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One more time

Reading up: 'Creative Destruction' -- again

One more time

"Creative Destruction"
By Richard Foster and Sarah Kaplan
Doubleday / Currency, 366 pages, April

(CNN) -- "This company will be going strong 100 and even 500 years from now." That's C. Jay Parkinson, president of Anaconda Mines, talking. He made this declaration three years before Anaconda was bankrupt.

The quote opens the first chapter of Richard Foster and Sarah Kaplan's book, "Creative Destruction." The co-authors then spend the next 300 pages trying to move beyond the anecdotal irony of Anaconda's crisis to the level of sweeping theory promised by their dustcover notes.

You know your publisher has oversold you when you get a line like this on that dustcover: "In a book that is sure to shake the business world to its foundations, "Creative Destruction," like "Re-Engineering the Corporation" before it, offers a new paradigm that will change the way we think about business."

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The trouble isn't that Kaplan and Foster are failing to provide an interesting read. It's that their basic premise isn't really all that shocking -- and their paradigm isn't new. Still, you'll find yourself confronting plenty of useful observations and maybe wishing that what Foster and Kaplan (and others before them ) are saying might be heard in the executive suites.

These co-authors are with McKinsey & Company, the global management firm noted for its penetrating analyses. The basis for the scenario they offer here is compelling. The McKinsey Corporate Performance Database puts 40 years of study onto 1,008 companies in 15 industries. It's good stuff.

"As the '80s passed and we made our way through the '90s," the co-authors write, "both of us observed that almost as soon as any company had been praised in the popular management literature as excellent or somehow super-durable, it began to deteriorate. Searching for excellent companies was like trying to catch light beams: They were easy to imagine, but so hard to grasp."

Indeed, the McKinsey people could find only 160 companies of the database's 1,008 still could be classified as "long-term survivors" from the study's 1962 inception to 1998.

Highly technical in their approach, Foster and Kaplan throw off charts and graphs like the rest of us distribute carbon dioxide. They come at you relentlessly with the many business stories they know and the numbers behind them.

Most of us tend to think, they write, that the brass ring belongs to companies built for continuity -- those focused on operations.

What Foster and Kaplan are here to tell us is that "discontinuity" -- represented, for example, by the fast and deep shifts in the technology sector -- is the order of the day. And to survive in a quaking market, they say, companies must resort to what Austrian-American economist Joseph Alois Schumpeter called "creative destruction."

graphic

Everything old is new again

Another book, also called "Creative Destruction," came out just last month on this very topic. That one, from MIT Press, is a collection of essays that explores whether today's Internet-smitten "new economy" is actually evidence of the rise at last -- more than 50 years after Schumpeter did his work -- of "creative destruction" as a natural phenomenon in business.

Foster
Richard Foster  

For that matter, Richard Nolan and David Croson were out in 1995 with another "Creative Destruction." That one was from Harvard Business School Press and promised "a six-stage process for transforming the organization."

With all this work on the topic, then, why doesn't "creative destruction" pan out more frequently?

Because creatively destroying your outfit is scary. It requires executives and employees to let go of cherished habitual thinking; demands stockholders who can tolerate owning something they don't recognize; and needs change to be courted aggressively -- not just tolerated -- to flourish.

"Divergent thinking" -- which F. Scott Fitzgerald's longtime wisdom called "the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function" -- is a key to a company's success at creatively destroying its worn-out values to move forward.

•  "Managing for divergent thinking," Kaplan and Foster write, "... requires control through selection and motivation of employees rather than through control of people's actions; ample resources, including time, to achieve results; knowing what to measure and when to measure it; and genuine respect for others' capabilities and potential."

•  "To improve long-term performance, the overall planning and control processes of the corporation need to be rethought. The conventional strategic planning process has failed most corporations. ... New ways of conducting a dialogue and conversation among the leaders of the corporation and their inheritors are needed."

Kaplan
Sarah Kaplan  

•   "Corporate control systems must be built that can manage both to control operations and increase the rate of creative destruction. Control what you must, not what you can; control when you must, not when you can. If a control procedure is not essential, eliminated it."

The news here for careerists, particularly those who toil in larger corporate settings, is this: They're not crazy. Oppressive top-down management, overlooked and underused talent, rigid and apparently arbitrary procedures? -- yes, they're the wrong idea.

But the number of books on the topic indicates how hard it is to get the American corporati to consider creatively destroying ... what? -- the executive bonuses? the power-tripping authority? the knee-jerk habits of a nation's free-enterprise system beginning to clear its adolescence?

Before American business learns to trust the "creative" part of "destruction" as the lucrative key to modern success, we may need a lot more than three books titled "Creative Destruction."

[watercooler]



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RELATED SITES:
Doubleday business books
McKinsey & Company
MIT Press: "Creative Destruction"

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