01 Jun 2003
Faculty Writings of Interestby Deborah Blagg; Laura SingletonTopics:
Revival of the Fittest
by Donald N. Sull (Harvard Business School Press)
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 stateoftheart football
stadium that bears your companys name. Clearly, all signs point to your firms continued success.
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 organizations 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.
by Henry W. Chesbrough (Harvard Business School Press)
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&Ts Bell Labs and Xeroxs Palo Alto Research Center (PARC) were formed, academic scientists had
little interest in research for business applications. Technologydriven 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
startups made it harder to keep scientists with hot new ideas inhouse.
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 dont fit a firms existing business model: Chesbrough urges companies to explore potential business
models in parallel with their new technologies.
In todays 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)
by Rob Austin and Lee Devin (Financial Times Prentice Hall)
Lets 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
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 todays knowledgebased, projectfocused
businesses to expand their thinking beyond industrial models devised to facilitate factory work in the last
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 Williamss 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 preconceptions and inhibiting
In the books 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
daytoday 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 ondemand
creativity is essential to success.
Wheel, Deal, and Steal
by D. Quinn Mills (Financial Times Prentice Hall)
As a followup to last years 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 lions share of blame at the feet of CEOs whose optionladen compensation
plans, designed to align their incentives with shareholders, rewarded shortterm earnings management and beautified
balance sheets. These tactics were facilitated by cooperative accountants who didnt 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 investmentbanking 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)
The old adage If you dont have something nice to say, then dont say anything at all may be a recipe for success
in polite society, as parents have long taught their children. But holding ones 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 dont get the vital information they need, productivity plummets, and creativity
crashes. Moreover, todays 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.