Strategy

On A Beautiful Mind

I recently finished reading A Beautiful Mind, a biography by Sylvia Nasar. As best stated by the author: “This is the story of John Forbes Nash. Ir. It is a story about the mystery of the human mind, in three acts: genius, madness, reawakening. ”

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

The young genius from Bluefield, West Virginia – handsome, arrogant, and highly eccentric — burst onto the mathematical scene in 1948. Over the next decade, a decade as notable for its supreme faith in human rationality as for its dark anxieties about mankind’s survival, Nash proved himself, in the words of the eminent geometer Mikhail Gromov, “the most remarkable mathematician of the second half of the century.” Games of strategy, economic rivalry, computer architecture. the shape of the universe, the geometry of imaginary spaces, the mystery of prime numbers —all engaged his wide-ranging imagination. His ideas were of the deep and wholly unanticipated kind that pushes scientific thinking in new directions.

Nash’s genius was of that mysterious variety more often associated with music and art than with the oldest of all sciences. It wasn’t merely that his mind worked faster, that his memory was more retentive,or that his power of concentration was greater. The flashes of intuition were non-rational. Like other great mathematical intuitionists —Georg Friedrich Bernhard Riemann. Jules Henri Poincare, Srinivasa Ramanujan — Nash saw the vision first. constructing the laborious proofs long afterward. But even after he’d try to explain some astonishing result, the actual route he had taken remained a mystery to others who tried to follow his reasoning. Donald Newman, a mathematician who knew Nash at MIT in the 1950s, used to say about him that “everyone else would climb a peak by looking for a path somewhere on the mountain. Nash would climb another mountain altogether and from that distant peak would shine a searchlight back onto the first peak.”

As was to become increasingly obvious over the months that followed, Princeton’s approach to its graduate students, with its combination of complete freedom and relentless pressure to produce, could not have been better suited to someone of Nash’s temperament and style as a mathematician, nor more happily designed to elicit the first real proofs of his genius. Nash’s great luck, if you want to call it luck, was that he came onto the mathematical scene at a time and to a place tailor-made for his particular needs. He came away with his independence, ambition, and originality intact, having been allowed to acquire a truly first-class training that was to serve him brilliantly.

Sometimes one person’s best choice is the same no matter what the others do. That is called a dominant strategy for that player. At other times, one player has a uniformly bad choice — a dominated strategy — in the sense that some other choice is best for him irrespective of what the others do. The search for equilibrium should begin by looking for dominant strategies and eliminating dominated ones. But these are special and relatively rare cases. In most games each player’s best choice does depend on what the others do, and one must turn to Nash’s construct. Nash defined equilibrium as a situation in which no player could improve his or her position by choosing an alternative available strategy, without implying that each person’s privately held best choice will lead to a collectively optimal result. He proved that for a certain very broad class of games of any number of players, at least one equilibrium exists —so long as one allows mixed strategies. But some games have many equilibria and others, relatively rare ones that fall outside the class he defined, may have none. Today, Nash’s concept of equilibrium from strategic games is one of the basic paradigms in social sciences and biology. It is largely the success of his vision that has been responsible for the acceptance of game theory as, in the words of The New Palgrave, “a powerful and elegant method of tackling a subject that had become increasingly baroque, much as Newtonian methods of celestial mechanics had displaced the primitive and increasingly ad-hoc methods of the ancients.”

All through the childhood, adolescence, and brilliant student career. Nash had seemed largely to live inside his own head, immune to the emotional forces that bind people together. His overriding interest was in patterns, not people. and his greatest need was making sense of the chaos within and without by employing, to the largest possible extent, the resources of his own powerful, fearless. fertile mind. His apparent lack of ordinary human needs was, if anything, a matter of pride and satisfaction to him, confirming his own uniqueness. He thought of himself as a rationalist, a free thinker, a sort of Spock of the starship Enterprise. But now, as he entered early adulthood, this unfettered persona was shown to be partly a fiction or at least partly superseded. In those first years at MIT, he discovered that he had some of the same wishes as others. The cerebral, playful, calculating, and episodic connections that had once sufficed no longer served. In five short years, between the ages of twenty-four and twenty-nine, Nash became emotionally involved with at least three other men. He acquired and then abandoned a secret mistress who bore his child. And he courted —or rather was courted by —a woman who became his wife.

Although Nash appeared unscathed, the arrest was a turning point in his life. Aloof, ambitious, coolly indifferent to others as he often appeared, Nash was by no means a true loner. Living in a tolerant ivory tower, he had been lulled into believing that he could do as he liked. Now he learned, in a particularly brutal fashion, that the emotional connections he sought threatened to destroy all else that he valued — his freedom, his career, his reputation, success on society’s terms. Contradictory imperatives can engender tremendous fear. And fear can be subtly destructive.

Nash’s lifelong quest for meaning, control, and recognition in the context of a continuing struggle, not just in society, but in the warring impulses of his paradoxical self, was now reduced to a caricature. Just as the over-concreteness of a dream is related to the intangible themes of waking life, Nash’s search for a piece of paper, a carte d’identite, mirrored his former pursuit of mathematical insights. Yet the gulf between the two recognizably related Nashes was as great as that between Kafka, the controlling creative genius, struggling between the demands of his self-chosen vocation and ordinary life, and K, a caricature of demands of his self-chosen vocation and ordinary life, and K, a caricature of Kafka, the helpless seeker of a piece of paper that will validate his existence. rights, and duties. Delusion is not just fantasy but compulsion. Survival, both of the self and the world, appears to be at stake. Where once he had ordered his thoughts and modulated them, he was now subject to their peremptory and insistent commands.

Nash’s remission did not come about as many people later assume because of some new treatment. “I emerged from irrational thinking,” he said in 1996, “ultimately, without medicine other than the natural hormonal changes of aging.” He described the process as one that involved both a growing awareness of the sterility of his delusional state and a growing capacity for rejecting delusional thought.

On a closing note:

Unlike a game of Hex, outcomes in real life aren’t predetermined by the first or even the fiftieth move. The extraordinary journey of this American genius, this man who surprises people, continues. The self-deprecating humor suggests greater self-awareness. The straight-from-the-heart talk with friends about sadness, pleasure. and attachment suggests a wider range of emotional experiences. The daily effort to give others their due, and to recognize their right to ask this of him, bespeaks a very different man from the often cold and arrogant youth. And the disjunction of thought and emotion that characterized Nash’s personality, not just when he was ill, but even before are much evident today. In deed, if not always in word, Nash has come to a life in which thought and emotion are more closely entwined, where getting and giving are central, and relationships are more symmetrical. He may be getting and giving are central, and relationships are more symmetrical. He may be less than he was intellectually, he may never achieve another breakthrough, but he has become a great deal more than he ever was— “a very fine person,” as Alicia put it once.

A highly recommended biography.

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The 48 Laws Of Power

I recently finished reading The 48 Laws of Power by Robert Greene.

Greene on Power, and the importance of developing Emotional Intelligence:

Power is a social game. To learn and master it, you must develop the ability to study and understand people…To be a master player you must also be a master psychologist. You must recognize motivations and see through the cloud of dust with which people surround their actions. An understanding of people’s hidden motives is the single greatest piece of knowledge you can have in acquiring power… People are of infinite complexity and you can spend a lifetime watching them without ever fully understanding them. So it is all the more important, then, to begin your education now. In doing so you must also keep one principle in mind: Never discriminate as to whom you study am whom you trust. Never trust anyone completely and study everyone, including friends and loved ones. Finally, you must learn always to take the indirect route to power. Disguise your cunning. Like a billiard ball that caroms several times before it hits its target, your moves must be planned and developed in the least obvious way. By training yourself to be indirect, you can thrive in the modem court, appearing the paragon of decency while being the consummate manipulator.

The book’s main premise:

Consider The 48 Laws of Power a kind of handbook on the arts of indirection. The laws are based on the writings of men and women who have studied and mastered the game of power. These writings span a period of more than three thousand years and were created in civilizations as disparate as ancient China and Renaissance Italy; yet they share common threads and themes, together hinting at an essence of power that has yet to be fully articulated. The 48 laws of power are the distillation of this accumulated wisdom, gathered from the writings of the most illustrious strategists (Sun-tzu, Clausewitz), statesmen (Bismarck, Talleyrand), courtiers (Castighone, Gracian), seducers (Ninon de Lenclos, Casanova), and con artists (“Yellow Kid” Weil) in history. The laws have a simple premise: Certain actions almost always increase one’s power (the observance of the law), while others decrease it and even ruin us (the transgression of the law). These transgressions and observances are illustrated by historical examples. The laws are timeless and definitive.

The 48 Laws of Power:

Law 1: Never Outshine the Master

Always make those above you feel comfortably superior.  In your desire to please or impress them, do not go too far in displaying your talents or you might accomplish the opposite – inspire fear and insecurity.  Make your masters appear more brilliant than they are and you will attain the heights of power.

Law 2: Never put too Much Trust in Friends, Learn how to use Enemies

Be wary of friends-they will betray you more quickly, for they are easily aroused to envy.  They also become spoiled and tyrannical. But hire a former enemy and he will be more loyal than a friend, because he has more to prove.  In fact, you have more to fear from friends than from enemies.  If you have no enemies, find a way to make them.

Law 3: Conceal your Intentions

Keep people off-balance and in the dark by never revealing the purpose behind your actions.  If they have no clue what you are up to, they cannot prepare a defense.  Guide them far enough down the wrong path, envelope them in enough smoke, and by the time they realize your intentions, it will be too late.

Law 4: Always Say Less than Necessary

When you are trying to impress people with words, the more you say, the more common you appear, and the less in control.  Even if you are saying something banal, it will seem original if you make it vague, open-ended, and sphinxlike.  Powerful people impress and intimidate by saying less.  The more you say, the more likely you are to say something foolish.

 Law 5: So Much Depends on Reputation – Guard it with your Life

Reputation is the cornerstone of power.  Through reputation alone you can intimidate and win; once you slip, however, you are vulnerable, and will be attacked on all sides.  Make your reputation unassailable.  Always be alert to potential attacks and thwart them before they happen.  Meanwhile, learn to destroy your enemies by opening holes in their own reputations.  Then stand aside and let public opinion hang them.

 Law 6: Court Attention at all Cost

Everything is judged by its appearance; what is unseen counts for nothing.  Never let yourself get lost in the crowd, then, or buried in oblivion.  Stand out.  Be conspicuous, at all cost.  Make yourself a magnet of attention by appearing larger, more colorful, more mysterious, than the bland and timid masses.

  Law 7: Get others to do the Work for you, but Always Take the Credit

Use the wisdom, knowledge, and legwork of other people to further your own cause.  Not only will such assistance save you valuable time and energy, it will give you a godlike aura of efficiency and speed.  In the end your helpers will be forgotten and you will be remembered.  Never do yourself what others can do for you.

 Law 8: Make other People come to you – use Bait if Necessary

When you force the other person to act, you are the one in control.  It is always better to make your opponent come to you, abandoning his own plans in the process.  Lure him with fabulous gains – then attack.  You hold the cards.

 Law 9: Win through your Actions, Never through Argument

Any momentary triumph you think gained through argument is really a Pyrrhic victory:  The resentment and ill will you stir up is stronger and lasts longer than any momentary change of opinion.  It is much more powerful to get others to agree with you through your actions, without saying a word.  Demonstrate, do not explicate.

Law 10: Infection: Avoid the Unhappy and Unlucky

You can die from someone else’s misery – emotional states are as infectious as disease.  You may feel you are helping the drowning man but you are only precipitating your own disaster.  The unfortunate sometimes draw misfortune on themselves; they will also draw it on you.  Associate with the happy and fortunate instead.

Law 11: Learn to Keep People Dependent on You

To maintain your independence you must always be needed and wanted.  The more you are relied on, the more freedom you have.  Make people depend on you for their happiness and prosperity and you have nothing to fear.  Never teach them enough so that they can do without you.

 Law 12: Use Selective Honesty and Generosity to Disarm your Victim

One sincere and honest move will cover over dozens of dishonest ones.  Open-hearted gestures of honesty and generosity bring down the guard of even the most suspicious people.  Once your selective honesty opens a hole in their armor, you can deceive and manipulate them at will.  A timely gift – a Trojan horse – will serve the same purpose.

 Law 13: When Asking for Help, Appeal to People’s Self-Interest, Never to their Mercy or Gratitude

If you need to turn to an ally for help, do not bother to remind him of your past assistance and good deeds.  He will find a way to ignore you.  Instead, uncover something in your request, or in your alliance with him, that will benefit him, and emphasize it out of all proportion.  He will respond enthusiastically when he sees something to be gained for himself.

 Law 14: Pose as a Friend, Work as a Spy

Knowing about your rival is critical.  Use spies to gather valuable information that will keep you a step ahead.  Better still: Play the spy yourself.  In polite social encounters, learn to probe.  Ask indirect questions to get people to reveal their weaknesses and intentions.  There is no occasion that is not an opportunity for artful spying.

 Law 15: Crush your Enemy Totally

All great leaders since Moses have known that a feared enemy must be crushed completely.  (Sometimes they have learned this the hard way.)  If one ember is left alight, no matter how dimly it smolders, a fire will eventually break out.  More is lost through stopping halfway than through total annihilation:  The enemy will recover, and will seek revenge.  Crush him, not only in body but in spirit.

 Law 16: Use Absence to Increase Respect and Honor

Too much circulation makes the price go down:  The more you are seen and heard from, the more common you appear.  If you are already established in a group, temporary withdrawal from it will make you more talked about, even more admired.  You must learn when to leave.  Create value through scarcity.

 Law 17: Keep Others in Suspended Terror: Cultivate an Air of Unpredictability

Humans are creatures of habit with an insatiable need to see familiarity in other people’s actions.  Your predictability gives them a sense of control.  Turn the tables: Be deliberately unpredictable.  Behavior that seems to have no consistency or purpose will keep them off-balance, and they will wear themselves out trying to explain your moves.  Taken to an extreme, this strategy can intimidate and terrorize.

Law 18: Do Not Build Fortresses to Protect Yourself – Isolation is Dangerous

The world is dangerous and enemies are everywhere – everyone has to protect themselves.  A fortress seems the safest. But isolation exposes you to more dangers than it protects you from – it cuts you off from valuable information, it makes you conspicuous and an easy target.  Better to circulate among people find allies, mingle.  You are shielded from your enemies by the crowd.

Law 19: Know Who You’re Dealing with – Do Not Offend the Wrong Person

There are many different kinds of people in the world, and you can never assume that everyone will react to your strategies in the same way.  Deceive or outmaneuver some people and they will spend the rest of their lives seeking revenge.  They are wolves in lambs’ clothing.  Choose your victims and opponents carefully, then – never offend or deceive the wrong person.

Law 20: Do Not Commit to Anyone

It is the fool who always rushes to take sides.  Do not commit to any side or cause but yourself.  By maintaining your independence, you become the master of others – playing people against one another, making them pursue you.

Law 21: Play a Sucker to Catch a Sucker – Seem Dumber than your Mark

No one likes feeling stupider than the next persons.  The trick, is to make your victims feel smart – and not just smart, but smarter than you are.  Once convinced of this, they will never suspect that you may have ulterior motives.

Law 22: Use the Surrender Tactic: Transform Weakness into Power

When you are weaker, never fight for honor’s sake; choose surrender instead.  Surrender gives you time to recover, time to torment and irritate your conqueror, time to wait for his power to wane.  Do not give him the satisfaction of fighting and defeating you – surrender first.  By turning the other check you infuriate and unsettle him.  Make surrender a tool of power.

Law 23: Concentrate Your Forces

Conserve your forces and energies by keeping them concentrated at their strongest point.  You gain more by finding a rich mine and mining it deeper, than by flitting from one shallow mine to another – intensity defeats extensity every time.  When looking for sources of power to elevate you, find the one key patron, the fat cow who will give you milk for a long time to come.

Law 24: Play the Perfect Courtier

The perfect courtier thrives in a world where everything revolves around power and political dexterity.  He has mastered the art of indirection; he flatters, yields to superiors, and asserts power over others in the mot oblique and graceful manner.  Learn and apply the laws of courtiership and there will be no limit to how far you can rise in the court.

Law 25: Re-Create Yourself

Do not accept the roles that society foists on you.  Re-create yourself by forging a new identity, one that commands attention and never bores the audience.  Be the master of your own image rather than letting others define if for you.  Incorporate dramatic devices into your public gestures and actions – your power will be enhanced and your character will seem larger than life.

Law 26: Keep Your Hands Clean

You must seem a paragon of civility and efficiency: Your hands are never soiled by mistakes and nasty deeds.  Maintain such a spotless appearance by using others as scapegoats and cat’s-paws to disguise your involvement.

Law 27: Play on People’s Need to Believe to Create a Cultlike Following

People have an overwhelming desire to believe in something.  Become the focal point of such desire by offering them a cause, a new faith to follow.  Keep your words vague but full of promise; emphasize enthusiasm over rationality and clear thinking.  Give your new disciples rituals to perform, ask them to make sacrifices on your behalf.  In the absence of organized religion and grand causes, your new belief system will bring you untold power.

Law 28: Enter Action with Boldness

If you are unsure of a course of action, do not attempt it.  Your doubts and hesitations will infect your execution.  Timidity is dangerous:  Better to enter with boldness.  Any mistakes you commit through audacity are easily corrected with more audacity. Everyone admires the bold; no one honors the timid.

Law 29: Plan All the Way to the End

The ending is everything.  Plan all the way to it, taking into account all the possible consequences, obstacles, and twists of fortune that might reverse your hard work and give the glory to others.  By planning to the end you will not be overwhelmed by circumstances and you will know when to stop.  Gently guide fortune and help determine the future by thinking far ahead.

Law 30: Make your Accomplishments Seem Effortless

Your actions must seem natural and executed with ease.  All the toil and practice that go into them, and also all the clever tricks, must be concealed.  When you act, act effortlessly, as if you could do much more.  Avoid the temptation of revealing how hard you work – it only raises questions.  Teach no one your tricks or they will be used against you.

Law 31: Control the Options: Get Others to Play with the Cards you Deal

The best deceptions are the ones that seem to give the other person a choice:  Your victims feel they are in control, but are actually your puppets.  Give people options that come out in your favor whichever one they choose.  Force them to make choices between the lesser of two evils, both of which serve your purpose.  Put them on the horns of a dilemma:  They are gored wherever they turn.

Law 32: Play to People’s Fantasies

The truth is often avoided because it is ugly and unpleasant.  Never appeal to truth and reality unless you are prepared for the anger that comes for disenchantment.  Life is so harsh and distressing that people who can manufacture romance or conjure up fantasy are like oases in the desert:  Everyone flocks to them. There is great power in tapping into the fantasies of the masses.

Law 33: Discover Each Man’s Thumbscrew

Everyone has a weakness, a gap in the castle wall.  That weakness is usual y an insecurity, an uncontrollable emotion or need; it can also be a small secret pleasure.  Either way, once found, it is a thumbscrew you can turn to your advantage.

Law 34: Be Royal in your Own Fashion:  Act like a King to be treated like one

The way you carry yourself will often determine how you are treated; In the long run, appearing vulgar or common will make people disrespect you.  For a king respects himself and inspires the same sentiment in others.  By acting regally and confident of your powers, you make yourself seem destined to wear a crown.

Law 35: Master the Art of Timing

Never seem to be in a hurry – hurrying betrays a lack of control over yourself, and over time.  Always seem patient, as if you know that everything will come to you eventually.  Become a detective of the right moment; sniff out the spirit of the times, the trends that will carry you to power.  Learn to stand back when the time is not yet ripe, and to strike fiercely when it has reached fruition.

Law 36: Disdain Things you cannot have:  Ignoring them is the best Revenge

By acknowledging a petty problem you give it existence and credibility.  The more attention you pay an enemy, the stronger you make him; and a small mistake is often made worse and more visible when you try to fix it.  It is sometimes best to leave things alone.  If there is something you want but cannot have, show contempt for it.  The less interest you reveal, the more superior you seem.

Law 37: Create Compelling Spectacles

Striking imagery and grand symbolic gestures create the aura of power – everyone responds to them.  Stage spectacles for those around you, then full of arresting visuals and radiant symbols that heighten your presence.  Dazzled by appearances, no one will notice what you are really doing.

Law 38: Think as you like but Behave like others

If you make a show of going against the times, flaunting your unconventional ideas and unorthodox ways, people will think that you only want attention and that you look down upon them.  They will find a way to punish you for making them feel inferior.  It is far safer to blend in and nurture the common touch. Share your originality only with tolerant friends and those who are sure to appreciate your uniqueness.

Law 39: Stir up Waters to Catch Fish

Anger and emotion are strategically counterproductive.  You must always stay calm and objective.  But if you can make your enemies angry while staying calm yourself, you gain a decided advantage.  Put your enemies off-balance: Find the chink in their vanity through which you can rattle them and you hold the strings.

Law 40: Despise the Free Lunch

What is offered for free is dangerous – it usually involves either a trick or a hidden obligation.  What has worth is worth paying for.  By paying your own way you stay clear of gratitude, guilt, and deceit.  It is also often wise to pay the full price – there is no cutting corners with excellence.  Be lavish with your money and keep it circulating, for generosity is a sign and a magnet for power.

Law 41: Avoid Stepping into a Great Man’s Shoes

What happens first always appears better and more original than what comes after.  If you succeed a great man or have a famous parent, you will have to accomplish double their achievements to outshine them.  Do not get lost in their shadow, or stuck in a past not of your own making:  Establish your own name and identity by changing course.  Slay the overbearing father, disparage his legacy, and gain power by shining in your own way.

Law 42: Strike the Shepherd and the Sheep will Scatter

Trouble can often be traced to a single strong individual – the stirrer, the arrogant underling, the poisoned of goodwill.  If you allow such people room to operate, others will succumb to their influence.  Do not wait for the troubles they cause to multiply, do not try to negotiate with them – they are irredeemable.  Neutralize their influence by isolating or banishing them.  Strike at the source of the trouble and the sheep will scatter.

Law 43: Work on the Hearts and Minds of Others

Coercion creates a reaction that will eventually work against you.  You must seduce others into wanting to move in your direction.  A person you have seduced becomes your loyal pawn.  And the way to seduce others is to operate on their individual psychologies and weaknesses.  Soften up the resistant by working on their emotions, playing on what they hold dear and what they fear.  Ignore the hearts and minds of others and they will grow to hate you.

Law 44: Disarm and Infuriate with the Mirror Effect

The mirror reflects reality, but it is also the perfect tool for deception: When you mirror your enemies, doing exactly as they do, they cannot figure out your strategy.  The Mirror Effect mocks and humiliates them, making them overreact.  By holding up a mirror to their psyches, you seduce them with the illusion that you share their values; by holding up a mirror to their actions, you teach them a lesson.  Few can resist the power of Mirror Effect.

Law 45: Preach the Need for Change, but Never Reform too much at Once

Everyone understands the need for change in the abstract, but on the day-to-day level people are creatures of habit.  Too much innovation is traumatic, and will lead to revolt.  If you are new to a position of power, or an outsider trying to build a power base, make a show of respecting the old way of doing things.  If change is necessary, make it feel like a gentle improvement on the past.

Law 46: Never appear too Perfect

Appearing better than others is always dangerous, but most dangerous of all is to appear to have no faults or weaknesses.  Envy creates silent enemies.  It is smart to occasionally display defects, and admit to harmless vices, in order to deflect envy and appear more human and approachable.  Only gods and the dead can seem perfect with impunity.

Law 47: Do not go Past the Mark you Aimed for; In Victory, Learn when to Stop

The moment of victory is often the moment of greatest peril.  In the heat of victory, arrogance and overconfidence can push you past the goal you had aimed for, and by going too far, you make more enemies than you defeat.  Do not allow success to go to your head.  There is no substitute for strategy and careful planning.  Set a goal, and when you reach it, stop.

Law 48: Assume Formlessness

By taking a shape, by having a visible plan, you open yourself to attack.  Instead of taking a form for your enemy to grasp, keep yourself adaptable and on the move.  Accept the fact that nothing is certain and no law is fixed.  The best way to protect yourself is to be as fluid and formless as water; never bet on stability or lasting order.  Everything changes.

 

On a concluding note from Niccolo Machiavelli in The Prince:

Any man who tries to he good all the time is bound to come to ruin among the great number who are not good. Hence a prince who wants to keep his authority must learn how not to be good, and use that knowledge, or refrain from using it, as necessity requires.

A highly recommended read in the areas of social philosophy, and political strategy. Additional recommendations for this genre would be The Art of War – Sun Tzu and The Prince by Machiavelli.

 

 

 

American Icon

American Icon: Alan Mulally and the Fight to Save Ford Motor Company by Bryce G. Hoffman has been on my reading list for quite some time, particularly for the high rating this book had received and my interest in cars. I finally had a chance to read it and despite the high expectations I had of this book, it exceeded them both in terms of content and delivery.

Below are the highlights from this book.

The backdrop of the american car industry in late 20th century:

Ford may have been the company that put the world on wheels, invented the moving assembly line, and created the industrial middle class, but its glory days were long past. Together with General Motors Corporation and Chrysler Corporation, it had been a powerful engine of prosperity in postwar America…That era of easy profit created a culture of entitlement in Detroit that afflicted management and labor alike – inflating salaries, wages, and benefits until they became the envy of the world. Success was viewed as a birthright, not something that had to be fought for and won. As the Big Three’s share of the market had shrunk, they had not. At least not fast enough. They all had too many factories, too many workers, and too many dealers. Generous union contracts negotiated in better times had created enormous legacy costs that their foreign rivals did not have to bear. And none of the American companies had the stomach for the radical reforms that were now necessary just to stay in business. Wall Street had begun a deathwatch, waiting to see which of the Big Three would fail first. Most of the money was on Ford, which had become infamous for lackluster designs, poor quality, and managerial infighting.

Ford itself had some additional challenges of its own:

While many of Ford Motor Company’s problems were shared by the rest of Detroit, the Dearborn automaker also faced some challenges all its own. Ford’s woes had not begun with of the Japanese in the 1960s or the oil crises of the 1970s. The company had been struggling with itself since Henry Ford started it on June 16,1903. It invested massively in game-changing products, and then did nothing to keep them competitive. It allowed cults of personality to form around larger-than-life leaders, but drove away the talent needed to support them. And it allowed a caustic corporate culture to eat away at the company from the inside. These were birth defects that could be traced back to the automaker’s earliest days. Henry Ford liked to boast that he had created the modern world. In many ways, he had. But he also created a company that was its own worst enemy.

Bill Ford who was CEO knew it was time for a big change in leadership of the company was to be saved:

Hockaday commended Ford for having the self-awareness and the lack of ego to admit that, but he gently suggested that Ford needed something more than a new COO. Bill agreed: The time had come to find a CEO who could save Ford from itself…Though he knew it was coming, Hockaday thought Bill Ford’s speech to the directors was one of the most moving he had ever heard in a boardroom. No one ascends to the top of a major corporation without a healthy ego, but those in the automobile industry we’re oversized even by Fortune 500 standards. It took a big man to admit that he could not save his company, particularly when his name was on the side of the building. In other rooms in Detroit, other CEOs were adamantly refusing? to admit defeat. They would stubbornly cling to power and take their companies down with them. Bill Ford cared too much about Ford to let that happen in Dearborn.

Alan Mulally was the man that was chosen for the task:

The Seattle Times called him “Mr. Nice Guy.” Mulally’s lack of pre-tension was evident in his dealings with other people. At formal events, he showed little interest in the rich and powerful, preferring to mingle with those less interested in comparing resumes or other measurables. He asked more questions than he answered and seemed genuinely interested in what people had to say, be they world leader or waitresses. Mulally made a point of remembering something about everyone he met and would often astonish underlings by recalling some scrap of information about their lives they had shared with him months or years before. He was also big on hugs, and had even been known to plant pecks on the cheeks of both men and women when he was in a particularly exuberant mood. All of this made Mulally adored by subordinates. It also kept his rivals off balance. They could never quite figure out how much of it was an act. And Mulally liked to keep it that way.

Despite being and unconventional choice:

The conventional wisdom in Detroit held that outsiders were incapable of understanding the complexities of the automobile business. Bill Ford’s decision to hire an aeronautical engineer to save his car company spawned plenty of jokes during those early weeks. There was a lot of snickering about flying cars and the return of tail fins. “He has no idea how we do things in Detroit” was the common refrain at Ford’s crosstown rivals, as well as within Ford itself And Mulally knew it. They’re right. I don’t know how they do things in Detroit, he thought. But I do know it doesn’t work.

Mulally had a unique management style that he shared and communicated with his team from the beginning:

Mulally called their attention to a list of rules posted on the wall. There were ten of them: • People first • Everyone is included • Compelling vision • Clear performance goals • One plan • Facts and data • Propose a plan, “find-a-way” attitude • Respect, listen, help, and appreciate each other • Emotional resilience … trust the process • Have fun … enjoy the journey and each other

Listening was a key part of his philosophy, even from his competitors:

As he was leaving, Mulally told Wagoner he would like to be able to call him in the future if he had more questions. He was just trying to be polite, but Wagoner took it as another sign of weakness. He would later claim publicly that Mulally had sought his help as he e struggled to understand the industry in those early days. The truth was, Wagoner had been played so well he did not even notice.

He had a clear vision, even for what Ford would look like after he leaves – his legacy:

The Plan…Mulally also looked to Ford’s past for inspiration…Alan Legacy: • Clear, compelling vision going forward •Survive the perfect Storm—commodities, oil, credit, CO2, safety, UAW • Develop a profitable growth plan, global products and product Strategy • A skilled and motivated team • Reliable ongoing BPR process • A leader and leadership team with “One Ford” vision implementation tenacity

An example of, luck favors the prepared mind:

Did Ford see the credit crisis coming? Certainly not the full magnitude of it. But it is clear that Ford knew the game was changing and had the foresight to get as much cash as it could before it was too late. Other automakers would not prove so prescient. In the end, they would have to borrow their money not from the big Wall Street banks, but from the American people. Ford’s financing deal would allow it to survive without a government bailout. If Bill Ford had not convinced his family to stake everything, the Fords likely would have lost control of the company entirely. A few months later, such a deal would have been impossible for any American automaker. A year later, even the most profitable companies in the world would have been unable to borrow half that amount.

Alan never lost touch with what the business was really about – engaging with customers and making a difference in their lives through vehicles:

It would not be the last time Mulally played at being a car sales man. This was a way for him to see firsthand how Ford’s customers approached its cars and trucks. But it also generated a huge amount of goodwill for the company. Everybody who met Mulally walked away an ambassador for Ford. He had that effect on people.

He knew that a successful relationship with the Union of Automotive Workers was paramount to success and worked hard on nurturing it:

Even in the face of this increasing animosity between the UAW and Detroit’s Big Three, Ford managed to maintain a better relationship with the union. Ford family members often dealt directly with UAW officials, even during the period when there was no Ford in the chairman’s seat. None of the company’s factories had been struck since 1976. But even Ford could not get the concessions it needed to be competitive with the growing number of foreign transplants setting up factories of their own in the southern United States…Mulally took a step toward Gettelfinger and looked him in the eye. “We want to prove that we can do this in America,” he said solemnly. “Ron, will you hold hands with me.? We’ll do this together, and we’ll go out there and say we did this together. We’re going to be able to make products in America and make them profitably and successfully. Or, we’ll just go out there and tell everybody it was too hard. We just couldn’t do it. It’s up to you.” Gettelfinger did not hesitate.

Alan kept refining his vision and rallying the company around it:

Beneath the first, Mulally spelled out his vision for the company: People working together as a lean, global enterprise for automotive leadership, as measured by: Customer, Employee, Dealer, Investor, Supplier, Union/Council, and Community Satisfaction

During the crisis, it was not just about being defensive, it was about the offense – accelerating the transformation with the new product lines:

Accelerating Kuzak’s product time line would require a heroic effort on the part of Ford’s designers and engineers. It would also require other departments to cut deeper. It was a testament to how much Mulally had changed the culture inside the Glass House that they were willing to do so. Fields expressed this new spirit in a speech to his troops that summer “I know this is really a kick in the teeth, but this is not Ford Motor Company not delivering—this is the external environment. This is an egalitarian knock to the industry, and what’s going to separate the winners from the losers is how those companies approach this setback,” he said. “It’s easy to be a victim. It’s harder to say we’re going to take this and we’re going to make lemonade out of lemons.”

While Ford was in a better position than some of its competitors during the financial crisis their were some inter-dependencies within the industry that it had to actively manage with them and with the government:

Both Toyota and Honda were just as concerned as Ford about the impact that the failure of CM or Chrysler could have on their suppliers, as well as about the growing number of parts producers who were already in trouble. When they heard about Ford’s effort to support its suppliers, they wanted in. So Brown forged a tripartite alliance with Ford’s archrivals to prevent a cascading collapse of the entire automobile industry.

Ford was now engaged in a delicate balancing act, trying to convince consumers and investors that it was in better shape than its crosstown competitors while at the same time trying to persuade Washington that it was just as deserving of help. When Mulally was asked why Ford needed taxpayer assistance if it was not in dire financial straits, he said Ford would need help if either GM or Chrysler failed. “It’s just prudent to be prepared together. There’s a lot of issues that we’re all dealing with,” he said. “We are very interdependent, and we’re all dependent on the U.S. economy. If any one of us gets in trouble in a big way, then that’s going to have major ramifications for the entire value stream for the suppliers, for the (automakers), for the dealers.”

The strategy of forgoing the bailout paid off for Ford:

Sales remained depressed, but Ford continued to outperform the market and gain share…The board was pleased. The directors had hoped that Ford would get credit for forgoing a bailout, but none of them expected the decision to generate as much goodwill for the company as it did…The decision to pass on a bailout was a big part of that, but it would have mattered little if the company’s showrooms were still filled with the same old boring products. Fortunately for Ford, transports stacked with new vehicles like the redesigned Fusion and Fusion Hybrid were pulling into dealer lots just as customers decided that the company was worth another look. Once again. Ford’s timing was perfect.

Alan throughout this entire period ensured the team maintained focus on improving Ford’s financials:

Mulally’s focus was now on improving Ford’s balance sheet and beginning the long, slow march out of junk bond territory. The terms of Ford’s massive 2006 financing deal stipulated that all the assets it had pledged to secure those loans would be released once its revolving line of credit was paid off and two of the three major agencies restored the company’s credit rating to investment grade.

For those who down-play Ford’s come back:

There are some who will point to the loans Ford received from the U.S. Department of Energy and the money it borrowed from the U.S. Federal Reserve and say the company did take taxpayer dollars. This is true, but in this sense, so did the rest of the major automakers —and not just the American companies. Japanese and German manufacturers benefited from these programs as well, in addition to receiving support from their own governments. But these were loan programs set up to address systemic problems beyond these companies’ control.

And Alan’s key role in that:

While many of the pieces of Ford’s turnaround were already in place, the company’s own culture was preventing them from being implemented with the speed and scope necessary to effect real change…But Ford would have run out of time and money before it got to where it needed to be if Mulally had not been there to put the pedal to the metal…Mulally ripped off the bandage, cauterized the wound, and cured the disease. Only an outsider could do that. But not just any outsider: It had to be someone who understood the complexities of global manufacturing, labor relations, and heavily engineered products…His disciplined approach cut through the company’s caustic culture and forced everyone to march in the same direction…He taught the other executives how to make decisions based on data instead of boardroom politics. And once he had, most of the decisions that saved Ford were made by the team as a whole.

The keys to Alan’s success in his words:

“What I have learned is the power of a compelling vision, a comprehensive strategy, a relentless implementation process, and talented people working together based on those commitments,” he told me during our last interview for this book, in May 2011. “We laid out a plan, and for four and a half years, we have been relentlessly implementing that plan.”…”You’ve got to trust the process. You need to trust and nurture your emotional resilience,”

Another key, was Bill’s – the chairman – unwavering support:

It was not just Bill Ford’s willingness to step aside and make way for Mulally that helped save the company. It was also his unceasing effort to give him the time, the space, and the resources he needed for his revolution to succeed. Without that, Mulally may well have become just another victim of a company and a culture that seemed impervious to change.

A reminder though that a true test of great leadership is the ability of an organization to sustain itself after the leader leaves:

The ultimate test of Mulally’s revolution will be its ability to endure his absence. Boeing has suffered major setbacks since Mulally left Seattle in 2006. Insiders say that is because his successors have failed to maintain the processes Mulally put in place to guarantee success. When asked if the same thing could happen at Ford, Mulally says simply that he has given Ford the tools it needs to prosper. What the company does with them after he retires is beyond his control. Ford’s history is a long list of stunning successes followed by epic failures, of against-all-odds comebacks that turn into retreats back into mediocrity and mismanagement. But there are important differences this time that augur well for Ford’s future.

On a concluding note:

Henry Ford once said, “A business that makes nothing but money is a poor kind of business.” Ford Motor Company has certainly made a great deal of money since Alan Mulally started there in 2006. But it has also made people believe that the highest principles of American enterprise —ingenuity, innovation, and integrity—have not deserted us entirely. In an economic era marked by avarice and greed, Mulally’s Ford has demonstrated that a company can still succeed by building a good product and selling it at a fair price. As the big Wall Street banks tried to hide their mounting failures, Mulally was exposing Ford’s shortcomings and challenging his company to overcome them. Wall Street’s obfuscation and trickery would ultimately drag the entire world into the Great Recession. With Mulally’s relentless determination to succeed. Ford would defy that downturn and once again become an engine of prosperity. From the day he arrived in Dearborn, Mulally said he was fighting for the soul of American manufacturing. If Ford had failed, a little bit of America would have died, too. But Ford did not fail. Under Mulally’s leadership, it showed the entire world that at least one American automaker could pick itself up, shake off the rust, compete with the best in the business, and win.

A highly compelling, highly valuable and recommended read on leadership, management and corporate transformation as well as on the automotive industry.

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.

 

On Decisive

I am a big fan of the Heath brothers, having read their previous bestsellers Switch and Made To Stick. I was excited to read their latest book Decisive, How to Make Better Choices in Life and Work, not only because they had written it but because decision making itself was a subject area of particular interest to me. This book exceed my high expectations both in terms of content and delivery.

The Heath brothers begin by reminding us why decision making is difficult:

And that, in essence, is the core difficulty of decision making: What’s in the spotlight will rarely be everything we need to make a good decision, but we won’t always remember to shift the light. Sometimes, in fact, we’ll forget there’s a spotlight at all, dwelling so long in the tiny circle of light that we forget there’s a broader landscape beyond it.

And while we instinctively think that more analysis should lead to superior decision making, it is actually the process we use to come up with the decision that is more important:

When the researchers compared whether process or analysis was more important in producing good decisions—those that increased revenues, profits, and market share—they found that “process mattered more than analysis—by a factor of six.” Often a good process led to better analysis—for instance, by ferreting out faulty logic. But the reverse was not true: “Superb analysis is useless unless the decision process gives it a fair hearing.”

So why is decision making so difficult and what is the key to improving our capability? It is about understanding the underlying set of biases:

Research in psychology over the last 40 years has identified a set of biases in our thinking that doom the pros-and-cons model of decision making. If we aspire to make better choices, then we must learn how these biases work and how to fight them (with something more potent than a list of pros and cons).

How does the normal decision process flow, and what are the challenges within each step:

If you think about a normal decision process, it usually proceeds in four steps…And what we’ve seen is that there is a villain that afflicts each of these stages:

-You encounter a choice. But narrow framing makes you miss options.

-You analyze your options. But the confirmation bias leads you to gather self-serving information.

-You make a choice. But short-term emotion will often tempt you to make the wrong one.

-Then you live with it. But you’ll often be overconfident about how the future will unfold.

And while we can’t eliminate these biases, we can counteract them:

We can’t deactivate our biases, but these people show us that we can counteract them with the right discipline. The nature of each villain suggests a strategy for defeating it:

  1. You encounter a choice. But narrow framing makes you miss options So…Widen Your Options. How can you expand your set of choices?
  2. You analyze your options. But the confirmation bias leads you to gather self-sensing info So…Reality-Test Your Assumptions. How can you get outside your head and collect information that you can trust?..
  3. You make a choice. But short-term emotion will often tempt you to make the wrong one. So…Attain Distance Before Deciding. How can you overcome short-term emotion and conflicted feelings to make the best choice?…
  4. Then you live with it. But you’ll often be overconfident about how the future Will unfold So…Prepare to Be Wrong. How can we plan for an uncertain future so that we give our decisions the best chance to succeed?

This is the WRAP process for decision making which is at the heart of this book:

Our goal in this book is to teach this four-step process for making better choices. Note the mnemonic WRAP, which captures the four verbs. We like the notion of a process that “wraps” around your usual way of making decisions, helping to protect you from some of the biases we’ve identified. The four steps in the WRAP model are sequential; in general, you can follow them in order—but not rigidly so. Sometimes you’ll double back based on something you’ve learned.

Why is a process needed?

To get that kind of consistent improvement requires technique and practice. It requires a process. The value of the WRAP process is that it reliably focuses our attention on things we otherwise might have missed: options we might have overlooked, information we might have resisted, and preparations we might have neglected.

1- Widen Your Options

On avoiding a narrow frame:

Focusing is great for analyzing alternatives but terrible for spotting them. Think about the visual analogy—when we focus we sacrifice peripheral vision. And there’s no natural corrective for this; life won’t interrupt our focus to draw our attention to all of our options.

On multitracking:

In a study of top leadership teams in Silicon Valley, an environment that tends to place a premium on speed, she found that executives who weigh more options actually make faster decisions. It’s a counterintuitive finding, but Eisenhardt offers three explanations. First, comparing alternatives helps executives to understand the “landscape”: what’s possible and what’s not, what variables are involved. That understanding provides the confidence needed to make a quick decision. Second, considering multiple alternatives seems to undercut politics. With more options, people get less invested in any one of them, freeing them up to change positions as they learn. As with the banner-ad study, multitracking seems to help keep egos under control. Third, when leaders weigh multiple options, they’ve given themselves a built-in fallback plan.

An important element of multitracking is our mindset:

How you react to the position, in short, depends a great deal on your mindset at the time it’s offered. Psychologists have identified two contrasting mindsets that affect our motivation and our receptiveness to new opportunities: a “prevention focus,” which orients us toward avoiding negative outcomes, and a “promotion focus,” which orients us toward pursuing positive outcomes.

Another method of widening options, is finding someone else who’s solved your problem:

To break out of a narrow frame, we need options, and one of the most basic ways to generate new options is to find someone else who’s solved your problem…Notice the slow, brute-force approach that had to be used by the lab that didn’t use analogies. When you use analogies—when you find someone who has solved your problem—you can take your pick from the world’s buffet of solutions. But when you don’t bother to look, you’ve got to cook up the answer yourself every time. That may be possible, but it’s not wise, and it certainly ain’t speedy.

2- Reality-Test Your Assumption

On considering the opposite as a way to further test our assumption:

The most important lesson to learn about devil’s advocacy isn’t the need for a formal contrarian position; it’s the need to interpret criticism as a noble function. An effective promoter fidei is not a token argumentative smarty-pants; it’s someone who deeply respects the Catholic Church and is trying to defend the faith by surfacing contrary arguments in situations where skepticism is unlikely to surface naturally.

Questioning can be an effective tool to that effect:

Roger Martin Says “What would have to be true?” question has become the most important ingredient of his strategy work, and it’s not hard to see why. The search for disconfirming information might seem, on the surface, like a thoroughly negative process: We try to poke holes in our own arguments or the arguments of others. But Martin’s question adds something constructive: What if our least favorite option were actually the best one’ What data might convince us of that?

Other methods include:

1. Confirmation bias = hunting for information that confirms our initial assumptions (which are often self-serving).

2. We need to spark constructive disagreement within our organizations.

3. To gather more trustworthy information, we can ask disconfirming questions.

4. Caution: Probing questions can backfire in situations with a power dynamic.

5. Extreme disconfirmation: Can we force ourselves to consider the opposite of our instincts?

6. can even test our assumptions with a deliberate mistake.

7. Because we naturally seek self-confirming information, we need discipline to consider the opposite.

On Zooming in and out, and the importance of perspectives to further test assumptions:

Psychologists distinguish between the “inside view” and “outside view” of a situation. The inside view draws from information that is in our spotlight as we consider a decision—our own impressions and assessments of the situation we’re in. The outside view, by contrast, ignores the particulars and instead analyzes the larger class it’s part of…The outside view is more accurate—it’s a summary of real-world experiences, rather than a single person’s impressions—yet we’ll be drawn to the inside view.

The point is that the predictions of even a world-class expert need to be discounted in a way that their knowledge of base rates does not. In short. when you need trustworthy information, go find an expert—someone more experienced than you. Just keep them talking about the past and the present, not the future.

When we zoom out, we take the outside view, learning from the experiences of others who have made choices like the one we’re facing. When we zoom in, we take a close-up of the situation, looking for “color” that could inform our decision. Either strategy is helpful, and either one will add insight in a way that conference-room pontificating rarely will. When possible, we should do both. In interpreting the sentiments of Americans, FDR created statistical summaries and read a sample of real letters. In assessing the competitors’ products, Paul Smith’s colleagues relied on scientific data and personal experience. In making a high-stakes health decision, Brian Zikmund-Fisher trusted both the base rates and the stories of actual patients. Zooming out and zooming in gives us a more realistic perspective on our choices. We downplay the overly optimistic pictures we tend to paint inside our minds and instead redirect our attention to the outside world, viewing it in wide-angle and then in close-up.

On the importance of ooching/piloting:

The “ooching” terminology is our favorite, but we wanted to be clear that these groups are all basically saying the same thing: Dip a toe in before you plunge in headfirst. Given the popularity of this concept, and given the clear payoff involved—little bets that can improve large decisions—you might wonder why ooching isn’t more instinctive. The answer is that we tend to be awfully confident about our ability to predict the future.

Which also comes with a warning:

Ooching, in short, should be used as a way to speed up the collection of trustworthy information, not as a way to slow down a decision that deserves our full commitment.

3- Attain Distance Before Deciding

On overcoming short-term emotions, use the technique of giving advice to a friend:

The researchers have found, in essence, that our advice to others tends to hinge on the single most important factor, while our own thinking flits among many variables. When we think of our friends, we see the forest. When we think of ourselves, we get stuck in the trees. There’s another advantage of the advice we give others. We tend to be wise about counseling people to overlook short-term emotions.

On the importance of honoring your core priorities:

The goal of the WRAP process is not to neutralize emotion. Quite the contrary. When you strip away all the rational mechanics of decision making—the generation of options, the weighing of information—what’s left at the core is emotion. What drives you? What kind of person do you aspire to be? What do you believe is best for your family in the long run? (Business leaders ask: What kind of organization do you aspire to run? What’s best for your team in the long run?) Those are emotional questions—speaking to passions and values and beliefs—and when you answer them, there’s no “rational machine” underneath that is generating your perspective. It’s just who you are and what you want. The buck stops with emotion…All we can aspire to do with the WRAP process is help you make decisions that are good for you.

Maybe this advice sounds too commonsensical: Define and enshrine your core priorities. It is not exactly a radical stance. But there are two reasons why it’s uncommon to find people who have actually acted on this seemingly basic advice. First, people rarely establish their priorities until they’re forced to…Second, establishing priorities is not the same thing as binding yourself to them.

4- Prepare To Be Wrong

On bookend-ing the future:

Overconfidence about the future disrupts our decisions. It make us lackadaisical about preparing for problems. It tempts us to ignore early signs of failure. It leaves us unprepared for pleasant surprises. Fighting overconfidence means we’ve got to treat the future as a spectrum, not a point…To bookend the future means that we must sweep our spotlights from side to side, charting out the full territory of possibilities. Then we can stack the deck in our favor by preparing for both bad situations (via a premortem) and good (via a preparade).

On the importance of setting up tripwires to trigger decisions based on gradual changes:

Because day-to-day change is gradual, even imperceptible, it’s hard to know when to jump. Tripwires tell you when to jump. Setting tripwires would not have guaranteed that Kodak’s leaders made the right decisions. Sometimes even a clear alarm is willfully ignored. (We’ve probably all ignored a fire alarm, trusting that it is false.) But tripwires at least ensure that we are aware it’s time to make a decision, that we don’t miss our chance to choose because we’ve been lulled into autopilot.

On the importance of trusting the decision making process

The WRAP process, if used routinely, will contribute to that sense of fairness, because it allows people to understand how the decision is being made, and it gives them comfort that decisions will be made in a consistent manner. Beyond WRAP, there are a few additional ideas to consider as you navigate group decisions.

 

On a concluding note:

What a process provides, though, is more inspiring: confidence. Not cocky overconfidence that comes from collecting biased information and ignoring uncertainties, but the real confidence that comes from knowing you’ve made the best decision that you could. Using a process for decision making doesn’t mean that your choices will always be easy, or that they will always turn out brilliantly, but it does mean you can quiet your mind. You can quit asking, “What am I missing?” You can stop the cycle of agonizing.

Just as important, trusting the process can give you the confidence to take risks. A process can be the equivalent of a mountain climber’s harness and rope, allowing you the freedom to explore without constant worry. A process, far from being a drag or a constraint, can it actually give you the comfort to be bolder.

And bolder is often the right direction. Short-run emotion, as we’ve seen, makes the status quo seductive. But when researchers ask the elderly what they regret about their lives, they don’t often regret something they did, they regret things they didn’t do. They regret not seizing opportunities. They regret hesitating. They regret being indecisive.

Being decisive is itself a choice. Decisiveness is a way of behaving, not an inherited trait. It allows us to make brave and confident choices, not because we know we’ll be right but because it’s better to try and fail than to delay and regret.

Our decisions will never be perfect, but they can be better. Bolder. Wiser. The right process can steer us toward the right choice. And the right choice, at the right moment, can make all the difference.

A highly recommended read in the area of decision making. If you are interested in further readings in this topic, I would suggest an earlier post, On Left Brain Right Stuff.

On The Mask Of Command and Heroic Leadership

After reading Team of Rivals, I was interested to learn more about Ulysses S. Grant, and thus I decided to read the Mask of Command by John Keegan.

In this book, John reviews and highlights of the styles of command of each of the following four historic generals: Alexander the Great, Wellington, Grant, and Hitler.

In his introduction, John defines leadership and how the recounts to follow will be assessed from that perspective:

Heroic leadership – any leadership – is, like priesthood, statesmanship, even genius, a matter of externals almost as much as of internalities. The exceptional are both shown to and hidden from the mass of humankind, revealed by artifice, presented by theatre. The theatrical impulse will be strong in the successful politician, teacher, entrepreneur, athlete, or divine, and will be both expected and reinforced by the audiences to which they perform. In no exceptional human being will it be stronger than in the man who must carry forward others to the risk of their lives. What they know of him must be what they hope and require. What they should not know of him must be concealed at all cost. The leader of men in warfare can show himself to his followers only through a mask, a mask that he must make for himself, but a mask made in such form as will mark him to men of his time and place as the leader they want and need. What follows is an attempt, across time and place, to penetrate the mask of command.

On Alexander the Great:

John, begins, first reminds us just how monumental his conquests were:

Thus is it just possible to grasp how extraordinary was the career of Alexander the Great. The distances and obstacles of either enterprise defeat the imagination – and they have, indeed, no parallel in any reality except that of Alexander’s own life…His orgy of victory was, of course, even more telescoped in time than Napoleon’s, who in turn gave battle oftener than Alexander ever did. Yet the achievements of none of these earthshakers quite match those of the original.

From his upbringing, courage/heroism was instilled in him:

Epic poetry meant Homer, whose celebration of the Greek heroic past was to determine Alexander’s approach to life. Disregard for personal danger, the running of risk for its own sake, the dramatic challenge of single combat, the display of life-and-death courage under the eyes of men equal in their masculinity if not in social rank such was the raw material of the Homeric cannon, and on it Alexander’s imagination began to feed in childhood.

His leadership style was one of self-command:

Alexander commanded alone, certainly maintaining nothing like the ‘three bureaux’ system – operations, intelligence, logistics through which European armies of the last hundred years have been articulated…But our main sources give no real hint that Alexander used his circle of friends as a sounding-board for his plans. That was not their function: it was personality and character that were under test when Alexander was among his close Companions, the test of quickness of wit, sharpness of retort, memory for an apt phrase, skill in masking insult, boast or flattery, capacity to see deep into the bottom of a glass, and no heeltaps. When in doubt – and Alexander probably took the trouble to disguise doubt though he felt it hut rarely – he turned to the most experienced professional at the court, Parmenio, to help him fix his ideas, using the old general’s temperamental prudence as a catalyst to precipitate his preference for the bold and immediate option.

He lead by example as well as by indulgence:

Alexander, in short, sought to lead by indulgence as well as by example. Indulgence could take various forms. Early in the Asia Min block grant of what today the British army would call ‘compassionate leave’: ‘some of the Macedonians had been recently married; Alexander sent them off to spend the winter with their wives in Macedonia … He gained as much popularity by this act as by any other.’

He was a storyteller and an effective orator:

If Alexander was a supreme theatrical performer to the point achieved by the greatest of actors – not consciously calculating the impact of his performances, but letting its force transcend both his own and his audience’s emotions – he was at the same time the most calculating of dramatic orators. Oratory, whose public importance in our own time has been overtaken by the small intricate skills of the electronic conversationalist, retained its power to move hearts and sway minds even into the age of the printed word…Alexander certainly possessed the envied power of oratory to a supreme degree. How he exercised it we can now only guess. Before artificial amplification, speakers could be sure of carrying their voice to large numbers only by careful pre-arrangement. The Greek amphitheatre, carved from the backdrop of a steep hillside, was a device for ensuring that the audience not merely saw but also heard.

He overcame personal adversity (injury), and was determined as ever for greater victory:

The pain from a wound, perhaps the lesions from a punctured lung, are a hindrance with which he had to learn to live.’ What this wound history suggests is a rising temperature of commitment, almost as if Alexander’s fever for victory rose with the tide of difficulty. For the difficulty did increase. Nothing succeeds like success goes the sayings – true enough, no doubt, when a man sets himself targets within the value system of an established society.

His strategy was unconventional, but one that proved to be successful:

The point to be observed throughout his subsequent generalship is that Alexander preferred the more to the less difficult among options and regarded evidence that the enemy had sought to increase the difficulty of a difficult option – by choosing a naturally strong position – as evidence of infirmity of purpose in the opposition. When he detected that the enemy had artificially enhanced the strength of a strong position – by fortification or the emplacement of obstacles – those signs seem to have clinched his conviction that it was there he should attack, since they signified that there the enemy was most vulnerable to attack, in psychic if not material terms. It is perhaps not going too far to say that Alexander, without benefit of Adlerian theory, had hit upon the concept of the inferiority complex and made its exploitation the kernel of his war-making philosophy.

He possessed unwavering courage:

His ferocious energy was one of the dimensions of character that transformed his physical and intellectual gifts into practical capacity. His unblinking courage was another. Alexander was brave with the bravery of the man who disbelieves his own mortality. He had a sort of godlike certainty in his survival whatever risk he chose to run. There is no hint, in any of the ancient biographies, that he ever showed fear at all, or that he appeared to feel it. This absolution from fear may have stemmed from his intimate identification with the gods of the Greek pantheon.

On Wellington:

He was always there on the front-line with his men:

What had prepared this extraordinary man for the mental, moral and physical ordeal of the four days of Waterloo – days that left those who had merely fought, without any of the strain of command Wellington had borne and perhaps less of the danger, shocked into pallor and silence by the horrors of the slaughter, drugged by fatigue and physically deafened by the close-range discharge of musketry? That Wellington had borne a greater share of danger than his subordinates is unarguable. Whenever the pressure of attack had flowed from one section of the line to another, he had followed it, leaving the units he had been supervising to a respite of which he had none at all. If he told his sister-in-law a day later. The finger of God was on me all day – nothing else could have saved me,’ he spoke close to the virtual truth.

He himself was narrowly spared. Though he had out himself at the head of none of the attacks – ‘taking trouble’ precluded that – he was constantly within range of cannon and frequently of muskets, perhaps as close as 200 yards. When giving orders to one of the Napier brothers, ‘a ball passed through his left holster and struck his thigh; he put his hand to the place and his countenance changed for an instant, but only for an instant; and to my eager enquiry if he was hurt, he replied, sharply, “no”, and went on with his orders’. The narrow escape discomposed him not at all. Napier saw him again ‘late in the evening . . . when the advancing flashes of cannon and musketry stretching as far as the eye could command [in fact across a front of about six miles] showed in the darkness how well the field was won; he was alone, the flush of victory was on his brow and his eyes were eager and watchful, but his voice was calm and even gentle’.

He relied on both his visual and hearing cues during the battle:

The range at which he observed the enemy varied. In manoeuvring before a battle, the armies might be separated by several thousand yards and yet still within sight of each other…What, in such circumstances, did he see and hear? More to the point, what did he look and listen for? Noise – its volume, quality. duration, bearing and range – was of the very greatest importance in signalling to him the course and intensity of action…This rise and fall of sound-waves would tell Wellington a great deal, would indeed provide his main means of gauging the pattern of events in sectors of the battlefield hidden from him by distance, ground or fire. They would also help to convey how resolute or battle-worthy were troops within visual range: half-hearted shouts and ragged volleys implied uncertainty of purpose or lack of real menace. But the evidence of his ears would count far less than that of his eves. Messengers from his subordinate commanders would, of course, bring him word of passing events, particularly of real or imagined crisis. But he counted on word of mouth less than other generals of his age, because of his settled practice of ‘taking trouble’, that is, going to see for himself.

He showed concern and compassion for the army he lead:

His concern for the afflicted was consequently strong. Self-control did not exclude compassion. Alexander had buried his dead and succoured his wounded because to leave a warrior’s corpse unhonoured was sacrilege to the Greeks, while to disregard the wounded was, at very least, bad policy. Wellington, by contrast, buried his dead because it was good practice but tended the wounded because it was charitable as well as sensible to do so. The dead were not buried with ceremony or memorial; it was a matter of getting corpses underground to leave a battlefield decent, control disease and preserve the morale of the army lest if pass that way again. The proper care of the wounded was, on the other hand, a matter of morality.

He was a true anti-hero:

Heroism to the Greeks, Professor Moses Finley has explained, contained ‘no notion of social obligation’. It was ultimately self-indulgent, self-flattering, solipsistic. ‘Pathos’, Alexander’s ‘burning desire’ to do something as yet not done by other men, perfectly encapsulates its ethos. Such a notion was abhorrent to the very centre of Wellington’s being. ‘Never forget.’ Napoleon once wrote to his brother Jerome, ‘your first duty is to me, your second is to France.’ Wellington, sailing to Portugal as a subordinate commander in 1806, reproved a friend for urging that he deserved a higher place by an exactly contrary statement of obligation. ‘I am nimmukwallah, as we say in the East; that is, I have eaten of the King’s salt, and therefore I conceive it to be my duty to serve with unhesitating zeal and cheerfulness, when and wherever the King or his Government may think proper to employ me.’

On Grant:

The military/warfare landscape during his time had evolved due to three important shifts:

Three elements in particular of the military system which had emerged from them rode in easy equilibrium. The first was the discovery that the pool of potential warriors that States could bend to their service comprehended a far larger proportion of the total population than they had earlier been willing or able to enlist. The second was that the pool required disciplining and drilling in a traditional manner if it were to obey orders. The third was that drill had begun to cede its central role in warfare to superior weapon power, represented primarily by the rifle, which promised to transfer advantage in warmaking to whichever society could most rapidly master the processes of technological change.

Grant set himself apart from Alexander and Wellington:

His propensity to judge the politics of warmaking is an index of the changes in the commander’s role that set Grant apart from Alexander on the one hand, and Wellington on the other. Alexander distinguished not at all between his role as ruler and his role as warrior. The two – in a world where states were held to be at war unless an agreement to observe peace specifically held otherwise, and in a kingdom whose court was also a headquarters – were identical. Judgements about the morality of any particular war would have been as alien to him as they would have been treasonable in a subject. Alexander was, in the strict sense, both the complete Hegelian and the perfect Nietzscheian. His state was the supreme expression of Reason and Will; he, as its ruler. Superman. Wellington, rooted in a society of law and institutions, would have been affronted by both notions; to him tyranny and raison d’etat were equally repugnant. For all the power he exercised, he strictly circumscribed his own freedom to question orders or contest Strategies. As a man whose highest ambition had once been to hold rank ‘as a major-general in His Majesty’s service’, he drew the sharpest distinction between his political opinions and his military duties. Both in India and in Spain, distance and consequent delay in communication had shielded him from day-to-day interference in his conduct of the campaign. But he did not thereby conceive himself empowered to make policy. Grant’s position was different again. Like Wellington, he rejected Alexander’s identification of military with political power. Unlike Wellington, he fought for his country not because birth made him its subject but because he judged its cause just. ‘The Confederates proclaimed themselves aliens, and thereby disbarred themselves of all right to claim protection under the Constitution of the United States, [becoming] like people of any Other foreign state who make war upon an independent nation.’

Grant understood the dynamics and fundamentals of the driving force behind the soldiers:

In a land of immigration and free settlement, with the sketchiest of civil bureaucracies and a strongly egalitarian spirit prevailing among the soldiers of both sides, it was their willingness to accept discipline, rather than their officers’ power to impose it, that ultimately kept them under arms. That willingness derived, when all allowance has been made for the inducement of regular rations and pay, from belief in the cause – Confederacy or Union, as the case was – thus making the Blue and the Gray the first truly ideological armies of history. No issue of personality blurred the quarrel, as it had in the English Civil War, and none of freedom or subjection to foreign rule, as in the struggles of Washington and Bolivar against Britain and Spain. The American Civil War was a civil war in the strictest sense, and its soldiers required to be led, not driven, to battle. Grant understood that, as his handling of his first regimental command clearly demonstrated.

As with Wellington, Grant was also an excellent writer:

Such dispatches equal those of Wellington at his crispest – as they did also in production of effect on the battlefield. But, as a writer. Grant exceeds Wellington in his powers of extended composition.

He studied and analyzed campaigns rigorously to aid in his planning and strategy development:

Campaign study had helped him develop the most valuable of all his aptitudes, that of seeing into the mentality of his opponents…More than that, he began to guess how they would react to his initiatives, and even how they would arrive at independent decisions…Grant did not found his mind-reading on mere divination. He valued objective information highly and collected it from many sources.

Grant understood the goals of the war, and what was necessary to achieve them:

As early as April 1863. as we have seen, he was writing that the war must achieve ‘the total subjugation of the south’ and that the army’s duty was ‘therefore to use every means to weaken the enemy’ by destroying not only their armies in the field but their economy at home. Grant’s title as ‘first of the moderns’ among generals derives from that gospel of frightfulness. Christian though he was, he had persuaded himself that the Just War doctrine of ‘proportionality’ restraint of violence within the bounds necessary to make an enemy resist from it – did not apply in a war of principle. Even before his protege Sherman had begun to make his name as a burner and breaker, therefore. Grant was burning and breaking with a will, turning recalcitrants out of their homes once territory was captured and ruthlessly carrying the war into the hearts of the Southern people. But there was a limit which even he was prepared to set to ruthlessness: he would not countenance private law-breaking in the use of violence, either against property or the person.

On Hitler:

It is necessary to first understand the context following the first world war:

The First World War remains, to the Western mind even at the end of the twentieth century, the war, by reason not only of the destruction it brought to the primacy of the Old World and the agony it inflicted on the manhood and family feeling of a whole European generation, but of its abidingly mysterious character. ‘How did they do it?’ the first question put to anyone confronted by the terrible reality of the trenches, gives way almost at once to a second, even more imponderable, ‘Why was it done? Why did the armies persist in the impossible, the breaking of barbed wire by breasts of flesh and blood.? Why did the generals bind them to the effort? No armies ever before, not even in the worst passages of siege warfare, sustained courage or casualties with the suicidal relentlessness of those on the Western Front. The nature of Western Front fighting seems to defy nature itself. Whence that extraordinary defiance?

As the second half of World War 2 was settling in, so was defeat for Hitler:

But by that stage of the war he was a man living with the knowledge of inevitable defeat, a knowledge that marked his face. hair, gait, posture and gestures with ghastly evidence of the stress he bore. The worst of his fears he kept at bay with bold expressions of belief in the tide-turning powers of his secret weapons; but they must have co-existed with the anticipation, growing within his consciousness like a psychic tumour, of the death he knew he would ultimately have to inflict upon himself. For the last two years of his life Hitler woe breathing, walking, talking, calculating corpse. destined as certainty for the grave as any of the millions he marked for death in that terrible climax of his dictatorship. The power to kill was, indeed, the only power left to him after mid-summer 1943. Peace he knew his enemies would never concede to Germany while he remained at its head; surrender meant, he must have guessed. trial and execution as a war criminal. After Kursk, therefore, his generalship partook of nothing more than reflexive reaction to his enemies’ initiatives. Strategic choice had slipped from his grasp. never to be restored. If we wish also to perceive something of the means by which he exercised it. Therefore, we have to return to the earlier period of his time as Feldherr – lord of the field.

The command and control strategy that Hitler adopted was a significant contributor to his downfall despite the advancement of technology in radio communication that enabled it:

The brief answer is that the Second World War. when widened to include the Soviet Union and the United States among Germany’s enemies, was a war that Germany could not win. A fuller answer needs deeper analysis. First and foremost there is the issue of Hitler’s command style. He decided from the outset, as we have seen, to centralize decision-making at a point far from the front and thence to supervise the control of operations in the closest detail. Fuhrerprinzip provided the motivation that underlay this choice: if he was to exercise supreme power, he must do so in the military as well as civil sector. But he could not have realized that ambition, had not current technical developments, unfortunately for the German army, made available to him the instruments which, superficially at least, endowed him with the means to do so. Radio – ‘wireless’ better communicates its crucial military quality had, by its perfection in the 1930s, dissipated the cloud of unknowing which had descended between the fighting soldiers and their commander ever since long-range weapons had driven him from the focus of combat. Wireless generated a flow of information from the point of critical contact between friend and foe which. properly used, did allow headquarters at successively higher levels of command to monitor the progress of events and moderate their course by sensible intervention. But ‘sensible intervention’ implied a division of responsibilities. On the Allied side it was generally and scrupulously observed. Churchill, for example, took the closest interest in the conduct of battles but had, or was talked by his advisers into, the sense not to interfere with his generals when crisis at the front transfixed their attention. Hitler, as we have seen, did not.

Furthermore, the inflexibility of his strategy, was the nail in the coffin:

The ultimate cause of his inflexibility may, however, be judged to different source, lying in his fixed perception of how high command ought to be exercised. In essence, it derived, as with so much else, from his trench experience. From those years he had brought the conviction, rooted in the German army’s own First World War doctrine, that unless going forward an army is safest if its stands firm, holding to ‘the rigid defence of a line’, as Falkenheyn’s general staff memorandum of January 1915 ordained. To it he added, once he had acquired the self-confidence to impose his operational judgement on that of his generals – and he had begun to do so even before the opening of the battle of France – the belief that ‘remote control’, insensitive to the tactical ebb-and-flow though it had been in the First World War, served better than direct involvement once radio communications allowed direct touch with troops in the fighting line. ‘In the long run you can’t command in the roar of battle,’ he had preached on December 12, 1942. ‘Gradually [a man] loses his nerve. It’s different in the rear.’

On a concluding note, John argues that military leadership, in the nuclear era, requires a non-hero:

The concept of struggle, and its attendant ethic of heroism. broods over us all today. It lies at the heart of Marxism and hovers not far from the guiding belief of democracy in the values of human freedom and choice. Yet the spectre of risk, by confronting which the leader authenticated himself as hero, is no longer deflected from those who follow him by the singular role he takes for himself. On the contrary, it diffuses the whole arena of struggle, threatening everyone equally, if not indeed the led more directly than their leader. The traditional means by which the leader sought to validate his followers’ sharing of the risk he led them to face – the cultivation of a sense of kinship, the use of sanction, the force of example, the power of prescription, the resort of action – now all fail. Indeed, what is asked first of a leader in the nuclear world is that he should not act, in any traditionally heroic sense, at all. An inactive leader, one who does nothing, sets no striking example, says nothing Stirring, rewards no more than he punishes, insists above all in being different from the mass in his modesty, prudence and rationality. may sound no leader at all. But such, none the less, is the sort of leader the nuclear world needs, even if it does not know that it wants him. ‘Post-heroic’ is the title he might take for himself. For all is changed, utterly changed. Passing brave it may once have been to ride in triumph through Persepolis. Today the best must find conviction to play the hero no more.

A recommended read on multiple dimensions: historical, military, and leadership.

On Steve Jobs

I recently finished reading Steve Jobs by Walter Isaacson.

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

1- “I always thought of myself as a humanities person as a kid, but I liked electronics,” he said. “Then I read something that one of my heroes, Edwin Land of Polaroid, said about the importance of people who could stand at the intersection of humanities and sciences, and I decided that’s what I wanted to do.” It was as if he were suggesting themes for his biography (and in this instance, at least, the theme turned out to be valid). The creativity that can occur where both the humanities and the sciences combine in one strong personality was the topic that most interested me in my biographies of Franklin and Einstein, and I believe that it will be a key to creating innovative economies in the twenty-first century.”

2- “His wife also did not request restrictions or control, nor did she ask to see in advance what I would publish. In fact she strongly encouraged me to be honest about his failings as well as his strengths. She is one of the smartest and most grounded people I have ever met. “There are parts of his life and personality that are extremely messy. and that’s the truth,” she told me early on. “You shouldn’t whitewash it. He’s good at spin, but he also has a remarkable story, and I’d like to see that it’s all told truthfully” I leave it to the reader to assess whether I have succeeded in this mission. I’m sure there are players in this drama who will remember some of the events differently or think that I sometimes got trapped in Jobs’s distortion field.”

3- “Jobs said that his appreciation for Eichler homes instilled in him a passion for making nicely designed products for the mass market. I Jove it when you can bring really great design and simple capability to something that doesn’t cost much,” he said as he pointed out the clean elegance of the houses. “It was the original vision for Apple. That’s what we tried to do with the first Mac. That’s what we did with the iPod.””

4- “The Blue Box adventure established a template for a partnership that would soon be born. Wozniak would be the gentle wizard coming up with a neat invention that he would have been happy just to give away. and Jobs would figure out how to make it user-friendly, put it together in a package, market it, and make a few bucks.”

5- “Coming back to America was, for me, much more of a cultural shock than going to India. The people in the Indian countryside don’t use their intellect like we do, they use their intuition instead, and their intuition is far more developed than in the rest of the world. Intuition is a very powerful thing, more powerful than intellect, in my opinion. That’s had a big impact on my work.”

6- “Jobs is a complex person, he said, and being manipulative is just the darker facet of the traits that make him successful. Wozniak would never have been that way, but as he points out, he also could never have built Apple. “I would rather let it pass,” he said when I pressed the point. “It’s not something I want to judge Steve by.””

7- “Apple. It was a smart choice. The word instantly signaled friendliness and simplicity. It managed to be both slightly off-beat and as normal as a slice of pie. There was a whiff of counterculture, back-to-nature earthiness to it, yet nothing could be more American. And the two words together—Apple Computer—provided an amusing disjuncture. ”

8- “Jobs’s father had once taught him that a drive for perfection meant caring about the craftsmanship even of the parts unseen. Jobs applied that to the layout of the circuit board inside the Apple II. He rejected the initial design because the lines were not straight enough. This passion for perfection led him to indulge his instinct to control. Most hackers and hobbyists liked to customize, modify, and jack various things into their computers. To Jobs, this was a threat to a seamless end-to-end user experience.”

9- “Markkula would become a father figure to Jobs. Like Jobs’s adoptive father, he would indulge Jobs’s strong will, and like his biological father, he would end up abandoning him. “Markkula was as much a father-son relationship as Steve ever had,” said the venture capitalist Arthur Rock. He began to teach Jobs about marketing and sales. “Mike really took me under his wing,” Jobs recalled. “His values were much aligned with mine. He emphasized that you should never start a company with the goal of getting rich. Your goal should be making something you believe in and making a company that will last.””

10- “Was Jobs’s unfiltered behavior caused by a lack of emotional sensitivity? No. Almost the opposite. He was very emotionally attuned. able to read people and know their psychological strengths and vulnerabilities. He could stun an unsuspecting: victim with an emotional towel-snap, perfectly aimed. He intuitively knew when someone was faking it or truly knew something. This made him masterful at cajoling, stroking, persuading, flattering, and intimidating people.”

11- “But even though Jobs’s style could be demoralizing, it could also be oddly inspiring. It infused Apple employees with an abiding passion to create groundbreaking products and a belief that they could accomplish what seemed impossible.”

12- “The best products, he believed, were “whole widgets” that were designed end-to-end, with the software closely tailored to the hardware and vice versa. This is what would distinguish the Macintosh, which had an operating system that worked only on its own hardware, from the environment that Microsoft was creating, in which its operating system could be used on hardware made by many different companies.”

13- “Their differences in personality and character would lead them to opposite sides of what would become the fundamental divide in the digital age. Jobs was a perfectionist who craved control and indulged in the uncompromising temperament of an artist; he and Apple became the exemplars of a digital strategy that tightly integrated hardware. software, and content into a seamless package. Gates was a smart, calculating, and pragmatic analyst of business and technology; he was )pen to licensing Microsoft’s operating system and software to a variety of manufacturers.”

14- “I’ll always stay connected with Apple. I hope that throughout my life I’ll sort of have the thread of my life and the thread of Apple weave in and out of each other, like a tapestry. There may be a few years when I’m not there, but I’U always come back. If you want to live your life in a creative way, as an artist, you have to not look back too much. You have to be willing to take whatever you’ve done and whoever you were and throw them away. The more the outside world tries to reinforce an image of you, the harder it is to continue to be an artist, which is why a lot of times. artists have to say. “Bye. I have to go now. I’m going crazy and I’m getting out of here.” And they go and hibernate somewhere. Maybe later they re-emerge a little differently.”

15- “Jobs sometimes avoided the truth. Helmut Sonnenfeldt once said of Henry Kissinger, “He lies not because it’s in his interest. he lies because it’s in his nature.” It was in Jobs’s nature to mislead or be secretive when he felt it was warranted. But he also indulged in being brutally honest at times, telling the truths that most of us sugarcoat or suppress. Both the dissembling and the truth-telling were simply different aspects of his Nietzschean attitude that ordinary rules didn’t apply to him.”

16- “For all of his willfulness and insatiable desire to control things. Jobs was indecisive and reticent when he felt unsure about something. He craved perfection, and he was not always good at figuring out how to settle for something less. He did not like to wrestle with complexity or make accommodations. This was true in products, design, and furnishings for the house. It was also true when it came to personal for the house. It was also true when it came to personal commitments. If he knew for sure a course of action was right. he was unstoppable. But if he had doubts, he sometimes withdrew, preferring not to think about things that did not perfectly suit him.”

17- “Ever since he left the apple commune, Jobs had defined himself and by extension Apple, as a child of the counterculture. In ads such as “Think Different” and “1984,” he positioned the Apple brand so that it reaffirmed his own rebel streak, even after he became a billionaire, and it allowed other baby boomers and their kids to do the same. “From when I first met him as a young guy, he’s had the greatest of the impact he wants his brand to have on people,” said Clow. Very few other companies or corporate leaders—perhaps none— could have gotten away with the brilliant audacity of associating their brand with Gandhi, Einstein, Picasso, and the Dalai Lama. Jobs was able to encourage people to define themselves as anti-corporate, creative. innovative rebels simply by the computer they used. “Steve created the only lifestyle brand in the tech industry,” Larry Ellison said. “There are cars people are proud to have—Porsche, Ferrari, Prius—because what I drive says something about me. People feel the same way about an Apple product.”

18- “One of his motivating passions was to build a lasting company. At age twelve, when he got a summer job at Hewlett-Packard, he learned that a properly run company could spawn innovation far more than any single creative individual. “I discovered that the best innovation is sometimes the company, the way you organize a company,” he recalled. “The whole notion of how you build a company is fascinating. When I got the chance to come back to Apple, I realized that I would be useless without the company, and that’s why I decided to stay and rebuild it.”

19- “Why do we assume that simple is good? Because with physical products. we have to feel we can dominate them. As you bring order to complexity, you find a way to make the product defer to you. Simplicity isn’t just a -visual style. It’s not just minimalism or the absence of clutter. X involves digging through the depth of the complexity. To be truly simple, you have to go really deep. For example, to have no screws on something, you can end up having a product that is so convoluted and so complex. The better way is to go deeper with the simplicity, to understand everything about it and how it’s manufactured. You have to deeply understand the essence of a product in order to be able to get rid of the parts that are not essential.”

20- “Despite his autocratic nature—he never worshiped at the altar of consensus—Jobs worked hard to foster a culture of collaboration at Apple. Many companies pride themselves on having few meetings. Jobs had many.”

21- “”From the earliest days at Apple, I realized that we thrived when we created intellectual property. If people copied or stole our software, we’d be out of business. If it weren’t protected, there’d be no incentive for us to make new software or product designs. If protection of intellectual property begins to disappear, creative companies will disappear or never get Started. But there’s a simpler reason: It’s wrong to steal. It hurts other people. And it hurts your own character.” He knew, however, that the best way to stop piracy—in fact the only way—was to offer an alternative that was more attractive than the brain-dead services that music companies were concocting.”

22- “But Sony couldn’t. It had pioneered portable music with the Walkman, it had a great record company, and it had a long history of making beautiful consumer devices. It had all of the assets to compete with Jobs’s Strategy of integration of hardware, software, devices, and content sales. Why did it fail? Partly because it was a company, like AOL Time Warner that was organized into divisions (that word itself was ominous) with their own bottom lines; the goal of achieving synergy in such companies by prodding the divisions to work together was usually elusive. Jobs did not organize Apple into semi-autonomous divisions; he closely controlled all of his teams and pushed them to work as one cohesive and flexible company, with one profit-and-loss bottom fine. “We don’t have ‘divisions’ with their own P&L,” said Tim Cook. “We run one P&L for the company.””

23- “Despite being- a denizen of the digital world, or maybe because he knew all too well its isolating potential, Jobs was a strong believer in face-to-face meetings. “There’s a temptation in our networked age to think that ideas can be developed by email and iChat,” he said. “That’s crazy. Creativity comes from spontaneous meetings, from random discussions. You run into someone, you ask what they’re doing, you say ‘Wow,’ and soon you’re cooking up all sorts of ideas.” So he had the Pixar building- designed to promote encounters and unplanned collaborations. “If a building doesn’t encourage that, you’ll lose a lot of innovation and the magic that’s sparked by serendipity,” he said. “So we designed the building to make people get out of their offices and mingle in the central atrium with people they might not otherwise see.””

24- “Jobs insisted that Apple focus on just two or three priorities at a time. “There is no one better at turning off the noise that is going on around him,” Cook said. “That allows him to focus on a few things and say no to many things. Few people are really good at that.” In order to institutionalize the lessons that he and his team were learning. Jobs started an in-house center called Apple University. He hired Joel Podolny, who was dean of the Yale School of Management, to compile a series of case studies analyzing important decisions the company had made, including the switch to the Intel microprocessor and the decision to open the Apple Stores. Top executives spent time teaching the cases to new employees, so that the Apple style of decision making would be embedded in the culture.”

25- “”Steve has a particular way that he wants to run Apple, and it’s the same as it was twenty years ago, which is that Apple is a brilliant innovator of closed systems.” Schmidt later told me. “They don’t want people to be on their platform without permission. The benefits of a closed platform is control. But Google has a specific belief that open is the better approach, because it leads to more options and competition and consumer choice.””

26- “The nasty edge to his personality was not necessary. It hindered him more than it helped him. But it did, at times, serve a purpose. Polite and velvety leaders, who take care to avoid bruising others, are generally not as effective at forcing change. Dozens of the colleagues whom Jobs most abused ended their litany of horror stories by saying that he got them to do things they never dreamed possible. And he created a corporation crammed with A players.”

27- “The saga of Steve Jobs is the Silicon Valley creation myth writ large: launching a start-up in his parents’ garage and building it into the world’s most valuable company. He didn’t invent many things outright. but he was a master at putting together ideas, art, and technology in ways that invented the feature. He designed the Mac after appreciating the power of graphical interfaces in a way that Xerox was unable to do. and he created the iPod after grasping the joy of having a thousand in your pocket in a way that Sony, which had all the assets and heritage, never could accomplish. Some leaders push innovations by being good at the big picture. Others do so by mastering details. Jobs did both, relentlessly. As a result he launched a series of products over three decades that transformed whole industries…”

28- “Was he smart? No, not exceptionally. Instead, he was a genius. His imaginative leaps were instinctive, unexpected, and at times magical. He was, indeed, an example of what the mathematician Mark Kac called a magician genius, someone whose insights come out of the blue and require intuition more than mere mental processing power. Like a pathfinder, he could absorb information, sniff the winds, and sense what lay ahead. Steve Jobs thus became the greatest business executive of our era, the one most certain to be remembered a century from now. History will place him in the pantheon right next to Edison and Ford. More than anyone else of his time, he made products that were completely innovative, combining the power of poetry and processors. With a ferocity that could make working with him as unsettling as it was inspiring, he also built the world’s most creative company. And he was able to infuse into its DNA the design sensibilities, perfectionism, and imagination that make it likely to be, even decades from now. the company that thrives best at the intersection of artistry and technology.”

Regards,

Omar Halabieh

Steve Jobs

On The Alchemy Of Growth

I recently finished reading the Alchemy of Growth – Practical Insights For Building The Enduring Enterprise – by Mehrdad Baghai, Stephen Coley and David White. This book was referenced during a recent CIO conference I attended.

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

1- “Growth’s transformative power is akin to the alchemy of old. Always a mystery, alchemy’s magical blend of science, philosophy, art, and spirituality held secrets that even its practitioners found difficult to penetrate. Still, they were all drawn to its alluring aim: to transform the everyday into the exalted. The pursuit of corporate growth has prompted a similar reaction in the field of management. Although excited by growth’s promise, executives are uncertain about how to capture it. Feeling ill equipped to lead a growth charge, many seek a approach that shows them how they can actually attain and sustain growth. This book is addressed to them. It attempts to arm business leaders for growth by laying out a proven practical framework for the holistic management of a growing enterprise. The ideas and approaches suggested here are applicable to businesses and business units of all sizes, in all locations. They are intended to provide guidance to all levels of business leadership.”

2- “Our research makes it clear that very few companies sustain above-average growth for their industry year after year. Indeed, some of the companies we studied have already suffered slowdowns, and we fully expect more to do so. But these setbacks do not detract ft-om the lessons to be learned from the sustained phases of growth; indeed, they serve to reinforce the need for new approaches to help executives keep growth going. Our own approach has been specifically developed to help companies grow throughout the business cycle – not only sailing through the upswings, but also maintaining growth during the downturns.”

3- “Horizon 1 encompasses the businesses that are at the heart of an organization – those that customers and stock analysts most readily identify with the corporate name. In successful companies, these businesses usually account for the lion’s share of profits and cash flow. Horizon 1 businesses are critical to near-term performance, and the cash they generate and the skills they nurture provide resources for growth. They usually have some growth potential left, but will eventually flatten out and decline. Without the support of a successful horizon 1, initiatives in horizons 2 and 3 are likely to stagnate and die. Management’s primary challenge in horizon 1 is to shore up competitive positions and capture what potential remains in the core businesses. Even when these are mature, continuing innovation can incrementally extend their growth and profitability. Traditional sales force stimulation programs, product extensions, and marketing changes can aim contribute. Restructuring, productivity enhancement, and cost reduction measures will also help maintain healthy performance for as long as possible.”

4- “Horizon 2 comprises businesses on the rise: fast-moving, entrepreneurial ventures in which a concept is taking root or growth is accelerating. The emerging stars of the company, these businesses are attracting investors’ attention. They could transform their company, but not without considerable investment. Though substantial profits may be four or five years away, they have customers and revenue, and may already generate some profit. More important, they are expected to become as profitable as horizon 1 businesses in time. Horizon 2 initiatives are usually characterized by a single-minded drive to increase revenue and market share. They need continuing investment to finance rollouts or otherwise accelerate the expansion of the business. In a few years, horizon 2 initiatives should complement or replace a company’s current core businesses. They may represent either extensions of these businesses or moves in new directions. Horizon 2 is about building new streams of revenue.That takes time and demands new skills. Without horizon 2 businesses, a company’s growth will slow and ultimately stall. A good growth company needs to have several of these emerging businesses “on the boil,” working to convert promising ideas into future earnings generators.

5- “Horizon 3 contains the seeds of tomorrow’s businesses – options on fiiture opportunities. Although embryonic, horizon 3 options are more than ideas; they are real activities and investments, however small. They are the research projects, test-market pilots, alliances, minority stakes, and memoranda of understanding that mark the first steps toward actual businesses, even though they may not produce profits for a decade, if ever. Should they prove successful, they will be expected to reach horizon 1 levels of profitability. A company that thinks it has a promising horizon 3 just because it compiles a long list of whiteboard ideas at a management retreat is fooling itself. Without deliberate initiatives to develop good ideas into horizon 3 opportunities, a company’s long-term growth prospects will fade. The options in horizon 3 are rarely proven opportunities, but they need to be promising and to have the support of management. Building successful businesses means seeding numerous options. Some will fail for internal reasons; others will fall victim to shifting industry winds. Most will never grow to become successful new businesses. Given these odds, a great deal of horizon 3 activity is needed to cover the multitude of possible futures. A company’s goal should be to keep he option to play without committing too much capital or other resources. The challenge is to nurture promising options while ruthlessly excising those with diminishing potential.”

6- “The three horizons can be used to promote growth in three ways. First, as a diagnostic tool, the three horizons can help managers assess the prospects for growth at any level in an organization and reveal possible gaps in the volume and consistency of new profit sources. Second, as a language, the three horizons approach offers a coherent way to communicate with employees and investors. Its simple terminology makes it easier for both groups to understand and discuss corporate priorities.”

7- “An excessive focus on growth can be just as much a problem as because they have failed to fill their business creation pipeline. others lose the right to grow when they become obsessed with new businesses. The novelty of these opportunities can be so exciting that managers take their eyes off horizon 1, forgetting that it must be maintained in order to provide the financial capacity to drive growth.”

8- “Another troublesome pattern occurs when companies have strong horizon 1 businesses and lots of ideas in horizon 3, but few people working to turn these ideas into real businesses. No matter how exciting the ideas may be, horizon 2 will remain empty until businesses are built. A company can find itself in an insidious situation as promising horizon 3 options lull it into a false sense of security. To complicate matters, these options can also inflate market expectations for growth far beyond the company’s capacity to meet them. As the gap between market expectations and the company’s actual growth widens, a steep fall in stock price becomes more likely.”

9- “If there are no hard and fast numbers to determine ideal balance across the three horizons, how should you define it? The standard is simple: balance means having the next engine of growth ready when it is needed. Applying the standard, however, is far from simple. The definition of balance varies from company to company. Consider the following factors: Pace of industry evolution…Degree of uncertainty…Managerial and financial capacity…Shareholder expectations.”

10- “Pruning the portfolio of businesses through divestment creates capacity for growth. Although a business unit may still be earning adequate profits, these must be weighed against the opportunity costs of management distraction and competition for resources. Management attention and other resources are often more productively focused on growth opportunities than on businesses with limited potential…Shedding unsatisfactory businesses has the added benefit of signaling strategic intent to both stock markets and employees. Conversely, not pruning increasingly irrelevant businesses can send mixed messages about a company’s direction and resolve to grow.”

11- “In our work, we have looked for ways to open managers’ eyes to hidden opportunities. To this end, we have developed a tool that we call the “seven degrees of freedom.” By systematically addressing each degree of freedom in turn. managers can learn to think more broadly about growth opportunities in their businesses.  1. How could we increase sales to the same customers with the same product mix? 2. How could we extend the business by selling existing products to new customers? 3. How could we grow by introducing new products and services? 4. How could we expand sales by developing better delivery systems for customers? 5. How and where could we expand into new geographies? 6. How much could we grow by changing the industry structure through acquisitions or alliances? 7. What opportunities are there outside existing Industry boundaries?”

12- “Companies are right to be cautious about pursuing growth initiatives. But to let due caution prevent them considering unusual ideas is foolish. Collins and Porras strike the right balance: “We’re not saying that evolutionary progress equals wanton diversification…. Nor are we laying that the concept of ‘stick to the knitting’ makes no sense. The real question is: What is the ‘knitting’ in a visionary company?””

13- “Whether the process is top-down or bottom-up is beside the point. It is not just the breadth of involvement that matters. but the breadth of the search. In the end, whatever the process used and resources deployed, finding attractive opportunities is always as much art as science.”

14- “Executives who want to develop horizon 3 options into core profit engines face two big problems: market uncertainty and gaps in their skills, assets, and relationships. We have found that successful growers typically address these problems by taking not bold leaps, but a series of measured steps. Each step takes them a little closer to their ultimate :es money in its own right, and adds capabilities that prepare them for further opportunities. When these growers look back on what they have achieved, they see not a chaotic zigzag but a distinctive staircase pattern.”

15- “No formula can substitute for managerial iudement. Even so analysis of more than 100 growth staircases reveals a consistent pattern. Virtually all successful staircases proceed in four phases: seeding the initial growth options; testing the the business model; replicating and extending the business; and managing for profitability.”

16- “Even when there is strong capability building at each step, migrating an idea from a horizon 3 option to an emerging horizon 2 enterprise and on to a horizon 1 core business is tricky. The advantage of taking many small steps rather than a few big leaps is that it helps companies manage the risks that arise on two fronts. First, market uncertainty makes it impossible to predict the success of a business: for every great idea, there are many that will fail. Second, new businesses call for capabilities that a company does not yet have; without them, the promise these businesses hold out will not be realized.”

17- “A broader definition of capability is required that includes all resources useful in gaining competitive advantage. In addition to operational skill, our definition of capability includes three other classes of resources: privileged assets, growth-enabling skills, and special relationships.”

18- “Only by differentiating their management systems across the three horizons can corporations avoid the barriers to growth that most systems inadvertently perpetuate.If all managers are evaluated purely on the profitability of their businesses – a good measure of horizon 1 performance – they will have little appetite for building horizon 2 enterprises. If some leadership time is not systematically reserved for building fledgling businesses, the needs of the core business will consume all managers’ days and nights, and they simply will not have a free moment to build horizons 2 and 3.”

19- “Horizon 1 operators: Deep functional and/or industry expertise Strong drive to hit targets and meet plans consistently, Discipline; Horizon 2 Business builders: Entrepreneurial desire to create, Comfort with ambiguity,  Top-line-focused, sharp decision makers ; Horizon 3 Visionaries: Champions, Unconventional thinkers”

20- “Our research indicates that about three-quarters of the companies that sustain high growth and high shareholder returns make acquisition a critical component of their growth strategies. They frequently acquire other companies – often up to five a year – to further the development of their growth staircases.”

Regards,

Omar Halabieh

The Alchemy of Growth

Competitive Advantage

I have just finished reading Competitive Advantage – Creating And Sustaining Superior Performance – by Michael E. Porter.

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

1- “Both industry attractiveness and competitive position can be shaped by a firm, and this is what makes the choice of competitive strategy both challenging and exciting. While industry attractiveness is partly a reflection of factors over which a firm has little influence, competitive strategy has considerable power to make an industry more competitive strategy has considerable power to make an industry m( or less attractive. At the same time, a firm can clearly improve or erode its position within an industry through its choice of strategy. Competitive strategy, then, not only responds to the environment but also attempts to shape that environment in a firm’s favor. These two central questions in competitive strategy have been at the core of my research.”

2- “The ability of firms to shape industry structure places a particular burden on industry leaders. Leaders’ actions can have a disproportionate impact on structure, because of their size and influence over buyers, suppliers, and other competitors. At the same time, leaders’ large market shares guarantee that anything that changes overall industry structure will affect them as well. A leader, then, must constantly balance its own competitive position against the health of the industry as a whole. Often leaders are better off” taking actions to improve or protect industry structure rather than seeking greater competitive advantage for themselves.”

3- “The second central question in competitive strategy is a firm’s relative position within its industry. Positioning determines whether a firm’s profitabihty is above or below the industry average. A firm that can position itself well may earn high rates of return even though industry structure is unfavorable and the average profitability of the industry is therefore modest. The fundamental basis of above-average performance in the long run is sustainable competitive advantage. ^ Though a firm can have a myriad of strengths and weaknesses vis-a-vis its competitors, there are two basic types of competitive advantage a firm can possess: low cost or diff’erentiation. The significance of any strength or weakness a firm possesses is ultimately a function of its impact on relative cost or diff’erentiation. Cost advantage and differentiation in turn stem from industry structure. They result from a firm’s ability to cope with the five forces better than its rivals. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them lead to three generic strategies for achieving above-average performance in an industry: cost leadership, diff’erentiation, and focus. The focus strategy has two variants, cost focus and differentiation focus.”

4- “The ability to be both low cost and differentiated is a function of being the only firm with the new innovation, however. Once competitors also introduce the innovation, the firm is again in the position of having to make a tradeoff.”

5- “Linkages among value activities arise from a number of generic causes, among them the following: The same function can be performed in different ways…The cost or performance of direct activities is improved by greater efforts in indirect activities…Activities performed inside a firm reduce the need to demonstrate, explain, or service a product in the field…Quality assurance functions can be performed in different ways.”

6- “Exploiting linkages usually requires information or information flows that allow optimization or coordination to take place. Thus, information systems are often vital to gaining competitive advantages from linkages.”

7- “Cost dynamics occur because of the interplay of cost drivers over time, as a firm grows or as industry conditions change. The most common sources of cost dynamics include: Industry Real Growth…Differential Scale Sensitivity…Different Learning Rates…Differential Technological Change…Relative Inflation of Costs…Aging…Market Adjustment.”

8- “Steps in Strategic Cost Analysis…1. Identify the appropriate value chain and assign costs and assets to it. 2. Diagnose the cost drivers of each value activity and how they interact. 3 Identify competitor value chains, and determine the relative cost of competitors and the sources of cost differences. 4. Develop a strategy to lower relative cost position through controlling cost drivers or re-configuring the value chain and/ or downstream value. 5. Ensure that cost reduction efforts do not erode differentiation, or make a conscious choice to do so. 6. Test the cost reduction strategy for sustainability.”

9- “Steps in Differentiation…I. Determine who the real buyer is…2. Identify the buyer’s value chain and the firm’s impact on it…3. Determine ranked buyer purchasing criteria…4. Assess the existing and potential sources of uniqueness in a firm’s value chain…5.Identify the cost of existing and potential sources of differentiation…6.Choose the configuration of value activities that creates the most valuable differentiation for the buyer relative to cost of differentiating…7.Test the chosen differentiation strategy for sustainability…8.Reduce cost in activities that do not affect the chosen forms of differentiation.”

10- “Technological change is not important for its own sake, but is important if it affects competitive advantage and industry structure. Not all technological change is strategically beneficial; it may worsen a firm’s competitive position and industry attractiveness. High technology does not guarantee profitability. Indeed, many high-technology industries are much less profitable than some “low-technology” industries due to their unfavorable structures.”

11- “Formulating Technological Strategy…1. Identify all the distinct technologies and subtechnologies in the value chain… 2.Identify potentially relevant technologies in other industries or under scientific development…3.Determine the likely path of change of key technologies…4.Determine which technologies and potential technological changes are most significant for competitive advantage and industry structure…5.Assess a firm’s relative capabilities in important technologies and the cost of making improvements.6.Select a technology strategy, encompassing all important technologies, that reinforces the firm’s overall competitive strategy.”

12- “Competitors are not all equally attractive or unattractive. A good competitor is one that can perform the beneficial functions described above without representing too severe a long-term threat. A good competitor is one that challenges the firm not to be complacent but is a competitor with which the firm can achieve a stable and profitable industry equilibrium without protracted warfare. Bad competitors, by and large, have the opposite characteristics. No competitor ever meets all of the tests of a good competitor. Competitors usually have some characteristics of a good competitor and some characteristics of a bad competitor. Some managers, as result, will assert that there is no such thing as a good competitor. This view ignores the essential point that some competitors are a lot better than others, and can have very different effects on a firm’s competitive position. In practice, a firm must understand where each of its competitors falls on the spectrum from good to bad and behave accordingly.”

13- “To segment an industry, then, four observable classes of segmentation variables are used either individually or in combination to capture differences among producers and buyers. In any given industry, a, any or all of these variables can define strategically relevant segments: Product variety. The discrete product varieties that are, or could be, produced. Buyer type. The types of end buyers that purchase, or could purchase, the industry’s products. Channel (immediate buyer). The alternative distribution channels employed or potentially employed to reach end buyers. Geographic buyer location. The geographic location of buyers defined by locality, region, country, or group of countries.”

14- “Industry Segmentation: 1) Identify the discrete product varieties, buyer types, channels, and geographic areas in the industry that have implications for structure or competitive advantage 2) Reduce the number of segmentation variables by applying the significance test 3) Identify the most meaningful discrete categories for each variable 4) Reduce the number of segmentation variables further collapsing correlated variables together 5) Plot two-dimensional segmentation matrices for pairs of variables and eliminate correlated variables and null segments 6) Combine these segmentation matrices into one or two industry segmentation matrices.”

15- “Sharing activities among business units is, then, a potential substitute for market share in any one business unit. A firm that can i share scale- or learning-sensitive activities among a number of business units may neutralize the cost advantage of a high market share firm competing with one business unit. Sharing is not exactly equivalent to increasing market share in one business unit, however, because a shared activity often involves greater complexity than an equivalent scale activity  serving one business unit. The complexity of a shared logistical system involving ten product varieties may increase geometrically cc compared to one that must handle only five. The added complexity becomes a cost of sharing.”

16- “Formulating Horizontal Strategy: 1. Identify all tangible interrelationships…2. Trace tangible interrelationships outside the boundaries of the firm… 3. Identify possible intangible interrelationships…4. Identify competitor interrelationships…5. Assess the importance of interrelationships to competitive advantage…6. Develop a coordinated horizontal strategy to achieve and enhance the most important interrelationships…7.Create horizontal organizational mechanisms to assure implementation.”

17- “While there are many non-Japanese firms that have achieved interrelationships, a number of characteristics of many, though not all, Japanese firms make them well positioned for exploiting interrelationships: -strong belief in overarching corporate themes -internal development of new businesses -a less rigid tradition of autonomy -more flexible incentives, less based on business unit results -willingness to centralize activities -greater tradition of committees and frequent personal contact among executives -intensive and continuing in-house training -corporatewide hiring and training”

18- “Complements are pervasive in industries. A firm must know what complementary products it depends on, and how they affect its competitive advantage and the structure of the industry as a whole. A firm must decide which complements it should produce itself, and how to package and price them. Bundling and unbundling of complements to package and price them. bundling and unbundling of complements is one of the ways in which fundamental industry restructuring takes place. The challenge is to make strategy towards complements an opportunity rather than a source of competitive advantage for competitors.”

19- “An industry scenario is an internally consistent view of an industry’s future structure. It is based on a set of plausible assumptions about the important uncertainties that might influence industry structure, carried through to the implications for creating and sustaining competitive advantage. An industry scenario is not a forecast but one possible future structure. A set of industry scenarios is carefully chosen to reflect the range of possible (and credible) future industry structures with important implications for competition. The entire set of scenarios, rather than the most likely one, is then used to design a competitive Strategy. The time period used in industry scenarios should reflect  the time horizon of the most important investment decisions.”

20- “The best way to deal with uncertainty is to make a conscious choice to follow one or more approaches, rather than a choice based on inertia or an implicit scenario. Weighing the factors involved in choosing 5 an approach described above requires a logic for each scenario that portrays the interdependencies between various aspects of industry structure. The most challenging part of dealing with uncertainty is to find creative ways to minimize the cost of preserving flexibility or hedging, and to maximize the advantages of betting correctly. Understanding the way in which each activity in the value chain can contribute to competitive advantage under the various scenarios may allow the firm to do so.”

21- “Conditions for Attacking a Leader: Successfully attacking a leader requires that a challenger meet threes basic conditions: 1. A sustainable competitive advantage…2. Proximity in other activities…3. Some impediment to leader retaliation.”

22- “Some important industry signals of leader vulnerability include: -discontinuous technological change -buyer changes -changing channels -shifting input costs or quality -gentlemen’s game…The following traits of industry leaders are signs of possible vulnerability: -struck in the middle -unhappy buyer -pioneer of current industry technology -very high profitability -history of regulatory problems -weak performer in the parent company portfolio.”

Regards,

Omar Halabieh

Competitive Advantage

On The Southwest Airlines Way

I recently finished reading The Southwest Airlines Way – Using the Power of Relationships to Achieve High Performance – by Jody Hoffer Gittell.

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

1- “How did this remarkable transformation occur? How did Southwest grow from an idiosyncratic Texas airline to an organization that managers all over the world are seeking to emulate? Efficiency…Quality…Controlled Growth Demand for Reliable Low-Fare Travel…Competitive Threats…Success Factors—Leadership, Culture, Strategy, and Coordination.”

2- “However, leadership is not confined to the CEO. Leadership is better understood as a process that can take place at any level of an organization.^ Indeed, leadership is needed in today’s organizations to motivate, support, and enable employees to work together in support of a set of shared goals.”

3- “In their classic book on organizations, James March and Herbert Simon’ describe the potentially disintegrative effects when employees in an organization pursue their owm functional goals without reference to the over-arching goals of the larger work process. Shared goals play an especially important role when different functions are involved in delivering the same service.”

4- “The three conditions that increase the need for relational coordination—reciprocal interdependence, uncertainty, and time constraints— are increasingly common in the service economy of today. As advanced economies have shifted from a manufacturing to a service focus, work settings that require relational coordination have become increasingly common. Many service operations are characterized by reciprocal interdependence, requiring iterative interactions among service providers rather than the sequential handoffs performed by workers on production lines. Many service operations also have high levels of uncertainty relative to manufacturing due to the difficulty of buffering service operations from the external environment and from differences in customers themselves. Finally, most service settings are highly time-constrained; they are designed to provide a service to customers, real time, simultaneous with the demand, without imposing excessive waiting times on customers.”

5- “Not every leader of a successful organization must be charismatic. What successful organizations do need from each of their leaders, however, is credibility— the ability to inspire trust; and caring—the ability to inspire a belief by employees that their leaders care deeply about their well-being.”

6- “Leadership is better understood as a process that can take place at any level of the organization.”^ Indeed, leadership at the front line can play a critical role in organizational success. Rather than undermining coordination among frontline employees, supervisors play a valuable role in strengthening coordination through day-to-day coaching and counseling.”

7- “Increasingly, jobs require not only functional expertise but also relational competence—the ability to interact with others to accomplish common goals. Indeed, people who perform jobs that require high levels of functional expertise also tend to need high levels of relational competence to integrate their work with the work of fellow employees. Organizations like Southwest Airlines that recognize the importance of relational competence, look diligently for employees who have it, then develop it to even higher levels through training, will have a distinct performance advantage over organizations that do not.”

8- “Organizations should proactively seek out conflicts rather than allowing them to fester. Then managers should bring the parties together to better understand each other’s perspective. If organizations do not identify and resolve cross-functional conflicts, those conflicts will weaken critical relationships of shared goals, shared knowledge, and mutual respect. When managers treat cross-functional conflict as an occasion for learning, they strengthen relationships between employees and boost performance of the work processes in which those employees are engaged.”

9- “The energy and learning that employees gain from building strong family and community ties can be brought into the workplace and leveraged to achieve stronger working relationships and better organizational performance. Organizations should therefore be vigilant to ensure that relationships at work do not overwhelm and undermine the family and community relationships that are needed to sustain strong working relationships.”

10- “Though information technology can be a facilitator, it is not expected to be an effective substitute. When a job is mediated largely through a computer or a telephone, an important element of social interaction is lost. The loss of social interaction weakens relationships, and weakens critical performance parameters. These limitations on the effective use of information technology exist because coordination is not simply about the transfer of information. Instead, coordination requires the construction of shared meaning in order to facilitate collective action. As we see at Southwest Airlines, boundary spanners can play this role, building relationships of shared goals, shared knowledge, and mutual respect across functional boundaries.”

11- “Traditional measurement systems are flawed because they orient employee attention toward functional rather than cross-functional outcomes and because they provide inadequate information for learning.’ To orient employees toward cross-functional outcomes and to provide more useful feedback about what to do, cross-functional performance measures should be used to supplement traditional functional measurement systems.”

12- “We have seen in this chapter the importance of flexible jobs for building strong relationships and high performance.”

13- “At Southwest Airlines, respectful relationships between company management and the unions chosen by frontline employees appear to set the tone for respectful relationships throughout the company.As Southwest’s leaders pointed out on several occasions, however, positive labor/management relations are not achieved once and for all. Rather they have to be reproduced every day.”

14- “Southwest’s partnership approach is radically different from the traditional approach to supplier relations. In the old model, organizations were independent parties who transacted with each other at arm’s-length through formal contracts, keeping information close to the chest. Cooperation occurred only within organizations, while careful arm’s-length negotiation with minimal information sharing was the normal mode for dealing with parties external to the organization.^ But when there is more uncertainty in the environment, there is much more that organizations can learn from one another. Because of the benefits of learning, both parties have more to gain than to lose from the sharing of information. Although there may be doubt and mistrust at the outset, “nee the cooperative exploration of ambiguity begins, the returns to the partners from further joint discoveries are so great that it pays to keep cooperating.” Ultimately, this ability to partner is an acquired skill like any other, and one with potentially significant effects on organizational success”.

Regards,

Omar Halabieh

The Southwest Airlines Way