On Avoiding Stupidity
I periodically give lectures at such venues as technology trade shows, product managers’ groups, and high-tech councils, and before beginning my talk, I always ask this question: “How many people have read the following books?” I then list some of the seminal publications on the history of high tech. These include such books as Apple by Jim Carlton, Gates by Steve Manes, and Hackers by Steven Levy. Invariably, only one or two hands go up; often, none do.
Then, I ask how many people have read the newest, hottest, thepromised- land-is-within-your-reach-if-you-just-follow-the-diktats-of-thi s-newest-business-guru wonderbook. The latest wonderbook differs from year to year and from decade to decade. In the 1980s it was, of course, In Search of Excellence by Thomas J. Peters and Robert H. Waterman and its myriad of profitable spin-offs (all based on an original foundation of bogus data). In the early-to-mid 1990s it was often Crossing the Chasm by Geoffrey Moore and its myriad of spin-offs (all based on product life cycle models that were first introduced in the 1950s). By the late 1990s and early 2000s it was often The Innovator’s Dilemma by Clay Christensen, which discusses how established companies have a hard time dealing with new ideas and the very successful follow-on, The Innovator’s Solution, which proposes a solution to the problem the author of the book admits no one has ever actually used (which is a rather innovative way to end a business book series, when you come to think about it).
Now, in all fairness, many of these business books offer practical, if often generic, advice about how to run a business and the best things to do while you’re doing it. Like most exercise machines, many of these books “work” if you rigorously follow their commonsense advice. In most cases, thinking up new or improved products or services to sell to people (this process is currently being lionized as “innovation,” and businesses have been doing it since the pyramids, but apparently the new label makes everyone feel even better about the process), being open to new ideas, treating customers well, organizing your data, hiring good employees, not committing accounting fraud, and so on, and so on, will certainly improve your chances of success. But this is rather like saying that breathing increases your chance of competing in the 100-yard dash. It will, but mere respiration is not what separates winners from losers in a race.
The danger comes when you dig into the specifics and try to apply the generic to your specific business and its challenges. Most writers of “theory” books can’t overcome the tendency to fit the facts into their grand frameworks, leading to a lot of misleading and contradictory advice. You already know the problem with Excellence. The Chasm books sometimes work well when talking about enterprise markets with fairly well-defined buying processes, but if you had relied on their advice during the microcomputer market’s early growth spurt in the 1980s, you would have been caught utterly flat footed by the rapid pace of events (Moore tries to deal with this problem with a later book that acts as a retrofit to the original theory, but it’s unconvincing). The Innovator books, written by an academic who has never worked in business, proffers a solution that has never been demonstrated to solve anything.
It’s not just high-tech firms that get themselves into hot water in this regard. Super-duper consulting firm McKinsey first wrote about and then introduced the concept of “eagles flying high” at Enron, a theory based on the belief that by hiring lots of smart people and letting the wind beneath their super-intelligent wings push them into the stratosphere, Enron profits would soar to ever loftier heights, clutched safely in the talons of all these Einstein flyers. Unfortunately, the theory didn’t take into account that really, really smart people might, in the interests of self-enrichment, create myriads of business deals and projects that objectively evaluated had little or no chance of turning a profit and then create a dizzying array of interlocking shell companies where accumulating debt could be buried, all at the expense of stockholders and company employees’ retirement funds.
Another problem with all business books that focus on grand theories of business success is that, in a very real sense, no such theory can ever exist. To help understand this concept further, take a quick look at a popular Hollywood fantasy, that of the young go-getter who develops a surefire way to “beat” the stock market. Now, suppose this fantasy could be translated into reality. Imagine that through the use of supercomputers and sheer genius programming, you create a stock-picking system that infallibly predicts which stocks will go up and down and then write a book releasing this information to the world.
What would happen?
What would happen would be that the stock market would immediately congeal into immobility and would have to be rejiggered to work in such a way that all your good advice and smart programming would be rendered useless. This goes back to the fundamental reality underlying all market-driven systems: there must be a winner and a loser in every transaction for the system to work. (It’s a grim fact, but before you run shrieking into the comforting arms of Marx and Lenin, the empirical evidence suggests that communism simply creates losers all around.) This carries over to the competitive environment all companies must endure in market-driven economies. Competition must winnow the myriad of firms over time to ensure the market can function. Failure must happen. But failure must also always have a cause.
The Main Causes of Failure
The basic types:
• Your company is based on fraud and/or the sale of illegal products and services.
• Your company is built around an unrealistic or ridiculous business assumption.
• Your company does not have a strategic vision and plan for success.
• Your company has failed to execute business basics in the course of selling its products and services.
In regards to the first two types of failure, I don’t have much advice to give. If, like Enron, ZZZBest, and thousands of other companies over the course of the 20th century and continuing into the 21st, your underlying business model is a Ponzi scheme, your business will fail, and maybe you will go to jail. If your company plans to market heroin or cocaine in the United States, you will fail and probably go to jail if someone doesn’t shoot or decide to dismember you with a chainsaw first during a dispute about optimal distribution strategies and reseller margins. If, like a very bright gentleman I spoke to during the course of writing the second edition of Stupidity, you intend to bring to market a new word processor for Windows, you will fail, and no one will even pay attention to you. If you’re the new SoftRam, please send me a shrink-wrapped version of your product for my collection.
The third class of failure, lack of strategic vision and planning, is, as you’ve seen, the one most business writers like to write about primarily because books about this topic tend to make the most money. Of course, all successful companies have to develop and sell products and/or services people will pay for; this is the essence of modern commerce, and it is here that a “strategic” plan is both useful and necessary. But few companies and theorists are content to leave it at just that. For the past several decades, American business has been obsessed with the idea that somewhere out there exists a grand unified theory of business that explains once and for all how success can be guaranteed if only the theory can be uncovered and explained. For a time “excellence” seemed to provide the Great Answer. Then the path to proven success appeared to encompass leaping like gazelles over chasms. Now, many believe institutionalizing innovation (something of an oxymoron) into the corporate genome is the first step on the path to enlightenment.
American companies are obsessed with this concept of strategy and are always recasting and reorganizing themselves so as to realign with the latest, greatest strategic vision as brought to them by a newly minted business guru or a shiny new CEO. Caught in a tautological loop, farreaching business plans are developed that are excellent or that leap far enough or that are innovative because excellent or leaping or innovating is what we do. Things usually go well at first. Americans, despite romantic self-images of rebel cowboys and sturdy nonconformists, are actually pretty good at organizing themselves and taking orders. We’re not as antlike as the Japanese, of course, but we do stand patiently in lines, stop at red lights, wait our turn, and take orders from authority with a fair degree of alacrity. So when plans and dictates come down from on high, companies can usually be whipped into fighting trim in fairly short order. A laser-like focus is brought to the creation of new marketing and sales campaigns. The competitive terrain is analyzed thoroughly via market research and focus groups. The distribution channel is primed with promotional money, advertising, and collateral. New products and services are manufactured in record time with maximum efficiency. The company maneuvers with stereotaxic directness toward its launch point and pauses in readiness, waiting for the command to move out. When the clarion call comes, the entire firm surges forward in lockstep unison, eyes set straight ahead on the prize, moving in a determined sweep to clear from the field of battle any obstacle that stands in the way of the ultimate victory and triumph.
But then things start to go badly wrong. You unleash a new word processor, and your entire company falls into the mud of massive confusion and market resistance because you’ve made a fundamental positioning mistake (MicroPro). You launch a hot new microprocessor, and because you’ve failed to realize that now that you’re a consumer brand, the PR rules have changed, and the charge forward has been halted by incoming fire from the press (Intel). You become the Internet’s most strategic site by dint of a marketing campaign that secures every corner of the globe with platoons of floppies and CDs, and then find yourself in full retreat as everyone stops using phones to connect to the Internet and starts using high-speed connections (AOL). You attack the market for digital content in 1998 with a can’t-miss device, an MP3 player the size of today’s iPod…and no one hardly pays attention (Saehan/Eiger Labs).
And then an awful realization bursts upon you. Business is not…war, at least conventional ones. Innovation doesn’t always lead to success; failure to innovate sometimes leads to disaster. Markets are not terrains that can be swept clear of enemies in all conquering waves. What is excellence in the context of one industry is a waste of money in another. If business is war, then it’s an odd sort of ongoing guerilla conflict in which the enemy can be an opposing company one day and a division or business unit at your own firm the next. Markets are swampy, Escheresque lumps of chaos studded with redoubts and obstacles that disappear and reappear from any direction, studded with over and under ramparts onto which confused invaders stumble and then stagger off from view. And even when you succeed in your objectives and take the field, sometimes the field disappears beneath you, and you find yourself slogging about in a pale foam that obscures your vision and leaves you wandering directionless in a vast wilderness.
And sometimes you get amazingly lucky....