книги / PRactice Book

Japan goes after industrial spies By Michiyo Nakamoto

The advanced manufacturing plant in Kameyama, where Sharp manufactures liquid crystal display (LCD) panels and TVs, sits in a remote mountain range, safely out of view of most prying eyes. But a mysterious car has been seen, once a month, outside the site that is home to the Japanese group's closely guarded secrets of advanced LCD production. Although the sightings of the car are not evidence that a rival company has been in search of sensitive information, they are nevertheless a reminder of the challenges that Japanese high-technology companies face in protecting their most valuable trade secrets.

When it comes to industrial espionage, Japanese companies have long been better known as defendants in high-profile cases, such as the notorious incident in 1982 in which employees of Hitachi were accused of stealing intellectual property from IBM.

Hitachi admitted theft in the criminal case and settled a civil suit. But increasingly, as new competitors emerge in industries they once dominated, Japanese companies are falling victim to industrial espionage that threatens to rob the country of a critical advantage over lower-cost rivals.

Last week, the Japanese government detained Takashi Okamoto, a Japanese scientist charged in the US with stealing genetic material on Alzheimer's disease nearly three years ago. The case, which is the first time the US Economic Espionage Act has been used, has led to changes in Japanese domestic law as well.

In response to growing alarm in the business community, the Japanese government enacted legislation this month to make it a criminal offence to leak corporate trade secrets.

“The flow of technology out of Japan is leading to a decline in competitiveness and in employment,” says Yoshinor Komiya, director of the intellectual property policy office at the Ministry of Economy, Trade and Industry (Meti). “We believe that there is some technology that should be transferred, but what is happening now is that technology that top management does not want transferred is getting passed on,” he says.

The problem is a highly sensitive one for the Japanese government, but is attracting attention as Japan's neighbors in Asia gain skills as manufacturers of high technology goods, forcing even the best Japanese companies on to the defensive. Consequently, intellectual property has become critical to Japanese companies in differentiating their products and keeping ahead of the competition. “We are taking many measures to prevent technology leakage,” says Yukio Shotoku, executive vicepresident of Matsushita. Rival Sony says: “We would certainly welcome a regulatory system to protect intellectual property in countries such as China and South Korea.”

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UK government backtracks over bribery By Jean Eaglesham

Bribery by UK companies operating abroad is being reduced by “education rather than prosecution” after the government said it would not strictly enforce laws introduced just two years ago. The World Bank has estimated the annual global cost of corruption at more than $1500bn (£789bn), although experts say it is hard to quantify. But Jack Straw, the Foreign Secretary, told diplomats last year, in internal advice which has only now come to light, that business should be “sensitized” to its responsibilities. He said the government would “prefer to change behavior by education rather than prosecution”.

Laws making it easier for British companies to be prosecuted in the UK for overseas corruption came into force two years ago, after the government came under pressure from the US, which has long had a ban on corporate corruption in the developing world. Only a month before the new UK laws came into effect, Foreign Office staff were instructed to tell executives that “bribery is bad for business. The payment of bribes is unacceptable.”

But there has yet to be a single prosecution under UK laws. Only four allegations have been referred to the National Criminal Intelligence Service, and only one is under active investigation. The government's position appears in tune with companies' claims that they need flexibility to operate in countries where small bribes are commonplace. The CBI, the employers' body, said last night it was “important to have a sensitive approach, because business has to deal with the world as it is, not as it would like it to be.”

Some executives complain that First World standards do not suit the realities of doing business in developing countries. They argue that strict enforcement will deter investment. Susan Hawley, a consultant to The Corner House, a think-tank, said: “It's shocking that the government does not favor prosecutions - the laws are not really going to be taken seriously by the business community until there are some highprofile cases.”

The Foreign Office has encouraged staff to report serious allegations, but in effect advised them to turn a blind eye to payments of small backhanders to speed up services such as customs clearance. “Whilst small payments. are strictly illegal, we do not envisage circumstances in which there would be a prosecution” the memo sent by Mr Straw last year states. The Foreign Office said its policy of educating British companies about corruption reflected the fact that it took the issue seriously. “It is absurd to suggest that we do not treat our work on enforcement with the utmost importance,” an official said.

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Tough lessons on leadership By Herminia Ibarra

It has become generally accepted that our organizations need better leadership if they are to survive and prosper in these difficult times. Well-led companies know that leaders are made, not born, and invest in the development of their future managers. But, in spite of the energy devoted to leadership development, the return on investment rarely comes up to the hopes and expectations of participating executives or company sponsors. As ever, the question is “Can leadership be learned?”

Most of us can agree on basic definitions. Simply stated, leaders are people who:

Establish a new direction or goal for a group;

Gain the support, cooperation and commitment of those they need to move in that new direction;

Motivate them to overcome obstacles in the way of the company's goals. Consider the experience of a manager called Anne. After a steady rise through

the functional ranks in logistics and distribution, Anne found herself unable to handle a proposal for a radical reorganization that came from outside her division. Accustomed to planning for annual improvements in her basic business strategy, she failed to notice changing priorities in the wider market. Although she had built a loyal, high-performing team, she had few networks outside her group to help her anticipate the new demands. Worse, she was assessed by her boss as lacking the broader business picture. Frustrated, Anne thought about leaving.

Let us examine Anne's situation more closely. No longer able simply to rely on her technical skills, Anne needed to acquire the ability to think creatively and consider a broader range of forces in finding a new strategy for the group. As a leader, she is expected to identify new trends and spot new opportunities in the business environment.

She is also expected to recognize new partners and find new way of bringing them on board. But, for Anne, working through networks was political activity -in her view, relying on who you know rather than what you know - and she had always rejected “time-wasting on polities”. She failed to recognize the importance of building and using networks that cut across managerial levels and divisions.

To be successful at the next level Anne had to change her perspective on what was important and accordingly what she would spend her time doing. Letting go of old ways of thinking can be a terrifying proposition. The leadership transition, therefore, can provoke deep self-questioning: Who am I? Who do I want to become? What do I like to do? Do I have what it takes to learn a different way of operating? Is it me? Is it worth it?

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Japan must reward bright sparks By Michiyo Nakamoto

Japanese industry shows strong resistance to the idea of rewarding merit. This was highlighted last month when the Tokyo District Court ruled that Nichia, a midsized chemical company, should pay Shuji Nakamura, its former employee, ¥20bn ($189m) for an invention he developed while at the company: a way to manufacture blue light-emitting diodes (LEDs).

The blue LED has revolutionized areas from the recorded sound and film industries to traffic-signaling systems. It vastly increases the capacity of compact discs and DVDs and is likely to replace traditional light bulbs.

Mr Nakamura's invention transformed Nichia from an obscure, rural chemicals maker with annual sales of ¥20bn into a global group with annual revenues of ¥180bn.

The court's decision, that Mr Nakamura's contribution was worth 50 percent of the profits Nichia could make before its patents on blue LEDs expire in 2010, was widely condemned in Japan. While the criticism focused on the size of the payments to Mr Nakamura, the ruling caused deeper worries about Japan's future. Business leaders warned that corporations, worried that they would face similar payment to successful researchers, would move their research and development operations offshore. Some characterized it as a sign of the collapse of Japanese social values, and some media commentators questioned the justice of rewarding an individual for his invention.

According to old-style Japanese corporate values, Mr Nakamura, nicknamed “the slave” by his western friends for his low pay at Nichia, should have been pleased with his modest rewards.

Yet, while his blue LED helped new industries to start up, and was widely praised as one of the top inventions of the decade, no Japanese academy or institution offered him a job when he left Nichia. With US universities competing to hire him, it is not surprising that he moved - with his bright ideas - the University of California.

In Japanese schools, there are no winners on sports days. Apart from the relatively brief periods of innovation by companies such as Sony, Japan's hightechnology industry has largely competed to offer similar products with little regard for their own specific skills. Now these companies are undergoing painful adjustment as they struggle to identify their individual strengths and make some money. Until Japan can offer both financial and social recognition for individual achievement, it is unlikely to produce its own Microsofts or Dells - or for that matter, a betterperforming Sony.

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Boost brands and profits with the right price By Tony Cram

Pricing is the second of the four “Ps” of the marketing mix. Much innovation and energy has been focused on the other three Ps - product, place or (distribution) and promotion. Yet marketers have neglected the innovative potential of pricing. For example, managers need to develop a keen sense of the value of their products relative to those of competitors. Lower-priced competitors can severely damage customers' perceptions of value in an industry by encouraging customers to make lower prices the priority rather than any product or service benefits.

The emergence of discount airlines is a prime example of this: Southwest Airlines, the highly successful low-cost US airline, increased its share of domestic flight revenue from 3.2 percent in 1990 to 12.9 percent in 2002. Ryanair and EasyJet have seen similar success in Europe.

However, competitors can fight back. Jet Blue - launched in February 2000 in New York - does not offer the lowest fares on the market, yet succeeds via a benefitled advertising message to consumers. It trades on such features as its in-flight comforts, 24 channels of DirecTV and industry-leading punctuality. In July 2004 Jet Blue delivered its 14th consecutive quarter of profit and a 14.1 percent operating margin.

Bottled water brands have always faced low-priced competition - namely tap water - yet have seen remarkable growth in the past decade by differentiation and a focus on benefits. Own-label brands from supermarkets grew by 19 percent in the UK market in 2003. Danone Waters launched Volvic Revive, a mineral water based sports drink, and grew by 29 percent in 2003. Other big brands focused on different qualities. Evian's Nomad bottle, aimed at outdoor types carries a belt loop, while Lakeland Willows' Spring Water contains salacin, a naturally occurring aspirin, which combats heart disease. If they offer genuine value to consumers, such benefits allow producers to sustain or raise prices.

Misperceptions are particularly common in product launches, where managers often set the price of new products too low. Take a historical example. In August 1959, the British Motor Corporation lost its nerve on the eve of the original launch of the Mini, reducing the planned list price to just below the £500 level - the level of perceived psychological importance. The car was an instant sales success and demand outstripped supply. However, profitability was so low over the early years that it was hard for the company to invest in the car's subsequent development.

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Why it pays to put the workers in the picture By Alicia Clegg

When workplace disputes flare up, the blame is often laid on a breakdown in communication. Talking may not always resolve disagreements, but withholding management plans until the last moment can certainly make a difficult situation worse. From 6th April 2005, UK employees gain the legal right to know about, and be consulted on, matters that affect them at work. This covers anything from the economic health of the business to decisions likely to cause redundancies or changes in how work is organized. The new rules, which implement a European Union directive, move the UK closer to other European states, most of which already require workplace consultation.

There are good reasons for businesses to forge ahead with such agreements voluntarily. First, there is the commonsense belief, backed by academic research, that companies do better when their employees are well informed and have a say in decisions that affect them. Second, by kick-starting negotiations the employer effectively takes charge. The regulations give organizations free reign to agree internally what consulting and informing employees amounts to in practice - what topics will be discussed, how often and by what means. In the UK - in contrast to most other EU states once a framework for information and consultation has been agreed, there is no requirement to work through elected representatives. If the workforce approved, a business could rely solely on face-to-face and electronic communication.

The mobile operator 3 prefers the personal approach. Whenever possible, it uses video calls and e-mail to put its young workforce in contact with senior managers. At the other end of the spectrum is AstraZeneca, the Anglo-Swedish Pharmaceuticals group, which has a history of consulting employees through elected forums and union representatives. Consulting through intermediaries can yield dividends, particularly during a change of ownership or under a redundancy program. Another point in favor of a mediated approach, says Ross Hutchison, head of internal communications at KPMG, the accountancy firm, is that representatives can be taken into the confidence of management in a way that an entire workforce cannot.

But do the gains from indirect consultation outweigh the attractions of more direct approaches? Not everyone is persuaded that they do. Alison Gill, co-founder of Getfeedback, a talent management consultancy, argues that knowledge exchange and online polling, not elected assemblies, produce better performance. "The goal is to involve people directly and profit from their ideas." In spite of earlier opposition, a growing number of companies believe that putting employees in the picture is good for business. If the remainder do not follow suit, they may now find their workers give them little choice.

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Now, about this web thing By David Bowen

Your corporate website is an investment that is quite likely the biggest element in your communications budget; whose Return on Investment (ROI) you cannot measure; and whose benefits are difficult to describe. And now I would like to explain why you should be spending more on it.

It is easy to say why companies have websites. It is because they grew up for fun (it is fun building a website; you should try). But what purpose does the site serve and why have you just authorized another large cheque to keep it going and growing? Well, if you didn't sign that cheque and the site disappeared, what would happen? In the short term, unless your company actually sells things online, your revenue would not suffer, and your costs would fall; but here are the other effects I predict.

First, your company would see the flow of phone, fax or email enquiries from customers reduce sharply. They use your site, via Google, to find out your details the most valuable role of any website is as a simple contact point.

Second, you would start getting worrying feedback from Human Resources that the staff were wondering what was going on. About one in ten visitors to your site are likely to be employees. They want to know what is happening in the company, too.

Third, your investor relations team would get irate phone calls from analysts looking for an elusive figure from the 1999 annual report. Analysts are used to finding historical data on company sites, and you don't want to upset them, do you? Fourth, journalists would be phoning your press office to confirm such details as how the president of your Polish operation spelt his name, or whether you still owned that company in Indonesia.

You may also get calls from careers officers in colleges, wondering if your company still existed and demanding extra copies of brochures for students. In due course, you would find the quality of recruits was falling, because people had come to rely on the web to get a feeling for a potential employer.

Disastrous though this may be, it does not explain why you should actually be increasing investment in your website. I said earlier that most websites grew up by mistake. As a result, most large organizations now have web presences that are grossly inefficient, racking up unnecessary 'hosting' costs on dozens or even hundreds of servers. Many large organizations are now looking at these costs, and thinking how much more sensible it would be to bring the sites together. Extra benefits would then tumble forth: further cost savings from sharing words, pictures and interactive tools, and greatly increased quality for the same reason.

But of course this is going to cost money in the short term. So when your corporate affairs director asks you to approve a project with no apparent ROI, please don't laugh in his face. Ask your fellow CEOs instead; I bet they are getting very similar requests.

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Goodbye to the golden age of global brands By Richard Tomkins

In the Harvard Business School professor Theodore Levitt's seminal paper The Globalization of Markets, written in 1983, he argued that, as new media and technology shrank the world, people's tastes would converge, creating a single global market that would be dominated by the world's most successful brands. So, when the Berlin Wall fell and the barriers to world trade came down, it seemed Prof Levitt would be proved right. Global brand owners poured into the newly opened markets and, facing little competition in countries unaccustomed to consumer culture, they thought they would clean up. Then, some awkward commercial realities started to close in. Once local consumers had tried these new products, they found them far too expensive to buy on a regular basis, even if they liked them. And soon, local producers sprang up offering much better value for money with products of only slightly inferior quality at a vastly lower price. Usually, too, these products were better suited to local tastes and cultural preferences than those being foisted onto consumers by the global corporations. The global brand owners were left spreading their advertising and other fixed costs over tiny market shares and often faced extra costs, such as tariffs.

In many of these countries today, global brand owners command the superpremium end of the market in any given product category, while local brands command the rest. The global brand owners could try to move into the mass market by creating low-price products designed to suit local tastes, but that would throw them into head-on competition with local companies possessing better distribution channels and a far deeper understanding of the market. Increasingly, therefore, they have resorted to buying local brands and the companies that own them. And here, of course, lies the paradox. Whatever is the point of owning a global brand if it does not work in global markets?

Let us be optimistic and suppose the poor countries do become rich. But what do we see happening in rich countries? Ever-proliferating brand choices. There are more soft drink brands than there have been for years, more fast food chains, more packaged goods, more cars. Supermarkets are competing with brand owners by selling own label products that are as good as the branded version but cost 20-30 per cent less. Global brands, of course, are not about to disappear. But it must now be clear that Prof Levitt was mistaken in believing the world's tastes would converge on standardized products. Everything we have learned about consumerism over the decades shows that, as people become better off, they want more choices, not fewer. Global brands may be here to stay, but their golden age is over.

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Samsung plays to the young generation By Maija Pesola

For hundreds of Europe's most fanatical computer gamers who took part in the first European championships this March there was glory up for grabs in best-selling games such as Halo 2 and Fifa Soccer 2005, and €150,000 (£104,000) in prize money. For Samsung, the South Korean electronics group that sponsored the event, it was a chance to strut its brand in front of Europe's gaming community. It will be hoping that the seven-figure sum it spent on the championships at Hanover's CeBIT computer industry exhibition will help it win over an audience that has been difficult for advertisers and marketers to reach. The games at the Samsung Euro Championships were all displayed on the company's 19-inch liquid crystal display flat panel screens, the mobile phone event of the games was played on Samsung's D500 handsets and the company created a special game for the event called Babe Rally. "The games are a platform for us to communicate with the youth sector and early adopters," says Hadrian Baumann, Samsung's general manager for European marketing.

Over the past five or six years, Samsung has fought to move its brand image more up market to compete with premium names, such as Sony. As a result, much of its marketing strategy has focused on what it calls the "high-life seeker" segment of the market - people who adopt technology early and are willing to pay a high price for it. Interbrand, the brand consultancy, recently ranked the company as the world's 21st most valuable brand, up from 42nd in 2001. But pressure has mounted on Samsung to keep up its efforts. The company recently slipped back into third place behind Motorola in mobile handset sales. At the same time, Samsung is suffering from falling prices for its LCD screens, due to a glut in the market. Stimulating demand for the screens among gaming fans could be one way to help ramp up sales.

Although Samsung scores well in overall brand surveys and is strong in Asia, studies indicate that in Europe it struggles to compete with strong local manufacturers, such as Nokia and Philips. Over the past three years, the company's internal research has shown a 25 per cent increase in positive attitudes towards Samsung in the 18 to 29-year-old age group. Positive attitudes among older consumers, however, have grown more slowly. In order to enhance its hip, youth image, Samsung has also signed a number of partnerships, including one with Quiksilver, the sportswear label, and Xbox, Microsoft's games console for which it makes DVD drives. Being associated with brands such as these, says Mr. Baumann, helps to give Samsung credibility in the youth market: "It is clear that young people have a huge impact over their parents and older people when it comes to choosing technology. We are using younger people as spokespeople for our products."

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The rise of the corporate blogger By Scott Morrison

Bob Lutz, the vice chairman of General Motors, does it. So does Jonathan Schwartz, chief operating officer of computer maker Sun 5 Microsystems. A handful of executives at Hewlett-Packard and Boeing are also getting in on the act. Welcome to the blogosphere - home to those informal, frequently updated online journals that people create to share their thoughts and opinions. Web logs, or blogs, have for the most part remained the domain of millions of independent bloggers who want to talk politics, trade tech ideas, share their daily lives - or criticise corporations. Now those same corporations are trying to figure out how they can take advantage of this new medium to attract attention, cultivate customer relationships, respond to criticism - and perhaps sell a few more computers, cars or aircraft along the way. One way for a company to enter the blogosphere is to establish a system on the corporate intranet, where web logs can be used as an internal communications tool.

IBM, for example, says thousands of its employees blog on the company's internal network, where they trade idle gossip and discuss corporate business strategy.

Much more visible are web logs targeting customers and the general public, such as GM's FastLane and Boeing's blog written by Randy Baseler, the group's vicepresident for commercial aircraft marketing. There are a few key rules that a successful corporate blogger must follow: they must write in a chatty informal tone, tell the truth, update their blogs on a regular basis and be willing to accept any criticism. The blogosphere is regarded as a source of unpredictable and often irreverent commentary and any dry, dull blog that smacks of corporate PR and legalese will quickly draw criticism from readers.

Blogging can pose legal risks however - so there are often company guidelines stipulating what can and cannot be posted on a corporate blog. Yahoo, for example, says that employees are not allowed to mention anything that has not been made public and bloggers are also asked to notify the corporate PR department if they receive queries from journalists. Given the potential damage that a disgruntled or careless employee could cause, why would a company allow its workers to spout off in cyberspace? With so much downside, what is the upside?

Well, blogging is transforming the way companies communicate and, for a customer, direct contact with an employee is so much more preferable than dealing with a huge faceless corporation. Robert Scoble, a Microsoft marketing executive specifically hired to blog about the company, has emerged as one of the blogosphere's most popular citizens because he pulls no punches when it comes to his employer. He argues that Microsoft's tolerance of employee blogs has helped shift perceptions of the software giant from strongly negative to surprisingly positive. And if blogging can help Microsoft soften its image, imagine what it could do for any other company.

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