What’s Next 2012Leading Minds in Business on the People, Trends, and Challenges Ahead

TM

What’s Next 2012 TM

Dear Customer,

If you’re a business leader, you can’t help but wonder what’s in store for you, your business, and the world marketplace in 2012.

2011 was a volatile year – political turmoil in the Middle East; financial crisis in Europe; the widespread adoption of e-readers; and the passing of a technology legend. How much more will our world change in the coming year? More important, do you have the information you need to make decisions that will put you on the upside of change?

At McGraw-Hill, we continuously monitor the trends and dynamics of global business markets. This year, as in years past, we asked our world-leading authors to assemble their views on what’s next for 2012. They came back with What’s Next 2012 a unique and exclusive window into the future of leadership, technology, finance, and innovation. No business leader can afford not to read this collection.

And as a valued customer, you are invited to download What’s Next 2012, compliments of McGraw-Hill. I am certain you will find it a valuable asset in the coming year, and I look forward to hearing your thoughts and comments. You can connect with us on Facebook or on Twitter.

I hope you enjoy What’s Next 2012 and I look forward to hearing from you.

Sincerely,

Philip Ruppel President, McGraw-Hill Professional

What’s Next 2012 TM

It’s hard enough to explain the past. But predicting the future? The older I get the less I bother listening to anyone who claims to know what the stock market, geopolitical reality or even the weather will be like more than an hour in advance. I still carry a naïve belief that the Cubs could win a World Series next year. But we all need religion.

With that said, there is one thing I am highly confident will demand more and more of our attention in 2012 and beyond. Inexorable trends from many directions put the fate of our economy, our politics, our planet and even our personal well being more and more on human behavior than advances in science and technology. The most critical need in the world today is accelerated diffusion of competence at influencing human behavior—that of ourselves as well as others.

Consider the convergence of just a few of the fairly indisputable trends around this critical competency:

• Economic growth in mature economies will be sluggish. This is bad news for bosses who depend on a rising tide to lift their individual boats. But it’s a huge opportunity for those who know how to engage employees in ways that differentiate their enterprise from competitors. For example, even in economically blighted Detroit, the custom software house Menlo Labs is growing at double digit rates under the skilled leadership of Rich Sheridan. He has created a culture of unsurpassed quality and reliability that sets them apart even more in a moribund economy than it would in a robust one.

• Chronic health problems will continue to drive health care costs higher. Heart disease, obesity, diabetes, addictions and a host of other conditions will continue to afflict a larger and larger percentage of the population. Mounting research will make it more unavoidably obvious that while therapies can mitigate some of these problems, our capacity to shape our own health habits offers the greatest promise of well being.

• Technology will continue to feed impulses more than values. Smart phones, tablets, MP3 players, GPS enabled gadgets and ubiquitous internet access will continue to feed—and exploit—the natural human proclivity toward immediate gratification. In 2012 we’ll become more acutely aware of the degree to which our lives feel more virtual than real—our relationships, our pleasures and our aspirations are becoming shorter-term and shallower. While some will try to stave off these effects by taking Luddite ascetic oaths eschewing technology—others will offer solutions that help us moderate our own use of technology. They’ll help us return our tools to the status of slaves not masters. The raft of emerging offerings that allow us to shut off texting in moving cars or enable us to voluntarily block our own impulsive access to IMs and internet surfing are the first evidences that we realize we are behaving in ways we don’t like.

• Emerging economies’ growth will separate real leaders from simple outsourcers. For the past couple of decades, business leaders have profited from a race to the bottom of the wage scales. Outsourcing or offshoring to the lowest wage geographies has proven a profitable way to increase margins. As emerging economies see wages rise in 2012 and beyond, the need for real leadership will increase. Ever reducing wage rates will no longer cut it—rather, finding ways to more creatively engage employees in producing value will be the only sustainable solution. And those leaders who lack this capacity will find it hard to compete.

More Capable Leadership in 2012

by JosEph GrEnny

ConTinuEd ►

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author sites:vitalsmarts.comjosephgrenny.com

facebook.com/vitalsmarts

TM

twitter.com/VitalSmartsNewstwitter.com/josephgrenny

ConTinuEd : More Capable Leadership in 2012 • by Joseph Grenny

• Global challenges will continue to exceed the influence capacity of national leaders. We see increasing evidence that climate issues, weaknesses in the international financial system, security threats and other global issues are larger than the capacity of any national-level political leaders—including those of the U.S.—to solve. We live in a hyper-connected and borderless world where problems no longer yield to state-level actions. Unprecedented levels of international cooperation will be required to create the world that serves our universal interests. But this kind of cooperation will never happen until we have leaders capable of imagining institutional forms and global-level influence strategies that will engage this kind of action. Following World War II, leaders emerged who had this capacity. The result was institutions such as the UN, the IMF, the World Bank and others developed shared ownership and shared solutions to cross-border problems. These leaders helped create international behavioral norms for human rights and economic citizenship that were novel to the planet. We need that same level of influence to take on the world-scale problems of today.

I’m not sure what will happen in 2012.

But I have a good idea what must happen if we are to continue to create sustainable human progress.

We need substantially more capable leadership at all levels—from our personal lives to the international theater. We need to dramatically increase humanity’s capacity to influence its own behavior. We don’t lack for ideas that can improve our common lot. We don’t lack for inventions. What we lack is a capacity to influence behavior in a way that helps us enjoy the fruits of the ideas and inventions we have in such abundance.

May we make this kind of progress in 2012.

JosEph GrEnny is the four-time New York Times best-selling co-author of Crucial Conversations, Crucial Confrontations, Influencer, and Change Anything. for more than 25 years, he has served as an expert in organizational behavior, interpersonal communication and corporate training. Grenny is also the co-founder of vitalsmarts, an innovator in corporate training and organizational performance. vitalsmarts has consulted with more than 300 of the fortune 500 companies and trained more than 695,000 people worldwide.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: hayzlett.com/

facebook.com/Jeffrey.Hayzlett

plus.google.com/108906024487950561894/posts

linkedin.com/in/hayzlett

TM twitter.com/JeffreyHayzlett

running the Gauntlet

by JEffrEy hAyzLETT

My predictions for 2012:

The Mobile Wallet

Throughout 2011, you heard me saying "mobile, mobile, mobile." In 2012, I predict the mobile wallet will be the next big thing. With more and more online companies like eBay, Amazon, PayPal, using the mobile device as a platform to make instant online purchases, we're now seeing technology built into smartphones that allows customers to swipe their phones rather than their credit cards at retail outlets. Banks are really taking advantage of this technology and offering their customers a new level of service. This is a space marketers need to not only be aware of, but be involved in.

social – Crowdsourcing vs. friendsourcing

Crowdsourcing is a cool tool for spot surveys, quick answers, and general engagement, but friendsourcing is about trust: reaching out your most valued advisers, the people you really know, and finding out what they think. These people can be your close friends, colleagues, or mentors. However, they can also be your brand ambassadors—the social media friends and followers you’ve built those relationships of trust with over your social media network.

on-Line Qualitative Market research

2012 will be an exciting year for the research industry. It is clear that the shift to online qualitative research has begun and is likely to accelerate in the coming year. The need for deeper and richer insights to support making better marketing and business decisions is critical. Companies must be prepared to act fast. This category is rapidly growing and the corporate researchers that make the move will be best positioned to be the winners in this new game—it is a business imperative.

JEffrEy hAyzLETT is the bestselling author of The Mirror Test – Is Your Business Really Breathing and former Chief Marketing officer and Corporate vice president of Kodak. he is now an in-demand speaker, business Tv personality and leads his company The hayzlett Group.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: leadershipiq.com/

facebook.com/LeadershipIQ

TM twitter.com/leadershipiq

skills Are Commodities: build your Team by investing in Attitude

by MArK Murphy

As if the global labor market (e.g. China and India) weren’t supplying enough skilled people, the Great Recession’s unprecedented unemployment has ensured a nearly limitless supply of technically-qualified candidates for every job. Technical proficiency, once a guarantee of lifetime employment, is a commodity in today’s job market. What employers now want, and what truly differentiates high and low performers, is attitude.

Whether you’re looking for star power inside or outside your organization, you need to assess attitude. But attitude is tougher to evaluate than skills as many people have been trained to fake their attitude with elevator pitches about collaboration and vague exhortations about “teamwork” and “accountability.” And identifying the “right” attitude behind your organization’s success isn’t always easy. For example, Southwest and the Ritz-Carlton are both great companies, but the attitudes driving their respective success are as different as night and day.

first, discover your organization’s unique attitude and then diagnose if someone truly shares that attitude or is just lying in order to look like a high performer. Peoples’ language and grammar reveal a lot and a new textual analysis method helps cut through the sesquipedalian obscurantism (aka lots of big words intended to mislead) to tell if someone truly has the attitude, personality, and chemistry to deliver the results you want..

Listen carefully whether interviewing a job candidate, or discussing a new team with one of your employees. People with poor attitudes (aka low performers) use a lot more qualifiers than people with great attitudes (aka high performers). Qualifiers are words that modify, limit, or hedge the meaning of an answer and include adverbs, waffling, and absolutes.

identify the low performers quickly. For instance, low performers use 40% more adverbs (words ending in -ly, like quickly, totally, thoroughly, etc.) than high performers. They depend on adverbs to ‘amp up’ their answers as the facts don’t speak well enough on their own. So instead of describing a situation where they had a brilliant idea, a low performer might say “I was constantly/ always/often/usually (all adverbs) coming up with great ideas.”

High performers typically have no problem coming up with direct and factual statements that are past tense, personal and don’t rely on adverbs or qualifiers to provide a “high performance” boost.

Low performers also use 40% more waffling (could be, maybe, perhaps) and 100% more absolutes (always, never) than high performers. It may seem strange that waffling and absolutes go hand in hand, but both stem from insecurity. “Maybe I was on a team like that...” is an obvious hedge—not wanting to be pinned down. But the use of absolutes— “the people in this department never know what they’re doing and always ask for my help”—also stems from insecurity and a need to show off.

We also assess how people with great and not so great attitudes differ in their choice of pronouns, verb tenses, and emotions. We listen to candidates’ language and determine whether they’re headed towards the high or low performer camps.

Although we’re only just uncovering the full potential of textual analysis to reveal the attitudes that deliver top performance, it’s a revolutionary idea that will be imperative to success in 2012 and beyond.

MArK Murphy is the author of the bestsellers Hundred Percenters and HARD Goals and the new book Hiring for Attitude. The founder and CEo of Leadership iQ, a top-rated provider of cutting-edge research and leadership training, Mark has personally provided guidance to more than 100,000 leaders from virtually every industry and half the fortune 500. his public leadership seminars, custom corporate training, and online training programs have yielded remarkable results for companies including Microsoft, ibM, GE, MasterCard, Merck, Astrazeneca, Md Anderson Cancer Center, and Johns hopkins.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author sites:josephmichelli.com/zappified.com/

facebook.com/pages/The-Zappos-Experience-Book/107408155986662

TM

twitter.com/josephmichellitwitter.com/zapposxperience

A Continuing Trend of Terrific business Leadership

by JosEph A. MiChELLi

What a great couple of years it has been for leaders in business (albeit not so great from the perspective of political leadership), and 2012 will prove to be no different for the business community. One of the unintended positive consequences of the most recent recession has been the rise of values-driven, socially conscious corporate leadership. Let's face it, for decades marginal and even disingenuous leaders could advance on the strength of the economy alone. Today, and even more so in 2012, leadership requires positivity, integrity, a values orientation, a passion to serve, and a clear message that inspires people to move in the direction of a shared vision.

In 2012, I expect to see leaders expand their focus beyond their company's quarterly earnings to tackle significantly larger social problems. I will be traveling to India with Howard Schultz the CEO of Starbucks to experience the opening of the first Starbucks store in that country. Leaders like Howard will continue to not only steward their companies in emerging markets but they will also expand their social leadership globally. Howard, for example, will increase actions he began in 2011 to address the troubling unemployment rates we are experiencing in the US. His campaign will further challenge other business titans to spur the economy through a collective commitment to hiring. Additionally, he will activate customers and other business owners to send a message to Congress to act in a fiscally responsible manner or lose political contributions. Other leaders with whom I work at Zappos, like Tony Hsieh, will also focus increasingly on social issues like workplace engagement and the need to transform working conditions and toxic business cultures in America and beyond.

More leaders will drop the pretense of perfection in 2012 and understand that people are looking for authenticity, candor, and humility. Increasingly leaders will venture outside of their offices and actually engage in spontaneous conversations with their staff and with customers. The “walking about” leader will enjoy an advantage over those chained to their desk. In 2012, we will see an increase in leaders that seek to inspire and serve their people with a decrease in those that attempt to control or micro-manage them.

In a nutshell, 2012 will be a year where leadership elevates beyond the transactional to the interpersonal. It will be a time when leaders care both for and about those they serve and where profits will be measured both by P & L’s as well as the happiness of employees and customers. Moreover, in 2012 the true measure of leadership will be not only business success but social significance.

Those are my predictions for 2012 and even if I am wrong, I hope they will serve as aspirations of all who carry the title of leader.

JosEph A. MiChELLi, ph.d., is the bestselling author of Prescription for Excellence and The Starbucks Experience. he is an internationally sought after speaker and organizational consultant who has been featured on The Glenn beck show and CnbC’s on the Money.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: winningthecustomer.com/

facebook.com/WinningtheCustomer

TM twitter.com/winningcustomer

2012 Will be About building, not selling

by Lou iMbriAno

Companies, large and small, have always viewed marketing as over-the-top creative ideas that capture the imagination of consumers to drive them to purchase their products and services. Broadcasting the brand in big ways has been the “go-to” manner of selling. Building relationships with the consumer has played a role and customer service has been a part of many organizations’ repertoires, but more as a necessary function of operations than as a part of the marketing plan. There are, of course, exceptions such as the Four Seasons Hotel, Disney, or Zappos, but they are in the minority when using the company experience as a marketing mechanism to drive business.

The economy keeps making times more challenging for all and winning the customers’ business is ever more difficult. Marketing can no longer be viewed as being just about the “ideas” to promote your product or services. In 2012, we will begin to see a larger emphasis on building relationships with consumers, and budgets that were set for big marketing and advertising campaigns will be shifted to support the structure and efforts of customer happiness. The focus of marketing will migrate from product-centric to more consumer-oriented engagement.

I realize that consumer engagement is not anything new in 2012, but with the financial demands and an even smarter consumer, a new focus will have to be placed on how a company engages to build a consumer’s trust and confidence. There will have to be a deeper, more interpersonal level of interaction and understanding of the consumer. The current structure of organizations will have to change to support this notion and resources will have to be shifted. The ideas will also have to shift from the larger-than-life broadcasting of product characteristics to see how products and services fit with the consumer’s actual needs. Any companies with a “standard method of operation” when interacting with consumers have to break out of their handbooks and listen to consumers to understand their goals.

Social media engagement has become an even larger priority as a mechanism to listen to and engage with customers. This part of the organization, and others, that previously have been viewed as cost centers to a company will now have to be looked at as new business mechanisms, while the old ways of selling will have to be re-examined. The current customers of organizations will provide the opportunity for more revenue in two ways: spending more themselves and becoming ambassadors of the brand. Because of this shift, resources will have to be divided more evenly between current and new business, and the antiquated 80/20 rule will have to be abandoned.

Selling in 2012 will have to be less about a company’s products and services and more about winning the customer. The new year will be less about selling and more about building.

Lou iMbriAno is CEo of Trinityone Worldwide, a sports and entertainment marketing company. from 1997-2006, he oversaw the sales and marketing for the new England patriots, new England revolution professional soccer team, foxboro stadium, and Gillette stadium.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: managerscanyouhearmenow.wordpress.com/

increase Consumer Confidence to regain Economic strength

by dEnny f. sTriGL

Unfortunately 2012 is shaping up to be another difficult year for the business world. I don't see that much will change until after the U.S. Presidential election next November. Unemployment will remain high, between 8 and 9 percent, with real unemployment much, much higher. We will be fortunate if we see real GDP growth of over 3 percent here in the U.S., and construction spending and factory orders will continue to be down through at least the first two quarters of the year.

I'm normally an optimist, but frankly in the near term there is little to be optimistic about. Throughout 2011 we heard nothing but bad economic news followed by more bad news. Consumer confidence has been at its lowest level in over 30 years. In general people have been skittish because they can't find any good economic news to hang on to. If some glimmer of good news comes out, it has been followed by more negative news. Hence the market volatility we saw throughout 2011.

As consumers, over the course of the last two years, our confidence has steadily declined. A strong indicator of the level of consumer confidence is the rate at which people save. The savings rate has recently been about 5 1/2%—a rate which is the highest we've seen since the mid 1990s. People have seen their two biggest assets; their 401K plans and the value of their homes, significantly depreciate. And when people hear their president express concern about whether the government will be able to issue retirees' social security checks without an increase in the debt ceiling, they worry, they wonder what's happening...and they don't spend their money.

Low consumer confidence leads to low corporate confidence. If consumers aren't buying products at the rate they once did, companies slow production. Retail sales were slow in 2011 and will continue to be slow through most of 2012. This situation has resulted, and will continue to result, in the slow industrial production numbers we have been seeing. U.S. corporations, too, worry about higher taxes, more regulation, and costs associated with the new healthcare legislation. This legislation coupled with weak demand for products will continue to result in lack of hiring, or perhaps further layoffs.

Unfortunately, in our current economic and political environment consumers and corporations don't have the confidence to invest. 2011 saw companies wisely paying down debt and cutting costs to improve their bottom line profitability while they saw slow top line growth. In at least the first half of 2012 we will continue to see the same.

Ironically, there has never been more money on the sidelines waiting for a reason to invest and the cost to borrow has never been lower. I'm optimistic we will see improved consumer confidence and return to strong economic growth after the 2012 general election. I'm confident we have the brain power, ingenuity, and resources to make it happen. It can only be done, however, without more "help" from Washington. Incidentally, the economies of many countries around the world are depending upon America regaining her economic strength.

dEnny sTriGL, former president and CEo of verizon Wireless is widely recognized as one of the most prominent architects of the wireless communications industry and his career in telecommunications spans over four decades. he is past chairman of the board of directors of the Cellular Telecommunications & internet Association, the national industry association based in Washington, d.C.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: whatworksonwallstreet.com/

investing in stocks in the Coming years

by JAMEs p. o’shAuGhnEssy

Most investors would love to know what to expect from the investment markets in 2012. Of course, the problem is that over short periods of time it is difficult to predict which markets will be the best for investors. The good news, however, is that if you take a longer-term point of view, it becomes much easier to make choices today. Often, the investment that appears the safest in the short-term is actually the most detrimental to your long-term financial health. Take bonds, for example.

Over the last several years money has been pouring into bond funds just as it has been pouring out of stock funds. Yet, as I write this, the yield on the 10-year Treasury bond is at a record low of 1.73 percent. That means investors who buy the bond today and hold it through its maturity will earn a pittance over the next ten years, and that is before taking the effects of inflation into account. Indeed, if we assume standard inflation over the next ten years, investors buying the 10-year Treasury will actually see the real, inflation-adjusted value of their portfolios decline over the period.

Contrast that with what you can earn with an investment in stocks. In the fourth edition of my book What Works on Wall Street, I featured an investment strategy that invests in market-leading companies with high dividend yields. Currently, the dividend yield on a portfolio of 30 stocks selected by this strategy is 6.83 percent! You can enjoy significantly higher income than an investment in bonds, but also benefit from any capital appreciation the stocks might enjoy over the next decade. Nevertheless, many readers worry about the value of their capital fluctuating in a volatile market, which brings us back to the ability to focus on the long-term when making financial decisions in the here and now.

I’ve studied the rolling 10-year increase in income from this strategy since 1963 and found that the average percentage increase in income from dividends over all previous ten-year periods was 148 percent! What’s more, given where we are in the stock market—emerging from the second worst ten-year returns in over 110 years—history demonstrates that the future returns to the market over the next five- and ten-year periods will likely be strong. When we analyze the 50 worst ten-year returns for the stock market since 1871, we find that the average real—or inflation-adjusted rate of return—for stocks over the next five- and ten-years was always positive, averaging 15.53 percent per year over all five-year periods and 14.63 percent per year over all ten-year periods.

Thus, while the stock market may always be more volatile than other investments, I think that investors who can take a longer view will be much better off considering equity investment strategies like this one, rather than fleeing to the perceived safety of bonds.

JAMEs o'shAuGhnEssy is Chairman and CEo of o'shaughnessy Asset Management. he previously served as portfolio Manager, director of systematic Equity, and senior Managing director for bear stearns. o'shaughnessy is the author of the bestsellers What Works on Wall Street, How to Retire Rich, Invest Like the Best, and Predicting the Markets of Tomorrow: A Contrarian Investment Strategy for the Next Twenty Years.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: storyleaders.com/

facebook.com/storyleaders

TM twitter.com/storyleaders

rediscovering the human Connection

by MiChAEL bosWorTh and bEn zoLdAn

At Story Leaders, we believe change in the sales world is right around the corner.

Once upon a time, before information technology, businesses had to rely on good old-fashioned, face-to-face human contact to build and maintain relationships with their employees and customers. This high level of personal interconnectedness fostered strong corporate cultures. An employee knew his or her company’s story, values, and beliefs—and so did customers. A strong corporate culture, in turn, fostered a sense of corporate responsibility from one generation to the next, a commitment to developing people and their careers.

But in recent years, things changed. As one of our clients put it, “When I was at IBM in the late eighties, the company felt a sense of responsibility to develop the next generation of leaders. Now, nobody does it.”

That change can be attributed, in part, to the advent of the Information Age. IT promised to make us all more connected, more informed, more productive. But if IT has broadened our capacity to connect, it has also led to a shallower brand of connection. We don’t have to connect person-to-person anymore, so we don’t.

Other changes in the business climate, such as deregulation, contributed to a broader shift in corporate America. The conceptual, right-brain outlook that once guided so many companies to success was replaced by a more myopic, left-brain outlook focused on profits, processes, systems, and technology. Corporate responsibility and personal connection took a back seat to P&L statements. Automated systems replaced people. Numbers trumped values and beliefs.

Even the sales profession, where interpersonal relationships have always been so important, felt the effects. The traditional emphasis on personal, emotional connection got shunted aside by automation, forecasts, and expertise. (We should know; we were the ones who developed the era’s prevailing, left-brain sales paradigm.)

The result? An economy-wide disconnect between companies and their employees and customers. Granted, a few companies, such as Southwest and Apple, managed to buck the trend, effectively communicating their values and preserving their identity. But the business world in general suffered a decline in its collective emotional intelligence.

Fortunately, we believe the pendulum is about to swing the other way. The current financial crisis has served as a wake-up call to corporate America. Businesses have been forced to acknowledge that there has to be a better way. Change is always slow, but the crisis brought the pain necessary to set change in motion.

We predict 2012 will be a groundbreaking year, one in which corporate America will begin to raise its collective Emotional Quotient (EQ) once again. By looking to other professions and disciplines, we’ll start to relearn the value of working from our beliefs (why we do what we do), rather than from a tunnel-vision focus on profits (what we do). By heeding new scientific discoveries about human behavior, we’ll start to gain a better understanding of why people buy into ideas, how they’re influenced to change. By following the example of companies like Southwest and Apple, we’ll start getting back to sustainable, nourishing corporate cultures. In short, we’ll begin to rediscover the value of human, emotional connection and its capacity to enrich not only our personal and professional lives, but also our bottom line.

MiChAEL bosWorTh and bEn zoLdAn are co-authors of WHAT GREAT SALESPEOPLE DO, The Science of Selling Through Emotional Connection and the Power of Story and co-founders of story Leaders, LLC.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: jamesladams.typepad.com/blog/

Making the best products in 2012 and beyond

by JAMEs L. AdAMs

In 2012, most of our institutions will continue to flail around trying to figure out how to handle major challenges such as increased gobalization, the use and misuse of information technology, increasing populations and complexity, rising expectations, and shrinking resources. We will necessarily learn more about how to address these issues during the year.

I am particularly concerned with the products of technology, which exist to improve life for humans. Technology has come up with miracles in the last 10,000 years, but can do better. My book Good Products, Bad Products is about a number of aspects of product quality that often receive less attention than they should. The message in the book is that the products of industry should better serve us. The contents discuss why these products often fall short, and ways to improve them. We can definitely work on such products and services in 2012 and beyond. I believe that all of us involved in developing a product should aim to make it the best product of its type in the world!

There are a number of advantages to this goal:

1. It is good for you. It is fulfilling and rewarding to seek the best, especially if you succeed.

2. It is good for your family. Your kids can brag about you to their friends and your spouse can be more proud of you.

3. It is good for your work group. Groups function better of they are challenged with difficult problems that promise great rewards if solved.

4. It is good for your company’s reputation and profit.

5. It is good for the nation in which you live to be associated with such a product.

6. It is good for the human race which the product serves.

Many of us in the U.S. have lost sight of this goal. Fifty years ago we thought our products were the best in the world, even though some of them were clearly not. Now we are forced to consider our Japanese and German cars, our Korean electronic equipment, our computer code written in India, and “made in USA” products consisting of components manufactured in China, and realize that we are not only facing strong competition, but losing on many fronts. We are discovering that outsourcing, although economically beneficial to companies, is costing us jobs, making it difficult to control quality, and, even worse, slowly causing us to lose skills and experience essential to produce outstanding products. Companies are obsessed with short-term profits and burdened by past successes and traditions. We are worrying about our products’ ability to compete in the global marketplace. We have gone from overly optimistic to overly pessimistic.

We need to raise our sights and go for the best, even if we have to face a bit more uncertainty. For better or worse, being best in the world is obviously important to us. We suffer a national gloominess as other countries surpass us in health, longevity, child mortality, growth, and producing outstanding products. We have gone from an overly positive self-image to an overly negative one. Wouldn’t it be more fun, and perhaps more successful to put our effort in producing the best, even if we don’t produce the most? And the good news is that if we produce the best, we probably will have the option of producing the most.

And though I may seem U.S.-centric here, I can say the same ideas apply for people working at product development any place in the world. We all are pretty proud of our capabilities and in moving forward into 2012, we must better use them in improving the quality of the products of our industries, and therefore the quality of our lives.

JAMEs L. AdAMs, is an emeritus professor at stanford university, affiliated with the departments of mechanical engineering, management science, the program in science, technology, and society. his expertise covers mechanical engineering, product design, creativity and innovation, and organizational behavior. Adams is the author of Conceptual Blockbusting, Flying Buttresses, Entropy, and O-Rings, and The Care and Feeding of Ideas.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: expectationsinvesting.com/

short-Termism in 2012

by ALfrEd rAppAporT

The long-held notion that the only safe forecast is one that is long-term and presented more than 500 miles from your home has been completely overturned by the Internet. An imprudent forecast can now be exposed instantaneously, irrespective of the forecaster’s location. Nonetheless, because of the significant role that short-termism played in the global financial meltdown and is likely to play in shaping the economy in the years ahead, sharing some thoughts about what to expect in 2012 is worth the risk.

To get the economy back on track, government spending, budget deficits, and the alarming debt level must be reined in. But ultimately job creation and increasing the value of 401(k) and IRA accounts depend on economic growth in the private sector. Short-termism, the obsession by corporate and investment managers with delivering short-term results without regard for potentially destructive long-term consequences, is a job and retirement savings killer and the mortal enemy of economic growth.

Little has changed since the financial crisis. Corporate executives remain obsessed with meeting Wall Street quarterly earnings expectations and worry about near-term movements in their company’s stock price. Investment managers continue to focus on quarterly performance relative to their benchmark index and competing funds.

If the corporate and investment communities fail to address short-termism, wealth- and job-creating investment opportunities with longer-term payoffs will be intentionally bypassed, more bubble and bust cycles may be in store, and even the supremacy of free-market economies may be at risk.

The most effective way to combat short-termism is to reward corporate executives and employees at all levels of the organization for creating superior long-term value. With proper incentives in place, becoming a long-term value-creating company turns into an act of enlightened self-interest. Nonetheless, it will take bold leadership by boards of directors, CEOs, and institutional investors, who represent retirement savers with investment time horizons of 30 to 40 years or longer, to make this change happen. The stakes are too high to allow failure. A meaningful reduction in short-termism is an urgently needed private-sector stimulus package for unleashing economic growth and job creation.

Policies and everyday behaviors consistent with long-term value creation invariably challenge long-accepted and cherished organizational practices. It’s therefore a very safe bet that a wholesale abandonment of short-termism is unlikely to take place in 2012. But, I believe that we will witness a few influential opinion leaders from the corporate and investment communities step up and establish the path for others to follow.

dr. ALfrEd rAppAporT is the Leonard spacek professor Emeritus at northwestern university's J.L. Kellogg Graduate school of Management. he is the author of the pioneering book Creating Shareholder Value: The New Standard for Business Performance and coauthor of Expectations Investing: Reading Stock Prices for Better Returns. dr. rappaport has been a guest columnist for The Wall Street Journal, The New York Times, Fortune, and BusinessWeek. he created and designed The Wall street Journal shareholder scoreboard, an annual ranking by total shareholder returns of the 1,000 most valuable u.s. corporations, published annually from 1995 to 2008.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: moneywatch.bnet.com/investing/blog/wise-investing/

TM twitter.com/larryswedroe

“We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from

grown-ups who behave in the market like children.”

—Warren Buffett

There is an overwhelming body of evidence that there are no good stock market gurus or economic forecasters. Yet, investors continue to be attracted to what Jane Bryant Quinn called “investment porn.” The attraction might arise from what seems to be an all-too-human need to believe that there is someone who can protect us from bear markets. Unfortunately, there is only one person who knows where the market is going and if we ask him, we won’t get an answer in this lifetime. (In the next one, it won’t matter.) This is why whenever I am asked about my forecast for the economy or the market my answer is always the same: “My crystal ball is cloudy.”

however, when it comes to predicting investor behavior, my crystal ball is perfectly clear. With that in mind, here are five “fearless forecasts” for the coming year:

1. While individual investors worship Warren Buffett, and desire to invest like him, they will in fact do the opposite. Buffett advises that if you are going to try to time the market (something he advises against) you should buy when others are panicking, and sell when others are greedy. Instead, individuals will buy (high) after periods of strong performance and sell (low) after periods of poor performance.

2. Despite the mountains of evidence showing no persistent active management outperformance beyond the randomly expected, investors will pour money into “hot” funds — Morningstar’s four-star and five-star rated funds. This will happen despite Mornginstar’s own conclusion that simply ranking funds by expenses produces better results than the star ratings.

3. Individuals will confuse the familiar with the safe and overinvest in their employers and other local companies.

4. Investors will fire active managers who have performed poorly and hire new ones without asking themselves: “If the process I used to select managers in the past failed to achieve the desired result, and I’m not doing anything different, why should I think I will succeed this time?” Doing the same thing over and over again and expecting a different result is what Einstein called insanity.

5. Investors will pour money into complex products (such as structured notes, guaranteed minimum return notes, and equity-indexed annuities) despite the fact that these are products meant to be sold, but never bought. If a security is complex, you can be 100 percent sure the complexity is in favor of the issuer.

My fondest wish is that you prove me wrong.

LArry sWEdroE is principal and director of research at bAM Advisor services. he writes the popular blog “Wise investing” at Cbs MoneyWatch.com. he has also held executive-level positions at prudential home Mortgage, Citicorp, and Cbs. rC bALAbAn is a former journalist and currently the media specialist for The buckingham family of financial services, which includes buckingham Asset.

five “fearless forecasts” for 2012

by LArry sWEdroE And rC bALAbAn

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: http://www-personal.umich.edu/~liker/

facebook.com/Jeffrey.Liker

What’s next in the World of Lean and Continuous improvement?

by JEffrEy K. LiKEr

Since The Machine that Changed the World (1991) defined “lean production” (based on the model of the Toyota Production System) as the next new paradigm of management since the mass production revolution, lean has spread from automotive to the rest of industry globally; to defense, to financial services, to government, to health care, and more. As lean has expanded globally we have learned a great deal, both about what it really means within Toyota and about factors that lead to success and failure in trying to bring it to other organizations.

At a high level we can view the evolution of lean from a toolkit to eliminate waste, to a system to deliver customer value, to a philosophy of continuous improvement. Now we are moving into a new era: lean is being recognized as a deep corporate philosophy that must be reinforced daily by leadership at all levels of the organization. It is a way to connect operational excellence to a company’s business strategy. This connection can only be achieved if team members both deep and broad in the organization are constantly surfacing problems, finding the root cause (Plan), attempting countermeasures (Do), checking what happened, and acting on what they learned (PDCA).

As a global movement, there are no signs that lean is losing traction. A large portion of organizations have some sort of lean program giving it various names. Whatever the philosophy is called, what will kill the efforts is viewing lean as a program led by a specialized staff organization or outside consultants to get short-term results. The only root to success for the long-term is to view lean as a cultural transformation toward the goal of developing people at all levels who not only do their work, but constantly look for better ways to do their work. My book, The Toyota Way to Continuous Improvement, gives detailed examples of the journey of organizations in different sectors—the good, bad, and ugly.

The role of leadership in a lean organization, as detailed in The Toyota Way to Lean Leadership, is to live the values, show the way, and develop others through daily coaching. Organizations are increasingly discovering the role of culture and leadership and will continue to do so into 2012. Unfortunately, there is no quick-fix recipe to transform leaders from a short-term focus on quarterly returns to a long-term focus on developing people to achieve operational excellence—it is a challenge. They must want it badly and transform themselves. Leaders that succeed in changing themselves to lead, teach, and coach on the long-term journey to continuous improvement throughout the organization will change the game in their industry. Though it is happening slowly and a bit spottily, the momentum for true leadership and cultural change is growing.

JEffrEy K. LiKEr, author of the popular Toyota Way books, is the acknowledged expert on Toyota processes and culture. he is professor of industrial and operations Engineering at the university of Michigan and a teacher and consultant through Liker Lean Advisors.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: mba.tuck.dartmouth.edu/pages/faculty/richard.d%27aveni/

facebook.com/ThunderbirdSchool

TM twitter.com/Thunderbird

re-discovering strategic Capitalism

by riChArd d’AvEni

2012 is an important year. Politically and economically America is at a crunch point. But there is something even bigger at play: the shape and future of American capitalism.

This is an odd thought. After all, we have been brought up to believe that Americans are arch-capitalists – from our brilliant world-changing entrepreneurs to our hugely successful globe-spanning corporations. It is true that we are imbued with capitalism, but that does not mean we are playing a smart game. Indeed, while we have been largely playing the same capitalist game for generations, the Chinese – yes, the Communist Chinese – have evolved a smart and strategic form of managed capitalism which is providing them with economic growth.

The stats are daunting. While the U.S. economy is still ten times larger than China’s, it is commonly estimated that China will top the U.S. economy in size by 2050, thus ending the American Dream of another century of world economic leadership. Some say it will be as soon as 2027. Chinese GDP growth has been from 3 to 7 times faster than the U.S. rate for most years during the last decade.

So, what needs to happen in 2012 and beyond for the United States to compete with the seemingly unstoppable Chinese juggernaut?

It must start with a debate. The best thing which could happen in 2012 is a national debate about the rise of China and what we plan to do about it. In a free society debate is the lubricant of progress. And yet, many of our business leaders refuse to speak about what’s going on. Many are afraid of the stock market’s reaction if they suggest that China is not a safe place to invest. Many others fear the Chinese government’s reaction.

The conspiracy of silence is not solely the preserve of CEOs and politicians. The American people are largely in denial. Witness the continuing belief among many that we have a responsibility to solve every problem under the sun, including world hunger, global democratic rights for all, and the protection of allies, even when their usefulness to us is diminishing.

so, a debate, ignited by the presidential campaigns, would be a start. fundamentally, we have to re-think and re-learn our approach to capitalism. We have to master strategic capitalism. This sets three goals for the nation:

• to intentionally outpace, outperform or disrupt rival capitalist systems that present a major threat to the nation’s prosperity and power

• to intentionally guide the nation’s economy toward a better long-run competitive position by adjusting the nation’s mixture of different forms of capitalism

• to intentionally shape a world (economic) order that benefits the nation and its allies through the creation of a strong, global economic sphere of influence and trade patterns within that sphere.

Strategic capitalism is the defining issue of our times. It will shape the political debate in the next U.S. Presidential election, and all across Europe. It is the theme that will shape the economics and politics of the world for decades to come. Our capitalist strategy over the next few years will determine the fate of nations and the world economic system.

riChArd d’AvEni is professor of strategy at the Tuck school at dartmouth College.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author site: businessgenome.com/

facebook.com/BusinessGenome

TM twitter.com/BusinessGenome

linkd.in/BusinessGenome

Embrace your inner Angler: replace forecasting with forward casting for competitive advantage in 2012

by AndrEA KATEs

‘Tis the season for predictions, when business leaders rely on experts’ forecasting skills for insight on what the year will bring. But, forecasting is like trying to hit a dartboard. Only luck, and a quick hand, will tell. In the past, when competition didn’t move quite so fast and conditions were less complex, some predestined companies hit it right, especially when the market behaved exactly as predicted. Under those ideal conditions, double-digit growth was achieved as planned by December 31.

Times have changed. The 2012 business environment isn’t a lake, but a river. We can’t just lower our bait and wait for the fish to come. We have to master new techniques for attracting fish, or we’ll fail and starve.

We need to embrace our inner fly fisherman and master the skills we need to fish in rapidly-running waters.

1. don’t forecast. forward cast.

Learn to read the competitive waters differently—with a dynamic view of what’s upstream and a good feel for conditions downstream. Where are your fish heading?

If you’re a Rite-Aid or a 7-11, what will you make of Walmart’s new small-box neighborhood marts? If you’re a restaurant, what can the food truck on the corner teach you? Are the Hyatt’s anti-allergy Respire Rooms a sign of opportunity for wellness-focused travel? How will InBev respond to the craft beer movement? When coolhunting.com headlines Uniqlo pop-up stores as a new retail trend, how will traditional retailers and real estate companies respond?

2. once you sense where the fish will bite next, throw your best fly forward.

Go the route of Green Mountain Coffee, which placed its bets on the single-serve coffee market and delivered 63% growth in revenues as a result. Commit, innovate, collaborate, and engage your customers in your new direction.

3. Condition your team to recast when necessary.

Adaptation to change requires a team that pays attention to competitive shifts and learns to adjust mid-stream. Practice observation, responsiveness, and nimbleness.

4. Test the waters in some different rivers—think cross-industry.

Watch the waters where your customer already lives. Which brands already attract them? When rental car companies have your car ready the instant you arrive, will customers expect hotel companies to follow suit? When smart phones can transmit information directly from your bank to a store, will credit cards become obsolete?

What signs do you see today that reveal where your fish will bite tomorrow?

AndrEA KATEs is author of Find Your Next: Using the Business Genome Approach to Find Your Company’s Next Competitive Edge, based on her experience with more than 250 clients including royal dutch shell, KpMG Jones Lang Lasalle, and GM/onstar. she is founder of the business Genome® project, and an expert in cross-industry innovation.

What’s Next 2012 TM

ALso AvAiLAbLE froM This AuThor Get gift ideas for everyone on your list

Author sites:druckerinstitute.com/businessweek.com/bios/rick-wartzman-2126.html

facebook.com/pages/The-Drucker-Institute/370577529725

TM twitter.com/DruckerInst

Three Glimpses into 2012

by riCK WArTzMAn

When McGraw-Hill asked me to put together a short piece containing my “predictions . . . into 2012’s biggest business challenges through the lens” of Peter Drucker, I had to laugh. Drucker, after all, thought that making predictions was a terribly treacherous thing to do.

“We must start out with the premise that forecasting is not a respectable human activity and not worthwhile beyond the shortest of periods,” Drucker wrote in Management: Tasks, Responsibilities, Practices, his 1973 classic.

That said, Drucker had an incredible knack for picking up on pivotal shifts and patterns in the economy and society before most people could discern them—or, as he put it, for looking out the window to “see what’s visible but not yet seen.” So, with that in mind, here are three glimpses out the window, if not outright predictions, for what may lie ahead over the coming year:

1. More and more companies will realize they can’t find the skilled workers they need to fill the openings they have. “We face a growing mismatch,” Drucker warned way back in 1985, "between jobs and available labor supply.” To be sure, the current jobless recovery is being driven in large measure by the depth of the recent recession and the continuing reluctance of businesses to hire. But there is no question that in addition to these cyclical issues, major structural changes are at play.

New jobs demand “a habit of continuous learning," Drucker explained in a 1994 article. Those who previously would have gone into manufacturing “thus cannot simply move into knowledge work or services the way displaced farmers and domestic workers moved into industrial work.” What’s so daunting is that the only way to fix this growing problem is to turn around our troubled schools and to create a system of lifelong education and training for workers of all levels—an incredibly time-consuming and expensive proposition.

2. The Euro will collapse. “It is much too much to hope,” Drucker wrote in his 1999 book Management Challenges for the 21st Century, “that the individual countries within the European Union will subordinate their domestic policies to the stability of the Euro.”

3. China will continue to confound. The world’s second largest economy will send decidedly mixed signals through 2012 as to whether it’s destined for a bubble-bursting “hard landing” or a far softer one. This will make it increasingly difficult for outsiders to sift the evidence and know whether—and how much—to invest there. For as Drucker declared in the mid-1990s: “A prosperous China that at the same time has a modicum of social peace would be the greatest market opportunity since the tremendous recovery of defeated Europe and defeated Japan in the years following the Pacific War. A China in collapse . . . may be the greatest danger that we face.”

riCK WArTzMAn is the executive director of the drucker institute at Claremont Graduate university and the author of What Would Drucker Do Now?