de PPP v19, #64

1."Leave the door open for forgiveness"

I would like to begin by saying that between April 17, 1975, and January 6, 1979, the Cambodian Communist Party was the only one responsible for the crimes committed in Cambodia. As evidence of this, I refer to Cambodia's 1976 Constitution, the first page of which reads in part: "After leading the national revolution that fully and completely obtained democracy on April 17, 1975, the Cambodian Communist Party continues to lead the nationalist revolution and to build the nation emphatically and with a monopoly on all its parts".

This is the evidence I want to show to the nation and to the people through this tribunal.

First, I would like to evaluate the crimes committed throughout the country from April 17, 1975, to January 6, 1979. After April 17, Pol Pot became greedy by enacting policies that claimed the lives of so many people.

This was because Pol Pot controlled everything, especially a party whose members numbered in the tens of thousands. Our crimes at that time were many.

More than 1 million lives were lost under the Cambodian Communist Party, of which I was a member. I admit that I am responsible for my role in these crimes.

Let me express my profound regret for the atrocities committed by the Cambodian Communist Party between April 17, 1975 and January 6, 1979. Secondly, I would like to clarify the crimes committed at the S-21 prison.

I admit my legal responsibility for everything that took place there, especially the torture and killing, as I have already expressed when the co-investigating judges requested the acting out of events in order to assist in recalling what happened at the Cheung Ek killing fields and at the [current] Tuol Sleng Genocide Museum.

I would like to apologise to all surviving victims and their families who were mercilessly killed at S-21. I say that I am sorry now, and I beg all of you to consider this wish.

I wish that you would forgive me for the taking of lives, especially women and children, which I know is too serious to be excused. It is my hope, however, that you would at least leave the door open for forgiveness. Thirdly, my feelings of guilt cause me great suffering whenever I am reminded of the past.

I feel shock whenever I think of the actions I took and the orders I gave to others, which claimed so many innocent lives. Though I was following the orders of Angkar, I still must take responsibility for these crimes.

I have already told the co-investigating judges that I was taken hostage and served merely as a performer in a criminal regime. I am certain that everyone will think that I am a coward, that I am inhuman.

I am willing to accept these words honestly and respectfully. In S-21, I considered my own life and the lives of my family as more important than those of the prisoners, and I could not defy the orders of my superiors. Even though I knew these orders were criminal, I dared not think this way at the time. It was a life-and-death problem for me and my family.

As the head of S-21, I never considered any other alternative to carrying out all orders from my seniors, even though I knew that to do so would mean the loss of thousands of lives.

Now, I feel a deep guilt, regret and shame, as I know that I have made so many enormous mistakes against my nation, against the whole Cambodian population, against the families of all the victims who lost their lives at S-21 and against members of my own family, as well, some of whom have already passed away.

To resolve these mistakes, I have decided to cooperate with the Extraordinary Chambers in the Courts of Cambodia, as this is the only way to share the great sorrow over the crimes of S-21 and those committed against the Cambodian community as a whole, and to account for what I have done to my people.

I would like to say, further, that the horrible tragedies of S-21 occurred as a practical phenomenon, which compels me to tender myself honestly to the Extraordinary Chambers in the Courts of Cambodia to be tried under the law.

I promise to continue my cooperation with the Extraordinary Chambers by answering all questions from the judges, from prosecutors and from civil complainants, on the basis of what I can remember and what evidentiary documents show.

Now, please let me express the sorrow of my life in the following way.

It gave me no pleasure doing the things that I did. I requested a transfer to the Ministry of Industry in May 1975, but my request was denied. Instead, I was sent to S-21. I was initially less concerned because I thought I would be only a deputy. But later, I was appointed head of S-21. I protested again and asked that they choose someone else. I was only willing to serve as a deputy.

But I was forced to accept the position, and so I agreed. One date that I will never forget is January 31, 1977, when Son Sein ordered me to arrest several administrators from the Northern Region.

I tried to ask for some clarification, saying: "Brother, they seem to be different". But he threatened me over the phone. "Hey, Duch!" he yelled.

"Who was Thuon or Khuon, from whom you extracted confessions?" I dared not oppose him any longer. But I questioned why those who had sacrificed their lives to liberate our nation and our people would now have to be imprisoned and die as traitors to the party.

I would like to clarify to the nation and to all my countrymen through this hearing that the Northern Region administrators and I were very friendly and sympathetic to one another. Most of them were imprisoned with me in 1968.

I grew more and more surprised as greater numbers of prisoners were sent in from other regions, and when at the end they arrested brother Ngaet Nhau, who we called Pong, on March 13, 1978, I realised that the end of my own life was near.

I was in shock over my activities [at S-21], and I was frightened that I might not be able to survive. Then, Brother Number 2 [Nuon Chea] ordered me to move all remaining prisoners at S-21 to Boeung Cheung Ek, and I thought then that my life was truly over.

So to save myself, I hid in my kitchen day and night. Those who worked at S-21 can testify that they did not see me there any more. Finally, at 11am on January 7, [Vietnamese] tanks went past the front of my house.

I no longer knew what to do. At 2pm that day, I took everybody out of S-21 to the pedagogy centre and then continued my journey that night. During the next year, which I spent on the run, everyone who accompanied me lost their lives. Two of my brothers died. Six of my nieces and nephews also died. Comrade Pon, his wife and his children also died.

Other officials and their wives and children died. No one survived. In the end, only four of us - me, my wife and my two children - remained. You know, at that time I did not agree to obey the new sub-secretary of the Northwest Region.

He assigned someone to fetch me back, and he had a loaded gun waiting for me. I thought about the more than 1 million people had already died, so the four of us were prepared to die.

Thinking about all that had happened under this [Khmer Rouge] regime, I would not have regretted losing my life. Because of my great sorrow, I can think of only one way to apologise sincerely to all the victims and to my parents who gave me life. They wanted me to be good, and I wanted to be grateful to them by leading a good life. But I fell into bad ways in the end.

I have thought of one way to give myself comfort and to ease my suffering. That is, to apologise to all Cambodian people every year on November 17, which is my birthday. On that day, I will always do something to remind myself of my guilt and sorrow. I drew a picture this year about the last days of the Cambodian Communist Party.

The party last celebrated its birth on September 30, 1978, as it thought there would be no more time to celebrate in the future. At the top of the picture, I wrote: Congratulations on the 18th anniversary of the birth of the Cambodian Communist Party. Below this, I drew three chairs. The middle one represented Pol Pot.

The chair on the right represented Brother Number 2, Nuon Chea. The one on the left represented Ta Mok, who also sat on the honorary chair during the celebration of the party's anniversary.

At that time, the only true words were spoken by Pol Pot, who said: "The right way is to win." I added analyses of everybody's desires. I wrote down Ta Mok's dream, which was: "Nothing can be above me". I wrote: "On top of Ta Mok, there is only a hat, and only the sky is above the hat." Meanwhile, Pol Pot's dream is a peaceful dynasty. He stands on Ta Mok's strength.

For Nuon Chea's dream, I wrote: "No matter who is king, I am still an heir." In this way, I tried to symbolise the feelings of each of them. And at the bottom of the picture are the skulls.

I also included the prediction of an old man from Banteay Ampil district [Oddar Meanchey province], which Lieutenant Commander Neak Vong -- who presently serves along the border -- can still remember.

The court can see the picture of those three "rice blades", which form the word "party", and which means that the Cambodian Communist Party since 1974 has never been an oppressor of the lower social classes but rather the blind operator of an agrarian dictatorship.

I am only reading
2.Mixed reactions to Duch apology at second day of trial
3.More suspects risks war: PM
4.PM threatens train chief after power row
5.Hun Sen threatens to close S'ville port
6.EIU defends report on risk of social unrest in Cambodia
4.'I am responsible', Duch tells tribunal

The second flawed assumption is that our bankruptcy laws are not adequate for handling defaults by investment banks or other financial institutions. The Lehman Brothers bankruptcy, which created turmoil in credit markets, is often offered as irrefutable evidence. But the conventional wisdom is based on a serious misreading of the Lehman collapse.

Vote Earth for One Hour

From melting glaciers to increasingly intense weather patterns, we know that climate change is already impacting life on our planet.

Join us as we take part in Earth Hour, by switching off your light for One Hour at 8.30pm on March 28, 2009.

For further information on Earth Hour
please visit www.earthhour.org

Volunteer Help
1. http://www.youthstarcambodia.org/ - Youth StarCambodia
2. http://www.kya-cambodia.org/ - Khmer Youth Association
3. http://www.kysd.org/ - Khmer Youh and Social Development Org.
4. http://www.yrdp.org/ - Youth Resource Development Programme

Job Search
1. http://www.careerlink.hrinc.com.kh/ - The CarrerLink
2. http://www.bongthom.com/ - Bongthom
3. http://www.yep.camfeba.com/ - CAMFEVA'a Youth Employment and Social Dialogue Project 4. http://www.kyop.org/ - the Khmer Youth Orientation Project
5. www.pelprek.com
6. www.cambodiaworks.com
7. www.cambocareer.com
8. www.khmer-jobs.com
9. www.phnompenhpost.com
10. www.camfeba.com - the Cambodia Federation of Employers and Business Associations
11. www.ccfcambodge.org
12. www.cambodiajobs.blogspot.com

When the going gets tough, the tough get going. BeShaper
@34% job-hunt savvy
@52% job-hunt little understand
@14% job-hunt empty

9 Leadership, Managment and Supervision p137

Power is the ability to get things done.
1.Coercive power - the power of physical force or punishment
2.Resource power - for example, a resource of information
3.*Legitimate power - for example, the power to authorise and approval
4.Expert power - for example, the skill, knowledge of managing and leading people
5.Personal power - the trait personality that can influence, inspire other people
6.Negative power - the power to strike, a temporary stop working

*Authority - the right to get things done: to ask someone else to do something and expect it to be done.

*Responsibility - the obligation a person has to fulfil a task, which (s)he has been given.( he or she is responsible for work)
*Accountability - a person's liability to be called to account for the fulfilment of tasks they have been given.(he or she is accountable to a customer)

*Delegation of authority - the process whereby a superior gives to a subordinate part of his or her authority to make decisions.
(I think, thing like this, would rarely see inCambodia provided the conditions of when to delegate and the problems of delegation)

The work of the manager:
-Planning, Organizing, Commanding, Co-ordinating and Controlling - Fayol
-Setting objectives, Organizing the work, Motivating people, Measurement, Developing people - Peter Drucker
-Interpersonal, Informational and Decisional - Hanry Mintzberg

The work of the Supervisors:
-Planning
-Organising and overseeing the work of others
-Controlling
-Motivating employees, and dealing with others
-Communicating

The work of leadership:
-Interpersonal influence
-Securing willing commitment to shared goals
-Creating direction and energy
-an orientation to change

Three basic schools of leadership theory:
1. Traits of leadership
Judgement, Initiative, Integrity, Foresight, Energy
Drive, Human relations skill, Decisiveness, Dependability, Emotional stability
Fairness, Ambition, Dedication, Objectivity, Co-operation

2. Styles of leadership
-Tells; sells; consults; joins - The Ashridge Model
-Exploitative authoritative; benevolent authoritative; consultative; participative - Rensis Likert
-Concern for task; concern for people - Blake and Mouton's Managerial Grid

3. Contingency approaches
-Handy's 'best fit' model
-Hersey and Blanchard's 'situational leadership' model

Peter Drucker - quotes

1. "In fact, that management has a need for advanced education - as well as for systematic manager development - means only that management today has become an institution of our society."
2. "The best way to predict the future is to create it."
3."Management is doing things right; leadership is doing the right things."
4. "What's measured improves."
5. “Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you've got.”

6. “Efficiency is doing better what is already being done."
7. “Follow effective action with quiet reflection. From the quiet reflection will come even more effective action.”
8. “People who don't take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.”
9. “The most important thing in communication is hearing what isn't said.”
10. “The purpose of business is to create and keep a customer.”

11. “There is nothing so useless as doing efficiently that which should not be done at all.”
12. “When a subject becomes totally obsolete we make it a required course.”
13. "Rank does not confer privilege or give power. It imposes responsibility."
14. "To focus on contribution is to focus on effectiveness."
15. "People in any organization are always attached to the obsolete - the things that should have worked but did not, the things that once were productive and no longer are."

16. "Wherever you see a successful business, someone once made a courageous decision."

9 External environment p53

The four major external environmental influences can be represented by the acronym PEST: Political/legal, Economic, Social and Technological. Other headings sometimes used are Ecological, Ethical and Demographic.


(spot ‘influence explained + examples’)
1. Political. The political environment is not simply limited to legal factors. Government policy affects the whole economy, and governments are responsible for enforcing and creating a stable framework in which business can be done. The quality of government policy is important in providing three things: physical infrastructure (e.g. transport); social infrastructure (education, a welfare safety net, law enforcement, equal opportunities); market infrastructure (enforceable contracts, property rights).

Other political factors include government stability, taxation policy, foreign trade policies and social welfare policies.

2. Legal. The legal framework within which company operate is of great potential importance to them since it can have a material impact on their structure, their costs and their relationship with their employees and their customers. Legal factors include: the basic ways of doing business; ownership, rights and responsibilities; health and safety; employment issues including unfair dismissal and redundancy; data protection issues; environmental issues such as pollution control and waste disposal and specific laws relating to tax collection and payment and to cartels and price fixing. Some legal regulatory factors affect particular industries, if the public interest is served. This is for either of two reasons: the industries are, effectively, monopolies or large sums of public money are involved (eg in subsidies to rail companies). For example, eleecticity, gas, telecommunications, water and rail transport are subject to regulators

3. Economic. The economic environment is an important influence at national and local level. The overall increase or decline in gross domestic product will influence the demand for goods and services. Local economic trends will be important in determining the type of industry in an area, rent levels, labour rates and house prices. The level of inflation will inform business decisions and wage inflation will often compensate for price inflation. Interest rates will impact on corporate investment plans and on personal investment in property. The rates of corporation tax, income tax and VAT will also be important contributors to corporate and personal investment and spending decisions

4.Social. Demography is an increasingly important component of the social environment. Important demographic factors include: growth or decline in national populations; changes in the age distribution of the population; the concentration of population into certain geographical areas; ethnicity; household and family structure (e.g. the growth of single person households and lone parent families); employment patterns such as the move towards a more flexible workforce employing more casual workers and an increasing proportion of employees who work from home. The implications of demographic change include changes in patterns of demand, and example being the increased demand for health care services among the elderly as a result of aging population.

5. Technology. Technology is a key driver of both the type of products and services that are made and sold and the way in which they are made or provided. Examples include companies selling easily transportable goods, for instance book and CDs, which are enjoying considerable success over the Internet. Technology can also affect the way in which markets are identified; for example, database systems make it much easier to analyse the market place; and the way in which firms are managed, since IT encourages delayering of organisational hierarchies, homeworking and better communication.

5 Stakeholders p48

A stakeholder is an individual, or one of group, whose interests are directly affected by the activities of a firm or organization. They may be dependent on the organization, or exert some kind of influence over it. In other words, they have varying degree of power.

Three key shareholders (spot 'reasons')
1. Managers and other employees of a company are appointed to look after the daily activities of the company. They need information, for example about the company's finacial situation, and they need to be able to work effieciently and make effective decisions using their own knowledge and skills. Empoyees are also inerested in information about the company because their careers are dependent upon it.

2. Trade contacts include suppliers of goods to the company, and customers who purchase the goods or services on offer. Suppliers need to be assured that the company can pay its debts according to any contractual terms. Custores need to be sure that company is a secure source of the goods and services that they need.

3. Providers of finance to the company might include a bank which allows the company to operate on overdraft, or which grants a loan. The bank want to ensure that the company is able to meet its repayments. Shareholdrs of the company also want to assess how well the management is performing, as they are the owners and provide some of the finance. They will have their own expectations for capital growth and dividend income.

Key external environmental influences on an organisation and its stakeholders
A useflu model for environmental analysis uses the acronym PESTEL. This analysis the external environment into 6 categories, shown here with some indication of the areas that they cover.
(spto 'influences')
1. Political - regulatary influences, such as government policy on infrastructure
2. Economic - important at local and national level, and including incluences such as inflation, interest rates and government spending.
3. Social - demand profiles, ethnicity, family structures, age and population growth
4. Technological - this influences the way in which products are made, bought and sold.
5. Environmental/ecological - pressure groups and 'green' concerns, such as pollution control
6. Legal - a general framework for the conduct of business, varying from contry to contry

de PPP v19, #57..

Financial crisis puts country at high risk of unrest: EIU

1...Cambodia is in among top five countries most at risk of instability from the worsening economic downturn
2.The report's Political Instability Index
....a. Underlying Vulnerability index - 7.9 out of 10 (Cambodia scored)
............ inequality,
............ state strength and public trust in political institutions
....b. Economic Distress index - 8 out of 10 (Cambodia scored)
........... levels of development,
........... growth and unemployment
3....as people lose confidence in the ability of the govenments to restore stability, protests will become increasingly likely.

4.Cambodian economist Kang Chandararot said the EIU did not know enough about the Cambodian economy.
....Unemployed people could return to the land if they are unable to find jobs in the main urban centres.
....Public investment from foreign aid would help weather the crisis, provided the aid continued.....a dollar in public investment would lead to two dollars in private investment, contributing to continued growth.

de PPP v19, #57

Visiting China official talks rice mills: ministry

1...Chinese investors were eyeing Cambodia's undeveloped rice production sector,...
2.Cambodia's agriculture industry has long-suffered from a shortage of mills to process and store its sizeable rice yields....many farmer are forced to sell raw paddy - earning little profit - or even let crops go to waste...
3. The visiting official signed a memorandum of understanding to promote trade between his province and Cambodia...

CriticalThinking - Fallacy

Responds:
1...has guarnteed that we will not take tax on farmers' rice or farmlad...
2...have told...that ... will not tax farmland...
3...have responded that Cambodian farmers require not only tax-free land, but also irrigation systems and roads,...
4...promise to raise salaries, but to raise the money they have to collect land tax and other taxes,...

Issues:
1...have urged ...to tax large land holdings.
2...could earn about US$27 million per year if it charged $10 per hectare from the 2.7 million hectares...
3...not aware of any country where people are allowed to own such large land holdings without paying tax,...
4...should limit how many hectares of rice-farming land can be owned tax-free and increase taxes for landowners that have confiscated land and left it unplanted.
5...should not take tax from people who have only a few hectares...For companies or otheres who has hundreds of thousands of hectares of land...we should tax them like other countries do.

de PPP v19, #57.

Highlights of 2008 (ACLEDA BankPlc. unconsolidated*)

- Assets rose 45% to US$687.5 million
- Loans grew 47% to US$456.3 million
- Non-Performing Loans to Totals Loans remain low at 0.29%
- Deposits increased by 41% to US$487.0 million
- Net Profit After Tax rose by 118% to US$21.2 million
- Shareholders' Equity grew by 75% from US$49.7 million to US$86.9 million
- Retrun on Equity (exclude subordinated debt) improved from 19.6% to 24.4%
- Non-interest expense to gross income redued from 57.7% to 51.5%
- Cambodian network grew from 204 to 226 offices
- ACLEDA Bank Lao Limited opened with 3 branches in Vientiance,Savannakhet and Paxse.

*These figures relate to the operations in Cambodia only so will differ from the consolidated financial statements which include Laos.

27 Rewards p76

Intrinsic rewards
The intrinsic rewards offered by work are those which are 'within' or integral to the work itself, such as interest, responsibility, challenge or a sense of achievement. Such rewards are also, in a sense, 'within' the individual and dependent on his or her perceptions and needs: satisfying work relationships, security, pride in identifying with the organization and so on may act as rewards.

Extrinsic rewards
The extrinsic rewards offered by work are those which are 'outside' or incidental to the work itself, but offered by the organisation in exchange for work. Such rewards are also, in a sense, outside the control of the individual, being at the disposal of others and external to the perceptions of the individual.They foster an 'instrumental' orientation to work, that is, they encourage people to work in order to obtain rewards, rather than for the satisfaction of the work itself.

Types of extrinsic rewards
1. Basic pay
2. Monetary incentive
3. Non-monetary incentives
4. Profit-sharing and share ownership schemes
5. Holiday entitlement over and above the statutory amount
6. company car schemes,or subsidised transport, of various types
7. Benefits over and above legal requirement
8. Entitlement to welfare provisions
9. Access to facilities

MyFavoriteQuoteOfTheWeek

"People look at the outward appearance, but God looks at the heart." -

The PPP v19, #53.

Israelis focus on farming, telecoms during visit
....1."One of our most important messages is that we see agriculture as a business - not just a way of feeding people." - Israeli delegate
....2."We are not coming to Cambodia to save hungry people - we are here to make people make money from agriculture." - Israeli delegate
....3."Israeli agriculture operates as a system - you pool resources ... We will be working with Cambodia to increase not only the technology, but the way that farms organise themselves." - Israeli delegate
....4."We are growing rice in the wet season, but we really aren't growing much in the dry season. We should be growing vegetables in the dry season, but we need better irrigation, and greenhouses." - Yang Saing Koma
....5.. 59 percent of Cambodians rely on agriculture
........ Rice yields:
........ in Cambodia, 2.6 tonnes per hectare
........ in Thailand, 3.5 tonnes per hectare
........ in China, around 6.0 tonnes per hectare - World Bank
....6."Agriculture sector growth is constrained by the poor use of fertilisers, weak irrigation systems and rural roads, limited access to credit and poor research." - World Bank 2008 report

sth done for the sake of a quick profit at the expense of a healthy market

"We have lived through an era where too often, short-term gains were prized over long-term prosperity; where we failed to look beyond the next payment, the next quarter, or the next election. A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. Regulations were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn't afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day. "
Barack Obama

The PPP v19, #51 ...

Crisis threatens poverty reduction
1.Goal #1: eradicate extreme poverty and hunger
........... % of people living below the national poverty line
...........-1994 : 45 to 50 percent
..........-2004 : 34.7 percent
..........-2007 : 30 percent
..........-90% of the Kingdom's poor lived in rural areas
2.Economic growth reached 10.6 percent per annum over the last 5 years
..........-2005 13.3 percent
..........-2006 10.8 percent
..........-2007 10.2 percent
..........-2008 7.0 percent
..........-2009 6.0 percent(prediction of the government)
....................... 4.9 percent(prediction of the World Bank)
....................... 4.7 percent(prediction of ADB)
....................... 1.0 percent(prediction of EIU)
......................-0.5 percent(prediction of IMF)
3.Rural poverty-reduction efforts would
..........increase the agricultural productivity
..........reduce the threat from the unpredictable bad weather
..........need for policies that would clarify land ownership and protect land titles

The PPP v19, #51 .

SMEs seen as key to growth
..........1. represent around 65% of GDP
..........2. employ 85% of the whole Cambodian job market
..........3. mainly use domestic resources
..........4. income is circulated within the local economy
..........5. not much effect from the global downturn
..........6. estimate represent of 90% of Cambodian businesses
..........7. able to strengthen and create other jobs
Need more incentive 2 SMEs
..........1. more loan with low interest
..........2. low fee for opening business

Small and medium enterprises (also SMEs, small and medium businesses, SMBs, and variations thereof) are companies whose headcount or turnover falls below certain limits.

The PPP v19, #51..

Mobitel expansion
............1. $350 millions total investment in 3-year service upgrade project
............2. 75% coverage of Cambodia by 2012
............3. 46% of Cambodians will have mobile phones by 2012 (expected)
Good news are
............1. increase employment
............2. spur competition

The PPP v19, #51

Diversify economy
...........1.make more funding available to unemployed urban workers looking to relocate to the countryside.
...........2.further support for small and medium-sized enterprises in rural areas.

ThePhnomPenhPost March 12, 2009

1.Garment industry fails to find new markets
2.Chinese exports in free fall
3.Deflation stalds Indian economy
4.Man sets out to land 50 jobs in 50 weeks

hbr.harvardbusiness.org #02

Reinventing Your Business Model

1.One secret to maintaining a thriving business is recognizing when it needs a fundamental change.

In 2003, Apple introduced the iPod with the iTunes store, revolutionizing portable entertainment, creating a new market, and transforming the company. In just three years, the iPod/iTunes combination became a nearly $10 billion product, accounting for almost 50% of Apple’s revenue. Apple’s market capitalization catapulted from around $1 billion in early 2003 to over $150 billion by late 2007.

This success story is well known; what’s less well known is that Apple was not the first to bring digital music players to market. A company called Diamond Multimedia introduced the Rio in 1998. Another firm, Best Data, introduced the Cabo 64 in 2000. Both products worked well and were portable and stylish. So why did the iPod, rather than the Rio or Cabo, succeed?

Apple did something far smarter than take a good technology and wrap it in a snazzy design. It took a good technology and wrapped it in a great business model. Apple’s true innovation was to make downloading digital music easy and convenient. To do that, the company built a groundbreaking business model that combined hardware, software, and service. This approach worked like Gillette’s famous blades-and-razor model in reverse: Apple essentially gave away the “blades” (low-margin iTunes music) to lock in purchase of the “razor” (the high-margin iPod). That model defined value in a new way and provided game-changing convenience to the consumer.

Business model innovations have reshaped entire industries and redistributed billions of dollars of value. Retail discounters such as Wal-Mart and Target, which entered the market with pioneering business models, now account for 75% of the total valuation of the retail sector. Low-cost U.S. airlines grew from a blip on the radar screen to 55% of the market value of all carriers. Fully 11 of the 27 companies born in the last quarter century that grew their way into the Fortune 500 in the past 10 years did so through business model innovation.
Stories of business model innovation from well-established companies like Apple, however, are rare. An analysis of major innovations within existing corporations in the past decade shows that precious few have been business-model related. And a recent American Management Association study determined that no more than 10% of innovation investment at global companies is focused on developing new business models.

Yet everyone’s talking about it. A 2005 survey by the Economist Intelligence Unit reported that over 50% of executives believe business model innovation will become even more important for success than product or service innovation. A 2008 IBM survey of corporate CEOs echoed these results. Nearly all of the CEOs polled reported the need to adapt their business models; more than two-thirds said that extensive changes were required. And in these tough economic times, some CEOs are already looking to business model innovation to address permanent shifts in their market landscapes.

Senior managers at incumbent companies thus confront a frustrating question: Why is it so difficult to pull off the new growth that business model innovation can bring? Our research suggests two problems. The first is a lack of definition: Very little formal study has been done into the dynamics and processes of business model development. Second, few companies understand their existing business model well enough—the premise behind its development, its natural interdependencies, and its strengths and limitations. So they don’t know when they can leverage their core business and when success requires a new business model.

After tackling these problems with dozens of companies, we have found that new business models often look unattractive to internal and external stakeholders—at the outset. To see past the borders of what is and into the land of the new, companies need a road map.

hbr.harvardbusiness.org #01

1.Marketing executives focus too much on ever-narrower demographic segments and ever-more-trivial product extensions. They should find out, instead, what jobs consumers need to get done. Those jobs will point the way to purposeful products—and genuine innovation.

1.EconomicsBlog

1. http://www.economicshelp.org/econ.html