double cheeseburgers a submarin e sandwich two sausagestuffed pizza putTJs a Ilarge steak burrito a tamale with chili and cheese Plus sides Such volume may not be typical otfetrery heMy user But in his case Mr Frantz says quotmovers get so liungry that by lunch they just want to eat as rnuch as they can at the first place they see Plus a lot ot39times they don39t have wives to cook for thernquot At 36 Mr Front is single Dave Thomas understands their need says Bill amp Phil39s Mr Sheridan Mr Thomas the 67year old founder and chairman of Wendy39s lntemational Inc is Mr Sheridan39s gastronomic hero quotNo matter what Dave Thornas makes it sound like there39s nothing better than the new cheddarrnushroom bacon cheeseburgerquot Mr Sheridan says quotI love that cornmercial when he goes to a fancy restaurant and says I39d rather have a burgerquot Everyone else there seems like a stupid pllllzquot Unlike frequent fliers and preferred shoppers heavy users get little in the way of special treatment or freebies At fastafood restaurants they stand in the same lines as everyone else indistinguishalble from light ltileffC DDL lLllTTI llS and SettingsquotslructlltdetLocal SettingsquotTentp 39S lftistl ondlttln Hi I Ziltll Dow Jones Publications Library Page 4 of 8 users They39re almost never invited to Join a frequentdiners club Among national l39ast l39ood chains only Subway with hardly a fried item on its menu has a regular reward program quotThe local franchisees can use those plrogriamsi if they want but it39s not a big piece of our marketing effortquot says Denny Lynch spokesman for Wendy39s International He adds that the chain39s most popular item on its 99cent value menu J the Jr Bacon Cheeseburger 9 probably draws more heavy users than would any C D UjP0l l Is this poor niarketing Could sweeter treatment induce even heavier use from these custornersi The issue is complex overt effort to encloumgle heavy usage could draw the ire of nutritionists And usage traeking systems could turn off customers who don39t want to know how otten they partakex When Mr Sheridan talllies for the first time the cost of his dining out the shock of it about Sl L000 1 year starts him threatening to cook at home Also who wants to be known as a fastifood regular lf an entpress lino existletd for such customers would they use it especially since society tends to turn up its nose at extreme l39astfood usage Concern about image helps explain why Mr Sheridanquots partner Bill Karantz has cut back on his fast l39ootl restaurant visits Mr Krantz the public face ofBill 8 Phil believes it is important for any customer he meets to find him quotnot looking like it slobquot He still visits l39asttfood joints often enough to qualify as a lieavy user but just as often these days he gets his cheesteburiyg crs pizza and steak sandwiches from sit down restaurants quotIn business your a ppearance means a lotquot he says Mr Sheridan doubts his partnerquots change of habit is all about business quotBill39s kind of like an image guyquot Mr Sheridan says quotllIe has money he lives in the city and he doesn39t want to be known as a llastfood eaterquot To hear it from the industry the heavy user39s absence in fastfood advertising doesn39t mean he is unappreciated quotThey are the people we just want to hugquot says Ms Brewer the consumerinsight specialist at KJFC Nor does it indicate a lack of competition for the heavy users business In ways no casual observer would recognize fastfood purveyors woo the heavy user For instance marketing for a new line of chicken sandwiches at KFC makes no specific mention of the heavy user But behind this launch is the knowledge that the heavy user is an inacar diner and dislikes picking at bones while driving quotOur heavy users were eating a ton ofchicken sandwiches elsewherequot says lKFC39s Ms Brewer Also in an age when many restaurarits are introducing low calorie lilcquotC jDUUllnlr3l l5 and Stettings slruclttle Local SEIIll lES39HTEquotl1lP AidiSi li1stt39olodlitnt lill lquot 200i Dow Jones Publications Library alternatives why would Taco Bell dip its popular Gordita a stuffed pita concoction into a deep fry to create a highercalorie and higherfat version the Chalupa Aclvertisernents for the Chalupa never say this but its creation was quotaimed at increasing transactions with our core heavy fastfood usersquot according to a recent Tricon International qU3I39lCBfi39CElfnlliL1S press release In Wisconsin Burger King is testing its Great Ainerican Burger which boasts a tliieker beef patty than others on its menu and is expected to appeal to heavy users The heavy user39s penchant for quantity and value is what inspires two sandlwichesfor S2 deals and multiples thereof at MeDonaldI s And it is in part because the heavy user likes his sandwiches made to his town speicifications that other purveyors are foll owing Burger King in building custommade sandwiches Of course for big chains it niales some sense to aim marketing tefforts at potential custiorners rather than those as reliable as the heavy user Much of the faniilythen1ed adveiirtisling at MeiDonald39s for instance is designed to persuade parents of Happy Meal customers to partake as Well But at least one hlquotl1blllI39gt 39l cornpany is staking its future on a direct appeal to the heavy user After years of poor sales Checkers is ditching adveirtisciiients featuring smiling faces biting into juicy burgers CTlVi39I1Ed with den y vegetables fora series of CaI lf00l15 aimed directly at its core customer which it describes as Y single male under age 30 who has a working class job loves loud music doesn39t read rnucli and hangs out with friends The new and canipaign which kicked off an l features roclt rnusic fast cars and a doiniinatrix named Holly who is on quotan insatiable quest for Checkers fast food and will do anything to get it says Jeff Hicks creators ofthc cainpaign and president of Miami advertising rm Crisp in Porter amp Bogusky The hope that Holly will dazzle the lieary user quotlquotlinugiine what two guys at a C9U l39lStrllL39l39lU site are talking about l39ll tell you for sure it39s not Pokenion or Toy Story39 quot Mr Hicks says The ads however are designed to appeal to the heavy user39s vanity rather than V frequent burger consurnptiori 9 the men who court Holly are hunky not clhunlty 39 39Wequotre not hangiirig out a sign that says 39Welcorne Heavy Users Mr Hicks says Establishing a public relationship with its best custorner might be easier if the industry devised a different label As a synonym for eustotner quotquotuser often is employed when the product at hand is illegal such as heroin And who would call his customer quotiheavyquot Bill 8 Phil39s Mr Frantz when told of the industry term for loyal custoiners says quotIt sounds like it means big fat pig quot tilesC Docuinents arid Settings lruckJe local SettirigsTeinip 39SJl39istt39o odlitin ltjl l 2lllJl Page Sr of 8 Dow Jones Publications Library Page 6 of 8 Of this McDonald39s perhajps the most imageesawy of the fastfood cornpanles is well aware quotin plain EngllsIli it just translates to who is the best customerquot says Charles Ebeling a spokesman for the Oakbroole lll company He dismlsses the terrn as quottrade yernaculorquot and says i 39iCD0llLlit1i39S no longer uses the pill tSE Eujphemisrns inCi Ud39 quotmostoftenquot customer and quotcorequot customer Nobody trarclts or knows the physical dimensions of heavy users But as a class they almost certainly are lighter titan most Americans would tE lt39peCI Even nutritionists say that fast food receives a diSpDpDl1i0l1Ltlit amount of blame for the nationquots obesity When President Clinton gained weight during his first term attention focused on the single occasion he went for a jog and wound up at McDonald39sthough a lilcelier culprit was the heavy schedule of state dinners he attends Truth is much of the nations overweight popiuluic seldom eats fast food and much of the lteavy using fast food population isnlt overweight according to Heidi Maasdant a nutritionist at the University of Clilcago Hospitals At a time when eating and drinking establishments of every kind account for 45 of the nation39s food dollar and when fastfood joints account for only 14 of the food dollar 6 a larger contributor to ertcess consumption may be sitdown restaurants Ms Maasdam paid a recent visit to Spiaggia one of Chicago39s finest restaurants and had a four course meal of its most popular Offerittgs Her conclusion Sihtoruld have eaten at McDonald39s The Spiaggia meal delivered about 1800 caloriies and 145 grams of fat she estimates compared with L290 calories and 52 grarns of fat from a Quarter l ounder with Cheese large order of fries and large Coke at McDonald s Just as halfofiadult America is ox39erweiglit so are halfof the heavy users at Bill amp Phil Messrs Sheridan and Front want to reduce The laborer Mr Frantz carries about 230 pounds on a 5f0Oiie9ll lL39 il frarne quotEvery morning l wallte up and tell ntyself lquotm going to start a diet But by the end of the day when l39rn hungry it doesn39t matter anymorcxquot says Mr Frantz who recently left Bill amp Phil but who remains a heavy user At l l C for lnstance quotyou get the chiclten and then there39s corn and then you want fries and then you39re like Man those little side portions won39t fill me up It gets out of controlquot quotHe39s like a gal on Chicago39s Michigiazn Avenue Heyjust lteeps buyingquot Mr Sheridan says Not that Mr Sheridan can39t relate to that impulse With his shirt on his 260 pounds look almost proportionatc to his 6foot4 ineh frame But on his coming vacation in Cancun he hopes to bare flesh without feeling selfeconscious Everyowne at Bill amp Phil ltnows about his diet tilelC 39 Docun1ents and Settings slruckdet Local StlTll39lg5Tt3lll lV WSJt1itl7uodlitm lull I 397 39ZlIUl hs 39 Dow Jones Publications Library tileo39C 39tD otuments and Settingsslrnekde Locol SeittingsquotTein1p WSJfnstt39ootlhtm Page 7 of8 He recently switched to skim mill and he started doing the Tae Bo exercise videotapes in his living room Lately he39s been eoming to the office toting SlimFast The implications of this go beyond his own vaeaitiotn because the crowd at Bill amp Phil is suseeptiblte to peer pressure Either others will start driinkiiig SlimiFast Or One evening Mr Frontz and o rcontrotst quotloborrer Hugh Jackson urge Mr Sheridan to aecompanjy them to dinner Mr Sheridan concedes he is dying for a clieeseburger Then agairi he sliouldnlt But a Quarter Founder with Cheese would hit the spot quotWhat the hellquot Mr rSheridan says MClDonaquotld39s it is At 8 pl I1 on a F ridoy the local McDonald39s is niostly empty Some parents watch their young children climb at the adjacent Plnyltand Tlie three movers approach the eotinter quotCan I have your orderquot a uniforrned clerk asks Mr Frantz goes firstquot Five eheesebnrgers Large order of fries Small soda quotEverything plainquot he says For Mr Jaeksoii Four Filet 039 Fish Si1I ttZlt39t39lL i ltquot S Donhtlre Quarter Founder with Cheese Small order of fries Ltnrge coffee quotSee how warm it is in here with the bright colors and decorations and plantsquot Mr Sheridan notes scanning the room quotI think it does make it seem like it39s really time to re1tquot Now that he is here a Quarter Pounder with Cheese hardly seems suffteitetnt First Mr isheridan orders a No 4 Double Quarter Founder with tCheese fries and Coke Then he adds it No 6 Crispy MCCi11lCkEll Sandwich setzond order of fries and elioooltite shake quotAnd supersize it allquot he adds That39s McDonald39s parlance for extr39ilarger portions an option that costs only 39 cents As he waits for his food Mr Sheridan says the chicken sandwich indieates he hasnlt forgonei his diet entirely quot39l39d feel like at for an if l ate two burgersquot At their table each begins his own ritual Mr Frantz consumes ve eheeseburgers two to three bites apiece He muses aloud that these are l SUb5 nTi3l oonipared with the burgers he had two nights ago at Choppers a loeial stand where quotthe double burger really is a triple burger and you can get it with Swiss cheesequot Illquot I quot Mi 1 rDow Jones Publications Library Page 8 of 8 Mr Sh flrda concurs that size is good but notes that it can go too far He says he once speeialily ordered a triple Quarter Pountiet with Cheese ancl quotI honestly thoiight my heart was going to stopquot he says Mr Jaeilcson eats slowly Removirig a fried sh llet from one sandwich he adds it to another Then he repliiees the top bun and presses down with his palm creating illl kESi1ifdOUbiCl With the neisit two fish sandwiclies he repeats the process Turning then to his Douhle Quarter Pounder with Cheese he tops it with barbecue sauce For lecksonl the primary issue is thieknessquoti quotlWendy39s prevails They don39t have these skinny patties says the 40 yearold mover quotWhen I have a double burger I want to feel my teeth sirnking through two siiihistantrinl layers of hcwiiie mammal fleshquot As for Mr Slieridzm his tray brimming minutes ago with two big sanclwiches two orders of fries la chocoilate shake and a C ofke now holds only 3 scatterinig of fries He smiles quotI honestly feel better than I thought I wouild39i39 2000 Dow Jones 8 Conipany Iiie All Rights Reservedi tileC DDCL1l l1LquotI lS iind Settings salrruulxde Liicul Siettiiigs Tentpr39WSJfiistt39omlhtm ll l T 2llll l ails at139 T0urnaJ L360 Hero 2llol0ll A Proctically Everybody In Dunn NC Reads The Daily Newspaper In an Electronic Age It Wins pt Blanket Coverage A Of HometovmGoirgsOn A 39 Top Story A Bear39s Sad End By Pnrrzlcu T Rtporter of Tim Wu Engr J UIHAL Pw NtC 39ilol the along his route Calvin Connolly Jr is an olldllast lon39ed sight 1 on 1 bicycle dellllrerlng y Block alter blt he throws trig E to nearly every norne i Tbeirsdevotzlon to the paper mnkeattlepeopleoltmnniornctinngoln in the T c a newapaa d 12 moles or every ill homes lot 1 l penem on or 124 that39s v to P and sail dimp 8 some of best P in Ameri i journalism any that busier illestyles anduaumralshmtrompllntitowarvd electronlcl media mean the erosion is Inevitable But here in In Blglenold World War E E with I b educstlon is pruvlngit ljsn39L Hoover Ad p Daily P3 in 195i hu u in its pri mary P climb to ii the highest otany duly paper veri ed by the Audit oi T pp A number that Daily Record teal l 0 basedonthesiaeollillsioonemarken about itll0il i 0 it seems to defy nearly publishers ol y fer psomenoy men markets d too di verse for I single paper to appeal to everyone is whllte but H7 black Someuny newsmperi reading em Dunn II I Dliilianlnry and Iarrners oompe don but Dunn has A 7 or that too Forty mules irom lu 0 itls within reach at that city TV News in Obsewer Five separate dailies or sale mm hazel I1 one Dunn 9 station All have Web sites as does the Daily Record The town has a radio statioiny What more the Daily Record is an aitemoon paper I three1 mat D declined dmlllallically in the past decade Home The Daily iitecnrrri isn39t the only US paperTdlEl1quotlV iFIE clnzulatlon q M N it of them reach x 15 of homes In their r markets 39l11ey range from the iamily ownled Holdreg l Dally Citizen in Nebraska selling 3l7ll oopies a day to the EW p y Naples Daily News In Florida tzlrculatlon H321 The Daily 0 lormuia liter qy oi downhomer new that renders can39t get mywhem else x manly metro papem w focusing more on local news let go an tar as the t Fteoordl in St liohngblinr VL whim t iplctures of homeless cnts and Ds brought to l ot tes thine doulemReoord39s primarymarkeit pencuan tlon 96 at hotlsefbolds lleanlmlle the Sentinel in Cullisilel p Mb n regular pro les of pbm school The Il Helm n him 32 prints snapshots readerI send all everydaly events such as a gnndcl tlld39s More e Here in Dunn where boostlngi F tlon is a nearobsession M2 Adam be Wf tllat readers f to see their 0 b in print f Jim he lent his 39Sl3 IlJllI aT S I long paper must till its f with the at Xe Why do people make large donations to the symphony To b their names in the program the b a By now you how it ml 1 tamtic a 7lmost any absolute nutinlnotll a lot oi names he wrote But Y B it Analyst of in reader1liIlpl more subscrlptlons and more ads tooquot The memo remains p reading for the papers new reporters in a tllrlcetweeltly column quotThese little C Adams leads by e uImple column mentions than adoun P p repeat edly it their favorite Ieature Mr Adams is N E or always wearing a suit and tie ldomng only the jacket even when he goes to the gym He has I h clllvalmus man ner lhat bellies an ability to glean lnlior Pat an 0 at the Triangle Wgme ner sewed hreal nst one B the next dly found lnerselt praised in ioolurnn for sending homeoaoung to her son39s battal ion overseas Not everyone appreciates Z uf attention When Cynthia Blndernan a homeahealtli nurse went on a cruise to the 0 to 42 I I rvuIIIn a several P k Mr lidaxns jllstedhergiorlfwiiiilothen irholookthe jirom her nowlute lhmhand and wibout what people ihink ii could inure illno i was a Wild Pf she i315 But Ms Bindeman still buy the pa f me wouldnquoti miss wedding and 1hirih announcements 4 Ronald Dralughon used in subscrih 39e in me News amp Observer and The Wall Streei Jloumai but he them because the rilhuiiy 0 was the only one he was cover to oover We or our was in the paper says Mr Dnughan land Land hauls sludge You in see in Afouhie whorl out oi lunaticquot quot Roonrdwhlchisovrnedhy ftire photogra w and Spottler coverage us daily P penoo39auon torunlmiahonasrIpcoerIngeoHaLol IE5 mrenezolhclievents is K is is in p rdigion hei g in en dlverdiy i in P en K p tor the Z 0 It write up V htrthdajr parties ol len selling scram oop ies of A paperi to the parents A weekly teamres only comments v read er phone in Ursa M dolr When an American Eaglequot plane Pu Railgh in x v 15 ii n matron hui oouldn39i q lead position r went to the ooimon hetllreen al ilarge hlarlr bear fl mun drmnz oil in his job at 1 use onrnpany SILidaaoculedpuliquote it owns the First 0 I am Seen and it Got Mei ootireulkedhemeilz the paper or the grim uthe hm Her eoucimion el l ellleyloingtoseeaslorynhmrin fr439 puion iherouipnge i1rantioseevio hear being hit by 1 guy driving to Kelly Phh I have 1 s oi humorInd ihni pull quote was so funnyquot Saiies at stores and vending bores maker up 2079 of irrula1iori V The Daily Record typically runs state national and international news as a handful oi hriels on pages two and three Mr l39idampIIiE395 run Bart now the Daper39 pulbilsher doesn39t think his big ciiy peers should do the same but he finds it mat many pack their I0cai news into I separate section and mi meir lroni pages with national and lntemaizional stories Lhal have already been on television His suggestion for ihern Run local hewfon the trout pugs 0 put lih 39l1ltlolIampl and inlernaliongl news in 1 separate aeolian T A p Farimer ii The ipuhiic thinks they own the D newrpaper Pf Daily Record tieariy succeeds as n businless it its revenue is up 13 in live year its 39pmi ii 5Y in the lust of this year was 20 39i39hal39s the D ll nenpaperlunlL1 or public companies ex clu u 0 ts iates innImam in lo llorion Raenrch in Silrer Spr39ng q paper has de ed mr sinccHrAdamsiaunchodit5oyear5 ll I 11500 loan tron his P M Em it faced ihinmg loompeililon I declaresold weekly where Mr Ad am once 2 Alter years or itrugzie ihe Dally hroire into the black I eventually bought me weekly and it Then in um 1 qdvenisers he let his on 1009 A new on the ciuilengie Mr Gilli dust step was oolmierinmidres He raised p G price it might ruurevnyloiose readembutluir and gave simqibors option of renew oiler that 1 gdmiiy rose Heusoranmotesisiospururriers in sell 111 paper in the rsi one the grand print was SLIM 0 in 0 M hicity Y Mr dlrlnnad 0y line haw tide and o eling advice about what to noiwInlioseeaeIlIIntloIee innt in we QU QU about it P0 He wants me in put gory ohm in headihm l don39i think you have to hue Child beheaded in car wreck 39 39 She says she lhasn39t minded the circu Iaiion direcinrquots input She wants P readem P U and has heeded some of Gilligan advice mail as to remove town names from headlines instead of Development Planned for Anderson Creekquot whici1 rnighi led in interest readers in Dunn or Erwin rhe recently headlined 1 story New 0 Hay in the Works Filo Audit Mr Giiligui also prodded Adams to ply 1100 for audit by the Audit Bureau oi it thing in hell advertisers the paper FT a strong local mam Imther to prove it J Adarns doubled the audit P he mnieiiectiw But when the Inirediniiprii l393iheuhm her The pnperquotspmeha1lonopl its 7V market V 39 39 p P J 10 n oi rihe report39s In no W my daily rarer39had QMBW DOM NW6 He ordered IHIIIIHII ad to 0 Be While n1tlonIi adrertisersr didn39t pound 0A the mug Reoal quotI the pmer picked in name oeitphon uxd And thus audit amend with iota ldrertiscrRnn Her era oomrner oi Diswuni mends P than hail ol his ad on the P I e he spenl 1 p 0 am he rlnutmein l B s PP with b 0 I bu been In S 0 on bike with lidillli deiiverers in ours rho Duly P P i using uiuiu lilo threw into driveways or p them in elnh de plastic I1rihhed In ihern except lor rural routes Mr eager to rrmm in his nahire laabh has Just hall in work for line Juneau Empire T l Adm earrilers who were let go oom pioained arousing ihe rympalihy all some nzaaders But eventually readers em braced me new system Ind I ride villi Calrin Cormeiiy Show J 0 15year old places the Daily Record exactly where each mhacriher likes it in lhe carpori in 0 chair n in the Pq grill oi Ldoor He lin lshes iT route 1 line house of an elderly subscriber whose ireoomiy P when he otien in chal HE39S ml Ipedli buddy C C o39nmleI the D P lo 1 paper every day quot 539 notes fl p T with ldlmpies on pD C and HIS I39m to l in would PM or ii Bill with in Py e the T O9 Ihldl o l WII I subscribequot p 39 W SJcom Major Business News l gE I OI J Mfav 1I 2tlll2 Fresh Marketing Tactics Help Writer Push His Thrill ers to Mass Audience By JEiFiFREt39t39 A TRACHTENBERG surf Rqmmr or Tquot E WALL STRI1E l J t ram Ii NEW YORK e A few years ago booksellers who received advance copies of Jiamtes Patterson39s thriller quotPop Goes the Weaselquot eornptlained to the author about the unresolved fate of COMPANIES Reuters one of his heroines p t Patterson listened and then oblioginoglg changed the ending He added a drarnatic rescue and gave the heroine a newborn child quoti said Let me write another chapter and see what we thinl39 quot Mr lPatterson says quotThis is not quotMadame BoviaryTquot quot tanner Patterson A veteran advertiisting etecutive Mr Patterson has now become one lot the world39s betstesellinig authors by doing something radical in the world of books creating and selling them with the coldeyed calculations of a soap marketer To give one of his books a boost he paid for his own TV commereialr When he wanted to ring up more sales in Califomitia he set a new series in San Francisco He spencls weeks on the road sigtting thousands tofbooks His romance novels 39l39Siuzunnet39s Diary for Niehoiliasquot getting a lift from a promotion with Crysttail Light drink rnix which totfers beach towels to winners ofa trivia quiz about the romune novels Mr Patterston tigurod out in the midl99 US that many boohsttotrets mover their bestsellers to the baolc of the store after six to eight weels To prevent this from happeninig to his bO0iltS be persuaded Little Brown amp Co a unit of AOL Time Warner Book Group to launch a second wave of marlteting two rnonths after the publication date In effect this forced boolszstores to continue prtwidfing his titles with prime diiisplaiy it also added a burnpup in profits because it meant that tens of thousands of books that might have been returned were sold quotOther publishers have copied second waviequot39l says Sessalee Hensiley the head l etliotn buyer for Barnes 8 Noble lne the cosuntryquots largest retailer quotlfwe have a big title in February or March we39ll reprornote for fFathier39s Day and then again in the fall tor C htristmns Jim was the start of thatquot httponlinewsjcotsmJartielepriint0SB l 02 l 323 75263 9 97328U t0 0hIinl 5Z82002 4 W bJiC0m 39 lVl Ur DUSllm 55 lVtCWS rage 4 U J Lucrative Franchise All this has made Mr Patterson one of the publishing world39s most lucrative franchises He has sold an estimated 25 million books since quot39l39hc Thomas llumberquot quotWilt published in l 976 Totdayl he cams an estimated 25 million a year A typical year can int olive three new hardcovers three mass poperlibtaclts plus foreign sales book clubs and lrlolljcwtiottl deals Most rccenltly actor Morgan lirteeniian starred in 200139s quotAlong Came ta Stpidcrquot At home in Palm Beach Mr Patterson worlcs at a huge round wooden table Spaced several feet apart are distiinct rnounds of paper manuscripts he is currently revising outlines for new projects and pages from other novels that he is writing in longhand He starts the day at one stack and then slides his chair to the next after an hour or so a literary asrscmbly line Critics haven39t been generous to Mr P atterson but readers llotck to his books which range frorn vveepy romarlces to gory thrillers Lately the assembly line has more than one worl er On his most recent novel quotZnd Chancequot cowriter Andrew Gross is included in small typeface below Mr l atterson39s emlolazoned rnoni lter Readers didn39t seem to care or question how much of the buol Mr Patterson had written quotThe key to a brand is ltrust39iquot he says quotThe trust is that l will deliver a very commercial book that you won39t find disappointingquot Mr Patterson is working with Mr Gross on other projecls quotI don39t want to go into what l do but we both add valuequot says Mr Gross 49 Jim has so many projects going he needs an as sistant 39 39 Characters in Mr Patterson39s thrillers are humiliated tortured and butchered 0 o a matter of course But in his Pdq scuffed boat shoes and bluettchetcked shirt Mr Patterson 55 years old looks like just another suburban dad He39s of medium height cleanashaven with pale blue eyes and a touch of gray in his hair Although those who have seen him at book signyings say he has a Phil Dortahue lillte swagger in front of a crowd he usually speaks in muted tones glancing away as he talks After joining J Walter Thompson in l97l as ajunior copywn7ter Mr Patterson quicltly showed a knack for sensing what consumers wanted Within l 8 months he was tasked to worlt on the Ford and Quaker Oats accoulnts By 1980 he was named the company39s creativedi rector and eight years later J Walter quotl l1ompson USA39s chief executive quotlim lteamed his discipline from the nuns in Catholic school he39s organized and very early in his career he knew how to pnitoritizequot says Bulrt Manning chainnan emeritus of l Walter Thompson His ties to the industry remain strong He has a voicemail setup at rival ad shop Mc ann Erickson a unit of Interpubtlic Group of Cos where he occasionaltly dispenses creative advice Mr Patterson also sprinkles the names ofrealilife advertising executives into his books including lnterpublids CEO John J Dooner Jr quotit was my l5 secondsquot says Mr Donner who makes a cameo as the husb and of a lidnap victim in quotRoses p J Redquot Mixed Results ltttpzonlinewsj comarticlleprintf0SB I 02 l 323 75263997323000html 5t2t82002 T WtSlcom Major Business News Page 3 of 5 Mr Patterson39s early results were mixed His first novel quotThe Throntas Berryrnan Numberquot won a highly prized mystery writerlst award but it sold modestly and the five novels that followed made few ripples By l99l Mr Patterson made a choice He could either write sorpihisticated demanding books or mass ntarket thriller quotl sat down and said l really want to write a big bestseller here and l39m going to really lay it on in terms of action and romaneequot he says wanted a blockbusteiri of a book3939 quotlhe novel that followed quotAlong Came P Spiderquot introduced Alex Cross a black hornicide detectivepsychologist who works in Washington loves his grandrnother and kids and is tough but tender Mr Patterson quickly attracted a loyal black readershipr many of whom were conviineed that Mr Patterson was black It proved to be Mr Patterson39s breakout book And how he did it became a blueprint for the success of the titles that have followed Alter Little Brown acquired the novel in an auction Mr Ptatterisoin root with the heads of the book publisher and told them he wanted a TV ad campaign He would push the envelope and we39d That39s not how it39s done in publishing quot rtecalls Holly Wilkinson a lorrner Little Brown publicist quotHe39d say Why not quot When it became clear that Little Brown woul dn t change its mind Mr Patterson made his own l57 second commercial and paid for it out of his own pocket That 2500 may have been the best investment he ever made The spot showed a red spider running across the screen together with blurhs of praise from such writers as C live C ussler and Nelson De Mille Mr Patterson then pushed Little Brown to saturate three key markets New York Chicago and Washington and to print enough copies to ensure readers could nd the book lle turned down a book tour because he wanted to spend all of Little Brown39s marketing rnoney on advertising He also insisted on approving the book39s dust jacket including its typography Alter rejecting numerous efforts from the publisher Mr Patterson called in a designer he knew from the ad business He ultimately chose a cover distiinguished by large silver lettering and a rnucih smaller illustration of a welllit house lquotlanked by a green front yard quotNot to compare myself to them but llemingway and Fitzgerald were also deeply involved in their coveirs and titlesquot says Mr Patterson The nal sales tsouch carne when Mr Patterson changed his orliginal title quotRernentber Maggie Rosequot to quotAlong Came 1 Spiderquot after an editor spotted the nursery rhyme phrase in the rnanuscript quot When you create a continuing character you want the jacket the ad carnpaign the look of the book and the various titles to reference each other so a reader thinks Oh yeah l liked that bookquot P says Fredrica Friedman a literary agent who edited Mr Patterson at the time ln recent years all Alex Cross books have featured a nursery rhyme in the title SelfPromoter Mr Patterson has adroitly made himself part of his own marketing pitch often appearing in his own commercials and print ads He first showed up in a commercial in l998 to promote his novel quotWhen the Wind Blowsquot a fantasy about kids who can tly The book subiseiqiuently became a bestseller httpn onlinerwsi oomartieieprinttlSB l 02 l 323752639973280 0tlihtml 5i 282002 WBlCClI39n llVl3j0xl IESIISITIBSS lN ElVS httpnnlinewsj COl39Il3I39lCltt3 priinUUSB l U2 l 32375263997328000htn1l Page 4 of 5 This year Mr Patterson39s publishers will spend more than 2 million prornotiinpg him a huge sum by publishing standards The ambitious media plan includes TV eommereials that span eight months ot the year author aptpearances in 19 citties print advertising and a Web site l that attratts more than two million hits each month P Patterson reaches into his own wallet to help pay some of the rnarlieting costs associated with his work linger to sell rnore boolis on the West Coast Mr Patterson set his newest series t e1tttring the Women39s Murder Club in San F l39ElIquotlClSUO To distinguish that series from his popular Alex Cross brooks Mr JPatterson uses elongated numerals in the two titles that have been published so far quotlst to Diequot and quot2nd Chancequot ln a crowded book store readers know imnitedtiately that if the cover boasts a nurser y rhyrne it39s an Alex Cross novel while a number signi es it belongs to the wornen39s murder series quotTThere are something like l50l00 products in a typical superstore and most of them measure six inches by nine inchesquot says Michael Pietsch publisher of Little Brown and Mr Puttirstm39s editor quotHow do you stand out quot One way is to understand something about the American psyche Mr Patterson39s two and three page chapters appeal to people with short attention spans and little time to read llis paragraphs are also lean on description because dense writing slows readers down At night when a lot of reading is done many P inclined to close a if the next chapter is too long They don39t have that problem with Mr Patiterson39s b00l S quotit39s about simpplifying for the reader3939 he says At his current rate of production Mr Pattersoin is expected to fulfill his contract early t lt 3939t year It39s not certain he39ll remain with Little Brown although he says he is happy there ll not his agent says she has already been offered t l lulIl lJOOlE nine gure deal valued at a minilmurn of lOO million Says Laurence Kirshbaum chainnan and chief executive of AOL Time Warner lnt s AOL Time Warner Book Group quotWe would die first before we let him goquot Write to Jel frey A Traehteinberg at 2 URL for this ar ehz Hyperlinks in this Article Hl lzil Updated May I 4 2002 t397 pm EDT copyright 20112 Dow Jonas 1 GompIny line All Right Ruriarvid Printing dist bu on and use of this mnumiat is unnamed by your Subne ption amuarnernt and copwigtht laws For infomtatiun about sutbseribting Oh to tht1pmvwwvnjeom 5 Z 82002 Wslcom lamp q Trends In Fashion Targets Mothers in 405 Fonmamnon T i mumla 0 iponurul by hijii T May 9 2003 1233 LII EDT PAGE ONE Christopher amp Banks Shuns Treznds W EREP39r T l A i A lIlu 1 pifonull In Fashion Targets Mothers III 403 IuuIwuiTu BylAbl YlllCI quotquot 39 quot 39 quot39 quot39 39 I M quoti ri mull to us i g 339un 313w39 l fr39g 3bvllt Mb I n mv c H mm is is 418yam old of two p mm quotpm Iquot W l39l 39Wquot PquotW 39W3939 39 She P6 N say Joseph W T T Pennington ofthe lw39s ratailat Ml hdtllsll IWIS IIhII NII biglausinms decisions amp She Y y a P 0 j how 3 ofllvlinmelhapolis B inn generally Swan far Bunk Sales at mores open at least a yair or mnemm sales have 0 positive for 0b a that D only by omem of the nalinnquotfI 25 top a teen i Hot Tupi 0 W p0 to boost its pF by 20 100 03 outlstd in Pq towns 08 mroughout the US majur US retailers sluggish 1 see B3 eonuaag amp Bmkfs April sales e p 39 A hsmllooo p its in December 1996 the day it emerged from Chapter 1 l bmhmcy pmtecuon would be an sh3h5s9o4 today a nearly 18fold increase During same Dow B0 0 Avcragc mac4839ah comfPA2VJBNA4Rfir clepti1IUOSlBl0524283043332960000hml h 1 A i I quot exactz vea who are p over soft 88163 be too in Los Angeles New York ldoesrm live in the city She39s a suburban or smallmwn F One 0 out t consists of a red a P and m P 0 A Page I of 5 W22005 WSJcom t H amp Banks p In Fashion P l in 403 2 of 5 WWGWWmm 2 amp Banlcs 0 that p women still long for an era of classic P Such women nd a at me V of a vrith it styles to an ages loratdepartrnenttstoresthattfy to wooyaungm p p 39 yottmfttl middleage quotA U l Dream When I look at the 01 I 391 don39t P my clothes as tight as thw quot says aton 1 46yearold in Rapids I PK Wismmln town of 18000 Atme mull P b and amp Fitch Z to T r amp Banks 9 99 ofher Her fwontei 39 T store is a emer A middluagequot she says p as A1mTaylor 0 K 39 ofoldercustomera 0 N as awhole is pushing in adi 39 dLimcuquotnn Based on retailers pmjwtiom footage devoted to teens is to jump 63 ow from levels ofi396 m lion B P footage baby n m A A 422 million p feet F slated to mow only 37 to an 0l9 by Weiss 0T 39 Fmmded in 1956 t ristoplm amp Banks 9 P Braunla Fashions Corp solidi E women as min blazers to a age It didn39t alter PW of in own clothes U n more and conml over its Bruin bou t styles by other P After years of 39i Z if 8 Bra1tm39s led for M ll p pmtec on m 1996 p ve ph it spent in Chapter II closed mm P N anew 0 PY8 following 0p its and A metchmdimg officer Knowing the Guatnmor V p 0l Z T P4 founded the p Wisconsin n W m overhaul of Q amp to focus on a single custoimcr N s PS by a 01 Z had f by 0 Weiss a Brands G execu ve at P Ut vasity in the mid19903 Weiss 0 lmmving a customet393 is p9 to p p 0 X habits C signals of style quotHis was does your want at sandwich dew she ehtmku of on B Prange says quot I39l1at 0 in 0 the customer In j P g P vividly 7 ofmistnphar amp Bmkts customers After P p l women in in mget h plonlinetvsitcomPA2VFBNA4Rm cle lnrint0 RBI M39M R1n4t1119lu rtn nn P an Ham T e 7 Shims Trends In Fashion Tmgels Mothers ii 405 Page 3 of 5 18 M35 0 55 1130 Gme WM 3 ol39Mary I 3 C evolved OVH c lcunm y Mary eouldwomlus etcuchai She u a She prefers aildown such es 39l Gl Friday39s to McDonald39s T W N to ll her closetquot Anya r P1angel chief execulive in 998 The p ojm to G it pS p pS its own and even to howl clothes shouldl ti T told to 7 not would like in p style but after its px 6 7 mme A 2000 Tlae to p P w di cult employew were skeptical of to image of Mingle p S exactly hip A number A of era left the company b Ton i u for a h quotWe like her we Ms Genytee the merchandising T Q She39s a good person A good 0 a good She39s someone you39d want to at dawn have 0 withquot amp n in focus W p3 what I 8 hve yielded Customer want elo zeu tltm can bcwom at Pp md aT1Tlalc dl39abeoebell p To Tmretime 6 wumm want C quotA T T T and G jFocua ewenlool atphotns one best O Mary r keeps p at T lt i To s a photo P wavy chmut 0 B eyes 0 b she looks younger than 48 0 is customemtocrenteaeuin ltIeedtosizealllofi csclothg wimproportlomre eetingthe ofuge B All i o eers p to i PM g PX an quotMarysquot b out their P9 at p stores in movie mentors and 0T 1raTvelingT Mccamn 3 in La Vegas is o F spot Executives are to woa m at Mary vorite and w t P P1me w X p A to scout in Wisconsin 0f a resort area in southern for its 0 and of 0X G he 5 sipping a an the Loose Moose Bar amp Grill 0 Great Wolf Lodge a hotel with in lfimx llogicabin exterior p slides His 6 obTaerva1ion which he would share with E3 mmegement was that 0 not do of q 1 1 the company39s sales of quotAmericanaquot P red white pz blue color had boomed quotUsually you39ll see tone of it herequot says 0 Prme favors blue c and lchakis who stayed a er a recent mamgt mo up manta and co ee cups His observations the should not bet on d yum humonliltnewsiemnPA2V JBNlA4Rmick nnimm R lni d n lmi il amn an 1 nnnnn herampBenksShmsTrendsInFashionTargets 5 in40s Pgge4of5 Omcm e onChrimphampampBanksdevelopedwhen mmeomofhnhuptcyeomtiethnit D dmuldnotuytonelltodnughtersuwellastlmeirmothersMmyquotdoean tlikewalldngintojtmior ztzes ata1liquot uye 1 O3 the 4 exeeu ve quotIf 2 The pE5 ymicamp ans 4 Mary a haven F tel omes 2 for meme bodies attentive B L B amp Bank is 0 an store P 0 0 PmC 4950 0 1 with 388 at Talbots But 0 to Talbots 0 amp pI a hs P touches such eel hm 0 with other N P does little of M my the At 0q lheve led to apparel de ation the index of p ms d 10 einee1996 to JP 1 on prices at amp is made poaaible Y its clothes aren39t Wendy E go out of style in one season x one m why its W which 0 118 last year outnmk of most of its peers Many eurmt play e p For exnmplegwemers up of n o have hot So has with a cat the company a eombhm on of me a PH q embroidaed mm eats whoa eolot ul 8 A Pe sells wen on a one semen P seasonyen ajumper and a thme stays its sales slow A Noah p an ad E been n for 0 p vereim 0D onto the Eli P are for elder 5 is e p act 0 ywmts to look age not P p few p she passed a amp Banks 0 m Stevens W ts 0 A I of like e p ways of f P with mow nlcee n But when the H went inside she liked me 39reaLl1yl elmt styles she eueh ne and p with w g a 38 yenr olcl p at ya eellege buys out ts In P town of 25000 people she few alternatives of choices caused Ms some ewkwmd At a golf to e n w A in year she 0 Ms p whose husbands business colleagues showed up in P same shortsleeve sweeter tam 0 yellow 0 tom 0 amp G just madet the smement even bigger mat in smalletown America arenlt places to nice wommls business elothes E Kroliltowski says We another so we aren39t always p eme ming climb of v amp 7 hit a P bumps U fall hunt by the wobbly economy P worries and shipping delays the West X port the company pB some Its fell om I high of 4480 in July to a low of 1350 February u the company j its eelleetion md posted betterthanexpected 4 in its fourth quarter mled1Itle k hrmtannint nntmPlA39VTFINA4tRarticle emintmsB1 ns24y2B30433329600t00thtml 9f220tJ5 By Robert S 487 words 13 January 2003 The WIN B2 Eniillih T T T T copyright c 2003 Dow an Inc P a 8 will T7 nnoiihir look It tin 8 nf mmpaniu M I can in whidi Nike 2 dufundad new against 3 um In 6 In 0 7 eoum im y7 P 5 thougm mg canutiiui1on39I Hut bar laws abidging the 0 or tpuchquot cnmmnniaI advnrusing 4 hll ban in uupuon anioraiiy W l In39t bu 0 or niisiuding iauring can put dlcld ahowevcr u high count In ioasmnd some rutictions on commercial lplldl Now the iniiim givgs HI 0 the acuity in push tin Iim Mr iurx Tiin Niia can In 1998 mm Mm Kinky I cniiiomia 5 P yaiiswrton P 01 company In ii San Francisco court under in in nigiuiltinq unfair competition and like advancing Iin Iiiogod timi Iriiiwn x M p It h Z time Milne Hui in minimum in new releases an and up ed pings are pmtodad by Hm Although two ciiifurnia iower the statequot top court said Niki U mri viiilirociad by n mrrmurdai spoaiur to n mmmorciai audicnen lddlnq um ism mm quotquotcurnmcitiaI spam for of applying slate lam barring rub and misiundying camimwchi 0 Milne Inc vs I asky H In othar on Friduy high court 1 39 Agreed tn dlcidc J Inability plans must deter an a apnyncian imncnming whe mr 8 be p P court haw in p ways the rulequot tr nil tn such I icennmi Hard I Black Corp empioyu filed fur disability for I 1997 back injury ATM roque L was denial an mination by Mr Mordquot pian said his Injury didn i prwint him from doing his I job at the Towsoni Md 0 of power tacit and 9 nppiiIncuTI Hr iiiorvd and DICIMIO P1 doqor ruched tin apposite condusiun Biacit vs Hard The tourt also said it would rule on similar claims mat an dreaded by arbitration can be bundiiodi P In 1 singig class action caraiim supreme Court ruiqd that two related arbitrauon Tiviurds rcquirimg Coriseco Inc39s Green Tree Financial Corp unit I mabilchamIT lander in St Paul iiviirm to pay about 27 million to 3700 Iiindividuais In arbimtionu invaivim quotIl campanrs aiiagod violauori ni comumenproue on iaws may he bundiad The company said arbiintion L tiaati agreed to don39t provide iar dun actions in gununi campanins to dual indlvidunlily wxIh cinrnplnl u uridnr irbitrmon Tm Ian is Irnpuitant because binding arbiinuon an uud Increasingly In comumnr and nancial trlniaeiiion imiudfing aadnam and IGII1 Green Tran vs Bazzie 13 II humpVglobal c vmcomandefaulLaspxppPrimtamphcPublicu on i i0142008 Factiva Paselofi uaanset1Is mid from Dow Reprint 9 mplwwwadjriprlntiaaonnlllnkDJRFnctlvIhtm FACTIVAI Iljm20 30 1130D006J 1o0ooooo2oo3o113moooo1p G 2008 1FO IEI VI me A httpgloba1famivacomam dcfault aspx ppPrintamphePt1blica1iun I 0 I 412003 Else e Archive p1 d 1 of2 E I 39 I for 0 b Sonny nu ma Una 0 iF39lle 5 otsam on the Saw e loan to In Tool meonou R MONEY z fEUSINE5SFINANC1AL DESK EVERYlB0DY39S BUSINESS How to Sell a Mustang or Anwhlng Else 11 E a basic the 0 of world of is p of touches leyefyoomerlof me world of economics P it is rarely discussed in BL and the of every of you hold it your M was sold So were your morning l1iIi m and and no 0g your bow obey your slippers not to mention home and lyour 0E H For much of life I was d As a lawyer I tried to sell my views to an aisu1tive law judge atthe P Commission At House I 8 ounce who sold a version of P notgethim b It was about and f Diego Anyone all of mat nonseme As I writer who has z my 5 ve 1 of Pa And now I mootlyl try R to sell my son on the idea of going to eollege and t I by 0 My rstjob shoes and I loved it Although I did care for Miller the man I awed by of an Sale nanquot I am totally impressed by gent salesmen I see w me when I am sold by a good sol smut I step P w and feel u for the learning s I but salesman I have ever encountered in Barton quotThomas who sells q estate r n In Angeles p s Ariz n over Texas He I Pt close friends and most of our o B to p y of Cn basic ideas which y o in the mament of good ideas are o m your m my your o lniother words o your 0 o k h of me buyer Don39t try to shove something down f 5 i throat Don39t try to i Vk Just listen to 0Ek he j wants see k you have i good or I Pk he needs and h and onnnge to make it Bi to buy j He h the buyer is 1 g e with a real need on real timetable to buy and the real means to buy Then setisfy d need h quotIt is also important to be 1 Re to your buyer In foot I lohslerve b almost all suooesa in domes 39 down to being 9 a to someone a a to p b voter a friend to me jnclge a ieud to your 9a a P to the client a ieud to your Au Enid so aptly you have to not just be M but 39 well Lao No1 4 4e M 1 I L B I J I lI1 fJnn 1 Al39f 1 D ul rquot39l En1 t A nnom 1 1 I19gpnng EVERYBODWS BUSDIESS How to Sell he er Else 0 Archive c0 Pagequot2 bf 2 2 0 0 in action a days ago in a moment ofsalee gmius so p mought it 3 ta be 21 l In a selfhelp moup All attend in Lon Angelea I bye a who has had he checkered life and never previously 3 e 0 even he is 29 calls me his quotrabbiquot L me to 30 year p5 quotI have to youquot this young man met my credit is terrible because my G so messed Im beforequot we went on a very Saturday morning to e ny We sat with a brand aleewomah 0 her P the sales mennger quot1 have to you my friend told evaTyrone at our little 315 able quotmy fe has been 0 messed upquot I helpfully quotAnd he wants to P it out by J a ear from you and by being at h paoyerquot 3 O xed us 0 her brown eyw I lwue brown 0 said quot39 39I het39s ell a My life p been c mp 11u39e is my 0 selling Fords and we39re going to v out our lives together 5 p I shelnd totally instantly bonded mm the buyer A er all it took p 0 beibefdy IL steady job a pay web and he seen e Mustang and on the dotted S B S slang with had listened tcthe buyer 0 J 8 mdeold heneeded A endwented SomemighthevefoughteboutthetimtereethrnteormeeeloreftheeeIbuttheeewere quot P bewamde f Teztateerontemnsthetamanywd tbadlyintpairedezediteotxltla brdtodrive away T l I home and all afthe men wnmen been 7 sellers to me ofreal 39 by A tr estate cars jewelry and 0Y which v by far our largest p year by t as we 0s for 5 egei E of ealiesmen and ealeswomen have hem to me have o to whet l p their interests with mine 0 who did soon gone p by ITHQUGHT about the mamgemems I have liked especially my at P Ltd new ye 3 1100 e share by way for P recall my eoltmn about it a few momma p it M18800 All of management have best melt interests with stockholder 7 I of G mm X H z N ell sell us on to be Meir or by Pb and bonding our fiendsl that l 0t a little B of me sel39ler s an at Ferd p Itwle me Mona Lisa me p t of p the perfect little jewel For all of you out ere sell and utes all of us one way or you 0 want to keep it in To tie ll393 C l the and be a p you39ll eoonmvn the Dnvfmg by Philip Andemotn e I H l 39 l iL JL gtI p tlmnmEnhtIum1eIalmIhelH slEnh Inn 39 r l V 7 l139H39n Naulln f l390ri39l 1l39Il fl39il rI39lrO39lquotHquot5tipJI IQ lQqKi Wl 4 I fquot 1 l Ilf39lltquotquot E 7 T39I39IquotIt It nnaem 1 1 NP1n E 4 7 r it 1 l F0RMAT FOI39E p t i w p3 XEROX if g Jponsorudllw r T 7 WALLS quoto N N157 January ZED lf9 9 3 Portable CEO Do You Need an Expert 9939 JLPANEHS FEPR39 T5 On Widgets to Head a Widget Company its quot quot quot 39 39 quot quot 39 nonsoommerclal uso only To order praeentatlonareedy eople for 7 s r is P l dletrib lie or r oolle B7 HELYAR 3quot JQANN 539 mm dicntsuor guiiiriignr usggtita rdrer sun Reporter arm wru srnrsr roumu L s 39 39 39 r Jaliwn u quot93 Eaprints togltuul the bottom of my 39 i Dru T g g wmdireprlnlseom E ago a bedrock like AlquotampT Corp See 3 sample quotmm in PDF Kodak or h1ternattonalBus1ness Machines Corp rs mm T i wouldn39t have dreamed of having an outsider as CEO Today they 39 Om 3 r Iquoti l 6quot W5 Grids OW all do Ten years ago chief executive officers were rooted in one business rarely strayed from it Today increasingly tliey hopsootoh around corporate America and across all industry boundaries A bar1ker tIunedutility executive Delta Air Lines gt a former accountant and consultant heads computer maker Unisyrs Corp a formers nance professor Y cereal executive runs publisher Times Mirror Co them the portable CEOs They are the antithesis of the l95t0sstyle company man more really like the 19505 TV cowboy Paladin whose philosophy have gun will travelquot Portable CEOS are hired not because they know the guts of the business but because they have the guts of a leader They are quick on the draw to shake things up and sometimes equally quick to move on Rising In the Ranks They also p growing number A recent study by Miohligan State University emeritus management professor Eugene Jennings found more than a third of CE05 hired by 369 major corporations in the 19905 came from outside the ciornpany A Harvard Business Schooil study of 839 big companies found fewer outsider CEOs e 17 39 but a faster rise in their more than doubling since 1980 compared with a near doubling since the 19705 among companies in the Michigan State study The studies include all outsiders but what is surikirng is how many comet notjust from outside the company but also from an entirely different39indusrtry The CEO with the right stuff is ihncreasinglry seen as having superior general management and leadership abilities not specialized industry knowledge That trend is only likely to grow A tripl etindushjr star like IBM39s Louis V Gerstner Jr 0x redefmed sluccess and lured other executives toward the fame and fortune of running a multicompany decathlon And a growing number of boards upartioularly those at troubled companies are open to going outside if only out of imitation and desperation Certainly stellar companies like General Electric and CocarColo Co continue to groom and httpIfonlir1erwsjr oormfPA2VTBNA4Rfarticrle prirtt0SB 8853325 B I 4 347 1 900000 html 42 I 2005 W Slcom a Portable CEO Do You Need an Expert On Widgets to Head a Widget Cornpar Page 1 of 6 WSJ con1 Portable CEO Do You Need an Expert On Widgets to Head a Widget Comps Page 2 of 6 pick only lifers as leaders quot l honestly say it never even crossed our mind to use outside peoplequot says James B Williams a Coke dirwtor who oversaw the CEO transition from y late Roberto Goizueta to M Douglas Ivester It isn39t necessary because there39s so much talent at CocaCola and because you want continuity so thatequots never a threat of missing a beat Pursuing Free Agents The portable CEO reflects some of the profound business changes of the past decade Boards have more powerful and that includes Z charge of succession They often cast a broader net for candidates than in the days when insiders tapped proteges The companies bigger the competitive turf i more slippery the failure costs higher and the available talent supply thus winner Like bigleague teams Big Board companies d now willing to pursue free agents especially if a dynamic outsider sends a desired signal of change to investors and worlcers Outsiders can however also easily crash for they don39t know the nuances and politics of the business O heading For every IBM which has seen its business revive and its stock price nearly quadruple during Mr Gerstner39s near veyear therels an Elgghead inc which has wound up with egg on its face in recent years through failed outsider CEOs The software retailer is now on its fourth A portable CEO is in any event a more volatile mix of pluses and mlnuses than the lifer Mark Willes who went from pushing Wheaties for General Mills Inc to peddling papers for Times Mirror says boards must assume portable CEDS quotwill rnalce mistakes The question is will the cost of 1 mistakes be srnaller the advantages of a esh peirspetctivei Recruiters Role One big reason the answa so often oornes back quotyesquot is D executive recruiters now often suongly recommend hotshot outsiders quot39It39s a better bet to go for the great athlete rather than the average player who knows the industnr says Thomas Neff of US operations for the SpencerStewart executiveSearch rm The balance has tipped l rornn1anagement to leadershipquot Outside CEOs typically a he y pay pprerninm over insiders who move the top that39s pro tabrle for recmiters who typically collect a fee equal to one third of an executivels projected rstyear cash compensation In addition highpro le crossindustry hires become headhunters calling cards in landing new corporate clients Whats the right stuff for succeeding in this l1igh rislt highreward endeavor Here are some of the emerging axioms Make it snnppy When Mr Gerstner joined IBM on April l 1993 he told an acquaintance he expected to spend the first full manI115 Sii2ing up the situation He was a cornputer indusu39y novice after all coming from top stints at American Express Co and RJJR Nabisco Holdings Corp But he soon found Big Blue39s woes were too big for In a lateMaya meeting with his newly hired chief nancial officer Jerome York both agreed IBM needed to incite deep cost cuts ibecausc in Mr Yorkls words quotthe problems were so massivequot A month later Gcrstner presented his board a plan to eliminate 35000 jobs and take a pretax charge of 439 billion It was tough medicine but it went down well with worried directors quotThe httplon1inewsj comJPA2VJBNA4Rlarticleprlnt0SB8 85 332581 4347 I 900000htrnl 4212005 WSJcorn Portable CEO 0 You Need an Expert On Widgets to Head a Widget Comps Page 3 of 6 was concerned that IBM could get into a liquidity crisisquot recalls York By moving swiftly we greatly P their fearsquot When Willes joined Times Mirror in June 1995 almost immedliotely he shut down two newspapers earning him nicknames like quotCereal Killer and quotCap n Crtmch But Mr Willes whose Mr Chips appearance belies his boldness says quotN do those shutdownst over again We A to establish a sense of disciplinequot adding quotThey quickly got the discipline message I don39t regret the timingquot Mr Willes told analysts last month following two years of resitructuring he expected Tirnes Mirror39s 1997 earnings to rise nearly 570 horn the previous year Make it personal PDz his second day in of ce lusilco Corp CEO Robert Stnialek summoned the 12 business unit heads to a Dallas hotel room and delivered on ultimetumt Make your business achieve tough operntingiprofirt goals o a year or consider your business for sale 39l39hen RZ Smialek who had just been Ah frorn Siiehe PLC a British engineering cornpany listened to objections from his new subordinates After all he had contravened their longtirne autonomy and had challenged their assumptions ofwhot possible at the diversi ed manufacturing company i pooresbperfonning unit heads howled loudtest They Whis is the way it is The low margins you see here are typical of the indusnyquotquot he recalls quotThat39s the way it39s going to he replied d Smialek He also remembers why hetook this approach quotWe needed to raise the barquot Nine units his lD operating income goal on time All but two a heads have since le t Meanwhile lnsileo shareholder have outperformed the market throughout his nearly ve iyenrt tenure At Unisys Lawrence Weinbach met with top l00 managers last October after one month on the CEO job and announced Everyone in this room is going to be responsible for two customers3939 The condition of i being adn ttead to the next menngernent meeting would be a declsnttion of the two speci c customers each will handle S Weinbnch had also made that requirement of senior management at Big Six accounting cornparIy Anr1dlersen Worldwide his previous CEO post but saw an even more urgent need at this longstruggling contputer maker One of its troubles he sensed was being too internally oriented including in nearly total lack of custorner contact by top executives quotIt became very clear that I had to change CF culture and change it very quicltlyquot says Mr Weinbach who made himself subject to the twocustomer rule too quotWe had to start thinking about the customerquot Tailthe some friends One characteristic of premier portobles like Mr Gerstner and turnaround artist Albert J Dunlap is a set of loyal sidekiclts who follow them from job to job Crary Wetsel didn39t have any at Botland International Inc one of the contributing factors to his short 83 as CEO of the Scotts Valley Calif software concern His predecessor had fired a httponlinewsj comPA2VJiBNA4lUnrticle print390SB 88533258143471 9U0000htl391l 42112005 number of senior managers and Wetsel replaced them almost entirely by promoting insiders But between the operating inexperience of the new CEO he had a nance background his industry inexperience he came frorn Octel Communications Corp a voicernail specialist and the new aides greenness Borland39s f wasn39t sure an attempted was taking hold B Wemel resigned in July i996 after 17 rnonths on the day the company predicted an unexpectedly big quarterly loss He saw the problem as an unsupportive hoard they saw the problem as a disorganized management team Successor Delbert Yocam rnade sure his team wouldn t be short of sawyor loyalty He recruited two former U from Apple Computer Inc soon after joining Borland in December P Says Yoearn quotMen and women who39ve worked with you before know how to operate and how you operate Beware of predators Sad scenarios like that of John R Walter made ATampT s president and then in a frenzy of backbiting unmade unfold more often than realized Outsider gets top job outsider gets ambushed by politically potent insiders outsider winds up back outside sadder hut wiser t and o en richer Ronald T LeMay never thought his job at gorbageshauling giant Waste Management Inc would include to haul the company39s founder out of the way He wasn39t former CEO 0 L Buntroclds rst choice Almost from day Mr leMay arrived horn longidistance carrier Spri m p July the two men locked home over everything from corporate jets to corporate accounting The latter proved particularly contentious with Y Buntrocrk who was still a board niernher demanding P the company stick with his aggressive approach and Mr LeMay demanding a more conservative one After an unexpected seoondquarter earnings decline the new CEO quotfelt a major overhaul was requiredquot according to hoard mernlaer Robert S Miller while some directors saw him as overreoeting After little more 100 days on the job LeMay fled back to Sprint When Bruce Kryxsiak agreed to leave the Circle K Corp conveniencestore chain last January to become Dollar General Corp39s president it was the understnnding that he would he CEOin waiting W he didn39t understand was just how long a wait In the course of last year it became clear that chairman Cal Turner Jr the S7 yearold son of Nashville discounter39s founder was in no P to give up No 1 job 03 Krysiialr 47 began to press Mr Tumer for a date when he would become CEO and he says now quotI pushed him a little harder and little faster X he to he pushedquot Mr Krysiak announced his resignation O December effective April 1 Mr Tumor began looking for a new No 2 this time he says someone who into Dollar General39s strong team culture rather than someone with a homing desire to be CEOquot Both say they erred in not getting the timetable straight up front Citing the symbols Mr Willes of Times Mirror believes d a newcomer must quioldy make symbolic gestures as well as substantive ones because quotyou only get one chance to make a first impressionquot He moved the CEO39s o iee om a central courtyard area overlooking an interior atrium to a corner httponlinewsj eomP A2VJBNA4Rartieleprintf0SB88533253 I 43471 900000html 4l2 12005 WSIlcom Portable CEO Do You Need an Expert On Widgets to Head a Widget Compa Page 4 of 61 Eng WSJcom Pormhle CEO r You Need an Expert On Widgets to Head a Widget Compa Page 5 of61 http llonlinewsjcomPAZVl39BNA4RJarticleprintDSB 8853325314347l 9000CIOhtrnl highly cyclical marine business and a happier Brunswiclc board conference room with huge picture windows facmg City Hall The intended message quotLet39s not gaze at each other let39s look outside Our readers are out therequot He also the Picassos taken off the executive dining roorn wells because quotit said we 0 more p an insurance company 0 4 in newspaper company he says He replaced mom with work by Times Mirror phoitographers No chain saw No problem The Al Dunlap model quotthrow out the burns and tear up the companyquot is the best known modus operandi But it isn t the omy way to go Raymond spent his early days at phannaceutical giant Merck amp 2 not terrorizing his employees but endlessly to them He met about 40 senior managers asking each the same two ques ons What do you believe p the major issues facing the crornpanyf and quotWhere would you focus your if you were mequot i He had entered a company whose morale had been sapped and gowthrate slowed by a messy succession scramble Tl1at39s what forced the company to hire him away from medical equipment maker Becton Dickinson amp Co His interviews enabled him to grasp Merck39s dynamics and to pjurlge its people three months he chose 12 people for his top team and one month later they developed a plan to get Merck back up to speed The of Ciilmar39tin39s L says Merci director and CEO searchcomrninee rnernber G Bowen was 0 he saw the company didn39t need a makeover but a healer and facilitator quotHe went in the idea was going to be a partnershipp says Mr Bowen He was eager to release the talent that was therequot Fit In it What it really corners down to caseby case is t When a cornpany the wrong person go very wrong very When it hires the right person they can We happily and pro tably ever after Brunswick Corp done both in l994 the boat maker recruited John P Reilly chief of Tenneco lnc39s nutomottivc husiness to be its president and ultirnately successor to longtime and CEO Jack Reichert But Reilly clashed with a Reichert aide putting him at odds with the chairman And he was a hands on type imrncrsing himself in the companyquot businesses Brtrnswiclch directors belatedly realized that the company really needed a strategic thinker and marketer Reilly was gone in p months moving onto more succesefinlly E Cleveland based Figgie lndustries Inc then Stant Corp an autoparts maker Brunsiwick then recruited Peter Larson another outsider who did t that bill Mr Larson who was chief of l Johnson amp J1olhnson39s consumer and pcrsonnl carc products became CEO immediately and began rede ning Bmnswick He up high growth companies that made camping gear bicycles and other recreational cqiuipmcnt tlrnt he reasoned could be cross rnarltieted to Brunswick39s core boat customers That has produced a company less dependent on the An outside CEO works liflthc hoard has a clear understanding of it looking for and finds 42112005 39 wsmm Portable CEO Do You Need an Expert On Widgets to Head a Widget Compa Page 6 of 6 the right person says Jay Lorsch no Brunswick director and Harvard Business School professor But he adds quotmost companies should still be llying to emulate GE develop deep pockets of talent imide and let the board get to know it Like any corporatel fashion this one s dangerousquot COl1y ghI2039i05lDUIl Jami I 0 Me Al Rlglno Reserved copy is for your personal noneommorciall was only Distribution and use of his material are govemad by our Subscriber Agreernorlzt and by copyright law For nonapersonol use or to order multiple copies please contact Dow Jones Reprints at 13003430006 or visit wwwdroprinlaeom hupon1inewsj eomPlA2VlJBNlA4Rarticle pnmosB3sl5l3l325s1434719oooloohtmI 42l2005 h Blipfnra lpdjmemubinDJInIaerae1iveeWESTST0RYampGJANum4063881 In2003 11 P Battle 1 us But It quotOnly T oMny Me Up Unison R Willce and Bryan 0515lI 998 A The Wall Street v Page A1 V e 1998 Jones amp Inc A wmmmt mu Joel I ein V the nation39Is top antitrust lmshadehectieweek 0 a 65 billion h1erga39 begwem two Baby landed on p ogsla e 1 mcwohn Malone to P he forced Bill Gutehland todelay ne planned shipmmt d its Wmdawa 98 euteomhe of g ment C memme he also publicly warned ether companies 0 he39s a a p will not give people a pan a year a timid to 0H on p h tams Mr C as the most ae ve the meat U T D in a generation His of at the Justice is 1 to set the eempai ve rules as global T new munaliths in media Mr Klein39s tatgetis Mr and p uaw James f mnmcauons Ltnmty E Pugs J K I mm wim Clmmquots more e j b he was b to j M f qplauded but lawmakers and me ma a complained he wouldn39t be His problm then As 0b 0 m he had approved Bell A aniid Cazpquots billion k P Corp me h mags on k and me j m 39 h eonmmer wtivists thought should be e lhe Nb d e who pBe bow to big oompmies am the Nd do their bidding and Time Well Sueat Puc in its news P b he go easy on b Senate b for a a z says now as hedid b that me a cue a xb b wb Teogle ware ghlting me m mleeom act on my basicquot A Some 0 worry he MZ U T and yesmday settlmem Y 7W r fear H6 been sW 1 job says farmer o P6X Y Robert 0 But I hopehe 0 isi fV fmther39 because ifme Z Mr Z X isn t p Y bY Z P W 0 X 7V X pavf i T f T Bnrkmys U A Mictoao rival RX R Q says he X wimMrKlm39nin1992 quot uyingtogetLoonnHdmey outofllhe Hammerquot Q U as private lawyas to Q the New York hotzelier whowas in P an incometax Q um hR aayshis oR Q hP P 1 so or P hm tamer is pauexned Qn le common 1 M he us Pst dakto 0 K quotI L don39t have tlgis F O Tm uying to Iowa on yO economy UI E says in an K I39m J to dwide 0WM pML on its memits ou at a E not an cur Oneobviaus n fut D J is me of merga FK quotI ve never seem p B itin 40 years of antitrum pracxiicc says James R511 a B lawyer who held Klein39s job under President pm But Klein KD sharpenedhis by JA ma a aggvasiwe B such as Amvid Boies 1 dC New York lawyu and by showing an to analyze the potential of mergers in less ways 39 39 man we mnpshot oftypical antitrust mamas at ihapInfssglpdjnncomugigbmDJInmncavecgiwmsTsroRYampGJANum4o53as1 R 172003 uuw Jules Maury A 4 01 I you39re unphuia inthe e says Veneer 1 r q who me deparmnenfa ATampT case You 3 less certain A in terms d analysis 10 yarn It39s much In sort what the 0R as p 03 e T Kla39JnT prefers gn on to N all n equal 39 because a court deeisdodhas Wid z a single case I 39 feels its S V precedent pays 0 lawyu who worked brie y with Mr at we depanznent He more 6 probably many of his predecessors to take a to court gm o S also on his we will he if P Pw m q you guys in P ma a give says Rule no former Iuwice Deparunent is on for Mlmoso But o v T T Klein isn39t easy as by this l osasaul T olhe C by big cable A1 a new hmdsy Q said the x P p R ea e slot owned by Mundoeh 39s o I39de Inc an P 0 v 0 a 0 0 we 31 L L B cable p me monopoliminmia munuyrquot The mm as a surprise to DanO39B1ien Pximumfs president and chief o5mg Just the day 0a he says hebelieved i 39gt T no P meodeal to proceed P4 His A lawyers met Ian incl believed that no lewmilt was imminent p Mr O39Brien 6 p phone S I no y g a news oonfermee on a 0 39 Only the N m iii fo did Mr Klein call P measta s mttomeys to alert mm me lawmit The Jew wouldn39t let a attmd me news ungd oonly after m oftheo T e um J 3 r le P get one 0 lawsuit v O39Brien to cancel 3 X X p H hefelt had shot 1 mo Tm P p out ofmy Hdneyso h prilmmtg1pdjnreoniegibinDJInmraeIiveegiWEBSTS39l 0RYampGJANom4063881 0210112001 The Wall Sweet Page B1 Cbpyright cc 2001 Dow um amp Company Iuc AG T 1efm39mu39 chief ofme Iun ce 0 as in map euteeulivo z its i 39 in hurdlesasit z the US E A R x main who led the z to T up h moso y T T ma z 0 Ly of T Li n Incj a US mbaidiary of the 9x x x u And hevms w the Ii e ofchief liaison Qm 54r 0 t v Ot not hnvedie tqpeu1iung respondbility q an 396 big U t mcluda ir lq A Kp s r q magm39no39 LJal1r Vt Us 7 j the mum fs BMG t gq fk o q meme p o will p to l to q j Yq s in Gummy m T q p in the ismes at the n dt dd technolcggy and bf iks Q n to be a part afLthatquot p o 6p Klein He says he at met j el years ago at it n DC h k 39 Chief among me hurdles m 0 e iIquotd1 T i 1 m om BMG lh unitwith Buma g Group A in 9 ST STD39R3Yamp7 lANmnu 4 II39M 1 rmnm uuw Juuuu 0a uuluy 11300 1 two at p 0 z 1 p hut year People close to Wmlmi have met that 0 ofudeol sealed are 0 P 5050 ma merger with Music Group new 1 g of Time Wmner Ina of in g P played down my mggestion mat was brought to approval for the 0 No wmxlwdebeeataboutnafm PP Itfis muehsnoote It h get butthat wun39t X reason quothe said P added 3 he hoped to d P3 Kleiws knowledge of compile 5 P me Internet He said he would alsomely on El n of le pE in 0 Ln with Napster hue music to develop to o lessharing 0 no mum aims t I 3 VI i t to 0l a 0l in ap a any pmgress in up thigh music f for the L step is widely p 3 ho 3 Kleih my be g to 0 some elmity to 2 393 0 X pH responsibility for the t J v t e vision from the music 0f it to who heads 395 Dwitet TKleinquots renown as a T he is bwt tlmown in 7 0 for an lawya m the quotcase he to owe thesemat to file suit he bwnme eonvineed t riolated federal I aopublie 0 the were quot eeting The ahturp public of aceoutivw left to hisstat litigator David But F u Boies it was w Klein who may k a P with Bin in the 11th hour ofIhe39 Mir Klein left his as an uust divisionhehireflast 7 P Middelho dearly hopes to make a splash by Klein quotAlmost no one in the US use with the name Bertelsmann quot T Middelho It is mat a face in the Americmpubtlie that we are good 0 that best by a person with the of Joel 39 h1tpllt1rstg2pdjnremnlegibinlDIh1temcaiveegiWEBST4STORYampGJANI1m5645923 13zoos yr Kleiniu1r39eady Inytumngly global he g D T p p In 0 to helpehim said Cuy I j in P He39ll go R the xnitua an with a lot afcredibility D J me persemlitiee over there K the P invohred in me p mad p to this 1mp JrnmypajmoomrcbinmnnmmcevevegWmsrs1o1urampGJANums64s923 13zoos THE NEW SCHOOLS CHANCELLOR OVERVIEW BLOOMBERG PlCKS A LAW Page l of2 El Nrw ork Eitttrs Technology THE NEW SCHOOLS CHAN CELLOR OVERVIEW BLOOMBERG PICKS A LAWYER TO RUN NEW YORK SCHOOLS Joel I Klein a publishing executive and a lawyer best known for leading the antitrust prosecution of Microsott was appointed yesterday by Mayor Michael R Bloomberg as the first chancellor of the recon gured New York public school system In announcing his choice for chancellor before his top staff members in the historic H Cointhousc Mr Bloornbcrg has put in the iinal piece of a series of historic changes intended to bring greater accountability for the education of 11 million New York City children accountahility has has promised that rests with him In tlultei the State Legislature granted Mr Bloomberg control of the school system undoing more than 30 years of a decentralized system that was intended to give power over schools to local communities but created huge disparities and left thousands of children without b1sic skills To syrnboliae a bread with the past Mr Bloomberg decided to move the newly named Department of Education39s hBalqll l le1 S 0tIl2 of Bronlzlyn and into the Tweed Courthouse in the backyard of City Hall He also settled a protracted contract dispute with the city39s teachers giving large raises in exchange for modest contract contcessions With the city39s Board of Education abolished replaced by an advisory committee with no real authority Mr Bloomberg moved secretly consulting with few to nd a chancellor who could take over the system before the start of the school year By appointing Mr Klein a former federal prosecutor who grew up in a housing project and attended the city39s public schools the mayor has now begun the process by which he has said his entire rnayoralty should be judged Mr Klein is the chairman and chiefexecutivc of Bertelsmann Inc an American operation that is part of the Gcrnian media conglomcrate Bertelsmann which this week ousted its chairrnan and chief executive Thomas imiddelhoff From 1997 until 2001 Mr Klein was the assistant attorney general in charge of the Department ot39Justice39s Antitrust lhivision where he led the charge to break up Microsu Although a news release on Mr Klein described him as possessing quotconsiderable experience in the field of education 3939 this experience seems to have been limited to studying education for a bit and teaching math to sixth graders at a public school in Long Island City brie y before he entered the Army Resenre Because Mr Klein lacks the professional education credentials required by state law he will need a waiver from the state education commissioner Richard P Mills before taking his post City Hall officials said yesterday they were in contact with Mr Mills who assured thorn that a committee would quickly respond to the city39s request Mr Klein would receive a salary of 240000 He will accept neither a 10000 monthly housing subsidy nor the brownstone in Brooklyn that is often used to house a chancellor The house will be put up for sale Mr Klein who has lived in every borough but Staten Island will continue to live on the Upper East Side of Manhattan Mr Bloomberg standing under the barrelvaulted ceilings at Tweed Courthouse in the same grand room where he greeted welludshcrs the day he was inaugurated said the cityquots school system quotis an organization that has not been accountable to anybody and has basically been isolated from the rest of city government and from the public39s demand for a good education product for their childrenquot Mr Klein will bring many qualities to the job he said quotWe need somebody with intelligencequot the mayor said quotWe need somebody that is innovative we need somebody with impeccable integrity we need somebody with management sldlils we need somebody with scholarshipquot Mr Bloornherg and Mr Klein share much They are both selfmade sons of workingclass families of the same generation Mr Bloomberg is on Mr Klein 55 Both put lthemselves through college with jobs involving vehicles Mr Klein drove a taxi Mr Bloomberg parked cars Both l391 l t39C Cl aICt39ll degrees from Harvard Mr Klein in law Mr Bloomloerg in business administration They travel in similar social circles Mr Bloomberg called Mr Klein quot1 friendquot a term he extends to just about anryonc he has ever shared dinner wi39Lh Mr Klein yesterday spoke passionately about the education he received in the public schools quotI owe those teachers and this city school system more than I can ever repayquot he said quotI pledge to do all that 1 can to give each child in the city of New York a l39irstrate educathut and the keys to unlock what this magni cent world has to ot 7erquot39 He continued quotLet me add a word to the parents of all our school children I know how much you care about your children39s education l ltnow personally what it is like to loot into the eyes of an infant and be tilled with hopes and dreams We cannot let those hopes and dreams he dashed by an educational system that does not give our kids what they need and clesewequot Mr Klein was contacted by the mayor a little more than a month ago to join the roster of 50 names that were being considered by a committee to ht1pwwwnytimcscom2002073 0nyregionnewsschools chancellorovcrview bloomb 10 1 420 1 l THE NEW SCHOOLS CHANCELLOR OVERVIEW BrLOOMBERG PICKS A LAW Page 2 of 2 pick the chan cellor From those names roiughl V at dozen emerged as serious candidates who went through interviews On that list were Paul G Vallas the former schools chief m Chicago and Stardey Brezeno a deputy mayor under Edward I Koch Only Mr Klein was called back for a series of committee meetings and he was offered the job early last week Mr Blooinberg spent the lost hull of last weelc in the Caribbean and received Mr Klein39s acceptance once he returned over the weekend The ehoiee was held so closely that most oi Mr Bloombergs senior staff members were inforrned of it only hours before the press conference Mr Bloomberg wns so proprire tarv ahovut the appointment he personally chose the hour noon that it would be announced Mr Bloomberg said he was quotstruckquot when he interviewed chanoellors from around the eountry that the New Youl school system quotwhere none of us are happy with the resultsquot he said r better than most other major inner city school systernsquot The business baelgronnds of both men infected their locution yesterday They took turns referring to education as a 39 39produetquot and things lilzo quotsysten1s analysis to evialuate problem schools Little was said ahout curriculum or educational policy and Mr Klein dernurred when askred to outline his initial goals or to address how he would help to raise test scores around the city saying instead that he needed to talk to many peoplr first and make some new appointments Mr Bloomberg said that he would do as he has done with most of his oornmissioners appoint them and then let them be although it is almost certuin that the mayor will be explicit about his goals for the system He has said several times that New Yorkers should judge his entire mayoralty on how he addresses the myriad prohlerms ofthe public schools His passion for the subject was evident yesterday Mr Bloomberg who o eri reads from preparecl staternents when he announces things and oceasionally t1b5 an agency name or policy acronym spoke for nearly seven minutes without notes 1 39esterday about the new school sjvstern before ever mentioning M r Klein39s name Mr Klein is expected to start in the next few weeks and hundreds of Department of Education eriiplogreros will also tile into the 39I weed Courthouse where workers are wiring and carpeting the building for occtipaney and where equipment was being rolled in yesteidzly tfter the announcement the mayor took Mr litleiri on a tour of his new digs httpfwwwnytimeScorr1 2002O73 0nyregionfnewschoolschancellor overview bloomb l 0 l 4201 l 4W n quot Adsnarch V Y Id 1 p N I Imo new 3 I quot TH plank plilnndy and H midi ml ninth for N dayu 0 W I 4 6 DESK i V IBMIEW SCHOOLS CHANCELLOR CW i PGR Y A Path Back to SclmolV Joe rwin Klein 0T York City s new schools clmncello is notVan 3d man to shop P P P 3 he 1R S as PU Q R W of M at ue 7 in R led R government uT of p W Pl senior DU memben huddled 0 1 Au 39 hadspentkalmosthis henwapveupa W US nfmannet tlm T W with p City He is 1 ieuda nay P JS P 4 j p1ooplieinbad1cilies 39 39quot39Itquotsfair to my Joel is wR a U S pSP ufg1yquot mid Susan Davies umior 39 ioaunsel N 0U N division quotYcudon39t gd q Q h1midotquot e had molcug from time totime Ihlamt hisimotsin the New system and E pK in p M Cily w min Z P Wh uh Klampnm astoldoftheggi ata i A e in P g at Iustica 6 he h 3939I39twasmeonly 2 I ova saw him at a loss Davies G but an l9ssquot 0 Ile in s fgeling for nI1n Cltt w city Apublie whools may haunt for a lot 9 me 1 tbetweenlusr sum and 1etaskuhmdisnot39e11imeIy bvious You besure 1 an lmvyer anclan lawyerquot cyan with his ddI1s it I agschool system A Dwdu A A i 0 I I Kleinquot principal md P u elumcenepummtl stmnmggemdbothpasanda m mmdmmu ama wemopi nw I V MP3 qU4I Y 3 imeacomlsearchlmaeu39ic1mudlm39 clereaF1OAlFFQA5C0C738FDDAE089 111012003 ragoama uE1fIleinwlainpnvu TY mm pram ca wmm for20yeatI foal o onhealm 0A 1 ofmmtal hulth and li wion P 11 z Suptme Conn y won 9 of 0 d p H aliso tnughtlt law in 1 period One arm mam was mama K Powell I 0 6 of 0 2 Cm1NIsinrn quot 39 quot 3 Klein d not an evgnmg in an ewtaic to 39 r3 didquotquot39od taut ful139Iime in 0 day to Z P 4 said The p A procedure p1 nd mystifying mmananedmec1imm VlvhiteHouse in A1993eanyanahe 39 mlacing Vincmtw I committed W prepare F v o her cun 1ma onforSupreme p 2 eHemoredsmmirJus ceDeparmentin I995 and msmn39deV39mem1imA39nop in 1997 0 f his inure w Justice I I number of d nes b Ca he 8 PWg 5 f 39 5 nearly 2 Billion in b an g one oftho z divisions P P e f caitninal m uuat proseanion of man man a damn 0 z f 0 z uftigngbids on hc for 210 Jg of ozm and esh g sold to e York City of ducatim The compnnjcs plwded a P A Klein 0 viilljewe him w formei39 my ma Yolca MsDav39iu B a he and mu say itquot 0 wee not a bunchof kids doing a heztdld le X 0 Y He was htlIJ queIyny mescoms archrestlictedIuIicleresFlOAlFFC3A5COC73BFDDAE089 ma2003 Jack on Jack The HBR Interview by Harris Coalulingwood and Diane L Coutu 7151 n g4 3 p Reprint R0202G F u rch ased by Jon Cohen 0n cohenbrownedu on October 16 2012 The HBR Interview by Harris Colllngwood and Dianne L Coutu a ck la Jack In recent mohthsJack Welclfs life and legacy have literally been an open lbiookl Here the worlcl S most famous CEO gets the last word on what he did and why HEN lIE STEPPED DOWN as chairman and CEO of General Electric in September 2oo1 Jack Welch left behind an organization that had grown to 130 billion in revenue from 25 billion when his tenure began in 1981 Over the same period GE s market capitalization climbed from 13 billion to more than Moo billion Less quanti able but equally signifi cant was the extraordinary eftlorescencel of GE Welch and lbusiness itself in the general public consciousniess The Welch era at GE coincidecl with the migration of business and business leaders to space ever closer to the Copyright Cc 2002 by Harvard Business School Publishing Corporation All rights reserved Purchased by Jon Cohen loncohenbrowhedu on October 16 2012 THE BOTTOM LINE OM HACK WELCII center of popular culture Perhaps the shift began with Ronald leagan s infectious faith in the wisdom of the marketplace or perhaps it happened because 4o1ks and other selfdirected retirement plans made stock analysts of us all In any case as business became the arena where many of our hopes and dreams were played out corpo rate leaders became objects of fascination likened by one observer to medieval popes in their puissance and in scrutability No CEO exerted a more magnetic pull on the media than Jack Welch Sure Welch s gol ng buddies Bill Gates and Warren Buffett got their share of public atten tion but neither is famous as a businessman exactly in the popular view anyway Gates is a technologist and en trepreneur par excellence while Buffett is the investors investor Welch on the other hand personi es American busi ness hypercornpetitive obsessed with results tireless in the pursuit of growth and more growth And busilness people are if anything even more fascinated by the man than the general public is His central place in the man agerial worldview can be inferred from the amount that has been written about him more than a dozen books at last count innumerable mentions in the press and more than a half dozen appearances on the covers of both For tune and Buslnesslweek The Financial Times named him the world s most respected business leader for four straight years So great is the interest in Welch that Warner Business Books eagerly parted with 71 million to win the hard cover rights to his book jack Straight from the Gut writ ten with journalist John A Byrne International rights brought the total to 95 million Welch has donated all his proceeds to charity It appears to have been rnoney well spent The book shot to the top of the bestseller list and Welch s aroundtheworld promotional tour drew rapt crowds from Atlanta to Tokyo But the admiration and good reviews for jack and Jack were hardly universal Sorne critics faulted the book for failing to reveal the inner man despite the lengthy account of We1ch s upbringing dominated by his straight talking tough loving rnother Grace and the meticulously detailed recounting of his career which he began as a 1ooooayear engineer in GE s plastics division in Pitts elrl lvlassachusetts If his book was as its title claimed straight from the gut where was the selfexamination the analysis of his motives the baring of his deepest drives and conflicts Welch seems genuinely baffled by these complaints Relentlessly focused outward and forward he s uninter Harris lCoIl ingwood and Diane L Count the senior editors at H BR ested in plumbing the depths of his own psyche I don t think that much about myself he says Other objections though aren t so easily dismissed Critics have used the occasion of the book s publication to revive their claims that GE under Welch sacri ced people for profits in the first ten years of Welch s tenure as CEO GE cut its payroll by a quarter as its net income more than doubled and imposed a ruthlessly Darwinist ethic not just on one cor poration but by its e2rample throughout the LLB econ omy In this interview Welch confronts his critics as he looks back on an eventful career and assesses a life de voted to business For better or worse you take up a lot of room in people s heads both inside GE and in the wider world Why is that Did you consciously make yourself larger than life I wasn39t trying to be larger than life almost the opposite What I wanted to do inside G E was to touch every person I wanted to get into their skin I tried hard to make that connection so that they cared the way I cared Everyone from the factories to headquarters in Fair eld Connecti cut That s why I always made it a point to have a rela tionship with our unions I wanted them to be on the same page too I m less clear about the view of me outside GE In fact even at this age I m 66 I m still surprised to think that s me they39re talking about I don t take myself that seriously But if I had to guess if what you say is true I d say it s because ll m always willing to say what I J I m not afraid to put ideas out there But you have to understand that these ideas are starting points not endings I love to throw ideas out like Six Sigma or the boundaryless cor poration and have people test them modify thern ex pand them mold them learn from them I think about business a lot and I tend to verbalize my thoughts early to get those conversations started Those discussions led to a lot of success at GE and perhaps I get the re ectecl glory from that One idea that you seemed to grasp much sooner than most ofyour peers in corporate America is that lnforrnatiori was more valluable and more powerful than hard assets were When did you realize this It happened at GE Capital When I got involved with GE Capital in 1977 I had been making things all my life mak ing products Then I was given responsibility for GE Cap ital which was then still a very small business We had all the capital in the world and all we needed to make money was ideas That was a revelation to me Maybe it shouldn t have been l was a PhD chemical engineer and I probably should have gured that out already HARVARD BUSINESS REVIEW Purchased by Jon Cohen joncohenb rowhedu on October 18 20121 At GE Capital we coupled ideas with manufacturing disciplines When a loan went bad we worked it out we didn39t put a line through it One business of ours Polar Air came about because we had leased a bunch of 7475 to Pan Am and the airline went out of business We con verted the planes to cargo carri ers and started a shipping com pany We got into the railcar business the same way through a bankruptcy That s what we could do at GE because we had people with diverse operating experience as well as capital which gave us considerable stay ing power Unlike most bankers our people knew how to operate businesses And that gave you an edge as a lender Yes because we were able to that seriously I m less clear about the View of me outside GE In fact even at this age l m 66 I m still surprised to think that s me they re talking about I don t take myself bring manufacturing discipline to bear on credit decisions Take commercial equipment finance for example The person running it today used to work in lighting and appliances The experience in those businesses gave him rigor and op erating discipline He s worked with real hard assets he understands them So when he makes a loan to the semi conductor industry he knows to ask Is the equipment contemporary Can it be moved Will that asset stay alive He has a feel for that sort of stuff Or at least he has a better chance than someone who39s been in banking all his life The book is full of people sweating over anaou lots of money that are minuscule in the overall context of GE such as the purchasing executives who writes his own auction software rather than pay 1ooooo for an offtheshelf program lln a company as big as GE those numbers are rounding errors How were you able to maintain spending discipline GE is big in its overall size but small in its execution The transportation business is a good example of that There have been times when the people in that business broke their backs to ship two more locomotives before the end of the quarter to make lD rnillion extra That was the most important 10 million in the world as far as they were concernedThose little 39lD million pieces eventually added up to 3 billion a quarter Nothing at GE can swamp one s inclividual contribu tions But that wasn39t always the case I remember when Jack on Jack the loading docks ourselves putting products in the trucks so we could meet our pro t projection for the quarter Then we d have our quarterly review and the guy from Utah international an energy company that GE divested in 1983 would come in and say Well we had a strike at the mine the last three days of the quarter so we re going to miss our number by 50 mil lion it would drive me crazy Here I d been sweating to make my number and he makes that effort irrelevant in no time flat That s why l think natural re source businesses belong with natural resource companies The swings are so dramatic they over shadow everything else you do positive or negative If I39m a senior executive at a good sized corporation what are three or four things ll can do right now to rnalke my company small in execution Get into the skin of every person so they know that their ideas count Celebrate small successes Evaluate the peo ple down to the lowest units so they know that their achievements are constantly being measured and that they count It s critical that people know their contribu tions matter lt ls critical that they know what they do will be seen and rewarded It s pretty simple reallya nothing very profound about it Simplicity is the essence of managing people You ve got to be simple to get everybody on the same page And consistent When you re ghting every day to get every body on the same page you can t be changing your mes sage all the time Can you say more about getting people on the same page You need to give a rationale for everything For example there was a time when we wanted to cut travel by 30 but if we d just issued an order from headquarters the people out in the eld wouldn t have stood for it They d be on the phone saying What do you mean telling me how much I can travel So we tied it to lifestyle to work life balance i told people Look you ve been telling me your biggest problem is that you don39t see your families enough Now you re going to be seeing your families 3o more You always have to try to nd a rationale that ad dresses the personal needs of the organization as well as I was running a business group and we d practically be on i the corporate goals FEBRUARY 2002 Purchased by lorl Cohen jorlcohenbrownetlu on October 16 2012 THE BOTTOM EJNE ON JACK WELCH It doesn t seem like workalife balance was an issue for you though Not at all My life and work blurred And it ew by And then it was over The thing is I had the luxury of doing what I love which is hanging around with people I wasn t managing businesses I was managing people Well you managed businesses too You write about what you call deep dives where you immersed yourself in a business How did you decide when to do one of these dives My nose told me My gut To me the best example is the CT scanners Back in 1993 tube life the cathode ray tubes in our scannersewas terrible Our images were the best but doctors were going nuts because the tubes were going out while they were doing proce dures My gut told me to take a deep dive on this tube problem Now if you understand the way business works designing a new CT scanner the fastest most detailed with more pixels more data that s the candy that s the glamour job All the great engi neers are over there designing the new lscanner Meanwhile the tube is just a component The guy in charge of making it is also mak based on its current performance not its potential That s why I say you should always overstaff an oppor tunity If you believe a business is critical to your future put better people on it than it seems to deserve If it s a 5 million business put a 300 million person to work on it while it39s still 5 million and they ll make it 300 mil lion You put a 5 million person on it and it ll stay 5 million Let s shift gears You re often described in heroic terrns But in myths heroes always have tragic flaws Do you have a tragic flaw That s something I ve never thought about I don t think that much about myself I think tragic is too big a word I may be too impulsive but I wouldn t call that tragic I39ll get into a deal too fast sometimes You should always ioversto an opportunity If you believe a business is critical to your future put ljvetter people on it than it seems to deserve ing X ray hangers dollies every day stuff But the fact is the tube is the heart of the system it has to function before any thing else can But the organization wasn t reacting that way Tubes were in a dirty old building the head of man ufacturing didn39t have time for them even though the customers were screaming So despite having the best ma chine we were getting killed That s when I suddenly became the tube business man ager I asked the manufacturing rnanager iDo you want to be the manager of tubes He told me I was crazy I ve got ten guys at that level working for me he said So I used the power of my position I changed the salary level changed the position changed the people Instead of a guy making 110000 a year with six people reporting to him I swooped in over the top of the bureaucracy and said Let s pay the manager 350000 a year and make him an officer of the company Now the manager can bring in all these great people because he has room under him and suddenly you have opportunities that weren t there before But it doesn t always work out that way because the system eanyl systemwants to evaluate the position or I ll take a shine to someone and immediately give him or her a battle eld promotion That wasn t such a great formula early in my life My success rate was 5050 at best At best That improved later because I turned out to be pretty good at it On the other side if I could single out a strength I have a good nose Not to sound boastful but I believe I am very intuitive I don t get fooled very often You talk a lot about having business soul mates Who are these people and what role do they play in your work A business soul mate is someone i can talk to completely ope nly I can tell him everything I m worried about eve ry thing I m thinking about There have been several of these people in my career Larry Bossidy Paolo Fresco Dennis Darnmerman Bob Nelson Bill Conaty to name a few i trusted them with anything Consider the succession process Bill Conaty my head of human resources Dennis Darnmerman one of my vice chairmen and I were just consumed by it We talked about it every day There was so much pressure to make the choice and so much pressure to leak Yet not one iota got into the press That s because I had business soul mates with whom I could discuss anything These are the men who tell me the truth Well at least they came closest to telling me the way things were That39s an issue for CEGS isn t it They often seem to be the last ones to know the truth about the HARVARD BUSlll39lE5S REVIEW Purchased by Jon Cohen joncohenbrowhedu on October I6 20i2 organization How did you ever get anyone to tell you the truth By asking questions lots of them I would sit there and I would ask 18ooo questions and I wouldn t leave We d talk for hours For example I might walk down the hall to the of ice of Bob Nelson lone of Welrh s top financial planning executivesl close the door and tell him what was concerning me about this business or that business Nelsons the guy who was always giving me the picture two years out three years out And because he was a busi ness soul mate I would listen That s just the way it is If you work closely with someone for long enough you end up spilling all this stuff over each other A lot of what you talked about with your soul mates had to do with people especiay in the famous Session C human resioiunze reviews How was Session C different from a higililevel gossip session Rigor No question Session C s can be gossipy But it s gossip with a purpose Session Cs are rigorously out come oriented Say you re one of my business unit heads and we ve been talk ing about your top 20 man agers at a Session C At the end of that session weld send you a letter with our conclusions with what we discussed what we agreed upon and what we d left open And lo use this letter two months later and then another six months after that to see whats been done can do jack on lack than he was At our next review with him his goals for the upcoming year appeared very modest compared with what we d seen elsewhere Proving the adage that no good deed goes unpunished we all jumped on him and within a week he had doubled his target By the end of the year his results were triple his original projection That s what linkage is ideas getting enriched from one meeting to the next The way you expand on ideas can make people pretty uncomfortalble sometimes In the book you talk about one ofyour lRampD heads who criticized the work of his staff in India You objected to that and made an example of him What were you trying to get at in that story Here s what happened I d just been to India where I d gotten a very good presentation from the people at an RampD lab we d just started up there Two days later at our of cers meeting one of our top RampD guys says to me You got a lot of bull from those people Their work isn t that good So I say if I m getting bull it s A mamiger sjob is to make his people feel ten feet tall estrong powerful selfcon dent willing to take risks Runnilng down your own team is one of the worst things a leader about it That s the concept of linkage tlhat s been written about in the Harvard Business Review and elsewhere Ram Charanfcornqluerlirng a Culture of Indecision April 2001 But is linkage anythingi more than just following up Much more Linkage is expansion If you re following up all you re doing is asking Did you clean the toilet like I asked you With linkage you re seeing how an idea has mushroomed between meeting A when you rst brought it up and meeting B when you ask about it again Think of the auction software you rnentioned earlier The first time i heard about it the guy who decided to write his own auction software was shifting his purchasing opera tion to an auction format By the time I saw him again I had been to several businesses that had picked up his software idea and in fact were using it more aggressively FEBRUA RY 20lD 2 partly your fault Now I love this guy he s one of the top two or three R8213 guys within the company Extremely self con dent But if were truly a global company this talk about here and there has got to end We can t think of the In dians over there and us over here So I told this story the next day at the full meeting not men tioning any names because it was the perfect example of the kind of thinking we have to get away from And a few days later i got a letter from the RampDi guy apologizing and explaining how he was going to change his mind set Right It sounded as if he was kowtowing to you as ifyou d bullied him into saying what you wanted to hear let s face it there might be some of that in there But the fact is he will go about making those people his people Say you have sorneone working for you and you say that person is a dope Now why are you sending a dope to give me a pitch What are you thinking If you believe he s a dope then work out the problem That s what I was say ing A manager39s job is to make his people feel ten feet tall strong powerful selfcon dent willing to take risks Purchased by Jon Cohen jonoohenhrownedu on October 16 2012 THlE BOT39l39OM LINE IN JACK WElLCH Running down your own team is one of the worst things a leader can do But you know there are jpeople who say that s what you do There are business observers who say GE is a cult and that the teaching you do there amounts to brainwashing Without question that is the craziest thought in the world Let me tell you how it works if you don t under stand this you don t understand GE Take an idea like Six Sigma l ll throw Six Sigma out and say Here s my vision I ll exaggerate the case to create a sense of urgency and I ll insist that only the best people be assigned to work on it I ll make these pro nouncements about every initiative over and over again A relentless drurnbeat Tens of thousands of people en gage in the initiative Six Sigma or whatever and I go to countless meetings and make it the focal point of the ses sion Every meeting builds on the one before At each meeting we learn what the great people in a particular business have done with the idea Then we go to the next stop and we add what we learned at the last stop it39s the people who keep enriching and expanding the idea That s their job My job is to keep the organi zation focused on the initiative and to ensure that the best people are assigned to it When you do this on something like Six Sigma there s a great ferment an outs pouring of ideas That s why GE is a learning organization Everyone in GE gets up in the morning and comes to work every day trying to nd a better way But do people get to dissent There s no value in dissent for its own sake Dissent is only good if something better comes out of it What our critics may not see is that we throw a seed out there and it becomes a thousand owers All this brainpower goes at an initiative which expands and expands and expands so that ideas grow and grow and grow Rich and open exchanges on these ideas not brain washing are what make GE a learning organization Are you creative Marginally It s not my strongest suit But business isn t all about creativity lt s about seeing the value of an idea sometimes having it sometimes seeing it but expanding it Seeing an idea is as valuable as having it Using it and sharing it bringing it to life is as valuable as generating it Yotrve been described as blunt candid even intimidating Are you worried that your style may have driven good people oLlt ofthe organization How can you even ask that when you look at the CEOs GE developed My database is this Larry Bossidy at Honey well Bob Nardelli at Home Depot Jim lVIcNerney at 3M John Blystone at SEX Dave Cote at TRW Larry Johnston at Albertsorrs And most important a group of internal CEDS who are as good as anyone out there today I don t know of any company that has developed as many CEOS Now if that isn t buillding people what is Forget whether it s me or the systemwe build great people What are you proudest of in your career That thousands got into the game and were rewarded in the soul and the wallet That MH 6 not invented here is dead at GE That the succession process was one where everyone remained good friends and everyone won And that in left Irnrnelt GE got its best CEO ever You frequently cite your mother as the biggest iin uence on your life ls there anything you would want to tell her if she were alive today I ve never thought about what I want my gravestone to say I suppose Pd like it to say only one thing People jack I m not sure what I d tell her What l d want to do if she were here is buy her a great house and till it with nice things Give her things because she had such a hard life She used to get up in the morning and sift the ashes in the furnacesift it for haltbrurnt coals that she could use again I used to hear her at six in the morning down there You know I was doing pretty well up to now but here I am choking up You ve been called everytlhing from Neutron Jack to Services Jack to Nreandeirtha lack What do you want to see on your gravestone We never thought about what I want my gravestone to say i suppose I39d like it to say only one thing l339eople jac1ltquotA1l I did in my job was spend time with people It was the greatest job in the world So much so that when the book came out some people asked me why l didn t take more potshots at folks But why should I i like peo ple People who know me generally like me People I work with like me So People Jackquot 5 Reprint noraozo ii To place an order call 1980098850886 HARVARD BUSINESS REVIEW P urchased by Jon Cohen joncohenbrownedu on October 16 2012 F3 tiV8r Page i of 4 Happy llIornemalterf Lenmr Thrlvu An Zlullder Vllth oddball culture ceo gugtu gr Sense Throws urnmy vlorrne Income Sour A Methodl to This WIamplnlC39 by van ere Stall Reporter of The wall Street Journal 2332 words 27 July 2001 The wall Street Journal All Engllsh lliopyrlghtr C 2001 Dow Jones amp Company Inc MIAMI i In the spring or last year eixecuuvs from Lenrner corp gathered at a Dallas hotel to rneet top managers of U5 Home Corp the giant home builder Lennar was about to ecqgulre lennar s chief executive Stuart itliller sensed tension as the managers conternplrated nelr role under the Lenner umlorelle when his turn came to speak the 43yearold illr Mlller plopped down on the lloor of the conference and coaxed his audience to join him for a reedlng or the Dr Seuss classic Oh the Places l39oru39iIl Gel quotConrgratulationslquot he began Today is your day You39re olll to great places You39re oll and away And so 130 division executives met their new boss This was just their llrst glimpse of the peculiar culture has taken root at lennar which has become the nation39s No 2 homer builder in tams of revenue and unllts Soon came the company song song to the tune of the University of llotre Dame light sonar Inspirational books written by Mr Miller under the pen name Dr Steussquot a combination of Stuart and Seuss and readings of the sevenstanza company poem scratchrlngs From the lJttie lrien Odd as they are the traditions have helped strengthen and unity as company that has grown explosively in recent years since lts llournrdrlrng ln 1954 by Mr Miller39s father Lennar has gobbled up more than two dozen rivals and last year reached 47 billion In relrenvue second only to Corp of Dailies Lennfer39s profits surged 32 last year to 229 million and are on traclt for another record this year the cornpany says And during a generally lackluster time in the stock lnlarlcet Lennars share price has doubled over the past year closing yesterday at 4513 up three cents in 4 pm New York Stock Exchange composite trading Scott Campbell an analyst at Raymond James an Associates lnc credits Lennar39s culture with helping qulclcly T integrate the company alter the 12 billion LlS lllorne acquisition the homeblnliirdlng industry39s largest ever quotI can39t tell you what the Little Hen means3939 he says quotBut I think it helps that everybody knows that llttle rhyme or that little llngle from Stuart Miller down to the secretary who answers the phonequot In fact the poem is adapted from the children39s story about a hen who nds some grains of wheat and can39t pet any other animals to help her plant thorn 39 Look Look she clocked who will help me plant this wheat Not I quacltecl the duck and he weddled a weyquot goes one popular version In the con1panyquots spin printed on llttle cards that are distributed to all 7000 erniployees the hen successfully digs lovr worms during a drought while is big white rooster waits in vain for worms to come to him The final stanza rnaltes the corporate message explicit on here and there white roosters are still holding sales positions They cannot do rnuch buslness now because of poor conditions Meanwhile the little real hens are out agoblhllnrg up the worms httplglobalfactivaoonlasdefaultospx ppPrintamphciPublicalion l 0 ll 42008 F ctiv Page 2 of 4 Diana Damiano a sales manager in Palm Beach County Fla and a 17year Lennar veteran says reciting the mmoany the ice at lunches with employees from other parts of the company such as construction workers we all have things in common because we work in Lennariand this strange placequot she says Despite le Ben I39ll economic id0wnlmi i many residential builders are posting gains thanirs to low interea rates Flsllllil hwslfi PRICES mild iliolitlill d strong soils of singlefamiiyi homes Lcnnar has also made some smart business moves in recent years For example the company which specializes in iow to rnldprice honm for subdivisions offers floor plans with few clnoices PU amenities such as tiles moldings and appliances In the 1990 when many resldendal builders were boasting about customizing their floor plans several of Lelnnars questioned in But it has paid oil in cost savings and increased efficiency Lennar also timed some of its big iand purchases The company entered the Caliionnia market in the mid 199os just before the state housing marlcet rebounded from a long slump iiiow California accounts for about oneiiifth of the 22i39iiiii houses Lannar builds annually and about onequarter of its revenues iiowever if P cunant soitenlng of ihe housing maritot in the hioithern California hightech corridor spreads aisawhara in state Lannar could be vulnerable Fir Miller whose 2000i salary was near the top in the industry at 34 million including bonuses says Lennars oddball antls shouldn39t be mistaken s a iacic of discipline He says employees are Incuircated with company39s mantra to maximize on not assau month each oi 50 divisions sends Mr iiilier la ona page snaipshot showing if it39s meeting its financial goals P a rhythm and a method to this wacklnessquot he says Still the waciziness can be unnerving to outsiders who occasionally get pulled in to watch You feel like an idiot and you think These people do this every day quot says Pat Schiewliiz head of the national hornetbuilding division of Bank one Corp in Chicago iLennar39s lead banker for over a decade But he says he has grown used to it It39s part of their culture he says Bruce Gross chief iinancial oiiillcer who joined Lennar with its 1997 acquisition oi Pacific Greystone builders in California says his fears aibout the acquisition were compounded by the rumors he heard oi the lunacy at Lennar He even tried to talk executives of reciting the Little Red Hen before a bankers meeting that year fearing it would harm the company39s credibility 1 was nervous because I thought mat these were things we did in our hallways and not In public Mr Gross says But the bankers loved itquot T than three rnonths later Mr Gross dressed up in a pink disco outfit i or the cornpany s Christmas video For the second time in my life I wished for the death or disco he says At Lennars nondescript iour story headquarters in a Miami subdiyisrlon departments take turns hosting luncheons during which they perform skits based on books by Dr SEUSS or Dr steuss Alter cornpiaints from representatives oi the Dr Seuss estate Lennar two years ago agreed not to pu blish more copies of books under the Dr steuss name Last years holiday video featured Mr iviIiier s 68yearoird father Chairman Leonard Miller running around in a hen costurne leading executives in a rendition of who Let The Hens outquot to the tune of the hiphop song Who Let The Dogs Out The elder Mr Miller founded the company mat became Lennar with a s1oooo commission from selling some lundeyeioped lots in Bade County Fla The name Lemar is at cornbination of quotiLeonardquot and 39Arnoidquot alter co founder Arnold Rosana who retired In 1977 and stili serves as a director Early on the oxecutiyie suite where loiiiiicers now throw footbaIls and dance to celebrate positive stoickmarlcat news was buttoneddown quotin my day you had to be rnone conservative says the elder Mr Miller who maintains an oI3939ice at Lennars suburbanMiami headquarters The younger Mr iiiiler started working for Lennar at the age of 12 when he tool on landscaping and other odd jobs on Lennar construction sites to start saving money for his first car Sensitive about being the bossquots son he insisted that the laborers oh the job site not know who he was After graduating from Harvard and the University of Miami law school he joined Lennar iulltime in 1982 The next year as director of comrnercial property leasing and sales manager for the cornpany39s Dade County division Mr Miller joined two other executives at a seminar at the Disney Institute a rnanagementtraiinieng program run by Walt Disney co Theyi came back impressed by iiisney39s philosophy that worlcers should be rnotivated to be iiriendiiy even while doing rnundane repetitive tasks Baciv in Baden Couniy Mr Miller introduced voluntary name badges modeled on those he saw at ibisney He says the badges which bear first names and no job titles were a way for Lennar salespeople to arnake customers feel cornfortaIble httpglobalfactiyacornaadofauitaspxppi rintamphcPublication in142oo3 iFactirva Page 3 of 4 Soon llf iei badges also lound a ihorne at the company39s headquarters where die stall was becoming so large that not everyone knew one another These days Mr Miller who became CEO In 1997 and outer exgcumveg wear their badges anywhere their business takes diam As tor the Little Red Hen HIE company SIYS It dosnlt know me author of its version but that it dates back at least to 1984 when a manager in company39s Phoenix division began using It to inspire salespeople when tough times hit me housing market 1989 and 1991 Mr Miller who was then regional president of South Florida operations suggested mat other managers in the comzpany use poem as a tool to boost morale ilie tool it a step further 1994 suggeglng at a pO of division rrianagers that employwau memorize the poem and recite it at company i39unctions 39It s a very simple story Mr Miller says It speaks about challenges and how you deal with them 39 At a recent luncheon in the company39s Palm Beach dIyision a new construction supervisor breezed ithrough the first stanzas oi his ilrst public recitation or the Little Ran Hen when he sturnbled coworkers stepped in to help quotBring it home they yelled as he reached the last stanza a company was put through its biggest test in 1992 when its Miami division became the target of crlticisnii alter Hurricane Andrew wiped out much or iiliarni s southern subuirbs leyeling several subdivisions built by Lennarr Several homeowners filed lawsuits accusing the company of shoddy construction and the state and Dade County ilaunched invatigatlons into Lennars building practlces Eventually the homeowners lawsulm were uq by LerinaLr39s Insurers for an undisclosed sum the company says Lannar didn39t admit wrornpdomg The county39s Investigation cleared the company and the statequots civil complaint against iLennar and eight other big builders was settled Lennar paid 50000 Mr iviIIier says the cornpany built to the standards of the time By the mld119905 Lennar was growing rapidly but several divisions in Florida were missing sales targets worried that complacency had set in Mr Miller searched for new ways to keep employees motivated and hit upon tiie Dr Seuss books he was reading to his two children at the time initially he would simply quote 39Yerile the Tuirtie In speeches about p vulnerability of being on top and Green Eggs and Ham in speeches about persistence paying off irhen tailoring the messages more dosely to Lennar he and other executives wrote their own nursery rhymes in the style of Dr Seuss where39s the wowquot teaches that to stand out rorn a crowd requires an1bitIon that can come only from iwithin A l39oilowup where39s the ilow tells of using research practice and simpllcity to succeed The books iwritten under the name Dr teuss are illustrated by die company39s advertising firm and published in hardcover for internal use The us Home acquisition is a new excuse to rhyme ieennar is adopting U25 Home39s training progriarn called I Care To mark the occasion Mr miller wrote a poem that begins I am once again excited For I39ve come to a conclusion Our new I Care program Is our next revolution At a training seminar for about 150 employees last mondi Lennar decorated a llouston hotel conference with a jungle therne modeled on the CBS television show quotSurvivorquot Under a banner that read In Search of com return on net assets empiloyees were drilled on the irriipoirtance of meeting nancial goals and taught how to deal with crisis situations and the news media To break up the monotony they put on skits and read poetry written by Mr Miller and other managers Ron George Lennar s tax director declined to wear a name badge or recite the Little Red Hen until last year his 25th at Lennar quotI was here before the name badgesquot39 he says 391 predated the Red Henquot He says he liinally gave in to make sure no one would question his loyalty to the company Jim Lonergan a former sales and rriarketing manager in the company39is Palm Beach cllyIslon attended the 1994 meeting where Mr Miller first suggested that all managers rnernorizo the Little Red Hen A l39ter 14 years with the cornpany he says he had come to expect a izraditzionai professional sales atmosphere It didn39t help when Mr Miller threw a fourInch iong red andgreen Gummy worm at him during a meeting As soon as the session wrapped up Ivir Lonergan promptly quit his job quotHe was like a kid with this i 39 Mr ionergan says I guess it39s httpglobal factivacomaadofaidtaspxppPrintamphcP ublication 10 142008 Factiva hard to have things crammed down your lhmat lhat I would mnslder lddsl stul l39quot Today Mr Lnnerqan who Is PX tqgcdiler He says he sull owns Lennar stock and admlrnes Mr of conslrucIlon In Palm Beach oF son jolned th ga Jaurnal hunk Read the compIete Journal at WSJcamJoumlalunks Document 1100000002001lll727dx7I39O0Dl3a httpfglobalfactivacomaadefauJtaspx39ppPrintamphc says he lunddrstandsvd1e C lC lTIPIlquotIV Lennard company poem quotScratchings From me Little Red Hen In the onllne Publication role of Lqnlnarls culture In tylng me company Miller39s llaadershlp His son Jim Jr Is Lanzna s dllractor l Page 4 of4 Q 2006 Factlva Inc All rights resarvw 10 142008 Artictle 1 of I IN THE LEAD Shackleton 39 s Techniques For Surviving Antarctica llnspire Business Leaders By Stephanie Capparell 12192000 The Wall Street lournal Page B1 Copyright c 2000 Dow Jones amp Company Inc HE HAS BEEN CALLED quotthe greatest leader that ever came on God39s earth bar nonequot even though he never led more than a small crew and is better lofiown for failures than achievements That39s because Sir Ernest Shackleton the Anygloalritsh explorer of Antarctica failed only at the improbable he succeeded at the unirnaginable and is considered a model of leadership during crisis Shackleton set out for Antazretiea in l 914 with the ambitious goal of crossing the continent on foot Alas his ship the Endurance never even ltouehecl land It became stuck in the ice in the Weddell Sea for months and eventually sank leaving him and his crew of 27 stranded more than 1200 miles from eiivillization They were left dri ing on ice flees in the terrifying sold with just three rickety lifeboats some tents and limited provisions Eventually they made it to a small island and waited while Shackleton and a handful of men sailed 800 miles over tumultuous seas to a whaling station on South Georgia Shackleton then took a ship to rescue the others Every man survited Shaekleton39s brilliant strategy kept his crew hopeful and focused on survival for more than a year land a half We no wonder that various leaders today look to Shaeklseton for ideas on how to hire how to get ya diverse goup pulling togethetr how to inspire unity and loyalty how to get aboveaverage performance from average workers and 135 how to beeorne adaptable enough to handle any situation SHACKLETONquotiS TOOLS WERE constant conirnunication careful planning courage discipline and exibility Above all the Boss as he was called was an optirnist Even though the rnenls situation consistently got worse he held to a belief that all would work out in the end James J Crarner of Thestreetcorn credits Shaclltleton with inspiring him to go forward alter colleagues urged him to fold his troubled busir1esses in 1998 quotOptimism is true moral couragequot Shackleton said r Crarner wrote the quote in big red letters on his ot39fice whiteboard He still clings to that philosophy now that his nancialnews Web site is again being battered quotIf you listen to the pessirnists you39ll make the wrong decision or be so confused and so befuddled you39ll lose the emotional energy you needquot he says Sl1ackleton39s optirnisn1 was never foolhardy lt was bome of his con dence in his own abilities and those of the men he picked and trained Capt James A Lovell Jr knows the value of such teamworlc and camaraderie As cornmander of another quotsuccessful faiilurequot as NASA dubbed Apollo 13 he also led his men to safety against incredible odds He sees many sintilarities between Shaeleton39s ordeal and the one he faced in space in 1970 when his crew was forced to abandoned its cornrnand ship for a crarnped lunar module after an explosion knocked out lifeasupport systems quoti think it39s very irnportant that everybody has a job to do and everylotne chips inquot says Capt Lovell who read about Shaclscleton before a recent trip to Antarctica quotYou go in knowing everything is not going to work and if you can think of things that can go wrong you can think ahead quot Shackleton always looked ahead and kept his eyes on the big picture He was quick to abandoned a strategy that wasn39t working and replace it with a better one That kind of adaptability inspired US Secretary of the Navy Richard Danzig to hold a serninar on the explorer last year for senior personnel at the Pentagon quotShaclleton came to grips with the cold hard realities and constantly generated options that offered his group ways of getting outquot Mr Danzig says at SIiIACKLE39fON S handling of his men after they abandoned Slllp offers lessons on how to lead in crisis Here are a few erarnples 1 Irnrnediately address your staff offering a plan of action asking for everyone s support and showing confidence in a tpositive outcorne The Boss heartened his crew with a simple speech that le no doubt he was in charge 2 Give your staff an occasional reality check After time people will start to treat a crisis situation as business usual and lose their focus The stranded crewrnen became so cornfortable that they started ordering the cook to make tea to their personal liking Shackleton quickly instituted rationing 3 Keep malcontents close to you andwin their support Shackleton took the most difficult personalities into his own tent When one man threatened his authority the Boss made him his confidant 4 Use humour and other diversions to relieve tension One of the few iterns Shackleton rescued from the sinking ship was a crewrnan39s banjo 5 Let all the people involyeid in a crisis participate in the solution Shackleton gave all of his men work assignments so they could feel useful lo the end Shackleton succeeded because he inspired his men to do great things he didn39t crack the whip from behind quot39Managedquot people merely follow orders they don39t really contribute says Michael f Dale now retired president of Jaguar North America who used Shackleton39s story to spur his sales staff to record revenue last year quotIf you have the kind ofcorrunitrnent Shackleton hadquot he says quotyou can absolutely achieve rniraclesquot Adapted from quotShack1eton39s Way Leadership Lessons From the Great Antarctic Explorerquott by Margot Morrell and Stephanie Capparell a staff writer at The Wall Street Journal to be published in January by Viking 2001 by the authors lEZ rnai1 cornrnents to shackletons wiayjunocorn FIHLtn tn H39quotETlltIEtIquoti 137 F c v Page 1 of 2 HIIIIIIFI J0iIrnIi Kay Graham Deurvod a ilulllzer Management Too By Roger Lowensteln 1079 words 23 July 2001 Wall Street Journal A14 iengilsh Copyright c 2001 Dow Jana amp Company inc Katharine Graham die late chairwoman of the Washington Post Co seemed to symbolize a bygone era a time when publishers were political power brokers iirst and businesspeople second Hrs Graham stood down the president39s men today39s publishers wage battles in boardroorns And if Mrs Graham once dared to deity John Mitchell modern media barons have more to fear iirom Merrill Lynch But it shouldn39t be forgotten that Mrs Graham also blazed a trail as an executive it was not only Post39s readers that proiited from her improbable reign but investors Under ivlrs Graham the Post Co consistently ranked among the top American companies in on equity and shareprice growth Given her lack oi business training this was just as remarkable as her famous defense oi the freedom to publish when her father Eugene Meyer bought the Post out oil ban kruptiy in 12933 the operation was thirdrate both financially and eciitoriailwy Though its fortunrres improved under both Meyer and his soninlaw Philip Graham the Post remained a privately owned paper with little national standing iluring this time Kay remained offstage a dutiful and shy housewife and mother iwhen her husband died by his own hand she was even less equipped to run a modern corporation than she was to become the lady of iwashIngton1ouirnalism By 1963 women weren39t exactly strangers to newsrooms iirs Graham herself had worked as a reporter in early womanhood but were complete unknowns in corporate boardrooins In a phrase that spoke for the times she said quotI sort oi tliouglit figures were for men iilonetheless she decided that rather than sell the Post she would run it Media companies were In heady transition weaker papers were folding and stronger papers including the Post had acicnowliedged the futility of ghting izelevision Instead they were acquiring stations Formerly oriecity operations were raising public capital to fund expansion Mrs Graham39s advisers suggested the Post issue a stock with diluted voting righis which would leave editorial control in the family the same arrangement exists at Dow Jones is Co owner oi The Wall Street Journal The neophyte Mrs Graham was dubious what if some Wail Street wolf connlved to take the cornpany over Then on the eve of the P0 the Post was handed the Pentagon Papers Mrrs Grasharn boldly decided to publish in open de ance oi the i iixon administration and d plize ltihe qualms oi her company lawyers who lretted that it would jeopardize the Post39s new standing as a public company In fact the converse was true good stories made good business After die Post won a Puliaer for iwatergate Mrs Graham garneiy declared to security analysts that she wanted to win a figuratiive Pulitzer forn1anagernerit She ibaciced it up with rising profits Even so wall Sltreet turned lag cold shouider In the early 3970s media properties were strangely out of favor The Post39s shares dropped and dropped down to a measly four times earnings It was at this point that the wolf appeared Mrs Graham was told to her horror dial 10 of the Post had been acquired by an unicnown investor rorn Omaha oil all places The investor was also in transition He oversaw a textile business but was increasingly aware diet textiles were not the place to be He was eager to diversify especially into media which he recognized as cheap The imestorg warren Bumett sensed Mrs Graham39s treplciation and offered not only to halt his purchases but to teach her the basics oi business Because Mrs Graham was new to the game it was easier ior him to oi l39er and easier for her to accept He walked her through annual reports moreover he gave her an appreciation for die httpglobalfactivacomandefaultaspx ppPrintamphcPubrlioaiion i 0 i 42008 I active Page 2 of 2 oonoept of return on capital a standard that was the very basis of Pulitzer In business Post executives were wary of Mr Bu elt but Mrs Graham put him on the board It dlidnft hurt that ihe charming and i39oiIltsy iiiebraskan was unschooied in the arts of the Washington salon Mrs Graham j went to work on his alltat diet and cheapioolrinq grits could in a sense return favor I will never iiorget interviewing Hrs Graham about her Midwestern buddy In the front parlor of that stately home that left no jloumaililst unawed 39 When he arnived It was only cheeseburgers and mad what do you call them french fries she rernariad with the patrician air that was indeilbiy hers Mr Burnett helped Mrs Graharn to Vh that the Post strendih was ii iiranchise as a vehicle for local advertisers Having invested in a lemon iiike textiles a cornmodity business bc contrast to him was only too clear He P that it was 0X to ooncentrate on the good business me Post owned than to scatter funds on lessappealing diversiricatlonsn Indeed he advlsw the Post could find no better outlet for its capital than in own This advice in an era when media chains were pursuing growth in cable and such at any price was irritraiily shociinn iiionetheiess Mrs Graham recognized its wisdom and repurchased shares by the bushel The Post did diversity but in a patient fashion Mrs Graham also had the guts to crush a strike by menacing and at tinras violent oreismein who had been bent on maintaining arbitrary conhtri of the plant This strengthened the 6 and enabled it to eliminate its primary competitor the warshington Star The liberal Mrs Graham was never so lrnisiryneyied as to extend generosity io competitors in lzrusiness The knock on the GrahamBul39i39ett regime was always that their conservatisrn kept the Post from some complained that it never grew to be a rnedia qoiiath like Tirnewarner But while Hrs Graham was CEO largely thanks to her having retisred 40 of me shares on the dreap the stock appreciated 3200 the Standard amp Poor s 500 in comparison ciirnbed 250 A publisher has a trust with readers Mrs Graham reoognized that a CEO also has a tmst with investors That trust was not to enlarge the CEO s iiefdom but to preserve and increase the owners capital A Puiitier indeed Mr Loweinstein the author of bu etty The Making of an Arnerican Capitalist Random House 1995 is currently writing a book about the Internet bubble Docurnent 1000000020011 D723dX7n0DD0l 2003 Factiva inc All rights reserved httpglobalfac vacomoardefaultaspx ppPrintamphcPublication 1 0142008 P P P Article I of I Farnilly Finance How Much Is Your Time Worth Nevr Research Eizplores Actual Cost of Pverforming Household Tasks the Economics of Garlic By Jane Spencer 02262003 The Wall Street Journal Page D1 V Copyright c 2003 Dow Jones amp Company Inc SARAH KALLINEY DOESN39T have time to do her laundry visit her parents or change the cat39s litter box She eats out six nights a week uses a personal shopper and gets her groceries delivered to her doorstep But the timersitarverd Manhattan executive who bills at roughly i200 an hour recently spent nearly 10 hours battling her cellphone cornpany Sprint PCS over 9 in late fees is it possible that was worth her time It is a question economists are finally beginning to tackle After decades of using timevalue t39onnolas to help companies maximize productivity researchers and even the US govlernment are looking at how those concepts apply to the liorne front In an economy of convenience where time can be purchased in everything from bags of prewashed lettuce and do gwalking services these studies aim to help answer dozens of questions Americans wrestle with daily Who can afford a babysittler A lawn service A personal shopper quotThe household is a little rrnquot says Daniel Hamermesh an economics professor the University of39lquotexas quotIt employs labor it buys technology it makes decisions about what services to outsoi1rcequot 141 But it is a that could use some management consultants Americans often make drastic rniscalculations about the value of their time taking a do ityourself approach to tasks that might be less costly in time and money to hire out A sirnple oil change for examlple costs 2499 at some Jiffy Lube locations But the supplies to do it yourself can run about 21 Yet about 43 million US residents say they change their own oil In the past economists looked strictly at your income to put a price on your leisure hours Now the study of offtheclock time or quothousehold productionquot as it is formally known is getting a fresh look even beginning to take into account intangible factors such as satisfaction and pleasure In January the Bureau of Labor Statistics launched its first study of household time use in an effort to provide reliable data for the emerging eld The monthly survey will ask people to report how much time they spend doing such things as practicing yoga and dropping off their kids A ood of S academic papers such as quotTakingIlousehold Prloduction Seriouslyquot and quotTime Crunch or Yuppie Kvetch are also circulating Other work has looked at the impact of timesaving technology from lmicrowavcs to washing machines This body of S scholarship P 3 gaining new relevance now that pinched budgets are forcing some to work longer hours putting a higher premium on cost etquotfective use of free time Economists say one of the most cornrnon miscalculations is quotoutsourcingquot childcare needs to ree both parents to contribute to the household income While plenty of parents choose to stay in the labor force because they enjoy their jobs others stay because they think they can39t afford not to Sometimes the math proves otherwise as Steve and Jan Lira recently discovered She works three days a week as a tax analyst bringing their combined income to more than l20000 a year They recently looked at what her job was actually costing them from the 18500 they will spend on daycare to the 14000 they lose in tax credits By the time they threw in her worlltassociatecl costs office parking dry cleaning the restaurant meals they were consuming because they were both too exhausted to cook they determined that if she left her job the couple would lose only a few hundred dollars a month But economists I39eC0gI1lzC that for many families the numbers are 1 42 just a starting point You can temper the equations with what economists call quotpsychic variablesquot Some divide household activities into two categories consumption things you enjoy and production anything that feels like work Love gardening it is consumption Hate gardening That is production increasing the argument in favor of hiring someone else to do it quotIt39s not just about the moneyquot says Dr Harnerrnesfh quotI get pleasure from listening to the symphony other people get pleasure from harassing the airlines That is how Sarah Kalliney justifies her epic battle with Sprint It was worth it for the satisfatztion quotThese people are jerks and they39re taking money that39s not theirsquot says Ms Kalliney quotIf they39re going to ruin my day I39m going to min theirsquot She finally won but only after she traclred down the phone number for the president of the company Sprint PCS says it has since taken steps to improve its Custorner service The traditional approach which valued at leisure time based on your a ertax hourly wage was published by ll5obel prize winning economist Gary Becker in 1965 The idea was that any time that Went toward leisure could be reinvested in work But incomebased formulas have obvious limitations For instance many people on a fixed salary don39t htwe the option of getting extra pay if they Work another hour In addition some people39s worlc is keeping a house running which doesn39t come with a salary Still in guring out how to maximize your time salary is a logical jumpingoff point Economists suggest you begin by calculating what an hour of your time is worth based on your salary after taxes Using that figure you can then compare the cost of doing the job yourself vs outsourcing it If you do it yourself you have to add in the price of any materials if you hire sorneone else ofcourse you have to factor in the time it takes to hire and manage them Then you are ready to tackle the other half of the calculation which looks at the nonfinancial costs and bene ts Among the factors to consider how much you enjoy doing the job yourself and what you39re giving up All told these conclusions will steer you in one direction or the other To see how this formula works in the real world we outsourced tasks from lawmnowing to our tax returns 0b and then redid the jobs ourselves to compare Buying a jar of prechopped garlic for l 43 exarnple saved us 22 minutes of slicing and dicing According to the formula anybody who makes more than l0000 at year can technically afford it Emotional downside fresh garlic tastes better Investing in technology even a good garlic press can change the dynamics of these calculations That is what we found when we did our taxes Visiting a wallrain tax preparer was a mere two minutes faster than the software progarn we used factoring in our travel time to his office but he cost 139 more Under this particular scenario you would need to make almost l4 million a year to justify hiring someone Thenthere was our messy desk A 85anhour jprofessional organizer wliippedi half of it into shape The other half we tackled ourselves The threshold income for hiring the pm More than half arnillion dollars partly because we had to hang around to help her navigate our piles of papers But she did throw in a feng shui ianalysis of our bedroorn Many hardcore do ityourselfers are grappling with these same variables Mark Berg a nancial planner in Wheaton Ill changes his own oil and once rented a 70pound jackharnmer to rip out his concrete basement floor But the garage sale he held last summer challenged his view After hours of planning and along day in the J one sun he netted a nasty sunburn and a wage of 356 an hour somewhat short of the l 50 an hour he charges at the office quotWe will never do another garage sale he says Home Economics E Herels a list of tasks and the annual income at which 1t makes sense to hire someone to do them for you Mowing the Lawn If you make more than 44000i hire a lawn service More examples based on our tests of how much you have to make to Justify outsourcing Doing Your Taxes 13900000 Chopping Garlic 10000 0rganiz1n Messy Desk 570000 Paying Bi ls 196000 M4 I P 39g1muhmmummmumwum pt K L P K 39J3quot 4quotquot quotquot 39 iI i39 V455 iiw II a 2 a Aquot n39IIlquot quot1llhhllli339i A39 394393939us unuua Ir39EnquotIiu rm L a W E j E E I oI1ItnmIiIsg1ounnmuhUurtuuaIt onnl I mammu E g A 1 A F i mllll L z outan H A T 11 in my 4 AA quot3quotquotquot4 i A 39 u 1ua hEs4 DU 5D j j in HF 39 P v Iuglmzimrp m H e L T 0 P ju u39i z z mgealmnmm W I V T anmmmmman 3 IIlrIwwuammr A 39 g um1h1mhmf 39mfuagumufug 4B P u 1 W 4 nsuuumenuuagaunryemwonmuw V Pp f 39quuumumidt coupuuMnaammw uullaua z 39 7 0 u 39 A E 39 39 TT w P z VI t smaw1mbuamn nuaImnhunmu aumuIrsAbIaasuu mwuschmmwmev L A 2 nmaniamm A u lfamphmalm4miub aawg 07 T T A mwuqmuvausmimumr 9 ma B c 14 to scan R1Nc1rLEs or PERSONAL NIANAGEMENT must Gama youasyoul5e nwokunlIahits twWDuMmAaAreguhr baaanmgumakemnmdm1i a in your Iifg would brmg p reauis z T 1 junglequot But if you in the ght jmige it makes all H12 3 in and 2 Habit 1 333 quotYou39re the O You are in chargequot It39s based 1 P X of 0 quot39dquotP39quotdfquot 1 It 0m you f upjsay quotI39hat a an PP I39ve G givan k my A Cl391 dh00 L unimyaodalumlnur 1 1 Script 2 is e ntor It 0g m nLvoumcilIsrAuuurarndwritedownasl1o11a11swartothe followmgivm 1 lheptac mlfu 1huerItofHabitsl P Ira the Jf39Uw t F lmfi2 his 0 W H pb Yaum39uquottbr T S T Awithoutav onofand Butwiththat 39 W dny in p daywt by q A 3 by 39 39 u 39 I1 is A hum p n n n 0 It mm39eofanartit39sbuedonapl1jbeophy Yauhavetnasltthe p But mace 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When eommiuiom issue reports they call for longer school years revamped cmriculums P more funds so teeclmerl can N skills M lmowleclge Butskills R knowledgemesm youcanmeasmewithlestiloonlythe most super cial componmt of n eapiul H education reforms have JL failed fM they try to improve the s lls of studenh 0 K K me 0 I E4 of K cnplml D components BJ to L and uncomfortable to talk about but they are H 39 A3 39 foundation of wevery iiipg gn p F culmml capital the habits assumptions emo oml dispoaiytlooe and lingulsticr PfD we unconsciously pick up from hmilies neighbors and ethnic groups usually by age 3 In a classic 39 James 5 Coleman that happens in the family shapes a ehildiedueehfoml achievement more 6 what happens in In more Ileclcman and 0 quotmost of due 0 in college and delay are determined by early family There social cepitnll the of how to behave in groups and within ios tutions Jn mean for J knowing what to do if your community college loses your transcript Or it can mean the rules of politeness They of North Carolina now o ers P to poorer students so theyquotll know how to behave in 39 39l here39sn1oral capital the ability to be uuemonhy rslttldents who drop out of high school but take P But to y g p 39 N than imey for those with no school idiplomru 39Iquotlmt s R many people p the httpIIaelecLnytineseomf20DSll l1Jlopinionfl3brooksl1lmlnTop2fOplr1iomJ2fEdiL 1m 6zoos X Htman pZ New York Times Page 2 M2 0513 are less i and less dependable I their less educated j esemployers soon p Bruins PR skills V matter you don39t show up on There eoginittive j i Z mew p inherited htuinpower But lmportmt cognitive Ildlls are not R by IQ gU T are f U some people know how to evaluate U and their abilities while others R P IQ are eluelm Some lowAIQ people can sense what owners are feeling while U poem cannot 08U 0 b can be T over a lifetime S there aspirational capital e rezinthebelly R to achieve In his book Millionnire Mind Thomas J RR reports that the avenge Q O in P M collegiate GPA not very good But millionaires omen had g People told mm N P O stupid to achieve t so they set out to prove the naysayers PvH Over the P K H lmva L a lot of work trying to s the L parts of p I capital Their mrk has I P tcumipletely J by policy matters who to treat hurmm capital as aldlls PfG knowledge The result A ufeznpensive policy failures We now pF lI10l39Bt empita on education wan just about any other g on 3 0 result are No Chi Behind are akillacquiring cage an economic wheel and have Vbecu disappointitng We pour money into Title 1 and Start but we lm1g tu39m These proyurti T Z i s are not designed for the way people really are The only that work are local P a me dawn to tmir very beings aclmotls create intense culhtres ot39 schievemen1t who to heform met lives The that work touch all the cmponenu of human There a goat T ih Capital Pi Enough said d W JquotquotquotA i as q mu D glllgt g 3 0 Eng IQ nli ja noI 39ld in il Ino aiw I Uilq i l nngt1 nau39st 2eae aa 5 pg httpllaelectnytitncscem2OD5I1 ll13lupinionJlEhmokaihttItlnTop2t Opinion2diit 1 111612005 Wh at is Sfroteg 13 p E Porter Harvard Business Review C 96608 e continuously to For almost two decades tnnnegers have been must be fltexible to respond rapidly to oompet r itive and market chzngear They must benchmar I 1 Operational E ec veness Is Not Strategy T 7 logy The quest for productivity qullity and op 1 to by 1 new set oi Companies has spawned I rmarhble number of mnna ent i tools and teemlqueu total quality G c l mt h h teompeti on outsourc n ling partnering achieve beet tice They must outsource aggres sively to gain ef fieieneies And What tea change manage ment Although ye 0 pl they must nur T T mmts haven often a core ootnpetenciea in q by Miehaeply Porter been hmnntio many eornpaniea lmwe race to stay ahead of Positioning once the heart of otirategy is 139e39Iect ed us too static for today r markets and 0 technologies p to the new dog ma rivals 8 quickly any market position and competitive advantage in at best temporary But those ibeliefs are 0 and p they j R more and more down the path of mutually dleetruotive competition w True some barriers to competition are as regulation eases and 0 become global True t companies have properly invested energy in becom leanet and more nimble In many industries however what some call hyperoompeti on is a selfquottin ieted wound not the ineviytahle outcome of ta P pamdign of oornpetition The root of the problem the failure to distin laetween operational effectiveness and strat been frutrntetl by their inability to translate those into sustainable profitability 1 And bit by bit almost imperceptibly mznngement 2 tools have taken the place of strategy As manag eta to improve on all boots they move inrther t away from oompetitive positions Operational E ectivenesszt Necessary but Not Suyffioioni Operational effectiveness and strategy are both essential to superior Q whitch all t is the p goal of any enterprise But they work in very different ways Michael 2 Porter is the E man dq Fmfam of Business Adrninlsnation at the Harvard Business School in Boston Massachusetts 19 C t l 99Gh7 I H l lIQdPEnDWI dl39E T dCC hu n Dr WBtl reenginreering y the resulting op iquot eompanyunaotpetfotmrivalsonlytfitem aj estalalisha iferenoethtititrclnpteuei veltmnet tIlalevralueetalowueoatotdothoth o average unit q 8 results in lower average unit costs 0n ptod1ctetortIerviceseucInceldngoncustomere u nal productn and pZm d u Cost is ectlvltieu and cost t q Tq 0 q more ueiently chm Similarly j tie they Activities j 1 V eethehaaicunltso oompetit1Lve0ver all edvlntsge or disadvantage results from all a company39s acdvitleu not only I 0 h estiveneua IOEI means P f eimilu activities better i rivals g g Operational b but is not k ed to ld It j to any number of practices b allow 1 company to better its inputs by for example defects in g or pog oping better pcW Easter In connect atrategic f df mm a t i f jdlf erent activities t 0A rivals or oX sctivittfes in dif fermt ways in e ectiveneas among pr are pervasive Pva companies are sble A A company can outperform rivals only if it can establish l a difference that it can preserve to get more out of Z inputs 0 others because r they eliminate waeted effort employ more ad vanced technology motivate employees better or have pester W into V Y activ itiee or sets of activities Such tli erences in Q V article has bene ted greatly from the am sutance of many indlvidualsu and companies The omlzar gives special thanks to Ian Rivldn the coauthor of a related paper Substantial research erontributlons have been made by Nicolai Slggelkow Dawn Sylvestm and Lucia 1 Marshall K N Roger I and Anita G Gabon have protrided especially extensive comments 63 ltionmle ectivenesaaereanimport nteouroeotdi ferencea in pro tablliity among eompet1totII be cause they directly n eet relative cost positions and H of F D in operational effectiveness were let the heart of the lnpeneee p F to C com panies in the 1980 p C lapanese so 7E ahead of rivals in operationd effectiveness that they could C lower cost and superior qtullity at the some time It is on point P A t cause so much recent q about competition depends on it Imagine for a moment sf produrcttvityu I frontier that constitutes the mm of 6 but practices at any giv en Think of it no the w value that a company delivering a particular product or service can cre ate at a given cost using the beat agement 7 and H5 39n1puta The productivity frontier 0d5 apply to individugl activities to pauper of 0I activities such so order 4 and manufacture 0 and to an entire company ac vitites When a company improves its operational effectiveness it moves toward the frontier Doing so may 1 investment cliffement personnel or simply new ways of The productivity frontier is constantly I outward an new tecvhnolo es and management ep preaches are developed as new inpum become avadlable Laptop computers mobile communica tions the Internet and software such as Lotus Notes for enmple have rede ned the productivity HA1VAnD PEWEW l onmburDlc mber I996 available technologies skills mm i i Z e Constant improvetneutin operational am yoi activi ties has allowed anbetnnotin1 improvements in o T Qquot 1 pa e A eetlvitleeinoedertoeliminnte the l improve customer utlefnotlcn end achieve beet pmetiee Hoping to keep up with u change management and the r l n The of 7 and tionampatltledi iculttopaformeI1IetivideeIa Aaeompanienmovetothe ronIla W on multiple of at t the utne For example F that o lnpaneee of tlpid b the 19803 4 nble to lower and p 0 What were once be to be real tradeaffe between defects Ind ooate J out to be illusions cre ated by poor operational effectiveness Macro have to reject Inch false aideo e new in P to eupezior pv tahiltty r it is not oomph nteshevet 4 4 ampebankofop t 1 of new technologies pp imtennda13petioarweyIdmeetingeue tou1en39neede1 hemoetgenetiesolut1onethose i thntennbeuaedinmuluppleeettinpedi methe fastest Witness the of DE technique OB oompetition the productivity outward effectively 0 the bar for evetyone But alwough such a produces abeolute impmvetnent m P e ectiveneu it to reh ve for no one 5 billionplus US p The nnior players RJL a Son Com puny Queheeor World Color Press and m Preoe ereoon1pedngheadtolhead p of customers o ering the some array of otechnologies grmne and web offset investing heavily in the some new equipment and P crew But the re by customers and equipment suppliers not re l tained in superior pro tability Even induatrya Japanese Companies Rarely Have 1rnhgiu p P a global revolution in upm effeotiv in pK 19703 and 1980 I 6 such as total quality and 0 improvetumt An 1 result enjoyed 0V ooet end qudity for many 1 But lepeneee companies ruely developed that did Sony Conan end for example eompaniea imitete and another All rivala o etmost if not all product feauuet vies p employ all L and much one moth ae plant eon guxat tions of Inpanesestyle competition are now becoming easier to recognize In the 19803 with rivals far from the productivity ontiet it pmsible to on both 0 and indefinitely Tapeneue companies all able to yaw in an ex eeonomy and lw penetlznting global They appeared unstoppable But as H pp in operational e ectiweae P7 compe niea are inereuingly caught in I trap of own melting If they are to eeeem the mutually deemaetive battles now nu ng their performance Japanese x will P to learn po a Tb do so they tnzy have to L span is notoriously n unheated and oompanies have a 0 to on hand 0 that predisposes them to go to gent to satisfy any need a customer that V pate in that way up binning pod tionlnig all to 111 customers of Julian is 0 the nut orls researczh with H1l39Otd1 Tnkeuehz with help from Monika Snknkibaro in1995ThIspnttmisphyingitceHoutlLnindm i o tryaiter1nduin39yEventheapcneeepioneersof F The d on rivals outsource convince to n1oregmeriodrooencnvitieahecomeAsrivahirni based on y dfectiveneel alone in mutu II Strategy Rests on UniqueActivities p deliberately choosing a net of activ l shorthaul lowcoat point topoint service he tween cities and in large i new tmrclera innLilies md artudmta Southwea e frequent dcptrtures and low fares attract prices a or car and convenienceorientd tnwelerc who The essence of strategy is differently than rivals do 3 for example But the essence of strategy is in the ac t Wise a strategy is nothing more than a marketing lender Donnelleyh profit margin consictntly hither than 7 in the19B0a Ya to lean 111 46 cenhe P Driven by pedomnnce but pre telSectheineertmpnneeecompnniesnarcly n lacking vision company after company HlV 5 1quott F lGliquotl y m r The reason thnt improved operational left standing are often o that one in p oornpetltive conver luted others not 0 with real adnnuge gence in more subtle innidiouc q more n of impressive L in 0X huachrmrldng companies do themore theyulook ieifecnveneu many companies etched on 0y But its tools ly draw companies toward imitation and homo Gndually managers hcvc let p 0 p 0 result in 0 cum cornpetition static or P prices and ampcient third 5 often X ones the into one another improvmenln in quality cycle times or supplier otmte ec omverge and competition becomes 1 of i ability to invest in the for the term Competitive strategy is about W W It A airline is to get p 2 gets from almost any point A to any point B To reach a number of decizinations and serve pas sensors with connecting flights fullservice gir lines imploy a huhandspoke ayatern K on rnajor To attract passengers who desire more comfort 0 offer firstclass or husinen itiee to M a of value Southwest Company for eurnple o erc cities Southwest avoids large and does i not fly P its include husi i must planes they coordinate and check transfer luggage Because some sensitive customen who would travel by servemenlo Southwest in otailora all its activities to deliver low ooet convenient service on its par ticulu type of route Through fast turnarounde would choose a fullservice on other routes Most p strntey39o positioning in l terms of their customers Southwest Airlines service price and oonvenienceaensitive travelersquot to keep planes flying longer hours than rivals and provide frequvmt de with fewer aircraft South choosing to perform activities seats inm ne msase chasm er premium classes of service Auto mated ticlredng at the gate wcoun eges customers to bypass travel agents allowing Southwest to avoid e commissions A eet of 737 craft boosts the efficiency of rnaintenancer Southwest p staked out a unique and valuable tivitiw choosing to paform activities differently or to perform diiferentyactivinea rivals Other slogan will not withstand competition tics On the routes served hy Southwest 1 54 1mnvmrn M NovunhlrDoeenihcr 1995 1117 destructive leading to were d attrition that The recent wave of industry consolidation l pressures on costs that compromise companies class service To accommodate passengers who i get be traveling for many hours fvullqervioe at the gate of only 15 minutes Southwest in nhle l west not o er meals strategic position based on a tailored set of activi geteyotmgfurnclturelmyerewhowentatyleetlow coetWbntturnsthlemnrketlngconceptintou e differently from its display utnplter of the rnerTchmdiee One area pY 25 tofu another ve 0J But mote J 1 tion of the choices 9 to of book or wood 0 or elt mte styles offer thoue varieties to pd oi choices a customer I S order is to 1 with v y luck the be delivered to the tamer home within six to eight g This in 1 value 0 that cuetomizmtion and but does so at In contrast Ike serves customers who are i O n 0 customers P the etore Ikeansenee1f eervioemodelbuedmc1eerin store displays Rather rely solely on mini party 0 Ike 0 its own P x to at is pod it in p no don39t the pieces together Adjacent to the PQ do their own pickup and delivery lkee will P6 of its 0 position comes W having do it 0 lie of ferecnnmberofextre tlnt its are p are uniquely P withtheneedsofitacustomae whoereyoimgnot I wealthy likely to hnve but no nnnnyl end ibecauee they work a have u need i toehopetoddhours The Origins of Strategic Positions Strategic positions emerge three sources which are not mutmlly exclusive and often overlap First positioning can be based on Findlng ow Posi ons ThoEnhopt39oneuritIquot Edge Sitrntegiceornpetition be thought of II the of perceiving new positions that woo cue B ot p cue 0x fering depth of merchmdiee in I single precinct category take PF share depart ment etoten p 1 more limited Ielection in pA pD pick o customer who crave in principle and en etrntegixc positions In new entrant often have the positionmge are oft not obvious and G them p creativity and l New ens trunta often discover r that lmve been available but einipiy overlooked by eatebliehed com petitors listen for example recognized a customer group thet bed p ignored or served poorly D City Stores entry into 5 is based on a new way of x activities extensive r of one product vnoiluule eophilticetetl use of in house customer F toincumbente Newentrilnte that 1 competitor once held but has ceded of imitation and And entrants 0 of distinctive P from P P 0 borrows heavily from Circuit City39s p in inventory 4 other activiuiee in f e1 ectmonice Most commonly howevu new D up because of p New groups or new emerge as 3 evolve new diotribution appear new become available When such chmga new tmtnnts by 1 history in the in dustry can often more easily perceive the for I new way of tonipeting Unlike incumbents new eomets can be more exible because they feet on tradeolfs activitiea an itisihaaedonvthechoiceoiptoductorservleervvarh p 3 P 2 p 5 euetoma 5 4 6 Z4 2 3 whm a com A sets ofactivities yLubelnternedmI1iorinatance in automotive 3 iv e ts and does not o er other Strategic positions can be based on customers needs customers accessibility or the variety of a c ompany s products or services ear or services its value J producesfasterservioeatalowercostthanhroader linerepsinhops a P attmc ve many subdivide their buying oil from the focused m Jiffy Lube y aleaderinthemutualiund industry is P of varietybased tioning provides an array oi common stock bond and money market f m 0 t diictable u and rockalaottom expenses 3 company39s investment approach J the possibility of 0 perfor mance any one year for good relative perfor mance in year is P ior PQ ple its index It avoi makizngj pk on interests rates and steers clear of narrow stock groups Fund managers keep trading levels low D holds 0 down 0 the com pany customers rapid buying and P so drives up costs and can force a fund P to trader in order to deploy new capital and 0C cash for redernptions p also g a consistent lowcost k to U v distribution customer service and marketing Many investors include one or more Vanguard P in their por iolio while sggessively managed or specialized funds hem oomxfpetitors spending to a superior value p for a type of service A varietybased positioning seznre a wide array of customers but for most it will meet only a subset of g 0 A second basis for positioning is of serving most or all the needs of a group of 66 HEATED B IlA IiGIT a of it arises there atailoredsetofectivitlescanservethoeeneeds sitive others 1 md need varying amounts of a and likes a are var p of such a a to meet all the home iurniahin needs of its customers not just a subset of ing arises when the same haaidiifermtneedsondilfereaitoecaa P P person iorenmple may have i needs when Y i 0K on P pleasure with the Buyers of or tcmersIcs1lIhisnesdsbased A variant of R Q needs hiom their p2 supplier y it is 39mtuitive for most managers to oi their business in U oi the customers needs p But a critical elent of 1 poslti nin is not at all intuitive and is often overlooked p in needs will not translate into meaninyul positions unless the best set of i activities to satisfy th also di ers If that t not the case every could meet those needs and there would be 0 or A valuable about p in private pj for exainple Bessemer 1 Company targets families with a minimum of 5 million in investable assets who want capital preservation p with wealthy accumulation j By one sophisticated account o icer for every l4 amilieaBessemerhasconiigureditsac tivities for C Meedngs for p y ample P more p to be held at a cl ient39s ranch or yacht than in the office Bessemer a wide array of services including investment V ZA and estate eministration oversight of oil and gas investments and for race horses and PC Loans a staple of most private v T T i banks are rarely needed by Beesemefs clients and The people who use or Iiffy are i make up a tiny fraction of its client C and income Despite the most generous compmsation y y of account officers and the highest personnel cost as a percentage of operating expenses Bessemer diiierentiation with its target produces a y i return on equity estimated to be the highest of any private R competitor ipotuorrneetnonlypertinl11tllerooreidiceyn P the nriety needs x or i come of three is poei oning rev qulreteui1otedsetofectlvitienhecuneitieal tweree m oid uvwonytheenpplyside thntieoufdi ermcesinectivitieelIowever tlonlnglenotelwayeefunc moidi erenceeon l 06 often P w G differ The testesthat is the needo oi Carn1ike e srml1 town cuetoatncra for run more to ward comedies Westems lms and ntedNC17 entertainment does not run any lm l 4 Whntieetrategy1 Strategy volving e 6 net of u Ii 0 were only one H position P would he no need U W P would in simple irnper etivewlntheteoetodisoovenndpreen1ptitv1 he essence of strntegc positioning in to 7 that are N horn rinJs39 If the same r set of activities were best to A ell p l p l fectiveneu p III A Sustainable Slrategc Position Requires Tradeo s Choosing I unique position however is not enough to gmrantee I sustainable advantage A 0 2 C by 0Y bente who are likely to copy it in one of two ways First I conipetitor repooition S to fA N superior periormu LC Penney for instance elonetoa more upscale Eaehicnoriented eoftgoods Aeecondnndiarmore conimontypeofimitationis 0 r etraddler P to 8 the ts of e eueeeesml 1 while its position It grafts new features or technologies onto the it For those who argue thet competitor 0 copy any market the indmtry is a pa l test case It would that intently any i petitor imitate any other airline activities f Any eirline can buy the nine planes lease the gates and match the menus and end hag i gage o o ered by other Connfnental saw how well Southwest nental set out to match Southwest on he num ber of point topoint routes The airline dubbed l the new service Continental Lite It eliminated meals and firstclass service increased i frequency lowered fares and shortened time at the gate Because Continental p l a lullservice airline on other routes it continued to use travel n and its fleet of planes and v to provide baggage and sent assignments T But at etratey5cposition in not sustainable unless there p with other positions Tradeoffs occur when activities are incompatible Simply put a X that more of one notes sitntee less of another An can choose to serve cost and slowing 1 time at the yte or it can choose not to but it u not do both without hearing a pH create the need 3 and protect against and o Neu i soap Neutrogem Corporation variety p poei koning is built on a quotkind to the skinquot residuefree soap formulated for pH With a large P calling on dermatologists Neu trogmi s c strategy looks more a drug company than a soap mnlI39er39e It mdviertioee in i 1 journals tends to at C tends medical conferences and performs reeearch l at its own To reinforce lite tioning Neutrogenn orig39Lnnlly focused its P tion on drugstores and avoided price promotions In position Neutrogenn said no to the deodorsnts and eltin softeners that many out i tomers desire in their soap lt gave up the largee volume pottinl of P supermarkets and price promotions It secri ced menniac Y efficiencies to achieve the sosp39s et tributee In its oriynal positioning Neutrorgena med 1 whole raft of mde c e like those tradeoffs that protected the company from imitators Ttadeo e p for three The first is in consistencies c n or reputation A oompany l v known for s one 0 of value ss lack and confuse customers or even a Neutrogena a slow more emmeive Pvq P process to mold its fragile k l was Pk and decided to straddle While O 1 m its position as s airline Conti tell i aive in competition and to value or attemptr to deliver two inconsistent with its poeition II I inexpensive TS eoapwouldhzveahdtimeireahapingitaimagto Neutrogemie nO medical reputa ozrevhunmedaofmillioneofdtillarei vnva meior mdluniy a O NO to O Second and more important tradelotto 0 J from activities themselves Di erent positions with their tailored activitiee L diiferent e L equipmmt K r em employee behavior different skills and C ierent rnannment CB Many re p The more tea has configured its activities to lowerooatebyhavingitecustomasdotheirown uaemlbly and delivery the less able it in to eatlefy D who higher levels of B Ilowever tradeoffs can be even more B In general value in if an activity is overde aimed or 59 for its 7 For example ev if a given salesperson were capable of provid p a high level of to one cuotorner Ind to another the ulespeison39s and of or her coat would he wanted on the second customer Moreover productivity 9 irnprove when variation of an activity is 6 By provid e in a N4 level of 7 all the time the calen jpereon and the entire sales activity can often achieve p1 of learning and scale Finally tradeo o 3 from 2 on internal coordination and control By clearly choosing to compete S one way 0 not another senior v makes tional priorities clear Companies that try to be all to 0 cus tomers in connect rial coninaion in the trenches an ployea attempt to make daytoday operating deci sions without a framework Positioning trade oiis are pervae atrategy They create the need for choice and pnnpoeefullyi what a company of i feral They deter straddling or 1 because competitors that engage in those approaches under mine their strategies and degrade the value of their P activities 39I radeoffs ultimately Continental Lite The O loot 0 of of dollars and CED lost his job Ito plane were delayed leav 9 ing congested huh cities or slowed at the gate by baggage transfers Late and cancellations mine it reputatlmif it deliver of Tradeoffs are essential to strategy They create the need for choice and purposefully limit what a company offers gmerawdauemdcomplnmteadayCm nen I i still pay standard but i neither could it do without agents for its for all H p p Similarly it muchlowettieketpn ceeiorIiteserviceItonm promised again by the of 03 i nmtalh p 0 may travel agmtu P Continental tried to compete in two way et oncelnt1yingtoheloiwcoetvoneomerouteeand i p0 service others Continental paid an mom straddling penalty If no R the two 0 could have ounceedediButtheabceneeoftradeaof oisadanger one that M X P is not always Southwest convenience one kind of high quality Pt to be 0 P low costs i its hequent departures tated by a number of lowcost K P gate and automated PO for enmple However other oi airline quality an 1 t cent a meal or baggage tranofera 0 coats to provide v ity oocur primarily when there is redundant or wanted e ort poor control or accuracy or weak co ordination Simultaneous irnprovernmt oi cont dii erentian on is possible only whm a company be gins for the produc vity Erontier or when the frontier shifts outward At the irontierj where d cornpanies have achieved current y practice trandecit between coat and diifeirentiation is i real indeed AEter a decade of enioying productivity advan T tages Honda Motor Company and Toyota Motor tier in 1995 faced with customer pY tnnoe to O automobile prices Honda found S the only way to produce a leoeeexpennive O 69 F ierhene te p p l 1 Corporation recently T up against ithe from 3 was to skimp on fdeatures In the United States i p itreplsoedtlmereirdlskbnkeemthecivicwlth Toyotsiniedto seilsversionoiitshesteelLllugCo xvii endcheaper nToyote s cue s Indthe t p y effectiveness gently hsve 3 t hsvetotnnfutermdhteriuIttoItsyinplsoe AswereormtotheqneetlonWhntisstntmrl Iheuseneeofstrstegyischoosingwhntnottodo Without tradeoffs would be no need for eooldsndwouldbeqpuieklyvmiuted pdoo e eetiveness Poeipoflooins choices not only which activities I cornpsny will perform and how it will activities but o how is about Po d vidinl activities or functions strategy is about p combining F Southwest39s rapid gene which P and sE use of aircraft is C to its highconvenience lowcost t But how does Southwest achieve itquot Part 3 4 of the P lies in the company39s we paid gate and ground crews whose productivity in turn around is 0 by iexihie union rula But the bigger part of the answer lies in how South west performs activities with no meals no sent sssimmt sod no interline baggage fers Southwest avoids to perform se vitiea that slow down other It selects airports h and routes to avoid congestion that introduces I delays Southwest39s strict limits on the P and length of routes 4 M possi ble every P Southwest turns is s 737 Fit looks out imitators by creating a chain that is as strong as its strongest link What is Sovuthwestis core competence Its key to success factors The correct answer is that every thing matters Soutthwesrs strategy invoives so whole system of activities not a collection d parts Its competitive advantage comes from the way its d activities fit and reinforce one another 70 A IV Fit Drives Botltilompetitive Advantage and Sustainability Pit locks out imitators by r s diet is as soon as its strongest As in most comp nice with good strategies Southwest39s activities j complment one another in ways that creete reel value One activity cost for aample is lowered because of the way p sctivitiu are Similarly one sctivity39s value to can be by a company39s other activities That is the way stntep39c fit creates competitive advantage and Types of Fit The p of fit among functioned policies is one of the oldest ideas in strategy Grsduslly however it has been supplanted on the t i ment Rather p seeing the company as at whole have to core p tencies quotcriticalquot resources and quotkeyquot success fac tors In fact Ht is a far more v component of i cornpetitive advantage than most recite Pitt is important A tdlscri ete activities often s ect one soothers A sophisticated sales for example confers a greater adven tsge when the company39s product embodies technology sud its marketing approach emphasizes customer assistance 0 support A production line with levels of model variety is more valuable when combined with so inventory and order processing system that y the need for stocking finished good7s a sales process equipped to explain and encour age customization and an advertising theme that stresses the benefits of p rodoct variations that j meet a cnsttornefs special neeamp Such complemen tsrities are pervasive in strategy Although some 1 JUSINESS 1 NovemhrDeeelnbc I996 neversehleveseustninsblesdvsntsge139heywill iltnmaogactlvi T hgenedcmdnpplieetomm K I 0 c valmble fit in ci c N it enhances 1 position pA pt4 mutually exclusive fit in simple 8 tsncy N S activity function and the cctivltict with in p0 atmtegyg It H pou ollo turnover and does not r lhlglrly oom pennted money menngerm The compcny dia itn m TD to 0 P G its 0 c to cost savings Consistency ensure that the competl ve advan ofgctl tiea cumulateenddonoterodeorcnn call themselves out It p c 0 d 0 b a to c in c connotation c an e output39sdtDc pcolIol1 hau 39IlrulhuuIdhlond ucllIiltlcuamplqIcIlbdnIvu39lLIiIoonponluwIhoenot nk Mpping Activity Stems T utnteyepe It also J Y jZ on public p X and word ofmouth V holders will improve implementntion tmongh Secondorder t occur when acttvitiee are re i infogcing Ncntrogeu for exmple market to l pcW ended by Q W t Neu l p W mg while requiring lather amp to feature the hoeelfs u Once guests have tried Neuttogemin c1uxuryhotelampeylfIen1orellkelytopurehueitIt quot the h or ask their doctor about it Thus Nezutrogenra p N and hotel p R activi ties O one N lowering toul O In fL example Q Conpontion sell I Q row line of N lowpriced p to O all main customei R retell commerclnl promotional md giveaway 0rL HL 11 available P H As with any I v o tioning serving 1 H poop of cuacomem Bic phasizes a yH need low price for can no ebrond reach a Luge E forcelancl hen y televi o alon p9C Bic the ben ta sB Pt S HltrquotlrIr3r1 lay umlnnrnu I n B B 1996 f1395I1lllH39llIlll i A J quot1 B pen and F marketing approaches w Vrmguurd s ActivitySystltm iui nulnailIatEhAndufhleqninImaId ii wk 3 2 i n 1 il 39l39ITir i39ll rquot 111 quot ilF39quotH1quot f1Ii i LUTIl ii 7 jg I Je tency nearly all activities product design that emphasizes ease of rnanuimeruring r plants for low cost expensive purchas to materiel coats and inhouse parts y production whenever the economies dictate its activities are x For example the com Yet Bic goes beyond simple consistency l uses pointof sale displays and frequent l A The competitive value of V individual activities cannot be A separated from the whole b changes to eIlLI139llllLI7t3 impulse buying To han dle pointofsale tanks in company needs a large nelee force Bic is the largest in its industry and it handles pointof eale activities better its ri vals Moreover the eon1bin1tionvofpoint of eale 72 activity heavy television advei sing and parhg t yields far more buying q any activity in isolztion could Thirdorder fit goes beyond activity reinforce ment to what I call optimization of effort The Gap a retailer of canal clothes P ev1il j ability in its stores a eritica1 element or its strategy The Gap could keep products either by holding y store inventory or by restocking from warehouses The Gap has 0 its effort across these ties by its selection of bar sicelotl1inge1moat out of warehouses thereby the need to P large instore invento ries The emphasis is on restocking because the Gap39s merchandising strategy sticks to basic items in relatively few eol y are comparable retailers achieve turns of three to four times year the Gap turns its inven i tory seven and at half E var Rapid reetoele ing moreover reduces the cost of I theGnp39uhortn1odeleyelewhichiuixtoeid1t I n o dzsip choices for enmp1ecIn eliminate the need a ftex ule service or mnke it possible o customer to perform service activities selves Similarly with supplier or i 0Tl can the need for Innllthxieetypesclf t diewhnlc k more than any Ppk Competitive advantage grown out of 0 m entire system 05 utivideeTl1e fit activities P o l coat or j o Beyond that the competi tive value of ii twwrities or the aesoohted skills yi or raoutroeecannot he 0 l competitive companies it PIg be 8h to 15 h phin by g individual strengths Southwcrst Ahi ilnyes Activity System i i h i T etoretitica1reIouieeaThelito ntrengthn cum moron nmny and one strength blends into others It in more metal to f tiesUuchaslawcoatnpgrticulnnotion o cui tomeree11ioeonparu culgtoonoeptiono thevn1 i oiti tiylinkedemyitiee Fit and Sustainability Strntme t among many vw in a tai not only to competitive Z but C the p oi that advantage It is harder 1 dvd to V In of U 6X U it is merely to imitnte in 0 Y ya Y 0 pKX y I eet of product p T vX on systems oi activities are far more euetu39mnhle those on mdividtml aodvities T this simple Z The probability that competitors can V any activity is h quot 5Iniari lI l 39 mM I hr I39rquot39IM1 rrzmir 3 F v NX J H39J II 39n iII u I1HEll39f l H in 239 unlikely 9x9r 81 9x9lx9x9 66 so mi lg front the tradeoffs lacing established rivals still The more a compnnrs o rests on activ ity systems with seeond and t the g t more f its 0 will be Y sys hard to imitate And even if rivals can relevant 0 they will have pi replicating them fit is because it it P3 integation of decisions and actions across many independent subunits A competitor P to match m activity sys tem p little by 0 only some activities and not the whole Perfornianee does not it can 7 Recall P Liteis i disastrous atternpt to imitate Southwest Finally fit 03 a company activities creates pressures and incentives to improve operational e ectiveness which makes mLitation harder will degrade the performance in others so that are and more prone to Ty at The Irnplieit of El One ideal competitive position the industry El r of all activities and achieving best Cl Agessive outsourcing and u to 0 x iciencies D rest on a key success factors z z core competencies El Flexibility and rapid to all competitive and u 0S 74 less than one x t 0Z improvementslnoneaetivity gtiononlveompoundstheiradvantagesandraises Strategic positions should have a horizon of a decade or more not of a single planning cycle And even new entrants though they do not s i T onel Thusfindingsnevratrs SN untangle from outside e company and l g unity also r a compsnrs identity t Fit means p q poor perforrnance in one activity costly Not only must a company i intli i lvidusgl activities but it must also reslim en re sya Alternative Views of Strategy WENIIS Qk Lh pay dividends in others Compsnies with yl inviting targets xl superionty in strategy pSi in d When activities eomplmmt one another rivals 0 U get little ben t fully 0 h Xg whole system f l situations tend to promote winner g builds the best activity systemJ f lllls orinstaneewins while rivals with stratwes Q Child World md Li The most viable positions are those whose ac tivity systems d because of trade j Stratege r sets the tradeoff rules that how individual activities p be com p and strategy in tetrna of activity systems only it clearer why 0K3 rational structure systems and 0 need to be strstegvspecific Tailoring organization to strat p in turn P able and to One inipvlication is that strategic lpoaitions should have s horizon at a decade or more not of s single P cyele fosters E ments in individual activities and e fit tivities allowing an organization to U unique and skillm tailored to its Conti r Conversely frequent shifts in positioning are l Sustainable Comgetitive Advantage El Unique competitive position D Activities to D IZI Clear and viaHvis cornpetitorl Competitive advantage arises fit across activities D P comes from the activity system not the 0 D Operational effectiveness a given terns nnynevercsrchnptothe vscillsting The inevitable result at fre quo1tchiftsinstrste yoro silnretotchooseedis t tinct position in the Exit place is metooquot or p sctivitv tcon gnrations inconsistencies WhatisstutqyWecsnnowoompleteumem V Rediscovering Strategy Theo Foilure to Choose l Whydo eon1snytcompanles miltohnveastrat on Why do P avoid strategic Or them in the past why do managers so often let strategies day and blur T Commonly the thregte to strategy are seen to ernsnete from outside a company because of Although D changes can be the prob lemampegreoterthrettosn ntegvoftencotnesampom A sound omtegv is tmdermined by 1 mie view of competition by ml urea and especially by a to pow 4 have become confused about ne p fsr from the productivity frontier nudeoffs i eppear P It been seem that a wellrun company should be able to but in inampective rivals up on all y Taught by popu lar manegement Qt that they do not have to l maize tredeoiist s have a w seneeth1ttodosoisssignLofwenlmesa Unnerved by forecasts of hyperconipetition x increase its likelihood by v ev erything about their compeititors Exhorted to think in kt of revolution w Mp every new technology for its own sake The pursuit of operational e ectiveness is seduc pest q have been under P m pressure to deliver tangible measurable perfor q improvents n in operational ei fectiveness l proycss although superior profitability may P h elusive Business publications and oonaultanm flood the rmrket with J 3l of 0 j Oj When many companies T tive because it is concrete and actionable Over the inforrnstion about whgt other are g the bestpractice mentality Caught up have a strategy h in the race for operational e ectivenese many l managers simply do not understand the need to dQend sondoingmmythingswell ootjustsfew i d integrating among s if there is no t sotivitles there is no distinctive strategy 1 simpler 0 of Y independent 08 i Q effectiveness determines on organi nation relsdve 0 Companies avoid or blur strategic choices for i other reasons as Well Conventional 0oZ X an Y is often mong 0qZ competi l Y W customer locus to i mean they must serve all custtorner needs or re spond to every pS hon dismhuoon channels Others cite the desire to exibility Organizational realities also work 7T suite io sometimes PGO to y blame for a P t choice Companies imitate one another in e N of Q behavior O rivals know p P thing they do not Newly mipowered L who are urged to seek every poesible source of im provement oiten lack a vision of the whole end the pegrspec ve to recomlze p The failure to choose sometimes comes down to the pJ to disappoint valued H or employees The Growth Trop Among all other in uences the BI to grow 7J G the G effect on strategy a TradeoHs and limits appear to constrain growth SB one C oi customers and excluding oth ers for instmce places a p D or limit on revenue 5A Broadly targeted strategies sizing low price result in lost B with customero sensitive to features or service Di erentiators lose sales to pricesensitive custiomers Y are constantly tempted to take incre ateps that surpass those limits but bilux E company39s strategic position Eventually pressures to gow or apparent saturation of the target market lead managers to broaden the position by extending p product lines adding new features com petitara popular services matching processes and even acquisitions For years Nlaytag Cor b porationh success was 3 on its focus on reli able durable washers and dryers lster extended to include dishwashers However conventional wis i 75 a activities Thesucceu of s stutegy 0 0 E H E E V 39r z 1 39I ht39fm391iai W Iu39it ff c c c c Pk lg 7 P A e p can help oomph n1oot wellieetnbllihed oomphK T i outh cothefdlowing of ouriproduct or m X are the mcutdis netiveii A i 39t I K g P P 39 39739 3 quot who it R P S i P s P s P s e quot 39 0 G G M wee 0 0 ml it in i P 0 in P d4va mw1eId1DI may 39 39 T 0 B tweneu Such o 39 o it dam the 0U supported the notion at a full Line of products Concerned with slow 0Y P7 and oompedtion from appliance pu was prmured by dealers and encouraged by to extend 39 its line May tag expanded into refrigeratora and i 0t under the Maytag brand and ac quired other brands e JennAir Hudwiclt Stove Hoover Admiral and Magic Chef with disparate Z positions Maytag has grown substantially from it 3684 39 FT in 1985 to a W of 34 billion in t 1994 but return on sales declined from 8 to 12 in the 19705 and 198139 to an average of ideas P T 1 between 1989 and l99j5 Cost cutting S improve this performance but laundry and 7P wruher products still anchor Maytag profitability Neutrogena bO have fallen into the some trap In the early 1990 its U18 distribution broadened to include mass merohzndiiere such as K Stores Under the Neutrogeno nune the company p expanded into a wide veriety of prodI1citee39ye 76 makeup remover end shampoo for eizamplei in which it was not unique and which diluted ito i age and it began i to price promotionn D and iinconsistenccies in the pursuit of gowth C p the competitive advantage 1 cotnpany had with its original varieties or terget containers Attempts to compete several ways at once create i end e organization al motivation and focus Profits fail but more p i enue is seen as the answer are unable to maize choices so the company ernbnrko on 1 new round of P 7 and compromises Often ri vals continue to match each 9 until idesperetion i breaks the eycle 0 in a merger or downsiz 5 to the P 5 Ph Pro io ha Growth Many companies after a 0c2 of v4 I and coastcutting are turning their attention to growth Too often to grow blur uniqueness Wlnt V to growth preserve Ind 0 foreestmegyiBroad1jythepreeriptionnitocon then t end compromising it 86 Ip E hleorooot1ytomatchonutnndalonebu1a1noth erworampmwAgn39uemuhthemaelveswhichnel tivities features or iorrne of coinpetition are feuible or less ooetly to th became of oomplet i 03 i pony 1 more diodnctive 2 ii t those i 0 who should value it But comp i nice 1 to me temptation to quoteasyquot without Or they target new 01 or pi compeny can often your and far more pro itably by better V needs and varieties i h whereitie e ncdvethmhyelumngittontinpo powth in which the eont n l puny locks Cumlke now the p i theater P in the United States owes its tepid to its concentration on markets The company p any hicity come to it as p of an acquisition Glohdintion ottm allows that in tent with strategy up large for on n focused Unlike domestically At general management s core is strategy de ning ax company s A position making tradeoffs and 39 forging fit among activities l globally is likely to leverage and rein force a company39s unique position and identity 1 Companies growth 0l broadening l industry oan P the risks to strategy by creating utmdalone each with it own brand nnnie and tailored activities t clearly struggled with i issue On the one hand it has p its premium and value brands into cruteileomim team units th c quot V p R compete with di ermt for B The Role of leadership cleirtetrntegyiaoftenp marilymorgnnlzodonnl one and depends on leadership With so many 1 forces at work 0 choices md tr1de t ncteorlenstoinen Irvoidingcompromloeiinmy 1 oils m organiirations n intellectual framework i to strategy in a necessary counterweight Moreover strong leader to choice In many oornponlee 0p 0 i into orcheemting p improvements and 0 But theleoder a role is broader andllr tnorel important General managernent is more P the stewardship of individual B Ito i core is and oomninnicating the company imique position tradeo e e t among activities p e r 0 v yide the discipline to decide which industry m 0 p m needs the company 0 opond to while avoiding organizational distrac g and the company R 2 P at lower nleyell lack the perspective and the to W I otritegy There will be constant preuurec to compromise relax tradeoffs and M rivals Joe of the leadda P is to teach others in the organi zation about anotegy and to say no Strntegy renders choices about limits in another of undamentail to developing a strat egy But so is deciding not to serve other customers or needs and not to o er features or services V strategy requires n what not to do as important as l choices about what to do Indeed leadership Deciding which target group of custoniere varieties end needs the company ohould serve is start m and clear conirnonicntion Indeed one of the most tmctione oil an explicit communicated strategy is to guide employees in making choices that arise because of trode ol39 o in their individual activities and in dayttoday do i ions 77 v Ml g t Ag 0 i ill l W l p5h I k CI 39 our prio ublet for mm k hit 0 j h j imitation and eenms 3h q b p h l c s A 0 2 c i W no ppd o ik g t c p g p g p g I 2 to i t c 7 the pawlI e jb Pg jb ee to 8j 8j 8j 2 of b Wd ialid Wd operational teifeotiveness is a neces e part of managment but it is not strategy In confusing the two have 0b backed into a way of p W b ootnpe tion 1 that is bc many indl uatrieal toward competlnve which is in no ome39s a interat and i is not ineviiitalale b must clearly distinguish operational e ecdraenesas om strategy Both essential but P Y two are c iferent V D involves p provernent everirwhere Y are no trade offs Fall ure to do N creates vulnerability even for compa nies with a Z stratm 0OW operational agenda i an is the proper place for oonsmnt eidhility and relentless efforts to achieve best practice In l contrast the strategic agenda is the right place for t v a unique position clear tradeoffs i and 1U t It involves theeontinnal search for ways to reinforce and extend the company po and c onntinuity its enemies are distraction and compromise Strategic continuity does not imply a static View of competition A oonipany moat continually im prove its operational effectiveness and actively try to H the productivity frontier at the same time there needs to be ongoing e ort to extend sition The strateyei agenda demands di3oiplinlte alami at MG 1 E vol 19 wl arehMr I995 IT39Sim j its uniqueness while the fit among 3 7398 its sactiwities Strateg39e eon nuity in p ahould 1 malre an organization39s oontinual improvement more effec ve A company may have to change its strategy 1391 there major structural in its induauy In fact new smteyc positions arise of r changes and new entrants nnenenma t bered by often can emloit them more 9 However a eo1npansy39sl choice of a new position must be driven by the ability to 7 new trade o a and leverage a new system of complementary activ ities into a sustainable advantage uomduaruaunu metisaruuvmumsmmgmnaamang Advanrnga NewT tod lht h laumudhhnkohquhtehqnmmmhreldteeenunuiad syatmof amp l i eltancuwithooheruntlngtllesofintan rupuuuanrionthented w Y i a 5view IOll990l 511513 pb a K Indlohn r 0 Momennnn and Evolution of Modern rmgflamniamrmmxmcnwimisls gtl99lll4 8l and 7 quot Indliitr P Joanna p Reprint 96608 Toplaoe all euailmtheernugenee aaanetvutdeoltj puperalanuyl is 1 3quot Awareness of the ve forces ca n help a company understand the structure of its industry and s1ql1lte0ut a position that is more iprofitable and less vui 1 Jr nerable to attack f Peter Crowther by Michael E Porter Editor39s Note ln 1979 Harvard Business Fleview puhlislnod quotHow Competitive Forces Shape Strat egyquot by a young ecorlomist and assocfiate protfessor Mii cheel E Porter lt was his iirst HBH article and it started a revolution in the strategy field ln subsequent decades Porter has brought his signature economic rigor to the study of competitive strategy for corpora tions regions nations and more recetntly hexalth care and ohilan thropy F ortar39s five forcesquot have shaped a gerleration of academic research and business practice With prodding and assistance frorn Harvard Eursirress School Professor Jon Fiivltin and longtime colleague Joan Magretta Porter here reofiirms updates and extends the classic worlt He also ratlclrosses common misunderstandingst prrovioles practical guitla nce for users of the iramework and offers a deeper view of its irnplicaztions for strategy today IN ESSENCE the job of the strategist is to under P and cope with competition Often however de ne competition too nanowly as S it occurred only among toclay s direct competi tors Yet competition for pro ts goes beyond es tablished industry rivals to include four other competitive forces as well customers suppliers p0tCI39l l3Li entrants and substitute products The extended rivalry that results from all five forces defines an inclustry s structure and shapes the nature of competitive interaction within an industry A3 different from one another as industries might appear on the surface the underlying drive ers of pro tability are the same The global auto industry for instance appears to have nothing in common with the worldwicle market for art masterpieces or the heavily regulate cl healthcare hbnorg I Januuryzooa I Harvard Business Review 79 n AND STRATEGY I The Five Competitive Forces That Shape Strategy delivery industry in Europe But to under stand P competition and pro tabil ity in each of those three cases one must analyze the industry s underlying struc ture in terms of the live forces See the ex hibit The Five Forces That Shape Industry Competition if the forces are intense as they are in such industries as airlines textiles and ho tels almost no company earns attractive re t on investment if the forces 5 benign as they are in such as software soft and toiletries many companies are pro table Industry structure drives competition and pro tability not whether an k produces a product or service is emerging or mature high tech or low tech regulated or unregulated While a myriad of factors can affect industry pro tability in the short ti including the weather and the business cycle I5 manifested in the competitive forces sets industry pro tability H the medium and long run See the exhibit Differences in ndustryl Pto tabtilityf Understanding the competitive forces and their under causes reveals the roots of an industry39s current pro t ability while providing a framework for anticipating and in uencing competition rand pro tability over time A healthy industry N should be as much a competitive concern to strategists as their company39s own position Un derstmding industry is essential to effective strategic positioning As we will see ldefending against the competitive forces and shaping them in a company39s favor are crucial to strategy Forces That Shape CuInpetitio n The con guration of the ve forces differs by industry In the market for commercial aircraft erce rivalry between dominant producers Airbus and Boeing and the k ing power of the airlines that place huge orders for aircraft are strong while the threat of entry the threat of substi tutes and the power of suppliers are more benign In the movie theater industry the proliferation of substitute forms of entertairlrnent and the power of the movie producers and dliSlUl39iiDLltDl39S who supply movies the critical input 8 important Michael E Porter is the Bishop William Lawrence University Pro fessor at Howard University lbased at Harvard Business School in Boston He is a sixtime Mcliinsey Award winner ir39lCluciing for his most recent HBH article Strategy and Societyquot coauthored with Mark R Kramer December 2006 80 Hlarvard Business Fleview I January 2005 I hbnorg The Five Forces That Shape Industry Competition The strongest competitive force or forces determine the pro tability of an industry and become the most important to strategy formulation The most salient force however not always obvious For example even though rivalry is often lierce in com modity industries it may not be the factor pB pro t ability Low returns in the photogaphic lm industry for instance are the result of a superior substitute product as Kodak and Fuji the world39s leading producers of photo gaphic lm learned the advent of photography In such a situation coping with the substitute product be comes the number one strategic priority industry structure grows out of a set of economic and technical characteristics that determine the strength of each force We will examine these drivers in the pages that follow the perspective of an incumbent or a company already present in the industry The analysis can be readily extended to understand the challenges facing a potential entrant THREAT OF ENTRY New entrants to an industry bring new capacity and a desire to gain market share that puts pressure on prices costs and the rate of investment nec essary to compete Particularly when new entrants are diversifying from other markets they can leverage exist ing capabilities and cash flows to shake up competition as Pepsi did when it entered the bottled water industry Micro soft did when it began to offer internet browsers and Apple did when it entered the music distribtition business The threat of entry therefore puts a cap on the pro t po tential of an industry when the threat is high incumbents must hold down their prices or investment to deter new competitors in specialty coffee J for example relatively low entry barriers mean that Starbucks must in vest aggressively p 9 stores and menus The threat of entry in an industry depends on the height of enny barriers that are present and on the reaction en trants can expect from incumbents If entry barriers low and newcomers expect little retaliation the entrenched competitors the threat of entry is and industry pro t ability is moderated It is the therefor of entry not whether entry actually occurs that holds down pro tability entry by limiting the willingness of customers to buy 0 a newcomer and by reducing the price the newcomer com mand until it builds up a large base of custorners 3 Customerlswitching costs Switching costs are xed costs that buyers face when they change suppliers Such costs may arise because a buyer who switches vendors must for ex ample alter product speci cations retrain employees to use a new product or processes or information systems The larger the switching costs the huder it will be for an en trant to gain customers Enterprise resource planning ERl3 software is an example of a product with very high switching costs Once a company has installed SAP39s ERP system for ample the costs of moving to a new vendor astronomical Industry structure drives competition and profitability not whether an industry is emerging or lmature high tech or low ltech regulated or unregulated Barriers to entry Entry barriers are advantages that incum bents have relative to new entrants There are seven major sources 1 Supplyside economies of scale These economies when rms that produce at larger volumes enjoy lower costs per unit because they can spread xed over more units em ploy more ef cient technology or command betterl terms from suppliers Supplyside scale economies deter entry by forcing the entrant either to come into the t on a large scale which requires disloclging entrenched com petitors or to a disadvantage Scale economies be found in every PS in the value chain which ones most important varies by ilndusny ln microprocessors incumbents such as Intel are protected by scale economies in research chip fabrica tion and consumer marketing For lawn care companies like MiracleGro the most important scale economies are found in the supply chain and media advertising In small package delivery economies of scale o in national logisti cal systems and information technology 2 Deimandside bene ts of scale These bene ts also known as network effects arise in industries where a buyer39s ness to pay for a company s product increases with the num ber of other buyers who also patronirer the company Buyers may trust larger companies more for a crucial product call the old adage that no one ever got red for buying from IBM when it was the dominant computer rnalter Buyers value being in a network with a larger number of fellow customers For instance online auction participants are attracted to eBay it offers the most potential trading partners Demandside bene ts of scale Pl because of embedded data the fact that internal processes have been adapted to SAP major re quot needs and the missioncritical nature of the applications 4 Capital requirements The need to invest large nan cial resources in order to compete can deter new entrants Capital may be necessary not only for xed facilities but to extend customer credit build inventories and fund up losses The barrier is particularly great if the capital is required for unrecoverable and therefore harderto nance expenditures such as upfront advertising or research and development While major corporations have the nancial resounes to invade almost any industry the huge capital requirements in certain elds limit the pool of likely en Conversely in such elds as preparation or shorthaul trucking capital requirements are minimal and potential entrants plentiful It is important not to overstate the degee to which capital requirements alone deter entry If returns are at tractive and expected to remain so and if capital markets are efficient investors will provide entrants the they need For aspiring air carriers for instance nancing is available to purchase expensive aircraft because of their resale value one reason why there have been numer ous new airlines in almost every region 5 Incurnbemy advantages ind epenclent of no matter what their size incumbents may have cost or tages not available to potential rivals These can stem from such sources as proprietary technology preferen tial access to the best raw material sources preemption of the most favorable geographic locations established brand identities or cumulative experience that has allowed incum hbrorg l January 20093 l Harvard Business Fleview B1 AND P I The Five Cornpetitive Forces That Shape Strategy bears to pa how to produce more ef ciently Entrants P to bypass such advanmges Upstart discounters such as get and WalMart for example have located stores in free e sites rather than regional shopping centers where established department stores were well entrenched 6 Unequal access to distribun39Ton clionnels The new on trant must of course distribution of its product or service A new food item for enampley must displace others W the superrnarltet shelf via price breaks promotions intense n efforts or some other means The more ited the wholesale or retail channels are and more that Pn0 competitors have tied them up the tougher entry into an inclustry be Sometimes access to distribution is so a barrier that new enuants must bypass distribu tion channels altogether or create their own Thus PI low cost airlines have avoided distribution through travel agents who tend to favor established higherfare carriers and have encouraged passengers to book their own ights on the internet 7 Restrictive government policy Government policy hinder or aid new entry directly as well as or nul lify the other entry barriers Government directly limits or even forecloses entry into industries 0 for instance licensing requirements and restrictions on foreigi invest ment Regulated industries like liquor retailingtaxi services and airlines are visible examples Govemrnent policy can heighten other entry barriers Pm such means as eit pansive patenting rules that protect proprietary technol ogy from imitation or environmental or safety regulations that raise scale economies facing newcomers of course government policies may 1 make entry easier directly j subsidies for instance or indirectly by ba sic and it available to all rms new and old reducing scale economies Entry barriers should be assessed relative to the capa bilities of potential entrants which may be startups foreimi hnns or companies in related industries And as some of our examples illustrate the strategist must be of the creative ways newcomers might nd to circurnvent appao ent barriers Expected retaliation llow potential entrants believe PU curnbents may react will influence their decision to enter or stay out of an industry If reaction is vigorous and protracted enough the pro t potential of participating P the industry can fall below the cost of capital Incumbents often public statements and responses to one entrant to send a to other prospective entrants about their comrnitment to defending market share Newcomers are likely to fear expected retaliation Incumbents have previously responded vigorously to new entrants incumbents possess substantial resources to ght back including excess I and unused power avail oz Harvard Business Fleview I January 2008 l hbmrg Differences in industry Pro tability The average return on invested capital varies markedly from industry to industry Between 1992 and 2006 for example average return on invested capital in US industries ranged as low as zero or even negative to more than 50 At the high end are industries like soft drinks and prepackaged software which have been almost six times more profitable than the airline industry over the period able productive capacity or clout with distribution channels and customers Vlncurnbents seem likely to cut prices because they are committed to retaining market share at all costs or because the industry has high xed which create a strong mo tivation to drop prices to excess capacity industry growth is slow so newcomers can p volume only by it from incumbents An analysis of barriers to entry and expected retaliation is obviously cnicial for any company contemplating entry into a new industry The challenge is to find ways to surmount the entry barriers without nullifying through heavy invest ment the pro tability of participating in the S THE POWER OF SUPPLIEFIS Powerful suppliers more of the value for thernselves by charging higher prices limiting quality or services or shifting costs to industry par ticipants Powerful suppliers including suppliers of labor can squeeze pro tability out of an industry that is unable to pass on cost increases in own prices Microso z for in stance has contributed to the erosion of proiitability among personmquot computer malters by raising prices on operating systems PC makers competing ercely for customers who 7 easily switch among them have limited freedom to Xv their prices accordingly Companies depend on a wide range of different supplier groups for inputs A supplier goup is powerful It is more concentrated than the industry it sells to Microsoft s near monopoly in operating systems coupled p the Eragnentadon of JPC assemblers exempli es PUc situation The supplier group does not depend heavily on the in dustry for its n Suppliers serving many industries will not hesitate to extract l pro ts from each one lfa particular industry accounts for a large portion of a sup plier m39oup s volume or pro t however suppliers will want to protect the industry QR reasonable pricing and as sist in activities such as RampD and lobbying industry participants face fb costs in changdng suppliers For example shifting suppliers c di icttlt b com panies have invested heavily in specialized ancillary equip Average Return on invested Capital in LlS lndustries 19922006 51 inmplcgwe zen MWe rsmmmse lt mmnon urs imam runs 3 on 5 ms an 1 39 no 3 Number oi industries 3 3 I 39 I I 39 r 01 5 NH 157 20 25 39IH 161 or 0Jg Ilium measure of d tor not to mention for equity investors Return on all or the h rate all pro t fail to aooount for the to in the p Here we byavaraae wb IISIIIIBIIlGlIl l8 lhImClBufIOfFOlCThi3 controls tor idiouynemtlc diflarenols in capital istrueture and tax p ind 3F P smegma Pours k Ittdlulaotwenlen otle ment or W learning how to operate a suppliers equipment as with Bloornberg terminals used by fmanciial profession als 0139 rms may have located their production lines adja cent to a supplie s 0V facilities as hi the W of some beverage companies and container manufacturers When switching costs uP high F participants it hard to play suppliers o against one anotiher Note that suppliers may have wP costs as well FP their power Suppliers offer products that are differentiated O maceutical companies that offer patented pN with E tinctive medical bene ts have more power over hospitals health maintenance organizations and other drug buyers for example than D companies o iering inetoo or ge neric products There is no substitute for what the supplier group pro vides Pilots unions for example exercise considerable sup plier power over airlines partly because there is no good alternative to a welltrained pilot in the cockpit The supplier goup can credibly threaten to integrate for ward into the industry in that case if industry participants l39Il1ampkE p much money relative to suppliers they will induce suppliers to enter the market Pro tability of Selected lJS Industries Average RQIC 1992a2DD6 Security Broken and Dealer 7 settlhinn 5 0Z7 0Z7 0Z7 0Z7 0Z7 Phermleoutluli 317 lPerfumI Gounotlu ilioilotriu k 333 AdVDitl Ihv aoncillt a 211355 Dietillod SpitIn 0k4 ZIAGB semiconductors l 239l3 Medial l39lI Il lll39lIDll 21 095 Man mnd Boys Nothing e 195 Ting 198 Household Appliances 0 1 131 Malt Euorugu mov Chlld scorn Service 176 Household Fumiltuo 11lHl39n Drug Stone 183 Grocery Stores 1l0 Iron and Steel Foundriu 39 39I I39h GouldIn Ind Cracker Z 154 Mobil Hanson u 39 i E E Average industry v2i39rsa39i ii39issit G re nes U5 nmw Products quot P is 13395 J i Engines mu Turbines pN 1431 Book Publehlng 13496 iubaratary Etnllpmont 13I39lln Oil and En quot 39 39 11 Soft rinh Bottlllm 1 I7 b Knlntting Mill 1105 Hotoln 104 GItilo MeiIDrdur Hausa 39 69 Airlines 51 we POWER OF BUYERS Powerful customers the flip side of powerful suppliers W capture more value by forc ing prices demanding better quality or more service thereby up costs and generally playing industry participants off against one another all at the Ps of industry pro tability Buyers powerful if they have nego tiating leverage relative to E participants especially if they are price sensitive using their clout prilnarily to pres sure price reductions As with suppliers there may be distinct goups of custom ers who differ in power A customer group has negotiating leverage if l There are few buyers or each one purchases in volumes that are large relative to the sizes of a single vendor volume buyers are particularly powerful in industries with high xed costs such as teleconununications equipment off shore dlilling and bulk chernicals High xed costs and low marginal costs the pressure on rivals to keep capac ity lled 0 discounting The industry39s products are standardized or iundi ferentir ated If buyers believe they can always nd an equivalent product they tend to play one vendor against another Buyers face few costs in chagnging vendors hlbrorg l January 2003 l Harvard BLl5inB5S Fleview B3 6 NED STRATEGY I The Five Competitive Forces That Shape Strategy i Buyers 0 credibly threaten to integrate backward and produce the industry39s product themselves if vendors are too pro table l of soft R beer have long controlled the power of packaginlg manufacturers by threat ening to make and at times actually making packaging ma terials the1nse1ves A buyer group is price sensitive The product it purchases from the indusny represents a signi cant fraction of its cost or procurement budget Here buyers are lilcely to shop around and bargain hard as consumers do for home mortgages Where the 0 uct sold by an is a small fraction of buyersquot costs or expenditures buyers are usually less price sensitive The buyer moup earns low pro ts is strapped for cash or is under pressure to its purchasing Highly pro table or cashrich customers in contrast are gen erally less price sensitive that is of course if the item does not represent a large fraction of their The quality of buyers products or services is little H fected by the industry39s product Where X is very much affected by the inclustryis product buyers generally less price sensitive when purchasing or renting production qual ity cameras for instance makers of major motion pictures opt for highly reliable equipment with the latest features They pay limited attention N price The ind1utry39s product has little effect on the buyer39s other costs IIere buyers focus on price Conversely where an industry39s product or service pay for itself many times over by P performance or reducing labor material or other costs buyers usually more interested in than in price Examples include products and services like tax accounting or well loggng which measures belowground conditions of oil wells that can save or even make the buyer money Similarly buyers tend not to be price sensitive in ser vices such as investment banking where poor perfonnance can be costly and embarrassing Most sources of buyer power apply equally to consum ers and to businesstobusiness customers Like industrial customers consumers tend to be more price sensitive if they are purchasing products that pk undifferentiated expensive relative to their incomes and of a sort where product perfor mance P limited consequences The major difference with consumers is that their needs can be more intanm ble and harder to G Intermediate customers or customers who purchase the product but are 0 8 the end such as assemblers or bution channels analyzed the same way as other buy ers with one important addition intermediate customers Q signi cant power when they in uence the purchasing dlecisions of customers downistrearn Con sumer electronics retailers jewelry retailers and amicultural equipment distributors are examples of dishibution chan nels that exert a in uence on end customers 84 Harvard Business Review I January 2008 l hbtorg Producers often attempt to diminish charinel clout 0a exclusive arrangements with particular distributors or retailers or by marketing directly to end users Compo nent manufacturers p to develop power over assemblers by creating preferences for their components with down customers such is the case with bicycle parts md with sweeteners DuPont has created enormous clout by its brand of carpet iibers not only to the carpet manufacturers that actually buy them but also to downstream consumers Many consumers request Stainrnaster even though DuPont is not a cmpet manufacturer TlINE THFIEAT OF 5UBS39l lTlJTES A substitute performs the same or a similar function as an industryis product by a different rneans Videoconferencing is a substitute for travel Plastic a substitute for aluminum Email is a substitute for express mail Sometimes the threat of substitution is downstream or indirect when a substitute replaces a buyer industry39s product For example lawncare products and ser vices are threatened when multifamily homes urban 6 substitute for singlefamily homes in the suburbs Software sold to agents is threatened when airline and travel websites substitute for travel agents Substitutes are always present but they are easy to over look because they may appear to be very different from the industry s To someone searching for a Father39s Day gift neclcties and power tools may be substitutes It is a sub stitute to do without to purchase a used product rather than anew one or to do it yourself bring the service or product inhouse when the threat of substitutes is high industry pro tabil ity suffers Substitute products or services limit an industry39s pro t potential by placing a ceiling on prices if an industry does not distance itself from substitutes through product performance marketing or other means it x suffer in terms of prolitability and often growth potential Substitutes not only limit proiits in normal times they also reduce the bonanza an industry reap in good times ln emerging economies for example the surge in demand for wired telephone lines has been capped as many con sumers opt to make a mobile telephone their rst and only phone line The threat of a substitute is high sg It offers an attractive priceperforrnance to the indusnyh product The better the relative value of the sub stitute the tighter is the lid on an industry39s pro t poten tial For example conventional providers of pzd telephone service have suffered from the advent of inert pensive internetbased phone services such as Vonage and Skype Similarly video rental outlets are istmggling with the emergence of cable and satellite videoondemand services online video rental services such as Netflix and the rise of internet video sites like Google s Youllube The buyer39s cost of switching to the substitute is low Switching from a proprietary branded drug to a generic P usually involves minimal costs for exampilef which why the shift to generics and the fall in prices is so substan tial and rapid Stratemsts should be particularly alert to changes in other industries that may make them attrac ve substitutes when they were not before Improvements in plastic materials for example allowed them to substitute for steel in many au tomobile components In p way technological changes may participate in an industry for reasons or to offer a line Clashes of personality and ego have sometimes exaggerated rivalry to the detriment of pro tability in elds such as the media and high technology y cannot read each other s simtals well of lack of with one another diverse approaches to competing or goals The k of rivalry re ects not just the intensity of competition but also the basis of competition The dimen sions on which cornpetition place and whether rivals Rivalry is especially destrluctive to profitability if it gravitates solely to price loecaluse price competition transfers profits directly from an industry to its customers or competitive di5cDI1tiIlquotllit39leSli1i1 seemingly unrelated busi nesses can have major impacts on pro tability Of course the yi threat also shift in favor an industry which bodes well for its future pro tability and growth potential RIVALHY AMONG lEXlSTNG COMPETITOHS Rivalry among t competitors talrels many Z forms in cluding price discounting new product introductions ad vertising U and service improvements rivalry the pro tability of an The degee to which ri drives down an industry39s pro t potential depends first on the intensity with which companies compete and second on the basis on which they compete The intensity of rivalry is greatest p Competitors are numerous or are roughly equal in size and power In such situations rivals nd it hard to avoid business Without an industry leader de sirable for the industry as a whole go unenforced industry growth is slow Slow growth precipitates ghts for market share Exit barriers S high barriers the flip side of entry barriers arise because of such 0 as specialized assets or lmanagernentis devotion to a particular business These barriers keep cornpanies PX the market even though they may be earning low or negative Excess capacity remains in use and the pro tability of healthy competitors suffers as the sick ones hang on Rivals are highly committed to the business and have aspirations for leadership especially they have goals that go beyond economic performance in the particular industry High comrnitrnent to a business arises for a variety of reasons For example stateowned competitors may have goals that include employment or prestige Units of larger companies converge to compete on the same dimensions have a major in uence on pro tability Rivalry especially destructive to pro tability if it gravi tates solely to price because price competition transfers prof its directly from an industry to its customers Price cuts are usually easy for competitors to see and match making suc cessive rounds of retaliation likely Sustained price competi tion also trains customers to pay less attention to feattum and service 7 competition is most liable to occur PS Products or services of rivals are nearly identical and there are few switching costs for buyers This encourages competitors to cut prices to win new customers Years of i line price wars reflect these circumstances in that Eixed costs are high and marginal costs are low creates intense pressure for competitors to cut prices below their average cosm even close to their marginal costs to steal incremental customers while still O some contribution to covering xed costs Many basicmaterials P such as paper and alurninurn suffer from this problem especially if demand is not So do delivery companies with fixed networlts of routes that p T served regardless of volume Capacity must be expanded in large increments to be ef cient The need for large capacity expansions as in the polyvinyl chloride bushtess the industry s supply demand balance and often leads to long and recurring peri ods of overcapacity and price cutting The product is perishable Perishabillty creates a strong temptation to cut prices and sell a product while it still has value More products and services are perishable than is commonly thought lust as tomatoes are perishable because they rot models of computers are perishable they lhlblrorg l Janunrylzl lo ll Harvard Business Floviow B5 STRATEGY l The Five Competitive Forces That Shape Strategy soon become obsolete and information may be perishable if it diffuses rapidly or becomes outdated thereby losing its value Services such as hotel accommodations are perishable in the that unused capacity never be recovered Competition on dimensions other than price on product features support services delivery time or brand image for instance is less likely to erode pro tability because it im proves customer value and support higher prices Also rivalry focused on such dimensions can improve value rela tive to substitutes or raise the barriers facing new entrants While nonprice rivalry sometirnes escalates to levels that undermine industry pro tability this less liltely to than it is with price rivalry As important as the dimensions of rivalry is whether ri vals compete on the same dimensions When all or many competitors 0 to meet the same needs or compete on the same attributes the result is zerosum competition Here one rmis gain often another s loss driving down pro t ability While price competition a stronger 9 than nonprice competition of P O zero sum may not happen if cornpanies take care to segment their markets targeting their lowprice offerings to different customers Rivalry can be positive sum or actually increase the aver age pro tability of an industry when each competitor to serve the needs of different customer segnents with ferent mixes of price products services features or brand identities Such competition can not only support higher av erage pro tability but also expand the as the needs of more customer groups are met The opportunity for competition will be geater in industries serving diverse customer goups With a clear understand T of the structural underpinning of rivalry can sometimes take steps to shift the nature of competition in a more positive direction Factors Not Forces lndustry structure as manifested in the strength of the ve competitive forces determines the industry39s longrun pro t potential because it determines how the economic value created by the M is divided how much is retained by companies in the industry versus bargajnd away by cus tomers and suppliers limited by substitutes or constrained by potential new entrants lay considering all five forces a strategist keeps overall structure in mind instead of gavitae to any one element In addition the strategists atten tion remains focused on conditions rather than on fleeting factors it is especially important to avoid the common pitfall of certain visible attributes of an industry for its derlying structure Consider the following Industry growth rate A common mistake is to assume that fastgrowing industries are always attractive Growth does tend to mute rivalry because an expanding pie offers is Harvard Business Fleview l thnuaw 2008 I hbtorg opportunities for all competitors But fast 09 can put suppliers in a powerful position and high gmowth low entry barriers draw in entrants Even without new en trants a govrth rate will not guarantee pro tability if customers are powerful or substitutes N attractive Indeed some fastgrowth businesses such as personal computers have been among the least pro table hidusuies d recent years A narrow focus on growth is one of the major l of bad suategy decisions Technology and innovation Advanced technology or n novations are not by themselves enough to make an try shucturally attractive or unattractive Mundane low technology industries with priceinsensitive buyers high switching costs or high entry barriers arising from scale economies are often far more pro table than sexy indus tries such as software and internet technologies that attract competitors Government Government is not best understood as a sixth force because government involvement p2 neither in herently good nor had for industry pro tability The best way to understand the in uence of government on competi tion is to analyze how smci c government policies affect the ve competitive forces For instance patents raise barriers to entry boosting industry pro t potential Conversely gov ernment policies favoring unions may supplier power and diminish pro t potential Bankruptcy rules that allow failing companies to reorganize rather than exit can lead to excess capacity N intense rivalry Government operates at rnultiple levels and many different policies each of which will Y in different ways complementary products and services Complements are products or services used together t an industry39s product Complements arise when the customer bene t of two products combined is greater the sum of each product s value in isolation Computer hardware and soft ware for instance are valuable together and worthless when separated In recent years x researchers have highlighted the role of complements especially in hightechnology indus tries where they are most obvious By no means however do complements appear only there The value of a car for ex ample is greater when the driver also has access to gasoline stations roadside assistance and auto insurance Complements can be important when they affect the overall demand for an industry39s product lIowever like government policy complements are not a f force de termining industry pro tability since the presence of strong complements is not necessarily bad or good for indusuy pro tability Complements affect pro tability through the way they influence the ve forces The strategist p7e trace the positive or negative influence of complements on all five forces to ascertain their impact on pro tability The presence of complements can raise or lower Industry Analysis in Practice Good industry analysis loolrs rigorously at the structural underpinnings of pro tability A rst step is to understand the approprlete time horizon One of the essential tasks in industry analysis is to distinguish temporary or cyclical changes from structural changes A good guideline for the appropriate time horizon is the full business cycle for the particular industry For most industries a three to fiveyear horizon is appropriate although in some industries with long lead tirnes such as mining the appropriate horizon might be a decade or more It is average profitability over this period not profitability in any particular year that should be the focus of analysis The point of industry analysis is not to declare the industry attractive or unattractive but to understand the underlpinnrlngs of competition and the root causes of profitability As much as possible analysts should look at industry structure quantitatively rather than be satisfied with lists of qualitative factors Many elements of the five forces on be quantified the percentage of the buyer39s total cost accounted for by the industry39s product lto understand buyer price sensitivity the percentagae of industry sales required to fill a plant or operate a logis tical network of efficient scale its help assess barriers to entry the buyer39s switchinig cost ideterminiing the inducement an entrant or rival must offer custornersi The strength of the competitive forces affects prices costs and the investrnent required to compete thus the forces are directly tied to the income statements and balance sheets of industry partrlclpants industry structure de nes the gap between revenues and costs For erarnple intense rivalry drives down prices or elevates the costs of marketing FlampD or customer service reducing margins How much Strong suppliers drive up input costs How much Buyer power lowers prices or elevates the costs of meeting buyers demandls such as the requirernent to hold more inventory or provide nancing How much Low barriers to entry or close substitutes limit the level of sustainalble prices How much it is these econontic relationships that sherpen the strategists undrerstanding of industry competition Finally good industry analysis does not just list pluses and minuaes but sees an industry In over all systernle terms Which forces are underpinning or constraining today39s profitability How rnight shifts in one cornpetitive force trigger reactions in others Answering such questions is often the source of true strategic insights barriers to entry In application software for example ers to entry were lowered when producers of complemen tary operating system software notably Microsoft provided tool sets it easier to write applications Conversely the need to attract producers of complements can raise bar riers to entry as it does in video game hardware The presencel of complements can also affect the threat of substitutes For instance the need for appropriate fueling stations makes it dif cult for cars using alternative fuels to substitute for conventional vehicles But complements can j make substitution easier For example Apple s iTunes hastened the substitution from CD5 to digital music Complements can factor into industry rivalry either posi tively as when they raise switching costs or negatively as when they neutralize product differentiation Similar analy ses can be done for buyer and supplier power Sometimes companies compete by altering conditions in complemen tary industries in their favor such as when videocassette recorder producer WC persuaded movie studios to favor its standard in issuing prerecorded tapes even though ri val Sony39s p was probably superior from a technical standpohlt Identifyiing complements is part of the analysts work As with government policies or important technologies the strategic significance of complements will be best ulnden stood through the lens of the five forces lilhanges in industry Structure So far we have discussed the competitive forces at a single point time Industry structure proves to be relatively blue and industry pro tability differences are remarkably persistent over time in However p is constmitly undergoing modest adjustment and occasion ally it can change abruptly Shifts in structure may emanate from outside an indusufy or from within They can 0L the industry39s pro t potential or reduce it They may be caused by changes technology changes in customer needs or other events The ve com petitive forces provide a framework for identifying the most important industry developments and for anticipating their impact on industry atbraclriveness Slhilting threat of new entry Changes to any of the seven barriers described above p raise or lower the threat of new entry The expiration of a patent for instance may unleash new entrants on the day that lMerclr s patents for the cho lesterol reducer zocor expired three pharmaceutical mak ers entered the market for the P Conversely the prolif eration of products in the ice cream industry P lled up the limited freezer space in grocery stores making it harder for new ice cream makers to g access to distribu tion in North America and Europe Strategic decisions of lcadhtg competitors often have a major impact on the threat of entry the 1970s for hbrorg I January 2008 I Harvard Business Review 87 y AND STRATEGY l The Five lcompetitive Forces That Shape Strategrv example retailers such as WalMart k and Toys R Us began to adopt new procurement distribution and inven tory control technologies with large ned costs inclucling automated distribution centers bar coding and pointofsale terminals These investments increasecl the economies of scale and made it more di licult for small retailers to enter the business and for R small players to survive Changirrgy supplier or buyer power As the factors u11dler lydng the power of suppliers and buyers change with time their clout P or declines ln the global appliance industry for competitors including Electrolux General Elec tric and Whirlpool have been squeezed by the consolidation of retail charmels the decline of appliance specialty stores for instance and the rise of big box retailers like Best Buy and Home Depot in the k States Another example is navel agents who depend on airlines as a key supplier When the internet allowed airlines to sell tickets directly to cus tomers this signi cantly increased their power to bargain down agents co139nmissions Shifting K of substitution The most common reason substitutes become more or less threatening over time is that advances in technology create new or shift priceperfonnance comparisons in one direction or the other The earliest microwave ovens for example were large and priced above 2ooo SB them poor substitutes for con ventional ovens with technological advances they became serious substitutes Flash computer memory has improved enough recently to become a meaningful substitute for low capacity harddisk drives Trends in the availability or per formance of complementary producers 8 shift the threat of substitutes New bases of rivalry 7 often intensi es naturally over time As an industry matures z7 slows Competi tors become more alike as industry conventions emerge technology diffuses and consumer tastes converge Industry pro tability falls and weaker competitors are driven from and geogaphic segments such as riverboats trophy proper ties Native American reservations international expansion and novel customer groups like families Ileadtohead ri that lowers prices or boosts the payouts to winners has been limited The nature of rivalry in industry is altered by mergers and acquisitions that introduce new capabili es and ways of competing or technological innovation can reshape rivalry In the retail brokerage indusu y the advent of the internet lowered 6 costs and reduced ditTerenliation trigger ing far more intense competition on commissions and fees than the w In some industries companies to mergers and con solidation not to improve cost and quality but to attempt to stop intense competition Eliminating rivals is a risky strat egy however The ve competitive forces tell us that a profit 0 from removing today39s competitors often attracts new competitors and backlash from customers and suppli ers In New York banking for example the 19305 and 1990s saw escalating consolidations of commercial and savings banks including Manufacturers Hanover Chemical Chase and Dime Savings But today the landscape of Manhattan is diverse as ever as new entrants such as Wachovia Bank of America and Washington Mutual have entered the market Implications for Strategy Understanding the forces that shape industry competition is the starting point for developing strategy Every company should already know what the average profitability of its industry is and how that has been changing over time The live forces reveal why industry pro tability is what it is Drdy then can a company incorporate industry conmtions into strategy The forces reveal the most signi cant aspects of the com petitive enviromnent They also provide a baseline for sizing Eliminating rivals is a risky strategy A profit windfall from removing today39s competitors often attracts new competitors and backlash from customers and suppliers the business P story has played out in industry after in dustry televisions snowmobiles and telecommunications equipment are just a few examples A trend toward intensifyhrgv price competition other forms of rivalry however is by no means inevitable For ex ample there has been enonnous competitive activity in the US casino industry in recent decades but most of it has been positivesum competition directed toward new niches B8 Harvard Business Review I January 21108 IN hbnorg up a company s strengths and wealmesses Where does the company U versus buyers suppliers entrants rivals and substitutes Most importantly an understanding of industry structure guides managers toward 0 possibilities for strategic action which may include any or all of the follow ing positioning the company to better cope the current competitive forces anticipating and exploiting shifts in the forces and shaping the balance of forces to create a new in Using the five forces framework creative strategists may be able to spot an industry with a good future before this good future is reflected in the prices of acquisition candidates dustry structure that is more favorable to the company The best strategies exploit more L one of these possibilities Positioning the company Strategy can be viewed as build ing defenses the competitive forces or p4 a tion in the where the g weakest Consider for instance the position of Psaccar in the market for heavy tmclrs heavytruck industry is structurally challenging Many buyers operate large eets or are leasing com panies with both the leverage and the motivation to drive down the price of one of their largest purchases Most are built to regulated standards and offer s unilar features so price competition is rampant Capital intensity causes rivalry to be erce especially dining the recurring cyclical down turns Unions exercise considerable supplier power Though there are few direct substitutes for an 1Bwheeler truck buy ers important substitutes for their services such as cargo delivery by rail in tl39n39s Paccar a Bellevue Washingtonbased com pany with about zoss of the North American heavytruclk market has chosen to focus on one moup of customers owneroperators a drivers who own their trucks and contract directly with shippers or serve as subcontractors to larger trucking companies Such small operators have limited clout as truck buyers They v less price sensitive p of their strong emotional es to and economic dependence on the 0 take great pride in their truclo in which they spend most of their time Paccar has invested heavily to develop an array of fea tures with owneroperators in luxurious sleeper plush leather seats noiseinsulated sleek exterior styl w and so on At the company s extensive network of dealers prospective buyers use P to select among thousands of options to put their personal signature on their trucks P truclts are built to order not to stock and delivered six to eight weeks Paccar s p also have aero desimis that reduce fuel consumption and they x their resale value better 0 other trucks Paccars roadside progarn and ll39l supported system for dis tributing spare parts reduce the time a truclt is out of All these are crucial considerations for an owner operator Customers pay Paccar a 10 and its Kenworth and Peterbilt brands are considered symbols at truck stops Paccar illustrates the principles of positioning a company a given 0 The firm has found a por tion of its industry where the competitive forces weaker where it avoid buyer power and pricebased rivalry And it has tailored every single part of the value chain to cope well the forces in its segnent As a result Paccar has profitable for 68 years straight and earned a longrun on equity above aoss in addition to revealing positioning opportunities p q existing indusny the live forces framework allows com panies to rigorously analyze entry and exit Both depend on answering the question What is the potential of business p is indicated when industry structure is poor or declining and the company has no prospect of a su perior positioning In considering entry into a new industry creative strategists can use the framework to spot an indus try with a good future before q good future is reflected in the prices of acquisition candidates Five forces analysis may also reveal industries that not necessarily attractive for the average entrant but in which a company has good reason to believe it can surmount entry barriers at lower cost than most or has a unique ability to cope with the industry39s competitive forces Exploiting industry change industry chmges bring the opportunity to spot and claim promising new strategic posi tions if the has a sophisticated understanding of the competitive forces and their underpinnings Consider for instance the evolution of the music industry P the decade With the advent of the internet and the digital distribution of music some predicted the birth of thousands of music labels that is record companies that develop artists and bring their music to market This the analysts argued would brealc a pattern that had held since Edison invented the phonograph Between three and six mai or record companies had always dominated the industry The internet would they predicted remove distribution as a barrier to entry unleashing a ood of new players into the l A careful analysis however would have revealed that physical distribution was not the crucial barrier to entry Rather entry was barred by other bene ts that large music labels enjoyed Large labels could pool the of develop ing new artists over many bets cushioning the impact of inevitable Even more they had advan tages in breaking through the clutter and getting their new 3 heard To do so they could promise radio stations and record stores access to welldonown artists in exchange for promotion of new artists New labels would nd this nearly impossible to match The major labels stayed the course and new music labels have been hbrorg l January 2008 l Harvard Business Fieview BS credit menu planning and inventory management to shift the basis of competition away from just price These moves together with stepped up irtvestinents in inforrnation tech nology and distribution centers substantially raised the bar for new entrants while P k the substitutes less attractive Not surprisingly the industry has been consolidat ing and industry pro tability appears to be rising dr leaders have a special responsibility for improv ing industry y6 py so often requires resources that only large players 5 Moreover an improved induslryl 3 is a public good because it bene ts every 6 in the industry not p 5 the company that initiated the ima provement Often it is more in the interests of an industry leader than any other participant to invest for the common good n leaders will usually bene t the indeed improving the industry may be a leader s most pro table strategic opportunity in part because attempts to ther market share can trigger strong reactions from rivals custoniers and even suppliers There is a dark side to shaping indusuy that is equally to understand Illadvised changes corne petitive positioning and operating practices can undermine industry Faced with pressures to gain market share or enamored with hinovation for c own sake managers may Defining the Relevant ilndustry De rling the industry in which comlpofi tioh actually takes place is important for good industry analysis not to l ll lBf7l tlOl39I for developing strategy and setting business unit lboundaries Many strategy errors emanate from mistak ing the relevant industry defining it too broadly or too nanrow ly Defining the industry too broadly obscures differ ences among products customers or geographic regions that are important to competition strategic positioning and profitability Defining the industry too narrowly overlooks commonalities and llnlzages across related products or geographic markets diet are crucial to competitifve advantage Also strata glsts must be sensitive to the possibil ity that ilndustry boundaries can shift The boundaries of an industry con sist of two primary dimensions First is the scope of products or services For example is motor oil used in cars part of the same industry as motor oil used in heavy tlruclcs and stationary engines or are those different industries The second dimension is geographic scope Most lindustries are gross nt in many parts of the world llowever is com petitlorl contained within each state or is it national Does competition take place within rogiorls such as Europe or North America or is there a single global industry The five forces are the basic tool to resolve these questions if industry structure for two products is the same or very similar lthat is if they have the some buyers supplieris barriers to en try and so forthl then the products are best treated as being part of the same industry If irldustry structure differs marlcedly however the two products may be best understood as separate industries in lubricants the oil lused in cars is similar or even iidentical to the oil used in trucks but the similarity largely ends there Automotive motor oil is sold to fragmented generally unsophisticated customers through HUlIl39n3 r0U5 and of ten powerful channels using extensive advertising Products are packaged in small containers and logistical costs are high necessitating local productsion Truck and power generation lubricants are sold to entirely different buyers in ehtirelly different ways using a separate supply chain Industry structuro lilyuyer power barriers to entry and so forthl is substantiaIly different Automotive oil is thus a distinct industry from oil for trucl and stationary engine uses Industry profitability will differ in these two cases and a lubricant comlpahy will need a separate strategy for com peting in each area Differences in the five competi tive forces also reveal the geographic scope of competition if an industry hbrorg l Januiry zoos l Harvard Business Review all has a similar structure in every country lrivals buyars and so ohl the pre sumption is that competition is global and the five forces analyzed from a global perspective will set average pro tability A single globali strategy is needed If an industry has quite differ ent structures in different geographic regions however each region may well be a distinct ilndustlry Otherwise competition would have leveled the dif ferences The five forces analyzed for each region will set profitability there The extent of differences in the five forces for related products or across geographic areas is a matter of degree making industry definition often a mat ter of judgment A rule of thumb is that where the diffelrerlces in any one force are large and where the differences involve more than one force distinct industries may well be present Fortunately lhowever even if indus try boundaarles are drawn incorrectly calrefuli five forces analysis should reveal important competitive throats A closely related product omitted from the industry definition will show up as a substitute for example or comlpetiltors overlooked as rivals will be rocogrlizod as potential ar39ltrants At the same time the five forces analysis should reveal major differences within overly broad industries that will indicate the need to adjust industry bouridarlies or strategies LEADERSHIP AND S l39lIATEGY l The Five Competitive Forces That Shape Strategy trigger new kinds of competition no incumbent can When EA actions to improve their own company39s com petitive advantage then slratem39sts should ask whether they are setting in motion dynamics that will undennine industry 7 in the long H in the early days of the personal computer industry for instance IBM tried to make up for its late entry by offering an open architecture that would set industry 6 and attract complementary makers of application and peripherals In the process it ceded ownership of the critical components of the PC the operating system and the microprocessor to 0 k Intel By standardizing PCs it encouraged pricebased rivalry and shifted power to suppliers Consequently IBM became the temporarily dominant firm in an industry with an endur ingly unattractive Expandlnpg the profit pool When overall demand grows the indusn39y39s quality level rises intrinsic costs are reduced or waste is eliminated the pie expands The total pool of value available to competitors suppliers and buyers mews The total protit pool expands for example when channels become more competitive or when g industry latent buyers for its product that are not currently bemg served When softdrink producers rationalized their inde pendent bottler networks to them more ef cient and effective both the softdrink companies and the bottlers bene ted Overall value can also expand when G work collaboratively with suppliers to improve coordination and limit unnecessary costs incurred in the supply chain This lowers the inherent cost structure of the industry allowing higher profit wearers demand r lower or both 0139 r on quality standards can bring up industrywide quality and service levels and hence prices bene ting rivals suppliers and custorners pb the overall pro t pool creates oppor tunities for multiple industry participants it can also reduce the risk of destructive rivalry that when incumbents attempt to shift bargaining power or capture more mar ket share However expanding the pie does not reduce the irnportance of industry How the expanded pie J divided will ultimately be determined by the ve forces The most successful cornpanies D those that expand the pro t pool in ways that allow them to share dispro portionately in the bene ts De ning the industry The five competitive forces also hold the key to de ning the relevant industry or industries in which a company competes Drawing industry boundaries correctly around the arena in which competition actually takes place clarify the causes of pro tability and the ap propriate unit for setting strategy A company needs a sepa rate strategy for each distinct Mistakes in industry deiinition made by competitors present opportunities for staking out superior strategic positions See the sidebar De ning the Relevant Industry 92 Harvard Business Flavlew l January zone I hbror g Typical Steps in Industry Analysis De ne the relevant lncustry I What products are in it Which ones are part of another distinct industry I What is the geographic scope oi cornpetitlon Identify the particl panto and augment them into groups if approprrimtrnz Who are I the buyers and buyer groups I the suppliers and supplier groups I the comlpetiltolrs I the sluhstilltlutes I the potential entrants Anus the underlying drivers of aaelh clompotltlvo force to dotormllm which forces are strong and which are tweak and why Determine overall industry structure and test the alnalyrsic for consistency 4 Whyls the level of profitability what it is I Which are the conrrolling forces for pro tability I Is the industry analysis conslstant with actual l onglrun prolltability I Are morepro ltable players better positioned in relation to the five forces Analyze recent and likely future changes in each force both positive and nogatilvn Identify aspects of industry Structure that mlg ht be Influenced by compotitors by new entrants or by your company Common Pitfalls In conducting the analysis avoid the following com mon mistakes I De nin the industry too broadly or too narrowly I lvlalcing lists instead of engaging in rigorous analysis I F39aying equal attention to all of the lorces rather than digging deeply into the most important ones I Confusing effect lprice sensitivityl with cause louver economical F Using static analysis that ignores industry trends 3 Confusing cyclical or transient cl39ianges with true structural changes I Using the 39f l39al39l39lEVVOll39k to declare an i ldlJSI l39V attractive or unattractive rather than using it to guide strategic choices RC Vay Competitiioyn and Value The competitive forces reveal the drivers of industryl compe tition A company strategist who understands that competi tion extends well beyond c rivals will detect wider competitive threats and be better equipped to address them At the same time a couiprehensively about an in dusu39y s Oe can uncover opportunities differences in customers suppliers substiituteis potential entrants and ii vals that can become the basis for distinct suateg7es yielding superior perforrnance in a world of more open competition and relentless change it is more important than ever to 6 structurally about competition Understanding industry structure is equally important for linvestors as for managers The ve competitive forces reveal whether an industry is truly attractive and they help investors an cipate positive or negative shifts H industry structure before they obvious The live forces distinguish shortterm blips from P changes and allow investors to talc advantage of undue pessimism or optimism Those companies whose strategies have industrystransforming potential become far clearer This deeper PL aibout competition is a more powerful way to achieve genuine investment success than the nancial projections and trend extrapolation dominate today s iriveastment analysis If both executives and investors looked at competition this way capital markets would be a far more effective a for company success and economic prosperity Executives and investors would both be focused on the same funda mentals that drive sustained pro tability The conversation between investors and executives would focus on the sunt tural not the transient 0 the improvement in com pany performance E and in the economy as a whole if all the energy expended in pleasirig the St139eet 39were redirected toward the factors that create true economic value 6 1 For a discussion of the value chain framowoiryk sea Michael E Porter Com petitive Advantage Creating and Sustaining Supenor Performance The Free Press 1998i 2 For a discussion oi how imomot toclnnology improves the attrtaictrivonass of some industries while eroding the pyrofitaloiltity of others see Michael E Porter quotStrategy and the Internetquot HBH March zoom 3 See tor instance Adam M Brsndenhurgor and Barry J Nolebtuff Coopen flan Curroricv Douhiladay 1996 Reprint H01801E To order see page 139 quotDo you have to orange into my office every day and talk about workquot hbrorg I January 2008 I Harvard Business Review 93 Harvard Harvard Bunimu 5dnooli Publiduing calman an EB5Cd1os39l39 is Iiunud for individual use of al39horiznd P at this iru39l39i391rl39ion and is nod inimdod for us a nnuwiigu mqhriiaI Ilmward p 5dno Publxishing ii planed 1390 pcnnigion 1390 make this work llV il bl 39l39hI 1 c c l39ronsic l CIl1l39V quot or otlnu of digital awn or fmiuniuim lo inrollod in a For S mdi arl391oriznfion rogardiing comas eonfact pcmiuiom9hb1p39arUnrdQd I ac va b 1 of 2 Politics Ir Policy IBllJ 5 AJIIIII to P 7 or Illao 0nenlerne Hurting lndueuy 8 p of me ml p 6 Journal 1141 words 9 October 1997 me wall street Journal A20 copyright c 1997 Dow amp company wns moron As the Bay region endures its worst 2 in a decade cuslnoniers of Market Inn a restaurant diet has served up die riches oi Bay to a generation of congnasmen p 7 and ihelr stalls have come up wllh a hay 111ey order inn Mike Kipp says he P elsewhere because several rivers running into re chesepeeine Bay have had outbreaks of a poisonous algaeslike ueatule called Iils howeven want chalreaubriand Today it39s not the reality it39s the mat governs the rnenu he says For iollu on capitol Hill however 0 reality is w the federal government doesn39t have that tidy he to the new outbreak of pflesiaerla K on the Alzlaritlc seaboard willie pliederie and related microscopic beastls have caused more 1 billion of damage to seelbod Industry in the past 25 years the has been underwhelming maintains Rep Shays la e Repulrllcawn who leads a House panel thei has v the Five federal agendes have paraded PX research before his Government subcomnrnittee In 4 days due cornrneree Department39s National and Atmospheric Administration the Emrironrnental Protection Agency m Public iieal i ue Food and Drug Adrnlnlshatlon and the lllalulonai of iileeiih may each had their own lime part of this puzzle but no one had enough ownaship to coordinate things he says The House has since named MOM ihe lead agency 4 in mershalina any federal response is he 0 Existing laws don tl dlredily oover one of the main pollutants Thad are t mnollis from large livestock operations not are by state agencies that are in mm lobbied by larrn groups to keep controls lminimel quotFirst we need a strategyquot explains Don Scavla director oi NOM39s coastal program He says approach deal with a whole femiliy of microorganisms causing losses on East and lust p and in die Gull of Mexican coliecuvely cell quotharrnhrl algal iaioorns and they include pilesteria I tides that down k Gulrs shellfish lndumiy lla year brown tides that periodically wipe out Long Island39s scallop Industry and pareiyuc shell sh poilsoning 0 I ilcl the lshellmh IlI39ldllStI y along the Wed Coast Many of one ceiIecl Involved In the algal blooms are V until they come in with cinrnlcais p in abundance near land Then their populations explode and throw oil re famlly of poisons 3 can muse lesions and irlli fish In humans 2 creatures can also cause skin lesions and shortrterm memory losses in muse who come In Contact wl i the water or Inhale the spray Scientlsts haven39t found the exact cause of the algal bloorns but MGM39s Dr Scevia and others point to nitrogen rlch animal waste as a prime su iecl We are itallldng about aheas ll1al have been roverstimulated by nitrogen he says miiAA39s estimates of 11 billion oi damage he adds doesn t include ue socalled halo e ed the more wldpreecl enllseefoodl hysteria httpIglobalfactivacomlaadefaultasp ppPriniamphcPiJblicaIion 10142008 Fac va Page 2 of 2 p Z ofsunny L White 1 llmIe39s sealood Clty an is as yet no o all pT harmed by Ph from eaung seafood n die 9j Dev Mr White llh sales Ire down Hie males oi z 5u come w the Gulf or lleotloo are off 25 As loola out bu the oneway glass e or his omen he sees sales Iablesn stadoed with lee and fish and Ft We39ll eurvlwe tlils he p a lot of 0Jo people who depend 8 lhe bay for a living woinf t39 so far federal 0 s money r been qu nlggllng Aooordlng to Don Anderson a senior sczlerillotat woods Hole Oceanographic q In Mauachusette 3 rnllllon was Ll up last year after me n scare In the o The 08p was Pp up among 0 o studying problems in lilahe New Yorlr end we39ve bm j ho Xm the agencies that not enoughquot explelinsn Dr Anderson national h for 61 program As it ands k h oirre what 0ql lmow about fh to JoAnn M Burlmolder I botanist who e 0 j for Iiiolth Carolina State University she llret traced pllesurla to a f caro nai P f ldl in 1991 d she f po P d from large hog 0 eppeeredto beoneofthe eeuaelol ltI bloorrie As slieloldll1e5hayasubeornnilltee loruie f lilorth Carolina oilllelale rIdlculedquot c p b end Hiinateried her c research budget llortli Carollrne ollldals began paving rb eitentlon to her though after 1995 PJ an algal bloom ldlled 15 sh when uiey die algal blooms deplete the oxygen over large areas of umber leevlng quotdeed zones where P9 lives according to Don Boeech an p at me University of llarylend He Idantllled in New Jereayeehe dead zone in the Gull of Meadeo and says there Is a smaller one Iurldng at p X of S S clilelcen manure from huge R X on Maryland Eastern Shore he suspecb ls part of the reason for the bloom Kay Richardson president of Delrnarvn 0 P Industry lnc a trade dS for borne 400 0 T humus disagrees P Is no problem as we see it right now she argues Maryland l term Bureau has already begun to mobilize its OO against proapeetlve control In Maryland where Gov O kM is conducting an aggressive probe Into potential pllesterla causes By contrast ofllelals in Vlrglnle and HOI39U391 Carolina have been more cautious sometimes appearing skeptical about whetherr there is a an 25 milliongallon spll of hog manure sewage Into North carollna coastal waters three years ago Deborah Atwood a vice pireslident all the Natlonal Pork Producers council lnslsu D Carolina controls are She thlrilrs TB sewage and global warming oould be causing pflesterie singling out hog re ners she asserts is not falr or O scientifically The University of Maryland Dr Boescli remains 0 that a pollueal solu on will evolve In his state A mircken farmers and beleaguered watermen often live sideebyslide In the Gulf Y many ol the nitrogen zpollutants he minke come down the iitlislsslppi farms in the upper Midwest he is saingulne Alter about the problem in st Louis Inst he recalls a llerrner responded what more Important feeding people of worrying about a few dead sh Document 1000000020021 1DD 7dhl9 Op ll39i O 2006 Fawiva Inc All righu reserved httplglobahfac vacomantlefau1LaspippP1intamphoPublica1ion 10142008 Au plvbl Help Return to Headlines If You Can39t Get A Me With a Gun Big Bucks Might Work Friedman Made a Fortune New Her Job Is Datiulg And a Peculiar Business It I By Robert McGough Staff Reporter of The Wall Smelt Journal 3989 words 16 December 1998 quotI39ll Wall Street Journal All Englisib Copyright C 1998 Dow Jones amp Company Inc Lesley Friedman made a tidy 21 million when she sold a temporary lawyer business she had built in York over the course of eight stressful years Opting to retire early p settled down in her Palm Beach Fla home Her irnuestrnent portI olio swelled in the bull market Life was But entrepreneurs yearn for new challenges And Ms Friedman attractive energetic and unmarried is no exception What has she chosen for a second career quotl39rrl clating she says This is a new vocation for Ms Friedman who has never really dated much Dating certainly wasn39t a big part or her hlgh school years in a Los Angeles suburb where good grades were of utmost irrlportance And later at Mount Holyoke college and New York University law school she was a classic overachiever too busy for run and games Then she becarne an obeasive business owner Through it all Ms Friedrnen who admits to 39 years but occaxsionailly lam slip that she39s in her eanytornid 403 never seriously got around to dating There was never any time But she has plunged into her U lfutlliatime endeavor quotof trying to llrld a husbalndquot with a vengeance in the past 12 mondis she has had 73 blind dates More than one a weekquot she excleims not to mention a lair number of repeat dates She attributes her high rlalecount to a novel approach She is treating dating like a business venture She even has a veyear plan Find the right dating markets highabrow charities and Democralic Party fundraiaers for example Network Get by 2002 quotin business it39s very important to have avision what could be what will bequot she says quotThat translates to dating I never say that lsomethingis impossible And l39rn trying to learn from each situation 3939 Ms F rledman is used to pllying rough in the business world when she was still running her linn Special Counsel llnternational she battled competitors and even took on the local bar which had concerns about the e of temporary lawyers and once tried to put her out of business But her new career is tar more bruising quotI had a much tougher skin about business ups and downs than i have about relationship ups and downs Ms Friedman says 391 mice everything personallyquot lt is after all an unlrncwn often scary world quotI39ve never understood men she confesses This time around its no different She39s appalled what she sees as by their lack of manners their narcissism their xation on extreme youth and diinness She lwonries about gold diggers httpintegratefactivacorrisearchlarticlcasp 1 l92007 o Flactiva Page 2 of 7 p of all she shuggles with a very cor1temporary dilemma molding her appearance and personality to tradldonal notions of temimnlty or exhibiting her toroetul businesslike nature She admits that relationships with 6R are this whole area at my life I haven39t succeeded at But she is aiming high 3 very high quotBemuse i am a highhetworth individual and very educated and all of that i am looking for very intelligent highpowered and successful 0j She thinks she39ll get along best with re salt made wealthy man i rather man someone who inherited wealth because they will have the same bootstrap sensibility This summer and tall sitar dabbling with dating in niche markets like London Florida and the south of France Ms Fnedrnan took her marketing campaign to the biggest toughest turf of all New York She digs at the upscale University Club in midtown Manhattan and rented a house in the Hamptons the Long island summer playground of Manhattanis elite F One advanmge to New York is that some other key consultants are located here quotWhen I was in business I had a bunch ol lawyers accountants and consultants who i used to run things by she says Now hequot consultants are people who give me advice on my social life for me up help u with this Some of her consultants are hiends others are specialists whom she pays in July not long after she arrives in New York she drops in on her key paid consultant Sheila Grant quotLesley you can look very casual chlc You dress up something by throwing a sweater over itquot says Ms Grant her quotreimagingquot consultant Ms Friedman is standing in Ms Grants airy Sutton Place living room with its scenic vistas of Manhattanquots East River A tall woman in her 503 Ms Grant sits with erect posture on the edge of a sofa offering a running commentary on a onewoman fashion show starring Ms Friedman and her new wardrobe Grant thinks the wide belt Ms Friedman is wearing around a sleeveless shilil draws attention to her hips Remove the belt she says and the eye is drawn to lMs Friedman39s bustllne and race her best features Ms Grant ladies out encouragement with her pointers quotYou are the beautitul woman is dying to outquot she says Ms Friedrnan who once her huslneee with an iron grip permits herselt a nervous but grateful smile quotDo men really notice this stuff Ms Friedman asks quotAbeolutelyquot Ms Grant insisxm quotMen will say She39s so put together she dresses so beautitullyquot39 P Friedman first hired Ms Grant who charges 250 for an initial consultation 100 an hour allter that last year when she was preparing for her assault on the global dating scene She now consults her treqiuendy even calling for fashion advice before dates We a business relationship but the two women seem honestly fond of each other After their initial rneeting Ms Friedman shipped her entire wardrobe by UPS from Palm Beach to New York for Ms Grant to inspect The consultant tossed almost everything out Most of the out ts too large Ms Friedman had lost 25 pounds thanks to a diet andexercise regimen But they also were too frumpy To drape Ms Friedman39s newly svelte physique Ms Grant took her on a threeday 16hour shopping spree they hit Bergdort Goodman Escada and Pilar Rossl that yielded a 7 pieoe tall and winter wardrobe including shoes and accessories Out went the baggy pants and tioppy matronly tops in came tight pants stiletto heels that took some getting used to and strapless cocktail dresses quotShe was smredquot Ms Grant recalls quotShe would say No I could never wear that But Ms Grant prevailed and the scariest out ts were ordered sometimes in several diirierelnit colors quotI thought professional intelligent women should be very modestquot Ms Friedman says 3939I didn39t have one sexy outlitquot She still harbors misgivings about her sartorial makeover quoti can39t believe I spend my time at idle tailor But I39ve gotten some great dates it39s a function of gl39lViflg the customer what he wants she says httpintegratefactivacornscarchlarticleasp t ll9l20i07 Factiva Page 3 outquot 7 in her Iiving room his Grant suggests cosmetic dentistry as a possibility Ms Friedman agrees and U some done And she39s not satis ed with Ms Friedmanquots hair style which she deems un attering quotShe was getting her haircuts in Palm Beach without mequot Me Grant murmurs Not all business plans cR and Me Friedman s suntnner in the Hamptons proves unauocesshll Her strategy is to take Tia share in a house in East Hampton monthly cost for the whole house 510000 and wangle lnvimtlons to charity and sports events she gures are irequented by wealthy New York men At the MercedesBenz Polo Challenge at polo tournament she gets into the VIP tent area with the creme de la J She39s invited to the Huggy K oeebrlty tennis charity fundraiser sponsored by Wall Street39s Forstrnann brothers But she complains that the men have their eyes on the wai ike 20sormetliing models who tend to populate these types of events Ms Friedman is attractive quotone of the most beautiful women i39ve ever seenquot one New Yonk rmn gushed to a mutual acquaintance recently but she feels she just can39t compete with the youngsters Moreover it distunbs her that the only time she attracted attention men at a iHarnptons event was when she wore an outfit displaying some cleavage She frets that her search is turning her mind to mush quotI39ve at to readquot again she says She considers options perhaps volunteering at a charity Anything to reactivate her intellect All i do is focus on my physical appearance and look tor men ehelarnents quotI39ve become a bimboquot Franldy she has the most luck meeting rnen when friends x her up Going to parties in the llarnptons and waiting to get picked up just doesn39t work she concludes She has 0 success with the strategy one latesumrner night at a Manhattan restaurant alled San Pieho she chose it because its a favorite of dealmalltlng businessrnen indeed a 52yearold lawfirrn partner wanders over to the table where she and as married girlfriend are dining But Ms Friedrnan immediately focuses on his shortcomings He has a beard probably too scratchy to kiss Besides quothe probably has a fth a sixth the money l have39 which leads her to worry that he might be a gold digger Worst of all he initially tries to pick up her friend Still when he calls Ms Friwrrlan a few days later she agrees to go out with him because she feels they have quota lot in oornmon He is well educated having gone to Columbia Law Schoolquot and he39s very intellectual and smartquot The first date goes quotiabulouslyquot39 Their dinner is lled with quotintellectual stimulating conversationquot ltturns a bit awkward later when he suggests going out for a drink and they end up outside his apartment building quotLet39s go upquot he tells her quotI hardly know youquot she replies He urgently wants to show Ms Friedrnan his rareboolt collection She demure and he gailantly sees her home in a cab which she judges is quota very gentiemanly thing to doquot A few days later they meet again if you really liked me you would steep with me tonight he tells her over drinks Ms Frtedrnan is insulted and disappointed She39s wearing 3000 worth of clothes and has schlepped into Manhattan irom the liamptons to meet him when she says no his response is quot lMty does this have to be all on your terms What about my needs and feetingsquot httpintegrate factivecrorr1searchlarticlcasp 1 11912007 Festive Ahal Ms Friedman realizes the language of negotiation Familiar tenrain quotMaybe we couidbotl1 of our needs Ms Friedman tells him I39m willing to sleep with you tonight but i went to knowyou re not going to rust drop in retum she asks for quot12 weeks of monogamyquot She has a fallback posihorr She actually willing to settle for six weeks or morrogamy But negddratirng makes her date nervous quotI wouldn39t have wanted to oorneup againstjyou at the negotiating table he says After a lressthanlsparkling dinner at a nearby restaurant the bearded lawyer accompanies her hornex gives her a peck on the 3 says quotI39ve heard your termsquot and disappears into the night m go out allow njrore times but the pizzazz is gone their linal date ends in a quarrel I was just so disappointed Ms Friedman says later quotHere was someone I thought I would love to get to know better39 Gelrling pressuredtor sex is a recurring problem she says Men Perticulany New York men expect to jump into bed with her nght away Besides being turned off by their pushlnees Ms Friedrnan who is accustomed to the clearcut edges of the business world believes there39s no economic basis tor their position Just nrn the numbers she says The cost of buying a woman dinner at one of the fancy New e restaulrants she prefers is about 150 A highclass prostitute probably costs 500 per an an encounter whatever you call it she says The economic conclusion guys are getting off cheap it a expect sex afterjust c or dates it39s not fair quotAny man who tries to get a woman to sleep with him on the first or second date when he has no longterm interest in her deserves having women go aiter him just for his money she declares quotIt39s a twoway street But she worries that the social economics or New York are different from what her calculations allow I expect to be courtad I expect to be taken out nicely I expect someone to wait for lo dates before they have sex with V she says quotAnd a lot of people are telling me especially in New York this is just not realistic That people are very immediate here they39re very goaloriented Either it works or it doesn39t work On a crisp October evening Ms Friedman is back at Sheila Grarrt39s apartment surrounded by a group of devoted Democrats Ms Grant39s husband a realeslate developer is hosting a fund raiser for US Sen Patty Murray the incumbent Democrat trom Washington state his Friedman who s fairly apolitical is hereto find her own big spender But it39s kind of a bustquot she complains in a low voice made scratchy LG a cold quotThere are only two good lociting men herequot One of them a natty w hite bearded rrran in a doublebreasted suit is wearing a wedding ring But she does chitchat with the other man He39s tall strongl eatured with curly hair He srriiles He39s a lawyer goodl But once again she goes into llau ltlinding mode Shela disappointed to discover that he39s an in house lawyer for a notforprolit organization Surely he doesn39t have much money she quickly reasons and he probably tailed to make partner at a law firm Vilheen he tries to exchange numbers with her she discovers an urgent task elsewhere and slips away into the crowd in sales she recalls it takes a lot of networking to come up with a good prospect quotThe more you re there and more you39re nehvorkintg ultimately the more clients you get she says its a tiring process In her business For every 10 prospects I got one clientquot The same seems to apply to her new career some politicians here are in lrielr 30s too young A money manager and his giirltrliend promise to introduce her to a friend who has gotten divorced MS Friedman writes a check for Sen lvlurrayquots campaign on the way out she stops to chat with a Democratic l und raiser if he introdiioes her to a man she marries she says she will give the Democratic party 100000 A few heads turn as the fundraiser exclaims loudly quotits a dealilquot and grips her hand in both of his Just like business Ms Friedman later explains quotit had to incentivlze o sales torcequot httpzintegrate f39aotivaicomJscarchlarticileasp 1 192007 Factiva Page 5 of 7 There39s no question Ms Friedman has made an enormous start up investment in her new vocation There39s me new wardrobe complete 2 1200 Escada jackets and 30CllJ Christian Dior suits in the past 12 mon ts she eiatsily spent quotin the six gures on clothes have such a tremendous investrnent in my wardrobe l have to Then there are the continuing expenses quotDo you know how much it costs to get a manicure every week I think a manicure is 25 A pedicure 25 to are paying 50 to 60 a weekquot Fhats not all There39s a bikini wait a haircut every four to ve weeks and hair coloring The beauty salon is very expensive she says My accountant he s been telling me to cut back on the beauty parlor He tells y Can39t you blow dry your own hair 0 this is why she thinks women deserve perquisitessuch as free meals and a modicum of chivalry in rehirn tor the upkeep a woman needs to do for a man Another disappointing date Perfect resume lousy personality i like him on paperquot Ms Frledirnan says This prospect the result of a limp by an acquaintance was divorced in the past 14 months is in his 0 50a and pm tor atop New York law rm That means he39s probably making between 1 million and 2 million a year a statistic she garners from American Lawyer On meir first date at San Pietro Ms Friedman frets that her dress is too lowcut mat it gives quotthe wrong impression A slip of the tongue doesnt help matters They run into someone herdate knows who tells Ms Friedman what a terri c guy he is quotI seduced that l rneant deducedquot she stumbles The men rear with laughter ll turned so redquot she says But as the date goes on she likes him even more He39s smart and has a degree irorn an Ivy League law T school He doesn39t brag about hirnself and seems quotfolksyquot saying he quothates to dress up She concludes that quotthis is a normal man who happens to be bright and successfulquot Hie says he never cheated on either of his previous wives He likes to travel another plus On the downside he has a young child don39t know how I feel about that says Ms Friedman pj date last tl39mee andahalf hours Later he tries to get her to invite him up to her room for the night This bothers her a bit and Zz says no But all in all it was a tun evening Things are my in the following days She learns that he speaks critically of her to the person who xed p up saying she seems to be ounderingf with her lil e in her view he takes too long 10 days betore mliling her for another date Then when he nally calls he wants her to go out that same day which to her seems rude Still they go yet he seems aloof Alter a few iwee lrs when she ihasrrt heard from him she invites him to lunch and asks for teedback He chaetises her saying she shops all day and goes to parties every night a oornrnent she would shrug off more easily if he had anything positive to say about her She perseveres I handled the comment like a sales call I turned to positivequot telling him about her ilnterest in charity work Later on this lawyer who asks not to be identi ed says Ms Friedrnan39s being quottotally iocused on nding a matequot was a turnolii tor him He doesn39t like that they were introduced by a matchrnalcing staffer of a charity to whom Ms Friedman has promised at big donation it the match ends in marriage this lsnquott me right reason to get involved in a charity he argues He also repeat his criticism that her search is centered on all the 7 things quotShe goes to parties in the Hampton and parties in Palm Bach and she39s worrying about the niceties of fancy lunches and who site wherequot he says p Friedman finds this disappointing saying her interest in the charity s with is gentrine P predates her husband P She doesn39t think she39s lirivolous quotl39rn very loyal i work very hard on things live always impintgatefaotivacoimsearcharticleasp 1 l9 Z007 39quot quot quotquot as may at an I been at his top of my class she protests She decides to take his criticisms as a sign that he39s still depressed about his divorce and not ready for another relailonship Ms Friedman though gets better feedback from Jonathan Falkas a New York investor and socialite she met alter he spotted her of the corner or his eye at the bar of MaraLego Donald Trurnp39s club in Palm Beach They had three or tour dates before deciding they would simply remain friendsMr Farkas was also getting over a bad breakup And though he didn39t know or her veyear plan back then he doesn39t hold it against her and in hopes she39li succeed 3939I thought she was really attractivequot he says But he does worry Ms Fnedrnan a novice at dating may be underestimating the risks While you can put business setbacks behind you he says quotthere39s no exact science for emotional pain39 As November grows colder Ms Friedman is having saltdoubts quotMaybe I39m banking up the wrong tree with this whole crazy thingquot she says I think maybe i have to face the fact that I kind of missed the boat when I was in my 205quot Perhaps she worries quotI made a choice to be e cenfeer woman and that means lquotm precluded from certain types of relationships with menquot She adds quotI39m also getting a little bored it39s just not very intellectually stimulating this whole process its taking so much time just to get ready for the datesquot Some of her friends and quotconsultantsquot perceive that Ms Friedman is going mrough the types oi dating pains they experienced when they were younger Freddie Codey a friend in Palm Beach sees Ms Friedman as a quotwonderful woman whose lite has been abbreviated quotMany women have done this for years and they start very early Ms Corley says quotthe whole dating thing the question of being alluring and really the mating game so to speak She delayed all that And oi course being smarter and having more means than 0 women she can do this very expeditiously nowquot But quotMs Friedman s expectations are high she says and quotshe needs to be patientquot Another unpaid quotconsultantquot Victoria Scaravelli encourages Ms F nadmran to do charity to meet people in a more rneaningtul setting than the party oikrcurlt People get caught up in Lesleyquots enthusiasm and that works to her advantage its almost like lesIey39s to againquot says Ms Scaravelli 29 Ms Friedman is preparing to leave New York for a couple of weeks In the past few days she has been feeling a bit more upbeat quotI had a breakthrough that39s what I call it when in business something moves to the next levelquot she reports its not an earth shattering breakthrough Just a couple of tun dates with nice guys who respected her boundaries Then again to a single woman in Manhattan that quali es as earthshattering Her epiphany First rower dates but higher quality ones No more runoflzhernill law finn partners for her she says quoti have to date guys who are really extremely successful which is what I39ve been wanting to do because they treat me betterquot She39s going to start quotprequalilyingquot her dates much as she became more selective about clients as her business grew d quotI just think i have to start being much more con dent about who in am and really trying to be myself and not try to be what I think the guy wants me to She then excuses herself ashing her new smile its time to get ready for another date gq Journai Link For an interviewquotwiu1 Ms Friedrnan see Today39s Business at 7 am EST on CNBC See related letters quotLetters to the Editor Big Budget Cinclerelilaquot WSJ Jan 4 1999 Document j0DD000ti2001D91diucgDDwc i httpintegratefaotivacorrtSearcharticlerasp I 192007 SHul IiIIl T of oupitd But Pb aim the problem 9 they the mpilulllny have By Norm Pn A 0 Z SowhydaemahppenPanof tlrIepmblcmIbe wv hnmdowidlopsdmkmwhm P I don thus It pO in 50 nmmI39llgiveyum 1Ld1inky re5gmng39mobelIIcnIlil nawi inCn39 lbmiI39I39wuofiuunp oyg eamptamt a r 39 1 laczednielbeauaelwuzpom 0 zofiong 39 aumme nindhe myurIwaiftinfuem medbutI Vin done H p I mi munm39jrdInbOrd3eyiwetinaeo T Tuzengmuudugwnn t heydouaum 5mp1aa39139huueibauiaI uiony mndmme n guu1ymuaumgqr namaonra i Pkpuapledidit T quot I I gouuiLnvin nnta7he i1gp npn 39 into buingas m widnout a unmmaouldmendit T theyneeampmdomsmviveAll Aaoupleofmnn shtI p pl He U g T Enid Don W0ttfT1mTbeflfgDingta the Y 39 Me 9 z Did they sent more npncc fail He 3 quotHow an you they need I teasp bcnnIme39haid Tiunm 39 tinnuumahighucnmpnny Thcywereoutoflnzninesswidlin cgrlalladml1anupandadcd troublcquotWhc11ynuseetl39neni1trnch were Baloncy mixed 200000 and chmwn 120000 T if autdmwindow Ofonu1semheamofd1oaE nt h a Mry aommon People who fail on G time I can only ny Forget image g Ilway39sayd1eyweundrpiJizad andlsuppone Forget about 0 1 spladm Forget R everything 1 d1ey39r in the serm that eir But it P they didn39t have itI as start 0 It39l thcy didn39t us out espg iaIly if people p you to give important just wait until you can them u uhuiuyiuiiuunudnau2h auhunu uu4uE snu aasu1qIuuhpuuagnLhunu l tlsai 4 iltuwlumm uat mum tron uuv uuu nu manna D I C I M l I I I 9 9 5 I N C p they39re 10 3 f on D daq 0 z 0 z P your capital to until you don near it iny 9 V more You don39t have mgive up your draulu Datum are I7 ow oILuu LEV reees 1us mggest Unallenge As New Chief of AOL Time Page I of 3 Deeenher 1521100 was ARTICLE Levin Faces R Biggest Challenge Pquot39h39quotE5 39Equot 39quot 3 e 7 iI to I a P339 Uym39 As New Chief of AOL Time Warner mm mmmmm P P B Lrnnqmumn wau ham or euaomn oxaannaa152w puee ulbrderl epmhholllthe bouorn of any artldl or it CBS ever decides to do a version of Stuvivor39l set in corporate AA jungle Time Warner p Chairman could emerge as I 39139 mp i l P95 3918 pc industryls P W V 3 mpm 9 um 35 h Atage6llv1rLevinhasedly de edpredictionsofhisdemise P bestedriwlswho seemedtohavemeadvantage 0 apparent career slumps But after almost eight at we helm y do of Time Warner he faces biggwt n yet chief WW9 quotWquot V 9399 3quot mceeutive of the eonibined AOL Time Warner Inc he N be under M pI t to wring vast synergies from the marriage A onetime theoloy major at Ilaverford College cerebral Mir W de es image of the end i m g t nu mogul He dislikes personal publicity prefers philosophiod to sound P He comes alive 0 about ph technology a recent eneotmter at Time Warner39s 0 York found p a an opennecked irt emblazoned with i i it 1 7 o 0 W has digp lal phone he 3 both in Europe the IJLS At p Wanna has been a hands o CEO division cmefs alone as long as they met goals although he is for closely how the units perform o m comments on obscure details of operations His critics fault him mainly for failing to overcome the rivalry that has often prevented Time Warner divisions from lworlcing together quotHe is not a 0D CEO manager He doesn39t have monthly mee ngs of CEOS where he pounds the table but he is He 0 0H that is going on in due company IY every new album every moviequot says a company executive People close to him don W that to change He will leave the omitting details to the new 0s chief of cers AOL President Robert and Time Warner President Richard Piarsons Mr Pmsons be a shorttinzer he is a possible candidate for a post in the new Bush on It is Pittman who is widely regarded the most likely heir apparent he can demonstrate his ability to make the merger work But no one expects Mr Levin to bow out anytime soon in many ways the merger of AOL s Time Warner will be at t ng culmination to his 23year Though he an U advome thttponlinewsjcomPAZVJBNA4RarticleprlntSB 976834982777882755l1tml 8232006 Wsleom Feces His Biggest Challenge As New Cbief of AOL Time Warner Page 3 of 3 Lcvinmanaged to rise above these milures he with a much bigger c le Inul lilllmndollar purchase of several cable systms my q I995 e 0 cable was cm of favor on Wall Street to stmd p view saw cable as keycondurt to o enng new phone and P2 services p acquisitions were Y mm mngor shareholders and sorlne powerful executives Time Warner helping Time Wanm39s stockpnce totalkofamovesgainst E quotHe bolnbmded om every directionquot says i Semel R of Warner Bros and Music Group quotLet39s not forget Time in the shape He 18 the who took eveiyone on and decided to continue buying cable He a vision Robert Duly whowwas D of the studio and music goup wim that he z Levin39s cable He had a passion that we should seemed even more vulnerable after he decided to buy Turner Broadcasting Systems 0 deal p Turner39s major P Ted and cable e John Malone Liberty 0 into Time as big p to that the P would join 0 Butwhilel r Turner inifnllymadealotofmise aboutgettingme O to work together Y managed to him an ally Mt Malone on the k n didn39t end beings factor 0 Wasn39t allowed to vote its Time Women stoekespm39toftheregulm1oryqoprovalforthe39l39t1rnerdeal With cutting helping to P Warner39s stock price for the rst lime in yams a major rally began in midI997 v Microsoft Corp invested in Cement and F as change in favor of cable And 0 Y able to gently sidehne the outspoken 1Z Turner will have no role after the AOL pH Yet Z triumphs were dmicened by the murder of son Jonathan in midI997 him to wimdraw L for 0B months Eventually 9 p the public squabbling that plagued the company he TmeiWarner He Warner Music Group39s be us i g P F Fuchs in late 1995 pwY Y by P involving his role He then gave YY job to Mr Fucm39t chief antagonists P Daly and p When in 0 of 1999 they would leave after it the end of an era of strong 9 chiefs who their own policies at the company But the nally made many of 0c a pomibility 0 J to the conclmion that led him Y the of AOL M Warner simply couldn39t do it alone Write to Peas at le r one Irlclls nnpnontmwqeonvaroealsm7ea349a27Trem55nunl copyright 1005 Dow ll company inc All Renewed d copy is for personal nomcommenchl only and use of y are governed by our Subscriber and by copyright G For use or to order multiple copies hy p Dow Jones at w or visit wwwdmprlntecom httptonliine wsjcomPA2VIBNA4Rfnrticlepr39intSB976834982777882755html u A I WALL o u u q Jmlylmmz PAGE one AOL Shakes Up In Management As New 8D Way for Old SC 1LOL l39Ine wT Inc T V lded therecunquest ofmc world39a h F T iTT m8 T o A 19mammmmMTTmwTam 39 39 quotA39n TmIn T T T f 8 IQ S Pm T M dimbymed 1cIGIlineh dellwhosetlaomlegeunsto TT N am gug mmmmmwced p 39 quotquotquot quot quot quotquotquotquotquot 3quotquot39 0I1lmeT j wlsmppmd toum Wamefj sstody H39mquot39s39 quot culun39ea erw5mgitova39forSl035billion T AToLTs SIIAKETMP IWWNE K T T T A T ml T Bn 2 an quot39 quotquotquotumquot39 p ADL1imWarnarlneAOL Onlhclhu39OtltbbUdIIy T m3 Wquot13 quot5 business 39 5 quot0 13 I 395 T am quotquot me A Maineu 3 VI 5 awtometsnmectforemployeesrespeatfor1meTpuBlicatlarge39 Thtnsdayfsshnke11pa1Ece1aTdaylTI1gboardmeuti11ginDulles V1 followed loss of M1 9 togwcr AOL Time Warner a 34 c T asenriee with a P P music lahelmdeablecompanyin39abidto d d of each Bcfme ngnndpoamazeulkofaynagiescmwerhemvivedruaimenmmustle J News Pugezofs u u P3 tndIIyquot Ann 3O p I eaneclxtive of M Ch mmJemeyBewImtomehft1eofgoupchairmenMrBewkeS0 yasndwilg tovqaightofthgoomnnsmblcnetwadcxwhich inchndeCNN I39N39l and39I BSuswelhsit YR 39 a 0lM I If i at the am of the merger 1 with adi 39ennt sp1itof K BI I d P P P P p I Warner nonAOL 0C5 N I embrace Pumas P P P T h1 medTmaWuneruew vuL mmmyoampshigh yhguea vesindnltadythysof H H melanl990s O pB P 4 1 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1oa14aaca54e5u2n1aooohm my n1aa551ua2amp4aoomru 7 I9 2002 7 hforll lum non aina ng no N 9 rectwa rage l or 3 Help Return to Headlines Bad Connection Failed E ort to Coordinate Ads Signals Deeper Woes at AOL r in ghtiing Amer Divisions Derails Merger Goal Board C onsidcrs ShakeUp Moment of Truth for Pittman By Rose Julie Angwin and Martin Peers 2848 words 18 July 2002 The Wall Street Journal All English C pyright c 2002 Dow ioncs amp Company Inc NEW YORK Tr Myer Barlow one of AOL Time Warner lncquots top ad executives was about to storm out of the Rockefeller Center conference room tor the third time A wealthy America Online veteran who had his own private let Mr Barlow was pushing a group of his more buttoneddown corporate colleagues last year to sign a 100 million advertising deal Burger King fastfood chain would get marketing m from most of AOL Time Warner39s units would then share the revenue But some of AOL Time Warner39s divisional ad sales executives were balklng believing may could out better ad deals by dealing directly with Burger King rather than in companywide package Mr Barlow after listening to repeated objections from the 39l391 lrne Warner side zipped up his briefcase and rnarci1ed out without a F The quarrel was an early warning sign that the ballyhooed union of AOL and Time wamer was in A key premise of the 1035 billion combination announced in January 2000 was mat the ohllne upsmrt and the venerable media conglomerate would centralize their adselling operations The idea championed by Co Chlef Operating Officer Robert Pitbnan was that the units could win more ad dollars working together than they could separately AOL Time Warner would entice advertisers with the promise oi space in inc rnagezines airtime on Turner cable networks spots on the America Onllne service and licensing opportunities with Wamer Bros lm studio The grand plan has all but ground to a halt stymied by a cumbersome structure and bitter corporate in ghting Many of the advertising deals announced by the company including Diageo PlC39s Burger King fall far short oi K Plttrnan39s ambitions for them and some early clients are declining to renew their contracts Mr Barlow who headed the adcoordinatiion effort quietly quit that post late last year and hasn39t been o iciallly replaced Mr Pittman himself appears to P an Increasingly marginal role and is expected to leave c company any day 39 AOL p Warner39s board will meet today and is expected to discuss a proposed management shakeup that would expand the responsibilities of Home Box o ice Chairman Jefirey Bewkes and Tirne inc Chairman Don Loltgan say people familiar with the situation The move would coincide 0 the imminent departure of Mir Pittman although details were still being worked out yesterday Mr Pittman declined to be interviewed Meanwhile Turner Broadcasting Chairman Jamie Kellner has been tapped to try to fix the companywlde advertising effort All told the highest pro le merger of the past decade the ultimate wedding of new technology and p y media looks like a marriage in name only Recently installed Chief Executive Richard Persons in a stratoglc about iface is letting all the divisions operate in their own best interests as they had at the old me 0 q Mr Parsons likes to talk about his units being best in classquot an echo of me notion it General Electric Co that business units newrrt have any connection with each other but be No 1 or No 2 in their own markets Tltouglh the company insists that it will still searrchi for synergies they no longer will be be top priority httpfintegratcfactivacron39uSearcharticievasp 1 I93007 ii ROIIVEL ragoeuro quotThe individual operations at AOL Time Warner have no interest in working with each other and no one in 39 39 393939l99 39l39 ll 5 9 pI it melts them irrorkyvitlr each otherquot says Deiiilitt former chairman and m 399il 139 g I F39UDl i3 GF lJPe SA39s Opirmedra USA the rnediabuying agency From day one itwas lust When the rrterger closed 18 months ago Mr Pittman established a group known as the Advertising Council composed of about 20 oi the top ad and rnarketingexecutives of the new corrrpanyls various divisions it met every two weeks either lfl the company39s Rockefeller Center headquarters building or the nearby Time 8 Lite building Within the larger council was a smaller group of a halfdozen ad executives which met on alternate weelre to work out details They had to live up to the extravagant prornlses that had accompanied the initl heralding of the merger Mr Pittman often publicly noted that Time Inc Turner and America Oniine shared only four advertisers from respecdve top too presenting opportunities for crossselling Those kinds of deals quotwill increasingiy become a key drivler of the company39s future growth Mr Pittman said in a press release last year In a stream of press releases AOL Time Warner boasted of what it called quotStrategic Marlceting Alliances with marquee names such as HampR Block lnc Toyota Motor Corp and Continental Airlines By the and either third quarter the company clairned to have signed 22 deals valued at more than who million Three mondts later the total topped 1 billion by virtue of deals with Burger King Dalmlerchryslar AG and Kellogg e But many of the early agreements weren39t as impressive as they c some were with suppliers such as Noriel Networlts Corp which provided equipment to America Online or companies in which Arnerim Online had a smite such as Kinko39s inc its not clear if these deals made any extra money The company has never disclosed how much extra revenue was through these centralized deals Vtlhatrwonied some division execunves was that these crossplatform deals otten meant giving advertisers largerthanusual discounts Even though the issuance oi stock options was supposed to rrraire divisional executives drink of the greater good this kind oi sacri ce was hard to swallow especlalIy when those options became worthless because of the company39s sagging stocit S Hearing the hype about this giant media machine some marketers eagarty approached AOL with ideas of their own but found themselves barred at the door Kurt Graetzer chief executive of the Milk Processor Education Prograrn overseer of the national K Milkquot roalmpaign came to the company bursting with ideas soon alter the merger He had 10 miliion a year to spend and wanted a rnarlreting plan full of bells and whistles one idea He wanted to post sneak peeks of Time irrc content on the group39s Web site The notion dissolved in complexities over rights ownership and licensing agreements The idea of creating a partnership around C Line Cinemas Lord of the Ringsquot trilogy never got off the ground Mar Graemar says the deals didn t happen because none oi the units would give an inch quotThinlltlng you had a direct line to ail these entities was la big mistakequot he grousas By the M9 the first quarter of 12001 was over the bottom was telling out of the magazine and television advertising markets and online advertisirig executives were beginning to notice ominous signs AOL Time Warner39s top rnanagernent was nonetheless sticking to overly ambitious growth mrgets and was squeezing the units dry to get there The sakes were high While advertising accounts for 35 billion or 22 of the company39s total revenue it is tar more proiitable than the other two rnain sources of income subscriptions and quotcontentquot such as and music AOL Time projected its ad reveriue would grow roughly 20 tor 200i By surnrner it was clear the executives on the Advertising Council didn39t have time to follow up on ideas oated around the conference table and they were too busy running their own divisions They needed soldiers So last August the company created another body the Giobal Marketing Solutions group to be the operating arm of the council Mgr Barlow was moved frorn his berm at America Dnline to run the new group and its roughly 30 staffers Mr Berlow39s takeno prisoners management style didn39t encourage much cooperation A chainsmoker prone to colorlui rnvectrve he39d made a name as the top America Online ad salesman during the shortlived boom in httptintegratefactivaoomSearcharticiieasp 1 ll92007 139 BUM V at is new 0 an 4 oniine advertising liite several or his colleagues at America Onllne who millionaires as their stock options soared in the late 399us he had his own jet Tothe more conservadve 39l39lme Warner executives he seemed to yernbody a certain AOL swagger they worried that his aggressive manner rnlght alienate melt longstanding clients EV t certain delaiswere getting done AOL designed a campaign for Samsung Elecuonics39 audiovisual Pi0i9 ll l39 equipment that ran in Time inc magazines and on 0 Ameriw Oniine service Sarnsung also offered free Dvps of a Time Warner movie when customers purchased a DVD player at a retail store Samsung says it39s happy with 0J arrangement Then his Sept 11 terrorists stnlck Flakling companies drastically pull back on spending By the fall of 2001 supporters of crossplatforrn advertising badly needed a big deal So the Burger itlng discussions were a big opportunity for Mr Berlow s team But the divisions kept resisting Wamer Bros refused to participate in a pfbrnotion that would have required it to give away DVDs and videotapes because that could have hurt its bargaining position in future promotions with chain The studio dismissed outright a Burger King suggestion to offer wallon rota on sitcoms such as quotFriendsquot to Burger King employees The burger chain wanted to be able to offer such perks to reward exemplary lwolrkers Warner Music wouldn39t agree to let Burger King give out tree CDs of its artists music By the and of the year AOL Time Warner had abandoned the targets it had promised to wall Street its stock price was beginning to crumble Chief Executive Gerald Levin quit in December and was replaced with Mr T Parsons a genial lowpro le former Warner executive The move was broadly interpreted as a victory for P oldnmedia businesses over the brash upstarts at America Online Mr Barlow quit his marlteting posidon the next day a move the company didr t announce and assumed a vaguely de ned position assisting Mr Pittrnan The Advertisling Council was still wheezing along Each rnonth a memo was distributed to the company39s advertising executives detailing potential deals it often topped 15 pages or closely spaced type listing everything from casual conversations to hlllsblown negotiations But advertising executives and advertisers themselves no longer had a clear idea of who was in charge in the beginning Mr Pittman sometimes would negohate directly with an advertiser leaving the council to come in and up the details Another executive Robert Friedman was later given a role dreaming up Iargreascale ideas but never worked directly for the council39s operating arm Matting life more cornpllcated p member of the council had the power to veto any of the deals The structure confused some potential clients An advertising agency acting tor Pepsico inc foroxarnple has exploring crossmarketing opportunities tor several months Agency representatives of the and beverage company sat down with senior and mldevel executives numerous times but solar haven39t reached a deal One of the issues says an executive who has attended the rneetings is that AOL Time Warner could never explain how its structure worked Too often advertisers say the council pitched ideas that the unis didn39t know about and often objected to later quotIt39s hard to figure out who can get the deal donequot says the executive January brought a second lowering oil growth targets and warning of a massive iinancial writedown eventually totaled 854 billion to account for the declining value of the rnerger Animosity between O Online and Warner and in particular Time inc was reaching fever pitch Some Tune Warner executives were convinced that the companywide deals were schemes to prop up America Online39s wealtening ad revenues Meanwhile some advertisers wanted to get out of their cornrnitrnents to Online as Internet mvertising began to fall out or favor comCola Co for exarnple agreed to a roughly 50 million iaemontlw deal that included spending a certain proportion with America Online then shifted some of the dollars out of that area me Burger King deal iinpaliy announced in November but missing some key components was also on the rocks Sports illustrated was supposed to promote a Whopper Sports Moment oi the ltllontltquot But mat went on httpintegratefactivecolnsearchlartici casp 1 192007 back bumerjjlileanwhile executives at the magazine worried the entire deal would fall apart C 3079 King executives privately and told them the Time Inc 0 could go ahead regardless of the tale of corporate deal Eight months after the deal was publicized a customer walking into a Burger King store won39t see any signs of the aliliance O Burger chief global marketing oflicer Chris Clouser says the alliance with AOL Time Warner is an evolving relationship that we are satisfied with at this pointquot in February for exarnrple AOL Time wamsr and Burger King up to promote the cartoon Networlds PowerPuif Girls cartoon by offering PowerPufl39 toys and meals at the stores On the VVl l0ppelquots 45th birthday in March Online ran quotHappy Birmdayi WE 533989l1lllrlllBitllatrInked to a coupon for a tree slice of apple pie with a Whopper purchase ads appeared in People rnagazine and Spore Illustrated and on some Turner cable channels Meanwhile a music themed Web site for Burger King designed by America Online will launch X on the onlina service and Burger Kingls Web site The site called quotBK Backstage will have behindthescenes music and content and contacts to win prizes such as backstage passes But Mr Clouser concedes there have bwn bumps in the road quotI diinltx some of the AOL lime wamer siblings fail to see at some times the necessity of unity The corporate rnandate continued and sometirnes AOL Time seemed to strike deals simply for the sake of doing diam AOL l39ime Warner ditched AMR Corp39s Arnerlwn Airlines as y corporate airline because P a signi cant longtime advertiser wouldn39t commit to spending a guaranteed amount of advertising according to people l amiIiiar with the negotiations By contrast UAL Corp39s Llnited which didn39t olifer as good a discount for flying said it would sign a contract Only 5 million in adverhsing was promised for one year United won the business but one person familiar with the deal reckons the increased cost of ying with lJnited could more men olliset the ad commitment An AOL spolzesman said the UAL deal was better for the company The harddriving Mr Pittman kept pushing for more deals and at times it seemed that he was the only glue holding together the joint adsales ell39ort But in April he was dispatched to Dulles Va to x 0 Online which was reeling from a drop in d revenue At the same time some early advertisers unhappy P his results or their deals were backing out when the time came to renew Wrangler for instance just declined to renew a 6 million deal it had struck last year to advertise in a number of arenas including Sports llllustrated America Online and cable channel TNT where the hosts oi quotDinner and a Movlequot were its jeans on the air The apparel company a unit of VF Corp decided it could negotiate just as easily with Time inc and Turner separately and didn39t need the online element of the deal AOL aye it has improved the process since the Wrangler deal Toyota was another rnuohaliyped early deal a huge promotional package signedlast August But Steve Sturrn vice president or marketing for 39l39oyota Motor Sales USA says AOL Time Warmers central group didrrt up any workable ideas for the car company39s fall 2002 launches They39re talking about a new deal for next spring but the jury is out whether we can reach 6 level or last yearquot Mr Sturrn says in part because the 2001 prornotion was so large A spokeswoman tor Acll says his company has had a lot of creative programs in the auto category 39 Width Mr Barlow out of the picture and Mr Pittman falling out or favor and occupied with Online Mr Parsons the CEO last month sked Mr Kellner the chairman of Turner to step in Mr Kellner says he hasn39t yet fully studied the past deals but acknowledges that some units worried the central deal malting organization led to discounting that hzlannages their core business39 The central bodies will remain but will be more focused on creative deals that don39t compete with the units basic sales eftorts he says This is not a failurequot says Mr Kellner adding quotThis is a relatively young merged company and there are always growing pains P i it takes a while to get the rhythm or any cornpanyquot Document jODODDlJ020020718dy7i0OO3l Return to Headlines httpintcgratefactivacromsearchlarticleasp 1 192007 AOL Time Warner39s Steve Case Resigns Amid Intense Pressure WSlcom Page l of 4 WHO can YOU must to PLAN 5F m MW at YOUR RETIREMENT Dow denies Reprints This copy is for your persorial rioricommercial use only To order presentatiooready oopies for distriibutzion to your colleagues clients or ciistorners ise the Order Reprints too at the hottorn of any article or Vl5lMNVWCljfBDfl lSCDm See a sample reprint in PDF format Order a reprint of this article now w w 0H TECHNOLOGY l January1320U3eo2pmi ET AOL Time Warner39s Steve Case Resigns Amid Intense Pressure iBy MARTNi PEERS aridJULlA ANGWIN 1 Staff Reporters Df THIE WALL STREET JO lJiRNAl NEW YORK Succumbing to months of pressure from disgruntled shareholders and board members alillte AOL Time Warnesr Inc Chairman Steve Case said he would resign from the topjob at the huge but troubled media conglomerate he helped create The departure of Mr Case effective in May represents a coda to America Online39s shortlived and unsuccessful reign over Time Warner Initially heralded as a sign of the new Internet era the deal quickly became a failure as America Online39s business badly stumbled and cultural clashes between the two companies led to severe in ghting The stock price of the cornbined coinpany has plummeted wiping out nearly 200 billion in marlltet value in the past two years A0135 Shake Up Mr Case resignation could make it easier for the p company to consider radical steps such as spinning off America Online or dropping AOL from the company39s name It likely will lift morale among employees and executives most of whom blamed Mr Case for the outcome of the merger The departure of Case 44 release on Case39s decision p M f p th 1 g d h f th p p h 1 CNBC Dow Jones Brusiiness Video AOL yearSD mm P I 6 ea Em ilp 0 P E wmpaily e chairman save case says wmid be the best remain a director for now means AOL Chief Executive thing for the company to leave the chiairmani RiChaId Parsons 53 must solely bear the blame 01 Credit 8 P0 for the company39s fortunes 21 l G Fl Read the full text of AOiL Time Warner39s press Discuss What do you think of Case39s move On the Line Bios of key playeirs A Victory WSJcomAOL Get full coverage 7 By quitting Mr Case has handed Gordon Crawford an executive at Capital Group AOL39s biggest institutional shareholder a signi cant victory The money manager carnpaigned hard for the clriairi39nanquots ouster Mr Crawford has for many years been the most in uential media investor in the country thanks to the size of Capital39s stakes in most media companies Mr Crawford has also cultivated close relations with top executives and is particularly close to AOL Vice Chairman Ted Turner and Libem E Mec Corp Chairman J ohnMalone Mr Turner is one of AOL39s biggest shareholders and was the main force on the board pushing for Mr Case39s removal according to people close to the board Mr Malone was likely part of the group opposed to Mr Case although Liberty39s stock carries limited voting rights httpzonlinewsjcon39iarticle0SBll0424132l9 059789778400html 10 l 620 1 2 AOL Time Warner39s Steve Case Resigns Amid Intense Pressure WSJcom Page 2 f4 Mr Crawford was a big supporter of the merger in 2000 but he soured after the merger hit problems He also was upset by reports of aggressive accounting at America Online which raised questions about the online company39s management Mr Case was CEO of America Online before the merger Last summer Mr Crawford told Mr Case he should step down and he also tried to rally other board members to his position say people familiar with the situation While Mr Case endeavored to change Mr Crawford39s mind having lunch with him several months ago to make his case for why he should stay Mr Crawford didn39t back down He repeatedly told AOL that Capital would vote its 76 stake against Mr Case at the annual meeting reminding company executives of that as recently as last week when they met at an investment conference in California Capital39s position likely would draw some other shareholders particularly Mr Turner who owns 36 of the stock While the group likely wouldn39t have garnered enough votes to oust Mr Case it would have been very embarrassing It39s not clear whether Capital will oppose Mr Case remaining on the board Time to Go The prospect of an ugly shareholder ght is partly what precipitated Mr Case s resignation he acknowledged Sunday He said that while the public debate about his role had quieted in recent months quotthere was the possibility that things would heat up again as we got close to May and the company can39t afford any distractionquot right now After thinking about his position over the holidays he decided on Friday that it was time to step down he said He insisted that no one had suggested he step down quotThere was overwhelming support for me to remain as chairmanquot he said noting that there were quotone maybe two voices which were raisedquot on the board about him AOL board member Franklin Raines chairman and CEO of Fannie Mae said Sunday night that there were informal discussions quoton the sidequot of a board meeting several months ago regarding big investors urging Mr Case to depart He said that discussion was quotmore trying to understandquot the push than anything else quotThere was no reasonquot to oust Mr Case he said quotSteve has been a constructive member of the board and I39m delighted he is going to stay on the boardquot p Parsons is one of the quotstrong possibilitiesquot to succeed Mr Case as chairman Mr Raines said although he made clear it wasn39t a slam dunk While having one person be both chairman and CEO long has been common in the US corporate scandals of the past year have raised questions about the practice 5 p 2 Steve Case Tn a statement through AOL Mr Turner also said he was happy Mr Case was staying on the board quotI admire Steve Case39s decision to put our company and its employees rstquot Mr Turner also noted in the statement For years Mr Case evangelized about his vision of an online community then engineered a breathtaking merger With in ated America Online shares he managed to acquire perhaps the most valuable set of hard and dependable entertainment assets in existence When it was announced J an 10 2000 the deal was valued at 15614 billion a record at the time lt was valued at 1035 billion when regulators approved it a year later The company39s market value peaked around 260 billion in May 2001 and now stands around 665 billion The deal was a godsend for America Online shareholders whose shares surely would have fallen along with the rest of the Internet stocks but it earned Mr Case intense criticism from Time Warner investors and executives who saw their shares and options plummet httpquotonlinenwsj comarticlequot0SB l 0424132905quot97897784t00html 10162012 AOL Time Warner39s Steve Case Resigns Amid Intense Pressure i WSJcom Fag 3 Of 4 One person close to the company said that Mr Case39s position had become untenable because of the hostility from senior executives People from the former Time Warner division complained for months that Mr Case made little contribution to the company because he focused on shaky theories about convergence of technology and entertainment Some executives had complained that Mr Case39s presence inhibited internal debates about the company39s future direction One executive noted Sunday night that Mr Parsons has inherited a collection of assets but any thought about whether to change the collection was affected by Mr Case39s presence as he was an architect of the merger Insiders have said for months for instance that changing the name back to Time Warner wouldn39t be possible while Mr Case remained chairman quotThis is a positive for the companyquot said Henry Ellenbogen an investment analyst at T Rowe Price one of AOL39s largest shareholders quotSteve Case is the last significant AOL executive to be at the company Now the only thing left is the namequot Mr Case denied that his presence had inhibited strategic debates noting quotwe have had some vigorous management meetingsquot Mr Parsons played down the impact of Mr Case39s departure He said it had nothing to do with a possible name change or spin off and added that he was remaining on the board so his quotvoicequot would remain quotas vigorousquot on the board Indeed Mr Case made clear in his statement that he planned to continue to play a role in strategic debates He noted that he would stay cochairman of the board39s strategy committee with Mr Parsons helping quotensure that we maintain a balanced perspectivequot to meet current business challenges while simultaneously thinking about future technological services quotI will continue to advocate a forwardlooking viewquot he said in the statement Mr Case had very little involvement P dayto day management of the company although he had played a role at the America Online division in recent months He was involved in the selection of Jonathan P Miller as chief executive of the unit and regularly spoke to Mr Miller about ways to revitalize the division But some of his ideas oored colleagues from Time Warner During discussions about who should succeed Gerald Levin as CEO Mr Case proposed Bertelsmann AG39s thenCEO Thomas Middelhoff a longtime friend and fellow Internet advocate according to a person close to the situation His abrupt resignation means that most of the architects of the merger have been removed from the co rnpany Just over a year ago Gerald Levin abruptly quit as chief executive of the combined company after clashing with Mr Case Then last summer Robert Pittman the former America Online president quit amid increasing criticism of his management style from executives within the Time Warner divisions Mr Case doesn39t need a job however his AOL shares make him a multimillionaire As of March Mr Case owned 115 million shares of AOL common stock and 183 million stock options according to documents led with the Securities and Exchange Commission At current prices his common stock would be worth 171 million Over the years Mr Case regularly cashed in his stock options in 2001 alone he exercised options worth 1273 million according to the lings Forcing out Mr Case would have been dif cult for the Time Warner guard Until the end of this year approval of threequarters of the board would have been required by the company39s bylaws for Mr Case39s removal Mr Case retains the strong loyalty of a majority of directors httponlinewsjcomarticle0SB l 04241 329059789778400html l 01 620 l 2 AOL Time Warner39s Steve Case Resigns Amid Intense Pressure WSJcom Page 4 Of 4 Mr Case spent 17 years zealously helping to build America Online from the ground up Under his leadership America Online grew to be the largest Internet service provider in the world with more than 35 million subscribers worldawide In the past year however the company has had slowing subscriber growth and a steep falloff in online advertising Online ad sales the most pro table part of America Online s business are expected to be as low as 16 billion this year down from 27 billion last year Write to Martin Peers atmartinDeerswsieom and J ullia 0 D at 39uliaan is r 39 Copyright 2012 Dow Jones 8 Company Inc All Rights Reseweiicl this copy is for your personal nomcomimerclilal use only Distributiori and use of this material are governed by our Subscriber Agreement and by copyright law For nonpersonal use or to order multiple copies please contact Dow Jones Reprints at 18008430008 or visit v ww djreprintscom httponlinenwsjcon1article0SrB104241329059789778400htm1 10162012 WSleon1 The dspoils of Wu in Kabul Now Include Thai Restaurant Page 1 of 4 v FORMAT Fol he e FIIHTING 11 sponsored by o PAGE bNE l The Spoils of War d quotKabul WW 3 8 ffym t Now Include Thai Restaurant 393 l 39l39 39E39m39 quot 01 Thongngamkam Goes Where ILN Does f quot j AA 39 Looltlngto Make Money From World Crises eE gv39lT39w C o l or 7 V urn wanvmnwvmmmo sn S mpmm T om shortly p I of this I lde blew 310footwide q Tn one of ruined39city39e 0I z Lolita out hunting for vital supplies auhowu jumbo O own in om 1 P and bottles of A 39 quotquot39 eairviwan om Pu Pam a bombedout factory a hoddle of beggar s and the cum of a Soviet armored vehicle Bangkokborn bumhesswonlan looked on of desperate poverty decades of and the decay left by bin Laden toppled Taliban hosts In a county like P thete is not h competitionquot said purveyor of v l and souvenir e to nation V in broke states around the world quotWhen a i the past decade she has followed on mmvan of United Nations omeials relief workers lg oeeonsuuetion D to Cambodia 0D Timer Kosovo now to in on of by catastrophe Last q she opened I called Lei q in 0 Klan an enclave of vvnlled once favored by al Qaeda e It depends for businew on B agile in a pancelled by foreigni troops and kept a oat by foreig funds Always oh the lookout for e l new P Thonpgamkam follows the news eloeely visiting a newly opened P Internet salon to check up on events in and in p potential zones of E1ectricity 2 falters but a generator keeps d 0 d might be her tiext stop but only ifthe US grants a role to the UN in the and reconstruction of me county I always follow the UN 3939 she says Her logic UN of cilals eunmorethansoldiers do eatoutmore o en http 1on1imevwsj oomPA2VJBNA4Rla139tieleprinM0SlB 1 05243 079 7992d8970000ohunl 93922005 an univvuul auu u1uuou1 W C hv HUW q lll l t Of4 1 n to bases 9000 troops in make P of bleakmarket Uzbek 0 but have a 0 0 US diplomats G out a bit They need W y vom gecurity ml to out R do sometimes leave a for w or 5 quot u 5 a 52tyearold divorcee P Kabul lag here 39om L Kosovo she had opmed a Q otter me UN took charge of p on in 1999 in Koaovo to out mto her competitive edi ce of oompeti on 0 fairly 0 so If p to look for a new phee quotlooked a good for me It had a plethora of agencies a economy violence rocket attacks and to keep P ajwaybut just w Ps to allow the ofm afterdmk curfew Curfewa p dwth to I 14 A deeidedtorelocatetnAfghani etanalongwitloherm ofeooke 39 iandwaiuesseabasedinlioeovoShetentedahouseanddthelivingroomintoaA A T PU rolls y soup U Pc own 0 has been despite fms 0R in the south of md an order now p y to UN to stay indoors 39 quotEveryone to eat A says j h who declines to say how much she One x customers UN employees French aid wotken tz of oera om aninternatitonal force that petals Kabul q a grotm ofbu y s who y med with pistols in a fouowrheel dri1ne vehicle without a Xq plate They w to soy Ys Aside om opium quotproduction which Q soared mj t nu regime u s p bombs in 2001 s foteigtiers is g only real economy says t Medley n o of 0m yj pYo P p 1 A c zs earns 40amonm adriverforaforeimouo tcaneam l timwthat Tomm is tmlidtely to mke o f anytime soon The h l l was P m last y and l State 0 m k j US ih 9g travel to i But says Mr Medley j g a j course for 0h Radio i k foreip aid 39 b is to total about 18 billion year j g xk om i o te i i The UN has more f 700 f d in ti Nongovernmental y e owiza om only a g of which operated e the now number d than 10QO A s g power Gf some d 0O 0 not P f Burhanuddin p d an 8 cleric Pe former prwident and id mw mm H mm oa kebab Omt an 8 T a commie of D H1alPaoeTh tBubtgf TIn m For a few weeks Kabul even had an 3 quot quot quotquotquot quot V Z a A a few down from a mosque For security hupxran1inewsjcomA2vJBNA4Rauc1eprimmsBtos243o797992s97ootooJmt 9212005 u m any mm In H lww 1llI1lIl6 mm FEE 39v 3 0154 UN in people o i o last month the bu P down b o that it might be targeted by terrosisis The Transitional Islamic State ofl ifghanistanl as the country is o aeigolly called n alcohol but often s eye to in pl39iVEte by 5 Knbul p u is a uicky place to run a It39s a lot Kosovo or Q Timer says easier X p R where die tried brie y to sell P to I 0E R genocide or Somalia where 0 gave up scouting for a P the only p safe forms of transpomtion were helicopters P z ours female e says helps Even armed in feel uneasy tyim a feisty Imveiled Y p Ms rst 0 a food 0 by coups was too tame and far too oompetitive With her three children at school in He x is A government has scant ofKnbulstillruns32 0 uohgeneratingits ownred tape I39ohelp Z is p of pW XR PUR R iough p to auhle n isn39t The restaurant39s p4 pT work and Kabulisy mobile network set up a license p 0 by the 0 V 0 Z Z is also doing well Ms p ordafed a new batch of A Tshirts from quot of To up on supplies shops at Kabul39s xst and only P 0 nswiss companythat ies p U on the edge of is British camp l the 0 it servw foreigners only A 7 A39s therereoently 5 um o e wandered aisles before loading up on beer 3 Z a She was late for which O sold 01711 On drive into got a 2 on oellphone Her 0 uouhle h for a new venture a with a tness o ering massaga O oials who earlier on year cable television as onIslamic didn39t me ida of mssme pF brought happier news a P for a p of 16 For all its troubles she says y is a quotvery sweet cake for d A few years ago she opened a p in Australia it opped In stable plaew PHz are too many eompe torsquot she says Write to j Higgins at andreWhigginswsjoom copyngm sous Dawson 2 P y Inc all mam Reserved A 39 This t is for your P v noncommercial kv only 9w and Pv of this l39 l18Ml39ilIIvIIU governed by our h zplzlonlinelwsjcomPA2VJBNA4Rartiele jrint0SiB10524307979928970000htInl 9ZQ005 5 Pnga1of2 By lllooar 1174 3 Iprl 2000 The Will Smut MI Eng l Icwr aht C 2000 Jena I 9 0 p In mph 1 1 h l39Ild hIRu VIlquot 7OpI39IV0II1ly lITWhIIQWI lnQOplWI IlInv up 1 tIdl1 V lU 5 In p 5 um M p1 p40 2 gm his nlnvu nn nanny 3 Jr urn V1 G7A 2 Paltn ultlullnlndlhold Pain bviluod and In wmcn 1 0 39I horalsnonoIrIthIinjmII1goIrmvniaaIIteuhklrnimmInitwhldiltnnldydonotunclqtundfnrinhuman wrouWMt39anIonhewmtnn39th cbnuqudundmdgImt 1lIl HrBl l39lEI lhlIhG lIl1PlltlplftlIeI39l39DltIlIl nod In It to his 15 p In man at T wlmlnluunn TIg 139mnd tl1rI n1lnhIadangauuInIoIIJ on and fantaIImombI1ltInn ItgothubIgmoIpuodw T p and an var two of En am bang and in false p m ihpdgn L nI Tll39l39lI cnplul mhpu K on an of mpplhg al 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New Yarkmd Michael I Sem in U contributed to 0 ar cle llll for lab k Foranonauuuamnnubomdtmnbbaupic phanearIndDauJaIu cl f or W Z 95758S3588hml W Buffett wary on rise of stock prices Udinj Page 1 Of 2 Hand activate your occountlNo39ve emailed you an alztivatibon link Visityour pra ll pagotor help and options Bu ett turns wary on rise of stock prices author James P Miller and Robert L Rose publication Wall Street Journal iasn D0999660 publishadl March 1 1l997 start page it added 616 PM Warren Buffett cautioned over the weekend that the stock markets extended runelup has driven prices so high that it is likely investors are overpaying for quotvirtuelIy all stocksquot quotYou can of course pay too much for even the best of businessesquot Mr Buffett said in his closely watched annual letter to Berkshire Hathaway lno stockhoilders The risk of overpaying which surfaces periodically as markets advance quotin our opinion may now be quite highquot he said lnve store who buy stock when the market is quotoverheatedquot he warned quotneed to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paidquot Mr Buftetl thus joins Alan Greenspan chainnan of the Federal Reserve Board in sounding a warning about skyhiigh stock prices But Mr Butfett has sounded cautionary notes in the post only to be fooled by the biggest bull market in history Four years ago he wrote in his 1l9 9 2B391lTlU3l report that quotstocks cannot forever outperform their underlying businesses as they have so dramatically done for some timequot He also said at the tirrle that we39ve long felt that the only value of stock forecasters is to lnake fortunetelIers look gooo Mr Bulffett sprinltled his letter with the humor and advice offered in his homespun style that have made his annual messages must reading for many investors whether or not they own shares in Benkshire Hathaway the Omaha lllab holding company that he controls This year his letter was clelivalrad in a new way via the Intemetj Mr Bllffett39s letter showed that Berkshire Hathaway has substanatially increased its investrnant in McDonald39a Corp the giant hamburger chain The company disclosed that its tormerlly modest stake in McDonald39s rose to more than 301 million shares representing a 43 holding Those shares had a yeer end market value oi 137 billion more than twice the market value of Berkshire longstanding investment in Washington Post Co The McDonaldquots stake appeared for the rst time in Berkshilre39s annual listing oli its biggest oommonstoclr investments tlntill now Berkshire holdings in the Oak Brook lll company have appeared only in Securities and Exchange Commission lings that disclose portfolio changes to year after the fact Fleur rnonths ago a Berlkshire ling showed that during the third quarter M1995 Berkshire had almost doubled its McDonald39s holdling to 93 million shares or it 3 as of Sept 30 1995 The erlnuel report indicates that during the pest ve quarters Mr Buffett more than tripled his MlcDonaId39s holdings Although Mr Bulifett didn39t comment on that key investment in his letter McDonald39s fits with hi5 style of putting money in companies strong brand names llibs move several years ago into shares of Cocaecola Co paid off big as that company expanded rapidly and pro tably overseas Berkshirels CocaCola stake purchased for 13 billion was worth more than 10 billion at year end making it by far Earlishire39s biggest holding While MoDonald39s is growing rapidly abroad it has stulnnhledl in the US and is trying to win back domestic customers with price cuts Many investors meanwhile have ed the SIDGR Consistent with the longterrn value oriented investing strategy or its chairman and controlling stockholder Berkshire Hathaway39s portfolio changed little in 1996 quotWe httpudiar1i proquestcomireedfdoci 507ddcdbdcl63 9f487t6t44 rl l39l 1 n I I W 1 Buffett turns wary on riisc of stock priices Udini Page 2 Of 2 contiriue to make more money when snoring than when activequot said Mr Butfett in his Ie er And he suggested that others might do well to follow the same approach quotMost investors both institutional and individual will find that the host way to own common stoclrs is through an index fund that charges minimal feesquot he said Those structuring their own poirttoliios he added should focus on a small number of companies with businesses that are easy to understand and eamings that are likely to rise tor a long time quotif you aren39t willing to own a stock for ten years don39t even think about owning it for ten minutesquot he wrote Mr Buffett also challenged the advicel that individual investors otten hear iaoout rebalanciing their iportliolios to maintain a desired mix by selling their winners and iputting the money into investments that have ilagged behind Suggastingi that an iinrvestor quotsell off portions of his most successful investments simply because they have come to dominate his porttolio is akin to suggesting that the Bulls trade Michaeli Jordan because he has ibeconne so iirnportarit to the teamquot he said The in vestor reiterated his preference for companies and industries that are unlikely to experience major change While many companies in hightech businesses or promisinlg blut nasoent indiustnes will show faster percentage growth he concedes 3939I would rather be certain of a good result than hopeful of a great onequot39 7Berkshiirequot s holdings include its 81 stake in Coca Cola Co a tlJ5 stake in American Express Co and the t5 3 stake in Washington Post Co Currently Bertshire holds a 35 stake in Walt Disney Co the report notes after swapping its shares of Capitalil ities ABC lnc for Disney stock when Disney acquired Cap Cities last year The stock markets surge helped drive up the book value of BErkhillFB i5 shares at 3 is last year with a poiinted lack of concern Mr Euttett says in his letter that the company39s stool didn39t show a sirriilar appreciation The investor notes that in his letter last year when Berkshire shares BRTKA were trading at about 36000 apiece he had said the stock39s gain in market value had outstripped its gain in intrinsic value and that he and Charlie lvlunger the company39s vice chairman quotdidn39t at that moment consider Berkshire to be undervaluedquot Berkshire Class A shares which closed Friday at 369lJCl up 1llCi in composite trading on the New York Stock rExchange have in the past year seen a signiincant increase in their intrinsic value partly hewuse of a quotstunning perfonnarice by its Geico insurance unit Mr Buffett says now quotThis of course means that in 1996 Berlltshire39s stock underperformed the businessquot he wrote and as a result he now considers the stock39s ounrent price to be quotmore approiprtatequot The Berklshiire Hathaway chairman ended with an invitation to the company39s annual meeting in Omaha on May 5 that included a plug for the hot roast beef sandwiches at my favorite steakhouse t3orat39squot Mention the name of my iinivaluable assistantquot Debbie Boisanelc he added and you will be given an extra heat of gravyquot Credit Staff Reporters oi The Wall Street Journal httpudiniproquestcomreadfidoc507ddcidbdd639f4i8764l45ld60A l itl i39nl 7 mmmumm Arddclofz Baa and How He Doc 1 Fhdilg r In y and End 03181995 Page Cl 39 A c 1995 Dow Jones amp Ci O own 108 of p stock not 83 m liable on B T 1397 22 1995 A T A ofme y i 1956 95 0 today A c1mihyand1ugainuubbby 39 le P P o 1 Oz holding to P 39 a P Py pf an kz 423 az R P z P z P z 7 P z glwayawithhiualm p 0a Itwuhlrlyin 1966 0 Wall r T wuMrBnEau39Im athoiIicalvluoaeddngmentorhndteliI39ed tImgau mm Stireethnd Barman qaeeulntianiaoramcutiag P I Wu p j can of O dlbdnnewmegnng nomntwallslreet p ajned an am V 7 Hun EVE I The Go3oinvoaIingwuhsperfomgnmaml an i i of uidfnt wnmh to mock V A gugouweakbywgaguasybydaynoymnptbemkliedmfmumiby Mquot i I W TT T I I 5h 1 um I dte in Kiaiit Plus a p p 7 g p i md He 4i P Pw g nj i so samdhe could hand Never on a A salequot39ofa he wrote to 0g 0 0 Bu in Pf T A 5 quotHmre me pmchw g pace be no umucu j 1 variant even a oer sale d good 1 4 mm tam A n givan 5 slowly P E in 1966 4C he was pdD buy 39Btookthe A 6 ofplomg B AD to new Iecotmu ThT vuugumindycli mlttime orMrBu etl Ifmepopuli B B B 391I llnltotIbIIIlmn E 7 7 7 ofcqimlf 8 1 8 T 8 fumn39nudmucbIr9InuinSanDiButityio1cIdfoW B B 7 39afGnGo 39 h 7 whalit ianuadm P i1lepadanoftunnktice 39mdmenmb rnncialsutun iaitlf H apIrInaA in V1 with r6 falkaw culled 7 4 achdaytelI39synuwhuhemmknfyo rAimuutinAthgbu iuaaaiIA quot P 3 t keatthatpmiceSomedaynheisop c mdsct thevalue highmdaogidiys hoiA 39e 7ulwnets evaluelow 1 s 5 of 0 2 for Apatiernt inv hg As 2L would tell Forbes it wauflike waiting It p5 plan for pitch ma pitch 0 1 nacessary with never 1 sttika t getjunt 1 pitch you wam And theg 1 the you ukoyomanmd hit it 39I haewarefowfatpitchuinl9681ayurwhautockmdi g year reeordby3039I39heA 39 P 4 m 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