Leadership & Business

The New Science of Management

We read about companies like Facebook, Google, and Amazon. Or SpaceX and Tesla. But for some reason, as businesses go, they don’t quite seem real. For most people, they’re very different from the companies they work for. After all, while Google offers free meals, your company may have done away with the 50-cent soda machine and now it’s charging a buck-seventy-five.

So how is it that these companies are able to create so much value that they seem to print money, and what can we learn from them? What shouldn't we learn from them? In my new series of books that I’m calling the “Connect the Dots Series,” I explore these questions and many others, with a focus on helping readers develop a better understanding of the complexities of today’s business environment.

In the first book, titled, What’s Good for the Goose Could Cook the Gander, I explore the real world of best practices and why there’s often as much, if not more, risk in adopting the best practices of others.

In a later book about the design of metrics, I explain how best practices and data can be dangerous. Like pharmaceutical drugs, when used properly, they can be of great value, but when used improperly, they offer decision makers a warm fuzzy feeling, making them feel confident and safe in the decisions they make.

Unfortunately, all too often, I see half-baked attempts to emulate the so-called best practices of others, or major decisions being made off of bad or incomplete data. The reasons are many; suffice it to say that with the mountains of data and constant bombardment of best practices, it’s easy to overdose without ever truly understanding what it is that we’re taking in in the first place.

In a book about collecting the dots, I'll explore where we actually get our best practices and our data. And what do we do with it all? I know you’re familiar with the term, “connect the dots.” This easy task often seems hard because so often we just don’t even have all the dots necessary to complete a picture.

By exploring these three topics and more, my hope is that readers will come to recognize that the old maxim, “keep it simple stupid” (or silly, as I tell my kids) is really quite stupid in its own right. Simple is nice, but that doesn’t mean simple is right. When our quest for simplicity turns into a denial of complexity, our simple solutions often lead to a complex web of ill-fated results. In the world of 2012, winners are not the ones who avoid complexity; winners are those who master it. I hope this new book series both sensitizes people to that fact while helping them along the road to mastery.

By mid-May, you’ll find the first book in the series available on Amazon.com.

How to Spot a One-trick Pony

I recently read extracts from a new book titled Good Strategy, Bad Strategy by Richard Rumelt of the UCLA Anderson School of Management. One of Rumelt’s contentions is that copying from other companies, especially business icons, can often lead to marginal results, if not ruinous mistakes.

My experience as a business advisor substantiates that conclusion. I have witnessed many organizations futilely attempting to copy business practices from iconic companies, simply because those companies are successful, but without critical examination of how those same business practices will work in their organizations. In more direct terms, they’re dazzled by success. 

Google is a case in point. But the question is: What can we really learn from Google’s success? Is it how to innovate? If you select innovation as a best practice to emulate, what specifically do you mean? Is it that Google developed the most-used search engine? Or Google Earth? Or any of its many other products and services? If so, how do any of the business practices Google uses to sustain those segments of its company apply to your company?

Consider this example of a company that once upon a time so many envied. Shortly after the Time Warner and AOL merger, I met with a vice chairman who had been with Time Warner. He said to me: “Dave, these people (AOL management) think they’re the most innovative people in the world. As far as I can tell, they’ve only come up with one innovation: It’s called AOL.” AOL was a one-trick pony.

These examples highlight two important things to watch for when considering best practices:

1. You can look elsewhere to gather ideas, but you cannot allow a company’s apparent success blind you to this reality: Their best practices may not fit your business model.

2. Watch for repeat performers—companies that have continued to see success with their best practices. These are the companies that have proven their practices again and again.

One parting thought: If you want to be number two or number three in your industry, you can look for best practices from others, but if you want to be number one you cannot. You must define the new best practices yourself.

You can read more about best practices in my forthcoming book, What’s Good for the Goose Could Cook the Gander. It will be available soon on Amazon.com.

Best Practices: The Good, the Bad, the Ugly

Recently I attended one of the countless numbers of conferences held every year to examine best practices. At this conference, one of the speakers, a longtime client, boasted about his company’s best practices.

As he talked on, I thought to myself: That’s not what’s really going on. What he’s describing are his company’s goals. He’s relating the ideal state—the way he’d like things to work. But they’re not really working that way.

I listened to other speakers with a more skeptical eye. And I must tell you, they all made the same basic mistake: They took what they’d like to be doing, and put it in the context of actually doing it. Misleading their listeners, perhaps, but I don’t believe that was their intention. I think these executives really and truly believe that the best practices they want are the best practices they’ve got, so they project it that way. And after all, who wants to talk about things not really working all that well?

Companies can fool you into believing they have best practices, when they really don’t. That’s one of the bad aspects of benchmarking against other organizations. Worse, companies will blindly follow a best practice, even though their culture and environment are completely different than the successful company. In others words, they don’t consider that what’s a best practice for one company might not be for them.

Of course, modeling a practice after a company—if you pick the right practice and the right company—can deliver benefits. That’s the good news. But telling the difference between the good and the bad best practices is as easy as keeping the room’s attention during a Friday afternoon presentation.

In subsequent blogs, inspired from my forthcoming book on best practices What’s Good for the Goose Could Cook the Gander, I’m going to describe companies that can fool you into believing they have best practices when they really don’t, compare them to companies that do have best practices, and then show you how to tell the difference.

For example, Cisco by being a repeat performer in the success of its mergers and acquisitions, has clearly proven that its practices are, in fact, best practices. But then there are the fake Ciscos—what I call one-trick ponies—that often fool us into emulating their practices that are in reality far from the best. How do you spot the one-trick ponies?

Best Practices: Arriving at the Wrong Solution?

What is it about best practices that make them so appealing? Google, Facebook, Amazon, everyone loves to talk about them. You might be thinking the Internet is the key to their success. And that’s certainly a big part of it. But I want to talk about more than just the Internet. So let's expand our list of companies, pulled from Fortune’s list of most admired companies. Apple, Starbucks, Nike, FedEx, Virgin Atlantic, Berkshire Hathaway, Southwest Airlines. What do these companies all have in common that makes them icons that we want to learn from?

If you said their founders, you're right. All of these companies are run by their founders, or were until very, very recently. And founders tend to bring a certain kind of leadership that most hired CEOs can’t deliver.

Others among Fortune’s list of most-admired companies are companies like Disney and Wal-Mart. While no longer run by their founders, they carry their founder’s name, and they tend to be run in
accordance with the principles of their founders much longer than companies that don’t carry the founder’s name.

When considering best practices, one of the biggest mistakes I find many companies making is their incessant desire to emulate others, but all too often, in the quest to find characteristics they want to emulate, they fail to think about how those companies differ from their own. They don't consider that what works at one company won’t at another because they don't have the same culture, or environment, or structure. For example, adopting another company’s best practice approach to file server backups is one thing, but all too often it’s bigger than that, like values, or culture.

An example that I always reflect back on—it makes me laugh because I saw it so many times—is the companies that would adopt 13 of Dr. W. Edward Deming’s 14 points. The one they’d always skip? No. 11: “Don’t measure people.” By choosing not to adopt No. 11, many of the others were nullified. For example how are you going to create “constancy of purpose” if you’re still leading people to selfishly sub-optimize because of how their individual performance is measured? Or how will you achieve point No. 8, “drive out fear?” In other words, you can't just pick the parts of the equation that you want and leave out the rest. You might feel good because you think someone else has already done the hard work of proving what you’re about to do works, but the reality is that it won’t work for you—at least not like it did for them.

Understanding best practices—how to find them, how to vet them, and when to ignore them—is the
topic of the first book in the “Connect the Dots Series:” What's Good for the Goose Could Cook the
Gander. It's easy to get dazzled by the success of iconic companies and to make brash decisions based on what works for them. Identifying those rare best practices that are truly applicable to your company, that’s hard. Knowing when to walk away from a supposed best practice that every other company seems to be jumping on—that’s REALLY hard.

Read more about best practices in my forthcoming book, What’s Good for the Goose Could Cook the Gander.