Tom Peters’

EXCELLENCEXCELLENCE. ALWAYS.E. ALWAYS.

XAlways/Austin/07 September 2006

Slides* at …

tompeters.comtompeters.com

*also “LONG”

That’s a

BigBig Number

….

THREE THREE BILLIONBILLION NEW NEW CAPITALISTSCAPITALISTS

—Clyde Prestowitz

“There is no job that

is America’s God-given

right anymore.”

—Carly Fiorina/HP/January2004

“Deutsche Bank Moves Half of Its Back-office Jobs to India”/

headline/FT/0327 (500 (500 of 900 of 900

Research)Research)

EXCELLENCE.

MANDATE.

““If you don’t If you don’t like change, like change,

you’re going to you’re going to like like irrelevanceirrelevance even less.”even less.” —General Eric

Shinseki, Chief of Staff. U. S. Army

““It is It is notnot the the sstrontronggest est of the of the

species that species that survives, survives, nornor the the most intellimost intelliggentent, , but but the one most the one most

resrespponsive onsive to chanto changgee.”.” —Charles Darwin

“Forbes100” from 1917 to 1987: 39 members of the Class of ’17 were alive

in ’87; 18 in ’87 F100; 18 F100 “survivors” significantly

underperformed the market;

just 2 (2%), GE & Kodak, outperformed the market from

1917 to 1987.

S&P 500 from 1957 to 1997: 74 members of the Class of ’57 were alive in

’97; 12 (2.4%) of 500 outperformed the market from 1957 to 1997.

Source: Dick Foster & Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market

“It is generally much easier to kill an kill an

organizationorganization than change it

substantially.” —Kevin Kelly, Out of Control

(Practical) ImplicationImplication?

“Go for it!”“Go for it!” (Why not—

alternative is slow death, at best)

C.E.O. to

C.D.O.

“The Silicon Valley of today is built less atop

the spires of earlier triumphs than upon the

rubble of earlier debacles.” —Newsweek/Paul Saffo

TP#1*:

NetscapeNetscape!!

*Where would you rather have worked for those 5 years, Netscape or IBM-HP-Microsoft-Oracle? (Where, 25 years from now, would you

rather to be able to tell someone—e.g., grandchild—that you worked?)

““Wealth in this new regime Wealth in this new regime flows directly from innovation, flows directly from innovation,

not optimization. That is, not optimization. That is, wealth is not gained by wealth is not gained by

perfecting the known, perfecting the known, but by but by imperfectly seizing the imperfectly seizing the unknown.”unknown.” —Kevin Kelly, New Rules for

the New Economy

New Economy?!

Sergey + Sergey + Larry Larry > >

Harvard/Harvard/370370

EXCELLENCE. STARTERS.HORRORS.

Franchise Lost!

TP: “How many of you [600] really

cravecrave a new Chevy?”

“Ford, GM and Chrysler do not just make cars expensively … they make bad

cars expensively.” —

Investec analyst, International Herald, 0805.06

Sluggish + Obese + Unimaginative + More

Sluggish + More Obese + More Unimaginative + Even More Sluggish + Even More

Obese + Even More

Unimaginative = NISSAN + RENAULT + GM = Innovative Challenger for

Toyota????

Oh, Great …

Ford: Airplane

guy.GM: CFO.

Small cars HQ: Small cars HQ: LA.LA. Big cars HQ: Big cars HQ: Dallas.Dallas. Corporate HQ: Corporate HQ: Atlanta.Atlanta.

CEO: CEO: Roger Enrico Roger Enrico oror Lou Gerstner Lou Gerstner oror Meg Whitman.Meg Whitman. COO: COO: Bob Nardelli.Bob Nardelli.

Chairman: Chairman: George Steinbrenner George Steinbrenner oror Jack Welch Jack Welch oror Ross Perot. Ross Perot. Vice-chairman Vice-chairman

& CFO: & CFO: Warren Buffett.Warren Buffett.

Chief Marketing Officer: Chief Marketing Officer: Brenda Barnes.Brenda Barnes. Chief Branding Officer: Chief Branding Officer: Phil KnightPhil Knight

(or (or Howard SchultzHoward Schultz). Chief Innovation ). Chief Innovation Officer: Officer: Steve Jobs Steve Jobs oror Jeff Immelt. Jeff Immelt. Chief/Supply Chain: Raid Chief/Supply Chain: Raid Wal*MartWal*Mart or or CostCoCostCo or or Dell.Dell. Chief/Dealer Chief/Dealer

Relations: Relations: Carl Sewell.Carl Sewell.

EXCELLENCE. STARTERS.

BASICS.

Did one of ’em ever turn to the other and say: “Wow, “Wow,

I wonder what I wonder what unimaginable new unimaginable new

tools, tools, otherwise not otherwise not ppossibleossible, will be , will be

brought forth brought forth for mfor myy daudaugghter Alice, ahter Alice, agge e

1717, because, because of this deal?” of this deal?”

People.Product.Clients.

Execution.Enthusiasm.Excellence.

People.Product.Clients.

Execution.Enthusiasm.Excellence.Relentless.

People.Product.Clients.

Execution.Enthusiasm.Excellence.Relentless.

Senility.

Forget>“Learn”

“The problem is never how to get new, innovative

thoughts into your

mind, but how to get the old ones out.” —Dee Hock

EXCELLENCE. THE WORD.

Synonyms

PurityTranscendence

VirtueEleganceMajesty

Antonyms

Mediocrity

EXCELLENCE.

GAMECHANGER.

Excellence1982: The Bedrock “Eight Basics”

1. A Bias for 1. A Bias for ActionAction2. Close to the 2. Close to the CustomerCustomer3. Autonomy and 3. Autonomy and EntrepreneurshipEntrepreneurship4. Productivity Through 4. Productivity Through PeoPeopplele5. Hands On, Value-Driven5. Hands On, Value-Driven6. Stick to the Knitting6. Stick to the Knitting7. Simple Form, Lean Staff7. Simple Form, Lean Staff8. Simultaneous Loose-Tight8. Simultaneous Loose-Tight Properties” Properties”

ExIn*: 1982-2002/Forbes.com

DJIA: $10,000 yields $85,000 EI: $10,000 yields $140,050

*Forbes/Excellence Index /Basket of 32 publicly traded stocks

EXCELLENCE.

ALWAYS.

““Why in the Why in the world did world did you go to you go to SSiberiaiberia?”?”

Business* ** (*at its best): An emotional, An emotional, vital, innovative, joyful, vital, innovative, joyful,

creative, entrepreneurial creative, entrepreneurial endeavor that elicits endeavor that elicits

maximum concerted human maximum concerted human potential in the potential in the

wholehearted servicewholehearted service of others of others.***

**Excellence. Always.***Employees, Customers, Suppliers, Communities, Owners, Temporary partners

EXCELLENCE.

VALUE ADDED.UP THE LADDER.

EXCELLENCE.

SOLVE IT.

$55$55BB

“Big Brown’s New Bag: UPS

Aims to Be theAims to Be the Traffic Traffic Manager for Manager for CorCorpporate orate

AmericaAmerica”” —Headline/BW

EXCELLENCE.

SOLVE IT. NO OPTION.PSF. (PSF++)

“ ‘Disintermediation’ is overrated. Those who fear disintermediation should in fact be afraid of

irrelevance—disintermediation is just another way

of saying that … you’ve become

irrelevant to your

customers.”

—John Battelle/Point/Advertising Age/07.05

Department Head

to …

Managing

Partner, IS [HR, R&D, etc.] Inc.

Up, Up, Up,

Up

the Value-added Ladder.

The Value-added Ladder/Opportunity-seeking

Gamechanging Gamechanging SolutionsSolutions

ServicesGoods

Raw Materials

EXCELLENCE.

EXPERIENCE IT.

“Experiences are as distinct

from services as services are from

goods.” —Joe Pine & Jim Gilmore, The Experience Economy:

Work Is Theatre & Every Business a Stage

Experience: “Rebel Lifestyle!”

“What we sell is the ability for a 43-year-old accountant to dress in

black leather, ride through small towns and

have people be afraid of him.”

Harley exec, quoted in Results-Based Leadership

The Value-added Ladder/Memorable Connection

Spellbinding Spellbinding ExperiencesExperiences

Gamechanging SolutionsServicesGoods

Raw Materials

$79$7988

$415/SqFt/Wal*Mart$798/SqFt/Whole

Foods

Summary:

WallopWal*Mart16*

*Or: Why it’s so absurdly easy to beat a GIANT Company

The Small*Mart Revolution: How Local Businesses Are Beating Local

Competition —Michael Shuman

EXCELLENCE.

DREAM IT.

Furniture vs. Dreams

“We do not sell ‘furniture’ at

Domain. We sell dreams. This is

accomplished by addressing the half-formed needs in our

customers’ heads. By uncovering these needs, we, in essence, fill in the blanks. We

convert ‘needs’ into ‘dreams.’ Sales are the

inevitable result.” — Judy George,

Domain Home Fashions

The Value-added Ladder/Emotion

Dreams Come Dreams Come TrueTrue

Spellbinding Experiences Gamechanging Solutions

ServicesGoods

Raw Materials

Big Blue

EXCELLENCE.

LOVE IT.

Kevin Roberts:

LovemarLovemar

ksks!!

Top 10 “Tattoo Brands”*

Harley .… 18.9%Harley .… 18.9%Disney .... 14.8Disney .... 14.8

Coke …. 7.7Coke …. 7.7Google .... 6.6Google .... 6.6Pepsi .... 6.1Pepsi .... 6.1Rolex …. 5.6Rolex …. 5.6Nike …. 4.6Nike …. 4.6

Adidas …. 3.1Adidas …. 3.1Absolut …. 2.6Absolut …. 2.6

Nintendo …. 1.5Nintendo …. 1.5

*BRANDsense: Build Powerful Brands through Touch, Taste, Smell, Sight, and Sound, Martin Lindstrom

LovemarkLovemark Dreams Come True

Spellbinding ExperiencesGamechanging Solutions

ServicesGoods

Raw Materials

EXCELLENCE.NEW VALUE EQUATION. NEW “C-levels”.

CCXXOO**Chief eXperience Officer

CCDMDM*

*Chief Dream Merchant

CCLL OO*

*Chief Lovemark Officer

CCSTSTOO*

*Chief Storytelling Officer

CCDDOO**Chief Design Officer

CCfafaOO*

*Chief freaks acquisition Officer

CCQQOO*

*Chief quest-meister

CCWWOO**Chief WOW Officer

CRO*

*Chief Revenue Officer

EXCELLENCE. EVERYWHERE.

SpainPortugal

ItalyIreland

Singapore TaiwanThailandMalaysia

Singapore Philippines

UAEOmanChile

RomaniaNew Zealand

Australia

Better By Design: A National Strategy

NZ = NZ = Design Design

ExcellencExcellencee

EXCELLENCE.CENTURY 21.

EMPIRES OF THE MIND.RICHARD FLORIDA.

JUAN ENRIQUEZ.

““HumanHuman creativity is the creativity is the

ultimate ultimate economic economic

resource.”resource.” —Richard Florida, The Rise of the Creative Class

““THE FUTURE BELONGS THE FUTURE BELONGS TO … SMALL TO … SMALL

POPULATIONS … WHO POPULATIONS … WHO BUILD BUILD EMPIRESEMPIRES OF THEOF THE

MINDMIND … AND WHO IGNORE THE TEMPTATION OF—OR DO NOT HAVE THE

OPTION OF—EXPLOITING NATURAL RESOURCES.”

Source: Juan Enriquez/As the Future Catches You

U.S. Historical Strength: Invest in Creativity

*Foster new industries*Foster new industries

*Free & open society*Free & open society

*Investment higher ed,*Investment higher ed, R & D, culture R & D, culture

*Immigrants*Immigrants

Source: Richard Florida, The Rise of the Creative Class

CI/Top10 Metro*: AustinAustin, SF, , SF, Seattle, Boston, Raleigh-Seattle, Boston, Raleigh-

Durham, Portland, Durham, Portland, Minneapolis, Washington-Minneapolis, Washington-Baltimore, Sacramento, Baltimore, Sacramento,

DenverDenver

CI/Bottom10: Detroit, Norfolk, Cleveland, Milwaukee, Grand Rapids, Memphis, Jacksonville, Greensboro, New Orleans, Buffalo, Louisville

*> 1M/49 totalSource: Richard Florida, The Rise of the Creative Class

“The global talent pool and the high-end, high margin creative industries that used to be the sole province of the U.S., and a critical source of its

prosperity, have begun to disperse around the globe. A host of countries—Ireland, Finland, Canada, Australia, New Zealand, among them—are investing

in higher education, cultivating creative people, and churning out stellar products, from Nokia phones to the Lord of the Rings movies.. Many of these countries have learned from past U.S. success and are shoring up efforts to

attract foreign talent—including Americans. … The United States may well be the Goliath of the twentieth century global economy, but it will take just half a

dozen twenty-first-century Davids to begin to wear it down. To stay To stay innovative, America must continue to attract the innovative, America must continue to attract the world’s sharpest minds. And to do that, it needs world’s sharpest minds. And to do that, it needs

to invest in the further development of its to invest in the further development of its creative sector. Because wherever creativity creative sector. Because wherever creativity

goes—and, by extension, wherever talent goes—goes—and, by extension, wherever talent goes—innovation and economic growth are sure to innovation and economic growth are sure to followfollow.”.” —“America’s Looming Creativity Crisis”/Richard

Florida/HBR/10.04

EXCELLENCE.

INNOVATE. OR. DIE.

“A focus on cost-cutting and efficiency has helped many organizations weather the

downturn, but this approach will ultimately

render them obsolete. OnlOnlyy the the constantconstant p pursuit of ursuit of

innovation can innovation can ensure lonensure long-g-term term

successsuccess.”.” —Daniel Muzyka, Dean, Sauder School of Business,

Univ of British Columbia (FT/09.17.04)

More than $$$$

#1#1 R&D

spending, last 25 years?

GM

“I don’t believe in

economies of scale. You don’t get better by being bigger. You get worse.” —

Dick Kovacevich/Wells Fargo/Forbes/08.04 (ROA: Wells, 1.7%; Citi, 1.5%; BofA, 1.3%;

J.P. Morgan Chase, 0.9%)

Scale?

“Microsoft’s Struggle With

Scale” —Headline, FT, 09.2005

“Troubling ExitsExits at Microsoft” —Cover Story, BW, 09.2005

“Too BigToo Big to Move Fast?” —Headline, BW, 09.2005

“I am often asked by would-be entrepreneurs seeking escape from life within huge corporate structures, ‘How do I build a small firm for myself?’ The

answer seems obvious: Buy a Buy a very large one very large one and just waitand just wait.”.”

—Paul Ormerod, Why Most Things Fail: Evolution, Extinction and Economics

The Perils of Conservatism/The Perils of Conservatism/IndustrIndustryy Leadershi Leadershipp

“ ‘“ ‘GoodGood management’ was management’ was the most powerful reason the most powerful reason

[leading firms] failed to stay [leading firms] failed to stay atop their industries.atop their industries. Precisely Precisely

because these firms listened to their because these firms listened to their customers, invested aggressively in customers, invested aggressively in

technologies that would provide their technologies that would provide their customers more and better products of the customers more and better products of the

sort they wanted, and because they sort they wanted, and because they carefully studied market trends and carefully studied market trends and

systematically allocated investment capital systematically allocated investment capital to innovations that promised the best to innovations that promised the best

returns, they lost their positions of returns, they lost their positions of leadership.”leadership.”

—Clayton Christensen, The Innovator’s Dilemma

InnoTacs

We We becomebecome who we hang who we hang

out with!out with!

“The Bottleneck

Is at the Top of the

Bottle”“Where are you likely to find people with the least diversity of

experience, the largest investment in the past, and the greatest reverence for industry dogma:

At the top!”

— Gary Hamel/Harvard Business Review

Measure “Strangeness”/Portfolio Quality

StaffConsultantsConsultants

VendorsVendorsOut-sourcing Partners Out-sourcing Partners (#, Quality)(#, Quality)

Innovation Alliance PartnersInnovation Alliance PartnersCustomersCustomers

Competitors Competitors (who we “benchmark” against)(who we “benchmark” against)

Strategic Initiatives Strategic Initiatives Product Portfolio Product Portfolio (LineEx v. Leap)(LineEx v. Leap)

IS/IT ProjectsIS/IT ProjectsHQ LocationHQ LocationLunch MatesLunch Mates

LanguageLanguageBoardBoard

try ittry it

““Experiment Experiment fearlessly”fearlessly”

Source: BW0821.06, Type A Organization Strategies/ “How to Hit a Moving Target”—Tactic #1

tolerate tolerate [encourage?] [encourage?]

failurefailure

Sam’s Sam’s Secret Secret

#1!#1!

bet the bet the farmfarm

“[Immelt] is now identifying technologies with which GE

will … ssyystematicallstematicallyy set out to build set out to build

entirelentirelyy new new industriesindustries”” —Strategy+Business, Fall

2005

EXCELLENCE.

4/40.

4/404/40

De-cent-De-cent-ral-iz-ral-iz-a-tion!a-tion!

Ex-e-Ex-e-cu-cu-

tion!tion!

Ac-count-Ac-count-a-bil-ity!a-bil-ity!

6:15A.M6:15A.M..

EXCELLENCE.

ACTION.ROOTS.

GRANT

“One of my superstitions had always been when I

started to go anywhere or

to do anything, not to not to turn backturn back, or stop, until

the thing intended was accomplished.” —Grant

NELSON

On NELSON: “[other] “[other] admirals more admirals more frightened of frightened of losing than losing than

anxious to win”anxious to win”

BOYD

He who has the He who has the quickest quickest

“O.O.D.A. “O.O.D.A. Loops”* wins!Loops”* wins!

*Observe. Orient. Decide. Act. /Col. John Boyd

BOSSIDY

““ExecutionExecution is is thethe j jobob of the of the

business business leaderleader.”.” —Larry Bossidy—Larry Bossidy & Ram

Charan/ Execution: The Discipline of Getting Things Done

“Execution is a

ssyystematic stematic pprocessrocess of rigorously

discussing hows and whats, tenaciously following through, and

ensuring accountability.” —Larry Bossidy & Ram Charan/ Execution:

The Discipline of Getting Things Done

PEROT

READY.READY.FIRE!FIRE!AIM.AIM.

Ross Perot (vs “Aim! Aim! Aim!” /EDS vs GM/1985)

MASTERS

“This is so simple it sounds stupid, but it is amazing how few oil people really

understand that you only find oil if you drill wells. You may

think you’re finding it when you’re drawing maps and

studying logs, but you have to drill.”

Source: The Hunters, by John Masters, Canadian O & G wildcatter

HERB

““We have a We have a ‘strategic plan.’ ‘strategic plan.’ It’s called It’s called doing doing thingsthings.”.” — Herb Kelleher

EXCELLENCE.

BEDROCK.TALENT.

Brand Brand = =

Talent.Talent.

DDDD$21M$21M

A review of Jack and Suzy Welch’s Winning claims there are but two key differentiators that set GE “culture” apart from the herd:

First: Separating financial forecasting and performance measurement. Performance measurement based, as it usually is, on budgeting leads to an epidemic of gaming the system. GE’s performance measurement is divorced from budgeting—and instead reflects how you do relative to your past performance and relative to competitors’ performance; i.e., it’s about how you actually do in the context of what happened in the real world, not as compared to a gamed-abstract plan developed last year.

Second: Putting Putting HRHR on on a par with finance a par with finance and marketing.and marketing.

Our Mission

To develop and manage To develop and manage talent;talent;

to apply that talent,to apply that talent,throughout the world, throughout the world,

for the benefit of clients;for the benefit of clients;to do so in partnership; to do so in partnership;

to do so with profit.to do so with profit.

WPP

“The role of the Director is to create a

space where the actor or actress can become more than become more than thetheyy’ve ever been ’ve ever been beforebefore, , more than more than

thetheyy’ve dreamed of ’ve dreamed of beinbeing.”g.” —Robert Altman, Oscar

acceptance

CCQQOO*

*Chief quest-meister

EXCELLENCE. INDIVIDUAL.BRAND YOU.

““If there is nothing If there is nothing very special about very special about

your work,your work, no matter how no matter how hard you apply yourself you hard you apply yourself you won’t get noticed, and that won’t get noticed, and that

increasingly means you won’t increasingly means you won’t

get paid much either.”get paid much either.” —Michael Goldhaber, Wired

DistinctDistinct … or

… ExtinctExtinct

EXCELLENCE

AWOL: THE NEW ECONOMY AND THE SCHOOLS

FIASCO

“My wife and I went to a [kindergarten] parent-teacher conference and were informed that our budding

refrigerator artist, Christopher, would be receiving a grade of Unsatisfactory in art. We were shocked. How

could any child—let alone our child—receive a poor grade

in art at such a young age? His teacher His teacher informed us that he had informed us that he had

refused to color within the refused to color within the lines, which was a state lines, which was a state

rereqquirement for uirement for demonstratindemonstratingg ‘ ‘ggrade-rade-level motor skillslevel motor skills.’ ”

—Jordan Ayan, AHA!

Ye gads: “Thomas Stanley has Thomas Stanley has not only found no correlation not only found no correlation

between success in school between success in school and an ability to accumulate and an ability to accumulate wealth, he’s actually found a wealth, he’s actually found a negative correlation.negative correlation. ‘It seems that

school-related evaluations are poor predictors of economic success,’ Stanley concluded. What did predict success was a willingness to take risks. Yet the success-failure standards of most schools penalized risk takers.

Most educational systems reward those who play it safe. As a result, those who do well in school find it hard to

take risks later on.” —Richard Farson & Ralph Keyes, Whoever Makes the Most

Mistakes Wins

15 “Leading” Biz Schools

Design/Core: 0Design/Elective: 1

Creativity/Core: 0Creativity/Elective: 4

Innovation/Core: 0Innovation/Elective: 6

Source: DMI/Summer 2002/Research by Thomas Lockwood

EXCELLENCE.

BEDROCK.PURPOSE.

“I never, ever thought of myself as a

businessman. I was interested in creating

things I would be proud of.”

—Richard Branson

“People want to be part of something larger

than themselves. They want to be part of

something they’re really proud of, that they’ll

fight for, sacrifice for , trust.” —Howard Schultz, Starbucks

EXCELLENCE.ENTHUSIASM.

ENERGY. PASSION.

RELENTLESSNESS.

““Nothing is so Nothing is so contagious as contagious as enthusiasm.”enthusiasm.”

—Samuel Taylor Coleridge

“It is no use saying ‘We are doing our best.’ You have got to succeed in doing

what is necessary.” —WSC

EXCELLENCE.

AGILITY.

““The most The most successful successful

people are those people are those who who

are good at plan are good at plan B.”B.”

—James Yorke, mathematician, on chaos theory in The New Scientist

EXCELLENCE. SHOWING UP.

2255

MBWAMBWA

“You must bebe the change you

wish to see in the world.”

Gandhi

“The The FirstFirst stepstep in a in a ‘dramatic’ ‘dramatic’

‘organizational change ‘organizational change program’ is obvious—program’ is obvious—

dramaticdramatic personal personal changechange!”!” —RG

EXCELLENCE.

STRETCH.

The greatest dangerThe greatest dangerfor most of usfor most of us

is not that our aim isis not that our aim istoo hightoo high

and we miss it,and we miss it,but that it isbut that it is

too lowtoo lowand we reach it.and we reach it.

Michelangelo

Kevin Roberts’ Credo

1. Ready. Fire! Aim.2. If it ain’t broke ... Break it!3. Hire crazies.4. Ask dumb questions.5. Pursue failure.6. Lead, follow ... or get out of the way!7. Spread confusion.8. Ditch your office.9. Read odd stuff.

10. Avoid Avoid moderationmoderation!!

EXEXCELLE CELLE ALWALWAYSAYS..