Management: "Information is Power?

Written: 24/11/2001

In the "good old" capitalist days, capital ruled. O.K., one also needed labour and knowhow or technology (or land in the "ancient" times), but capital was the scarce, the critical resource.

If one had capital, one could easily secure the rest. In capitalism, big is beautiful, utilising economies of scale and scope. A strong savings mentality helped build strongholds of capital, multinational, now "global", corporations.

Nowadays, in the "globalisation" era, it appears that capitalism has won, that it is invincible.

Why?

Because the more capital one has, the bigger one is, or the bigger one can become.

Right?

Well, not exactly.

Global players are indeed strong. But where does this strength come from?

We argue that the single most critical source of power is Information.

This argument seems to agree with the era of the Internet (in spite of the dotcom fallout) and global telecoms.

Today one can view, listen, surf, purchase, invest anything and anywhere in the world he or she wishes. So Information is indeed Power.

But what is "Information"?

I look up for information on the word "information" in my wordprocessor's Thesaurus.

It offers me the following synonyms: knowledge, data, facts, news, advice, tip, intelligence, wisdom, lore. It also offers the following antonyms: Ignorance, conjecture, mystification, hiding.

So information is knowledge?

Do data and facts yield Power? Advice? If I am then well informed, or well advised, does that mean that I am wise and powerful? So why are not all wise people rich or powerful (and vice-versa)? Why is there then the saying that "ignorance is bliss"?

At the corporate level, does this imply that the strength of global corporations comes from their ability to collect knowledge, data, facts, news, advice, intelligence and wisdom from around the world and put it to use? What if they "overload", just as machines sometimes do?

In the days of state imperialism, access to raw materials was paramount. Numerous wars were fought in the quest for unique, bulk or cheap raw materials.

Have data and facts, advice and intelligence replaced those tangible raw materials for corporate dominance?

Apparently.

Does that mean that wars will be fought over information? What kind of information? What kind of wars?

Is it marketing information? About the needs and wants of consumers which will make products and services successful in these markets? Is then the competitive problem of a local or regional company the fact that it does not know what are the needs and wants of potential consumers in other parts of the world?

Is it about information on who are the appropriate wholesalers or retailers, investors, workers, providers, etc around the world? On the other hand, why do local dominant players lose ground to the global crusaders? If they know their own turf, how can others beat them on it? Maybe because they have knowledge that comes from information gathered in other geogarphical places.

Is it information on where to find sources of funding around the globe?

In most disciplines of Business Administration, and most of all in Finance and Macroeconomics, the fundamental working assumption is that there exists "perfect information".

Is then information the maker of "kings"? The source of competitive power? Would perfect information make the markets function as well as in theory, introduce absolute competition?

Would it become the great "equaliser", making all people equal, or all companies equally profitable?

Wait a minute.

Does that mean that whoever has the data of facts is the emperor? But are data and facts the only material needed to achieve knowledge? What about processing it?

Don't you need a good old machine to make data and facts into knowledge and wisdom?

* At personal level, it is the mind.
* At corporate level, everybody is aiming for the learning organisation.

But does knowledge automatically bring success? Of course not. Just as power does not mean you win, unless you know how to use it (strategy).

This is where the notion of Human Capital enters the corporate picture.

Some of the best practices regarding management of Human Capital can, according to many management gurus, be found among film studios, theatre companies, publishing houses. We would add, certain football and other athletic teams-corporations.

Management: Picking the Winners

The global presence of a company does not automatically render it "global". It has to gain this property.

The ability to find and globally exploit local knowledge (see "Metanationals") requires the competence of utilisation of human capital. It is worth noting that in this period of sharp cost cutting in order to satisfy the financial markets, there exists a danger of destroying "intangible capital" which was built by corporate HR policies with much effort and over years.

The value of a coompany's human capital may not be easy to quantify (there are, however, various methods). Maybe because after all management is not just about numbers!

At the end of the day, every management style is judged by its results. The same applies each strategy, each tactic and each decision.

Ultimately it is not at all easy to predict which companies will survive or will emerge as winners in the global markets over the next few years. But it seeems that the rewards will be significant for those who can today predict successfully who the future winners will be and "invest" (in various ways) in the future of these "winners".

Management beyond limits

Is the management "game" changing along with the concept of competitiveness?

Undoubtedly, more than ever before, the philosophies, theories and practices of management are useful tools for corporate survival. Yet, management is not done with golden rules.

In an era when the power of global brands is growing fast and globalisation rules, many gurus of management stress the importance of building relationships with the target consumers rather than fighting battles with competitors. Does this mean that the game is changing?

Management decisions cannot be left to "automatic" pilots. Each method, each tool of management needs the human mind in order to be applied to each case, because each decision has different parameters.

Undoubtedly, in daily corporate life, a manager cannot solve each management issue, with multiple variables and unknown, from scratch. This applies to all types of functional areas (Marketing, HR, Finance) as well as general management.

The use of common logic, or of current practice of the corporation, the sector, the profession or the school of thought allows managers to save time when making their daily corporate decisions.

In Operations Research terms, this means seeking and finding "local optima" rather than seeking time and mind consuming "global optima".

Yet a manager should be aware that, while this global common practice saves times, it carries associated opportunity costs.

Corporations which offer their managers, at different levels, the "luxury" of studying each decision "globally", to search for solutions beyond traditional practices (or "local" searches), may actually gain a considerable competitive advantage.

In other words, globalisation is the era for "global optima", irrespective of the corporation's geographical reach (local, regional or global), size, sector or "age" (new or "old" economy).

For example:

• a traditional approach to competitiveness is via size or economies of scale or scope.
• a global company is normally associated with large companies (in terms of empoyees or revenue).

Yet there is nothing that dictates that a company with e.g. 500 or even 250 employees cannot be "global", i.e. have a global presence.

For a company to be competitive,, it does not have to be global, multinational, or simply "big". Size is irrelevant. A small "boutique" can survive in its local market (and even grow beyond) in face to face competition against giants. It can even beat them.

It should be noted that "survival" is a relatively objective criterion. But what does 'winning" mean in today's corporate battles? How is the score kept? What is the "game" and what are its rules?

I propose that:

In globalisation, the rule is that there are no rules.

Each company can select and play the game it is best suited for.

This is the era of the celebration of the "mind" (and the strategies the mind can plan and implement) for the creation of shareholder value beyong general rules, management recipes or golden rules (new or old), beyond the dicta of management fashions.

Poetry in Management?

The main emphasis of most history books is on leaders who left their mark in the times and places they lived in (and beyond).

There are very few references to their close associates and ever fewer to the mass of their "executives". Yet these people contributed significantly, directly or indirectly to important events. Imagine for example the making of the pyramids.

To-date, the corporate world has received relatively little attention by most historians. Maybe this is due to the fact that the History of the Corporation is still relatively short.

In books and movies, the business and corporate world has been utilised primarily as a background for the deployment of a plot. In most cases, the plot centers around non-business issues. This can be attributed to a perception that business issues are too complicated for the general (mass) audiences to understand, compared, for example, to detective or police work, or legal plots.

As a result, it is not surprising that, in many cases, in these media, the "part" of the Marketer, the Financier, the PR executive, or the Personnel Manager are relatively simplistic, compared to the reality.

As for the CEO's, they are usually the "bad guys" of the story.
"I wanted to become a poet, but I wound up a businessman". These lyrics (freely translated), are from a very well known Francophone song.

They imply that being a businessman is a much inferior creative alternative to being an artist, a poet. But is that necessarily true?

Many businessmen, managers and executives can claim that the content of their work is much more interesting and creative than it is often portrayed. Procedural - boring work is performed by artists too. No profession or other activity, goes without procedural or boring parts.

The correlation between the interest and the glamour "value" of a job and its remuneration level is a very complicated one. Few professions combine glamour, interesting content and high remuneration. On the other hand, unattractive jobs do not usually carry a salary premium.
Sports commentators apply metaphors such as "poetry", "art", "ballet", "inspired", etc. to describe impressive moves made by athletes.

Nowadays more vision, creativity, flair, and "poetry" is needed in managing, at all levels. But many "poetic" actions by managers go unnoticed.

All about Management: Follow your Strategy

In cost cutting periods, the value of the Management Accounting function becomes more apparent than usual.

Business school case studies are full of cases where companies cut allocated joint costs from one product, only to find out later that the full costs were now accumulated on the revenues from the other remaining product(s).

All management functions are important to corporate value creation. This corporate value cannot easily be allocated/attributed to each function (e.g. Marketing, Sales, HR, IT, etc.). Moreover, there are no "productive" vs. "staff" functions.

This traditional thinking becomes even more dangerous when radical corporate cost reduction decisions have to be made, often under intense psychological pressure for corporate cost cutting, brought about by the financial markets

Keeping one's costs high at the expense of maintaining a particular profit expectation "market trend" should be justified if this "investment" can be expected to yield a sufficient ROI.

Thus, when the "common market sense" says "cut, cut , cut", going against this "pack" mentality can yield extraordinary returns. Of course there are risks. But, "follow your strategy"

Europe's way?

• 'Who are my (company's) clients?"
• "What are my (company's) "products" (or "services")?
  (i.e. "What business is my company really in?")
• "What are my (company's) "core competences"?

In times of trouble, these questions become even more crucial than they normally are.

In view of the extra-ordinary circumstances, the temptation to "dodge" these issues is significant. Yet, in these times, clarity of vision is essential.

Like individuals, corporations have their energy limitations. Focusing the corporate energy to pursuing the right objectives, under the appropriate strategies, is a key success factor.

Europe's way of dealing with economic recessions seems constrained by its distinct "cultural" heritage (i.e. the "European Social Model"). One opportune question is "how is this model pertinent to the current situation"? Keynes' supporters have strong arguments for intervention. But are they strong enough?