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Late last year Target, the Minneapolis-based American discount retail chain, suffered a massive data security breach. Just before the busy Christmas season hackers broke into the corporation’s computer systems and stole information from over 100 million of its credit and debt card users. Fraudulent transactions using that data began almost immediately. It was a public relations disaster for Target, as its holiday sales fell 3-4% over those of the previous year and it was faced with the problem of repairing its security systems and replacing the customers’ cards. But there was a silver lining to this dark cloud: at least the big chain did not have to talk about the disastrous rollout of its Canadian venture, where it is expected to lose $800-$900 million in 2013. It had expected to break even!
Target announced its intention to enter the Canadian market – its first international expansion – in early 2011. It bought the leaseholds of 220 stores of the Canadian retailer, Zellers, which was a low-end discounter that had fallen on hard times. Zellers was founded during the Great Depression, when it had flourished via alliances with the American variety store, W.T. Grant (Grant went bankrupt in 1976) before being acquired by the Hudson’s Bay Company in 1978. Zellers took over the K-Mart operations in Canada but even together they were unable to compete effectively with Wal-mart and other big box retailers. The upshot of the deal was that, instead of being able to do an incremental store-by-store advance into Canada, Target was faced with executing a large-scale “big-bang” rollout in facilities that did not necessarily fit its size and location requirements and in a country where it could not rely on its American supply chain to handle the logistics.
The consequences of this, which even a casual shopper in the stores could see, were catastrophic. Much of the attractive merchandise found in the US stores never made it across the border due to licensing and labeling problems. In Canada there were miles of empty shelves and the prices of the goods on them seemed much higher than those in the US. As a result the Canadian Target stores seem empty and cheerless. Some shoppers say they preferred the old Zellers!
There was a very interesting story in the Sunday Telegraph a couple of weeks ago about John Yudkin (1910-1995), a British physiologist and nutritionist who did pioneering work on the connection between the consumption of sugar and all manner of health problems. In 1972 he wrote a book Pure, White and Deadly that outlined the link between excessive sugar consumption and heart disease and hinted at its connection to obesity, diabetes and liver disease as well as possible relationships with some kinds of cancer.
Not only was this message extremely unwelcome to the sugar industry and manufacturers of processed foods, but it went against the conventional wisdom of the times that saturated fats were the problem. The fat story had been a boon to sugar industry because food processors had responded to public concern about health by producing low-fat versions of their products and using vast amounts of sugar to conceal the fact that without fat they tasted awful. Thus what followed Yudkin’s book is a classic illustration of the challenge of institutional change. Like the tobacco industry and the makers of leaded gasoline, to name just two examples, the sugar industry and those who used sugar as a major ingredient of their products, had insinuated themselves into the fabric of the communities they depended upon. Sugar manufacturers sat on national nutrition councils and pop producers sponsored conferences. They set out to discredit Yudkin and his work in ruthless, unscrupulous ways. He found himself disinvited from conferences and vilified by fellow scientists employed to discredit his work, which was dismissed as “emotional assertions” and “science fiction”.
It’s another launch of another strategic plan to the company’s senior and middle managers and the CEO is rattling on about “roadmaps” and “blueprints” that will generate “traction” in the market and “buy-in” from the employees. The employees are watching politely, but I can see that they aren’t engaged by the message and that their “shields” are “up”. No wonder; the kinds of images that the CEO’s language is evoking are mechanical ones of top-down control. If you have a roadmap for a journey, that implies that you know where you are going and that there is a clear route to be followed; blueprints are usually designs for machines and they suggest that we have a detailed design for the project and that all we have to do is build it according to specifications. The roadmap and blueprint images both imply that little creative input or learning is expected from the employees; they just have to follow directions. And the “buy-in” metaphor indicates that no commitment on the part of employees is needed either – it just an economic transaction.
“That’s ridiculous!” I can here some readers mutter, “…‘roadmap’ and ‘blueprint’ are just figures of speech.” Yes, they are “figures of speech” but their impact is far from trivial. Indeed I think that their power is far greater than most managers realize and it drives me crazy to hear the careless use of such a potentially powerful feature of language as the metaphor. I can still remember how depressed I felt when the CEO of the company that had acquired us described himself and his senior team as “guns for hire”; the image of mercenary killers was totally at odds with the culture of commitment that we were trying to build in our organization.
The view of the role of metaphor in management practice has been an erratic one. The reform of the business schools in the late 1950s was greatly influenced by the views of analytic philosophy, which emphasized conceptual clarity and formal logic and had no time for metaphorical language. This began to change in the late 1970s, with the appearance of Burrell and Morgan’s Sociological Paradigms and Organisational Analysis, which used Thomas Kuhn’s concept of the paradigm to suggest that there were radically different ways of framing organizations and their issues. Subsequently Gareth Morgan went on to write about the critical role that metaphors play in this framing process in his well-known book, Images of Organization. He explored organizations as machines, as organisms, as brains and as psychic prisons among other analogies. Each of these metaphors revealed some insights but concealed others and none was comprehensive.
“Cigarettes have no place in an environment where healthcare is being delivered.” With these words, Larry Merlo, the CEO of CVS, the US second-largest drugstore chain, announced that they would be the first such chain to discontinue the sale of cigarettes. The decision appears to be an admirable one. It comes across as the highly unusual decision of a public company to forgo certain short-term profits in exchange for uncertain long-term benefits. CVS estimates that, together with ancillary products bought by smokers, it will lose about $2 Billion in annual revenue, costing it about 17 cents a share in earnings (CVS earns about $4.50 a share annually). So the downside is clear; what about the upside?
The upside has to be seen against the volatile, ever-changing face of American healthcare, with all its attendant uncertainties. One of the most helpful guides to this is Harvard Business School’s Clayton Christensen’s The Innovator’s Prescription, written with medical doctors Jerome Grossman and Jason Hwang. Their basic insight is that the one of the reasons that the American healthcare system is so expensive and inefficient is because it is being disrupted by three dynamics. The first is scientific and technological progress, which sees our understanding of diseases advance from that of symptoms to causes. Thus leukemia, which we used to think of as a single disease, is now seen as comprising over forty different kinds of blood cancers, each of which may require a different approach. The second is what they call business model innovation, often facilitated by digital technology. The third disruptive dynamic is in the value networks – the contexts in which firms launch their business models. The migration of TV sales from appliance stores to discount retailers would be a good example.
“Ethical Capitalism – Worth a Try?” was the rather timid title of one of the open forum sessions at the recently concluded World Economic Forum at Davos. It was chaired by Zanny Minton Beddoes, the Economics editor for The Economist, and featured a panel of leading businesspeople as well as the social sector represented by Save the Children’s Jasmine Whitebread and Muhammad Yunus of Grameen Bank fame.
The panel began with Stan Bergman, Chairman of Henry Schein, declaring that he was “100% committed to the notion of free markets” as if they were articles of faith rather than useful tools, whose efficacy in practice is not always guaranteed. This point was made later by the economist on the panel, Ignazio Visco, Governor of the Bank of Italy. But it quickly became clear that most of the businessmen regarded capitalism as an economic machine that tended toward equilibrium and that any changes should be minimal and directed at making the machine work better. Of course this assumption of equilibrium legitimizes the status quo and makes any criticisms of the system suspect.
Several of the participants made the point that, as an economic mechanism, capitalism is inherently free of ethics and that they have to be imposed from the outside. From that they concluded that there was nothing inherently wrong with or bad about the capitalist system; the problems were caused by bad or misguided individuals – investors who looked only to the short-term, unethical capitalists and interventionist governments. It was another version of the “bad apples, not a bad barrel” argument; get rid of the wrong doers, the system is fine.
The only participant who disagreed with this assessment was Muhammad Yunus, who argued that capitalism has an inadequate, impoverished view of human nature, emphasizing selfishness at the expense of our ability to be selfless and altruistic. He gave the example of payday lenders in America and the UK who are often the only source of funds for poor people and who charge interest rates of 1,000% or more. He went on to suggest that the high level of unemployment and that the state of the American healthcare are both examples of problems with the capitalist system. Clearly his comments struck a note with the audience and his remarks were the only ones to be applauded.