Books Of 2016: Worth A Look – Forbes
In the dispiriting year that was 2016, some books, studies and articles helped delineate the issues or point the way forward.
Competing Against Luck (2016) by Clayton Christensen et al
Let’s start on a positive note and begin with a book that has been 20 years in the making: Competing Against Luck: The Story of Innovation and Customer Choice by Clayton M. Christensen, Karen Dillon, Taddy Hall and David S. Duncan. The book describes how firms should tackle innovation by defining the jobs to be done for customers.
The book offers a simple but powerful insight. “Customers don’t buy products or services; they pull them into their lives to make progress. We call this progress the ‘job’ they are trying to get done, and in our metaphor we say that customers “hire” products or services to solve these jobs.” The book defines a ‘job’ as the progress that a person is trying to make in a particular circumstance. This definition is key to understanding why they make the choices they make. The choice of the word “progress” is deliberate.
The book explains how to put them into practice for instance through “understanding the customer’s story.” It is less explicit on how the approach is to be reconciled with two gigantic blockages on the business scene to the approach. One is the business reality that most firms are still generally focused less on innovation and more on maximizing shareholder value. The other is that, as Gary Hamel points out, the management in most big firms is still very bureaucratic—the opposite of what the book talking about. To understand or deal with these issues we need to go elsewhere.
The Shift Index 2016 by Deloitte’s Center for the Edge
One place to start is to get a take on the size of the problem in The Shift Index 2016—the continuation of this magisterial study of U.S. business by Deloitte’s Center for the Edge. It shows the massive, deep-seated and long-standing decline of U.S. public companies from 1965 to 2015. The rates of return on assets are barely more than a quarter of what they were in 1965.
Paradoxically, although we live in a time of unprecedented new technological possibilities, and worker productivity continues to increase, firms find it difficult to take advantage of these possibilities. The performance of both the top quartile of firms and the bottom quartile continues to decline, but the bottom quartile is very much worse. The “topple rate” of leading firms continues to accelerate. I discussed the implications of the study here.
Makers and Takers (2016)
Another set of insights come from Makers and Takers: The Rise of Finance and the Fall of American Business (2016) in which Rana Foroohar explains how the misguided financial practices and philosophies that nearly toppled the global financial system have come to infiltrate most American businesses. The book explains the “financialization of America” –- the trend by which finance and its way of thinking have come to reign supreme. It is perpetuating Wall Street’s reign over Main Street, widening the gap between rich and poor. Wall Street costs the economy 2% of GDP each year.
While policy makers are focused on regulating “Too Big To Fail” banks, the wider problems in the market system go unattended. Only about 15 % of all the money in the market system actually ends up in the real economy – the rest stays within the closed loop of finance itself. The financial sector takes a quarter of all corporate profits while creating only 4 % of American jobs. Our biggest and most profitable corporations are investing more money in stock buybacks than in research and innovation. The book clearly delineates the problem, but is less clear on what should be done about it.
If You’re in a Dogfight, Become a Cat! (January 2017)
In If You’re in a Dogfight, Become a Cat!: Strategies for Long-Term Growth (January 2017), Leonard Sherman, adjunct professor of marketing and management at the Columbia Business School, takes an even closer look at the pervasive idea in U.S. business that the purpose of a firm is to maximize shareholder value as reflected in the current stock price. Sherman shows in detail where this disastrous idea—“the dumbest idea in the world” according to Jack Welch—comes from and why it is so harmful. It also suggests what a substantive strategy of innovation would look like.
Embracing Agile (HBR, April 2016)
As to what to do about bureaucracy, Harvard Business Review gave us a clue with its landmark article in April 2016, “Embracing Agile.” Darrell K. Rigby, Jeff Sutherland and Hirotaka Takeuchi.
“Now agile methodologies—which involve new values, principles, practices, and benefits and are a radical alternative to command-and-control-style management—are spreading across a broad range of industries and functions and even into the C-suite.”
Executives claim that their companies are becoming more and more nimble. But “they don’t really understand the approach. Consequently, they unwittingly continue to manage in ways that run counter to agile principles and practices, undermining the effectiveness of agile teams in units that report to them.”
I discussed this important article here.
The Entrepreneurial Organization At Scale
While there is much talk of about what firms could be doing, or should be doing to operate entrepreneurially, the findings of the site visits by the SD Learning Consortium shows how some large organizations that are implementing Agile and operating entrepreneurially at scale, including Barclays, Cerner, C.H.Robinson, Ericsson, Microsoft, Riot Games and Spotify. The report of the SDLC is available here.
Atlas Shrugged (1957) by Ayn Rand
The novel, Atlas Shrugged, is an oldie and not exactly a goodie, but it is important reading for a world in which a number of members of the incoming U.S. government have proclaimed themselves to be devotees of Ayn Rand’s philosophy and now have a chance to put her philosophy into practice. Rand’s novel, Atlas Shrugged, is about a group of business leaders who are organizing a strike of the business leaders hasten the collapse of bureaucratic society.
Society, said Rand, comprises makers and takers. The makers were the great businessmen and the takers were parasitic moochers who get in the way of the morally-superior business leaders. “Man exists for his own sake,” wrote Rand, “that the pursuit of his own happiness is his highest moral purpose.”
- President-elect Donald Trump is a fan of Rand and admires Howard Roark, the main character in “The Fountainhead.” Roark is an architect who dynamites a housing project he designed because the builders did not precisely follow his blueprints. “That book relates to … everything,” Trump told Kirsten Powers in USA Today.
- The nominee to be Secretary of State, ExxonMobil chief executive Rex Tillerson has listed Atlas Shrugged, as his favorite book in a 2008 feature for Scouting Magazine, according to biographer Steve Coll.
- The nominee for Secretary of Labor, CEO Andy Puzderis is not just a fan of Rand’s books. The parent company of his business, Roark Capital Group, is even named after the hero of The Fountainhead, Howard Roark.
- The nominee to be Director the Central Intelligence Agency, Mike Pompeo, has said that his views on public policy flow from reading Rand’s novel, The Fountainhead.
At 1188 pages, Atlas Shrugged is a long slog. For those who don’t have the endurance to make it all the way through it, there is a helpful “Cliff-Notes” version by Adam Lee here and also summarized here.
In both The Fountainhead and Atlas Shrugged, the novels end amid ruins. If you want to understand why, you might read Rand’s essays, In Defense of Selfishness: Why the Code of Self-Sacrifice is Unjust and Destructive, which offers a moral defense of “the world’s dumbest idea.”
The Confidence Game (2016)
If you are trying to understand why U.S. politics ended up where it did in late 2016, a good starting place is The Confidence Game: Why We Fall for It . . . Every Time (2016) in which Maria Konnikova shows how confidence artists have it easy. “We’ve done most of the work for them; we want to believe in what they’re telling us. Their genius lies in figuring out what, precisely, it is we want, and how they can present themselves as the perfect vehicle for delivering on that desire.”
And read also:
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Disclosure: I am an unpaid pro bono adviser and director of the SD Learning Consortium.