Monday, June 20, 2005

Haloscan commenting and trackback have been added to this blog.

Execution, by Bossidy and Charan

Execution: The discipline of getting things done
by Larry Bossidy and Ram Charan

One of the most intriguing elements of this book was the basic concept. Is execution really a major element in corporate success or failure? Why Smart Executives Fail suggests that it is not, arguing that execution expertise can be quickly purchased (p 5). One answer to this difference of opinion may be the nature of the businesses studied. Why Smart Executives Fail studied instances in which successful companies failed, while Bossidy and Charan tell us that good execution must occur to achieve any success. In other words, most or all of the companies studied in Why Smart Executives Fail probably had a record of successful execution prior to their collapse. Johnson & Johnson’s stent business is a prime example of these divergent viewpoints, and Finklestein wins this argument through his (apparently) more wide-ranging and in-depth research. Despite this, many of the recommendations in the two books are very similar, for example, Bossidy and Charan say, “Insist on realism,” (p 57) and Finklestein gives “They ruthlessly eliminate anyone who isn’t 100 percent behind them” as Bad Habit #4 (p 226).

Bossidy and Charan present their ideas well, and give a good theoretical framework for successful execution. Their advice on how to integrate the people process with strategy and operations is particularly valuable, and they follow their own advice by breaking down their theory into operable steps. Their evidence in support of execution as a competitive advantage is thin, however, resting largely on personal experience. Other examples are much weakened by anonymity. In the end, Bossidy and Charan are not convincing in their argument that “Most often today the difference between a company and its competitor is the ability to execute.” (p 5) While a fundamental level of execution is clearly necessary for success, in most cases it is not sufficient; other elements of strategy play a large role.

Tags: , ,

Tuesday, June 14, 2005

Predictable Surprises, by Bazerman and Watkins

Predictable Surprises: The Disasters You Should Have Seen Coming and How to Prevent Them
by Max H. Bazerman and Michael D. Watkins

A major shortcoming of Bazerman and Watkins’ book is the failure to provide adequate evidence to support their arguments about what they call “predictable surprises”, which they define as “an event or series of events that take an individual or group by surprise, despite prior awareness of all of the information necessary to anticipate the events and their consequences.” Bazerman and Watkins build their case substantially on just two examples: aviation security failures leading to the terrorist attacks of September 11, 2001 and auditor independence concerns leading to the collapse of Enron and Arthur Anderson. Several other examples are discussed in less depth throughout the text, however many of these are not actually predictable surprises under the definition provided. For example, global warming is discussed a number of times; however global warming has been in public discussion since the 1930s, and today a substantial majority of people believe not only the concept of global warming but that current warming is man-made. By 2050, this subject will have been under study for 120 years and popular consensus will have been achieved for 50-60 years. This is certainly predictable, but hardly a surprise. The United States’ looming crisis in entitlement spending also falls in this category.

Flaws exist in other anecdotal support as well. For example, Bazerman and Watkins cite aviation security failures as an occasion when overly discounting the future lead to a predictable surprise. Quick calculation based on figures provided in the book show that, using equal discount rates for the expected future cost of security and the future cost of disaster, even with a disaster probability as high as 10% for any given year, the airlines would be ahead on a cost basis. The total destruction of both World Trade Center towers and the massive ensuing death toll was not reasonably foreseeable by the airline industry; based on the typical passenger plan carrying 78 people, this was the equivalent of an absurd 41 simultaneous aircraft disasters! Given the cost of implementation and the low probability of such a large disaster, even at a full cost of nearly $50 billion, the airlines’ decision to oppose security measures on a cost basis was reasonable. The full scope of this surprise was unlikely enough that it should not be termed “predictable.”

Despite some good analysis of reasons predictable surprises occur and ways to avoid them, this book is critically weakened by its lack of evidence. Bazerman and Watkins try to make it stand largely on just the aviation security and auditor independence failures; however these are insufficient evidence for their broad analysis and conclusions, particularly given the weakness of those arguments provided. This book would be substantially more persuasive with more anecdotal support.