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Revival of the Fittest
by Donald N. Sull (Harvard Business School Press)

Sull

Your company has been outperforming competitors for years, your charismatic CEO was just featured on the cover of a national business magazine, and your city boasts a new state–of–the–art football stadium that bears your company’s name. Clearly, all signs point to your firm’s continued success. Right?

Not necessarily, says HBS assistant professor Donald Sull in Revival of the Fittest: Why Good Companies Go Bad and How Great Managers Remake Them. Based on a decade of systematic research on how companies all over the world respond to changes in their competitive environment, Sull argues that outward manifestations of success — such as impressive earnings, media attention, and monuments to their past accomplishments — can cause managers facing new challenges to rely on formulas that brought their initial success.

When regulation, consumer preferences, or technology change, managers in successful firms often respond with more of what worked in the past — a trap the author refers to as “active inertia.” When new realities call for new approaches, some experts advise managers to respond by spinning off small, innovative business units to attack the problem. Others prescribe the more radical and risky measure of throwing out old success formulas in order to remake the company from scratch.

Sull favors a third approach. “Managers can fundamentally change their existing success formula,” he writes, but they need to make “transforming commitments” — managerial actions like exiting a legacy business, publicly committing to a new goal, or firing a powerful executive who defends the status quo. Such actions break the organization from the past and prevent it from backsliding into unproductive actions that no longer work.

Revival of the Fittest offers detailed examples of how a diverse range of companies — from IBM, Samsung, and Nokia to the Danish hearing-aid maker Oticon and Asahi Breweries in Japan — have used transforming commitments to regain competitive strength. The author also provides tools for diagnosing whether a company is trapped in active inertia, selecting the right commitment, giving it traction, and avoiding mistakes that commonly derail transformation efforts.

Sull maintains that inaction is rarely the cause of an organization’s failure to adapt to change. “A good analogy,” he writes, “is a car stuck in a rut: Managers put the pedal to the metal and dig the rut deeper.” In Revival of the Fittest, he offers managers the tools and frameworks they need to get their organizations rolling once again.

— Deborah Blagg


Open Innovation
by Henry W. Chesbrough (Harvard Business School Press)

Chesbrough

In the past decade, as technological developments raced forward, large corporations with a history of scientific leadership like AT&T, IBM, and Xerox ironically found themselves struggling to keep up. Their problem, says HBS assistant professor Hank Chesbrough in his new book Open Innovation: The New Imperative for Creating and Profiting from Technology, was a research model built for a different era.

When groups like AT&T’s Bell Labs and Xerox’s Palo Alto Research Center (PARC) were formed, academic scientists had little interest in research for business applications. Technology–driven firms large enough to finance their own laboratories could create a “virtuous cycle” where staying on the leading edge of science got them first to market with new products, in turn delivering higher profits to fund still more research.

As universities opened their doors to business and government partnerships, however, science with commercial applications began thriving outside corporate R&D silos. And the availability of venture capital for technology start–ups made it harder to keep scientists with hot new ideas in–house.

The result is an active market for intellectual property in which, argues Chesbrough, corporations should be looking to both buy and sell. He illuminates the principles for this “open” approach to innovation by analyzing successes and failures from IBM, Intel, Lucent, and Xerox, among others. One recurring theme is the difficulty of assessing internal discoveries that don’t fit a firm’s existing business model: Chesbrough urges companies to explore potential business models in parallel with their new technologies.

In today’s environment, he suggests, a research model that continuously looks outside as well as inside for solutions will be more efficient. In turn, moving ideas on new paths to market and perhaps even publishing research to enhance industry knowledge will provide new and important ways for companies to realize the value of their discoveries.

— Laura Singleton (MBA ’88)


Artful Making
by Rob Austin and Lee Devin (Financial Times Prentice Hall)

Austin and Devin

“Let’s be clear about what we are claiming,” note Rob Austin and Lee Devin, coauthors of the new book Artful Making: What Managers Need to Know about How Artists Work. “As business becomes more dependent on knowledge to create value, work becomes more like art. In the future, managers who understand how artists work will have an advantage over those who don’t.”

Artful Making is the product of an unlikely intellectual collaboration. Austin, a former technology implementation manager at Ford, is an assistant professor at HBS who teaches Technology and Operations Management. Devin is an actor, director, and emeritus professor at Swarthmore College, with more than thirty years of experience in the theater. Together, they developed the “artful making” concept to encourage managers in today’s knowledge–based, project–focused businesses to expand their thinking beyond “industrial” models devised to facilitate factory work in the last century.

The term “artful making” was inspired by the collaborative successes that creative artists regularly achieve without plotting a detailed set of objectives in advance. The book carefully analyzes this process as it occurs in artistic settings, such as the lengthy rehearsals leading up to a production of Tennessee Williams’s classic play A Streetcar Named Desire. Austin and Devin then draw parallels to the ways in which path-breaking companies, such as Sun Microsystems, promote innovative activity in business. Similarities include a belief that some of the most important ideas to emerge in a collaborative process are unrelated to any stated goal; that creativity requires an inherently iterative structure (trying and trying again); that “wrong” choices are necessary to make real progress; and that creative individuals are most productive when they are freed from restraining pre–conceptions and inhibiting circumstances.

In the book’s foreword, Eric Schmidt, chairman and CEO of Google, notes that in high tech and many other industries today, “the environment is changing so fast that it requires improvisation in terms of strategy, products, and even day–to–day operations. Just when you think you understand the technology landscape, you see a major disruption.” For business leaders who are willing to take an imaginative leap of their own, Artful Making provides a new model to inspire innovation in strategy formation, product development, and other business activities where on–demand creativity is essential to success.

— Deborah Blagg


Wheel, Deal, and Steal
by D. Quinn Mills (Financial Times Prentice Hall)

Mills

As a follow–up to last year’s Buy, Lie, and Sell High: How Investors Lost Out on Enron and the Internet Bubble, HBS professor Quinn Mills dissects the other half of the artificially supported 1990s bull market in Wheel, Deal, and Steal: Deceptive Accounting, Deceitful CEOs, and Ineffective Reforms. This time around, he focuses on large corporations that fattened stock prices through fraudulent financial reporting, devastating assets of individual stockholders when these accounting deceptions surfaced.

Mills initially explores how the mechanisms that should have protected investors failed. He lays the lion’s share of blame at the feet of CEOs whose option–laden compensation plans, designed to align their incentives with shareholders, rewarded short–term “earnings management” and beautified balance sheets. These tactics were facilitated by cooperative accountants who didn’t want to risk losing the profitable consulting business of the companies they were auditing.

Conflict of interest for auditors is just one example of intended checks and balances gone awry, according to Mills. He describes corporate boards too closely aligned with CEOs to act as objective watchdogs, security analysts pressured to tout companies to gain or retain their business for their investment–banking colleagues, and regulatory agencies too disjointed to police abuses adequately.

After analyzing the problems, Mills suggests possible solutions. While he advocates reorganization and reform of regulatory channels, he also proposes using market mechanisms to let investors vote with their dollars for firms that observe transparent practices, such as the use of outsider-only boards. Acknowledging the difficulty of teaching ethics in a culture that increasingly views morality as private and relativistic, Mills still advocates a role for business schools in raising the standards of decision-making for future leaders. Most of all, though, he encourages investors to be wary of reentering the market until there is real evidence that the systemic flaws that created this catastrophe are being addressed.

— Laura Singleton (MBA ’88)


When You Say Yes but Mean No
by Leslie A. Perlow (Crown Business)

Perlow

The old adage “If you don’t have something nice to say, then don’t say anything at all” may be a recipe for success in polite society, as parents have long taught their children. But holding one’s tongue may wreak havoc in the business world, according to HBS associate professor and corporate anthropologist Leslie Perlow. In her new book, When You Say Yes but Mean No: How Silencing Conflict Wrecks Relationships and Companies… and What You Can Do about It, Perlow examines the consequences of avoiding conflict in the workplace.

“We often associate conflict with its negative forms,” writes Perlow. “But conflict can also be a source of creative energy. When handled constructively by both parties, differences can lead to a healthy and fruitful collaboration.”

Using insights from her extensive fieldwork and hundreds of interviews, Perlow details the destructive effects of silencing conflict on everything from business partnerships to personal relationships. She documents how we often silence our differences, believing it is the best way to preserve relationships and get work done as expeditiously as possible, and yet, these very acts of silence build, creating a dangerous syndrome she calls the “silent spiral.”

The buildup of such silence, she finds, can be catastrophic as fewer new ideas emerge, unexpressed negative emotion festers, managers and executives don’t get the vital information they need, productivity plummets, and creativity crashes. Moreover, today’s difficult economic environment is exacerbating the problem because people fear they may lose their jobs for speaking their mind.

Perlow, who chronicles the fall of an online education company throughout the book, recommends a constructive spiral of speaking up. She urges senior managers to create cultures where people feel comfortable expressing differences, and she suggests manageable steps to enable everyone — from the CEO to the frontline worker — to help facilitate the process. “If we take responsibility and start focusing on conveying what we really think and feel — and on understanding what the other person thinks and feels — we can have a profound, positive impact on our relationships, groups, and organizations,” Perlow concludes.

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