(See agenda and speaker list for backgrounds.) Dick Foster has a story: Boris Yeltsin when asked to summarize the state of the Russian economy says "Good." When asked for a more indepth, two word description, he responds, "Not Good." Creative Destruction: markets outperform coporations. Long term survival and long term performance are not the same thing. Foster chooses to take an investor return lens. It's harder to get rid of a business you already have than create a new one. J&J took steps to make the corporation more market-like. Today, Quest, Global Crossing, Tyco tells us what happens when controls systems are inadequate. Must control what you must rather than what you can. Scott Cook re Intuit: Quicken is now less than 10% of the company's revenues. Quicken's business is not doing badly; it's just that other businesses are growing much faster. "I don't write books like these guys; I just try to do this stuff." Tax software: bought TurboTax, very fast way of generating tax forms on the computer. Then the "interview" process in the program insulated people from the forms; even better. Now they're working to obsolete the need to even type the data in. They're working to fill out your taxes for you. Those are examples of radical reinvention in your core business. Much of what they do in this area happens out of instinct or gut; what is conscious is the effort to see customers and customer needs in new ways. Dick Foster re his book: to talk about a dominating management philosophy in a new business is foolishness. There's too much going on. At the next stage companies start reflecting on the nature of their success -- "a very dangerous thing to do." They begin to attribute their success to themselves, call in the MBAs and everything gets rationalized. Finally, if you make it through that stage, at the top of the food chain you're the expert. You need neither answers nor questions about your business; "psychologists would call this state denial." Once you're their, you miss the opportunities to "sell to the non-consumer." (See Clay Christensen.) What to do about this? Be aware. Ask yourself questions like "what business should we divest this year?" Chis Zook: redefining the core. Remember the book Groupthink. Examined fundamentally problematic decisions. The stronger they wanted to achieve something, and the greater the egos, the more they tended to screen out data antithetical to what they wanted to achieve. Ideas about how to change: roles of outsiders (board of directors constantly pushing on management assumptions). Scott Cook: Intuit brought out a product in '92 to do accounting and blew the launch badly. But within a month they had a central innovation: this was the first accounting software with no accounting in it. Small businesses wanted nothing to do with "accounting" in their accounting software. By paying attention to customers, Intuit got dragged into eliminating accounting from Quickbooks when they realized customers were using Quicken to do their books in the workplace, and returning all the accounting software that was full of traditional accounting features. Dick Foster: minimum number of people needed for a bureacracy to develop is One. Must be aware and combat it. Chris Zook: non-core businesses that are undermanaged are worth paying attention to. Example: Carter's, babyware. Company was handling all aspects of production, and all in the U.S. Their core strengths were the brand, and their baby sleepers. "Remember the power of fewer things." What is repeatable, what should we focus in on? Have to be unsentimental, unwed to the past. [DMH aside: we're talking primarily about law firm clients here, but all this translates to managment wisdom law firms would do well to heed as well.] Randy Komisar asks panel about HP; how do you see the Compaq acquisition and other HP activities in terms of managing from the core? Chris Zook: 80-90% of value pre-merger was in printer business; that had become the core. Compaq's core was PC's -- 1/10th of HP's overall business value. Dick Foster: HP has maintained continuity and survived. They couldn't have come under more pressure, yet they hang in. Scott Cook comments he has a hard enough time running one business, let alone someone else's (ha ha). Q&A: recurring theme seems to be issue of ego. Seems to be a movement among institutional investors to examine the humility factor. Your thoughts? Scott Cook discusses companies with humble, noncharismatic leaders. Such folks are likely to lead with questions, rather than answers (coffee cup: "When I Want Your Opinion I'll Tell You What It Is"). Chris Zook has just completed 20 case studies and CEO interviews, out of which he gleaned this: even more observable than humility is what peoples' experiences have been. Near (corporate) death experiences, times of crisis. He wonders whether too much unbroken success without experience of failure is a dangerous thing. Dick Foster notes that there are alot of humble people who should not be CEO's, but it's equally easy to see where arrogance will lead to disaster. Another question: for Scott Cook, how has Intuit defined its core business? It doesn't. Dave Winer asks about near death experiences; there's alot of that going on here in Silicon Valley now. I.e., Yahoo needs to make money to survive and flourish after the near-death experience it's having now. Scott Cook responds, let's take Amazon, also came up in period of go-go growth. Bezos said when trend to investing for growth changed, his company would change. When it came time to focus on operations and profitability, Scott wondered whether Jeff could lead in this entirely different way. They'll soon be profitable after all costs. The essential element to make that happen is the leader. Next up: THE REALITY FACTOR: MAKING THE SMARTEST BETS NOW, with David Strohm, Partner, Greylock Bjoern Christensen, President and CEO, Siemens Venture Capital Danny Peltz, Senior Vice President, Wholesale Internet Solutions, Wells Fargo Tim Rohner, Managing Director, Bell-Mason Group and co-author, The Venture Imperative