Category: Management

“Good to Great” is Good, but Not Quite Great

  Source of book image:  http://images.barnesandnoble.com/images/7770000/7775266.jpg

 

When Ameritrade founder Joe Ricketts spoke to my Executive MBA class a few years ago, I mentioned to him that I had heard from Bob Slezak that Ricketts was a fan of Clayton Christensen’s The Innovator’s Dilemma.  Ricketts said that was true, but that the recent business book that he was most enthused about was Jim Collin’s Good to Great.

Ricketts is not alone.  Good to Great has become a business classic since it came out.  Recently I finally got around to reading it.

Well, I think it’s good, but not quite great.  I like the empirical, inductive methodology mapped out at the beginning.  And some of the conclusions ring true.  For example the importance of facing the "brutal facts."  And the importance of developing a thought-out "hedgehog" concept.  And the importance of getting the right people on the bus.  And the importance of slowly, consistently building momentum.

But I’ve got some big bones to pick, too. 

Maybe the biggest "bone" is Collins’ assumption that our goal should be the survival and greatness of a firm.  Instead of almost viewing firms as ends in themselves, why can’t we view firms as vehicles for getting great things done? 

Maybe great things can be done through firms that last and are lastingly great.  Or maybe great things can be done by shooting star firms, that are glorious while they last, but don’t last long.  Collins says it must be the former.  But either way works for me.

A smaller "bone" is the conclusion that "level 5" leaders tend to be modest.  Well maybe.  But some of that conclusion is derived from Collins’ defining "great" in terms of high growth of stock value.  A modest leader will be unappreciated by Wall Street, and her company’s stock value will show higher growth when she succeeds.  But has she thereby accomplished more than if she had built exactly the same company, but been more transparent and enthused about the company’s future prospects, and hence generated more realistic expectations from Wall Street?  Remember, the value of a stock grows, not by the company doing well, but by it doing better than investors expected.  (On this issue, Collins should read the first couple of chapters of Christensen and Raynor’s The Innovator’s Solution.)

But don’t get me wrong:  this is a very good book.  Those interested in how the capitalist system works, should read it, as should those who want to manage well.

 

The book is:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don’t. New York: HarperCollins Publishers, Inc., 2001.

 

New Book on Wiki (Quick) Process

   Source of book image:  http://ec2.images-amazon.com/images/P/1591841380.01._SS500_SCLZZZZZZZ_V37439749_.jpg

 

A new book is out on the wiki ("quick") phenomenon.  Chris Anderson has some stimulating comments on this phenomenon in his The Long Tail.  The Wikinomics book appears to be less profound, but may still be of interest.  (It appears to be a quick-read, management guru-jargon type book.)

The wiki issue that interests me is how wiki collaboration processes might substitute for rigorous editing and peer-review, as a way to get a lot of high-quality information out there fast.  (This is what Anderson claims, and the more I use the Wikipedia, the more plausible I find the claim.)

 

The reference to the book is:

Tapscott, Don, and Anthony D. Williams. Wikinomics: How Mass Collaboration Changes Everything. Portfolio, 2006.

 

“The Referee Should Not Be Too Quick With His Whistle”

I found the following wise comments while reading a short review of an old book by Edgar Monsanto Queeny, who followed his father as CEO of the Monsanto corporation, and who wrote a book called The Spirit of Enterprise which Schumpeter praised in a letter to Queeny.

(The abbreviation T.N.E.C. stands for the Temporary National Economic Committee, which I believe was an ad hoc congressional committee during part of F.D.R.’s presidency.)

Mr. Queeny does not give us a satisfactory analysis of the T.N.E.C. reports but his observations are always commonsensical and suggestive.  What emerges, and what is important, is that the positive Liberal State should not aim at too subtle a plan for freedom.  The referee should not be too quick with his whistle nor too ready to order players off the field.  The rules of the game may well allow for a little hurly-burly.  Economists like Professor Hutt, who are working out the rules of the game of free enterprise, deserve the highest praise.  But they should realize that refinement has its price as well as simplicity, and of the two simplicity costs the less.

Shenfield, A. A. "Review of the Spirit of Enterprise by Edgar M. Queeny." Economica 12, no. 48 (November 1945): 264.

 

The reference to Queeny’s book is:

Queeny, Edgar M. The Spirit of Enterprise. New York: Charles Scribner’s Sons, 1943.

 

Microsoft’s VX-6000 LifeCam Really Stinks

  Microsoft’s VX-6000 LifeCam.  Source of image:  http://www.microsoft.com/presspass/images/gallery/hardware/WC6_Angle_Silver_lg.jpg

 

I posted this to Amazon.com, late on Thurs., Nov. 30, 2006:

I have spent a frustrating afternoon and evening trying to install the VX-6000 on a fully updated MS XP pro system. The install took forever, because every couple of minutes the install program couldn’t find a needed file (if they need it, why not put it on the install CD?). So I had to browse my system and point them to where the file was (why couldn’t they design the install program to search for the file instead of making me do it?). Finally I got a successful install, and then I was informed there was an updated version, and I needed to install that. So I went through the whole time-consuming process all over again, including the schtick about searching for the location of several files. Finally it again said I had installed the program successfully. So I rebooted my PC, and clicked on the Microsoft LifeCam icon. After cranking for awhile I get "initialization error". I try rebooting again—same error. So I type in "initialization error" in the search bar of the "help" section, and I get back "no topics found." So they sell me an expensive camera, run me ragged installing it, send me a repeated error message, and provide me no clue on what to do about it. (I guess now that Bill Gates is saving the world through philanthropy, nobody’s left minding the shop?)

 

The final comment is probably a bit too snide or harsh.  Microsoft has always had the deserved reputation of letting some products out the door before they are ready.  E.g., the first couple of versions of Windows paled in comparison to the graphical-user-interface operating system that Apple was offering at the time.  And the CD that accompanied Bill Gates’ The Road Ahead would not work on what was then Microsoft’s premier operating system:  Windows NT.

Maybe these kind of glitches result from a conscious operating strategy that gives employees a lot of freedom to make their own decisions.  The upside can be speedy decisions, and creativity.  The downside can be glitches such as the VX-6000 LifeCam.  Taking the broad, professorial view, maybe overall, the upside justifies the downside.  Tom Peters endorses companies accepting this trade-off rather than adopting layered, rule-bound, slow, bureaucratic decision-making.  (See his:  Re-imagine!)

(But did I mention that the VX-6000 LifeCam really stinks?) 

 

The reference to the Peters book is:

Peters, Tom. Re-Imagine! London: DK, 2003.

 

Without Incentives, the Energetic become Lazy


Wise words from Frederick W. Taylor, who is known as the father of scientific management:


(p. B1) "When a naturally energetic man works for a few days beside a lazy one," Mr. Taylor wrote, "the logic of the situation is unanswerable.  ‘Why should I work hard when that lazy fellow gets the same pay I do and does only half the work?’ "



As quoted in: 

CYNTHIA CROSSEN.  "DEJA VU; Early Industry Expert Soon Realized a Staff Has Its Own Efficiency."  Wall Street Journal  (Mon., November 6, 2006):  B1.


Examine Your Assets and See If, and Where, They Can Add Value

In Gerstner’s book, there is an intriguing passage in which he defends turning IBM into an integrated services firm.  As an aside, he says that it might not now have made sense to build up IBM’s diverse assets, but now, having them in existence, it made sense to use them.  And he points out that even in the age of modularity, many customers needed, and were willing to pay for, a company that was able and willing to put everything together for them.

At first glance, this comment might seem at odds with the economist’s dictum that "sunk costs are sunk."  But Gerstner was not advocating the integration of IBM services because IBM had historically invested a lot in building up the parts of the organization.  He was pointing out that diverse parts, if properly integrated, would provide substantial added-value to an important sub-group of customers.

 

Here is the relevant passage from Gerstner:

(p. 61)  Unfortunately, in 1993 IBM was rocketing down a path that would have made it a virtual mirror image of the rest of the industry.  The company was being splintered—you could say it was being destroyed.

Now, I must tell you, I am not sure that in 1993 I or anyone else would have started out to create an IBM.  But, given IBM’s scale and broad-based capabilities, and the trajectories of the information technology industry, it would have been insane to destroy its unique competitive advantage and turn IBM into a group of individual component suppliers—more minnows in an ocean. 

 

The reference to the book, is:

Gerstner, Louis V., Jr. Who Says Elephants Can’t Dance? Leading a Great Enterprise through Dramatic Change. New York: HarperCollins, 2002.

Good Management Takes Guts and Time

Gerstner recognizes that decentralization is sometimes a good thing, but thinks in some ways the trend has gone to far in business—some business functions may be efficient to centralize: 

 

(p. 246)  I’m thinking here of common customer databases, common fulfillment systems, common parts numbering systems, and common customer relationship management systems that permit your customer-service people to provide integrated information about everything a customer does with our company.

On the surface it would seem that these are logical and powerful things to do in an enterprise.  Nevertheless, they usually require profit-center managers to do something very hard—relinquish some of the control they have over how they run their business.  Staff executives, consultants, or reengineering teams cannot do this without active line management involvement.  The CEO and top management have got to be deeply involved, reach tough-minded conclusions, then ensure that those decisions are enforced and executed across the enterprise.  It takes guts, it takes time, and it takes superb execution.

 

Reference to the book:

Gerstner, Louis V., Jr.  Who Says Elephants Can’t Dance? Leading a Great Enterprise through Dramatic Change.  New York:  HarperCollins, 2002.

For Major Changes, CEOs Need to Change Who “Calls the Shots”


Some of the best advice in Gerstner’s book concern ‘execution’ issues of rewards, incentives, and who has the power to make which decisions.  Consider:

(p. 249)  If a CEO thinks he or she is redirecting or reintegrating an enterprise but doesn’t distribute the basic levels of power (in effect, redefining who "calls the shots"), the CEO is trying to push string up a hill.  (p. 250)  The media companies are a good example.  If a CEO wants to build a truly integrated platform for digital services in the home, he or she cannot let the music division or movie division cling to its existing technology or industry structure—despite the fact that these traditional approaches maximize short-term profits.

. . .

I knew we could not get the integration we needed at IBM without introducing massive changes to the measurement and compensation system.  I’ve already explained that the group executives who ran IBM’s operating businesses were not paid bonuses based on the unit’s performance.  All their pay was derived from IBM’s total results.

When a CEO tells me that he or she is considering a major reintegration of his or her company, I try to say, politely, "If you are not pre-(p. 251)pared to manage your compensation this way, you probably should not proceed."

 

The reference for the book is:

Gerstner, Louis V., Jr.  Who Says Elephants Can’t Dance? Leading a Great Enterprise through Dramatic Change.  New York:  HarperCollins, 2002.

(Note:  ellipsis added.)

 

Managers Get, Not What They Expect, But What They Inspect

Louis Gerstner is well-known for down-playing the ‘vision’ thing. he emphasizes that seemingly more mundane issues are often more important than the lofty ones. For example, one of Gerstner’s key insights is often ignored in business: most workers perform well, when management takes the time and effort to observe performance, and to reward it when it is good:

(p. 250)  I have already pointed out that people do what you inspect, not what you expect.  Leaders who are thinking about creating true integration in their institutions must change the measurement and reward systems to reinforce this new direction.

(Note: italics in original. Also, see related passages on pages 212, and 230-231.)

 

Reference for the book:

Gerstner, Louis V., Jr.  Who Says Elephants Can’t Dance? Leading a Great Enterprise through Dramatic Change.  New York:  HarperCollins, 2002.

Antitrust Cases Can Hurt (Even Those that Get Dropped)

The antitrust lawsuit against IBM was dropped, and that against Microsoft result in the imposition of only minor legal remedies.  So some may conclude that IBM and Microsoft bore little ill effects from the suits.  But such suits can reduce morale, result in loss of talent, and restrain the efficiency, innovativeness and competitiveness of the prosecuted companies. 

In the case of IBM, Lou Gerstner has made some strong, and plausible, comments on the deleterious effects of U.S. antitrust action:

 

(p. 118)  The other critical factor—one that is sometimes overlooked—is the impact of the antitrust suit filed against IBM by the United States Department of Justice on January 31, 1969, the final day of the Lyndon B. Johnson administration.  The suit was ultimately dropped and classified "without merit" during Ronald Reagan’s presidency, but for thirteen years IBM lived under the specter of a federally mandated breakup.  One has to imagine that years of that form of scrutiny changes business behavior in very real ways.

Just consider the effect on vocabulary—an important element of any culture, including corporate culture.  While IBM was subject to the suit, terms like "market," "marketplace," "market share," "competitor," "competition," "dominate," "lead," "win," and "beat" were systematically excised from written materials and banned at internal meetings."  Imagine the dampening effect on a workforce that can’t even talk about selecting a market or taking share from a competitor.  After a while, it goes beyond what is said to what is thought.

 

The reference to the book, is: 

Gerstner, Louis V., Jr.  Who Says Elephants Can’t Dance? Leading a Great Enterprise through Dramatic Change. New York:  HarperCollins, 2002.

 

“Bet the Company”

When entrepreneurs, or innovative companies, take large risks, and succeed, we sometimes begrudge them their success.  But we should remember that sometimes they took great risks, and that they could have lost everything if they had lost the ‘bets’ they made.

One of the most famous examples of ‘betting the company’ is when Tom Watson, Jr. of IBM ‘bet the company’ on the development of the expensive, but pathbreaking, system 360.  

This episode is mentioned many places.  One that I ran across recently is in Gerstner’s memoir of his own time at IBM.  The following lines appear in Gerstner’s brief summary of some important periods in IBM’s earlier history:

Much has been written about this period and how Tom "bet the company" on a revolutionary new product line called the System/360—the original name of IBM’s wildly successful mainframe family.

To grasp what System/360 did for IBM and its effect on the computing landscape, one needs to look no further than Microsoft, its Windows operating system, and the PC revolution.  System/360 was the Windows of its era—an era that IBM led for nearly three decades.  (p. 114)

 

The reference to the Gerstner book, is: 

Gerstner, Louis V., Jr.  Who Says Elephants Can’t Dance? Leading a Great Enterprise through Dramatic Change. New York:  HarperCollins, 2002.