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May 1, 2013

Challenging Old Ideas

Beyond profit; embracing uncertainty; a formula for manufacturing

Grow

by Jim Stengel. Crown Business. 2011.

I was once in the audience for a presentation by a guy from Procter & Gamble’s (P&G) Pampers division. He was incredibility passionate about his subject so, as a mother who has changed her share of diapers, I asked how anyone could possibly be passionate about them. He asked me whether enabling a woman in rural China to sleep all night wasn’t worth it, whether finding a biodegradable solution to disposable diapers wasn’t worth it, whether getting dirty diapers out of a village’s communal water supply wasn’t worth it. His passion didn’t come from the smelly reality of diapers, but from the lifestyle improvements he could provide. 

That man was clearly a disciple of Jim Stengel, who wrote this book. And Stengel’s passion came from his discovery that companies with goals beyond simple profit can be the most successful. Companies, he found, that are bent on improving people’s lives grow more consistently and over a longer term than those focused only on profit. Stengel, the chief marketing officer of P&G from 2001 to 2008, all but stumbled across this insight as he helped reinvigorate what was then a somewhat floundering consumer products giant. Stengel had taken over a key management position at a company that was 164 years old and in danger of falling into complacency.

To help guide this drive from stagnation, he commissioned a research firm to study companies that were growing revenues and explain why. The results were not at all what he expected. 

“We again and again found that the world’s fastest-growing enterprises were organized around ideals of improving people’s lives and activated these ideas throughout their business ecosystems,” he writes. It didn’t matter what industry they were in or how big they were; as long as they were focused on those ideas, they grew and prospered. 

After he left P&G to start his own consulting company, he developed the Stengel 50, the 50 brands with extraordinary growth throughout the 2000s relative to their competition. He has maintained that list, and the study findings continue to be true. 

But, Stengel explains that the ideal of improving people’s lives has little to do with social responsibility or philanthropy. His version of improving lives has five main objectives: eliciting joy, enabling connection, inspiring exploration, evoking pride and impacting society.

Insisting on those higher goals and driving a commitment to them throughout an organization, Stengel says, creates passionate advocates in employees and customers, and gets better business results.

The book is hampered by some triteness and clichés (“sky’s the limit,” “one team, one dream”), and like too many executive-written books, suffers from an excess of first-person reminiscence. But, it’s a quick read with a worthwhile message that resonates across industries: “We’re in business to sell lots of stuff” just doesn’t galvanize people like “We make it possible for this person to live a better life.”

 

Producing Prosperity

by Gary P. Pisano and Willy C. Shih. Harvard Business Review Press Books. 2012.

Japan was once the United States’ most feared competitor. These days, it is struggling to emerge from stagnation in a “lost decade of zero economic growth.” That prompts these authors to ask, “Is America next?” The answer lies somewhere between a government-directed industrial policy and some concept of a totally free market that allows business to function at will. The ground they find between these economic opposites, and their prescription for rebuilding manufacturing and regaining our competitive edge, is surprising. The answer, these two Harvard professors say, is you.

“Government can create the right conditions,” they write, “but ultimately, management decisions will determine what happens.” The answer lies in rebuilding the “industrial commons,” the infrastructure of “R&D, know-how, process-development skills and engineering capabilities.” It’s not that we have off-shored jobs; it’s that we have exported capabilities. We need to rebuild manufacturing not with the low-skilled, blue-collar jobs of old, but with the high-tech, knowledge-based capabilities on which modern manufacturing increasingly relies. 

The authors are clearly more comfortable writing textbooks. There are a lot of checklists and priority orders here, a number of word-heavy charts that necessitate turning the book sideways. But these do break the problem down and make the solutions clear. At only a little under 200 pages, this book says everything that longer works on the subject say. 

Their argument gives business leaders no room for “the devil made me do it” excuses. They do not accept abdicating responsibility for a lack of imagination and growth to the need for a strong stock price or boosting next quarter’s results, to board opinion or competitive pressure. They say, in fact, that executive compensation needs to change in order to remove modern-day incentives that all but compel the drive for short-term results. They ask that executives realize their short-term decisions have long-term consequences that, in too many cases, have eroded the nation’s ability to support a healthy, innovative manufacturing sector. 

“This is not easy stuff,” they concede. “That’s why so few companies actually do it. But, that is precisely why it is so valuable. It [takes] great leadership.”

 

Antifragile: Things That Gain From Disorder 

by Nassim Nicholas Taleb. Random House. 2012.

Even if you haven’t read Taleb’s most famous books, The Black Swan and Fooled by Randomness, you’ve likely heard of them and know their basic premises. He has turned himself into the guru of uncertainty, describing in considerable detail how and why high-impact events are very often unpredictable. 

The premise of Taleb’s new book is interesting, but the writing is haughty, showing off a big brain and a bigger ego. The argument is solid, but he stretches it too far in an effort to coin another phenomenon like the black swan idea.

Antifragile is the opposite of fragile. Since there is no word for the exact opposite of that which is easily broken, Taleb invents one. His point is the old dictum: That which doesn’t kill you makes you stronger. In nature, things are made stronger by stress. In business and finance, if you lower interest rates at the first sign of economic trouble, you impose an artificial stability that will only fall apart later. In politics, the dictator quashes all dissent to create a false sense of security that results in eventual collapse—think Hosni Mubarak and Egypt. 

Volatility, he observes, can be useful information—the market has collapsed here, so you go somewhere else. In investment markets, options and futures can help you bet on uncertainty. 

So far, so good. But Taleb pushes into architecture, education and health care—there is apparently nothing that doesn’t benefit from pain. Uncertainty is better for us, he insists, and we should embrace it rather than looking for ways to counteract it.