In one week, I\u2019ll participate in A.T. Kearney\u2019s\u00a0Digital Business Forum, a unique invitation-only event where leaders in digital innovation have the opportunity to discuss and debate the future of business.\u00a0Leading up to the event, I’ve worked to secure\u00a0the participation of a diverse variety of technology startups, this in order to introduce into the dialogues that will occur discussion about\u00a0the potential disruptive impact these startups will have on existing industry and business\u00a0models.<\/p>\n
Simultaneous to my work on the event, I became\u00a0familiar with the writings of Jagdish Sheth, the renowned Charles H. Kellstadt Professor of Marketing at Emory University and prolific author of books on topics of importance to executives who wish to create radically new rules of business. It seemed timely to try and reach out to him to learn more about his unique insights into how business has changed in the digital age and how the legacy processes companies so rigidly follow can be a part of their undoing.<\/p>\n
As background, Sheth has authored more than 40 books and 400 academic papers and received more than 31 awards including the top four from the American Marketing Association. He\u2019s been widely quoted and interviewed by\u00a0The Wall Street Journal,\u00a0The New York Times,\u00a0Fortune,\u00a0<\/em>and\u00a0Financial Times<\/em>, and has been a guest on radio and television including CNN, Lou Dobbs, and more. Sheth has applied his visionary insights in his role as strategic advisor to some of the largest and most influential companies including AT&T, Motorola, 3M, Whirlpool, GE, Lucent Technologies, Nortel, and Ford.<\/p>\n I was fortunate enough to interview Professor Sheth by phone recently; an excerpt of what we discussed follows.<\/p>\n Based on your work\u00a0with\u00a0many of\u00a0the world’s\u00a0most respected companies,\u00a0how do you\u00a0see\u00a0companies<\/strong>\u00a0reimagining<\/strong>\u00a0their\u00a0business models\u00a0to respond to and take advantage of\u00a0new\u00a0digital\u00a0technologies?\u00a0<\/strong><\/p>\n Jagdish Sheth (JS):<\/em><\/strong>\u00a0Digital technology is turning business upside down. It is more disruptive than any other technology\u00a0has been\u2014including the telephone and television. It is as important, if not more, as electricity or running water.<\/p>\n I think it will have a huge transformative effect on corporate performance. It’ll redefine corporate culture and will definitely redefine and re-engineer business\u00a0processes\u2014whether it’s order-taking or the supply chain, for example. And it is going to change how to implement customer-centricity.<\/p>\n In the recent past and today, the Chief Information Officer has primarily managed the enterprise resource planning (ERP) based infrastructure including platforms like SAP and Oracle. However, 40 percent of a company\u2019s budget\u00a0now goes to\u00a0marketing, largely through cloud computing and on mobile platforms. And,\u00a0the software appropriate for smart phones is very different than that meant for laptops or desktops.<\/p>\n So there has been significant discontinuity, and the CIO unfortunately has not kept up with it. I\u2019ve seen the effect on the marketing side, too, where the Chief Marketing Officer did not anticipate the impact of mobile phones. I was advisor to\u00a0the Bell system when they were\u00a0commercializing the cellular telephone. We had well-known outside consultants, and their forecast (in 1984) was that there would be no more than\u00a0954,000 cell-phone users by the year 2000. But, in reality, it is\u00a0close to 4\u00a0billion today. Nobody knew that the cell phone would leapfrog PCs, especially in countries such as China and India, as the primary device and having e-commerce as Apps rather than going through a browser.<\/p>\n Emerging markets continue to be home to much of digital innovation. We can learn from e-commerce platforms like Alibaba and Flipkart because they’re starting with mobile phones in countries such as China and India.<\/p>\n Marketing is disrupted by digital technology there are no boundaries in the digital world. In the past, marketing knowledge was organized around location, such as the laws of retail gravitation we all still say it is \u201clocation, location, location\u201d in retailing. All traditional media are still based on local reach. However, today in the world of streaming, we can reach an audience anywhere in the world.<\/p>\n So, location-centric marketing laws, media expenditures, and retail store locations are becoming\u00a0somewhat obsolete. Take word-of-mouth, which used to happen only in places like the barbershop or a diner. Today, the Internet and social media are making user experiences reach\u00a0all over the world instantly. We focused on diffusion of innovation theories where opinion leaders influence the masses. Today, we must focus on democratization of innovations.<\/p>\n Control has shifted from the marketer to the user. The future is not with the people who buy, but people who use the product or service. It’s all about user experience. You have to learn how to influence the user and not just the buyer.<\/p>\n Why\u00a0do\u00a0you\u00a0think\u00a0some companies are seemingly more successful than others at reimagining\u00a0customer experiences\u00a0and\u00a0harnessing these new ways of thinking and working?<\/strong><\/p>\n \u00a0JS:<\/strong><\/em>\u00a0I did research on why good companies fail. The most common finding is that all good companies fail if they are either unable or unwilling to change when external drivers such as technology, globalization and non-traditional competition has disrupted the industry.<\/p>\n So the incumbent is at a disadvantage, and somebody who starts fresh, without the \u201ccurse of incumbency,\u201d as I call it, can do very well. Take Amazon, for example, versus a brick-and-mortar retailer like Wal-Mart. The latter may not\u00a0be able to catch up to Amazon because it is has a legacy-oriented IT architecture.\u00a0This is clearly true in the banking and financial services industries. Think about AirBandB and Uber and how they gained advantage over the incumbents.<\/p>\n Secondly, incumbent companies may be locked into their invested\u00a0capital. They have factories or supply-chain arrangements that are based on traditional industrial-age models, and now the digital age transforms things. To write\u00a0those assets on the books is very difficult if not impossible. The classic example is Kodak when film based photography changed to digital photography. What was a competency becomes a trap. I also find that some\u00a0of these companies are also in a state of denial, especially about competition from emerging market multinationals.<\/p>\n In the late seventies, I remember that automobile companies such as General Motors ignored Japanese competition consisting of small cars such as Datsun 210, Honda Civic, and Toyota Corolla. They believed Japanese cars would never catch up with them. Today, Toyota is the number one car maker in the world.<\/p>\n This denial of new reality in the cell phone industry is remarkable. The pioneer, Motorola, lost to Nokia who lost to Samsung and it may lose the market to new entrants such as Xiaomi, LeNovo and Huawei Technologies.<\/p>\n How\u00a0can an organization get its people\u00a0and\u00a0its\u00a0institution\u00a0to shift\u00a0the way they think\u00a0and\u00a0work to\u00a0transform to these new models?<\/strong><\/p>\n JS:\u00a0<\/em><\/strong>The hardest change is not the culture but the processes, followed by reorganization.<\/p>\n In your book,\u00a0Firms of Endearment<\/em>,\u00a0you talk\u00a0about the age of transcendence and how people are\u00a0looking for\u00a0a\u00a0higher\u00a0purpose\u2014how they have\u00a0changing expectations<\/strong>\u00a0for\u00a0the markets\u00a0and\u00a0the workplace itself. How would you say innovation\u00a0and\u00a0digital technology\u00a0might\u00a0facilitate this\u00a0\u201cchanging soul of capitalism\u201d?<\/strong><\/p>\n JS:<\/em><\/strong>\u00a0First, it brings back capitalism\u2019s original mission, which was to serve society as an institution. Corporations used to be organized to stay forever with predictable\u00a0succession planning. After the massive restructuring in the 1980s, everything was driven by shareholder value as the sole objective of the corporation. We got detoured into the belief that \u201cthe business of business is business.\u201d<\/p>\n In the 80s, the stock market collapsed and the debt-to-equity ratio exceeded beyond credit ratings. The conglomerates became out of favor. The break-up value was more than the conglomerate value. We invented concepts of \u201cre-engineering the corporation\u201d and downsizing, right sizing and outsourcing became the norm. Everything was about survival and ensuring that there are no hostile takeovers by private equity companies. Private equity companies, such as KKR and Berkshire Hathaway, invested in the conglomerate companies. It turned into a 25- to 30-year detour. Since the collapse of 2008, that approach has been questioned. Social media has amplified the issue; word gets out much faster now.<\/p>\n So, today the business of business is more than business. I learned that by working for companies in small-town headquarters like Whirlpool in Benton Harbor, Michigan. They did not relocate to large cities to raise capital. Once you go to New York to be close to investors, you basically are investor and analyst driven\u2014you end up living in a “gated community” and in the process put other stakeholders such as employees and the community as secondary priority.<\/p>\n Whirlpool was\u00a0a family-owned company. Even though it was a listed company, the family lived in the small town.\u00a0Church worship on Sunday is a great equalizer; neighbors are also your subordinate managers and their children go to the same school as yours, so you\u00a0become more egalitarian and more stakeholder-oriented. I have seen this at Kohler in Wisconsin, Kimberly-Clark before they moved from Wisconsin and several other great companies in Minneapolis-St. Paul and now in Seattle and the Silicon Valley.<\/p>\n Also, today we are all a fish in a digital fishbowl. There is no separation between personal and my professional life. Everything is recorded now. Therefore, your behavior\u2014which, by the way, in that small-town community was dictated by social norms\u2014is now on\u00a0the Internet and just one Google search away. Today, if I want to know what I did yesterday, I can just do a Google search on me! This is compounded by social media. Today, if just one incident is illuminated in the digital economy, it can pull a leader down no matter where he or she is.<\/p>\n Most important is the motivation of the young talent that is graduating from universities today. They are not as interested in life-long careers, so retention is a continuous challenge. It used to be that if the boss said you had to work late, you did. This was the era of job security. Then we entered an era where companies believed that if bosses showed more compassion for their employees, they would be more productive.\u00a0We began to shift from autocratic (Theory X) to more humanistic (Theory Y) where we cared for the employee\u2019s personal well-being.<\/p>\n Today, the word \u201cboss\u201d has a negative connotation in the minds of young people. Instead, you’re to become a coach and a mentor. So we have to learn that new leadership is more similar to\u00a0what happens on a basketball court, where coaches practice\u00a0tough love. They care a lot for\u00a0their players and know how to unlock their potential. It is the players who are the stars and not their coaches.<\/p>\n Today\u2019s young people want to be empowered, whether they’re competent or not. In Singapore, after extensive interviews, you recruit a talented young person and within 24 hours he says\u00a0he are\u00a0leaving. In exit interviews, they simply say\u00a0I don’t like it there.<\/p>\n They don’t need unions or government as a safety net because their parents are their safety net. Therefore they are just searching for something in their life, to provide meaning and purpose.\u00a0The only way you can bond with them is giving them purpose. I’ve mentored several\u00a0CEOs who are actually lonely inside. They have worked very hard for success and have made a lot of money. But they have never balanced their work with\u00a0purpose, so they eventually say, “Who am I? What have I done?”<\/p>\n With so many\u00a0social-media\u00a0outlets\u00a0now,\u00a0and people\u00a0connecting more in that way,\u00a0it can accentuate\u00a0the gulf\u00a0for those who don’t have\u00a0it\u00a0in their life.<\/strong><\/p>\n \u00a0JS:<\/strong><\/em>\u00a0Absolutely. And the CEO now has to keep in mind the parent-child relationship, where the parent cannot be the child\u2019s buddy. CEOs are struggling with their role. I find symphony conductors are a very good model. The symphony has just one conductor, but he or she can manage 90 musicians with different instruments and personalities to unite them in perfect harmony. The conductor has absolute power but a good conductor also knows the psychology of each of player and how to motivate them in the right way.<\/p>\n ##<\/p>\n The above is just an excerpt of my interview with Emory University\u2019s Professor Jagdish Sheth. To learn more about the valuable and visionary insights\u00a0of this brilliant and personable thought leader, I recommend reading\u00a0Firms of Endearment\u00a0and\u00a0The Self-Destructive Habits of Good Companies\u2026And How to Break Them. You can also visit his\u00a0website\u00a0to learn more about his entire range of work.<\/p>\n","protected":false},"excerpt":{"rendered":" Michael Hong Interviews Emory Professor Jagdish Sheth In one week, I\u2019ll participate in A.T. Kearney\u2019s\u00a0Digital Business Forum, a unique invitation-only event where leaders in digital innovation have the opportunity to…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[9],"tags":[],"yoast_head":"\n