investiledysfunction

My favorite business book ever is called The Halo Effect.  The description on Amazon reads “This tart takedown of fashionable management theories is a refreshing antidote to the glut of simplistic books about achieving high performance.  Consultants, journalists and other pundits tap scientifically suspect methods to produce what he calls ‘business delusions’: deeply flawed and widely held assumptions tainted by the ‘halo effect,’ or the need to attribute sweeping positive qualities to any company that has achieved success.”

In essence, business and the management of business is not a science so despite the well-crafted storytelling of the pundits, most business books are just good stories built on dubious assertions and data.  Click here to learn more about the book.

And so it was nice to read Elizabeth Spiers’ recent column in April 2008’s Fast Company entitled Library of the Living Dead: Embrace a Business Best Seller at Your Brain’s Peril.  (Note: Spiers is the founding editor of Gawker and Dealbreaker)  She writes “Contrary to what your parents and teachers told you, reading does not necessarily make you smarter…I’ll point you to the modern era’s second-worst literary promulgator of intelligence reduction: your local bookstore’s business section.”

She closes with a great paragraph which I’ve copied below so everyone can just take it in because it quite perfectly captures the problem that business books present.

“Business books let us amble zombielike through our careers, freeing us from responsibility for the quality of our own decision making. Better to delegate that responsibility to other people — Jack Welch, perhaps. It’s a fresh spin on the old saw that no one ever got fired for buying IBM: No one will ever get canned for leaning on something with a Ken Blanchard blurb on the front cover. The alternative, too frightening to contemplate, is to admit that problems are usually too complex to be reduced to one-size-fits-all solutions, to train ourselves to do our own analysis, and to be a little more skeptical when the shrieking man on TV tells us to buy shares of Google right this very minute. If we can’t do that, let’s at least reshelve business best sellers where they belong — in the self-help section.”

Couldn’t have said it better myself.

Fortune’s March 17 issue contains an excerpt from a book entitled The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation which is by P&G CEO, A.G. Lafley, and management consultant, Ram Charan, which has a couple of passages which are brilliont (nice, eh?). Before I share Lafley’s awesome insights, it is worth looking at P&G’s stock chart since he took over in 2001. So take a look at the chart below and notice the stocks dismal to pathetic performance until 2001 and then look at when Lafley took over. That is some chart, eh? So how did he do it?

Organic Growth

“We made sustainable organic growth the priority. Organic growth is less risky than acquired growth and more highly valued by investors…Adding a few points in market share can mean hundreds of millions in new revenue.”

Instead of chasing inorganic growth through M&A, Lafley astutely realized that optimizing their portfolio of internal investments in product development, marketing, etc could drive significant value in a much less risky. And the price chart shows the fruits of this effort. This really is one of the best examples I’ve seen of the power of organic growth and the fact that it works. Managing your investments as part of a corporate portfolio really drives performance.

On Innovation

“Long known for a preference to do everything in-house, we began to seek out innovation from any and all sources. Innovation is all about connection, so get everyone we can involved: P&Gers past and present, customers, suppliers, even competitors. The more connections, the more ideas; the more ideas, the more solutions. And because what gets measured gets managed, we established a goal of that half of new-product and technology innovations have some contribution from outside P&G - such as licensing or buying a technology, finding a partner, or making an acquisition. We are already beyond that figure, compared with 15% in 2000.”

I’m really beginning to like this Lafley guy. On the topic of innovation, he hits on so many key elements of innovation and the best part he actually did this in his organization - didn’t theorize or pontificate on it. Let’s dissect his most brilliont points.

• Set goals and measure it - Innovation doesn’t happen. And proclamations about innovation are just that - proclamations. You have to set goals and put them into people’s objectives and then make sure they are achieved. They did this.
• We’re not the smartest guys in the world - Innovation doesn’t happen because the top 10 people in the company think of an idea and go do it. There is no monopoly on ideas. And so opening up the organization and being receptive to ideas from everywhere is smart business.

I hope to meet Mr. Lafley at some point. In the meantime, I’ll settle for his book. For more info on the book, check out it’s Amazon listing by clicking here.