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GLOSSARY (TERM BUSTERS)


Active Inertia
Donals Sull in an article Why Good Companies Go Bad, describes why large organizations find
major change difficult. Sull refers to those forces as Active Inertia where in there is a management
tendency to accelerate activities that worked in the past in response to most disruptive changes.

Adaptive Planning

Developed by Russell Ackoff, leading American management expert.

According to him the main value of planning is in the process of making them not in the plan
as such.

Companies should minimize the need for retrospective planning (e.g. planning to eliminate
deficiencies formed by previous decisions)in the future (certainty, uncertainty and ignorance)

Reasonably certain future commitment planning

Uncertain future Contingency planning

Ignorance in future Responsiveness planning

Adjacencies

Developed by Chris Zook and James Allen.

Chiefly means related diversification

Identifying and exploiting markets close to a companys core business to create new growth
and and taking advantage of the existing competencies

By growing with adjacencies, companies can spot and prioritize favorable expansion
opportunities that are closely related to their core business.

Beachhead Market
A beachhead market is similar to a targeted strategic/priority market which gives companies a
learning opportunity before entering a priority market (for a companys international activities in a
given part of the world). For a company to be successful internationally in the long term, it needs to
understand the beachhead market and how to take advantage of it. Therefore, a beachhead market
becomes a companys main entry point for its global activities. A market segment with low economic
and political barriers and facilitates easy migration to targeted markets subsequently is considered an
ideal beach-head.
Examples of beachhead markets are Austria or Singapore for companies planning to enter Germany
or Asian region respectively.
McCormick & Co. the U.S. based food products company chose McDonalds (already its customer in
the U.S.) as its beachhead when it entered China in the 90s. This beachhead strategy was successful.

Benchmarking
Benchmarking is a way to determine how well a company is performing compared to others
elsewhere.
Four different types of benchmarking

Internal Benchmarking

Competitive Benchmarking

Industry Benchmarking

Best-in-class Benchmarking

Blue Ocean Strategy


In 2005, Chan Kim and Renee Mauborgne from INSEAD published a book on business strategy
named Blue Ocean Strategy. According to them, while many companies primarily focus on going oneup on the competition, the best way to compete is to stop trying to beat the competition. Markets are
typically classified into red oceans (known or existing markets) and blue oceans (non-existent,
unknown or untapped markets). In red oceans, companies will try to take market share from each
other while blue oceans represent highly profitable growth markets as the boundaries are yet to be
defined.
Examples of blue ocean strategy used by companies
Company Industry new blue ocean market
Crocs, Inc. Shoe industry New lightweight footwear (Fashionable and at low price)
Air Asia Airline Point to point travel system, easy booking system
ING Direct Banking Superior interest rates on savings with no fees
Nintendo Electronic games Reducing complexity and improving ease of use and fun
Kiva.org Non-profit New microcredit model

Bricks and Clicks


A business strategy/model wherein a company combines the traditional retail outlets (referred as
bricks) with online commerce (referred as clicks). It is also known as Click and Mortar strategy. An
addition to this strategy/model is flips i.e. catalogs.
Many supermarkets are commonly using the clicks and bricks model. For example, Tesco combines
its retail stores and is also focusing on online shopping (Tesco.com) to differentiate itself from its
competitors. Tesco has been very successful with its offline and online strategy.

Alternatively, some like Threadless.com, a T-shirt Web site and clothing startups like Lucy.com and
Delias.com are moving/have moved from online to offline i.e from clicks to bricks. This is also
referred to as a shift from e-tail to retail.

Business Continuity Strategy


A strategic approach by an organization to ensure its recovery and continuity in the face of a disaster
or other major incidents or business disruptions.
Case in point: Automobile manufacturing sector is probably the most affected when it comes to
supply disruptions. Companies manufacture automobiles in the U.S. or UK source parts from all over
the world. Japan is a popular sourcing destination for many companies. In 2011, Japans earthquake
and subsequent tsunami led to major car manufacturers like Honda and Toyota to suspend production.
Honda set up two teams to source components to ensure production continued at its Swindon plant. It
also announced that it could make up for lost production later in the year owing to its flexible working
policy. There would be no loss of earnings for the workforce while the company cuts production as in
2009, it had negotiated a working-time agreement Unite.

Cassandra Complex
The prevalence of the us-versus-them mentality in mergers and acquisitions which leads to doom,
like a self-fulfilling prophecy is referred to as Cassandra complex. The term comes from Greek
mythology, where the king of Troys daughter Cassandras doom prophecies turned out to never be
believed.
Cassandra Complex Example /case in point: When HP and Compaq planned a merger, many critics
felt it was doomed to fail as HP would not be able to integrate with its competitor. To avoid the usversus-them mentality among senior managers in the HP-Compaq merger, HPs CEO, Carly Fiorina
had each senior executive buddy a counterpart from Compaq. This buddy system was also referred to
as Noahs Ark staffing plan. What led to the mergers success was that managers from either side
helped each other during the integration process.
In the case of the AOL-Time Warner failed merger, the us-versus-them attitude prevailed.

Co-opetition

Coined by Ray Noorda (the founder of Novell)

New thinking that combines cooperation and competition.

Coopetition leads to change and business expansion in addition to finding new ways to
compete.

Creolization
Creolization is related to glocalization and is a combination of languages and cultures which were
earlier incomprehensible to one another. Some authors opine that creolization is not a mixture of
cultures alone, it also involves creation of new cultures.

Devils Advocacy

Someone can argue on why a proposal should be accepted by acting as a devils advocate to
improve the decision making process.

This leads to better understanding and management of the risks associated with the proposal.

The creativity guru, Edward De Bono calls it, black hat thinking.

Dragonfly Effect
In the Internet world, a small social media/web campaign can go viral and grab the attention of
millions of people across the globe all at a very low cost. In their book, The Dragonfly Effect
authors Jennifer Aaker and Andy Smith illustrate how to use the social web to achieve a big
impact/social change.
The title is inspired by the dragonfly which is a symbol of happiness,
new beginnings, or change in some cultures. When its four wings work
together it is the only insect that can fly in any direction. According to
the authors, the four wings of the dragaonfly represent focus, grab
attention, engage, and take action. When these four elements work
together it creates the maximum impact. Capturing peoples emotions is
important to use social media effectively. Nikes WE Portal and HopeLabs Re:Mission are good
examples of the Dragonfly effect.

Ecosystem Services
Provisioning services like food and water which maintain the conditions necessary for life on planet
Earth are referred to as Ecosystem Services. They are natural functions of the earths ecosystems.
Other examples are flood and disease control (regulating services) and spiritual, recreational, and
cultural benefits (cultural services) etc.
In March 2011, Puma, the France based Sports and Lifestyle brand announced a first-ever
Environmental Profit and Loss (EP&L) statement using a new accounting methodology to measure
the full economic impact of the brand on ecosystem services.

Ethics Quotient
Ethisphere, a research-based Institute in New York ranks the Worlds Most Ethical Companies based
on its proprietary rating system, the Ethics Quotient (EQ). To record a companys performance

objectively a number of multiple choice questions are put forth to the company. The EQ framework
has five core categories Ethics and Compliance Program (30%), Reputation, Leadership and
Innovation (30%), Governance (15%) and Corporate Citizenship and Responsibility (25%).
In 2011, in its latest rankings of Worlds most ethical companies, 110 companies from over 3000 in
100 countries made the cut. These included companies like eBay, Gap, Xerox and Adidas. Housing
Development Finance Corporation ( HDFC) was the only Indian company figuring in the list.

Experience Curve

Idea developed by Boston Consulting Group (BCG) in mid 1960s.

With accumulated learning, employees in a company learn to do their jobs more efficiently
and effectively over time and hence costs come down.

Flanker Brand
A flanker brand is a new product introduced by a company in addition to its existing brand in a
particular market category. The new flanker brand can be of a different variation (or size, type etc) of
the existing brand. In essence, a flanker brand is a logical brand extension within the existing product
category.
The term comes from a war metaphor as many companies use flanker brands to counter attack a
competitor who challenges the existing main brand with a unique offer or proposition. So the prime
focus is to position the flanker brand to counter the competitors offering or positioning but not
disturb the main brand. Flanker brands help cater to various market segments though an inherent risk
of diluting the brand image exists.
Example of a Flanker Brand: Intel introduced Centrino line of processors to protect its flagship
Pentium brand when competitors were gearing up to launch lesser-priced alternatives.
Free Rider

Being a first mover is not always advantageous.

A company which moves in later, can learn from the experiences of the first mover and avoid
similar mistakes.
For example, Microsoft emerged the winner in the browser market even though Netscape was

the first mover.

Genchi Genbutsu

A Japanese phrase meaning go and see for yourself or get your boots on

Is a key concept in the Toyota Way

Similar to the idea of Managing by Walking About (MBWA)

Guanxi
Guanxi (pronounced as gwan-shee) implies social relationships and is an important element to
conducting business activities in China. It represents the totality of relationship (mainly of utilitarian
nature) between two business partners. It is primarily a way of economic organization without any
law or formal rules. Guanxi is personal in nature and between people.
Chinese businesses typically do not begin a relationship with someone they do not know. If one
business party has guanxi with another there is reciprocation of social exchanges and favours. Gifts
are used to maintain the balance in/strengthen the relationship. Businesses entering the Chinese
market are generally advised to go with a local partner.
Guanxi Examples
Mcdonalds lack of Guanxi
In the ealy 90s, McDonalds had a 20 year land-use agreement for a huge restaurant in Beijing.
However, within two years it had to vacate the location for a businessman from Hong Kong (Li Kashing) who had the required Guanxi with him. Mcdonalds lost the trial. Li Ka-shings Guanxi was
outstanding as he had financed Chinese schools, universities, hospitals etc from his profits in China.
Microsoft Guanxi instead of a legal battle
In June 2002, Microsoft dropped its legal battle with the Chinese Government and decided to build
guanxi instead as it was determined to stay in China. This was in spite of its continued losses in the
immediate and medium future. Bill Gates, CEO at the time even signed an agreement with the
Chinese Government giving it restricted access to the source code of its Windows OS.

Halo Effect

Coined by Edward Thorndike, a psychologist

A phenomenon wherein it is assumed that just because an employee is good at doing a


particular task, he/she is good at doing other tasks as well.

Involves little mixing of traits and people are usually judged across the board.

Intrapreneurship

Practice of developing entrepreneurial skills and approaches by or within a company.

Employees are given enough freedom and resources to experiment with new ideas.

Judo Strategy

Coined by David Yoffie of Harvard Business School

It means avoiding direct confrontation and leveraging the strength of the opponent to create
space.

A new player can be successful via speed, flexibility, and leverage against a dominant player.

A challenger should examine the competition carefully, avoid head-to-head battles and use the
competitors strength to its own advantage.

Kepner Tregoe Analysis

By Charles H. Kepner and Benjamin B. Tregoe.

A structured methodology for identifying and ranking all factors critical to a decision to
minimize the influence of conscious and unconscious biases.

Aids in evaluating alternative courses of action and optimizing the ultimate results based on
explicit objectives

Can be applied to a range of decisions like marketing a product or site selection.

Law of Conservation of Profits

Coined by Clayton Christensen of Harvard Business School.

According to it, the total profit along an industry value chain does not change but profit
moves along the value chain.

As technology and markets change, few parts of the value chain become more attractive and
others less attractive over time.

A sweet spot on the value chain is a place where there is still scope to improve the
performance of the product or service, differentiate it from competitors and charge a premium.

Mazur Plan
A Mazur plan is a retail store management technique first used in 1927. Under this plan, the store
functions/activities are broadly divided into four major category areas merchandising, publicity,
store management and accounting and control. Hence, it is also known as the four-function plan.
This technique was developed by Paul Mazur who did an in-depth study of department store
organizational structure.
Mazur plans come under the subject area organizational patterns in retailing. With the growth of many
branch stores Mazur plans typically have three derivatives main store control, separate store
organization and equal store organization.

In main store control, the headquarters retains the final authority while in separate store organization
the branch stores have individual buying responsibilities. The equal store organization is the most
widely used today with both branch store and headquarters having equal status. However, modern
retail stores have changed and even have six to seven functions in their organization to address
complexity.

Murphys law

The law is named after Major Edward A. Murphy, Jr.

It implies Anything that can go wrong will go wrong

Nearshoring

Outsourcing activities to locations are reasonably close so that coordination is easier but not
necessarily the cheapest.

Eastern Europe, Mexico are a near-shoring destination for many companies in the US.

Open Kimono
Used mainly in business accounting and implies sharing information openly. It is similar to open the
books or the HR term open door policy. When a potential buyer is interested in acquiring a
company or a particular project, to open the kimono implies revealing financial and other vital
information about the company and being open and transparent in discussion. The kimono is a
Japanese traditional garment worn by women, men and children and the expression propagated during
the flourishing trade between U.S. and Japan.

Organizational Design

Involves how to group individuals and structure their tasks.

An organization design must consider the companys strategy, competitive environment, stage
of the life cycle and various other factors.

Porters Diamond
Michael E. Porters Theory of the Competitive Advantage of Nations based on four key factors is
also referred to as Porters diamond. Porters Diamond model suggests that some nations have an
inherent competitive advantage (National competitiveness or advantage) than others globally, based
on factor conditions (e.g. raw material abundance like oil in Middle Eastern countries), demand
conditions (e.g. Japans local demand for electronics), related and supporting industries (e.g.
Italian shoe industry benefits from related and supporting industries) and firm strategy, structure
and rivalry (e.g Hierarchical structure of German firms and Flat structure of Danish firms is
advantageous in engineering and biochemistry industry respectively). Managers can utilize this model
to assess investment in foreign markets and formulate entry strategy.

Purchase Trigger
Things like a good product description, in-store display or a deliberate call to action among others
which makes a customer purchase a product/service is a purchase trigger. E.g. Wal-Marts tagline
Everyday low prices could be a purchase trigger for consumers to come to the store and make a
purchase. H&Ms low-cost high-fashion strategy can also be a purchase trigger.
A companys website is useful for understanding purchase triggers. Conversion patterns, visitor clickstreams or website traffic can be analyzed in detail to understand the customers actions whether
he/she makes a purchase or exits from a website.

Pygmalion Effect

Also known as Rosenthal effect

Based on the premise that if people start believing in themselves, they prove to be effective.

A superior can constantly praise his/her subordinates. Soon they become highly productive.

Alternately, they are demotivated if they are constantly reminded about their shortcomings.

Q-Theory

Developed by economist James Tobin

A theory of investment behavior

Firms tend to invest as long as the value of their shares exceeds the replacement cost of the
physical assets of the firm.

Responsiveness Planning

Coined by Russell Ackoff

A conceptually elegant way of identifying and managing risks, essentially consists of building
responsiveness and flexibility into the organization.

Rocket Science Retailing


What is Rocket Science Retailing? Definition and Examples
In the past retailing was considered an art. However, retailers today are analyzing large amount of
data they gather on consumer purchases and preferences in making decisions and understand customer
needs better. This gives the retailers the ability to respond and execute supply chain decisions better,
align incentives within the organization and also explain the changes to the investors. In their book,
The New Science of Retailing, HBS professor Ananth Raman and Wharton professor Marshall Fisher
call this rocket science retailing, similar to the Wall Street transformation in the 70s era when
physicists and rocket scientists applied their analytic skills to investment decisions.

Examples of Rocket Science Retailing


Borders Group, the book and music retailer uses past sales data to tailor the product collection in its
stores. Zara, the fashion apparel retailer gathers sales trend information from store flows on a daily
basis for developing new fashion lines, change existing products and decide the prices.

Skunkworks

A skunkworks is a place ( or a team pf people) designed to encourage the employees of a


large organization to come up with original ideas. Employees are taken out in small teams out of
their normal work environment and given freedom from their companys standard management
constraints.

Modelled on the Lockheed aircraft companys secret research cum production facility in the
1940s

Supply learning
Supply learning is a term introduced by Brian Tomlin in 2008/09. Supply learning answers a key
question for customers Will a company be able to meet orders in the future?. A prediction is made
based on information on how well the company has performed in meeting order deadlines in the past.
In effect supply learning is a process wherein a customer uses past supplier performance information
to predict future supplier performance. A good performance report increases the chances of a customer
ordering more from that supplier in the future. Supply learning impacts both sourcing and inventory
strategies of a firm and helps in framing an optimal operating policy.

Swim Lane Diagram


A swim lane diagram also known as cross-functional diagram or Rummler-Brache Diagrams provides
a visual representation a process map and is used in process flow diagrams. The swimlane diagram
(arranged horizontally or vertically) demarcates responsibilities for sub-processes of a business
process. It is a process flowchart that provides information on who does what. Each member is
assigned to a lane(s) and the diagram looks like a swimming pool metaphorically. Each lanes helps
visualize a particular stage, employees or departments.
A book about Improving Processes in the 1990s by Geary Rummler and Alan Brache had proposed
Swim Lane Diagrams.

Tipping point

A phrase and book by Malcolm Gladwell, a New Yoork Times writer.

In epidemiology (the study of patterns of health and illness) the tipping point is that moment
when a small business change tips the balance of a system and brings about a large change.

To-Be Business Process Model


What is a To-Be Business Model?
A business process model which is developed by applying improvement opportunities to the present
business model (the AS-IS Model). The To-Be business process modeldefines a concept of what the
exisiting processes should be i.e. it can identify if the current business process are effective or need
improvement. Consequently, a Business Process Reengineering (BPR) exercise may be required.
In effect there are two types of Business Process Models the As-Is model (the present state) and the
To-Be model (the present state with improvements).
Example of a As-Is model to a To-Be Business Model
E.g. Dell tweaked its direct sales model as the PC business was maturing and a direct sales model
alone would not work. Dell had to consider selling through retail channels. Dell then started offering
its Dimension PCs and Inspiron notebooks via retailers like Wal-Mart and Sams Club.

Viral Marketing
Coined by Jeffrey Rayport, a Harvard Business academic in 1996

Choosing a small group of well-connected individuals (with high social networking potential)
to launch a product or service via the internet or mobile phones.

Wal-Mart Effect
Wal-Mart is known for its low prices strategy Every Day Low Prices. Wal-Marts impact on the
local economy and businesses when it enters an area/country is termed as Wal-Mart Effect. While
small competitors like the corner stores (mom and pop stores) end up closing down their businesses
failing to keep up with Wal-Marts strategy to drive prices down, bigger competitors also face the
heat. On the positive side, Wal-Marts entry can help curb inflation (see The Wal-Mart effect: food
inflation tame in Canada)
While many local businesses oppose Wal-Marts entry into their country, some governments refrain
from opening up foreign direct investment (FDI) to foreign multi-brand retailers. E.g. An AC Nielsen
study reveals that India leads other countries wr.t shops per capita with about 40 million shop owners
and employees. Wal-Marts entry into India can have an impact on many local corner stores. The
Indian government has a FDI limit in single-brand retail and allows only cash-and-carry stores that
can only sell to other local retailers or restaurants. (see related case study Wal-Mart in India)

White Knight

An expression used to describe a company that comes to the rescue of a firm facing a hostile
take-over bid from a predator. The white knight steps in with a counter-offer for the firm, thereby
saving it from the predator.

The term comes from Lewis Carrolls Through the Looking Glass (1871) in which Alice is
captured by a red knight but then rescued immediately by a white knight.

Xerox PARC

Xerox PARC (Palo Alto Research Center), the research division of Xerox

Established in 1970

Xerox first incorporated technologies like the Mouse, bit-mapped display, Personal Computer
(PC), Graphical User Interface (GUI), Ethernet, and Laser Printer.