May 3, 2007 Kansas City
May 4, 2007 Chicago, IL

Robert Herbold, former COO of Microsoft and author of Seduced by Success

In Seduced by Success, Robert J. Herbold shows you how to avoid the nine traps of success-the “legacy practices” that almost felled such giants as General Motors, Kodak and Sony. Herbold, a 26-year-veteran of Procter & Gamble who lived through each trap, gives you proven tactics for preventing arrogance, bloat, and neglect while capitalizing on your accomplishments, sustaining your momentum, and retaining your position in the marketplace.
The nine traps every successful organization must avoid are

• Neglect: Sticking with Yesterday's Business Model
• Pride: Allowing Your Products to Become Outdated
• Boredom: Clinging to Your Once-Successful Branding
• Complexity: Ignoring Your Business Processes
• Bloat: Rationalizing Your Loss of Speed and Agility
• Mediocrity: Letting Your Star Employees Languish
• Lethargy: Getting Lulled into a Culture of Comfort
• Timidity: Not Confronting Turf Wars and Obstructionists
• Confusion: Unwittingly Conducting Schizophrenic Communications

“Bob Herbold gets to the heart of why successful organizations and individuals often go into a tailspin, and how this can be avoided. His thorough reviews of specific companies we all know make this a very useful book, and I highly recommend it.”-Indra K.Nooyi, President & CEO, PepsiCo, Inc.

“This book rings painfully true….Bob Herbold demonstrates with clinical precision that a company's fall from grace can frequently be traced back to its time of greatest achievement. Before you get too depressed, however, take heart-he also gives you all the tools you need to avoid that ignominious fate.”-Sir Martin Sorrell, Chief Executive Officer, WPP Group PLC

Event recap from The May Report (edited)

 The BIGFrontier Breakfast Series featured former Microsoft and P&G exec. Bob Herbold Friday morning. At Microsoft, from 1994 to 2001, Herbold oversaw a 4x increase in revenues and a 7x increase in profits. Prior to Microsoft, Herbold was with Proctor & Gamble for 26 years and he ended up as VP of Marketing, which ain't bad for a company mostly known for branding and marketing.

It does not take long when listening to Herbold to figure out that he is not just an author. He has been there, done that, and there is probably very little in business that he has not seen personally. It is hard to throw this guy off his stride. He studied 44 firms for this book, but he has more than three decades in big business to understand first hand what he is writing about.

Change and innovation management is not a new story, but Herbold brought a new and fresh perspective to it. Two of his best examples were Kodak and Sony. He came up with a great quote from the Kodak CEO who was fired or quit --- this is the second guy in the job who had 25 years at Kodak --- and who said that he knew digital cameras would take but the company beneath him was stuck in the culture of being a film company and was not ready or able to change. (continued below)

Images from the 2007 Bob herbold event

Part of Sony's problem was that they thought that the hard drive was useless and they stuck on the idea of the mini disc. I have to read Herbold's book on this because I was a bit confused here. He talked about how Sony took way too long to innovate and respond to the competition --- like seven years! I don't understand if this was the razor problem as in the gave away the razor and made their money on the blades. Kodak did make their money on the film. I don't know if that was the reason they stuck to film in their culture. And for Sony, Herbold pointed out that they missed the boat on a key inflection point which occurred when hard drive capacity expanded significantly. Was the reason that Sony dismissed the hard disk's significance that they did not see it or was it that they thought Sony would make money on mini-disks?

Failing to change a business model, and failing to respond to industry inflection points can happen for many reasons. Herbold sees nine traps that successful firms need to avoid. Much of what he focuses on is cultural and it relates to the bureaucratic entrenchment of a certain mind set.

Let me not oversimplify Herbold. He studied 44 firms and while much of what he said was "old news" he did bring a fresh perspective and he obviously did a fair amount of research for the book. I liked his IBM and Gerstner example. Gerstner discovered in the first 60 days that IBM's customers were quite dissatisfied. He decided to send a set of emails to the entire staff of 300,000 people --- is that right? That way everyone was on the same page and that way, the existing structures did not undermine his efforts to change the culture. He restructured the company around customers and not products.

The Porsche example was also interesting and Bob did not mince words. More on that Monday.

I asked him for his take on Motorola and I will have that Monday for you as well. Also, he talked about McDonald's. Herbold mentioned a number of other firms including Boeing which he discussed with me after the meeting. I mentioned Motorola to Jeff Meredith this afternoon and even though he has not been following the Icahn saga, he made a very perceptive remark. He asked me if there was an example I could think of where a major company had such a downward slide as Motorola. I said, yes, an example from Herbold's talk was Kodak, which has been going straight down for years. Jeff hit an interesting point. They both missed the move to digital, he said. Motorola was very slow to move from digital to analogue and Kodak completely missed the move to digital cameras as they clung to the idea of selling film.

Herbold himself made a ton of money coming into Microsoft in 1994 and leaving in 2001. While he did not exempt Microsoft from his critique, did have to kind of pull it out of him. He would rather praise Steve Jobs and Apple than criticize his old employer, especially one that made him a wealthy man. I believe that Microsoft's stock quintupled in his time there -- at least that is what I was told.

The Steve Jobs examples were enlightening. Herbold talked about how Jonathan Ive and two or three hand-picked engineers were chosen by Jobs to come up with the iPod and they were completely isolated from all other groups at Apple which was quite deliberate by Jobs. He did not want them doing something innovative by committee. I have had this same discussion with the recent former head of a local tech group and you all know his name and what I am talking about. This person has told me repeatedly that he is not a "democrat" with a small "d" and that he does not believe things can really be done by committee decision making which strives for consensus and ends up taking the edges off of any good and somewhat disruptive idea, as Herbold put it. The former organization head refers to it as being "dumbed down by committee."

Herbold told me that a group similar to the one Jonathan Ive ran at Apple was used at Microsoft for some other project, Chris somebody --- I will get it off the tape -- and we also discussed a few other things.

One thing we talked about was what Herbold does other than write books. His last book, you may recall, was about fiefdoms and he certainly used some of that research here, especially with the Sony example. His last book sold 25,000 copies and Herbold hopes that this one will do 40,000. Sales are starting off strong. The guy from Transitions Bookstore told me that he sold 25 books Friday. Lundin hosted an event in Kansas City, MO on Thursday which had about 50 people, also with Bob Herbold.

About the author:
Robert J. (Bob) Herbold, retired COO of Microsoft Corporation, is the author of Fiefdom Syndrome: The Turf Battles That Undermine Careers and Companies and How to Overcome Them (Currency/Doubleday, September 2004). He is currently Managing Director of Herbold Group, LLC, a consulting business focused on profitability. Herbold serves on the Board of Directors of Weyerhaeuser Corporation, Agilent Technologies, First Mutual Bank, and Cintas Corporation. Also, in 2001 he was appointed to the President's Council of Advisors on Science and Technology where he serves as the chair of the Workforce/Education Subcommittee.

Herbold joined Microsoft in November 1994 as executive vice president and chief operating officer. During his tenure in this position until spring 2001, he was responsible for finance, manufacturing and distribution, information systems, human resources, corporate marketing, market research, and public relations. During his 6.5 years as COO, Microsoft experienced a four fold increase in revenue and a seven fold increase in profits. From spring, 2001 until June, 2003 Herbold worked part time for Microsoft as Executive Vice President assisting in the government, industry, and customer areas.

Prior to joining Microsoft, Herbold spent 26 years at The Procter & Gamble Company. In his last 5 years with P&G, he served as senior vice president of advertising and information services. In that role, he was responsible for the company's worldwide advertising/brand management operations as well as all marketing related services such as media and television program production. He was also responsible for management information systems and market research on a worldwide basis.

Herbold has a Bachelor of Science degree from the University of Cincinnati and both a masters degree in mathematics and a Ph.D. in computer science from Case Western Reserve University. Bob is a member of the Board of Trustees of The Heritage Foundation, Case Western Reserve University, the Seattle Foundation, Overlake Hospital, and the Board of Overseers of the Hoover Institution at Stanford University. He is also the President of The Herbold Foundation, which is primarily focused on providing college scholarships to science and engineering students.