October 14, 2004
News & Opinion: High Expectations for Confronting Reality
All is for naught if you are executing against a business model that is increasingly obsolete in the global marketplace, and so I suspect Confronting Reality was written to make sure that you're not racing a hundred miles an hour...off a cliff. (And to get you moving in the right direction.) The term "broken business model" is used repeatedly in the book.
Intended to shake up executives, business line managers, and business owners who may be lured - easier than you'd think - into assuming they have a cyclical "V-shaped blip in the growth curve", the book forces you to ascertain whether there are structural rifts underway making a business model increasingly obsolete. For entrepreneurs, this book offers food for thought on creating disruptive business models. Even with all the signals, most companies - yes, even entrepreneurs - have a bias toward hearing good news and Confronting Reality does devote a chapter to "Looking Around Corners."
We are entering a new era, defined by structural changes that won't reverse themselves anytime soon. Such epochal shifts have a habit of changing the rules for running a business, and this one is no exception.
I agree with the authors in much of their assessment and Bossidy shares his own sobering tale about the automotive components business unit during his helm at AlliedSignal.
[W]e asked ourselves why we hadn't seen the solution earlier, before investing time and money doing the right things to the wrong business...Allied and its competitors alike made products that were essentially high-level commodities...The basics of making money simply weren't there, so trying to fix the business was a futile undertaking.
From that experience Bossidy sees that the flaw - one that leads to bad decisions - is the "absence of a clear, integrated picture of your business reality, calculated at the very beginning of any effort to plan a business's course."
This effort typically begins with the presentation of a strategy. We've seen thousands of such presentations, many of them highly detailed, complex, and bolstered with masses of data. But we've rarely seen equally detailed plumbing of the exterior environment, the realism of financial targets that are set given the nature of that environment, and the organization's ability to deliver on those targets.
The rest of the book lays out what the authors see as a comprehensive "business model" - "one that modeled the business as a whole" - and rigorously analyzed all the elements and then "harmonized them." The entire exercise begins with a good hard look at the external environment including customers (and the authors state that too many companies think inside-out rather than outside-in) and financial targets before tackling strategy, operational activities, selection and development of people and organizational structure.
Their "business model" then becomes "an early warning system for real-world changes that pose threats or provide glimpses of opportunities." The emphasis is not on salvaging broken business models to limp along a wee bit longer but to breathe new life into them or significantly alter them to take on new opportunities.
I particularly liked the Kmart and Wal-Mart story. The writing was on the wall long before Kmart declared bankruptcy. "[Sam] Walton's business model created a structural change in retailing..." Kmart thought it was merely yet another competitor without understanding that Wal-Mart was changing the rules of the game. Wal-mart was doing something fundamentally different in the way they earned money and operated but K-mart didn't take the time to understand what it was. "Instead, they [Kmart] put their resources into strategy and positioning - signing on Martha Stewart, for example, and at the same time cutting prices aggressively. Such measures, while helpful in generating sales, couldn't possibly get to the root of the problem of the obsolete business model.
The authors draw from many good examples - including many cautionary tales - throughout the book, including first-hand experience at GE and Allied Signal as well as Dell, Kmart, Wal-mart, EMC, Sun, Cisco, IBM, Stanley Works, Home Depot, Thomson Corporation among other company mentions within anecdotes.
The chosen theme, message and angle of the book is extremely viable, timely and compelling for smaller companies and corporate executives alike but....
After Chapter 2 my enthusiasm took a nosedive and I set it aside. In a world drowning in business resources for the executive and manager, this book is decidedly not a page-turner. Had I not committed to write this review, it might have sat in the too-be-finished pile for a bit before sliding into the realistically-will-never-finish bin.
Even this review reflects the dry, parched ambivalence of the book's style as I couldn't muster enough enthusiasm based on content alone.
Bossidy and Charan acknowledge many of us have enough internal business problems to keep ourselves occupied twelve hours a day, so taking the time to understand the macro perspective isn't necessarily on the top of the priority list. And these are precisely the people that never find the time to read a business book. So ultimately I'm disappointed that the book was not written, rewritten and edited to ensure a fully engaging and enlightening product that begs to be read, heavily underlined, and zealously shared.
Evelyn Rodriguez is a marketing consultant offering strategic advice in reaching and engaging the empowered Customer 2.0 in an increasingly networked media world.
About Dylan Schleicher
Dylan Schleicher has been a part of the 800-CEO-READ claque since 2003. Even though he's stayed on at the company, he has not stayed put. After beginning in shipping & receiving, he joined customer service and accounting before moving into his current, highly elliptical orbit of duties overseeing the ChangeThis and In the Books websites, the company's annual review of books and in-house design. He lives with his wife and two children in the Washington Heights neighborhood on Milwaukee's West Side.