Avainsana: Leadership

How was the book?

Why should you read ”In Search of Excellence” book. Thomas J. Peters and Robert H. Waterman Jr. wrote the book in early 80’s and it was published 1982. The companies that were reviewed in this book have had truly excellent financial performance for the past twenty years in order to be part of the analysis. So the book is nearly 27 years old, the cases are much older than 27 years and some definitions used in the book are not very contemporary. Before starting this review we can ask one crucial question – are the learnings of Peter and Waterman still valid?

My answer is yes and no. No, because many of the learnings are elementary and self-evident from the current corporation’s perspective. Yes, if you have not lived the hard facts of running a large corporation. The book is needed to understand the basics of a large corporation. It’s also beneficial to learn how the current management theory has evolved from works of Peter Drucker to Jim Collins. This a ”back to basics” kind of book. The modern corporation has all or should have all these features by now that Peters and Waterman are explaining.

”In Search of Excellence” is a business book based on analysis of 43 American large corporations and out of those were interviewed 21 corporations. The method is like in the ”Good to Great” by Jim Collins. A side notion is that Peters and Waterman were ahead of their time, because they cited the famous duo – Kahneman and Tversky, on the representativeness i.e. how we are more influenced more by stories than by data. 

Also in the book was introduced a practices and concepts novel in corporate life globally in early 1980’s. For example a practice called ”MBWA” (Management by Walking Around) which meant that the management should also be visible. People working for you need to have informal constant contact or communication with management and being present is one of the most efficient ways of communication. Importance of culture: ”Profit is like health. You need it, and the more the better. But it’s not why you exist.” Culture as a corporate concept started to emerge in the early 1980’s.

 The book that I read was 340 pages long. The authors used 1/3 of the book before they even got to the point i.e. started to present results from the analysis. Second critique is that the results presented were only qualitative. I would have preferred quantitative analysis also. This critique does not lessen the wealth of understanding of management theory. 

 What are the key learnings?

 The writers were eager on forming a new theory how the excellent corporations ”behave”. Their new theory was built on three pillars:

1.    Breaking old habits and shifting attention which includes

a.    Regular reorganization

b.    Major thrust overlays

c.     Experimental units

d.    Systems focusing on one dimension

2.    Stability

a.    Simple, basic underlying form

b.    Dominating values (superordinate goals)

c.     Minimizing/simplifying interfaces

3.    Entrepreneurship

a.    ”Small is beautiful” units

b.    Task forces, and other problem-solving implementation groups

c.     Measurement systems based on amount of entrepreneurship, implementation

The new theory is supported with eight basics of excellent management practice or attributes that the writers found from the excellent companies:

1) A bias for action, for getting on with it.

The excellent companies had the standard procedure of ”Do it, fix it, try it.”

2) Close to the customer. These companies learn from the people they serve.

Excellent companies are close to the customer. Especially they are very close to the lead users. Other companies just talk about it.

3) Autonomy and entrepreneurship.

”The most discouraging fact of big corporate life is the loss of what got them big in the first place: INNOVATION”

4) Productivity through people.

”Nothing is worse for the morale that a lack of information down in the ranks. NETMA (Nobody Ever Tells Me Anything)”

5) Hands-on, value driven.

Figure out your value system and decide what your company stands for.

6) Stick to the knitting.

Robert W. Johnson: ”Never acquire a business you don’t know how to run.” When acquiring a company stick very close to your knitting and you will outperform the others.”

7) Simple form, lean staff.

Top-level staff are lean, keep the corporate staff fewer than 100 people and newer go for the matrix organization.

8) Simultaneous loose-tight properties.

Autonomy pushed to the shop floor and fanatic centralists around the few core values they hold dear.

Excellent corporations were brilliant on the basics. No hoopla, no nothing fuzzy. Simply K.I.S.S. The companies worked very hard to keep things simple in a complex world. They wanted to be simplistic. As Peters and Waterman elegantly express: ”They persisted. They insisted on top quality. They fawned on their customers. They listened to their employees and treated them like adults. They allowed their innovative product and service ”champions” long tethers. They allowed some chaos in return for quick action and regular experimentation.” We could stop here. This is the best that any book can offer. In these six sentences the writers explained the core formula of an excellent corporation.

How should we change according to the book?

The experienced boss has good instincts – his vocabulary of old-friend patterns tells him immediately whether things are going well or badly. Besides the instinct an excellent boss needs day-to-day management practices according to the book are:

·       Know your numbers, because business is a numbers game

·       Build momentum by accumulating small successes

·       Have only three to five objectives for the year

·       Be action oriented to maintain innovation

·       Support diversity to maintain creativity

·       Ask for one-page ”memos”

·       Embrace simplicity

·       Do MBWA IRL (or with Social Media)

Other notions about corporate life that I would interesting in the book were:

·       Excellent companies can separate creativity and innovation. ”Creativity is thinking about new things. Innovation is doing new things.” So support diversity.

·       Poorer performing companies may have strong cultures, but the cultures are dysfunctional.

·       Past personal success apparently leads to more persistence, higher motivation or something that makes us to do better.

·       People are good on holding six to seven pieces of data in our short-term memory. And that’s why even companies should focus on few key business values and few objectives.

Useful one-liners:

·       ”Label a man a loser and he’ll start acting like one”

·       ”Nothing succeeds like success”

·       ”More than two objectives is no objectives.” Watchword of Texas Instrument.

·       ”Sell it to the sales force.”

·       ”What gets measured gets done.”

·       ”But above all try something” Franklin Delano Roosevelt.

What should I personally do?

Support diversity and embrace innovation.

Summary

The book in six words – ”Eighty percent of success is showing up” Woody Allen. 

Peter Drucker: The Effective Executive – The Definitive Guide to Getting the Right Things Done

How was the book?

Peter Drucker is king of listing things. It all starts with his main messages. He has two main messages on how to become the effective executive. To become effective the executive needs to do certain simple things. And to learn how to become the effective executive. ”All the effective ones have had to learn to be effective”, because effectiveness is not inborn.

What are the key learnings?

How to become the effective executive? The first you have to manage oneself for effectiveness. Second, to learn to use the scarcest resource – time, correctly. Third, you have to have an action plan otherwise you will become a prisoner of events. Fourth, not only executives decisions matter – decisions made at every level matter.

There are eight simple practices that an effective executive must follow:

1. They ask ”What needs to be done?”
2. They ask ”What is right for the enterprise?”
3. They develop action plans.
4. They took responsibility for decisions.
5. They took responsibility for communicating.
6. They were focused on opportunities rather than problems.
7. They ran productive meetings.
8. They thought and said ”we” rather than ”I”.

The first two gives them the knowledge they need. The next four helped the to convert this knowledge into effective action. The last two ensured that the whole organization felt responsible and accountable.

Chester Barnard (1938) brought up the wisdom that organizations are held together by information rather than by ownership or command.

Executive realities are:

• The time belongs to everybody else than the executive.
• Executive himself have to change, otherwise nothing changes.
• Ineffectiveness comes from within the organization.
• Executive is in bubble, because he is within an organization.

Don’t miss the tide – changes in the trends. These will determine your success or failure.

How should we change according to the book?

First of all the executive is expected to get the right things done. Brilliant insight is not an achievement, getting the right things done is. Effectiveness is what executives are being paid for. Without effectiveness there is no performance.

Executive is not the same thing as a leader. Only few people have the same qualities – being a leader and an executive. But the habits of effectiveness can be learned. Five essential habits are:

1. Know Thy Time. Know where your time goes.
2. Focus on outward contribution – results.
3. Build on strengths.
4. First things first. Concentrate on few major areas.
5. Make effective decisions.

Know thy time; start with your time – not tasks, by managing your time and cut back unproductive timeconsumers, because time is the only limiting factor. Ask yourself ”What would happen if this were not done at all?”

How to prune the time-wasters:

1. Identify time-wasters?
2. Maybe your organization is overstaffed?
3. Malorganization generates excess meeting?
4. Malfunction in information?

Top management should always be asking from himself ”What Can I Contribute”. It’s his way of keeping track that he accountable for the performance of the whole. ”To focus on contribution is to focus on effectiveness.” Performance is needed in three major areas:

·      Direct results comes always first.

·      Building values and their affirmation.

·      Building and developing people for tomorrow.

Top managements contribution is needed in these areas:

·      Communications which is in the center of managerial attention.

·      Teamwork that makes things click.

·      Individual self-development.

·      Development of others.

The effective executive knows that every people-decision is a gamble and that their subordinates are not paid to please their superiors; they are paid to perform. That’s why the effective executive should concentrate on hiring people with strengths that he or his team is missing. ”One feeds the opportunities and starves the problems.” Also not to hire people on an ”undoable job”, a man killer. What is undoable job? It’s any job where two or three men is succession have been defeated although these individuals have been performing well in previous assignments. 

Staffing from strength starts by:

1.    The effective executive must make sure that the job is well-designed.

2.    Make each and every job demanding and big.

3.    Start by looking what the man can do (right people on the bus and right people on right places).

4.    Remember to put up with weaknesses.

Effectiveness is concentration, because the effective executive ”do first things first and they do one thing at a time”. Concentration is the effective executive’s ”only hope of becoming the master of time and events instead of their whipping boy.”

The effective executive always work under disagreements. It’s part of the package. Main reasons for disagreements are:

·      Without disagreements one becomes prisoner of the organization.

·      They provide alternatives.

·      It gives a possibility to ask that is the decision necessary, because it is a risk of shock.

To make decisions is the specific executive task. Right decisions will grow from the clash and conflict of different opinions and from consideration of competing alternatives. ”Yes” or ”no” decisions are not decisions. Decisions are judgements. Decisions are always a choice between ”almost right” and ”probably wrong”. The effective executive makes effective decisions via s systematic process. The elements of effective decisions are:

·      Strategic vs. generic. He has think through what is strategic and what is generic. Always assume that the problem to be solved is a generic and there is a rule how to solve it.

·      Goals; what are the objectives the decision has to reach i.e. what goals to reach. For example shall the decision increase market share.

·      Do the right thing; what is right rather than acceptable.

·      Execute; turn the decision into action.

·      Get feedback. Follow the consequences of the decision, did it reach the goals, do you have to iterate. 

What should I personally do?

Executives are not paid for doing things they like to do. They are paid for getting the right things done.

Summary

The book in six words – Don’t be a prisoner of events.

About the book

Aim of the book is to be practical discussions, philosophical tales and scientific and analytical commentary on the problems of randomness under uncertainty.

How was the book?

This book is for all the people who live in Ostrobothnia in Finland. All the people who thinks that ”moon oikias, soot vääräs” should read this. The Skin in the Game is a perfect book for them. Nassim Nicholas Taleb writes as everybody else would have wrong opinions. He intended the book to be an oversensitive bu***t detector. He says that the book came after a deep unplanned flirtation with mathematics. Unfortunately the first 40 pages were explanation what the book is about and how Taleb gave birth to it. For me it was a bit too much. Nevertheless I enjoyed reading the book.

What are the key learnings?

If I would have to draw a word cloud of the book it would certainly use three words – freedom, trade-offs and rationality. Putting your skin in the game you are making trade-offs with your freedom and sometimes rationality plays no role. 

Topics of the book are:

• uncertainty and the reliability of knowledge, 
• symmetry in human affairs, 
• information sharing in transactions and 
• rationality in complex systems and in the real world.

For Taleb skin in the game is about justice, honor and sacrifice. Things that that are existential for humans. Core of the book is rationality and risk bearing. Rationality resides in what you do and it is about survival. Rationality is also risk management.

 Important in the book are thinking flaws and what kind of people there are. The thinking flaws that Taleb brings up are:

• Incapable of thinking in second steps and unawareness of the need for that
• Incapable of distinguishing between multidimensional problems and their single-dimensional representations and
• They can’t forecast the evolution of those one helps by attacking.

There are types of Skin In The Game people:

• No skin in the game people are those who keeps the upside, transfers downside to others, owns a hidden option at someone’s else’s expense. For example consultants or corporate executives.
• Skin in the game people are those who keeps his own downside, takes his or her risk. For example entrepreneurs or citizens.
• Skin in the game of others or soul in the game are those who takes the downside on behalf of others, or for universal values. For example saints, artists, innovators, journalists who expose frauds.

Taleb’s characterization of people is so interesting that the following quote summaries his thinking. ”Beware of the person who gives advice, telling you that a certain action on your part is ”good for you” while it is also good for him, while the harm to you doesn’t directly affect him.” So there is asymmetry of advice is when it is applied to you but not him. As Romans were fully aware, one lauds merrily that merchandise to get rid of it (Horace). Advice and sales should be kept separately. But if the asymmetry or symmetry exists in sales, so how much should the salesperson tell to the buyer? Laws come and go; ethics stay.

 In the same context Taleb sees that peoples thinking and actions should go hand in hand. Those who do should talk and only those who do should talk. Things designed by people without skin in the game tend to grow in complication (before their final collapse). Like Nokia’s strategy department did. Non-skin-in-the-game people don’t get simplicity. Without skin in the game everybody is dumb. If you do not take risks for your opinion, you are nothing.

 Putin against heads of NATO countries is one example of asymmetry. Putin does not have to be re-elected and he does not have to act with the same rules. On the other hand NATO heads have to be thinking what his or hers statements means for his re-election.

 When we think about symmetries or asymmetries we must bear in mind four things:

·       Unconditional symmetry is base of democracy.

·       Symmetries between people and transaction – an eye for one eye.

·       Rhodian law – all must be made up by the contribution to all.

·       Silver rule symmetry: you can practice your freedom of religion so long as you allow me to practice mine.

Minorities are one important form of asymmetries. According to Taleb the dominance of minority has led to manifesto of dictatorship of the minority. For example halal meat or kosher drinks are more widely used than the minority. Lingua franca i.e. English is used as corporate language, because the entry-level of starting to use English is smaller than training everybody to use a new language. This is a case example of asymmetry is our time. Renormalization rule is one form that exist in the minorities’ eco-system. Renormalization means that everybody is using a minority product – lactose free dairy products, halal meat or kosher. To win the game you have to win only small proportion of users and you will get the vast majority as well. Sound, but controversial thinking and maybe a solid marketing strategy.

How minorities rule and make change happen? Societies evolve when few courageous people want to move the needle. ”All one needs is an asymmetric rule somewhere and someone with soul in the game.” Or as Alexander the Great has legendry said – ”I am not afraid of an army of lions led by a sheep; I am afraid of an army of sheep led by a lion.” Meaning that there is a value for active, intolerant and courageous minority. That is short, but elegant summary How Taleb sees people. 

Taleb spends few pages around a concept what he calls ”Intellectual Yet Idiot”. Taleb is suggesting that for example Richard Thaler is a intellectual yet idiot, because of his nudge theory. Btw what is IYI? According to Taleb it is ”one IVY league degree one vote” against one man one vote. Anyways Talebs critic might be in place, but having read The Nudge book I would argue that Taleb and Thaler have different motives. Thaler want’s to help us making positive action. Taleb want’s to grow the readers to become non-traditional thinkers and finding new perspectives. Strategy vs. execution?

Thomas Piketty and his books gets also his share of the IYI analysis. Piketty’s analysis is also seen flawed, because inequality works the other way around according to Taleb. He sees that year to year changes does not happen in the knowledge economy and the people belonging to the ne percent do not change. So the winner takes it all and Piketty does not understand that. According to Taleb. And maybe he is right. The one percent has different tools to protect their wealth than the blue collar workers have in order to accumulate his wealth. 

Taleb is also playing the violin of change in our globalized society. He points out that currently we are witnessing Uberization, birth of city-states and Black Swans. Uberized is a process of being disintermediated. City-states are growing and it will give birth of new governance. What has survived has revealed its robustness to Black Swan events and removing skin in the game disrupts such selection mechanism.

How should we change according to the book?

Why Romans had a slave as a treasurer? Because the laws for a freeman were different compared to a slave. The slave had more skin in the game. Taleb didn’t write this as self-help book, but I think that we can learn from these great ideas that he has. Concept of freedom, risk taking, envy and income mobility might be one of the ideas that might help us change.

Today the best slaves are those who you overpay and the modern slave knows that. For example expat strategy. Even extreme freedom is not freedom, because there lies also a risk. Employees are reliable by design, but you should not trust their ability to make hard decisions, because they are afraid of the risks. For example the tale by Aesop where the ass don’t want the collar of the dog although it gets all the meals. Eventually the free ass was eaten up by a lion. That is real skin in the game. Freedom is never free and life is full of trade-offs.

Salesperson and traders are manageable only when they are not profitable, in which case they were not wanted. When people turn into profit-centers, then no other criterion matters. And then people might turn into wolves again. Or risk takers which can lead that they are also socially unpredictable people. One way to show your freedom is to curse – for example in Twitter. That way you show that they are also competent which is a low-risk strategy to show off. ”Risk takers take risks because it is in their nature to be wild animals.” 

Few notions about work and businesses. Why firms exist? Because it’s too costly to negotiate every transaction and that’s why companies hire employees (like for example The Oktoberfest dilemma). ”What matters isn’t what a person has or doesn’t have; it is what he or she is afraid of losing.” The more you have to lose, the more fragile you are. So lovers of paycheck (employees) have significant skin in the game – their dependability and they have a reputation to protect. How to become financially secure? It’s not about means – it’s about lack of wants. ”F*** your money.”

Envy does not travel long distance or cross many social classes. Envy is apparently being upset that ”less smart” persons are much richer. Typically people envy people how are in the same level. Not the super-rich class. Envy you are more likely to encounter in you kin (Aristotle). So that’s why cobbler envys cobbler.

About income mobility Taleb has made interesting observation. Americans are far better well of than Europeans. American equality is that 10% of Americans will spend at least a year in the top 1 percent, and more than half of all American will spend a year in the top 10 %. But for example 60 % n the French list are heirs and third of the richest Europeans were the richest centuries ago. Make the rich rotate by forcing the rich to be subjected to the risk of exiting from the one percent? Are there mechanisms that is protecting the 1 %? Anyways this tells a bit different story about European and American income mobility.

Taleb’s book is flooding with quotations. Here is a small collection of those:

·       How to find hidden vulnerabilities – ask me why I don’t have a statue rather than why do you have one?

·       You can’t chew with somebody else’s teeth.

·       A bird in the hand is better than ten on the tree.

·       Madness is rare on individuals, but in groups, parties, nations, it is the rule. (Friedrich Nietzsche).

·       Action without talk supersedes talk without action.

What should I personally do?

Ultimate is when you have your skin and soul in the game.

Summary

The book in six words – ”Success is leading a honorable life”

About the book

The book by Yves L. Doz and Keeley Wilson is like a detective story. You know what will happen at the end of the story, but you don’t know where exactly did the crime happen.  

I served the mobile communications industry for 12 years and that’s why the ”Ringtone” book is very interesting piece of analysis to me. It’s like an analytical continuum for books such as ”Good to Great” or ”Leading Change”. I can remember great many historical dates and activities that this analysis presents.

How was the book?

In the case on Nokia and it’s mobile phone business we typically analyze the reasons for failure. But in this analysis there is also presented the reasons for the high-growth of the mobile phone business within Nokia. Somehow it is actually more interesting than the failure of the mobile phone business in Nokia. Wouldn’t you like to learn how to grow businesses more than how administer failure.

What are the key learnings?

I remember when I joined Nokia and the CEO of the company was Olli-Pekka Kallasvuo. One of the most impressing moments was when I heard mr. Kallasvuo to end one of his speeches stating that ”Internet is our quest”. Well said, but it was not only our quest, but it was also our destiny.

Nokia didn’t go from good to great. It went slowly from great to bad and then to worse. The old Nokia was once hit by the Schumpetrian creative destruction and it happened long before the mobile era. So actually Nokia has in it’s 153 years of history met disruption at least twice. And survived from both occasions.

According to Doz and Wilson the reasons for success of the mobile phone business in Nokia were:

·       Porter’s theory of competitiveness of nations is one explanation why Nokia and Finland was struck with the phenomenal success.

·       Planetary alignment i.e. good luck.

·       And fragmented and localized structure on Finnish telecoms market.

I think that Nokia was lucky when it got involved in the development work of NMT and later in the development work of GSM specifications. For example roaming was invented in the NMT standardization process and it led to the service development of other complimentary services than voice calls. GSM Standard in was a great business plan for companies that were hungry enough to execute. Nokia with it’s greenfield operator customers were more hungry than the incumbent state owned telecom operators. Radiolinja was one of the hungry customers and so it became the first customer of Nokia for a digital network.

According to Doz and Wilson the reasons for failure were:

·       It was unavoidable a la Schumpeter.

·       Organizational evolution and adaptation gone astray.

·       Failure of management volition.

There is no single decision that explains the failure of Nokia Mobile Phones. It was merely mixture of different and multiple decisions that lead to prolonged deterioration of the mobile phone business. Nokia was declining way before the arrival of new competitors such as Android and iPhone. These competitors were in platform business, but Nokia was still in hardware business. Nokia was caught up with the ”Red Queen” effect. The Red Queen explained that ”My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.” Maybe Nokians should have also tried to learn to run other routes. And smarter?

What could have Nokia done differently in order to save it’s mobile phone business?

·       Create and stick with a software-first vision.

·       They should have create a strategy how to compete against Internet companies.

·       Develop proprietary operating system for Nokia.

·       Nokia didn’t have a theory how succeed.  

·       Integrate interdependent decisions.

·       Behave disciplined as the Good to Great companies did.

At the end of the book Doz and Wilson offers some factors that might have saved mobile phones businesss from total destruction:

·       Nokia kept doing the same thing for too long.

·       The innovation center should have been established much earlier to California.

·       MeeGo should have been developed much earlier and in faster pace.

There is also exhaustive list of management lessons which are by far the best outcomes of the research and analysis. My favorite findings are:

·       Success begets failure.

·       Success also breeds conservatism.

·       A new reality of different nature calls for a new strategy-making paradigm.

How should we change according to the book?

As mentioned this book is like a detective story and you don’t know when or where does the crime take in place. Bearing in mind that ”Nokia’s success in mobile phones was neither the fruit of a repeatable recipe, nor an accident”. Due to that reason the Ringtone is somehow a dull book to read, because I was certain that the research team would have found a repeatable recipe.

But we can learn from the book a great deal:

·       We should invest into the future megatrends.

o  As long as GSM specifications was the business plan everything was well. When they had to become a software-first company, the hardware-first attitude overruled the need for change.

·       Never forget your customer.

o  Time consumed in committees was away from the customer centric work. Key driver in change is that change management must never forget the customer.

·       Organizational changes need presence of management

o  Matrix organization and it’s barons turned against each other. They had to compete from the same resources and the leadership team failed to guide these teams. ”Organizations structures do not fail; management fails at implementing them” (Jay Galbraith).

The idea of matrix organization was sensible for Nokia, but it was poorly implemented. Matrix organization is not a dead end, but there are three ways to run a matrix:

·       arbitration,

·       negotiation,

·       decentralization & delegation.

Because Finns have a strong tendency towards consensus Doz and Wilson suggests that in Finnish matrix organizations there should be clear and speedy rules for decision making

Matrix organization managers needs different set of business skills. For example when matrix leaders pushback decisions to managers he needs:

·       collaborative skills,

·       a careful balance of collective interest and self-interest and

·       structural context to match.

What should I personally do?

Read Gary Hamel’s book called ”Competing for the future”.

Summary

The book in six words – ”Lieutenants should not turn into barons” (Jorma Ollila)