Episode #59 - Best Business Books

Ron's Books

The Future of Management, Gary Hamel (2007) 

Your company is being managed by a small coterie of long-departed theorists who invented the rules and conventions of ‘modern’ management back in the early days of the 20th century. Management is out of date. Like the combustion engine, it’s a technology that has largely stopped evolving, and that’s not good.
Your company has 21st-century, Internet-enabled business processes, mid-20th century management processes, all built atop 19th-century management principles.

Types of innovation:

  • Management Innovation
  • Strategic Innovation
  • Product/Service Innovation
  • Operational Innovation 

Management Ideas 1900—2000 (most born after Civil War!)

  • Scientific management
  • Cost accounting and variance analysis
  • The commercial research laboratory
  • ROI analysis and capital budgeting
  • Brand management
  • Large-scale project management
  • Divisionalization
  • Leadership development
  • Industry consortia
  • Radical decentralization (self-organization)
  • Formalized strategic analysis
  • Employee-driven problem solving

Made organizations more efficient, not more ethical

Our organizations are less human than the people in them—people are amazingly adaptable and creative, our organizations are not.

Put efficiency ahead of every goal, since most management was invented to solve the problem of inefficiency.

1917 Henri Fayol, early management theorist, described the work of management as, "Planning, organizing, commanding, coordinating, and controlling." Sounds familiar, no?

From Hamel again, “Today the most valuable human capabilities are precisely those that are the least manageable. While the tools of management can compel people to be obedient and diligent, they can’t make them creative and committed.”

Management Innovation is defined as anything that substantially alters the way in which the work of management is carried out, or significantly modifies organizational forms, and, by so doing, advances organizational goals.

Management Innovation yields a competitive advantage if:

  1. Is a novel management principal, challenges long-standing orthodoxy
  2. Is systemic, encompassing a range of processes and methods
  3. Is part of an ongoing program of rapid-fire invention where progress compounds over time

Most managers find it easier to acknowledge the merits of a disruptive business model than to abandon the core tenets of their bedrock management beliefs. "What management practice or behavior does most to drive really great people out of our company? Or, which of our management practices does the most to destroy employee initiative?"

Examples of Management Innovations

  • Results Only Work Environment
  • Prediction markets
  • Internet, all periphery and no center
  • Knowledge Worker
  • Strategic Pricing (C-Suite)
  • Our Firm of the Future (not just a business model change!!) It’s an End, not just a means. It’s a Management Innovation as well:
    • Intellectual Capital leverage, not time leverage
    • Effectiveness over efficiency, efficaciousness
    • Value Pricing, not hourly billing
    • No timesheets
    • After Action Reviews

Positive deviants (management mutants), examples of companies that innovate management itself

  • Toyota (USA automakers thought it was  their paternalistic culture; then Toyota opened plants in USA and got same results)
  • Whole Foods
  • GoreTex
  • Google
  • Semco
  • Morningstar
  • Linux
The real reason it takes a crisis to provoke big change:  too much authority has been vested in too few people.

A Class with Drucker: The Lost Lessons of the World’s Greatest Management Teacher, William A. Cohen, PhD, 2008

William Cohen was Drucker’s first Graduate PhD Student (1975-1979), Claremont Graduate University.

Drucker called himself a social ecologist in that he believed the human condition could be advanced by more effective management and more ethical leadership.

Some of Drucker’s Lessons

What everybody knows is frequently wrong. For example, the demise of Tylenol (Johnson & Johnson) was predicted, but failed to occur.

If you keep doing what worked in the past you’re going to fail. Organizations  should make revolutionary change itself, even though it means obsolescing products of its current and past success

GE’s Jack Welch, CEO 1981 $12B value. 25x that when he left

            Drucker’s two questions:

1.    If you weren’t already in the business, would you enter it today?

2.    What are you going to do about it?

Approach problems with your ignorance—not your experience.

Ignorance is the most important component for helping others to solve any problem in any industry.

Henry Kaiser’s Liberty Ships, built 1500 in 2/3 the time and ¼ cost! He knew nothing about ship building.

Develop expertise outside your field to be an effective manager.

Outstanding performance is inconsistent with fear of failure.

The objective of marketing is to make selling unnecessary. Selling and marketing are neither synonymous nor complementary. One could consider them adversarial in some cases. There is no doubt that if marketing were done perfectly, selling, in the actual sense of the word, would be unnecessary. Marketing is not a business function, like manufacturing, because it permeated every aspect of the business. 

You can’t predict the future, but you can create it.

A Model organization that Drucker Greatly admired. The Army trains and develops more leaders, with a lower casualty rate. George Patton: “A pint of sweat in training is worth a gallon of blood in combat." Training is Army’s most important investments, not an expense.

How to motivate the knowledge worker

  • Theory X/Y not the answer
  • There is a responsible manager in authority
  • Workers are led, not managed
  • Workplace is participatory, but not “free-wheeling”
  • Workers are not motivated by money alone
  • Each worker is motivated differently, according to the   individual and the situation
  • Workers can leave = volunteers, treated with respect
  • Volunteers don’t need contracts, they need covenants

Drucker’s principles of self-development

Not up to others after we leave home/school—up to ourselves!

  • Reading
  • Writing
  • Listening
  • Teaching

Ed’s Books

A Failure of Nerve, Edward H. Friedman

Ed opened by quoting from the Preface of Friedman's book, here is blog post about the quote. TCMOOTITATIWWWPWAUTC

In short, Friedman's belief is that leaders do not need to be empathetic, but self differentiated and compassionate. They need to be step down transformers who seek to lower the level of anxiety around them, by simply self regulating their own anxiety. 

As an example of this, Ed cited the work of Captain Chesley Sullenberger of the ill fated, but not deadly, Flight 1549. When asked by Katie Couric if as any point he prayed, he replied, “I would imagine somebody in back was taking care of that for me while I was flying the airplane.”

Friedman also points out that data in business is like alcohol or other additive drug. It can be used in moderation, but many leaders are ensnared in its addictive properties and become dependent on it.

Wealth and Poverty, George Gilder (1981 Edition)

In addition to changing the lives of both Ron and Ed, this book influenced Ronald Reagan to implement supply-side economics during his first administration. 

Ed made two basic points about the book. First, that Keynesians, according to Gilder, have "hopelessly and irrevocably" confused cause and effect. Their mantra on demand causing supply is akin to saying demand or need and it will be given unto you.

Second, supply side economics is not about "trickle down." This notion was used to spurn the ideas of the book by its opponents, but in truth, Gilder makes a completely different point. He is saying that in order to receive one must first give, create or give and it will be given unto you

In other words if you want a meal/car/house, you don't go about demanding a house, you first give, in most cases to your employer who in turn trades money for your talent. You then can use that money to buy a meal/car/house. 

Note: there has been an update to this book, in 2012, but Ed was discussing the 1981 edition.