Execution

On The Inner Game of Tennis

I recently finished reading The Inner Game of Tennis by W. Timothy Gallwey.

Below are key excerpts from the book that I found insightful:

It is the thesis of this book that neither mastery nor satisfaction can be found in the playing of any game nor without giving some attrition to the relatively new relatively neglected skills of the inner game. This is the game that takes place in the mind of the player, and it is played against such obstacles as lapses in concentration, nervousness, self-doubt and self-condemnation. In short, it is played to overcome all habits of mind which inhibit excellence in performance.

Getting it together mentally in tennis involves the learning of several internal skills: 1) learning to program your computer Self 2 with images rather than instructing yourself with words; 2) learning to trust thyself  (Self 2) to do what you (Self 1) ask of it This means letting Self 2 hit the ball and 3) learning to see ”nonjudgmentally”—that is, to see what is happening rather than merely noticing how well or how badly it is happening. This overcomes “trying too hard.” All these skills are subsidiary to the master skill, without which nothing of value is ever achieved: the art of concentration.

The first inner skill to be developed in the Inner Game is that of nonjudgmental awareness. When we “Unlearn” judgment we discover, usually with some surprise, that we don’t need the motivation rf a reformer to change our “bad” habits.There is a more natural process of learning and performing waiting to be discovered. It is waiting to show what it can do when allowed to operate without interference from the conscious strivings of the  judgmental ego-mind. The discovery of and reliance upon this process is the subject of the next chapter.

The main job of Self 1, the conscious ego-mind, is to set goals, that is, to communicate to Self 2 what he wants from it and then to let Self 2 do it.

The time for change comes when we realize that the same function could be served in a better way.

Step 1 – Observe, Nonjudgmentally, Existing Behavior…Step 2 Ask Yourself to Change, Programming with Image and Feel…Step3 Let It Happen! Step 4: Nonjudgmental, Calm Observation of the Results Leading to Continuing Observation of Process until Behavior Is in Automatic…Step 4 Observation.

By increasing the effective power of awareness, concentration allows us to throw more light on whatever we value knowing, and to that extent enables us to know and enjoy it more.

Children who have been taught to measure themselves in this way often be come adults driven by a compulsion to succeed which overshadows all else. The tragedy of this belief is not that they will fail to find the success they seek, but that they will not discover the love or even tithe self-respect they were led to believe will come with it. Furthermore, in their single-minded pursuit of measurable success, the development of many other human potentialities is sadly neglected.

On a closing note:

Winning is overcoming obstacles to reach a goal, but the value in winning is only as great as the value of the goal reached. Reaching the goal itself may not be as valuable as the experience that can come in making a supreme effort to overcome the obstacles involved. The process can be more rewarding than the victory itself.

A highly recommended read in the area of personal development.

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On The Everything Store

I recently finished reading The Everything Store – Jeff Bezos and the Age of Amazon – by Brad Stone.

Below are key excerpts from the book that I found particularly insightful:

There is so much stuff that has yet to he invented. There’s so much new that’s going to happen. People don’t have any idea yet how impactful the Internet is going to be and that this is still Day 1 in such a big way.

“If you want to get to the truth about what makes us different, it’s this,” Bezos says, veering into a familiar Jeffism: “We are genuinely customer-centric, we are genuinely long-term oriented and we genuinely like to invent. Most companies are not those things. They are focused on the competitor, rather than the customer. They want to work on things that will pay dividends in two or three years, and if they don’t work in two or three years they will move on to something else. And they prefer to be close-followers rather than inventors, because it’s safer. So if you want to capture the truth about Amazon, that is why we are different. Very few companies have all of those three elements.

So looking back on life’s important junctures was on Bezos’s mind when he came up with what he calls “the regret-minimization framework” to decide the next step to take at this juncture in his career.

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate direct! to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital. Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.

Jeff Bezos embodied the qualities Sam Walton wrote about. He was constitutionally unwilling to watch Amazon succumb to any kind of institutional torpor, and he generated a nonstop flood of ideas on how to improve the experience of the website, make it more compelling for customers, and keep it one step ahead of rivals.

Bezos was obsessed with the customer experience, and anyone who didn’t have the same single-minded focus or who he felt wasn’t demonstrating a capacity for thinking big bore the brunt of his considerable temper.

“My approach has always been that value trumps everything,” Sinegal continued. “The reason people are prepared to come to our strange places to shop is that we have value. We deliver on that value constantly. There are no annuities in this business.” A decade later and finally preparing to retire, Sinegal remembers that conversation well. “I think Jeff looked at it and thought that was something that would apply to his business as well,” he says.

“I understand what you’re saying, but you are completely wrong,’ he said. “Communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other. not more.”

That was a typical interaction with Jeff. He had this unbelievable ability to be incredibly intelligent about things he had nothing to do with, and he was totally ruthless about communicating it.

If Amazon wanted to stimulate creativity among its developers, it shouldn’t try to guess what kind of services they might want; such guesses would be based on patterns of the past. Instead, it should be creating primitives—the building blocks of computing—and then getting out of the way. In other words, it needed to break its infrastructure down into the smallest, simplest atomic components and allow developers to freely access them with as much flexibility as possible.

‘Jeff does a couple of things better than anyone I’ve ever worked for,” Dalzell says. “He embraces the truth. A lot of people talk about the truth, but they don’t engage their decision-making around the best truth at the time. “The second thing is that he is not tethered by conventional thinking. What is amazing to me is that he is bound only by the laws of physics. He can’t change those. Everything else he views as open to discussion.”

On a closing note:

Amazon may be the most beguiling company that ever existed. and it is just getting started. It is both missionary and mercenary. and throughout the history of business and other human affairs, that has always been a potent combination. “We don’t have a single big advantage,” he once told an old adversary, publisher Tim O’Reilly, back when they were arguing over Amazon protecting its patented 1-Click ordering method from rivals like Barnes & Noble. “So we have to weave a rope of many small advantages.” Amazon is still weaving that rope. That is its future, to keep weaving and growing, manifesting the constitutional relentlessness of its founder and his vision. And it will continue to expand until either Jeff Bezos exits the scene or no one is left to stand in his way.

A recommended read in the areas of technology and corporate history.

On Confessions of an Advertising Man

I recently finished reading Confessions of an Advertising Man by David Ogilvy.

Below are key excerpts from the book that I found to be particularly insightful:

Today, the world of advertising faces four problems of crisis dimensions. The first problem is that manufacturers of package-goods products, which have always been the mainstay of advertising, are spending twice as much on price-off deals as on advertising…The second problem is that advertising agencies, notably in Britain, France, and the United States, are now infested with people who regard advertising as an avant-garde art form…The third problem is the emergence of megalomaniacs whose mind-set is more financial than creative. They are building empires by buying up other agencies, to the consternation of their clients.  The fourth problem is that advertising agencies still waste their clients’ money repeating the same mistakes.

(1) Creating successful advertising is a craft, part inspiration but mostly know-how and hard work. If you have a modicum of mostly know–how and hard work. If you have a modicum of talent, and know which techniques work at the cash register, you will go a long way. (2) The temptation to entertain instead of selling is contagious. (3) The difference between one advertisement and another. when measured in terms of sales, can be as much as nineteen to one. (4) It pays to study the product before writing your advertisements. (5) The key to success is to promise the consumer a benefit – like better flavor, whiter wash, more miles per gallon, a better complexion. (6) The function of most advertising is not to persuade people to try your product, but to persuade them to use it more often than other brands in their repertoire. (Thank you, Andrew Ehrenberg.) (7) What works in one country almost always works in other countries.

(1) I admire people who work hard, who bite the bullet. I dislike passengers who don’t pull their weight in the boat…(2) I admire people with first-class brains, because you cannot run a great advertising agency without brainy people. But brains are not enough unless they are combined with intellectual honesty…(4) I admire people who work with gusto. If you don’t enjoy what you are doing, I beg you to find another job…(6) I admire self-confident professionals, the craftsmen who do their jobs with superlative excellence. They always seem to respect the expertise of their colleagues. They don’t poach. (7) I admire people who hire subordinates who are good enough to succeed them. I pity people who are so insecure that they feel compelled to hire inferiors as their subordinates.

(1) I try to be fair and to be firm, to make unpopular decisions without cowardice, to create an atmosphere of stability, and to listen more than I talk. (2) I try to sustain the momentum of the agency – its ferment, its vitality, its forward thrust. (7) I try to recruit people of the highest quality at all levels, to build the hottest staff in the agency business. (8) I try to get the best out of every man and woman in the agency.

The agencies which are most successful in new business are those whose spokesmen show the most sensitive insight into the psychological make-up of the prospective client. Rigidity and salesmanship do not combine.

Some agencies pander to the craze for doing everything in committee. They boast about “teamwork” and decry the role of the individual. But no team can write an advertisement, and I doubt whether there is a single agency of any consequence which is not the lengthened shadow of one man.

(1) What You Say Is More Important Than How You Say It. (2) Unless Your Campaign Is Built Around a Great Idea, it Will Flop. (3) Give the Facts. (4) You Cannot Bore People into Buying. (5) Be Well-Mannered, But Don’t Clown. (6) Make Your Advertising Contemporary. (7) Committees Can Criticize Advertisements, But They Cannot Write Them. (8) If You Are Lucky Enough To Write a Good Advertisement, Repeat It Until It Stops Pulling. (9) Never Write an Advertisement Which You Wouldn’t Want Your Own Family To Read. (10) The Image and the Brand. (11) Don’t Be a Copy-Cat.

On a concluding note, “a collection of Ogilvy-isms”:

We prefer the discipline of knowledge to the anarchy of ignorance. Tell the truth, but make the truth fascinating. In the best establishments, promises are always kept. whatever it may cost in agony and overtime. Change is our lifeblood. It is important to admit your mistakes and to do so before you are charged with them.

A recommended concise and perceptive read in the areas of advertising, and influence.

 

On The Lean Startup

I recently finished reading The Lean Startup – How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses – by Eric Ries. This book has been in my to-read list for quite some time, and has been recommended to me by several friends over the past few years. I am very glad that I was finally able to read this gem in entrepreneurship and management.

Below are key excerpts from the book that I found to be particularly insightful:

After more than ten years as an entrepreneur, I came to reject that line of thinking. I have learned from both my own successes and failures and those of many others that it’s the boring stuff hat matters the most. Startup success is not a consequence of good genes or being in the right place at the right time. Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught. Entrepreneurship is a kind of management. No, you didn’t read that wrong. We have wildly divergent associations with these two words, entrepreneurship and management.

This is a book for entrepreneurs and the people who hold them accountable. The five principles of the Lean Startup, which inform all three parts of this book, are as follows: 1. Entrepreneurs are everywhere. 2. Entrepreneurship is management. 3. Validated learning. 4. Build-Measure-Learn. 5. Innovation accounting.

The Lean Startup method, in contrast, is designed to teach you how to drive a startup. Instead of making complex plans that are based on a lot of assumptions, you can make constant adjustments with a steering wheel called the Build-Measure-Learn feedback loop. Through this process of steering, we can learn when and if it’s time to make a sharp turn called a pivot or whether we should persevere along our current path. Once we have an engine that’s revved up, the Lean Startup offers methods to scale and grow the business with maximum acceleration.

Mark explained, “Traditionally, the product manager says, ‘I just want this.’ In response, the engineer says, ‘I’m going to build it.’ Instead, I try to push my team to first answer four questions: 1. Do consumers recognize that they have the problem you are trying to solve? 2. If there was a solution, would they buy it? 3. Would they buy it from us? 4. Can we build a solution for that problem?”

What differentiates the success stories from the failures is that the successful entrepreneurs had the foresight, the ability, and the tools to discover which parts of their plans were working brilliantly and which were misguided, and adapt their strategies accordingly.

Thus, for startups, I believe in the following quality principle: If we do not know who the customer is, we do not know what quality is.

These examples from Grockit demonstrate each of the three A’s of metrics: actionable, accessible, and auditable.

My goal in advocating a scientific approach to the creation of startups is to channel human creativity into its most productive form, and there is no bigger destroyer of creative potential than the misguided decision to persevere. Companies that cannot bring themselves to pivot to a new direction on the basis of feedback from the marketplace can get stuck in the land of the living dead, neither growing enough nor dying, consuming resources and commitment from employees and other stakeholders but not moving ahead.

For the Five Whys to work properly, there are rules that must be followed. For example, the Five Whys requires an environment of mutual trust and empowerment. In situations in which this is lacking, the complexity of Five Whys can be overwhelming. In such situations, I’ve often used a simplified version that still allows teams to focus on analyzing root causes while developing the muscles they’ll need later to tackle the full-blown method. I ask teams to adopt these simple rules: L Be tolerant of all mistakes the first time. 2. Never allow the same mistake to be made twice.

I highly recommend this book!

On Leading Digital

I recently finished reading Leading Digital – Turning Technology Into Business Transformation – by George Westerman, Didier Bonnet, and Andrew McAfee. This book was graciously offered to me by Capgemini during the recent CIO Perspectives event in Houston. As the title and introduction summarize the core of this book is: “Our most fundamental conclusion is that Digital Masters— companies that use digital technologies to drive significantly higher levels of profit, productivity, and performance—do exist, but they’re rare. For reasons that we’ll explain here, most firms fall short of digital mastery. That’s the bad news, and it’s why we believe you’re probably not ready to survive and thrive in the second machine age.  Here’s the good news: the reasons that companies fall short of digital mastery aren’t mysterious or too numerous to list. In fact, the reasons are pretty easy to categorize. Companies that struggle with becoming truly digital fail to develop digital capabilities to work differently and the leadership capabilities required to set a vision and execute on it. The firms that excel at both digital and leadership capabilities are Digital Masters.”

Below are key excerpts from the book that I found particularly insightful:

Digital Masters excel in two critical dimensions: the what of technology (which we call digital capabilities) and the how of leading change (which we call leadership capabilities). These are two very distinct dimensions of digital mastery, and each plays its own role. What you invest in matters, to a point. How you use those investments to transform your company is a key to success. Neither dimension is enough on its own. Each is associated with different types of financial performance, and each provides only partial advantage. Taken together, they combine to give Digital Masters a clear advantage over their competitors.

On Creating a Compellinq Customer Experience:

Put customer experience at the heart of your digital transformation.  Design your customer experience from the outside in. Increase reach and customer engagement, where it matters, through new digital channels. Make data and analytics the lifeblood of your customer experience reinvention. Seamlessly mesh your digital and physical experience in new ways. Keep on innovating—it’s never over. Every digital improvement in customer experience will open up new possibilities.

On Exploiting the Power of Core Operations:

Free yourself from old assumptions of the predigital age. Look for bottlenecks and inefficiencies in your processes, and consider whether new digital technologies can help you rethink your operations. Consider how each of the six levers may help you improve operations. If you can’t address both sides of a paradox at once, start with standardization or control. This may open up possibilities to address other levers. Consider examples from inside and outside your industry. As with customer experience, a strong digital platform is essential for operational transformation.

On Reinventing Business Models:

Constantly challenge your business model with your top team. Monitor the symptoms that drive business model change in your industry—for example, commoditization, new entrants, and technology substitution. Consider how you might transform your industry before others do it. Consider whether it is time to replace products and services with newer versions if your present offerings are under digital threats. Consider creating brand-new digital businesses using your core skills and assets. Consider reconfiguring your delivery model by connecting your products, services, and data in innovative ways to create extra value. Consider reinforcing your presence in your current market by rethinking your value proposition to meet new needs. Experiment and iterate your new business model ideas.

On Crafting Your Digital Vision:

Familiarize yourself with new digital practices that can be an opportunity or a threat to your industry and company. Identify bottlenecks or headaches—in your company and in your customers—that resulted from the limits of old technologies, and consider how you might resolve these problems digitally. Consider which of your strategic assets will remain valuable in the digital era.

On Engaging the Organization at Scale:

Lead the engagement effort to energize your employees to make the digital vision a reality. Use digital technology to engage employees at scale. Connect the organization to give a voice to your employees. Open up the conversations to give everyone a role in digital transformation. Crowdsource your employees to co-create solutions, and accelerate buy-in. Deal with the digital divide by raising the digital IQ of the company. Deal with resistance by being transparent and open about the goals.

On Governing the Transformation:

Look internally (e.g., IT, finance, HR, and capital budgeting) for effective governance practices. Consider which digital decisions must be governed at the highest levels of the company, and which can be delegated to lower levels. Place somebody in charge of leading digital transformation, whether that is a chief digital officer or another leader. Identify governance mechanisms, such as committees and liaisons, to assist in governance. Examine whether you need a shared digital unit, including the resources it would have and the roles it would play. Adjust your governance models as your company’s governance needs change.

On Building Technology Leadership Capabilities:

Assess the state of your IT-business relationships: consider trust, shared understanding, and seamless partnership. Assess your IT unit’s ability to meet the skill and speed requirements of the digital economy. Consider dual-speed IT approaches such as a unit within a unit or a separate digital unit that combines IT, business, and other roles. Focus your initial investments on getting a clean, well-structured digital platform; it’s the foundation for everything else. start building the right digital skills. Challenge yourself continually to find new things you can do with your IT-business relationships, digital skills, and digital platform.

In conclusion:

Our research has shown that Digital Masters enjoy superior performance, which should be reason enough to get leadership teams interested in the concepts presented in this book. But there’s also another, even more fundamental, reason: when it comes to the impact of digital technologies on the business world, we ain’t seen nothin yet. The innovations we’ve discussed in previous chapters, including social networks, mobile devices, analytics, smart sensors, and cloud computing, are certainly powerful and profound. They’re reshaping customer experiences, operations, and business models. The pace and impact of these innovations have been nothing short of astonishing, but they’re just a prelude for what’s to come. Technology’s role as the endless agitator of the business world will not only continue, but will accelerate—exponentially.

A recommended read in the IT strategy space.

On Barbarians At The Gate

I recently finished reading Barbarians at the Gate – The Fall of RJR Nabisco by Bryan Burrough and John Helyar. This book has been on my reading list for quite some time, and I finally (and very gladly) was able to read it.

First on the merger of Standard Brands and Nabisco:

Nevertheless, Johnson was intrigued. He got together with Schaeberle and liked the man. In a matter of weeks the two executives agreed to merge their companies. Nabisco Brands, as the new company would be called, was formed in a $1.9 billion stock swap in 1981, at the time one of the larger mergers of consumer-product companies. Technically, it was a marriage of equals. But that was considered so much chin music. Everyone knew Nabisco, with dominant brands such as Ritz and Oreo, was the more powerful company. Everyone knew who would be in charge.

And the ascent of Ross Johnson to the top position of the combined entity:

As the smoke cleared, Johnson emerged triumphant, both inside and outside Nabisco. As far as Schaeberle and the board were concerned, he could do no wrong. That year Schaeberle rewarded Johnson by ceding him the title of chief executive. Nabisco’s huge new research center was about to be unveiled, and Johnson, in a spasm of flattery, repaid the favor by naming it the Robert M. Schaeberle Technology Center. Schaeberle was moved. The Merry Men thought it was a brilliant way to put Schaeberle out to pasture. A man who lad his name on a building, they reasoned, might as well be dead.

Despite the increased scope of responsibilities and breadth of company activities Johnson was already thinking beyond Nabisco brands:

If Johnson grew indifferent toward Nabisco, it was because he could no longer see much of a future in it. The cookie wars has changed his thinking; he regarded the battle with Frito-Lay and P&G not as a final victory, but as the successful deflection of a shot fired across his bow. There would be another giant like Procter & Gamble—maybe even P&G itself—that would come after him again. Nabisco, after all, had fatal weaknesses. No amount of work was going to revitalize its aging bakeries anytime soon. Johnson, in fact, never bothered to formulate any kind of master plan for reshaping Nabisco. Years of scrambling had soured him on long-range planning. Instead he spent his time enjoying the high life, putting out corporate fires as they flared, and waiting. Someone had once codified the Standard Brands culture into twenty Johnsonisms. Number thirteen was “Recognize that ultimate success comes from opportunistic, bold moves which, by definition, cannot be planned.” On a spring day in 1985, less than a year after being tapped Nabisco’s chief, Johnson took a call from J. Tylee Wilson, chairman and chief executive officer of RJ Reynolds Industries, the North Carolina-based tobacco giant. Would Johnson be interested in getting together for lunch? Maybe, Wilson said, they could do some business.

On a parallel, Reynolds was thriving and generating more cash than it knew what to do with:

Life was good then. Reynolds’s Winston, Salem, and Camel were three of the top four bestselling cigarette brands. Prince Albert remained the top-selling pipe tobacco, and a brand called Days Work was the top chewing tobacco. Americans were smoking like chimneys. In 1960, 58 percent of all men and 36 percent of all women smoked. It was often said that Reynolds’s only problem was how to turn out cigarettes fast enough and how to ship all that money back to Wachovia Bank. In one respect, it was true. From a corporate executive’s point of view, Reynolds had too much cash on its hands. In 1956 the company amended its charter to allow it for the first time to buy nontobacco businesses.

Thus came the idea of merging the two businesses:

The talks, in fact, rekindled within weeks. A small army of Wall Street lawyers and investment bankers were brought in, and, the directors having been convinced, Reynolds agreed in principle to acquire Nabisco for cash. The lone sticking point was the price. Then, during the negotiations, Nabisco stock began rising, a sure sign that word of the talks had leaked. Johnson took it as an opportunity to wheedle more money out of Wilson. At $80 a share, Wilson said he could go no further. “Well,” Johnson said, “you’re not gonna get a deal at eighty bucks.” The logjam broke when Wilson agreed to throw in preferred stock, which brought the price to $85 a share, or $4.9 billion, at the time the largest merger ever to take place outside the oil industry.

Despite the fact that the anti-tobacco lawsuits were being settled for lower than expected amounts, RJR Nabisco’s stock was not moving up as expected, thus further persuading Johnson of the idea that a leveraged LBO is the way to unlock the true value that exists within the company:

The case mounted by Anthony Cipollone was considered among the strongest ever brought against the tobacco industry; the plaintiff’s lawyers had unearthed a raft of damaging documents. A tobacco victory, Johnson reasoned, would give his stock a real pop. When the jury finally delivered a verdict, it broke tobacco’s unbeaten streak—but just barely, clearing the industry of conspiracy and awarding only $400,000 in damages. “A tip for Tony Cipollone,” Johnson chortled, and waited for RJR Nabisco’s stock to spike up. It didn’t. Johnson’s office became a wailing wall where everybody came to cry about the injustice of it all. Horrigan was particularly bitter; he had predicted the stock would climb at least six points. “The market never going to give us its due,” Henderson complained. “The equity markets just aren’t a suitable capital structure for some companies.” Arguing to take stock from public hands was in fact the intellectual basis for an LBO, although no one openly advocated it at the time. Horrigan thought Johnson would never go private. “The problem with the company going private,” he said to himself, “is that nobody would pay any attention to him.”

The time was ripe for LBO’s, and the reasons:

In the five years before Ross Johnson decided to pursue his buyout, LBO activity totaled $181.9 billion, compared to $11 billion in the six years before that. A number of factors combined to fan the frenzy. The Internal Revenue Code, by making interest but not dividends deductible from taxable income, in effect subsidized the trend. That got LBOs off the ground. What made them soar was junk bonds. Of the money raised for any LBO, about 60 percent, the secured debt, comes in the form of loans from commercial banks. Only about 10 percent comes from the buyer itself For years the remaining 30 percent—the meat in the sandwich—came from a handful of major insurance companies whose commitments sometimes took months to obtain. Then, in the mid-eighties, Drexel Burnham began using high-risk “junk” bonds to replace the insurance company funds. The firm’s bond czar, Michael Milken, had proven his ability to raise enormous amounts of these securities on a moment’s notice for hostile takeovers. Pumped into buyouts, Milken’s junk bonds became a high-octane fuel that transformed the LBO industry from a Volkswagen Beetle into a monstrous drag racer belching smoke and fire.

As the bankers got involved in the process, Johnson could feel that he was losing control of the company, and that everyone was in it to grab a share of profits for themselves:

Johnson remained in his office, shocked at the turn in events. He couldn’t talk to Gutfreund or Cohen; they seemed too pleased at laving shown Kravis the price of messing with them. He couldn’t talk to Kravis, who, in Johnson’s words, was “pissing fire.” Just seventeen hours earlier, he had managed to get a peace treaty. He hadn’t wanted to invite Strauss or Cohen or any of the Wall Streeters. The whole thing had fallen apart over greed—pure and simple greed. And now, the piece de resistance, his own partners were launching a $20 billion bid without even bothering to tell him. He felt like the man who entered the casino in a tuxedo one night and emerged the next morning in rags. Far worse, Johnson realized, he had lost all control of his fate…Everyone, he reflected, was out to get something for themselves. The directors, with their petty concerns about pensions and auto insurance. Kravis and his investment bankers and their fees. Salomon and its bonds. And now Frank Benevento wanted $24 million. There was no bloody way Benevento was getting anywhere near $24 million, Johnson thought. He told him to bill the company for whatever he wished. The matter would be dealt with when things returned to normal.

The media quickly paid attention to this, and this also affected the employees productivity during that time:

In an editorial headlined, “Why the RJR circus is so dangerous,” Business Week reflected the business establishment’s distress. “This spectacle is not just unseemly—it is dangerous,” it held. “It is precisely this sort of behavior that plays into the hands of those who want to shackle the free market with unnecessary regulation. LBOs, including a potential RJR deal, should stand or fall on their financial and economic merits, not on the childish behavior of the principals.” For all the high-level handwringing, few felt the effects of the escalating fight as keenly as RJR Nabisco’s employees. In Atlanta, office workers sat during lunch periods glumly reading the daily news summaries the company issued. Isolated, irritated, and uncertain of their futures, the staff spent its days consumed with following the events on Wall Street, its spare time channeled into producing anti-Johnson propaganda.

A three pronged bidding war for RJR Nabisco was on:

The public the bidding for RJR Nabisco seemed frenzied, the emergence of a third bidding group transforming it into a wide-open race. But in the subdued hallways and offices of Lazard Freres and Dillon Read, there was no such enthusiasm. To the board’s advisers, the First Boston bid was hardly good news. Few among them had any confidence that Maher’s troops would come back in eight days with a concrete proposal.

KKR was the winner at the end:

Five minutes later discussion inside the boardroom ebbed. “Time is running out,” Hugel said. “Call for a motion.” Marty Davis spoke first. “I move we award to KKR.” “Second,” said John Macomber. “All in favor,” Hugel said. Hands filled the air. “All opposed?” So hands. “The vote,” Hugel said, “is unanimous.

Johnson semi-retired a rich man:

Johnson officially resigned that day, pulling the chord on his $53 million golden parachute.* His fanciest Gulfstream jet yet, ordered before the LBO battle, flew him to Jupiter on its maiden voyage. Johnson released a final statement before leaving: “The process we commenced last October has benefited the company’s shareholders and has proven the financial strength of our varied businesses.”

The shareholders’ were also enriched through the process, although not all of them happy about the proceeding:

Yet in the world’s greatest concentration of RJR shareholders— Winston-Salem, North Carolina—they weren’t thanking Johnson even as the money gushed into town. No sooner had Kravis won than signs began popping up: “Good-bye Ross, Hello KKR.” Nearly $2 billion of checks arrived there in the late-February mail. Now, more than ever, Winston-Salem was “the city of reluctant millionaires.” The river of money had washed away the last of RJR’s stock. Local brokers and bankers who managed people’s money got calls from distraught clients. “I won’t sell my stock,” more than one sobbed. “Daddy said don’t ever sell the RJR stock.” They were patiently told they had to. They were told the world had changed. No sooner had the checks arrived than out-of-town “financial consultants” descended on Winston-Salem to advise its residents on how best to spend their new riches. In leaflets tucked under windshields in the Reynolds parking lot, in pesky phone calls, in seminars at the Holiday Inn, stockbrokers offered to help people reinvest their windfall in the market. The frequent, incredulous response: “You want me to buy stock?”

KKR may have won the battle for RJR Nabisco, but it had lost the war in its investment going sour:

To its credit, Kohlberg Kravis wriggled out of its fix. In July 1990, it announced a $6.9 billion refinancing package, enabling it to buy back the junk bonds and substitute less onerous forms of debt. The costly maneuver probably assured that, as a buyout, RJR would neither be a free-fall disaster nor a windfall profit for Kohlberg Kravis. Whatever the case, it assured big paydays for the bankers and lawyers who reconfigured the original deal: another $250 million in fees. For Kravis ultimate success, it was clear, was years away. To make matters worse, Philip Morris, sensing RJR’s vulnerability, moved in for the kill, pummeling the company in a number of key markets. It expanded its sales force, undercut Reynolds on pricing, and attacked its strong discount brand, Doral, with two new off-price brands of its own. Analysts predicted RJR’s cigarette volume could fall 7 percent to 8 percent in 1989, while Philip Morris gained volume. “Philip Morris is eating our lunch,” Cliff Robbins of Kohlberg Kravis acknowledged in October 1989. “Marlboro is an unstoppable machine. We have a lot to do.”

There are many lessons within this story that extend beyond RJR Nabisco, namely:

  1. In a sense it had. Johnson was a product of his times, as surely as R. J. Reynolds was of his. The Roaring Eighties were a new gilded age, where winning was celebrated at all costs. “The casino society” Felix Rohatyn once dubbed it. The investment bankers were part croupiers, part alchemists. They conjured up wild schemes, pounded out new and more outlandish computer runs to justify them, then twirled their temptations before executives in a “devil dance.” That, at any rate, is what Johnson took to calling it. Depending on one’s viewpoint, the “dance” Johnson initiated at RJR will go down as either the high point or the low point of an era. It wasn’t an accident that RJR Nabisco should provide that moment. In its final decade Reynolds had become less a great company than a great dream machine. Its torrent of tobacco money allowed egos to run wild and fantasies to become true. Paul Sticht could walk with kings. Ed Horrigan could live like kings. Directors could be treated like kings…The founders of both RJR and Nabisco would have utterly failed to understand what was going on here. It is not so hard, in the mind’s eye, to see R. J. Reynolds and Adolphus Green wandering through the carnage of the LBO war. They would turn to one another, occasionally so much about what came out of their computers and so little about what came out of their factories? Why were they so intent on breaking up instead of building up? And last: What did this all have to do with doing business?

  2. To some, this saga wasn’t just about the fall of RJR Nabisco but the rise of an “I’ve got mine” ethos that would permeate every corner of corporate America. Even partners at once-staid accounting firms came to see themselves more as croupiers than auditors. Paul Volcker, who was chairman of Arthur Andersen in its dying days, believes its accountants became accomplices to Enron because they were so envious of such clients’ riches. As Volcker explained it, “The accountants felt like, ‘We’re as good as they are and we’re doing all the work.’ The general atmosphere was, ‘Money is out there for the taking.'” Reverbrations from the RJR buyout would also long be felt all up and down Wall Street. The deal went so badly for KKR and was attacked so vehemently by politicians that LBO firms pulled in their horns and eschewed mega-deals for years thereafter.

  3. The ensuing period is eerily reminiscent of the early 1990s-post RJR hangover, which raises a question: does anyone on Wall Street ever really learn anything? Colin Blaydon isn’t so sure. “When there’s a situation like this and everyone comes piling into a market they don’t fully understand, the financial markets always overshoot,” he says. “There are a lot of parallels to the world of the bubble that gave us RJR Nabisco.” Be assured, however, that the Barbarians are out there just beyond the gate, licking their wounds, biding their time, waiting for their next chance to storm the gates.

One of the best business books I have read to date, both in terms of content and delivery. A must read.

On The Bright IDEA BOX

This week, I have the pleasure and privilege to review Jag Randhawa’s book: The Bright Idea Box – A Proven System to Drive Employee Engagement and Innovation. Jag had approached me about his new book, having previously read Blue Ocean Strategy. Given that this book is about employee engagement and innovation, two topics I am very passionate and intimately involved with I was very much looking forward to reading and reviewing this book.

As the title indicates this is a book about innovation. Jag begins by making it clear that it is the employees within the organization that drive innovation:

It is never an idea, technology, market forces, or access to capital that makes a company innovative. What differentiates an innovative company from an average company is the people working inside the company.

Subsequently, their engagement level correlates to the level of innovation:

Researchers have long argued that a strong correlation exists between employee engagement and innovation. A highly engaged workforce can transform an average company to an innovative company, while a disengaged workforce can kill a great company.

The main premise of the book is to provide a framework for a bottom up employee driven innovation program:

This book offers a framework to create such a program, in which employees submit ideas to create operational efficiencies, improve business processes, increase customer satisfaction, and grow the business. This book mirrors the program I created at my work after years of reading, researching, and trial-and-error learning…This book is not meant to persuade anyone why he or she needs innovation, but rather to show how to get started on this journey.

Tying this back to employee engagement:

Creating such a program has an amazing effect on employee engagement. Let’s assume for a moment that you get absolutely no good ideas out of this program; then, you will still benefit from increased employee engagement. Establishing this program creates a new sense of worth among the employees, which, by itself, will increase their engagement. They will feel that you value their input— that they are intellectual human beings and their work makes a difference to their company’s bottom line. They will feel they are an integral part of the organization and not a dumb or easily replaceable component . Employee engagement increases trust between management and employees. Every job is important in an organization, and every job can be done better. You need to communicate that to employees. Ask them to look for ways to improve functions, processes, and products. If you feel there is any particular role that is not important or could not be improved, you are not thinking hard enough. Sometimes the problem lies in the definition of the role, and at other times, it is the person in that role. Take appropriate actions to make sure you address the actual problem.

The word innovation has been overused as of late, so Jag ensures he defines it and characterizes it for us:

The essence of innovation is to add value for customers. Inventions that wow people, but don’t add value, rarely survive for long, and they often end up costing more money than they add to the bottom line. For an invention to become innovation , it must add value for customers. The value can come through lowered cost, new features, aesthetics, convenience, ease of use, enhanced experience, or meeting emotional needs. Sometimes the value comes in the form of helping customers make more money , attain goals, or safeguard valuables.

Innovation = Invention + Execution + Adoption

Why is innovation so hard? And why do numerous companies don’t do well/fail in it?

Most companies fail to innovate because they are not receptive to the idea that enhancing existing products is innovative. The grass always looks greener on the other side . They cling to the notion of developing new products, which often end up costing companies more money than the new revenues they generate. This belief is further engrained in their minds by the notion that innovative ideas emerge in full form with “success” written all over them. In reality, this notion could not be farther from the truth.

What are the main areas of innovation that a company can focus on:

These areas of focus for innovation can be broadly classified into four business domains: • Revenue Generation • Cost Reduction • Business Process  • Business Model

REVENUE GENERATION The revenue-generating domain of innovation pertains to ideas that contribute to top-line growth. This focus is the most obvious for many organizations, and under this focus, creating new products is the most prevalent strategy.

COST REDUCTION As the name suggests, this domain encompasses ideas that help lower the operational costs of a business. Wal-Mart and Southwest relentlessly focus on providing value to customers through lowered cost. Therefore, ideas that help lower operational costs are given precedence over all other types of ideas.

BUSINESS PROCESS Process innovation is perhaps the most overlooked and underappreciated domain of innovation. In my view, business processes are perhaps the most important domain to innovate— especially customer facing processes.

BUSINESS MODEL Business model innovations address the “how” part of the value proposition of a business. A business model is the overarching process of an organization and explains how it transforms the input of labor, knowledge, material, means of distribution, and other resources into a product or service that customers feel is worth the money they pay for it. Business models also address how an organization acquires and serves its customers, and, at times, how it charges its customers in exchange for the value it delivers. Business model innovations entail changing one or more input resources in ways that deliver value to customers. Most business model innovations tend to be large, strategic initiatives, and you may not see many ideas in the business model innovations category from your employees.

What are the essential ingredients within a company for innovation?

As we discussed in Chapter Two, innovation has three critical components: invention, execution, and adoption. All three pieces must come together for any idea to see the light of day. All ideas face capital, intellectual, technical, and political challenges. These challenges can be overcome only if management creates the focus and employees align their efforts toward that focus and find creative solutions to make the products successful. This alignment and focus can be driven by strong management directives and processes, or it can come from employees as a passion to do great things, be part of something bigger, and make contributions toward a greater cause . The successful companies leverage both to drive continuous innovation.

Is it enough to have top-down innovation or bottom-up innovation?

A good organization is a mix of both top-down and bottom-up innovation. Top-down innovations are very important for dreaming big. Without top-down innovation, we would have never set foot on the moon, built the personal computer , or promoted personalized healthcare. It is the job of visionary leaders to push boundaries and constantly disrupt the market with new and innovative ways to add value for customers. However, leaders cannot be involved in every activity that goes on inside an organization . As the company grows, the only way to succeed is through delegation. The question then becomes: Are the delegates engaged at the same level as the leaders? Is their intent, energy, and focus aligned toward the same vision? Do they feel like part of that vision? Do they see themselves as an important piece of the puzzle in bringing that vision to reality? Creating a bottom-up innovation program can also be instrumental in bridging the gap between strategic intent and execution. When employees are more engaged, they provide superior service to customers and come up with ideas from a very diverse perspective that often gets missed in a top-down view.

Jag makes a very valid observation – and a key differentiator for this book – in that although attention has traditionally focused on product innovation it can and should also apply to services:

As I started my journey of innovation, I found that Service Industries have been largely neglected by most innovation experts and authors. A lot of books have been written on product innovation that teach how to develop new products, how to create prototypes, how to test markets, and how to build demand for novel products, but very limited literature exists on how to innovate in the Service Industry.

Subsequently, the framework for rolling out an employee-driven innovation program is introduced:

In the following chapters, I’ll introduce the Six-Step M.A.S.T.E.R. Innovation Program. Here are the steps: STEP 1: Mobilize STEP 2: Amass STEP 3: Support STEP 4: Triage STEP 5: Execute STEP 6: Recognize

On Mobilizing:

The first step in creating the Bright Idea Box program is to define and document the program’s vision and purpose. A clearly defined purpose statement will help ensure the entire workforce is marching in the same direction. The purpose statement should be a working document that captures the program’s essence, how it works, and the types of ideas you are seeking. It should be a three-part document outlining the purpose, objectives, and guidelines…This purpose statement is the overarching and simplified vision of the program that serves as a guiding beacon for employees who are thinking of new ideas, as well as those responsible for supporting and ensuring that valid ideas get implemented in a timely manner…The second part of the document should outline the area of focus and the program’s business objectives. The program’s objectives should be closely aligned with business goals and values…The last section of the purpose document should outline the guidelines for participating in the program. In this section, you can include what and who is outside the scope of this program.

On Amassing:

For this reason, at the heart of this program is an easy to use and easy to access Idea-Capturing System, which is available to all employees to capture ideas when they are fresh in their minds.

Idea Questions: 1. Name: What is the name for the idea? 2. Description: What is a brief description of the idea, including what problem it addresses and how it solves it? 3. Benefits: What value or benefits will the idea deliver to the customer or company? 4. Cost-Benefit Rationale: How much will it cost to try or implement the idea? Does the cost justify the benefits?This information is like a mini-business case for the idea. For an idea to be accepted and implemented, the employee must provide answers to all of these questions .

On Supporting:

The most important thing employees need is support and encouragement from management, and a little bit of freedom to contemplate and develop ideas. Creating an environment where management encourages employees to submit and develop ideas is the most important investment you need to make. You need to create an environment where employees feel comfortable bringing out the issues inside the company , flaws in the business processes , and weaknesses in your products.

On Triaging:

The next step in building the bottom-up employee innovation program is to create effective means for screening and prioritizing ideas…The best way to accomplish this is to form an Idea Screening Committee that meets on a regular basis to review newly submitted ideas and discuss changes to existing ideas.

On Executing:

Once an idea has been approved and financed, it must be implemented in a timely manner. Without a clearly visible process and a push from the top, an idea can easily vanish into the vast depths of corporate bureaucracy. As part of designing the program, you need to decide how you are going to test and implement ideas. You need to flush out who is responsible for implementing the ideas and what type of commitment you need from the impacted parties…There is no faster way to kill the innovation program than by not implementing good ideas.

On Recognizing:

The final step in developing the program is deciding how to recognize employees for their ideas and efforts. Recognition is the lifeline of the Bright Idea Box. Setting the right kinds of rewards is critical to the program’s longevity and ensuring that employees stay motivated to submit new ideas . Recognition is an opportunity to encourage desired behaviors and reward employees for thinking and acting in ways that add value for customers and the company.

What are some key leadership principles to help develop employees into innovators?

Below are the four leadership principles that play a vital role in developing and transforming employees into innovators. DRIVERS OF HIGHER ENGAGEMENT 1. Ownership: Give people responsibility and ownership. 2. Personal Growth: Grow people on a personal level so they can grow professionally. 3. Solution Mindset: Foster a Solution Mindset that promotes progress. 4. Partnership: Treat employees like partners so they will act like partners.

Ownership—Ownership instills a feeling of pride. Nothing motivates people to do more than pride. People work a lot harder for pride and often go to extremes to prove themselves. How can you take advantage of this human condition? Make employees the boss. Give them responsibility.

Personal Growth—Growth is the fuel of the soul. Without growth, even the masters can lose interest.

Solution Mindset—A solution mindset is a problem-solving approach that recommends that, no matter what the problem is, your first response should always be how to solve or get around the problem…A solution mindset, on the other hand, encourages progress. The goal is to keep moving forward. No matter what the problem is, focus on how to get around it and make progress…A solution mindset, on the other hand, encourages progress. The goal is to keep moving forward. No matter what the problem is, focus on how to get around it and make progress…To foster a solution mindset, tell employees that you are not interested in who or what caused the problem. You are only interested in hearing how we plan to go beyond the problem.

When launching the innovation program it’s important to sell it to all stakeholders:

To launch the Bright Idea Box program, you need to appeal to the rational and emotional brains of three distinct stakeholders. First, the top management, the executive leadership team in the company. Second, the middle management layers, and third, the front-line employees. I recommend that you create distinct sales pitches for each group to address their functional needs.

What are skills that we can all work on to further enable our innovative thinking abilities?

I have compiled a short list of skills that you can share with employees when you roll out the program . This is by no mean a comprehensive list of skills or techniques, but rather a starting point and enough to jump-start employees’ innovative thinking abilities. It is a short list that employees can easily understand and put to use immediately.

CURIOSITY Curiosity is perhaps the most imperative trait of all innovators. Being curious about what is on the other side and why things are the way they are is a great tool for making breakthrough discoveries.

LISTENING Customers are always telling us what they want, but employees on the other end are often not listening. There is no incentive for them to put up with customer complaints all day.

MINING Every frustration presents an opportunity. Instead of getting frustrated and blaming others for incompetence, mine your frustrations to look for ways to solve the problem…1. Not stopping at the first obstacle 2. Keeping a positive attitude 3. Always learning 4. Collaborate— share and ask for help 5. Solution finding rather than complaining.

BORROWING We like to believe that our problems are unique, but more often they are not. Often the problems we are wrestling with have been solved by others in different industries and in different products. Steve

NETWORKING The most innovative ideas often lie at the intersection of two different paths. We get some of the best ideas when we network with people from different disciplines .

WRITING Ideas often come when we are not looking. This is because of how our brain works. Our cognitive brain, which is responsible for decision making, has a limited capacity to process information, but our intuitive brain, which works in the background, can process a lot more information and make new associations that trigger aha moments…ideas. The second limitation of our cognitive brain is its ability to convert short-term memory into long-term memory. Often we get ideas, but they get lost in the rush of a million other things to do and remember. For this reason, recording problems and thoughts is essential to generating ideas.

PROBLEM SOLVING…ASKING “WHY” FIVE TIMES…REVERSING THE CHALLENGE…PROTOTYPING…

Getting a flywheel started takes a lot of energy— you push, and you push, and you push. Then with every turn, it becomes easier and easier to turn the wheel . And finally, it starts to generate its own momentum and what once took an enormous amount of energy becomes almost self-sustaining. It is the same for starting a bottom-up innovation program . It is a cultural shift and you will need to make a really strong push in the beginning and keep pushing until it gains momentum. With time, the recognition and the buzz created by this program will create a desire among employees to submit ideas. Pretty soon, you will have ideas pouring in at a speed faster than you can handle. The key is not to stop pushing.

What sets this book apart is its high degree of practicality – Jag has thought through and included the material not only to introduce the framework itself but how to operationalize it successfully – which is typically the harder part.

A recommended read in the area of innovation and employee engagement.

The Advantage

A few years ago, I read The Five Dysfunctions of a Team and it remains to be, for me, one of the most practical and applicable management books. Patrick Lencioni, the author of that book, has published a number of other books which have received high reviews as well, and I decided to read one of his more recent ones The Advantage – Why Organizational Health Trumps Everything Else in Business.

The main premise of this book is that:

The single greatest advantage any company can achieve is organizational health. Yet it is ignored by most leaders even though it is simply free, and available to anyone who wants it.

Sounds simple, so why is it that difficult?

But before leaders can tap into the power of organizational health, they must humble themselves enough to overcome the three biases that prevent them from embracing it. The Sophistication Bias: Organizational health is so simple and accessible that many leaders have a hard time seeing it as a real opportunity for meaningful advantage…The Adrenaline Bias: Becoming a healthy organization takes a little time. Unfortunately, many of the leaders I’ve worked with suffer from a chronic case of adrenaline addiction, seemingly hooked on the daily rush of activity and firefighting within their organizations…The Quantification Bias: The benefits of becoming a healthy organization, as powerful as they are, are difficult to accurately quantify.

What exactly is organizational health and how do I recognize it?

A good way to recognize health is to look for the signs that indicate an organization has it. These include minimal politics and confusion, high degrees of morale and productivity, and very low turnover among good employees…And so a good way to look at organizational health -and one that executives seem to respond to readily— is to see it as the multiplier of intelligence. The healthier an organization is, the more of its intelligence it is able to tap into and use. Most organizations exploit only a fraction of the knowledge. experience, and intellectual capital that is available to them. But the healthy ones tap into almost all of it. That, as much as anything else, is why they have such an advantage over their unhealthy competitors.

How do we create it, or get there?

An organization doesn’t become healthy in a linear, tidy fashion. Like building a strong marriage or family, it’s a messy process that involves doing a few things at once, and it must be maintained on an ongoing basis in order to be preserved. Still, that messy process can be broken down into four simple disciplines: Discipline 1: Build a cohesive leadership team…Discipline 2: Create Clarity…Discipline 3…Overcommunicate Clarity…Discipline 4: Reinforce Clarity.

On the first discipline – building a leadership team, let us start with the fundamentals, with the definition:

A leadership team is a small group of people who are collectively responsible for achieving a common objective for their organization…This is perhaps the most important distinction between a working group and a real leadership team. Collective responsibility implies, more than anything else, selflessness and shared sacrifices from team members.

What are the key behaviors of a leadership team:

On building trust:

Members of a truly cohesive team must trust one another. I realize that sounds like the most patently obvious statement ever made, something that every organization understands and values. As a result, you’d think that most leadership teams would be pretty good at building trust. As it turns out, they aren’t, and I think a big part of it is that they have the wrong idea about what trust is…The kind of trust that is necessary to build a great team is what I call vulnerability-based trust. This is what happens when members get to a point where they are completely comfortable being transparent. honest, and naked with one another, where they say and genuinely mean things like “I screwed up,” “I need help,” “Your idea is better than mine,” ‘T wish I could learn to do that as well as you do,” and even, “I’m sorry”…Trust is just one of five behaviors that cohesive teams must establish to build a healthy organization. However, it is by far the most important of the five because it is the foundation for the others. Simply stated, it makes teamwork possible. Only when teams build vulnerability-based trust do they put themselves in a position to embrace the other four behaviors, the next of which is the mastery of conflict.

On mastering conflict:

Contrary to popular wisdom and behavior, conflict is not a bad thing for a team. In fact, the fear of conflict is almost always a sign of problems. Of course, the kind of conflict I’m referring to here is not the nasty kind that centers around people or personalities. Rather, it is what I call productive ideological conflict, the willingness to disagree, even passionately when necessary, around important issues and decisions that must be made. But this can only happen when there is trust…When leadership team members fail to disagree around issues, not only are they increasing the likelihood of losing respect for one another and encountering destructive conflict later when people start griping in the hallways, they’re also making bad decisions and letting down the people they’re supposed to be serving. And they do this all in the name of being “nice.”

On achieving commitment:

The reason that conflict is so important is that a team cannot achieve commitment without it. People will not actively commit to a decision if they have not had the opportunity to provide input, ask questions, and understand the rationale behind it. Another way to say this is, “If people don’t weigh in, they can’t buy in.”

On embracing accountability:

Even well-intentioned members of a team need to be held accountable if a team is going to stick to its decisions and accomplish its goals. In some cases, people will deviate from a plan or a decision knowingly, tempted to do something that is in their individual best interest but not that of the team. In other cases, people will stray without realizing it, getting distracted or caught up in the pushes and pulls of daily work. In either case, it’s the job of the team to call those people out and keep them in line…At its core, accountability is about having the courage to confront someone about their deficiencies and then to stand in the moment and deal with their reaction, which may not be pleasant. It is a selfless act, one rooted in a word that I don’t use lightly in a business book: love. To hold someone accountable is to care about them enough to risk having them blame you for pointing out their deficiencies.

On focusing on results:

The ultimate point of building greater trust, conflict, commitment, and accountability is one thing: the achievement of results. That certainly seems obvious, but as it turns out, one of the greatest challenges to team success is the inattention to results. What would members of an executive team be focused on if not the results of their organization? Well, for one, the results of their department. Too many leaders seem to have a greater affinity for and loyalty to the department they lead rather than the team they’re a member of and the organization they are supposed to be collectively serving. Other distractions include a concern for individual career development, budget allocations, status, and ego, all of them common distractions that prevent teams from being obsessed with achieving results…The only way for a team to really be a team and to maximize its output is to ensure that everyone is focused on the same priorities— rowing in the same direction, if you will.

The second discipline is about Creating Clarity:

The second requirement for building a healthy organization—creating clarity—is all about achieving alignment. This is a word that is used incessantly by leaders, consultants, and organizational theorists, and yet for all the attention it gets, real alignment remains frustratingly rare. Most executives who run organizations—and certainly the employees who work for them—will readily this.

This is done by answering six fundamental questions:

1. Why do we exist? 2. How do we behave? 3. What do we do? 4. How will we succeed? 5. What is most important, right now? 6. Who must do what?

On what do we do:

If an organization’s reason for existence answers the Question, Why?, then its business definition answers the question. What? It’s critical that it be clear and straightforward. It should not be crafted so that it also be used in marketing material. The point is just to make sure that the leadership team is crystal clear about, and can accurately describe, the nature of the organization’s business so that they don’t create confusion within the rest of the company or, for that matter, in the market. It’s as simple as that.

On how we will succeed:

We came to realize that the best way for an organization to make strategy practical is to boil it down to three strategic anchors that will be used to inform every decision the organization makes and provide the filter or lens through which decisions must be evaluated to ensure consistency. Strategic anchors provide the context for all decision making and help companies avoid the temptation to make purely pragmatic and opportunistic decisions that so often end up diminishing a company’s plan for success.

On who must do that:

There is not a great deal to be said about this particular question, aside from warning leadership teams not to take it for granted. Although there is often clarity among executives in most organizations about who does what on the team, making assumptions about that clarity can lead to surprising and unnecessary problems.

The third discipline is Overcommunicating Clarity:

What those leaders fail to realize is that employees understand the need for repetition. They know that messaging is not so much an Intellectual process as an emotional one. Employees are not analyzing what leaders are saying based solely on whether it is intellectually novel or compelling, but more than anything else on whether they believe the leaders are serious, authentic, and committed to what they are saying. Again, that means repetition is a must.

The fourth and last discipline is Reinforcing Clarity:

As important as overcommunication is, leaders of a healthy organization cannot always be around to remind employees about the company’s reason for existing, its values, and so on. In order to ensure that the answers to the six critical questions become embedded in the fabric of the organization, leaders must do everything they can to reinforce them structurally as well. The way to do that is to make sure that every human system every process that involves people—from hiring and people management to training and compensation, is designed to reinforce the answers to those questions. The challenge is to do this without adding too much structure.

A concluding reminder that success in creating healthy organization rests on the leaders of the organization:

There is just no escaping the fact that the single biggest factor determining whether an organization is going to get healthier—or not—is the genuine commitment and active involvement of the person in charge. For a company, that’s the CEO. For a small business, it’s the owner. For a school, it’s the principal. For a church, it’s the pastor. For a department within a company, it’s the department head. At every step in the process, the leader must be out front, not as a cheerleader or a figurehead, but as an active, tenacious driver.

While there is a considerable effort involved, there is also a substantial reward:

At the end of the day, at the end of our careers, when we look back at the many initiatives that we poured ourselves into, few other activities will seem more worthy of our effort and more impactful on the lives of others, than making our organizations healthy.

A recommended read in the area of organizational leadership and management. If you have not read The Five Dysfunctions of a Team, I highly recommend you read that one first.

 

The Innovator’s Solution

It is hard to read any business article, blog, journal or magazine without coming across the word innovation. And while the profile of this topic has risen to prominence in the last few years, it is one that has been thoroughly studied particularly by professor Clayton M. Christensen. He is considered by many as “the architect of and the world’s foremost authority on disruptive innovation.” A few years ago, I read his seminal book in that area – The Innovator’s Dilemma, and recently I finished reading his second – The Innovator’s Solution which he co-authored with Michael E. Raynor.

Below are the key lessons from it that I wanted to share with you.

On the premise of the book:

If I wanted to start a company that could become significant and successful and ultimately topple the firms that now lead an industry, how could I do it? If indeed there are predictable reasons why businesses stumble, we might then help managers avoid those causes of failure and help them make decisions that predictably lead to successful growth. This is The Innovator’s Solution.

This is a book about how to create new growth in business. Growth is important because companies create shareholder value through profitable growth. Yet there is powerful evidence that once a company’s core business has matured, the pursuit of new platforms for growth entails daunting risk. Roughly one company in ten is able to sustain the kind of growth that translates into an above-average increase in shareholder returns over more than a few years. Too often the very attempt to grow causes the entire corporation to crash. Consequently, most executives are in a no-win situation: equity markets demand that they grow, but it’s hard to know how to grow. Pursuing growth the wrong way can be worse than no growth at all.

Can innovation be made predictable? Can it be turned into a process?

What can make the process of innovation more predictable? It does not entail learning to predict what individuals might do. Rather, it comes from understanding the forces that act upon the individuals involved in building businesses—forces that powerfully influence what managers choose and cannot choose to do. Rarely does an idea for a new-growth business emerge fully formed from an innovative employee’s head. No matter how well articulated a concept or insight might be, it must be shaped and modified, often significantly, as it gets fleshed out into a business plan that can win funding from the corporation. Along the way, it encounters a number of highly predictable forces. Managers as individuals might indeed be idiosyncratic and unpredictable, but they all face forces that are similar in their mechanism of action, their timing, and their impact on the character of the product and business plan that the company ultimately attempts to implement. Understanding and managing these forces can make innovation more predictable.

We often admire the intuition that successful entrepreneurs seem to have for building growth businesses. When they exercise their intuition about what actions will lead to the desired results, they really are employing theories that give them a sense of the right thing to do in various circumstances. These theories were not there at birth; They were learned through a set of experiences and mentors earlier in life. If some people have learned the theories that we call intuition, then it is our hope that these theories also can be taught to others. This is our aspiration for this book. We hope to help managers who are trying to create new-growth businesses use the best research we have been able to assemble to learn how to match their actions to the circumstances in order to get the results they need. As our readers use these ways of thinking over and over, we hope that the thought processes inherent in these theories can become part of their intuition as well.

On the difference between sustaining innovation and disruptive innovation and the associate strategies associated with each:

We must emphasize that we do not argue against the aggressive pursuit of sustaining innovation…Almost always a host of similar companies enters an industry in its early years, and getting ahead of that crowd—moving up the sustaining-innovation trajectory more decisively than the others—is critical to the successful exploitation of the disruptive opportunity. But this is the source of the dilemma: Sustaining innovations are so important and attractive, relative to disruptive ones, that the very best sustaining companies systematically ignore disruptive threats and opportunities until the game is over. Sustaining innovation essentially entails making a better mousetrap. Starting a new company with a sustaining innovation isn’t necessarily a bad idea: Focused companies sometimes can develop new products more rapidly than larger firms because of the conflicts and distractions that broad scope often creates. The theory of disruption suggests, however, that once they have developed and established the viability of their superior product, entrepreneurs who have entered on a sustaining trajectory should turn around and sell out to one of the industry leaders behind them. If executed successfully, getting ahead of the leaders on the sustaining curve and then selling out quickly can be a straightforward way to make an attractive financial return…A sustaining-technology strategy is not a viable way to build new-growth businesses, however. If you create and attempt to sell a better product into an established market to capture established competitors’ best customers, the competitors will be motivated to fight rather than to flee. This advice holds even when the entrant is a huge corporation with ostensibly deeper pockets than the incumbent.

On where disruptive innovation occurs:

Because new-market disruptions compete against nonconsumption, the incumbent leaders feel no pain and little threat until the disruption is in its final stages. In fact, when the disruptors begin pulling customers out of the low-end of the original value network, it actually feels good to the leading firms, because as they move up-market in their own world, for a time they are replacing the low-margin revenues that disruptors steal, with higher-margin revenues from sustaining innovations.

We call disruptions that take root at the low-end of the original or mainstream value network low-end disruptions…New-market disruptions induce incumbents to ignore the attackers, and low-end disruptions motivate the incumbents to flee the attack.

And why do executives of existing companies segment markets counterproductively?

There are at least four reasons or countervailing forces in established companies that cause managers to target innovations at attribute-based market segments that are not aligned with the way that customers live their lives. The first two reasons—the fear of focus and the demand for crisp quantification—reside in companies’ resource allocation processes. The third reason is that the structure of many retail channels is attribute focused, and the fourth is that advertising economics influence companies to target products at customers rather than circumstances.

How can this be resolved?

Identifying disruptive footholds means connecting with specific jobs that people—your future customers—are trying to get done in their lives. The problem is that in an attempt to build convincing business cases for new products, managers are compelled to quantify the opportunities they perceive, and the data available to do this are typically cast in terms of product attributes or the demographic and psychographic profiles of a given population of potential consumers. This mismatch between the true needs of consumers and the data that shape most product development efforts leads most companies to aim their innovations at nonexistent targets. The importance of identifying these jobs to be done goes beyond simply finding a foothold. Only by staying connected with a given job as improvements are made, and by creating a purpose brand so that customers know what to hire, can a disruptive product stay on its growth trajectory.

On extracting growth from nonconsumption (new-market disruption pattern):

1. The target customers are trying to get a job done, but because they lack the money or skill, a simple, inexpensive solution has been beyond reach.

2. These customers will compare the disruptive product to having nothing at all. As a result, they are delighted to buy it even though it may not be as good as other products available at high prices to current users with deeper expertise in the original value network. The performance hurdle required to delight such new-market customers is quite modest.

3. The technology that enables the disruption might be quite sophisticated, but disruptors deploy it to make the purchase and use of the product simple, convenient, and foolproof. It is the “foolproofedness” that creates new growth by enabling people with less money and training to begin consuming.

4. The disruptive innovation creates a whole new value network. The new consumers typically purchase the product through new channels and use the product in new venues.

On what makes competing against nonconsumption so hard for existing companies?

In a very insightful stream of research, Harvard Business School Professor Clark Gilbert has helped us understand the fundamental mechanism that causes the established competitors in an industry to consistently cram the disruptive technology into the mainstream market. With that understanding, Gilbert also provides guidance to established company executives on how to avoid this trap, and capture the growth created by disruption instead. Gilbert’s work, fortunately, not only defines an innovator’s dilemma but suggests a way out. The solution is twofold: First, get top-level commitment by framing an innovation as a threat during the resource allocation process. Later, shift responsibility for the project to an autonomous organization that can frame it as an opportunity.

On determining the right scope for the business:

When the functionality and reliability of a product are not good enough to meet customers’ needs, then the companies that will enjoy significant competitive advantage are those whose product architectures are proprietary and that are integrated across the performance-limiting interfaces in the value chain. When functionality and reliability become more than adequate, so that speed and responsiveness are the dimensions of competition that are not now good enough, then the opposite is true. A population of non-integrated, specialized companies whose rules of interaction are defined by modular architectures and industry standards holds the upper hand. At the beginning of a wave of new-market disruption, the companies that initially will be the most successful will be integrated firms whose architectures are proprietary because the product isn’t yet good enough. After a few years of success in performance improvement, those disruptive pioneers themselves become susceptible to hybrid disruption by a faster and more flexible population of non-integrated companies whose focus gives them lower overhead costs.

On how to avoid commoditization:

1. The low-cost strategy of modular product assemblers is only viable as long as they are competing against higher-cost opponents. This means that as soon as they drive the high-cost suppliers of proprietary products out of a tier of the market, they must move up-market to take them on again in order to continue to earn attractive profits.

2. Because the mechanisms that constrain or determine how rapidly they can move up-market are the performance-defining subsystems, these elements become not good enough and are flipped to the left side of the disruption diagram.

3. Competition among subsystem suppliers causes their engineers to devise designs that are increasingly proprietary and interdependent. They must do this as they strive to enable their customers to deliver better performance in their end-use products than the customers could if they used competitors’ subsystems.

4. The leading providers of these subsystems therefore find themselves selling differentiated, proprietary products with attractive profitability.

5. This creation of a profitable, proprietary product is the beginning, of course, of the next cycle of commoditization and de-commoditization.

A reminder that integrated companies possess a strategic advantage in their ability to respond to changes of value across the value chain:

To the extent that an integrated company such as IBM can flexibly couple and decouple its operations, rather than irrevocably sell off operations, it has greater potential to thrive profitably for an extended period than does a nonintegrated firm such as Compaq. This is because the processes of commoditization and de-commoditization are continuously at work, causing the place where the money will be to shift across the value chain over time.

The concept of core competency, which is often used to determine which part of the value chain to keep in-house, is misguiding:

Core competence, as it is used by many managers, is a dangerously inward-looking notion. Competitiveness is far more about doing what customers value than doing what you think you’re good at. And staying competitive as the basis of competition shifts necessarily requires a willingness and ability to learn new things rather than clinging hopefully to the sources of past glory. The challenge for incumbent companies is to rebuild their ships while at sea, rather than dismantling themselves plank by plank while someone else builds a new. faster boat with what they cast overboard as detritus.

To successfully build and manage growth businesses you need the right people, processes and values:

Executives who are building new-growth businesses therefore need to do more than assign managers who have been to the right schools of experience to the problem. They must ensure that responsibility for making the venture successful is given to an organization whose processes will facilitate what needs to be done and whose values can prioritize those activities. The theory is that the requirements of an innovation need to fit with the host organization’s processes and values, or the innovation will not succeed.

On managing the strategy development process:

In every company there are two simultaneous processes through which strategy comes to be defined. Figure 8-1 suggests that both of these strategy-making processes—deliberate and emergent—are always operating in every company. The deliberate strategy-making process is conscious and analytical. It is often based on rigorous analysis of data on market growth, segment size, customer needs, competitors’ strengths and weaknesses, and technology trajectories. Strategy in this process typically is formulated in a project with a discrete beginning and end, and then implemented “top down.”…Emergent strategy, which as depicted in figure 8-1 bubbles up from within the organization, is the cumulative effect of day-to-day prioritization and investment decisions made by middle managers, engineers, salespeople, and financial staff. These tend to be tactical, day-to-day operating decisions that are made by people who are not in a visionary, futuristic, or strategic state of mind…When the efficacy of a strategy that was developed through an emergent process is recognized, it is possible to formalize it, improve it, and exploit it, thus transforming an emergent strategy into a deliberate one. Emergent processes should dominate in circumstances in which the future is hard to read and in which it is not clear what the right strategy should be. This is almost always the case during the early phases of a company’s life. However, the need for emergent strategy arises whenever a change in circumstances portends that the formula that worked in the past may not be as effective in the future. On the other hand, the deliberate strategy process should be dominant once a winning strategy has become clear, because in those circumstances effective execution often spells the difference between success and failure.

On the execution of the strategy, three points of leverage:

1. Carefully control the initial cost structure of a new-growth business, because this quickly will determine the values that will drive the critical resource allocation decisions in that business.

2. Actively accelerate the process by which a viable strategy emerges by ensuring that business plans are designed to test and confirm critical assumptions using tools such as discovery-driven planning.

3. Personally and repeatedly intervene, business by business, exercising judgment about whether the circumstance is such that the business needs to follow an emergent or deliberate strategy-making process. CEOs must not leave the choice about strategy process to policy, habit, or culture.

General rules of thumbs relating to the financial management of growth businesses:

  • Launch new-growth businesses regularly when the core is still healthy —when it can still be patient for growth—not when financial results signal the need.
  • Keep dividing business units so that as the corporation becomes increasingly large, decisions to launch growth ventures continue to be made within organizational units that can be patient for growth because they are small enough to benefit from investing in small opportunities.
  • Minimize the use of profit from established businesses to subsidize losses in new-growth businesses. Be impatient for profit: There is nothing like profitability to ensure that a high-potential business can continue to garner the funding it needs, even when the corporation’s core businesses turn sour.

On a concluding note:

Many successful companies have disrupted once. A few, including IBM, Intel, Microsoft, Hewlett-Packard, Johnson & Johnson, Kodak, Cisco, and Intuit, have disrupted several times. Sony did it repeatedly between 1955 and 1982, before its engine of disruption got shut down. To our knowledge, no company has been able to build an engine of disruptive growth and keep it running and running. That reality has made this a risky book for us to write: Few business books say “Do this; no one’s ever done it before.” But there is little choice. Creating and sustaining successful growth has, historically speaking, vexed some great managers. Given the existence of principles but no precedent, we have simply done our best to suggest how successful growth can be created and sustained. We have offered an integrated body of theory derived from the successes and the failures of hundreds of different companies, each of which has illuminated a different aspect of the innovator’s dilemma. And so we now pass the baton to you, in the hope that you will find our efforts to be a valuable foundation upon which to build your own innovator’s solution.

I highly recommend this book, as a follow-on to Clayton’s earlier work.

 

Titan – The Life of John D. Rockefeller, Sr.

The name Rockefeller is ingrained within both American History and Business, but why so? This is the question that set me on the quest to read the National Bestseller, Titan – The Life Of John D. Rockefeller, Sr. by Ron Chernow.

Below are key highlights from this masterpiece that I wanted to share.

John D. Rockefeller’s began displaying and developing his business acumen at a young age:

Though only dimly aware of such distant developments, John D. Rockefeller already seemed a perfect specimen of homo economicus. Even as a boy, he bought candy by the pound, divided it into small portions, then sold it at a tidy profit to his siblings. By age seven, encouraged by his mother, he was dropping gold, silver, and copper coins that he earned into a blue china bowl on the mantel. John’s first business coup came at age seven when he shadowed a turkey hen as it waddled off into the woods, raided its nest, and raised the chicks for sale. To spur his enterprise, Eliza gave him milk curds to feed the turkeys, and the next year he raised an even larger brood. As an old man. Rockefeller said, “To this day, I enjoy the sight of a flock of turkeys, and never miss an opportunity of studying them.”

The same was also true for his attachment to his religious beliefs:

John D. Rockefeller was drawn to the church, not as some nagging duty or obligation but as something deeply refreshing to the soul. The Baptist church of his boyhood provides many clues to the secrets of his character. As a young man. he was raised on a steady diet of maxims, grounded in evangelical Protestantism, that guided his conduct. Many of his puritanical attitudes, which may seem antiquated to a later generation, were merely the religious commonplaces of his boyhood. Indeed, the saga of his monumental business feats is inseparable from the fire-and-brimstone atmosphere that engulfed upstate New York in his childhood.

These two elements formed the two pillars of his life:

He possessed a sense of calling in both religion and business, with Christianity and capitalism forming the twin pillars of his life…When challenges to orthodoxy arose in later decades, he stuck by the spiritual certainties of his boyhood…The church gave Rockefeller the community of friends he craved and the respect and affection he needed.

The role he had to play within his family, tough him responsibility:

Of course, this boyhood responsibility took its toll on John D., who experienced little of the spontaneous joy or levity of youth. Growing up as a miniature adult, burdened with duties. He developed an exaggerated sense of responsibility that would be evident throughout his life. He learned to see himself as a reluctant savior, taking charge of troubled situations that needed to be remedied.

On his entry to the Oil sector:

Tramping the banks. Rockefeller beheld the satanic new world bequeathed by the oil boom, an idyllic valley blackened with derricks and tanks, engine houses and ramshackle huts, thickly crowded together in a crazy-quilt pattern…Rockefeller represented the second, more rational stage of capitalist development, when the colorful daredevils and pioneering speculators give way, as Max Weber wrote, to the “men who had grown up in the hard school of life. calculating and daring at the same time, above all temperate and reliable, shrewd and completely devoted to their business, with strictly bourgeois opinions and principles.”

One of the keys to his business success was that he kept cash on hand, and allies in the banking sectors – which were essential particularly during the times of crisis:

It is impossible to comprehend Rockefeller’s breathtaking ascent without realizing that he always moved into battle backed by abundant cash. Whether riding out downturns or coasting on booms, he kept plentiful reserves and won many bidding contests simply because his war chest was deeper…To have orchestrated such a rapid campaign required a long relationship of trust with the banks.

Rockefeller believed in the importance of balanced work ethic:

Rockefeller bridled at the notion that he was a business-obsessed drudge, a slave to the office. “I know of nothing more despicable and pathetic than a man who devotes all the waking hours of the day to making money for money’s sake,” he recorded in his memoirs. He worked at a more leisurely pace than many other executives, napping daily after lunch and often dozing in a lounge chair after dinner. To explain his extraordinary longevity he later said, doubtless overstating the matter, “I’m here because I shirked: did less work, lived more in the open air, enjoyed the open air, sunshine and exercise.”

On his skillful negotiation skills:

One of Rockefeller’s strengths in bargaining situations was that he figured out what he wanted and what the other party wanted and then crafted mutually advantageous terms. Instead of ruining the railroads, Rockefeller tried to help them prosper, albeit in a way that fortified his own position.

One of his shortcomings was that he remained silent in the face of criticism, which haunted him particularly during the public relation battles he fought:

Only in the twilight of life did Rockefeller realize how poorly his taciturnity had served him in business battles. This was especially true during the SIC furor, which evolved into a political and public-relations battle. By remaining silent in the face of criticism, he thought he would seem confident and secure in his integrity—in fact, he seemed guilty and arrogantly evasive. Throughout his career. Rockefeller endured abuse with so much equanimity that Flagler once shook his head and said, “John, you have a hide like a rhinoceros! “

On his view of capitalism, and how he linked it to his religious beliefs:

In a critical distinction, he viewed competitive capitalism—and not capitalism per se—as producing a vulgar materialism and rapacious business practices that dissolved the bonds of human brotherhood. In a state of ungoverned competition, selfish individuals tried to maximize their profits and thereby impoverished the entire industry What the American economy needed instead were new cooperative forms (trusts, pools, monopolies) that would restrain grasping individuals for the general good. Rockefeller thus tried to reconcile trusts with Christianity, claiming that cooperation would end the egotism and materialism abhorrent to Christian values. It was an ingenious rationalization. While religion did not lead him to the concept of trusts, it did enable him to invest his vision of cooperation with a powerful moral imperative.

On his leadership skills and beliefs:

Even as a young man, Rockefeller was extremely composed in a crisis. In this respect, he was a natural leader: The more agitated others became, the calmer he grew.

Far more than a technocrat, Rockefeller was an inspirational leader who exerted a magnetic power over workers and especially prized executives with social skills.

Few outsiders knew that one of Rockefeller’s greatest talents was to manage and motivate his diverse associates. As he said, “It is chiefly to my confidence in men and my ability to inspire their confidence in me that I owe my success in life.” He liked to note that Napoleon could not have succeeded without his marshals. Free of an autocratic temperament. Rockefeller was quick to delegate authority and presided lightly, genially, over his empire, exerting his will in unseen ways. At meetings. Rockefeller had a negative capability: The quieter he was, the more forceful his presence seemed, and he played on his mystique the resident genius immune to petty concerns.

Rockefeller placed a premium on internal harmony and tried to reconcile his contending chieftains. A laconic man, he liked to canvass everyone’s opinion before expressing his own and then often crafted a compromise to maintain cohesion. He was always careful to couch his decisions as suggestions or questions.

On philanthropy:

Yet by the 1880s, Rockefeller had already formulated certain core principles for his bequests many of them stemming from beliefs he had long entertained as a businessman. For instance, like other industrialists he worried that charity fostered dependence and pauperized recipients…The most important concept Rockefeller bequeathed to philanthropy was that of wholesale giving, as opposed to small, scattershot contributions…Another cardinal principle of Rockefeller philanthropy was to rely upon expert opinion.

On Standard Oils’, the set of companies he started:

In a sense, John D. Rockefeller simplified life for the authors of antitrust legislation. His career began in the infancy of the industrial boom, when the economy was still raw and unregulated. Since the rules of the game had not yet been encoded into law, Rockefeller and his fellow industrialists had forged them in the heat of combat. With his customary thoroughness, Rockefeller had devised an encyclopedic stock of anti-competitive weapons. Since he had figured out every conceivable way to restrain trade, rig markets, and suppress competition, all reform-minded legislators had to do was study his career to draw up a comprehensive antitrust agenda.

Standard Oil had taught the American public an important but paradoxical lesson: Free markets, if left completely to their own devices, can wind up terribly unfree. Competitive capitalism did not exist in a state of nature but had to be defined or restrained by law. Unfettered markets tended frequently toward monopoly or, at least, toward unhealthy levels of concentration, and government sometimes needed to intervene to ensure the full benefits of competition. This was particularly true in the early stages of industrial development. This notion is now so deeply embedded in our laws that it has become all but invisible to us. replaced by secondary debates over the precise nature or extent of antitrust enforcement.

If Tarbell gave an oversimplified account of Standard Oil’s rise, her indictment was perhaps the more forceful for it. In the trust’s collusion with the railroads, the intricate system of rebates and drawbacks, she found her smoking gun, the irrefutable proof that Rockefeller’s empire was built by devious means. She was at pains to refute Rockefeller’s defense that everybody did it. “Everybody did not do it,” she protested indignantly “In the nature of the offense everybody could not do it. The strong wrested from the railroads the privilege of preying upon the weak, and the railroads never dared give the privilege save under the promise of secrecy.”

The following two excerpts summarize Rockefeller’s life and contributions:

The loftiest encomium to Rockefeller’s impact in this field came from Winston Churchill, who wrote shortly before Rockefeller’s death: When history passes its final verdict on John D. Rockefeller, it may well be that his endowment of research will be recognized as a milestone in the progress of the race. For the first time, science was given its head: longer term experiment on a large scale has been made practicable, and those who undertake it are freed from the shadow of financial disaster. Science today owes as much to the rich men of generosity and discernment as the art of the Renaissance owes to the patronage of Popes and Princes. Of these rich men, John D. Rockefeller is the supreme type.

The fiercest robber baron had turned out to be the foremost philanthropist Rockefeller accelerated the shift from the personal, ad-hoc charity that had traditionally been the province of the rich to something both more powerful and more impersonal. He established the promotion of knowledge, especially scientific knowledge, as a task no less important than giving alms to the poor or building schools, hospitals, and museums. He showed the value of expert opinion, thorough planning, and competent administration in nonprofit work, setting a benchmark for professionalism in the emerging foundation field. By the time Rockefeller died, in fact, so much good had unexpectedly flowered from so much evil that God might even have greeted him on the other side, as the titan had so confidently expected all along.

On a concluding note:

Although Junior moved into Kykuit after Rockefeller’s death, he knew that his father was inimitable, and so he decided to retain the Jr. after his name. As he was often heard to say in later years, “There was only one John D. Rockefeller.”

Attorney Samuel Untermver issued this paean to the elusive witness he had interrogated: “Next to our beloved President, he was our country’s biggest citizen. It was he who visualized as did no other man the use to which great wealth could wisely be put. Because of him the world is a better place in which to live. Blessed be the memory of World Citizen No. 1.”

After reading this book, I can definitely say that the question I had has been answered. A highly recommended read from a historical, humanitarian and business perspectives. If you are looking to learn more about the Oil/Energy side of the story, I strongly recommend reading The Prize: The Epic Quest for Oil, Money and Power by Daniel Yergin.