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Questions for Microsoft as It Nears a Crossroad

August 23, 2013 by

But Mr. Ballmer and Microsoft’s board have been considering the possibility of his retirement for some time. Still, because of Mr. Ballmer’s larger-than-life personality, the board’s reluctance to push back and the company’s recent product and financial problems, finding a new chief executive for Microsoft was never going to resemble a cut-and-dry, business-school case study, according to people with knowledge of the company.

“No one is an obvious candidate,” said Michael A. Cusumano, a professor of business and engineering at the Massachusetts Institute of Technology who studies strategy in the computer software industry. “All the really interesting people who were in the company over the last dozen years who might have been have left. I also find it hard to imagine they could bring an outsider in. Microsoft is known for having quite a lot of powerful groups within the company and they make life very difficult for anyone who tries to oversee them.”

Succession planning is a delicate issue for many companies, particularly one like Microsoft, where Mr. Ballmer has been a senior employee since 1980 and chief executive since 2000, and his longtime friend, Bill Gates, Microsoft’s co-founder, remains chairman.

“Particularly for a person like Ballmer, who really is one of the founders, leaving is almost like death, so it’s extremely difficult to have an orderly process,” said Joseph L. Bower, a professor at the Harvard Business School. “It requires a very grown-up relationship between the chief executive and his board.”

Industry insiders almost immediately began to place bets on which executives inside and outside Microsoft — and even outside the technology industry — could be tapped. The decision will go a long way to determining whether Microsoft will successfully transition to tech’s future of mobile computing and computing in a virtual cloud of data-storage devices.

But at the moment, at least, the betting cards are virtually empty.

Even though Mr. Ballmer had indicated he was going to retire when the youngest of his children went to college, which was in about two more years, “I think people thought Ballmer would maybe die with his boots on in that role,” Mr. Cusumano added.

Developing a succession plan is one of a board’s chief responsibilities, but only half of companies actively groom executives, according to a 2010 study by Stanford University’s Rock Center for Corporate Governance and Heidrick Struggles, the executive search firm that is leading Microsoft’s search. Boards spend only an average two hours a year on succession planning, the study found.

“When you have such strong personalities as Gates and Ballmer, is the board really proactive with them, or is it more of a caretaker board?” said David Larcker, director of corporate governance research at Stanford University’s business school, who worked on the study.

Though it might not be obvious outside the boardroom, Microsoft’s directors have been planning the transition, according to a person briefed on the board’s meetings who was not authorized to speak about them publicly.

Discussions have been happening for a decade, the person said, and intensified in 2010. Several months ago, Mr. Ballmer suggested to the board that it was time to begin a formal succession process, the person said, and told directors on Wednesday that he would announce his retirement.

Mr. Ballmer and the board have discussed the attributes they want in the next chief executive and have been appraising internal and external executives who might be candidates. Over the last 18 to 24 months, Mr. Ballmer has personally met with several outside executives, including people outside the tech industry with experience transforming very large companies, according to the person knowledgeable about the board’s work.

Nick Wingfield contributed reporting.

Article source: http://www.nytimes.com/2013/08/24/technology/questions-for-microsoft-as-it-nears-a-crossroad.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

For Drug Makers, China Becomes a Perilous Market

July 16, 2013 by Leave a Comment

The booming Chinese demand for drugs couldn’t come at a better time for Western manufacturers, whose sales have been slumping because of patent expirations in the United States and stringent price controls in Europe.

But selling pharmaceuticals and other health care products in China is increasingly fraught with peril, as shown by allegations in China this week that GlaxoSmithKline funneled payments through travel agents to doctors, hospitals and government officials to bolster drug sales in the country.

Chinese officials have compared the company’s operations to organized crime and have detained four Chinese executives for questioning. Shortly after government investigators raided the British drugmaker’s Shanghai offices last month, the British executive in charge of the company’s Chinese operations left the country. He hasn’t been back since.

Earlier this month, the top manufacturers of infant formula, including Abbott and Nestlé, lowered their prices in China under government pressure, and Chinese officials have said they are investigating the pricing policies of up to 60 foreign and domestic drug companies.

The rash of investigations is one measure of how critical the health care market has become to global companies — and to the Chinese government. The Chinese have made no secret of their goal of pushing the country’s domestic drug industry into more direct competition with the world’s top manufacturers.

As a result, global companies can expect more scrutiny, said Tarun Khanna, a professor at Harvard Business School who has studied foreign investment in China.

“Practices that may have been O.K. some time back may be more scrutinized by foreigners now,” he said, especially as the government seeks to shift from an export-based economy to one that is also focused on selling to Chinese consumers. “They’re trying to get more balance back.”

Several factors are contributing to the boom in China, experts said. China’s growing economy has given rise to a middle class that is increasingly able to afford expensive Western drugs, and to treat conditions – such as depression and respiratory illnesses – that may have otherwise gone undiagnosed or unmedicated.

And under a new health care program, China has expanded insurance coverage to hundreds of millions of new patients – 95 percent of the population had insurance in 2011, compared to 43 percent in 2006, according to a recent report by the consulting firm McKinsey Company. By 2020, China’s total spending on health care is expected to grow to $1 trillion, from $357 billion in 2011, according to McKinsey.

Even as foreign companies raise their investment, the Chinese are also looking to capitalize on the booming health care market. The government identified the medical industry as one of seven key areas for development in its most recent five-year economic plan, and the country’s medical sector invested $160 billion in research and development in 2012, nearly surpassing Japan, according to a recent report by the Boston-based Lux Research.

“China is interested in building a very strong, homegrown industry,” said Kevin Pang, a research director at Lux.

But some believe Western companies will have an edge because consumers may be willing to pay more for brands that are known for high-quality ingredients.

“There are so many drugs that are poor quality in China, so the ability to differentiate yourself is important,” said Craig A. Wheeler, the chief executive of the American generic drug maker Momenta Pharmaceuticals. His company is developing complex drugs known as biosimilars through a business deal with Baxter, which has an established presence in China.

Mr. Wheeler said the recent crackdowns are to be expected. “These markets are maturing, and these markets are going to be therefore more highly regulated,” he said.

The bribery investigation into GlaxoSmithKline comes as the company has been struggling to rebuild its image in the wake of a historic $3 billion fine in the United States last year, in which the company admitted to improperly promoting its antidepressants and failing to report safety data about the diabetes drug Avandia. Andrew Witty, who took over as chief executive in 2008, has repeatedly pitched the company as a global leader in ethical practices and said it has moved on from its previous lapses.

Article source: http://www.nytimes.com/2013/07/17/business/global/for-drug-makers-china-becomes-a-perilous-market.html?partner=rss&emc=rss

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Economix Blog: Technology as a Driver of Growth (or Not)

May 10, 2013 by Leave a Comment

Last week, while I was doing reporting for my column about the economic impact of digital technologies, I had a chat with Astro Teller. Mr. Teller runs Google X — Google’s incubator of crazy futuristic technologies like self-driving cars. He has little patience for techno-skepticism. Who cares if digital services don’t show up much in official statistics of gross domestic product? If you want to measure the economic importance of the Internet, he suggested, just try to imagine what would happen to the economy if the Internet were to vanish tomorrow.

This may not be the best measure of technology’s contribution to social welfare. But it raises a crucial point. The impact of a technological innovation depends on how deeply it embeds itself in everything we do.

Earlier this month, a couple of economists at the Harvard Business School and the Toulouse School of Economics in France produced a paper asking “If Technology Has Arrived Everywhere, Why Has Income Diverged?” Economic prosperity, they noted, is ultimately driven by technological innovation. So if technologies today spread much more quickly than they used to from rich to poor countries, how come the income divide between rich and poor nations remains so large?

It took 119 years, on average, for the spindle to spread outside of Europe to the poorer reaches of the late-18th-century world, according to the authors. The Internet encircled the globe in seven. One might expect that this would have helped developing countries catch up with the richest nations at the frontier of technology

The reason that this did not happen, the authors propose, is that despite spreading faster, new technologies have not embedded themselves as deeply, measured by their prevalence, relative to the size of the economy. “The divergence in the degree of assimilation of technologies started about 100 years ago,” observed Diego Comin of Harvard Business School, one of the authors.

Spindles eventually became as prevalent in poor countries as they were earlier in rich ones. By contrast, according to the economists’ model, PCs in developing nations will achieve only 40 percent of the penetration that they attained in industrialized countries. Startlingly, they estimated that the Internet’s economic footprint in poor countries will reach only about 4 percent of its penetration in rich industrial nations.

The economists aren’t quite sure why this is the case. Professor Comin suggests it might be that societies that were the most innovative inventors 100 years ago became much better of assimilating technologies; more creative at figuring out new ways to take advantage of innovations across the economy.

In any event, according to the researchers, the shallower penetration of new technologies in the third world explains of their economic lag: “changes in the pattern of technology diffusion account for 80 percent of the Great Income Divergence between rich and poor countries since 1820.”

We may not directly see the economic impact of the information-technology revolution. But countries where it does not spread, it seems, will remain poor. That seems like a pretty big deal.

Article source: http://economix.blogs.nytimes.com/2013/05/10/technology-as-a-driver-of-growth-or-not/?partner=rss&emc=rss

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Corner Office | Tony Tjan: Tony Tjan of Cue Ball, on Accepting New Ideas

December 9, 2012 by Leave a Comment

Q. Do you remember the first time you were somebody’s boss?

A. The first time was when I was probably about 16 or 17. We lived in Newfoundland, and I was a distribution representative for a multilevel marketing company. I had to recruit other distributors and train them, and it was my first experience trying to understand how to motivate people.

But I learned some of my most important lessons when I founded an Internet advisory firm called Zefer. I was 25 and going into Harvard Business School. I certainly wasn’t as self-aware at that time — being really honest about my strengths and weaknesses — as hopefully I am now. I think early on in many people’s careers, you have a tendency to want to show off your good side, and vulnerability and degrees of humility are not viewed as desirable traits. It probably made me a more intimidating, more inaccessible person. I was also less direct than I am now.

Q. And what was the biggest lesson from that experience?

A. The seminal inflection point for me was being at the highest of highs and then going right through the nuclear winter of the dot-com bust. We had a business that had grown from nothing to over $100 million in about five years, with about 900 employees. We had filed to go public, and I could probably tell you the second of the beginning of the dot-com crash, actually on the day we were to go public, April 14, 2000. We then had layoffs and a significant restructuring. It’s hard to even describe that period, but we eventually came out of it.

The lesson from that was that self-awareness trumps all. You need to know what your superhero strength is, but you really learn at tougher times what your and others’ weaknesses are. The biggest shift for me was that I realized how important intrinsic rewards are — like the value of a meaningful role — over extrinsic rewards.

Q. You must do a lot of mentoring. Any advice?

A. One of my partners, Mats Lederhausen, has developed a good framework for mentoring. It was inspired by Deepak Chopra, but Mats has evolved it over the years. There are five questions to pose to someone you’re trying to be a mentor to: What is it that you really want to be and do? What are you doing really well that is helping you get there? What are you not doing well that is preventing you from getting there? What will you do differently tomorrow to meet those challenges? How can I help, and where do you need the most help?

The sequence is important. You have to understand the larger purpose; understand the person’s self-awareness around their strengths; understand external or intrinsic blocks to doing that; and understand the person’s plan and motivation to change before you just assume you can help. It’s just as important, for clarity and to reinforce self-awareness, to have the person play back to you after the meeting in an e-mail what they heard and said.

Q. What are some things that you’ve learned from mentors?

A. One was Jay Chiat, one of the founders of the Chiat/Day ad agency. He had this incredible capacity for optimism, particularly optimism during mentorship. He had this amazing ability to think of every reason why an idea might work before criticizing it and thinking why it might not work. When you’re a mentor, you’ve got to realize that people are often sharing their dreams, and I think it’s human nature to be a critic. We’re skeptics. As you get older and more experienced, wisdom is great, but you also have to be careful not to automatically impose your mental framework and your lessons.

I’ve translated it into a rule that I try to get people to follow, and I’m still working on this. When someone gives you an idea, try to wait just 24 seconds before criticizing it. If you can do that, wait 24 minutes. Then if you become a Zen master of optimism, you could wait a day, and spend that time thinking about why something actually might work. In venture capital, you’re at the intersection of human capital and their big ideas, their dreams. My favorite quote is from Eleanor Roosevelt: “The future belongs to those who believe in the beauty of their dreams.”

Q. How do you feel your leadership style has evolved?

A. I’m pausing more for self-awareness, and I’m just trying to take time to reflect on decisions, and to be more intellectually honest. As an example, I will go into our annual meeting and we’ll put down the five things we say we’re going to accomplish this year. The following year, I’ll bring out the exact same page.

But what hasn’t changed is that I’ve always had a certain amount of drive and intensity. My college roommate once told me I have “pregnancy envy.” And by that he just meant that I had this desire to give birth to something, to create.

Q. How do you hire, and also size up entrepreneurs you might want to invest with?

A. There’s the two classic buckets. You look at the hard-skill stuff and the soft stuff, and I try to focus on more of the soft stuff. On a résumé, I think you can pretty quickly assess a person’s track record. I then look for a sense of cultural simpatico. It may be even more important when you’re investing behind someone. And I tell them, with venture capital, you should really think of this as us getting married. And they say, yeah, yeah. And then I add: and we’re not allowed to get divorced.

So you want to get a sense of their values, and whether you would enjoy spending time with them. And I’ve described the four traits I’m looking for as heart, smarts, guts and luck. Whether you are hiring someone or investing behind someone, especially early stage, you need to feel some of that heart and that will, that fire in the belly. And you can feel it. This often comes out more through stories, so you have to probe. Does this person have some weight behind them, meaning they’ve overcome challenges and adversity? I often ask, “Have you sold anything when you were young?” Because I will never forget selling door-to-door at age 15 in Toronto. You grow thicker skin. Rejection early is good, because you get used to it.


Article source: http://www.nytimes.com/2012/12/09/business/tony-tjan-of-cue-ball-on-accepting-new-ideas.html?partner=rss&emc=rss

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