Brian Sommer is in extremely good form at the moment. This week’s visceral piece: Cautionary Tale for Best Practice Promoters talks about the complexity of achieving success and failure:
One Big 8 accounting genius developed a huge best practices database years ago. He and his cohorts would arrive at client sites and meticulously check off each best practice against what they observed. They always found thousands of practices that weren’t being used and this then led to additional consulting and systems gigs. Unfortunately, whenever I would ask to see the correlation between any of these best practices and improved business performance, I got lots of defensive posturing. Proof/causality is really hard to come by. Why? Success is complex and not single factor dependent.
To put this in context, Brian is referring to a CFO Magazine review of The Halo Effect (Free Press, February, 2007) by Phil Rosenzweig which sets out to debunk corporate success:
Business gurus may rest their case on extensive research (Delusion #5, “Rigorous Research”). But much of that research is compromised, says Rosenzweig, since it relies on halo-distorted articles and books, and on surveys of employees who themselves are blinded by the light. (Will managers at an industry leader be likely to say that their company lacks commitment to its customers?)
I get cross when I’m told that ABC client who has implemented this fantastic oojahthingamybop gizmo (best practice cause) that has led to them enjoying world class performance (best practice effect) – doesn’t want to talk. Competitive advantage. Rubbish.
Gary Loveman, CEO of Harrahs the casino operator will talk all day and night about how they’ve used certain techniques to extract the maximum share of wallet from casino players, at the least possible cost, that leave those customers coming back for more. He knows full well that if a competitor tried to emulate his system, that’s OK. Because by the time they’ve got it done, he’s moved on to something new.
If you look at what Loveman has done, then it is not all down to systems. To make Loveman’s strategy work, you need a specific kind of organisation, a specific type of bespoke system and a specific approach to customers. There is no single best practice factor. We can all learn from the success of others, in general but as Brian correctly points out:
The best companies do not accept competitive parity as a cure-all. Mimicry won’t help them succeed long-term. A unique strategy is what will help a company carve out its niche in the marketplace.
And very often that is heavily laced with a dose of luck or random events that for reasons yet to be fathomed coalesced at the right time. Darwinian?
However, when companies fail – and I mean go bang rather than suffer a downturn or lose in a hostile bid – it is almost always possible to discern an inability by management to react appropriately to the circumstances in which they were operating. For me, the most recent classic case is PeopleSoft.
- Dave Duffield, founder and CEO knew when to retire
- Craig Conway, who succeeded Dave, didn’t know when to give in
- Dave returned and did the deal with Oracle that would never have happened under Conway
Those are management decisions. That why sometimes the most difficult job a professional can have is in telling the client they’ve plain got ‘it’ wrong.
In a case I was on, a Big 4 crew was assembling a new costing system as a best practice. Which would have been fine if it wasn’t for the small matter of management needing help figuring out which production line to sacrifice and how the hell to ditch millions of pounds of rapidly obsolescing stock. The day I closed the factory gates for the last time, the costing system was incomplete and the company was in excess of £200,000 the poorer.
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