Serial Innovators: A book review by Bob Morris

Serial Innovators: Firms That Change the World
Claudio Feser
John Wiley & Sons (2012)

How and why continuous innovation and adaptation can help an organization “live” longer

What we have here is a “hybrid” narrative that develops on two separate but interdependent levels: a fictional account that focuses on Carl Berger (CEO of American Health Devices or AHD) and Claudio Feser’s exposition of a core thesis that continuous innovation and adaptation can help an organization “live” longer. Only a few years ago, these were corporate equivalents of thriving organisms: Bethlehem Steel, British Leyland, Commodore, Digital Equipment Corporation, Enron, General Foods, Lehman Brothers, Pan Am, Polaroid, RCA, Texaco, TWA, Union Carbide, Uniroyal, Westinghouse, and WorldCom. Today? All gone. And keep in mind, this is only a partial list of organizational fatalities. Of the Top 50 in 1960, only 13 are among the Top 50 in 2010. As for the other 37, 23 have either filed for bankruptcy or been acquired.  The remaining 14 are well-known but endangered.

Frankly, I am much less interested in fictional accounts (however well-told in narrative form with setting, characters, plot, conflicts, etc.) than I am in research-driven revelations based on real-world situations. Feser is a highly-skilled storyteller, to be sure, but I now focus on what he has to say about extending corporate longevity. Here are some of the passages that caught my eye in Chapters 1-5:

o  Daniel Kahneman and Amos Tversky’s pioneering research on three heuristics of judgment (anchoring, availability, and representativeness), Pages 27-29
o  Mental biases (framing, optimism, loss aversion, and status quo) and the rigidities of bounded rationality, Pages 29-32
o The Theory of Self-Efficacy Beliefs (i.e. task-specific self-confidence), Pages 40-45
o  Plasticity, learning, and behavioral change, Pages 61-63
o  Large-scale rewiring of brains, Pages 63-65

And then in Chapter 13:

o  The role of a company’s leaders during its transformation, Pages 161-162
o Two elements of Feser’s concept of developing a leadership legacy: (1) “building an organization that builds human passion, self-confidence, values and capabilities,” and (2) building an organization that “has a positive impact on society…one that – with its mission, values, and scale – continuously invents new products and services that make life healthier, better, safer; an organization that can change the world,” Pages 163-164

As I reviewed the material in the Appendix, “Analysis of the Top 50 U.S. Firms of 1960,” and learned what has since become of them, I was reminded of an observation by Ecclesiastes, “To every thing there is a season, and a time for every purpose under heaven.” However, as Charles Darwin’s research on what is now referred to as “natural selection” suggests, organisms – be they organizational or natural – either adapt or perish. Moreover, in recent years, adaption has required constant (“serial” and serious) innovation just to survive.

Although a world-class pragmatist, Feser has high-hopes and great expectations, indeed a rock-solid faith, that almost any organization can not only survive but thrive if (HUGE “if”) its leaders focus their thoughts and actions on what really matters, on doing good, on helping others grow. Yes, profitability is highly desirable and must be achieved and then sustained…but while “building institutions that develop passionate, principled, self-confident, learning individuals” who also do good, whose collective and collaborative initiatives “can have an impact on society.”

As for Carl Berger, good news. Everything eventually turned out well. The details of his story are best revealed within the narrative, in context. However, I do want to say I agree with Claudio Feser that Berger provides a compelling example of a young business leader who overcomes major challenges (including cancer), one who reminds us that we really can “live a life that matters, a life in which we can make a difference.”

The Parable of the Japanese Steel Executives – Don’t Even Try To Do Everything; Do! One! Thing! Very, Very Well

The Parable of the Japanese Steel Executives – Don’t Even Try To Do Everything; Do! One! Thing! Very, Very Well

Let’s call this the parable of the Japanese Steel Executives.

I remember an interview years ago with Walter Mondale, then the Ambassador of Japan.  He was touring the largest steel plant in Japan, and he asked his hosts, the leaders of the company, what they thought of Bethlehem Steel.  After 30 minutes of Japanese deference and politeness, they paused and asked Mr. Mondale why Bethlehem Steel was branching off so far afield from steel with their investments/holdings.  Mr. Mondale said that it dawned on him at that moment that the Japanese steel men loved steel – while the American steel men chased after profits.  Mondale’s conclusion:  the men that loved steel would end up winning the steel wars against the men who chased profits.

Or, in other words – don’t try to do everything, just do! one! thing!, and do it very, very well.

I thought of this as I read the always helpful/educational/useful Farhad Manjoo this morning.  He writes about the demise of the HP Tablet, and the absolute dominance of the iPad.  (Yes, I have one – - yes, I love it!).

He states that there is actually an opening for a “competitor” to the iPad.  No, not quite a competitor.  Anyone who can afford a Tablet will opt for the iPad.  It is simply that much better than all the pretenders.  Instead, there is an opening for those who wish they could afford an iPad, and can’t.  The idea is a less expensive, “partial” tablet (my phrase).  He describes such a lower priced gizmo, and suggests that Amazon just might be able to make it work.  But it won’t be a competitor to the iPad, it will instead open up that next market “down” from the iPad users.

Here’s the line that grabbed me:

In the tablet market, doing more stuff with a worse user experience isn’t as good as doing less but doing it better.

(Read the full article, Do Less, Do It Better:  A recipe for Amazon’s rumored iPad competitor).

Doing less, but doing it better.  Now this is a formula for success, regardless of your endeavor.  Do your one thing; keep to that one thing; and do it better than anyone else.

So, what is your one thing?  And, how good are you at it?  Define it carefully.  Get better at it.  Become the best.  There’s your agenda for the next few months/years.

“Nobody Knows Anything” – Malcolm Gladwell sweeps through a large swath of the 20th century of American Business in a Tour de Force

Malcolm Gladwell

If you read this blog, you know that I am a big fan of Malcolm Gladwell.  And as much as I like his books, I equally like his essays (all but the very most recent archived here).

Here are some excerpts from his essay entitled The Risk Pool.  (I re-read this essay after it was linked to in this article by Timothy Noah at Slate.com).  It’s about – everything.  Pensions, health care, technological advances, Peter Drucker…  reading this feels like en education in 20^th century business.

Excerpt number one – the dominance of Bethlehem Steel:

“In 1956, Eugene Grace, the head of Bethlehem Steel, was the country’s best- paid executive. Eleven of the country’s eighteen top-earning executives that year, in fact, worked for Bethlehem Steel. In 1955, when the American Iron and Steel Institute had its annual meeting, at the Waldorf-Astoria, in New York, the No. 2 at Bethlehem Steel, Arthur Homer, made a bold forecast: domestic demand for steel, he said, would increase by fifty per cent over the next fifteen years. “As someone has said, the American people are wanters,” he told the audience of twelve hundred industry executives. “Their wants are going to require a great deal of steel.”

Excerpt number two — GM’s President makes a lot of money – and pays a lot in taxes:

The president of General Motors at the time was Charles E. Wilson, known as Engine Charlie. Wilson was one of the highest-paid corporate executives in America, earning $586,100 (and paying, incidentally, $430,350 in taxes).

Excerpt number three — Peter Drucker rightly observes/predicts, confirming Taleb’s (The Black Swan) truism — “nobody knows anything”  (except maybe Drucker):

The most influential management theorist of the twentieth century was Peter Drucker, who, in 1950, wrote an extraordinarily prescient article for Harper’s entitled “The Mirage of Pensions.” It ought to be reprinted for every steelworker, airline mechanic, and autoworker who is worried about his retirement. Drucker simply couldn’t see how the pension plans on the table at companies like G.M. could ever work. “For such a plan to give real security, the financial strength of the company and its economic success must be reasonably secure for the next forty years,” Drucker wrote. “But is there any one company or any one industry whose future can be predicted with certainty for even ten years ahead?” He concluded, “The recent pension plans thus offer no more security against the big bad wolf of old age than the little piggy’s house of straw.”

Here are some “lessons” one might draw from this essay:

1.  There was a time when the rich really did pay higher taxes. And this is from a period when America really flourished.  There may be a connection.

2.  Technology really does endanger worker’s jobs, and change really does endanger the long-term health of companies. Both Bethlehem Steel, and ultimately General Motors, went bankrupt.  There was a time when no one (except Drucker) could have imagined that these behemoths might someday face the end of their reign.

3.  No company is really big enough to take care of the pensions and the health care of all of its workers and retired workers. Because, tomorrow, as is now quite obvious, a company (if it has survived) will likely have a smaller pool of workers.  Here’s another excerpt:

When Bethlehem Steel filed for bankruptcy (in 2001), it owed about four billion dollars to its pension plan, and had another three billion dollars in unmet health-care obligations. Two years later, in 2003, the pension fund was terminated and handed over to the federal government’s Pension Benefit Guaranty Corporation. The assets of the company—Sparrows Point and a handful of other steel mills in the Midwest—were sold to the New York-based investor Wilbur Ross…

4.  The more we know, the more we will be prepared for the next surprise. I have long felt that this simple saying is important to remember:  “the more you know, the more you know.”
And tomorrow will be different from today.  And then the next tomorrow will be even more different.  So, knowing the vast sweep of business struggles and change helps us not be as surprised by the next surprise.

Let me encourage you to read the Gladwell essay.  It will make you think.

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(To purchase my synopses of Gladwell’s books The Tipping Point, Blink, and Outliers, with audio + handout, go to our companion site, 15minutebusinessbooks.com).