Essential MBA Reading III: Built to Last

Another title that should be on the reading list of anyone who want to lead a company is Built to Last by Jim Collins. BTL looks at 18 'visionary' companies defined by Collins as those in existence for over 50 years with a long track record of success. By comparing the inner workings and histories of these companies against a selected comparable company, Collins divines certain themes that consistently helped the visionary companies outperform their comparable.
The main drawback of the book is constant repetition of messages. The main messages of the book could have summarized on two pages. If we wanted a good discussion of each point, the book could have taken 50 pages. Instead we get about 250 pages including the epilogue, but excluding the appendices. The extra 200 pages is filled with example after example that reiterates the same messages. That isn't to say that the messages are not important. Always remember:

• Clock building, not time telling;
• No "Tyranny of the OR"
• Preserve the core/Stimulate Progress
• Seek constant alignment
  

More MBA Reading - The Goal

Over the break I was able to only read one of my two books, so the other one will have to sit on the shelf for at least three months because a new quarter has begun and I have a big bunch of reading. This quarter has a few non-textbooks on the reading list. The first of which, The Goal, I was able to plow through pretty quickly.

The Goal is a textbook in the form of a novel designed to teach the operational management theory of constraints. Essentially, it revolves around a manufacturing factory using the newest technology yet hemorrhaging money. At its time (and to a certain extent even today), The Goal really turns our first instincts on how to run a plant on its head and shows how the instincts can hurt us.

The novel is really a pretty easy read although the author, Eliyahu Goldratt, is not much of a novelist. He does do a great job of simplifying the theory through the everyday examples contained in the book. The theory is remarkably simple, but seems so counterintuitive at times. I found it hard to put the book down as I wanted to continue reading to learn the whole theory.

If you have to act in or converse with a production environment, I highly recommend this book. It really clarifies important concepts like throughput, inventory, and bottlenecks so that you can talk the language and help identify the issues with a production process.

What I am Reading Over the Spring Break

The first book I took on over spring break is Moneyball by Michael Lewis. At first blush Moneyball is about baseball, but it has much broader business lessons. Moneyball is a engrossing tale about the 2002 Oakland Athletics. The books premise is to experience a year in the life of a team that is consistently accomplishing as much in Major League Baseball as teams with 3x the payroll. What it delivers is a lesson of how an organization can use detailed metrics to find opportunities that its competitors overlook from either ignorance or arrogance.

Moneyball is incredibly well written. It communicates the statistics in terms that anyone can understand and paints the issues in very human terms. Oakland has subscribed to the theory originated from a group of statistically inclined fans that the most baseball experts rely on biased stats and overlook the unbiased ones to form their judgments about baseball (On base percentage matters alot more that batting average). Also, if you do the analysis strategies that we think work in baseball, such as sacrifice but or fly, actually are harmful; you should just play to get on base every time. What is amazing is that these objective conclusions are contrary to everything our gut and what the experienced players believe is true about baseball.

In my opinion, the message of the book is that if baseball, with all of the rich statistical data available, is full of misconceptions about what works and who is valuable, then how flawed are our perceptions in our everyday lives. If baseball execs cannot truly value players with all of that information about their performance, how can we value our employees with less perfect information. The premise is frightening, yet ripe with opportunity for those who are willing to commit to tracking objective performance data and perform proper analysis.

Great book! Great read! Great study in performance analysis!

What am I reading over Christmas break? Part II

As I may have mentioned, I purchased two business-related books that I planned to read over the Christmas break. The second of these books is Crossing the Chasm by Geoffrey Moore. This book is the must have books for new technology ventures (and for those who experience some success, but suddenly found new sales coming in very slowly).
In the past, I have read parts of this book, but never read the whole thing cover to cover. After finishing reading it, I want to kick myself. Numerous companies that I worked with back in London were hitting the chasm and did not recognize it or know what to do. I even remember mentioning to an owner of an extremely successful London company that they hit the chasm and should read this book, but I never took the initiative to read it then (in my defense, I was in the process of learning a completely new software and networking environment).
For those of you that are saying, "'Chasm' what are you talking about, Speirs?": when a new company is formed and offers a new, innovative piece of technology that would solve or improve some problem, they often work hard over a year or two to get that first sale. They may even get a second or more sales depending on the market and product. They all pop out champagne believing that they are soon going to dominate the market, but something happens. The next sales are very difficult. They are confused because they have some satisfied customer references, yet they do not move these new prospects. It is at this moment that they have arrived at the Chasm.
Across the Chasm are these new prospects who are not impressed by the current batch of customer references or the current marketing approaches. To be clear, these new prospects are the holy grail; they represent the path to solid profitability for the company. Many companies die at the Chasm because to cross it requires some radical changes about how the company operates. Crossing the Chasm gives these companies a step-by-step playbook on how to attack the Chasm. Must have for all tech entrepreneurs.

What am I reading over Christmas break?

There is a lot of free time over the Christmas break with the quarter system. Preparing for this, I pro-actively ordered two MBA related books before the end of the class. I just finished reading The Innovator's Dilemma by Clayton Christensen. The book addresses how even well-managed companies can not seize opportunities presented by disruptive technology.
Disruptive technology is improvements to current technology that are not sufficient for the current market, but could create a new (although less profitable) market. Established companies often ignore disruptive technology because their customers do not want it, the new markets are too small, and the margins are smaller than they currently experience. The problem is if the disruptive technology's capabilities improve at a greater rate than the demand of the established customers, at some point the disruptive technology will be adopted by those customers and the established firm will lose market share.
An example is Flash drives. When invented, the capacity of flash drives could not service the laptop industry, but they were ideal for iPods. As flash technology improves, it may develop the size and cost capabilities demanded by the laptop industry. Then, the flash drives will overtake the current 2.5" drives because flash is much more stable. Disruptive technology is not limited to hi-tech - discount retailing was a disruptive technology for the department stores. When first introduced, department stores wanted nothing to do with the low margins of discount retailing. The problem is that as the ability of the discount retailer to offer better discounts and move into higher quality goods, they are now supplanting the department stores from their traditional market as we can now go to Walmart to get a good blender.
This book is a classic and I highly recommend it to anyone interested in business. While there are the occasional detailed analysis, the book is written is a very easy-to-read style.