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October 24, 2011 12:24 am
It is a curious fact that in industry after industry there is at least one company that appears to succeed not by doing the same thing better than everyone else but by playing a completely different game.
Take Apple. The technology company is unique: this vertically integrated corporate dictatorship makes expensive, beautiful niche products that have revolutionised several industries (not counting retail, of which it is also now a most skilful exponent).
Or Toyota, which despite recent slip-ups, it is still the most formidable car manufacturer. Probably not one in 100 people could name its chief executive, and its management processes are so grooved that appointing a new one causes as much ripple as changing a lightbulb. The Toyota Production System, a wonder of the industrial world rivalling the original assembly line as the most studied industrial phenomenon of all time, sets the carmaker apart from less successful competitors.
John Lewis’s model – the department store is owned by its employees – is unique, but its rivals would love the same rapport with their customers. Equally distinct from the norm is Whole Foods Market, an upmarket organics chain whose chief executive, John Mackey, is a libertarian capitalist, yet the company has a salary cap that limits compensation for everyone to 19 times the average wage of an employee. Semco, the extraordinarily successful Brazilian mini-conglomerate, has no corporate rule book and allows employees to set their own salaries. At WL Gore, the maker of Gore-Tex fabric, there are no formal management titles: leaders become leaders by attracting followers. Lonely Planet was founded by a couple of hippies – which did not stop it from turning the guidebook industry on its ear.
Yet it is as if companies such as these are invisible to conventional management wisdom. They are explained away as exceptions that prove the rule or appropriated as examples of radical differentiation (true, but that does not get us very far). Or they are simply ignored. The result is that, far from being allowed to challenge the paradigm of the day, they are co-opted into it.
Such marginalisation is harder to sustain since 2008. The collapse of major financial institutions was as much a challenge to management as to economics, undercutting assumptions about reward, recruitment, risk, strategy and governance.
In this light, perhaps the “exceptions” have something to tell us. If they are seen not as exotic outliers, but the advance guard of a new order, the first obvious quality that these companies share is a sense of purpose beyond making money for shareholders. As Steve Jobs, Apple’s founder who died earlier this month, famously asked John Sculley, the former president of PepsiCo who became the chief executive of Apple, in 1983: “Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?” Apple’s products and Toyota’s processes did alter perceptions of the world; but all the exceptions share the belief that they do not need to accept the world as others see it.
The introduction of products such as the iPod, iPhone and iPad under Steve Jobs’ leadership turned Apple into the world’s most valuable technology company. He died on October 5 2011 at the age of 56.
They all back purpose with guiding principles. For Lonely Planet’s founders, it was to write guidebooks for poor but obsessive travellers such as themselves. For Ricardo Semmler of Semco and Bill Gore it was stripping away management to free ordinary people to work creatively. Jobs again: the Macintosh computer turned out so well, he said, “because the people working on it were musicians, artists, poets and historians who also happened to be excellent computer scientists”.
These businesses all temper purpose (or the founder’s personality) with a visceral connection to the customer: they are “outside-in”. Toyota’s “pull” production system, geared to delivering a car to the customer in minimum time and with minimum fuss, is the archetype here. Purpose and principles are held together by measures that track the organisation’s purpose, not the City’s or Wall Street’s.
Still not convinced? The biggest, indeed elephant-sized, exception to its industry is an investment company that obeys all the above requirements. It denounces derivatives, eschews hedge funds and invests only in real firms making real goods and services that it understands. Its preferred holding time is “forever”. It is, of course, Warren Buffett’s Berkshire Hathaway, which since 1965 has provided shareholders with a compounded annual book-value gain of 20.2 per cent, for a total increase of 490,409 per cent.
Perhaps Management 2.0 does not need to be invented. It is already here, just – as science fiction writer William Gibson said of the future – unevenly distributed.
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