Gagan Kaul Blog

There is an interesting comparison being drawn between two books written by some of the biggest names in business and strategy. John Kay, in a Financial Times article aptly titled “Beware of Grand Visions and Foresight in Business”, talks about the companies mentioned in the two books, viz. Competing for the Future by C K Prahalad and Gary Hamel, and In Search of Excellence by Tom Peters and Robert Waterman.

John Kay writes - In Competing for the Future, CK Prahalad and Gary Hamel suggested that companies should adapt a strategy concerned with ‘creating stretch goals that challenge employees to accomplish the seemingly impossible’. But hindsight is a harsh taskmaster and most of the companies paraded by P&H for their foresight, have since underperformed.

A 2002 Fortune study reviewing the companies that Tom Peters and Robert Waterman had picked two decades earlier showed that they had generated shareholder returns in excess of the Standard & Poor’s index. This is not true of the Prahalad and Hamel’s 12, which yielded 6.2 percent per year against 9 percent for the market as a whole. The four companies [Prahalad and Hamel] praised for ‘regenerating their strategy’ were all subsequently acquired by larger companies in the same industry. AT&T, Compaq, JPMorgan and Banker’s Trust …

A point worth noticing here is the different thought process between the business thinkers and gurus from the academia, and those that are at the helm of the business. The article and the results might give contrasting clues as to who drives what … do the businesses drive management thinking or vice versa. That should become an interesting point of discussion, as successful businessmen often cite the knowledge and insight gained through years of experience to be the key factor for success. On the other hand, we have seen lots of academic thinking and models (remember game theory et al) contributing effectively in redefining the business models of ailing corporations and turning them around.

I think that any forecast needs to be based not only on the academic studies, but also by taking into account the common business acumen. It can be very well compared with the stock markets - fundamental and technical views. In the longer run, you have to go hand in hand with both to make a sound investment decision. In a similar fashion, business acumen combined with research and new operational paradigms (read academia) would also need to go hand in hand to survice in the present times. So if you are a believer in only one school of thought, every decision might become a risk. This is a tangential take on the article, but this is the thought that flashed through my mind when I read the article.

Tom Peters was quick to take note of John Kay’s article. This is what he writes in self admiration on his blog:

“I guess my perverse pleasure comes because almost every “big” management book seems to need to devote a paragraph to trashing the companies Bob and I picked. None cites even a dollop of data to support their point … which doesn’t slow them down in the least. We did indeed make our share of mistakes—but the bunch-as-a-whole have been remarkably resilient.”

However, Chris Valey has a different take on the article and says that Prahalad’s latest book actually makes good sense. On a separate note, The Independent has come out with a listing of twelve books that have changed the world. Check them out as they should make for an intersting reading.