InReview – Issue 68

book-andersonFree: The Future of a Radical Price by Chris Anderson. New York: Hyperion, 2009. xi, 274 pp.

Chris Anderson is the editor in chief of Wired magazine and the author of a best-selling book, The Long Tail. He was also the U.S. business editor for The Economist.

What would happen if an early prediction that electricity would be too cheap to meter, made at the time of the successful splitting of the atom, had come true? How would our economy look different? As a thought experiment, this would be a great exercise, though we know it did not happen.

But Anderson argues that another fundamental technology is rapidly approaching this point: bandwidth, processing power, and storage have dropped, and continue to drop, so significantly, that we might see the day when these are regarded as too cheap to meter. When products can be created digitally and can be distributed over the Net at virtually no cost, this changes the economics of many things.

It is not just computing that is impacted. Anything that can be put in digital form such as books, newspapers, and other media, also face very new economics. How do you run a business when the manufacturing process (digital copying) and the distribution process (over the Net) cost basically nothing?

It is this world that Anderson explores. He looks at why these things are true, and then looks at numerous business scenarios to see how they have been or might be transformed. How do you manage costs when a key resource is “free” is just one of the questions he explores. The usual process of saving and economizing is replaced by freely wasting that resource, as he urges us to do.

I was disappointed that he did little analysis on what went wrong with the dot-coms and the “new economy” from the 1990s. Because that era was proposing a version of Anderson’s free economy.

That said, however, this is a fascinating read. Even when you find yourself disagreeing with Anderson on his predictions, it is important to consider his arguments, because this is an area where almost every business must engage, at least at some level. Non-technology people in particular should engage in the ideas of this book because they are, by traditional standards, a radical departure from the old world. At least the questions he raises need to be considered.

Reviewed by Al Erisman

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How The Mighty Fall: And Why Some Companies Never Give In by Jim Collins. New York: Harper Collins, 2009. xiv, 222 pp.

Jim Collins founded a management research company in Boulder, Colorado. He is best known as author of Good to Great and co-author of Built to Last.

For three years, Collins and his team had been doing research on why some respected companies had failed, sometimes to the point of bankruptcy. This raised two important questions:

• Did this failure negate previous research on companies with a sustained level of greatness?
• What are the factors that went into the decline of the companies that failed and could this failure be avoided?

The team concluded that failure did not negate prior research. A company with a previous sustained level of greatness can go through personnel and market changes and can simply stop doing the things that led to success. This does not negate the things that led to success initially, and only underscores the importance of continuing the focus on doing these things.

The team identified five stages of decline that were consistent with failure. They are:

  1. Hubris born of success
  2. Undisciplined pursuit of more
  3. Denial of risk and peril
  4. Grasping for salvation
  5. Capitulation to irrelevance or death

They argue these stages come in order, and that the trend can be reversed even at the later stages.

As might be expected from Collins’ other writings, the book is well illustrated with real cases — companies that eventually died, and companies that went part way through the process and reversed the trend. The book is thoughtful, well argued, and is mirrored in the newspapers on a regular basis. It was written before some of the recent bank failures, so Washington Mutual is only mentioned in the preface as a company teetering on the edge. Yet it was easy to follow the steps and see the strength of the work, as Washington Mutual became the largest bank failure in U.S. history.

The weakness of the book, in my opinion, is that it purports a stronger scientific basis for its conclusions than is supported. How can you tell when a company is demonstrating a level of arrogance based on past successes, for example? A scientific foundation would require more than a quote from an executive, which is the type of evidence offered.

In spite of the weakness, however, this sobering book should be read by any business leader, consultant, or academic. It acts as a reminder of the dangers of resting on past successes, relentlessly following the dollar, ignoring or pretending warning signs don’t exist, or looking for a quick way out of a well developed hole.

Reviewed by Al Erisman

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Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System – and Themselves by Andrew Ross Sorkin. New York: Viking (Penguin Group). xx, 600 pp.

Andrew Ross Sorkin is mergers and acquisitions reporter and columnist for The New York Times. The World Economic Forum named him a young global leader.

In Too Big To Fail, Sorkin provides the account of what happened in the world economic crisis involving the key players including AIG, Goldman Sachs, Lehman Brothers, Bear Stearns, the federal government, etc. He chooses his starting point of July 2008, and 600 pages later the clock has advanced one year. Most of the events of the book take place between July and September 2008.

Through interviews and the work of a team, Sorkin gives dates, times, and people involved in meetings and phone conversations during the frantic period, recreating the dialogue of who said what to whom. By the end, you feel like you have gotten to know many of the prominent financial figures from New York and Washington. The frantic pace of the book matches what was going on as the reader is pulled from meeting to meeting, watching a world that was filled with greed, risk, and isolation. On one level, this is a fascinating account.

But I found a lot of weaknesses in the book as well. I will specifically identify a few of them. By focusing on the small geographic area in a crisis that reached across the world, it gave focus to the book, but also limited its scope. The largest bank failure in the United States coming from this period was Washington Mutual, based in Seattle, and its demise was given barely a footnote in the story. Bankers from Japan and England were brought into the story only as they related to New York banks.

Second, with recreated dialogue, it is very difficult to separate fact from fiction. The author may well have gained lots of insight from interviews, but the quotes throughout the book have to be considered suspect. A great story, but how close to reality I kept asking myself?

But the weakest, from my point of view, was when he tries to analyze why the failures occur. Several places in the book he summarizes his conclusions, and in each place he offers a different perspective on the role of the regulators, the legislators, the bank leaders, the mortgage companies, etc. I concluded that even he didn’t know for sure what he believed. Further, these events were rooted in policies and practices that went back much before all of this broke. A humorous explanation by British comedians John Bird and John Fortune was filmed in February 2008 offering more insight into the factors leading to the crisis.

In spite of these criticisms, this sobering walk through the events makes the news come alive in a remarkable way. It’s a long read, but I got many miles on the treadmill reading it, and I found it offered good insight into the social events of the period.

Reviewed by Al Erisman

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Checklist Manifesto

The Checklist Manifesto: How to Get Things Right by Atul Gawande. New York: Metropolitan Books, 2009. 209 pp.

Atul Gawande is a general and endocrine surgeon at the Brigham and Women’s Hospital in Boston, a staff writer for The New Yorker, an associate professor at Harvard Medical School, and leads the World Health Organization’s “Safe Surgery Saves Lives” program. He is author of two previous books Better and Complications.

The premise of the book is quite simple, starting with the area of surgery. As surgical teams come together in the operating room, they usually are made up with different participants (surgeon, nurses, anesthesiologists) and need to go through the surgery as a team without forgetting anything (particulars about the patient, the surgery, the equipment, and medicines needed).

Often, the surgery is conducted under less than ideal conditions (interruptions for the surgeon, emergency situations for the patient). How does all this get done well each time for each new team and each new patient, even on something that may have been done many times before? The unfortunate answer is that it doesn’t always get done well.

Gawande wanted to see if creating common checklists for the process could indeed save lives. The short answer is yes, often with startling results. The key is getting the right checklist: not too complicated so that it adds to the work, hitting on all of the vital steps; and adaptable to many situations.

The results of small experiments were extended around the world through the World Health Organization project Gawande led. This means that checklists are used everywhere in surgery? Unfortunately they are not widely used, in part because it is very difficult to get expert and arrogant surgeons to use them. Part of the reason for this is the surgeons believes they know what they are doing, and another part is because of the shift in the team dynamics, sometimes putting the nurses in position of authority on a surgery.

The book may sound simple, boring, and only applicable to surgery. It is none of these. Getting a checklist right is surprisingly difficult, and Gawande spends time showing some of his false starts in producing checklists that seemed good but could not work. Gawande is an excellent writer, and his stories and applications pull the reader through the book. He develops the comparison with the construction of large buildings, and draws on the construction management world for insight. He also suggests the application to other areas. I was constantly thought of business applications of his ideas as I read the book.

Don’t confuse the seemingly simple, straightforward, well-written books as something to breeze through. It is vastly deeper and more thoughtful than that. I highly recommend this book.

Reviewed by Al Erisman

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SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good

SuperCorp: How Vanguard Companies Create Innovation, Profits, Growth, and Social Good by Rosabeth Moss Kanter; New York: Crown Business, 2009. 322 pp.

Rosabeth Moss Kanter is the Ernest L. Arbuckle Professor at Harvard Business School, where she chairs the Harvard Advanced Leadership Initiative . She is the author of numerous books and articles, including several New York Times bestsellers. The London Times named Rosabeth one of the “50 most powerful women in the world.”

There are many people in the world who are giving up on business as a source of transformation and service. This outcome seems to be heightened by the recent financial crisis and growing public disillusionment that has resulted from yet another round of catastrophic ethical breaches in business. In this important book, and based on a three-year study of more than 350 key leaders at about 15 major companies around the world, Kanter challenges this idea. Rather than pessimism, the author contends that the best performing, most agile and innovative companies in the world will be the most progressive and socially responsible. In the author’s own words:

Vanguard companies are ahead of the pack and potentially the wave of the future. The best of the breed aspire to be big but human, efficient but innovative, global but concerned about local communities. The best have business prowess and clout with partners and governments but try to use their power and influence to develop solutions to problems the public cares about.

The book is structured in four parts: The first section deals with the pressing challenges of globalization (and anti-globalization sentiment) that are forcing a change in existing models of business. Vanguard companies — such as Banco Real, Digitas, IBM, Proctor & Gamble, Shinhan Financial Group [LINK ], and Nokia — are successful because they are learning how to respond to four powerful forces:

  1. Increasing uncertainty and volatility
  2. Growing complexity
  3. Need for greater work diversity
  4. Intensifying pressure for transparency and responsibility

The second and third parts deal with how Vanguard companies align values, strategic priorities, people, and societal needs to achieve business excellence. And in doing so, how this positively influences supply chains, communities and countries in which they operate. The final part looks to the future, addressing some of the challenges that loom and characteristics that will be needed for transformative leadership.

There are many things I appreciate about this book. Kanter chronicles interesting stories of diverse companies doing well while serving society. For example, in response to Hurricane Katrina in New Orleans and the surrounding region in 2005, IBM codified innovations for NGOs into a kind of “disaster relief in a box,” which featured an open-source disaster management software. The author also presents a convincing argument for how for-profit business can contribute to human flourishing. Vanguard companies and their leaders see business and technology as a powerful force for making the world a better place. And while addressing unmet social needs with technology, not “charity or hand-me-downs,” they strengthen their own processes of innovation.

There are other helpful insights, especially related to changes in present-day workplaces and changing motivations for work, as well as helpful examples of how Vanguard companies partner with other societal institutions, like NGOs, governments, educational institutions, and the like, to magnifying their impact in the world.

Unfortunately, I found the book to be a bit repetitive and cumbersome. I would only recommend it if you are highly interested in the topics examined and want to stay current with the author’s latest research. I wasn’t convinced that Kanter had truly broken new ground and differentiated her work from insights coming from other streams within business management and education, such as social responsible business, conscious capitalism, and corporate social responsibility movements.

Reviewed by John Terrill