The one-sentence summary

Ignore charismatic leaders, complex strategies and the competition – if you want enduring success, concentrate on having a common sense of purpose.

WHAT THE BOOK SAYS

• It is the sequel to the 1994 classic about the successful habits of companies.
• It uses a 5-year research study to work out how companies can migrate from being merely good to being great. By the time the author had finished, he wondered whether it should in fact have been the prequel.
• Level 5 leaders build enduring greatness through a paradoxical blend of personal humility and professional will.
• Of particular note are the ‘dogs that didn’t bark’, factors that do not play a role in taking a company from good to great, including:

  ~ Larger than life celebrity leaders

  ~ High executive pay

  ~ Strategy (all companies claim to have one)

  ~ Technology (it can only accelerate change, not instigate it)

  ~ Mergers and acquisitions

  ~ Transformation programmes or themes

  ~ Sexy sectors or industries

WHAT’S GOOD ABOUT IT

• Although this book has taken on revered status, much of it remains helpful and relevant. You can try to apply the principles:

  ~ First who…then what. Get the right people on the bus, then decide where to drive it

  ~ Confront the brutal facts (yet never lose faith). Work out what you are good at, and do that. Work out what you are bad at, and don’t do that.

  ~ The hedgehog concept. The hedgehog does one thing well (curling into a ball) whilst the fox rushes around, creating the impression of speed

  ~ Culture of discipline. When you have one, you don’t need hierarchy

  ~ Technology accelerators. These are never the origin of greatness, merely enhancers of it

  ~ The flywheel and the doomloop. Moves to greatness all happen gradually – there is no miracle moment

WHAT YOU HAVE TO WATCH

• The evidence per company is highly detailed, so if you do not know the company (they are all American) or are not interested in it, then you have to wade through for the bits you want
• If you read The Halo Effect, you may think the whole study is rubbish

The one-sentence summary

A simultaneous blend of loose and tight properties is the perfect blend for running a successful business.

WHAT THE BOOK SAYS

There are eight basic principles of how to run a successful business and stay ahead of the competition. These are:

• A bias for action – get out there and try something
• Close to the customer – don’t be distracted by the internal stuff
• Autonomy and entrepreneurship – even if you’re big, act small
• Productivity through people – that’s all companies are made of
• Hands-on, value-driven – top companies make meaning, not just money
• Stick to the knitting – business diversity almost never works
• Simple form, lean staff – have a simple structure and outsource a lot
• Simultaneous loose-tight properties – a combination of centralised and decentralised gives the best blend

Communication works best when systems are informal, intensity is extraordinary, it is given physical supports, there are forcing devices, and it acts as a tight control system.

WHAT’S GOOD ABOUT IT

• There is a lot of material to work on. When they turned up the lights at Western Electric’s Hawthorne plant, productivity went up. It went up again when they turned them down. In many companies management is no more than an endless stream of Hawthorne effects.
• Chronic use of the military metaphor leads people repeatedly to overlook a different kind of organisation.
• The McKinsey 7-S Framework shows shared values surrounded by structure, systems, style, staff, skills and strategy.
• The exclusively analytical approach run wild leads to an abstract, heartless philosophy.
• Analysing a dead fish does not tell you everything about the live fish.
• Positive reinforcement nudges good things onto the agenda rather than off.
• Adhocracy is needed to offset bureaucracy (Alvin Toffler)
• Small groups are great chunking devices for getting things done.
• Do it, fix it, try it is the mantra of experimenting organisations:bootlegging
• We don’t kill ideas but we do deflect them

WHAT YOU HAVE TO WATCH

• At the very least people should be aware of what the book proposes
• The biggest criticism of it is that many of the featured companies have since disappeared. The authors’ response is that there weren’t writing Forever excellent and one can still be inspired by the good things
• The halo effect claims that books such as this are little more than story telling – if it were that easy to follow eight basic principles then all companies would have done so and been a roaring success – which clearly they have not.

In addition to this week’s book summary, here is my podcast overview of The Halo Effect by Phil Rosenzweig.

Download The Halo Effect by Phil Rosenzweig

The one-sentence summary

Beware of the wisdom offered by business gurus because it may be little more than false patter and naïve arguments that could mislead you.

WHAT THE BOOK SAYS

· Much of our business thinking is shaped by delusions – errors of logic and flawed judgements that distort our understanding of the real reasons behind a company’s performance

· These delusions affect the business press and academic research, as well as many bestselling books that promise to reveal the secrets of success or the path to greatness

· The most pervasive delusion is the Halo Effect. When a company’s sales and profits are up, people often conclude that it has a brilliant strategy, a visionary leader, capable employees, and a superb corporate culture

· When performance falters, they deduce the opposite but actually little may have changed. Other delusions are:

· Correlation and Causality: two things may be correlated but we may not know which causes which, or whether they are linked at all

· Single explanations: there are usually many reasons for something, not just one

· Connecting the winning dots: finding similar features in successful companies doesn’t help because they can’t be compared accurately with unsuccessful ones

· Rigorous research: if the data aren’t good, it doesn’t matter how much analysis is done – the conclusions will still be false

· Lasting success: is almost impossible to achieve – almost all high-performing companies regress over time, regardless of what they do

· Absolute performance: performance is relative, not absolute. A company can improve and fall behind its rivals at the same time

· Wrong end of the stick: successful companies may have highly-focused strategies, but that doesn’t mean such strategies guarantee success

· Organisational physics: performance doesn’t obey immutable laws of nature and cannot be predicted with the accuracy of science

WHAT’S GOOD ABOUT

· This is a hugely thought-provoking book that questions many pieces of received wisdom

· The analysis of In Search Of Excellence and Built To Last may force you to review your opinion of these two famous business books

WHAT YOU HAVE TO WATCH

· Nothing. It’s really worth reading.

The one-sentence summary

Ignore charismatic leaders, complex strategies and the competition – if you want enduring success, concentrate on having a common sense of purpose.

WHAT THE BOOK SAYS

• This is the 1994 classic about the successful habits of visionary companies.
• It uses a 6-year research study to examine companies from their conception, in some cases 100 years ago, to their current position, using a comparison company in each case along the way. All have outperformed the stock market by a factor of fifteen.
• There are twelve shattered myths about companies and leadership:

1. It takes a great idea to start a company
2. Visionary companies require great and charismatic visionary leaders
3. The most successful companies exist first and foremost to maximize profits
4. Visionary companies share a common subset of “correct” core values
5. The only constant is change
6. Blue-chip companies play it safe
7. Visionary companies are great places to work, for everyone
8. Highly successful companies make their best moves by brilliant and complex strategic planning
9. Companies should hire outside CEOs to stimulate fundamental change
10. The most successful companies focus primarily on beating the competition
11. You can’t have your cake and eat it too (the power of AND over OR)
12. Companies become visionary primarily through “vision statements”

• None of these are true and the examples explain why.

WHAT’S GOOD ABOUT IT

• Although this book has taken on revered status, much of it remains helpful and relevant.
• Given the authority and rigour of the study, it is perhaps surprising that so many companies still don’t pay attention to the findings
• If you are interested in providing a counterpoint to stodgy corporate approaches, you will probably find convincing evidence here from a respected source

WHAT YOU HAVE TO WATCH

• It is in some respects out of date given recent economic changes
• The evidence per company is highly detailed, so if you do not know the company (they are all American) or are not interested in it, then you have to wade through for the bits you want
• If you read The Halo Effect, you may think the whole study is rubbish