When Warren Buffett says: “If we don’t get it solved this week, I may go back to delivering papers“ that’s definitely something you should pay attention to. Buffett and Berkshire Hathaway attract more than 30.000 shareholders every year for the annual meeting, and it’s not for nothing that he is one of the most respected investors in the history. So when this guy tells you something like that about the financial crisis you know it’s bad. When you at the same time hear from Ben Bernanke of the Federal Reserve that: “If we don’t do this, we might not have an economy on Monday“ you know that the Fed is also very worried.

Something had to be done about it, and the House of Representatives just passed the bill that was later signed by president Bush to get a $700 billion of capital injected into the market.

The financial markets are important, and we definitely need them to be well functioning to have a healthy economic system where capital flows freely for different players to deploy in the best possible way. If investors and everyday users of banks lose their confidence in the system, they will prefer to save their money under the mattress etc, and there will not be any capital for others to borrow for new businesses, projects etc. This is obviously the scenario that the Federal Reserve (and Buffett) wants to avoid, but I can’t help asking myself if is it ok to create less responsibility in the financial markets by helping out the badly managed companies this way? Companies that simply took on more risk than they were able to handle and later had to admit this and file for bankruptcy.

So now that the ‘rescue plan’ is here these badly managed companies will have a second chance, but this is not really the kind of message you want to send to a business that is based on opportunity and where some people will do whatever it takes to make money, even though this doesn’t always mean doing it the most responsible way.

Of course we shouldn’t let the financial market fail, but we also need to send a clear message to these institutions about how to manage companies in responsible ways, so we wont need another big ‘rescue’ as this one. Helping out the worst players doesn’t send a hostile message telling that “we wont be here to help you if you screw up“ and this same fact could create more bad collapses in the future. If you know that someone will always be there to help you, you will simply not be as careful as if this wasn’t the case.

We need responsibility in the market, and definitely also a stronger focus on corporate governance to help shareholders get a better insight in their holdings and make sure that the management is doing whatever is best for the business, without risking everything in less smart decisions.

Friday morning the mayor indexes all rose on the news, but normalizes during the day, some to decline even more. So if this financial rescue is really going to help out the economy in the short run will be interesting to watch, and even more interesting to see if this will help to improve long term responsibility and the implementation of more corporate governance in all financial corporations.

‘Blue Ocean Strategy’ was one of the most hyped books back in 2005 when authors W. Chan Kim and Renée Mauborgne finished their long study of strategic implementation. I’ve heard argued that creating ‘blue oceans’ is basically about being different from your competition, but it’s not only a simple strategic differentiation of the products or services offered.

The authors talk about the regular ‘red oceans’, where companies compete head on to increase their revenues. This kind of competition is very hard and drives profit margins down for all players in the market. Companies try to innovate their products and processes to offer something that add more value to the customer, and at the same time drive costs down. The problem here is the heavy competition, and that is why it makes a lot of sense to create a so-called ‘blue ocean’ to make the competition irrelevant. The authors call the process ‘value innovation’, and the idea is to create value and innovate, while lowering costs at the same time. Create a new demand, or change your company’s focus to create a whole new group of customers by using the so-called ‘strategy canvas’ and define the answers for the following questions: Which factors that the industry take for granted should be eliminated? Which factors should be reduced well below the industry’s standard? Which factors should be raised well above the industry’s standard? And finally: Which factors should be created that the industry has never offered?

My favorite example is the Canadian circus Cirque du Soleil (it’s from Canada, but they tour all over the world). Take the circus business as an old industry with its proud traditions focused around the big tent, the clowns, the animals and so on. As technology moved in to our homes with Playstations and so on, the circus business took a negative turn and profits decreased. Here the normal ‘red ocean’ strategy would be to cut costs, and try some kind of differentiation to outperform the competitors. But what if the entire industry is going down the drain? The people from Cirque du Soleil asked this question and instead of focusing on being better than their competition, they invented a whole new industry by creating a new mixture between the circus, theater and a musical experience. A study done with the normal circus visitors showed that many things simply weren’t as important as some would think, and here the company could cut down their costs. For example the star performers and animal shows are two factors that drive costs up in a circus and Cirque du Soleil noticed that this wasn’t as important for the client as you would think. So by cutting down on these factors the company was able to decrease their costs and make their business more profitable.

Instead of just changing this focus to differentiate they created some new dimensions of the circus experience. They added artistic music and dance, and a new market opened up in front of them. People that had normally been going to theaters to see shows there, could now join a unique experience that had never been seen before, and Cirque du Soleil not only changed the way of doing business, but caught a whole new market segment. Where traditional circuses have their tents, these do not focus on the exclusiveness of the same, and Cirque du Soleil created a spectacular environment to give the optimal surroundings for their impressive show. By doing this they where also able to charge a much higher price than traditional circuses, again making their business more profitable.

At the time the book came out more than 40 million people in 90 countries around the world had seen Cirque du Soleil’s performance, so the effort paid off, and this proves how ‘blue oceans’ can help you not only outperform the market, but also create new markets.

In the book the authors further talk about six different ‘paths’ for creating ‘blue oceans’, but I will leave you with the recommendation of reading the book yourself to truly benefit from these strategic tricks. It’s easy read, interesting, and packed with great examples from the already mentioned Cirque du Soleil, fitness giant Curves, Apple and many more.

GET THE BOOK AT AMAZON.COM

It is no secret that the financial system is definitely suffering on the losses of the sub-prime debts issued by various big international banks and other financial institutions. First we saw Bear Sterns getting rescued and lately mortgage giants Freddie Mac and Fannie Mae got the same treatment. After this move the US Federal Reserve said that it would not be helping out any more financial institutions and that the market needed to develop more responsibility and transparency. The idea behind this is fine. If you keep helping badly run companies, the message you send will not be giving the financials any reason to do a better job. Oppositely this is like telling them that there will always be someone there to help them out, and this will definitely not have a positive effect in the long run.

So what happens when you say that and two giants like Lehman Brothers and insurance company AIG are ready to file for bankruptcy? Well something has to be done if we don’t want to see our financial markets go down the drain. Letting parts of the financial sector fail would simply have huge negative effects across the world economies, and it looks like U.S. government is one of the only actors with sufficient ressources to do something about it.

Some are asking why we should not just let this happen, and thereby ‘educate’ the market into behaving more responsible. Obviously this responsibility is needed and new procedures must be implemented to improve the overall transparency and stabilize the system in the future. But remember why the credit market is so important for the U.S. economy (and thereby the economies of the entire world), and if the market is undermined the consequences can be fatal. As long time investor and President of the investing community The Motley Fool, Scott Schedler said: “For the economy, the credit crisis means lower investment, lower spending, recession, business failures, and a massively devalued stock market. For the average taxpayer, this means watching 401(k)s plummet and putting on hold plans to retire, buy a house, or go to college, and for many it will mean layoffs, foreclosure, and bankruptcy.”

To ensure that we don’t see these effects even more clearly than we already have, something definitely has to be done now. This move (whatever it will be) will not leave the world unaffected, and money emission by the government would send the U.S. inflation rate up. Also the issuing of government debt through the Treasury bonds would have to be paid back, and this hurdle needs to be planned so that the innocent tax payer does not get the final bill for all of this financial mess.

As for now we do need the financial system to keep the capital markets working, and it seems that the U.S. government are close to an agreement on what action needs to be taken. The most possible thing is that they will accept some kind of financial bailout requiring huge amounts of money, but as of where to get this money and how is still being discussed.

This week the brand management company Interbrand released their yearly study of brands and their value in business. Their list is widely recognized throughout the business world, and there is no doubt that the brands listed are some of the strongest brands in the world.

Brand values are established on the basis of three main factors: Financial analysis, role of brand analysis and brand strength score. Each factor is meant to determine to which extent these brands will create cash flow in the future, and what influence the brand has in the moment where the client is deciding what to buy.

This years study has some movers in the top10, with internet king Google moving up from position 20 last year, to 10th place this year. Coca-Cola still maintains it first place, followed by the computer/software company IBM.

In my eyes this is a very interesting study, and it demonstrates why brands are so valuable, and can help companies create revenues, if investments are made to secure and further develop brand value. As the respected investor Warren Buffett once said about Coca-Cola: “If you gave me $100 billion and said take away the soft drink leadership of Coca-Cola in the world, I’d give it back to you and say it can’t be done”. Buffett explained why the brand value create long term competitive advantages, and it’s no surprise that Coca Cola is a company with great revenues.

To see the list, and read more about the study visit Interbrands homepage at ->http://www.interbrand.com

Open collaboration is not only about having an open source code, that many people can work on at the same time, without thinking about copyrights, patents or other types of protecting intellectual property. Most of you have probably heard of the operating system Linux, which is being developed by a massive number of volunteers collaborating to create a great OS for computer use. By working this way, many minds get together in one project, and as everything is open and accessible, the development process is very smooth and effective.

Now think about the average corporation. Most companies have core competencies, and many fear putting out their company secrets, as this could make their entire business collapse. As the cover of my recent read ‘Wikinomics’ says: “Today, encyclopedias, jetliners, operating systems, mutual funds, and many other items are being created by teams numbering in the thousands or even millions. While some leaders fear the heaving growth of these massive online communities, Wikinomics proves this fear is folly. Smart firms can harness collective capability and genius to spur innovation, growth, and success”-

Modern companies take advantage of these technological development to create competitive advantages, instead of seeing this as something evil, something that you better fight against. Take the music industry who for years fought against the online sharing, instead of trying to create a new business model based on this new reality. Apple’s Itunes showed us how online music sales can be done, and this business has been growing ever since.

A little different would be a company like Procter & Gamble, who spends huge amounts on R&D, and rely on these activities to create new products and incomes. A traditional company working in this sector would have a closed R&D department, to avoid industrial espionage and not letting any information out on potential new concepts. The idea here is to keep your cards very hidden, so no one else can see your hand and predict your next move, but what happens if you unleash the beast and let everyone else see your hand. In poker this would definitely be a stupid move, but in business this can be smart, if you know how to monitor and control the beast. Procter & Gamble opened up parts of their R&D to make users and researchers from the outside interact with them, and the results have been great.

Another example is airplane manufacturer Boeing, who made the famous 747 ‘double-decker’ plane back in the days. This company rely on many corporations in the production of an aircraft, and back in the days mostly did all planning and research themselves, to have other companies produce the parts. As former Boeing CEO Phil Condit put it: “a Boeing 757 is basically a bunch of parts flying together in close formation”. The aircraft is almost a bunch of Lego parts and the job was to develop and assemble the parts, not to produce them. Producing the parts is still out with suppliers, but Boeing changed their way of working with their partners. Instead of sending out detailed plans, they are now bringing the companies into the development, as many of these engineers have a great knowledge that is mostly very useful in the process. The change has made Boeing more innovative, and a more lean organization, even though it probably was no easy move to take.

There any many more examples from the real world, and I will indeed encourage you to read the book yourself to get valuable inspiration for your own business.

The process management is of keen importance, and systems and structures will be necessary. In Wikinomics the authors Don Tapscott and Anthony D. Williams cover some of the most interesting tools such as wikis, blogs. In the companies mentioned many systems have been developed and they probably had to adjust a lot of ‘screws’ during the process.

The interesting thing is that you can win by ‘opening up’, and this move can even give you a strong competitive advantage if you are visionary and have a great plan of how to utilize these new tools.

Get the book Wikinomics at Amazon.com