Amazon.com's Best of 2001
Five years ago, Jim Collins asked the question, "Can a good company become a great company and if so, how?" In Good to Great Collins, the author of Built to Last, concludes that it is possible, but finds there are no silver bullets. Collins and his team of researchers began their quest by sorting through a list of 1,435 companies, looking for those that made substantial improvements in their performance over time. They finally settled on 11--including Fannie Mae, Gillette, Walgreens, and Wells Fargo--and discovered common traits that challenged many of the conventional notions of corporate success. Making the transition from good to great doesn't require a high-profile CEO, the latest technology, innovative change management, or even a fine-tuned business strategy. At the heart of those rare and truly great companies was a corporate culture that rigorously found and promoted disciplined people to think and act in a disciplined manner. Peppered with dozens of stories and examples from the great and not so great, the book offers a well-reasoned road map to excellence that any organization would do well to consider. Like Built to Last, Good to Great is one of those books that managers and CEOs will be reading and rereading for years to come. --Harry C. Edwards
Book Description
The Challenge
Built to Last, the defining management study of the nineties, showed how great companies triumph over time and how long-term sustained performance can be engineered into the DNA of an enterprise from the verybeginning.
But what about the company that is not born with great DNA? How can good companies, mediocre companies, even bad companies achieve enduring greatness?
The Study
For years, this question preyed on the mind of Jim Collins. Are there companies that defy gravity and convert long-term mediocrity or worse into long-term superiority? And if so, what are the universal distinguishing characteristics that cause a company to go from good to great?
The Standards
Using tough benchmarks, Collins and his research team identified a set of elite companies that made the leap to great results and sustained those results for at least fifteen years. How great? After the leap, the good-to-great companies generated cumulative stock returns that beat the general stock market by an average of seven times in fifteen years, better than twice the results delivered by a composite index of the world's greatest companies, including Coca-Cola, Intel, General Electric, and Merck.
The Comparisons
The research team contrasted the good-to-great companies with a carefully selected set of comparison companies that failed to make the leap from good to great. What was different? Why did one set of companies become truly great performers while the other set remained only good?
Over five years, the team analyzed the histories of all twenty-eight companies in the study. After sifting through mountains of data and thousands of pages of interviews, Collins and his crew discovered the key determinants of greatness -- why some companies make the leap and others don't.
The Findings
The findings of the Good to Great study will surprise many readers and shed light on virtually every area of management strategy and practice. The findings include:
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Level 5 Leaders: The research team was shocked to discover the type of leadership required to achieve greatness.
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The Hedgehog Concept (Simplicity within the Three Circles): To go from good to great requires transcending the curse of competence.
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A Culture of Discipline: When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great results. Technology Accelerators: Good-to-great companies think differently about the role of technology.
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The Flywheel and the Doom Loop: Those who launch radical change programs and wrenching restructurings will almost certainly fail to make the leap.
“Some of the key concepts discerned in the study,” comments Jim Collins, "fly in the face of our modern business culture and will, quite frankly, upset some people.”
Perhaps, but who can afford to ignore these findings?
Customer Reviews:
A very thought-provoking book for people trying to grow their business........2007-10-02
This was a very interesting book for me to read. I have to imagine that I am in a pretty narrow target market for this book, though the concepts may be broadly applied. I work for a small business and can see many opportunities to put this book's findings to work.
The book tells the various stories of companies that made a transition from a market participant to market leader and saw sustained success for at least 15 years. The author was able to identify a few common factors between these companies, and he and his research team present them as a model for us to follow.
I had but one small issue, which is probably not information that contributes to the rest of the research. They detail radical decisions made by upper management, sometimes completely changing the face of an established business. I figure there must be a largely disproportionate number of business that fail when they made the same or a similar move. I would have liked to see some detail behind how those successful companies came to make that decision. The decision itself was largely overlooked.
Like many "business" books, I feel that much of what was written here was largely common sense. They weren't necessarily ideas that I have had or would have come up with on my own, but as I read them they seemed mundane in analysis. It made the reading slow going, but there was a silver lining -- for instant gratification, each chapter ends with a few pages of main concepts extracted from the text.
There was some very insightful research in Good to Great. The common elements identified were relevant and practical. It would not be an easy model to follow, but if it were it would defeat its own purpose to isolate those corporate characteristics that set successful companies apart. If you have ever wondered what steps you should follow to take your company from Good to Great, this is a book you should read (even if it is just the chapter summaries).
"Good" is not "good enough"........2007-10-02
"Good" is not "good enough". When organizations and/or individuals settle for "good" as "good enough" they set themselves up to become obsolete. "Good to Great" looks at those organizations that decided never to settle for "good enough" and became "Great". How about you? Are you striving to become great at what you do, or have you settled for being good enough to get by? Does the organization that you work for have a plan to move from good to great? Are you a part of the change that will take your company to the next level or do you believe that your company is "good enough" right where it is?
I believe there is more value to be gained by pushing good organizations to become great than trying to turn mediocre organizations into good ones. The data presented in "Good to Great" shows just how much value can be gained by those willing to make the leap to Great. The book also shows you what principles of business those companies that made the leap had to adopt.
My favorite chapters are chapter two (Level 5 Leadership) and three (First Who...Then What). Level 5 Leadership address the benefits of having personal humility combined with a strong will to build something great. We have to many leaders at the top that have let their egos become more important than the organizations they run. "Good to Great" explains how the leaders of those companies that made the leap avoided the ego trap while having great ambitions for building something exceptional. Everyone who wishes to become a leader that makes a difference should read this chapter.
"First Who...Then What" does a good job of showing how great companies put "talent" at the top of the agenda. Any leader who wants to build a strong organization must put "talent" at the top of their agenda. Jim Collins address two critical issues companies need to address when it comes to recruiting and developing their talent. He shows us why it is important to get the right people on the bus and the wrong people off the bus. And then goes on to explain how great companies get the people in the right seat. How many people in your organization are in the wrong seat? How many should be taken off the bus entirely? Companies are not good at hiring the right people and then are terrible at assigning them to the right job. This chapter is a must for anyone involved in the hiring of talent.
I also recommend spending some time at jimcollins.com. I have visited and revisited this site to get more information on the concepts presented in "Good to Great". Buy the book, then go to the website and start your own journey from good to great.
Larry Kevin Adams
theactionator.com
Good To Great.......2007-09-28
Our company is taking the advice of the book to heart. We have formed our "hedgehog" group and all are excited. We want to work in an environment of greatness. The book shows us the way. We have 7 of our employees who have agreed to "donate their time" at lunch several times a month to help us identify our circles. I would recommend this book to any company or organization that truly wants to have their maximum impact in the arena in which they operate!
My Business Bible.......2007-09-24
If I have a bible for business, this is it. First who then what is the only way to go!
Still applicable in 2007.......2007-09-19
I enjoyed the thought provoking aspect of this book. The different levels of leadership, the hedgehog concept are the two takeaways from this book.
How many of us fall into the trap of being everything to everyone? Most I suspect from the findings presented in the book.
Read this book to find out how you can strive to be a Level 5 leader. I found the book very insightful. Jim Collins and his team hit a homerun!
Book Description
"The Long Tail" is a powerful new force in our economy: the rise of the niche. As the cost of reaching consumers drops dramatically, our markets are shifting from a one-size-fits-all model of mass appeal to one of unlimited variety for unique tastes. From supermarket shelves to advertising agencies, the ability to offer vast choice is changing everything, and causing us to rethink where our markets lie and how to get to them. Unlimited selection is revealing truths about what consumers want and how they want to get it, from DVDs at Netflix to songs on iTunes to advertising on Google. However, this is not just a virtue of online marketplaces; it is an example of an entirely new economic model for business, one that is just beginning to show its power. After a century of obsessing over the few products at the head of the demand curve, the new economics of distribution allow us to turn our focus to the many more products in the tail, which collectively can create a new market as big as the one we already know. The Long Tail is really about the economics of abundance. New efficiencies in distribution, manufacturing, and marketing are essentially resetting the definition of whats commercially viable across the board. If the 20th century was about hits, the 21st will be equally about niches.
Customer Reviews:
Good article, stretched out to a padded book.......2007-09-26
This book started off as an article in Wired Magazine, and it was an excellent one. But Anderson must have decided to cash in, because the book doesn't add anything that wasn't covered in the article itself. It's not a complex concept.
Read the article on the Wired website. Then go spend your money on something from a tiny niche market.
One Trick Pony.......2007-09-09
This is one of those books that has one, keen insight and then takes one hundred + pages to say the same thing over and again. The keen point is indeed interesting. It just does not a complete book make. My $.02 !!
Good book for the startup entrepreneur in the 21-century .......2007-08-20
This is an insightful book into the today's world of retail business. Cool examples of how the Internet has leveled the playing field for many small businesses and artist.
Looking at it from the point of view of the producer and not the consumer or the retailer .......2007-08-16
I am not much of a business mind but I think I get the picture here. Instead of twenty percent of the product bringing in eighty percent of the revenue ninety- eight percent of the product is going to bring in all the revenue. Having so much available, and having ready access to it means sales no longer concentrate on a relatively few items. Freedom of choice abounds, niches multiply, Alvin Toffler is happy, future shock is no longer shocking, customization is here forever, and we all can have anything we want as long as we are able to pay for it.
Good. But I think of this in another way. Does this mean that 'value' also will not be centered as we ordinarily center it in the great works, the masterpeices, the few chosen ones? Does it mean our whole conception of valuing cultural goods will change, and a few big things will be less worshipped while many more appreciated? In other words will deTocqueville be happy here because 'equality' is in the saddle and mankind has many little good things, instead of the aristocracy only having a few?
And what does that mean for creators of culture? As a writer can I now happily post my unpublished writings with the thought that perhaps a few will read them, where before none did. In other words a moneyless long- tail is still a long- tail.
I don't know. But I do sense Anderson has hit on to a new truth here which will have all kinds of implications better business people than me will have to see.
Must read.......2007-08-14
The Long Tail is a must read for anyone wondering how the Internet works or how it's changing the world as we know it. In the book, Chris Anderson, the editor of Wired Magazine, explains how one simple principle is behind so many of the social and economic changes we are seeing with the internet. The Internet makes it possible for many people to produce and publish cheaply and for many other people to find those "amateur" works easily. For example, until the Internet, the only music you had access to was the top 40 on the radio or maybe the top 500 albums at the music store and maybe a local band at the bar on weekends. Now you have access to hundreds of thousands of songs written and produced by anybody and everybody in the world. Not only that but they are easily searchable in many different ways. So a you don't have to listen to just hits anymore and you don't have to be a world wide hit to be successful. That's what is changing the world. Niche markets are growing (around all of these non-hit works) and at the same time the way we share and find these niche products is becoming easier and easier - creating new communities online.
Chris Anderson explains it much better than me and I highly recommend the book if you've noticed that the Internet is changing the world and wondered why.
Amazon.com
IDEO, the world's leading design firm, is the brain trust that's behind some of the more brilliant innovations of the past 20 years--from the Apple mouse, the Polaroid i-Zone instant camera, and the Palm V to the "fat" toothbrush for kids and a self-sealing water bottle for dirt bikers. Not surprisingly, companies all over the world have long wondered what they could learn from IDEO, to come up with better ideas for their own products, services, and operations. In this terrific book from IDEO general manager Tom Kelley (brother of founder David Kelley), IDEO finally delivers--but thankfully not in the step-by-step, flow-chart-filled "process speak" of most how-you-can-do-what-we-do business books. Sure, there are some good bulleted lists to be found here--such as the secrets of successful brainstorming, the qualities of "hot teams," and, toward the end, 10 key ingredients for "How to Create Great Products and Services," including "One Click Is Better Than Two" (the simpler, the better) and "Goof Proof" (no bugs).
But The Art of Innovation really teaches indirectly (not to mention enlightens and entertains) by telling great stories--mainly, of how the best ideas for creating or improving products or processes come not from laboriously organized focus groups, but from keen observations of how regular people work and play on a daily basis. On nearly every page, we learn the backstories of some now-well-established consumer goods, from recent inventions like the Palm Pilot and the in-car beverage holder to things we nearly take for granted--like Ivory soap (created when a P&G worker went to lunch without turning off his soap mixer, and returned to discover his batch overwhipped into 99.44 percent buoyancy) and Kleenex, which transcended its original purpose as a cosmetics remover when people started using the soft paper to wipe and blow their noses. Best of all, Kelley opens wide the doors to IDEO's vibrant, sometimes wacky office environment, and takes us on a vivid tour of how staffers tackle a design challenge: they start not with their ideas of what a new product should offer, but with the existing gaps of need, convenience, and pleasure with which people live on a daily basis, and that IDEO should fill. (Hence, a one-piece children's fishing rod that spares fathers the embarrassment of not knowing how to teach their kids to fish, or Crest toothpaste tubes that don't "gunk up" at the mouth.)
Granted, some of their ideas--like the crucial process of "prototyping," or incorporating dummy drafts of the actual product into the planning, to work out bugs as you go--lend themselves more easily to the making of actual things than to the more common organizational challenge of streamlining services or operations. But, if this big book of bright ideas doesn't get you thinking of how to build a better mousetrap for everything from your whole business process to your personal filing system, you probably deserve to be stuck with the mousetrap you already have. --Timothy Murphy
Book Description
IDEO, the widely admired, award-winning design and development firm that brought the world the Apple mouse, Polaroid's I-Zone instant camera, the Palm V, and hundreds of other cutting-edge products and services, reveals its secrets for fostering a culture and process of continuous innovation.
There isn't a business in America that doesn't want to be more creative in its thinking, products, and processes. At many companies, being first with a concept and first to market are critical just to survive. In
The Art of Innovation, Tom Kelley, general manager of the Silicon Valley based design firm IDEO, takes readers behind the scenes of this wildly imaginative and energized company to reveal the strategies and secrets it uses to turn out hit after hit.
IDEO doesn't buy into the myth of the lone genius working away in isolation, waiting for great ideas to strike. Kelley believes everyone can be creative, and the goal at his firm is to tap into that wellspring of creativity in order to make innovation a way of life. How does it do that? IDEO fosters an atmosphere conducive to freely expressing ideas, breaking the rules, and freeing people to design their own work environments. IDEO's focus on teamwork generates countless breakthroughs, fueled by the constant give-and-take among people ready to share ideas and reap the benefits of the group process. IDEO has created an intense, quick-turnaround, brainstorm-and-build process dubbed "the Deep Dive."
In entertaining anecdotes, Kelley illustrates some of his firm's own successes (and joyful failures), as well as pioneering efforts at other leading companies. The book reveals how teams research and immerse themselves in every possible aspect of a new product or service, examining it from the perspective of clients, consumers, and other critical audiences.
Kelley takes the reader through the IDEO problem-solving method:
>Carefully observing the behavior or "anthropology" of the people who will be using a product or service
>Brainstorming with high-energy sessions focused on tangible results
>Quickly prototyping ideas and designs at every step of the way
>Cross-pollinating to find solutions from other fields
>Taking risks, and failing your way to success
>Building a "Greenhouse" for innovation
IDEO has won more awards in the last ten years than any other firm of its kind, and a full half-hour Nightline presentation of its creative process received one of the show's highest ratings.
The Art of Innovation will provide business leaders with the insights and tools they need to make their companies the leading-edge, top-rated stars of their industries.
Customer Reviews:
Kudos to Ideos.......2007-08-28
Excellent book with good insights. If you are in the business of innovation, this is one book that you shouldn't miss. I also recommend EIGHTSTORM: 8-Step Brainstorming for Innovative Managers.
Innovation for All.......2007-06-29
Through anecdotes, Kelley demonstrates how stumbling blocks to innovation can be overcome. He shows an appreciation for experimentation, momentum, and embraces failure as a true path to knowing. Failed prototypes are wonderful learning tools. Kelley's perspective keeps spirits high. He leaves much of the innovative process open ended - nearly encouraging innovation on innovating.
Interestingly, Kelley notes how medicine is becoming personalized and that the future can not be perfectly predicted. Still, he says we must aim at it. This was an important nugget of wisdom for me, a research coordinator at a think-tank-like public health research group, the Healthcare Innovation and Technology lab at Columbia University. On a daily basis we deal with innovation to improve healthcare and need to effectively innovate. Given that we tread a very specific territory - health and technology - and that Kelley's book could be so useful to us, it is obvious that he really has something to offer to everyone.
Innovation and creativity "how-to" guide.......2007-06-07
The Art of Innovation explains many of IDEO's creative techniques and in so doing paints a picture of the physical context in which all that creativity occurs, namely IDEO's office, your average geek's idea of paradise brimming with high-tech prototypes, foam cubes, "tech box" caddies with giant Post-Its and coloring pens ... and yes, it does look more like a playschool than Dilbertesque gray cubicle-land. Teamwork, friendship and a shared passion for helping clients innovate is clearly what binds people together and stimulates their creativity, while a supportive and forgiving management structure doesn't just tolerate weirdness, it actively encourages it. IDEO seems to have taken Tom Peters' advice "If you want to do weird, hire weird people" to the next level. In IDEO-land, "normal" people would probably stand out a mile.
Two creative techniques - brainstorming and prototyping - are particularly well described, in a way that encourages the reader to try something different. I've learnt some new tricks and even started applying them since reading the book.
El arte de innovar estilo IDEO.......2007-06-01
IDEO ha hecho de la innovación un arte, el cual es un proceso sistematizado, con pasos muy definidos, congruentes y faciles de llevar por las personas que conforman dentro sus empresas los equipos de innovacion y diseño.
Skip it and go right to 10 Faces.......2007-03-19
I recently read both this book and the Ten Faces of Innovation. My recomendation is to skip this book. It is written more like an advertisement for IDEO and was left feeling like Tom has crossed the line into arrogance. If you read it as a stand alone book there is a lot of useful information. However most of the concepts are covered in Ten Faces. If you have time read both books but if time is of the essence then jump right into the Ten Faces, you won't be disappointed.
Book Description
This book provides a comprehensive, flexible approach to the basic skills of business management with an emphasis on skills and applications. It presents traditional concepts, important contemporary issues, and timeless insights into applying management know-how–all toward the goal of achieving organizational success. Built around the concept of âCore Plusâ â a core of chapters covered in most courses, surrounded by a rich selection of optional chapters â enabling flexibility in the way the text is used.
Management History, Operations Management, Information Technology in Management, and Creativity and Innovation in Management.
For managers at all levels.
Customer Reviews:
Bad Costumer Care.......2007-03-11
Sell Sell Sell. That's what they really want only!!! ... I needed my book faster. I sent an email right before ordered it, saying that I wanted something faster, or I needed to cancel. Of course it was my fault of not seeing that they were from Europe, it was going to take 2 weeks but, there was no understanding AT ALL. Never buying with them anymore!!!
Fast Service, Great Quality.......2005-10-03
The book wsa in the exact condition the seller listed it at, which was close to perfect. It was delivered fast, no problems at all.
Great!!.......2005-09-17
The book was in excellent conditions also I got it before the estimaded date.
The "Foundation" of Knowledge For Successful Management.......2001-06-24
This book is one of the best foundation establishers I've read. I am the Chief of Strategy for a major headquarters and currently teach for three universities in such subjects as Strategic Management, Business Policy and Strategy, Business Communications, Supply Chain Management, and Production Operations Management. The point of that statement is that this book that I use on the job, as well as, to some degree in each course I teach. It is well written, organized, and provides outstanding tables and figures to clearly articulate the concepts. This is a desk-reference that will get lot's of handling. A must read!
good starter book for new mangers and students in business.......1999-07-22
author has good grasp of management in 21 century. What tools and skills will be needed
Book Description
In his landmark book Open Innovation, Henry Chesbrough demonstrated that because useful knowledge is no longer concentrated in a few large organizations, business leaders must adopt a new, “open” model of innovation. Using this model, companies look outside their boundaries for ideas and intellectual property (IP) they can bring in, as well as license their unutilized home-grown IP to other organizations.
In Open Business Models, Chesbrough takes readers to the next step—explaining how to make money in an open innovation landscape. He provides a diagnostic instrument enabling you to assess your company’s current business model, and explains how to overcome common barriers to creating a more open model. He also offers compelling examples of companies that have developed such models—including Procter & Gamble, IBM, and Air Products.
In addition, Chesbrough introduces a new set of players—“innovation intermediaries”—who facilitate companies’ access to external technologies. He explores the impact of stronger IP protection on intermediate markets for innovation, and profiles firms (such as Intellectual Ventures and Qualcomm) that center their business model on innovation and IP.
This vital resource provides a much-needed road map to connect innovation with IP management, so companies can create and capture value from ideas and technologies—wherever in the world they are found.
Customer Reviews:
Fair.......2007-06-21
This is another pretty good book from the author. As in his earlier book, he starts with the motivation for open innovation, which is an old idea but that is not well practiced. In this new book he addresses many of the shorcomings of the first book, such as getting real value out of the partnerships that can be formed while overcoming internal issues, such as NIH. He then talks about different ways companies go about this. What drives you crazy is that he seems unaware that companies have been doing this forever. In the consumer electronics industry, for example, open innovation is mostly the model. Companies like GE, TI, and RCA were examples. In the case of GE and RCA they go back almost 100 years.
Well-written, concise, with specific examples.......2007-06-02
As with his previous book Open Innovation, Chesbrough provides a concise and easily read review of important new trends in high-tech management. In this book the focus is on the path an innovation takes to profitability in the marketplace. Among the topics reviewed are novel "intermediate markets" for ideas and technology.
I particularly appreciated the chapters of the book that provide nine examples of companies that are more-or-less "pure play" innovation intermediaries. Companies like Innocentive, Ocean Tomo, and UTEK are profiled in depth. I appreciate the specificity, which will allow the reader to evaluate Chesbrough's insights into the future: By following up on the progress of these companies, we'll see how well Chesbrough hit the mark. This specificity is rare in business books.
It will be interesting to see where Chesbrough's interests flow in future. I would welcome a focus on public sector research institutions. A comparison of the innovation and commercialization models among universities, NIH, NASA, ESA, etc. could be helpful to policy makers as Open Innovation ideas gain wider acceptance.
Open Business Models for Those Who Rely on Technology Innovation and Need Intellectual Property Protection.......2007-05-14
This book is misnamed. Rather than being about open business models, the book's topic is about how to open business models to benefit from access to more technological innovation and strengthen your competitive posture through intellectual property.
As a result, Professor Chesbrough creates a misapprehension that successful open business models are almost always linked to technological innovation as their main purpose and benefit. My own research (with Carol Coles in The Ultimate Competitive Advantage: Secrets of Continuously Developing a More Profitable Business Model) indicates just the opposite point: Technological innovation is rarely the most effective way to open up your business model to create improvements.
So, this book's value is mostly to those who work in achieving or creating more benefits from technology innovation. If that is your interest, you've come to the right book. If that's not your interest, skip this book.
Why do those involved in achieving or creating more benefits from technology innovation need to open their business models? Professor Chesbrough points to several influences:
1. Technological innovation is coming from more sources than ever before. As a result, you will be developing inferior technology without accessing the best of what the world has to offer.
2. Most intellectual property isn't used for any practical purpose. That's a waste of social and company resources.
3. The protections for intellectual property are stronger now, and your pathway to progress will be blocked without collaborating with those who have complementary IP.
4. Product cycles are shorter and costs of developing new technologies are higher; open business models offer the promise of getting to market sooner at lower cost so that your business has a better chance of earning a decent return on new technology.
5. Large companies need to make new product development more productive if they are to meet their growth goals.
Professor Chesbrough does a nice job of developing those themes. He balances theoretical arguments with case histories of recent practices.
Of even more value, he explains how companies will have a hard time finding all of the technology they need without help. As a result, he feels that intermediaries will turn out to be important to helping connect organizations. His case histories of such intermediaries are very interesting in showing how difficult it is to play such intermediary roles without deep pockets.
For those who are new to the subject of technological innovation in the context of business models, you will find his descriptions of what a business model is (see page 182) and types for assessing your business model (see pages 132-133) to be helpful. The only quibble I would make with his types is that in his examples he assumes relative undifferentiation in industries and business types where there are often large nontechnological differentiations.
I found the last chapter to be by far the most helpful, in describing three case histories (IBM, Procter & Gamble, and Air Products) for showing how large organizations went from closed to open business models for the purpose of technological innovation. In fact, the discussion of Procter & Gamble's practices is the best one that I have read. That point, by itself, is sufficient to commend this book to you. I suspect that almost everyone will be doing what Procter & Gamble is doing now ten years hence.
Excellent work, Professor Chesbrough!
Innovation requires an open mind...and the courage to challenge "the ideology of comfort and the tyranny of custom." .......2007-03-14
What is an open business model? In Chapter 1, here's Henry Chesbrough's response to that question: "A business model performs two important functions: it creates value and it captures a portion of that value. It creates value by defining a series of activities from raw materials through to the final consumer that will yield a new product or service with value being added throughout the various activities. The business model captures value by by establishing a unique resource, asset, or position within that series of activities, where the firm enjoys a competitive advantage."
Having thus established a frame-of-reference, Chesbrough continues: "An open business model uses this new division of innovation labor - both in the creation of value and in the capture of a portion of that value. Open models create value by leveraging many more ideas, due to their inclusion of a variety of external concepts. Open models can also enable greater value capture, by using a key asset, resource, or position not only in the company's own business model but also in other companies businesses."
These two brief excerpts are provided because Chesbrough`s definitions of various terms are far clearer and more authoritative than mine could possibly be. Also, these excepts address the "what" so that in the balance of this brilliant book, Chesbrough can then focus almost entirely on the "why" and "how" concerning the design, implementation, modification, and performance measurement of open business models.
I was especially interested in what Chesbrough has to say about what several quite different exemplary companies -- including IBM, Qualcomm, Genzyme, Procter & Gamble, and Chicago (the musical stage show and film) -- share in common: "each started with an idea that traveled from invention to market through at least two different companies" which shared the work of innovation, and, all were assisted by effective management of an open business model. Chesbrough also devotes a substantial attention to IBM whose type 3 business model (i.e. multiple segmentations, "inside-out" mindset) reached a financial crisis in 1992. Had the IBM board not replaced its then CEO with Lou Gerstner and fully supported his leadership throughout an immensely complicated and equally difficult transformation , it is probable that IBM would not have survived. Gerstner deserves much of the credit for the success of that "cultural revolution" (as he once described it) but much credit should also be assigned to IBM's open source business model. Procter & Gamble is another company which completed an especially difficult transition from having internal staff members who protected (hoarded?) various technologies so that other companies, including potential competitors, could not use them to becoming a company with a much more open approach to innovation. Chesbrough notes that P&G began to pay much greater attention of external licensing of its technologies, (e.g. to BearingPoint), now strongly supports openly partnering for driving growth equity joint ventures (e.g. with Clorox), and an entirely new perspective on competitive advantage.
According to Jeff Weedman, vice president of P&G's external business development: "There are many kinds of competitive advantage. The original view here was: I have got it, and you don't. Then there is the view, that I have got it, you have got it, but I have it cheaper. Then there is I have got it, you have got it, but I got it first. Then there is I have got it, you have gotten it from me, so I make money when I sell it, and I make money when you sell it." To me, that in essence describes the primary competitive advantage of the open business model.
I also appreciate what is rarely provided in other business books: detailed notes (Pages 217-242) which are clustered per chapter. As I read them, it seemed as if Chesbrough were standing next to me, supplementing his narrative with additional comments that are always informative and frequently entertaining. What also struck me about Chesbrough's notes is that they enable him to acknowledge various sources with appreciation and admiration. His was obviously an open source approach to the research for this book and then to the writing of it.
To thrive in the new innovation landscape, change agents must have both an open mind and the courage to challenge what James O'Toole characterizes, in Leading Change, as "the ideology of comfort and the tyranny of custom." They would also be well-advised to absorb and digest the material in this book. Congratulations to Henry Chesbrough on a brilliant achievement.
The World It Is a'Changin.......2007-03-04
We have become accustomed to the fact that innovation has become a standard of the industrial world. Indeed companies like Microsoft market (very successfully) what is essentially nothing but an arrangement of bits. One of the things that this book brings to mind is that a lot of other companies (Procter & Gamble, Air Products) are innovative in a business that you wouldn't think of as being particularly innovative.
This book is exploring fairly new ground in its concept of 'Open Innovation,' that is creating a marketplace for innovation itself. You might not be able to capitalize on your new innovative idea, perhaps Air Products can, or perhaps you can use something that Procter & Gamble has done. And where that's a market like that, there are new specialty companies in the business of marketing innovation between companies.
We live in a time where the future is going to require major changes, peak oil and global warming to name two harbingers of change. Companies that continue to live in the old world are going to have a very hard time -- go look at Ford and GM
Book Description
"Toyota is becoming a double threat: the world's finest manufacturer and a truly great innovator . . . that formula, a combination of production prowess and technical innovation, is an unbeatable recipe for success."
-- Fortune, February 2006
For the first time, an insider reveals the formula behind Toyota's unceasing quest to innovate and do more with less, a philosophy that has made it one of the ten most profitable companies in the world (and worth more than GM, Ford, DaimlerChrysler, and Honda combined). In a rare look into Toyota's ability to consistently achieve breakthroughs that outperform the competition, The Elegant Solution explains what Toyota associates have known all along: it's not about the cars. Rather, Toyota's astounding success is just the visible result of a hidden creative process that begins with a seven-digit number.
One million. That's how many new ideas the Toyota organization implements every year. These ideas come from every level of the organization -- from the factory floors to the corporate suites. And organizations all over the world want to learn how it's done. Now senior University of Toyota advisor Matthew May shows how any company can achieve an environment of everyday innovation and discover the kinds of elegant solutions that hold the power to change the game forever. World-class benchmarks like Lexus, Prius, Scion -- even Toyota's vaunted production system -- are simply shining examples of elegant solutions.
A tactical playbook for team-based innovation, The Elegant Solution delivers powerful lessons in breakthrough thinking in a provocative yet practical guide to the three core principles and ten key practices that shape successful business innovation. Innovation isn't just about technology -- it's about value, opportunity, and impact. When a company embeds a real discipline around tapping ingenuity in the pursuit of perfection, the sky is the limit. Dozens of case studies (from Toyota and other companies) illustrate the universal power and applicability of these concepts. A unique "clamshell strategy" prepares managers to successfully lead and sustain the innovation effort.
At once a thought-starter and a taskmaster, The Elegant Solution is a vital prescription for anyone wanting to truly master business innovation.
Customer Reviews:
Nice stories, little new content.......2007-08-27
I excepted a lot from the elegant solution. It has been recommended by a lot of persons as a must read. Honestly, I was dissapointed. It's still an good book, but didn't find it as "classic" as people had suggested to me.
"The elegant solution" is about tools for creating innovation on your job. These tools are based on Toyota's tools and practices. The book is devided in three parts. The first part sets three general principles. The second part, by far the largest, provides the tools for innovation, the practices. The last part talks about implementing these practices.
The three principles are "the art of ingenuity", "pursuit of perfection" and "rhythm of fit". They were interesting principles, but not really new or shocking. Sometimes I found them even a little too vague.
The practices range from "thinking in pictures" to "master the tension". Each chapter shortly states the practice and explains the key ideas. After that it uses stories to clarify the practice. Lot's of stories are from inside Toyota. Some stories related to Lance Armstrong, a little too many in my opinion and they were somewhat boring. Anyways, in general, the stories were what made the book interesting.
The third part didn't provide very much content.
In summary, I enjoyed the book, for the stories. I didn't find the practices new and the book didn't provided me with any new insight that other lean books did not provide. The book was written a little bit too much in a "popular style" which annoyed me.
Worth reading for the stories. When wanting to know more on lean or toyota I'd recommend other books like "Toyota way" or "Lean product and process development".
Good nuggets, lots of fluff, some really sloppy thinking.......2007-08-22
I came to this book via the Shampoo Problem that's been floating around the internet these past couple of weeks (which he published in his Change This manifesto). The puzzle is this - a high-end health club puts nice shampoo in their showers, but customers keep stealing it. How do you implement a solution that takes no time to implement, doesn't inconvenience customers at all, and doesn't require any money? That's a lot of constrictions, but the author claims it can be done! (you can search for the answer yourself, I don't want to spoil your fun.)
The question itself reminded me of so many bad professors who would ask totally subjective questions and disregard legitimate answers until they found someone who agreed with them. "Who can give me an example of an apple that's tasty? Macintosh? No too sweet. Granny smith? No too bitter. Golden delicious? Why yes Bobby, you get a star."
This is the tone in my head while I read the book - condescending. Maybe he didn't write it that way, but that's how I'm reading it, and honestly, it fits. On page 21 he chides psychologists for loving "to explain our uniquely hardwired capabilities in hugely complex terms. Sixteen types, thirty-four strengths, etc." and then goes on to give his "easier, more elegant" (but no less arbitrary "four basic buckets of natural ability." (Four because the ancient Greeks loved the number four.) Of course, what he fails to mention is that the psychologists he's referring to all write for pop magazines like Cosmopolitan and their articles appear alongside such classics as "10 ways to improve your sex life" and "5 ways to tell if your man is cheating on you." He also never mentions the "four basic buckets of natural ability" again and they have absolutely no bearing on the rest of the book. (The book is filled with useless random made up facts like those.)
He also throws out sentences that have huge presumptions built in to them, but have absolutely no evidence to back them up. Stuff that, in a seminar you wouldn't want to question him on because "there is no right answer" or the facts are obscure enough that he could bluster his way though most arguments that weren't from an expert on the subject. In book form, though, and knowing better myself, I read this stuff and think "well there's a very poor and inaccurate description." Luckily there's an only 50% chance that even the next sentence will depend on you agreeing with that statement, much less the next page.
In a later section he rehashes "the scientific method" (I put it in quotes because he botched his basic characterization of it) and compares it to other four step iterative processes, mostly those developed by the military - Plan-Do-Study-Act (PDSA), Plan-Do-Check-Act (PDCA), Observe-Orient-Decide-Act (OODA), Scan-Analyze-Respond-Assess (SARA), etc. and comes up with his own version, cleverly called IDEA - Investigate, Design, Execute, Adjust. It's not much different than the others, but it's his and he can teach it in seminars as his own. FWIW, "While Toyota officially recognizes only PDCA (not IDEA), they actually use all of these (methodologies) to some degree." (page 73-4)
Well of course they use all of the methodologies to some degree - they all describe the same basic thing, and very few organizations are so button-down that they actually only use a single methodology and follow it to the letter each time.
The very next sentence is "Let's look closer at the process." But that's pretty much the last time PDCA is mentioned in the book, the next section is about process in general and why it's good to "Insist on a common approach."
Another example of sloppy leaps in logic and condescending attitude is the Edsel. (page 93) Ford did their research and designed a car that people would want - except nobody wanted it. Why? "The problem was, all the research was based on a forty-year-old market belief... that buyers fell into one of four income segments: low, low-middle, upper-middle, and upper... Except markets don't think that way. When it comes to cars, consumers were thinking `lifestyle,' not income."
I like how he swaps an old marketing tool for a modern one as if that's the answer to all the world's problems. Lifestyle marketing was originated in the 70's and 80's as a result of - surprise surprise - new market research techniques developed by psychologists who were using statistical analysis more and more in their psychological research. (I wonder if he thinks those psychologists are too complex now.)
He also utterly fails to get into the concept of lifestyle marketing - he tells you why the Edsel failed, and what they should have done, (or his completely arbitrary and baseless versions of them) but what they should have done is literally one word. "lifestyle." Shame on Ford in the 1950's for not using an 80's marketing concept to understand how the market thinks. Why didn't they use the word "lifestyle" instead - then the Edsel would have been a huge success.
Hansei is another example of this sloppy, condescending thinking. "Hansei is the rigorous review conducted after action has been taken. It's a huge and absolutely vital part of learning. And with few exceptions, our Western culture is just plain miserable at it." Of course there's not one mention of the term "post-mortem" which is a western term and performs the exact same function. Sure most businesses don't do it (most businesses don't follow a lot of best practices), but don't pretend that Toyota or "Eastern culture" somehow invented the concept and that nobody in the west does it. If there's an existing best practice that we understand, then why not just tell us about it rather than pretending that it came from the fount of the Toyota godhead?
"Ford hadn't gone to the field to see what was actually happening. They remained in the office and believed the data. Big mistake. The Edsel was dead on arrival, a complete and utter failure."
Of course the next chapter is about how Toyota did the same basic thing, but managed to succeed. Their data told them that the youth of today would be the car buyers of tomorrow (startling, I know). The case study for the Scion reveals absolutely nothing about the techniques they used to study the market - it's the after report.
"Where are these kids going to buy the car? There's no time or money for new stores. That's a problem. That means they go to a Toyota store. Okay, so they'll know it's a Toyota. How do we get around that? Think? We don't. It's not the ugly stepchild. It's legit, but different. It's Scion, offspring of Toyota. Don't ignore the Toyota link, it's got cred...."
Note the use of the magical word "Think" in that paragraph. He totally neglects to address what "Think" means. Think is the Elegant part of the solution (he also likes the word "Intuitive" and uses it liberally), yet he doesn't describe it at all.
"Think" is where all the magic happens. Katie Lucas calls this the "Run really, really fast" step for "how to win a marathon" methodologies. It's the step where all the real difficult, nitty-gritty stuff magically happens. South Park summarizes it "Step 1: Steal underpants. Step 2...... Step 3: Profit."
Ostensibly the whole book is about that one word "Think" but the tools he provides - the IDEA loop, mind mapping, story boarding are nothing new, and the book is utterly lacking a cohesive whole. They're just scattered ideas, praised one second, and then dropped in the next chapter. He even mentions the Toyota "dashboard" which is a tool for getting a quick overview of a problem - except he (again) utterly fails in to a dashboard. "Dashboard" doesn't even appear in the index of the book, and if it did, the only occurrence would be on page 113.
Here's all the text on page 113. "Creative Visual Control - Visual control is an integral part of Toyota's methodology. The Project Management Office of Toyota's North American Parts Operation (NAPO) used creative visual `dashboards' to track performance in their Stretch Goals Initiative (see Chapter 9)."
Chapter 9 is on how to stretch goals, not about dashboards. He clearly states "Visual control is an integral part of Toyota's methodology" yet it's explained nowhere in the book in any depth.
In fairness, Toyota did do something Ford didn't do (or at least something he claims Ford didn't do) - they got to know their market. Really engage them and have a conversation with them. Learn about them, and let those learnings drive their product, and he does get into that in the book.
The main thrust of the book - if I can understand it all because it's couched in so many superlatives and it jumps from topic to topic so fast that it's really difficult to tease core themes out - seems to be something like: Move forward by getting hands-on experience with your product and your customers. Don't dictate strategy based on numbers alone, or build bureaucracies - get down and dirty and get to know the product you're selling and get to know the marketplace. Come up with grand "elegant" visions for the future, but innovate little by little - tiniest bit by tiniest bit. Listen to everyone and implement every good idea, then standardize it so that the whole company benefits. Don't let the numbers do all the talking; learn the context, the story behind the numbers. Which is a pretty good message, and he does give you some tools to do that, but the tools are often vague, and you feel that the real tools are mentioned only in passing.
The subtitle of the book is "Toyota's Formula for Mastering Innovation." If this book was about the "formula" for Coca-Cola, it would say something like "cola syrup and seltzer" and go on about the intuitive and elegant way they matched cola syrup to the bubbling process and created a dynamic new soft drink and how the other soft drink companies of the day - lemonade, sugar-water and apple-juice - failed to really understand the problem, which is why they didn't come up with the cola + seltzer combination first and why they lost so much market share. (If only apple juice had thought "lifestyle" instead of "income segment!")
Overall, it's an okay read and a decent introduction to the subject of business innovation, though for a book that's supposedly written by a guy who's on the ground floor with this stuff, I would expect a *lot* more meat and a lot less fluff. Get it if you think you'll like it, but don't expect as much as the other reviewers seem to be hinting at.
"Keep it lean. Scale it back, make it simple, and let it flow.".......2007-05-22
The subtitle of this book ("Toyota's Formula for Mastering Innovation") is not inaccurate but somewhat misleading. Although, yes, Matthew E. May has much of interest and value to say about the Toyota Production System, his attention is by no means limited to it and to the remarkable organization within which it was developed and within which it continues to flourish. Today, Toyota is one of the ten most profitable companies in the world and worth more than General Motors, Ford, DaimlerChrysler, and Honda...combined. Obviously there are reasons for such extraordinary success but it would be incorrect to assume that other organizations can achieve the same success once they know what Toyota's "formula for mastering innovation" is.
What about this book's title? According to May, "Elegance isn't about being hoity-toity. It's not about lofty concepts and grand designs. It's not about beauty or grace, or anything to do with aesthetics - ugly is okay. Elegance is about something much more profound. It's about finding the `aha' solution to a problem with the greatest parsimony of effort and expense. Creativity plays a part. Simplicity plays a part. Intelligence plays a part. Add in subtlety, economy, and quality, and you get elegance...Elegant solutions relieve creative tension by solving the problem in finito as it's been defined, in a way that avoids creating other problems that then need to be solved. Elegant solutions render only new possibilities to chase and exploit. Finally, elegant solutions aren't obvious, except, of course, in retrospect."
Elegant solutions include library, paper money, pencil, wallet, wristwatch, icebox, mortgage, Social Security, credit card, cell phone, and auto leasing. These and other elegant solutions, as May correctly points out, "universally change the world's attitudes, beliefs, behaviors, and habits." Efforts to formulate elegant solutions are guided and informed by three principles: ingenuity in craft, pursuit of perfection, and fit with society. "They're the raison d'etre at Toyota, and nonnegotiable."
Earlier, I suggested that this book takes a close look at the mindset and the process by which Toyota continues to formulate elegant solutions. In fact, the Toyota organization implements a million ideas a year. May also includes within his narrative dozens of non-Toyota cases that indicate that none of the individual concepts are new, or even unique to Toyota. All organizations that formulate elegant solutions have people at all levels and in all areas of operation who possess both an ability and a determination to collectively and completely master all of the concepts as "a way of life, not a program centered on select teams led by specialists with artificial agendas."
But what about much smaller organizations, especially those with severely limited resources? Decision-makers in those organizations will be delighted (and perhaps surprised) to find that May provides a wealth of material that they can immediately put to use, once they understand the "deeper principles" that he discusses in Part I and the "ten key practices supported by tools and techniques" that he discusses in Part II. Then in Part III, May explains "how to put the practices and tools together well to achieve a [desired] result." He helps his reader to track the course of an exemplary team through a day of searching for the elegant solution.
For me, some of the most interesting and valuable material is provided in Chapter 12, "Make Kaizen Mandatory," as May poses again (as he does in other chapters) a combination of Problem, Cause, and Solution:
Problem: Innovation is hit or miss.
Cause: Creativity is misdirected and mismanaged.
Solution: Embed the kaizen ethic.
After a brief review of the factors that came together to help embed the kaizen ethic in Japanese business ethic during the decade or so following World War Two, he goes on to explain that at companies such as Toyota, the key issue is that they view kaizen in terms of standards that are created by the individuals performing the work, and, that standards are dynamic, and not everything gets standardized. These companies establish a best practice, document the standard, and train accordingly. Then in the next chapter, May shares his thoughts about "the power of lean" thinking and execution that reduce (if not eliminate) inconsistency, overload, and (most important) waste. Here is another combination:
Problem: Too many, too much - of everything.
Cause: Assumption that more is better.
Solution: Start thinking lean.
Once again, when it comes to innovation and designing solutions, the emphasis remains the same: "whatever you do, keep it lean. Scale it back, make it simple, and let it flow."
And that is what elegance really is all about.
Easy Reading.......2007-03-25
A must read for learning how to implement and sustain continuous improvement enabking lean to become part of the compny's culture
Interesting but little new insights.......2007-03-14
If you're trying to learn how to develop great products, this is not the book that you need to read. However if you're looking for a relatively entertaining book that has a lot of anecdotes of how Toyota and other world-class product developers have approached product development, this will suit you fine.
Book Description
If you're like most people, you bet your career and company on innovation--because you must. Payback: Reaping the Rewards of Innovation offers you a new way to think about and manage innovation that will dramatically improve the odds of success.
Authors James Andrew and Harold Sirkin, senior partners in The Boston Consulting Group, describe an approach to managing innovation based on the concept of a cash curve--which tracks investment against time. They ask the questions you need to ask: How much should you invest in a new product or service? How fast should you push it to market? How quickly can you get to optimal value? How much additional investment should you pour into sustaining and building the product or service?
Payback offers you practical and economically sound advice on when to pursue cash flow indirectly by first pursuing other benefits, such as brand and knowledge. It also shows you how to reshape the cash curve by using different business models--integrator, orchestrator, and licenser--each of which balances risk and reward differently.
The authors then present a short list of decisions and activities that you must make--not delegate--to achieve a high return on innovation. You won't find facile answers in Payback--but you will find valuable insights and practical guidance for mastering one of the most challenging and critical business activities: innovation.
Customer Reviews:
Solid idea; very weak exposition.......2007-05-24
This book bears all the weaknesses one expects from management consultants. It has a solid core concept, the cash curve, and a very simple graph to go with it. Virtually everything worth knowing gets said in the first 50 pages of the book.
What follows is a logical, step by step exposition of each point in more detail using selected examples from the authors' consulting experience. Sadly, no single customer example is longer than four pages, and details are sparsely strewn. It is especially noteworthy that they graphic of the key concept, the cash curve, is wholly absent from the second (much longer) half of the book.
One also gets the feeling that if the authors had had different customer engagements, they would have come to different conclusions. For instance, they discuss how Intel practices the integration business model in their chip business. However, virtually every other semiconductor company of any note on the planet is using outside factories (fabs in semiconductor parlance). Many, such as Qualcomm and Broadcom just to pick two examples have built market capitalizations in the tens of billions of dollars practicing the orchestration business model. It would have been very instructive to compare and contrast how two different models in essentially the same business can both lead to outstanding results for investors. Sadly, that discussion is wholly absent.
In summary, the core principal of the book is a very important one. I cannot think of a single business that could become a big success not understanding it. However, the lack of details in the customer examples keeps this book from realizing anywhere close to its real potential.
Freshman overview.......2007-05-14
Don't expect any insight into the process of innovation. Payback provides a freshman-level overview of innovation taking place in various companies, but is not a source of insight into the process. Years after the results of internal policies of many companies have become apparent to the business World, the author merely points to seeming successes and says "Do That", and to the failures "Don't Do That".
There is a decent comparison of the Integrator, Orchestrator, and Licensor models and some of the issues facing decision makers. Look for this around the middle of the book.
For a far more profound study that is immediately useful there is probably nothing better than Christensen's Innovator's Solution - cover-to-cover. Payback lacks any reference at all to many of the biggest challenges to implementing policies and deriving return in the market place, from innovation. Beginning with Christensen's Innovator's Dilemma, learn first of all why established companies get stuck in a rut of satisfying the demands of existing customers and simply cannot produce new products and services that really will produce big paybacks. Learn also the big difference between sustaining innovations and disruptive innovations. Discussing payback without this understanding is like studying Rocks without studying Geology.
I must have read a different book.......2007-04-09
Based on the other reviews I must have read a different book. But seriously Payback bills itself on the ideas behind creating practical and actionable innovation, how else could you meet the promise of 'reaping the rewards of innovation.'
Unfortunately the rewards they are talking about are all in terms of cash and profits making this book a 101 finance book built around the authors notion of the Cash Curve with the following basic tenants:
- don't spend to much to create an idea because that consumes upfront cash
- don't take too long to commercialize and bring the idea to market
- get your idea into volume production as soon as possible
- support the idea with a measured post launch investment.
Sorry but that's it. The book is heavy on the finance 101 side and extremely light on the idea of practices and ideas. Sure they say that you can play different role: innovation integrator, orchestrator, or liscensor but you pretty much know what the authors are going to say just by the role names.
The book does have an number of case studies, many that are available in the public domain, however these cases are more narrative telling you what happened without being analytical and telling you why the did this or that and the result it took.
Overall this book is very light on the ideas and actions required to deliver the rewards of innovation because it treats innovation as a financing event that is intended to generate cash. While that view is true, there is allot of insight, actions and practices that must happen before we can start thinking about how to get cash out of an innovation. I only hoped that the authors had taken the time to tell us that.
Business libraries and business managers will find it inspirational........2007-03-12
Written by professional consultants James P. Andrew and Harold L. Sirkin, Payback: Reaping the Rewards of Innovation is a solid guide to the difference between having a good idea and turning that idea into financial reward. Payback puts forth the argument that the biggest challenge facing most companies today is their need to increase returns from their innovation spending. Introducing a concept called the "cash curve", Payback explores the fundamental factors that affect how much financial return will be netted. From how and when it can be profitable to apply innovation to noncash goals (such as the acquisition of new knowledge or enhancement of the company's brand), to models that accurately assess financial, technical and market risks to the relative advantages and disadvantages of the integration, orchestration, and licensing models and when to employ each, Payback is a reservoir of solid, high-stakes insight into skilled decision making. As valuable for innovative small business owners as for managers of grand enterprises.
Leading Beyone Where The Numbers Can Tell You.......2007-02-18
Innovation is one of the biggest problems facing companies today. This book does an excellent job of analyzing innovation into various types of companies and showing several examples of successful and unsuccessful companies.
The authors break innovation approaches within companies into three broad categories:
1. The Integrator - Here is where a company has a core competence and they hold the developement very close to their chest. The example they use is BMW who has a core technology in engines that they protect as much as they possibly can. Afer discussing a couple of other successes they then discuss Polaroid who attempted to move from film to digital cameras but failed.
2. The Orchestrator - where a company has the broad general idea and the ability to take a product to market but doesn't have the time, expertise, or desire to do this particular design/manufacturing job.
3. The Licensor - Some companies develop technologies that they are not going to take to market themselves. Dolby is the example they use, with technology licensed to various manufacturers. They have become the standard for audio professionals.
These decisions cannot be made by accountants, they take a leader. Someone has to see the potential beyone what the sheer numbers are showing.
Book Description
Inside markets, innovation, and risk
Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street–from Morgan Stanley to Salomon and Citigroup–and a member of some of the world’s largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars. A Demon of Our Own Design tells the story of man’s attempt to manage market risk and what it has wrought. In the process of showing what we have done, Bookstaber shines a light on what the future holds for a world where capital and power have moved from Wall Street institutions to elite and highly leveraged hedge funds.
Customer Reviews:
Spectacular info... but ah what to do, what to do.......2007-09-22
This book is very well layed out and is an excellent primer on what is going on behind the scenes in the financial markets.
The end is a bit disappointing in that the issues are clearly explicated but the solution seems a bit murky and maybe impossible. The author does acknowledge the difficulty of implementing a truly workable solution.
Great risk insights, and lots of useful reminders on liquidity mechanics .......2007-09-21
A finance-related book like this one is always something I open with a fear of "deja vu". To Bookstaber's credit, his numerous insights quickly got me over this. It is a constant reminder to risk practitioners and traders that liquidity supply is a serious matter. It does indeed move mountains. For new comers into risk management and trading, it explains the sources of the LTCM debacle, and its learnings. By all standards, I recommend this book to any finance graduate, experienced trader, or risk manager. A very useful read.
The Wisdom of the Cockroach.......2007-09-14
In recounting his time as risk manager at a number of prominent houses (Morgan Stanley, Salomon Brothers, Citigroup etc.), Bookstaber completes the i-banking trifecta. First there was the Michael Lewis classic, Liar's Poker, detailing the juvenile bravado and macho antics of the trading floor. Then Jonathan Knee gave an intimate portrait of the i-banker deal making culture with The Accidental Investment Banker.
And now, in A Demon of Our Own Design, we get a glimpse at the risk management side of things... a sort of master plumber's walking tour through the bowels of the system, with technical descriptions of exactly what happens when pipes burst and boilers explode. (Some will find Bookstabers' level of detail intolerably dull; others will find it quite fascinating. I was in the fascinated camp.)
Nature of the beast
In describing the finer points of risk arbitrage, Bookstaber explains why it's normal -- expected even -- for trading desks to take a good whack every so often. The nature of the beast is to make relatively steady profits, month in and month out, and then give back a chunk of those profits when something goes haywire. (That's how you move huge sums on an arb desk; grind out small bets that are almost guaranteed to work, juice up the returns with leverage, and try not to be in the vicinity when the rare position goes kablooey.)
In light of this general modus operandi, perhaps it isn't surprising that the "quant" funds recently took a major hit (as of September 2007). They had been minting money for an extraordinarily long period, had the leverage to show for it, and now, after the recent "oops," seem to be generally back in business.
In fact it appears natural for much of Wall Street to work in this "make a little, lose a lot" fashion... the key idea being that all the little updrafts make up for the once-in-a-blue-moon downdrafts. (Such calculus works better for the fee collectors than the fee payers, but that's a different kettle of fish.)
Bookstaber's detail-rich description of the various trades that investment houses put on, many of them lasting years, is also enlightening. The details seem to confirm that, by and large, Wall Street is a gigantic, slow moving, conventional-returns type machine. (And what else could it be, really, with such an ocean of capital to allocate and so many jobs to fill? There is only so much creativity and contrarianism to go round.)
A dangerous combination
Risk manager war stories aside, Bookstaber's goal is to hammer home a key philosophical point regarding risk. He wants readers to understand that financial markets are inherently unstable, and this reality places limits on how far we (or anyone) should go in pursuit of outsized returns.
To make his point, Bookstaber uses various analogies to describe how the market is a highly complex, tightly coupled system... and to explain why the combination of high complexity and tight coupling is particularly dangerous.
The counterexample Bookstaber gives of a highly complex, loosely coupled system is the US Postal Service. The USPS has countless potential points of failure and myriad moving parts, but there are no catastrophic linkages involved. A lost package does not set off a disastrous daisy chain of events in which millions of packages are lost.
In contrast, the classic example of a highly complex, tightly coupled system is a nuclear reactor. The reactor is tightly coupled because any point of failure can lead to a knock-on chain reaction; one small thing going wrong can set the entire mechanism on a path to disaster. Being a highly complex, tightly coupled system, the market is less like the postal service and more like the nuclear reactor, in that the combination of aggressive leverage, complex methodologies and heavily interlocking parts leads to significant potential for catastrophe.
Exquisitely adapted
Another serious problem is Wall Street's deeply ingrained tendency to push the envelope. (Richard Lowenstein put it exceptionally well in his book Origins of the Crash: "Finance has its own Peter Principle, by which a successful model will be adapted to progressively riskier causes until it fails.")
In this habit of fighting for every inch of profit, Wall Street is like a self-evolving animal overquick to embrace the particulars of its immediate environment. The more precisely an animal is attuned to a particular "fitness landscape," the better that animal can thrive... in the short term at least, as long as everything stays just so. To be exquisitely adapted (as opposed to robustly adapted) is to be vulnerable to the slightest change.
Thus when the fitness landscape DOES change -- as it inevitably will -- the heavily specialized competitors tend to get crushed (if not go extinct). If a strategy-gone-sour broadsides a large enough group of market participants, the entire financial ecosystem can be thrown into turmoil. When the turmoil from this upheaval spills into the broader economy, wreaking havoc in its wake, the "demon" spoken of in the book's title is unleashed. (As this reviewer interprets it anyway.)
Wisdom of the cockroach
So the problem, in sum, is Wall Street's tendency to `overadapt' to every appealing landscape it encounters, building up complexity and leverage to dangerous levels in doing so.
Bookstaber's suggestion is to heed the wisdom of the cockroach.
The cockroach has survived a longer time span, and a wider variety of harsh environments, than humans could ever match. It is one of the creatures man cannot wipe out no matter how hard he tries. And yet, the cockroach's key risk management strategy is embarrassingly simple... simpler, even, than putting in a stop loss. The deeper point is that simple equals robust; by refusing to get fancy, and sticking with the tried-and-true, the cockroach ensures its reign as champion survivor.
Bookstaber uses the cockroach (and other examples from nature) to argue that we, too, should consider cutting back on our excessively specialized ways. The cost of a rough-edged strategy is forgoing excess profits in accomodative environments... but the benefit is increased likelihood of survival in a much wider range of environments, including the truly harsh ones. (As Jim Grant likes to joke, if so many of these credit-driven vehicles can barely handle prosperity, how are they supposed to fare when adversity hits?)
Harrumphs all round
Bookstaber's finger-wagging solution (be less fancy; take less risk) has the ring of common sense to it, especially in the way it frustrates all those market participants determined to have their cake and eat it too.
For those who seek to wring every last nickel out of the market (as LTCM used to brag of doing), Bookstaber argues persuasively that flying too close to the sun will always be perilous. The commitment to leveraging every edge on a broad scale inevitably leads to disaster-prone configurations, no matter how smart the players.
For those who think the answer is greater regulation of markets, i.e. more rules, Bookstaber shows how extra layers of bureaucracy can actually bring about the exact opposite of the intended affect. Perversely, layers of red tape can (and often do) make a situation more risky, by increasing confusion and complacency simultaneously.
Nor is greater information disclosure the answer. If the market's traditional liquidity providers (traders, market makers, speculators etc.) are forced to disclose their positions to the world in real time, they will react in the manner of poker players forced to play their hands face-up. To the extent that disclosure resolves uncertainty, it also drives market participants from the game. And because "liquidity is a coward" as the old saying goes, always running away when you need it most, strict disclosure rules would likely make bad market conditions worse at the least opportune times.
Some left smiling
Two groups in particular may be left smiling at the end of this book -- value investors and trend followers. In both the theory and practice of their normal operations, value investors and trend followers intuitively embraced Bookstaber's message a long long time ago, favoring longevity and robusticity over the temptations of adjusting to the moment.
It is perhaps not surprising, then, that value investors and trend followers are arguably the most profitable market participants by far on an absolute-dollar basis, hauling in hundreds of billions in profit over the course of many decades. They are champion survivors too... with a touch more class than the cockroach.
A MUST READ for all financial markets professionals.......2007-09-13
This is an excellent book. I cannot say enough good things about it. Unquestionably one of the best books on financial markets of the hundreds that I have read. This book provides a ringside view of how the major banks and hedge funds work and why financial risks have become more magnified than before.
Derivatives, trading and hedge funds are here to stay. They perform a valuable service to the financial markets, though Warren Buffet will disagree with me. Nevertheless, it is the mis-use of derivatives and the excessive use of leverage that leads to financial disasters. This book provides an excellent insight into why we witness financial turmoil in some of the most liquid markets.
I strongly recommend it to all MBA finance students as well as to financial markets professionals at hedge funds, prop trading desks, risk managers, quants, bankers, pension fund managers.
Demon.......2007-09-12
I found this book very interesting and full of information I haven't seen elsewhere. A Wall Street "quant" insider's perspective, focused on what can and does go wrong. The author also ties his analysis of famous Wall Street tailspins to other notable failures, including Chernobyl and the Challenger, and finds common themes.
Book Description
The author of the bestselling The Art of Innovation reveals the strategies IDEO, the world-famous design firm, uses to foster innovative thinking throughout an organization and overcome the naysayers who stifle creativity.
The role of the devil's advocate is nearly universal in business today. It allows individuals to step outside themselves and raise questions and concerns that effectively kill new projects and ideas, while claiming no personal responsibility. Nothing is more potent in stifling innovation.
Drawing on nearly 20 years of experience managing IDEO, Kelley identifies ten roles people can play in an organization to foster innovation and new ideas while offering an effective counter to naysayers. Among these approaches are the Anthropologist—the person who goes into the field to see how customers use and respond to products, to come up with new innovations; the Cross-pollinator who mixes and matches ideas, people, and technology to create new ideas that can drive growth; and the Hurdler, who instantly looks for ways to overcome the limits and challenges to any situation.
Filled with engaging stories of how companies like Kraft, Procter and Gamble, Cargill and Samsung have incorporated IDEO's thinking to transform the customer experience, THE TEN FACES OF INNOVATION is an extraordinary guide to nurturing and sustaining a culture of continuous innovation and renewal.
Customer Reviews:
How many faces do you recognise?.......2007-08-13
Building on the Art of Innovation, Kelly brings us the new theory of the ten faces of innovation. It is simple to read and easy to understand. Another book which I found just as breezy to read was Eightstorm: 8-Step Brainstorming for Innovative Managers.
Good stories, but very IDEO-centric.......2007-07-30
Tom Kelley's book The Ten Faces of Innovation defines ten personas (thankfully not "named"--Bob, Sally, etc--just titled) that exemplify roles in an innovative team. They aren't job titles or exclusive positions, and people can work across roles as well.
* The Anthropologist, who observes people and discovers ways to help them
* The Experimenter, an expert in prototyping and testing, probably the classic "innovator"
* The Cross-Pollinator, with broad interests who enjoys connecting different cultures
* The Hurdler, who champions projects and carries them over beaurocratic obstacles
* The Collaborator, who brings people together to work cooperatively
* The Director, encouraging, inspiring, supporting, organizing and championing innovators
* The Experience Architect, a specialist in designing full "experiences" that transcend simple products or services
* The Set Designer, creating spaces that inspire and support innovation
* The Caregiver, who improves the subjective, emotional aspects of products and how they relate to us
* The Storyteller, who tells stories about people and products in creative and interesting ways
The book is heavily IDEO-centric, and most of the examples are from Kelley's own 20-year career there. Not really a surprise for a book subtitled "IDEO's strategies..." but worth mentioning; this is basically IDEO in book form. It includes several weird asides that are clearly IDEO/Kelley quirks, for instance his long tangents into the power of napping at work, comfortable hotel beds, and (ugh) T-shaped people. The IDEO focus gets pretty old after a while, and makes you wonder about the broader applicability of the ideas. What works in a design consulting company that works almost exclusively on short-term projects may not be the best structure for others.
But the personas are broad and--as mentioned above--not exclusive to people's job roles, so they are good signposts for anyone interested in developing their own innovation skills. I suspect it would be less interesting for a sole inventor/designer, but for people working at companies they are especially applicable.
Innovation-in-depth.......2007-06-07
The Ten Faces of Innovation describes ten complementary personas - personality types or roles that contribute in different ways to creative teams:
Anthropologist - this is perhaps the most literal title, meaning people who have been professionally trained as social anthropologists to observe people and processes and interactions `with a fresh eye'. These are probably the biggest antidote to "But we've always done it like that" thinking.
Experimenter - willing to take a chance, maybe, but also willing to explore alternatives and test concepts through prototyping, trial-and-error and applied science.
Cross-pollinator - like a bee flitting between the private parts of flowers, the cross-pollinator spreads good ideas and techniques between specialisms, breaking down silos and sharing good practice
Hurdler - able to leap tall buildings (well project hurdles anyway) in a single bound. They are adept at finding ways over (or more likely around) around immovable obstacles to reduce the banging-your-head-against-a-wall bruising.
Collaborator - knits people and teams together by finding common interests and objectives. Sometimes described as the spider who weaves the web linking everyone to everyone else.
Director - nothing to do with the title on her business card, the Director provides clarity and direction, a rallying point for the troops yet with the humility to actively listen to input from the team.
Experience architect - with an uncanny knack of putting themselves in the customer's shoes, experience architects can visualize products and services at the point of use, no mean feat when they are barely on the drawing board and even the customers are an unknown quantity.
Set designer - this is a fascinating persona: someone who creates visual spaces and physical representations relating to the job at hand. Not really office architects as such, set designers invent scenarios and contexts. They are also comfortable to break unwritten rules and help people mix fun with work (now there's a thought!).
Caregiver - in the sense of nurses and doctors (no, not the teenage version), caregivers support their colleagues, providing a sympathetic sounding board and gentle encouragement when times are tough, and motivating and inspiring people to give there all at all times.
Storyteller - anyone familiar with The HP Way or the origins of Apple and Microsoft will recognize the value of constantly telling and re-telling inspirational stories as a way of reinforcing corporate culture. It's clear that this is a comfortable personal for author Tom Kelley since both books quite literally tell a story.
The book is peppered with genuine examples, most of which involve the genesis of familiar but once remarkable products that broke the mold in some way - style, design, functionality, whatever. Some of you reading this may have bought Palm V PDAs, for instance, on the strength of their sleek looks and brilliant user interface - the Graffiti stylus script language so close to English that anyone can pick it up with a few minutes' practice. How many of you appreciate the innovative use of glue instead of screws to bond the Palm V's case together, or the flat-pack lithium batteries inside? Like many other examples, the attention to detail and the multiple overlapping layers of innovation go well beyond the obvious external visual cues. This is innovation-in-depth.
Whether you are interested in applying innovation and creativity to work initiatives or life in general, the IDEO books are inspirational, instructional and fun to read - what a combination. Recommended.
Easy suggestions for increasing innovation.......2007-05-04
Welcome to an enjoyable, easy read - which is not to dismiss Tom Kelley's fine ideas. With the aid of Jonathan Littman, Kelley works throughout this book to show how innovation can be much more painless than most people think, and more fun. Kelley makes thinking collaboratively sound like a blast. In the process, he convinces you that your organization should nurture and cherish playing with ideas. Although he admits that his consulting company, IDEO, found itself grinding along on tedious projects at times, and that he has watched people shoot down perfectly good suggestions, his underlying message is one of open possibility. He presents 10 roles you can play during meetings, any one of which would be enough to add considerable value. By showing that these roles are temporary, he sends the message that if you want to stay competitive, you can change, and even must. As he examines everything from product names to rules governing how workers decorate their cubicles, Kelley demonstrates the many opportunities you have to create something new. The cost is often little or nothing; sometimes innovation simply means getting out of your employees' way. We recommend this book to managers who wish to break old patterns and encourage creative thought companywide.
Inspiring and fun.......2007-04-17
If you want to create an environment where innovation is the norm, what do you do? Tom Kelley doesn't have a prescription, but he does have some people he'd like you to meet. This book is about the roles that people in an innovation driven organization take on to create fresh new ideas on a regular basis.
If you're an individual contributor, this is a very helpful book both to understand the people around you and your own specific skills. What's more, although in some ways Kelley is describing personality attributes, he is also describing skill sets and ways of looking at the world that you can decide to cultivate. No one is going to be excellent at all of these roles- but that doesn't mean you can't strive to be well rounded!
As a manager, the main take-away lesson is that there are many different types of creativity that can reinforce each other if put together. The most important part of building a creative organization may come at the hiring stage, where you can most easily create a mix of the different personas. But if you're in a stable organization, as most of us are, you can use the "ten faces" to identify the different styles of creativity in your people, and use that information to form teams and projects to bring out their best.
The book is very heavy on anecdote and example. Every one of the ten personas has several stories that illustrate how such an approach can generate ideas that otherwise wouldn't have been considered. The Anthropologist will put themselves in the place of the average user or consumer, as did a woman who faked a pregnancy to see how she would improve the birthing experience at a major hospital. The Experience Architect will take a commodity service and turn it into a show that customers will enjoy for its distinctiveness, like the ice cream "cooking" at Cold Stone Creamery.
The persona that I found most intriguing, and perhaps also furthest from my own, was the Set Designer. Kelley believes strongly in the power of space to shape the minds of those who inhabit it, and just reading about some of the things that go on at IDEO is enough to make my own cube - which I had thought very nicely decorated - seem drab and uninspired.
"The Ten Faces of Innovation" is not a good book to read if you want to know exactly how to change your company, but it is an excellent resource for spotting the early creative behavior every innovator should want to encourage in their team.
Book Description
The Financial Principles Every Venture Capitalist Needs To Master
In Andrew Metrick’s Venture Capital and the Finance of Innovation, future and current venture capitalists will find a useful guide to the principles of finance and the financial models that underlie venture capital decisions. Assuming no knowledge beyond concepts covered in first-year MBA course, the book will familiarize you with:
- The relationship between risk and return in venture capital
- Historical statistics on the performance of venture capital investments
- Total Valuation - the data and methods used to value a high-growth company
- Partial Valuation – how to analyze the special features of VC transactions such as convertible preferred stock, participating preferred stock, payment-in-kind dividends, and liquidation preferences
- A framework for modeling investment in "research and development"
- The relationship between strategy and finance
- Cutting-edge techniques such as Monte-Carlo analysis, real options, binomial trees, and game theory
About the Author:
Andrew Metrick is an Associate Professor of Finance at the Wharton School of the University of Pennsylvania, where he teaches Venture Capital and the Finance of Innovation. Dr. Metrick received a BA in Economics and Mathematics from Yale and a Ph.D. in Economics from Harvard. Dr. Metrick has received numerous teaching awards and distinctions, including recognition by BusinessWeek as one of the best teachers at Wharton.
"This book is an excellent bridge between finance theory and venture capital practice. Metrick presents cutting-edge financial tools, creatively apllied to venture capital and R&D investing. It is destined to become the required reading for all students and practitioners in the field."
—Paul A. Gompers, Eugene Holman Professor of Business Administration & Director of Research, Harvard Business School
"Despite the increasing importance of the venture capital industry, until now there was no reference that could provide practitioners with a specialized grounding in finance. With clear explanations and practical models, Metrick’s book can fill this gap. I enthusiastically recommend this book to all venture capitalists."
—Ted Schlein, Partner, Kleiner Perkins Caufield & Byers
"Investors in young, fast-growing companies have a new way to calculate their value without regard to the prices of other companies’ stocks. This is an important advance, because most other appraisal methods for start-ups are based on relative valuation, which – as we saw at the top of the Internet bubble – grossly overvalues a new company when comparable companies in the same industry are also overvalued."
—Mark Hulbert, The New York Times, Dec. 31, 2006
Customer Reviews:
Best Book in its Class.......2007-06-09
After reading through this book and the financial models, I have to say that this is the best book in its class.
Dr. Metrick did a fantastic job.
I recommend this book to anyone interested in the mechanics of the venture capital industry.
An amazing book.......2007-05-07
The book is very comprehensive and covers a lot of venture capital finance. It clarifies a lot of concepts and applies them very creatively to Venture Capital. A good book to learn about the VC industry and in general finance (as VC finance uses the concepts very effectively)
Must buy and extremely useful for anyone in VC, R&D and Strategy.......2007-01-28
That's a great book that gives a comprehensive overview of all finance aspects that are related to VC, R&D and innovation. It has a useful and effective framework of how to think of innovation in a methodical way. After working as a strategy consultant for a couple of years I thought that with the knowledge I gained from this book I will be far more effective: more effective in analysing alternatives and assesing them and more effective in communicating it to my clients. The balance between theory and practical application of finance is exactly what I was looking for.
If you are intrested in VC in general, the first part of it will provide you with a comprehensive overview of the VC industry.
Best book of its kind.......2007-01-25
Metrick's book clearly and concisely illustrates the finance behind venture capital. Accessibly written, this book is the kind of book you would use to teach yourself how to apply the tools of finance to VC. I found it especially useful in understanding the different structures VCs use and in understanding the impact of additional financing on the valuation of a prior investor's shares. The examples in the book are well done and walk the reader through the numbers in a way that is easy to follow and illuminates the ideas articulated in the text.
This book is for anyone who wants to:
- understand how to apply finance to VC
- understand the different structures VCs use to protect their interests (this book is especially for entrepreneurs who want to understand the financial terms of a VC's offer)
- learn how to apply option pricing theory and Monte Carlo simulation to make financially informed decisions about R&D, etc.
You don't need a background in finance to get value out of this book (although it is helpful to be quantitatively inclined). It's written clearly enough and the math is simple enough that anyone with a working knowledge of algebra should be ok.
This book is NOT for people who want a book on how to be a VC, or how to evaluate a management team or business idea. While the book definitely has practical implications, in reality VCs probably don't actually use very many of the financial models in the book because they haven't bothered to build them. After reading this book, you'll be able to understand these models and, if you're good with Excel, build them yourself.
All in all, whoever buys this book will come away with the vocabulary and financial frameworks necessary to have an intelligent conversation with a VC. It's by far the best book of its kind.
Outstanding, comprehensive and utterly sensible analysis of the venture capital business.......2007-01-15
Professor Metrick is brilliant as a teacher, meticulous as a researcher and entertaining as a comedian. He captures his lucid lecturing style into written form with this book.
It's the closest you can come to attending one of Wharton's most coveted and insightful MBA classes without paying $80,000 and 2 years of lost salary.
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- Healthcare Finance: An Introduction To Accounting And Financial Management
- Healthcare Finance: An Introduction To Accounting And Financial Management
- Healthcare Finance: An Introduction To Accounting And Financial Management
- History: Fiction or Science? (Chronology, No. 1)
- History: Fiction or Science? (Chronology, No. 1)
- How to Price Landscape & Irrigation Projects (Greenback Series)
- Information Technology Project Management, Fourth Edition
- Intermediate Accounting
- Intermediate Accounting: Study Guide
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