I said in my last post that I believe we need to come together as communities of critical consumers of what we are being told by management gurus, business schools, book publishers and popular business journals. The responsibility to consume critically is ours. What I mean by consuming critically is that we need constantly to be asking questions.

In Search Of Excellence

This is how Tom Peters summarises In Search of Excellence, the book he co-authored with Robert Waterman:

“You could boil all of Search down to one idea: Soft is hard. Up until then, everybody assumed that hard was hard. “Hard” numbers told you everything that you needed to know about dealing with hard assets, such as factories, machinery, and buildings. But Search said that everything soft is hard. People, customers, and relationships — they make up all of the soft stuff that determines what really gets accomplished and how well it gets done. It turned out to be a revolutionary message.”

The claim that they ‘faked the data‘ (which Peters denies) has not diminished the book’s popularity and despite the well-documented poor performance of some of their ‘excellent’ companies after it was published, there is ample research to support what Peters and Waterman said.

Another more recently popular book in a similar vein is Jim Collins Built To Last: Successful Habits Of Visionary Companies. Steven Wheeler from the University of Southern California’s Centre for Effective Organisation, participating in a roundtable discussion on the life cycle of great business ideas, says that:

“if you had taken the 18 companies that were profiled in the book and invested in each of them over the next 10 year, you would have got about a 150 percent return. That is not too bad – until you compare it with an S&P 500 index fund, which would have given you a 250 percent return. And if you had the foresight to pick up a copy of Fortune’s 100 Best Companies to Work For each year, you would have gotten a 600 percent return.”

Wheeler goes on to comment that one way to build a successful business is to create an environment where people enjoy their jobs and are eager to work. All so far so good, and consistent with Peters and Waterman.

When Good Companies Go Bad

In the FastCompany article linked to above, Peters dodges the question of why some of the excellent companies subsequently performed so poorly. He says such criticism is ‘missing the point’. I have read the Fastcompany article back to front and I cannot see how it is missing the point. What accounted for the poor performance, especially if the companies cited conformed with Peters and Waterman’s eight indicators? Whether or not this is a good question, it is one I want to ask.

Jim Collins is back with another book, How The Mighty Fall: And Why Some Companies Never Give In. I have not yet read it but from the product description on Amazon, the first stage of decline is hubris born of success, taking businesses outside of their core.

This article from the FT concludes that:

“Organisations fail not because they stray from their core, but because they stick to it too closely as circumstances shift … the idea that focusing on the core is the best defence against failure is too simplistic for these complex and turbulent times.”

Now we are getting somewhere. Decline is associated with inability to sense and respond to changes in the external environment. Path dependency strongly commits businesses to past decisions. “Sticking to the knitting”, one of Peters and Waterman’s eight indicators of excellence, as an exhortation to concentrate on core products and services might need clarifying and expanding on?

Again from the FT:

“GM executives were so focused on cross-town rivals that they underestimated the threat posed by Japanese carmakers … once a trajectory is set, subsequent commitments reinforce the status quo. These can be bet-the-company decisions or incremental steps refining current technology”

Peters is obviously well aware of this. He says, again in the FastCompany article:

“The CEO of General Motors announced that GM wasn’t in the business of making cars, it was in the business of making money. (This came as a shock to most of GM’s customers, who were in the market to buy a car – or even a better way of life – not to spend money.) That may account for the rise of Japanese automakers, who most certainly were in the business of making cars … that customers would definitely want to buy.”

The trajectory set by GM, of which Peters was so disapproving, has culminated in General Motors filing this afternoon for bankruptcy protection.

I want to finish with another question. What is it about Peter Drucker that makes him such a baddie in Tom Peters eyes? That’s me got more reading and probing to do