From Gary Hamel’s The Future of Management:

There is no surer way to undermine a new business venture than to measure it by the profits generated, rather than by the learning accumulated.

He gives IBM as an example of a company that has learned this lesson:

IBM’s top-level growth team understood that when it comes to building a new business, you have to learn before you earn. Given this, they wanted to counter the debilitating assumption that if you’re not holding a new venture accountable for profits, you’re not holding it accountable for anything. Many of IBM’s past growth efforts had stalled when an early push for profits limited a venture’s potential upside by prematurely truncating the learning and experimentation that would have, in time, yielded a more powerful, and better targeted, business model.

The cheapest option is not always the cheapest option. The management blog over at About.com has an introduction to the concept of Total Cost of Ownership. Here’s the start:

If I buy product “A” for $50 is that cheaper than buying Product “B” for $60? Well, that depends.

The concept of Total Cost of Ownership, usually abbreviated as TCO, helps us evaluate the true cost of the purchases we make for our companies, and for ourselves.

I would like to add another cost as well. I call it the “pain in the neck cost.” In other words, you need to look not only at the purchase price of the item and not only at the total cost over the life of the product, but also at the potential for problems and trouble and turmoil that the product will simply cost your sanity. This cost is intangible — you cannot necessarily assign dollars to it — but is just as real.

These days, when time is the new scarcity, the pain in the neck cost is more important than ever.

Good column by David Brooks in the NY Times on why the Obama restructuring plan for GM won’t work. Chief among them: the problem is in the company culture.

G.M.’s core problem is its corporate and workplace culture — the unquantifiable but essential attitudes, mind-sets and relationship patterns that are passed down, year after year.

Over the last five decades, this company has progressively lost touch with car buyers, especially the educated car buyers who flock to European and Japanese brands. Over five decades, this company has tolerated labor practices that seem insane to outsiders. Over these decades, it has tolerated bureaucratic structures that repel top talent. It has evaded the relentless quality focus that has helped companies like Toyota prosper.

As a result, G.M. has steadily lost U.S. market share, from 54 to 19 percent. Consumer Reports now recommends 70 percent of Ford’s vehicles, but only 19 percent of G.M.’s.

The problems have not gone unrecognized and heroic measures have been undertaken, but technocratic reforms from within have not changed the culture. Technocratic reforms from Washington won’t either. For the elemental facts about the Obama restructuring plan are these: Bureaucratically, the plan is smart. Financially, it is tough-minded. But when it comes to the corporate culture that is at the core of G.M.’s woes, the Obama approach is strangely oblivious. The Obama plan won’t revolutionize G.M.’s corporate culture. It could make things worse.

Read on to see why Obama’s plan will likely make things worse.

And I’ll go ahead and add another thing to my list of things that should not exist.

Patrick Lencioni has a superb article on why, in spite of valuing diversity, most companies fail to truly tap into the competitive advantage it can offer.

It doesn’t appear to be online yet, so here it is in full:

[Read more…]

I’m enjoying the book A Class with Drucker: The Lost Lessons of the World’s Greatest Management Teacher. The advice is not unexpected for Drucker, but unexpected when compared to much of conventional wisdom. Here is the table of contents, which gives a good reflection of this:

1. How I Became the Student of the Father of Modern Management
2. Drucker in the Classroom
3. What Everybody Knows is Frequently Wrong
4. Self-Confidence Must be Built Step by Step
5. If You Keep Doing What Worked in the Past You’re Going to Fail
6. Approach Problems with Your Ignorance — Not Your Experience
7. Develop Experience Outside Your Field to be an Effective Manager
8. Outstanding Performance is Inconsistent with Fear of Failure
9. The Objective of Marketing is to Make Selling Unnecessary
10. Ethics, Honor, Integrity and the Law
11. You Can’t Predict the Future, but You Can Create It
12. We’re All Accountable
13. You Must Know Your People to Lead Them
14. People Have No Limits, Even After Failure
15. A Model Organization That Drucker Greatly Admired
16. The Management Control Panel
17. Base Your Strategy on the Situation, Not on a Formula
18. How to Motivate the Knowledge Worker
19. Drucker’s Principles of Self-Development

Jim Collin’s new book is out today. It is called How The Mighty Fall: And Why Some Companies Never Give In. Collins shows “how to spot the subtle signs that your successful company is actually on course to sputter — and how to reverse the slide before it’s too late.”

There are five stages of decline:

Hubris born of success

The undisciplined pursuit of more

Denial of risk and peril

Grasping for salvation

Capitulation to irrelevance or death

This looks like superb stuff. I am very much looking forward to the book.

While you are waiting for it to arrive, BusinessWeek has an exclusive excerpt from the book, along with many other materials. They include:

• Video of Jim Collins discussing the five stages of corporate decline
• Video of Jim Collins on why he admires Steve Jobs
• A slide show on what we can learn from failure
• An audio interview about the book

A good summary of the five tasks of the manager that Peter Drucker specified.