To know the secret of business success has always been our great desire. Instinctively, the recipes are gleaned from the experiences of successful companies. Experts tried to find out what those companies did, what strategy they implemented, what quality their leaders and employees had. And through induction method and they composed easy-to-read narration of “road to success”.
That is what Tom Peters and Robert Waterman, McKinsey consultants, exactly did in 1982 by publishing “In Search of Excellence”. They scrutinized painstakingly the most successful American companies based on long-term profitability and continuing innovation. They made much of 8 (eight) attributes of excellent companies. The result was applauded by business communities. It seemed the ingredients for success have been revealed.
But not so fast, two years later, Business Week announced in its cover story a disparaging question “Oops! Who is Excellent Now?” A third of those “best-run” companies fared financial trouble. Business condition seemed to have changed. The previous success utterly didn’t guarantee the success in future.
A decade later some experts still didn’t make out the phenomena. James E Collins and Jerry I Porras repeated the same mistake again in 1994 by presenting “Built To Last”. They defined successful habits of visionary companies. Later, some visionary ones: Motorola, Ford, Sony, Walt Disney, Boeing, Nordstrom, and Merck performed badly. Their management practices and leadership theory are in question. If that book is written at present, Apple will replace Motorola, Toyota will replace Ford, Samsung will replace Sony.
Why do their analyses fail? The best companies can go bust any time regardless the string of past success.
What Tom Peters and friends did was hindsight, analyzed something that had happened and treated them as if they were constant factors. They tried to define the causality of past action and success. It is ever-changing and dog-eat-dog business environment makes the proven strategy suddenly irrelevant with the new situation. And mostly, the causes of success hardly scientifically measured.
This brings us to the new approach in understanding the success and survival of companies.
The analyses are still based on the past occurrence. But the new approach is in no way well defined in well-rounded theory. No constant factors such as leadership, customer satisfaction, total quality management, you name it, guarantee success. Those count and influence, but they aren’t the real factors of success.
The best books diving deep this new approach are “Fooled by Randomness” and “Black Swan” written by Nassem Nicholas Taleb and as well as “Adapt” by Tim Hartford.
The underlying idea is nobody can make prediction what to transpire in the future. Nobody can predict the movement of stock prices. Nobody knows the product that hit it big. No prediction about the emergence of commercial internet, cellular phone, facebook, twitter, iPad etc. is cases in point. Small number of business people are just so lucky identified the serendipitous hits.
The only “constant factor” of the new approach is trial and error. (It can be disputed that trial and error is deemed as a strategy. But the big difference is other strategies usually have specific target and known path, whereas trial and error doesn’t.) Trial and error brings about variation in goods, services, business model and management. Some of them get by, but some flop. And those who succeed are just the lucky ones.
That is how business works in complex circumstances. Taleb reckoned that trial and error is attributed quintessentially to the success of capitalism or free market. He aptly put it: “The reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives.”
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Source:
1. In Search of Excellence, Tom Peters and Robert Waterman
2. Built To Last, James E Collins and Jerry I Porras
3. Fooled by Randomness, Nassem Nicholas Taleb
4. Black Swan, Nassim Nicholas Taleb
5. Adapt, Tim Hartford
6. http://www.fastcompany.com/magazine/88/built-to-last.html?page=0%2C0
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