Harvard Business Review's: The Essentials

A couple days ago, I finished reading Harvard Business Review’s The Essentials.  It provides 10 brief overviews major topics on business management written and co-written by various business leaders in today’s industry.  Topics range from leading change to the power in data analytics to marketing mistakes.  I thought this review would be a nice way to wrap up 2017, so here we go.  

My two favorite chapters in The Essentials would most easily be Innovation by Rosabeth Kanter and What Is Strategy? by Michael E. Porter.  

In Innovation, Kanter declares four mistakes many companies make when driving change.  These four mistakes are Strategy, Process, Structure, and Skills mistakes.  Kanter provides very solid and accessible ideas in this article, mentioned brands from Kraft Foods to IBM.  

• Strategy.  Kanter mentions that some of the current mistakes companies make when innovating is that they believe they can only improve a product, when services such as delivery, online shopping satisfaction, and customer services are also factors that contribute to how successful a company will be in innovation.  In other terms, Kanter argues that product innovation alone is not the only form of innovation and company should consider when navigating paths to better improve their business.  Another problem that arises when a company becomes too product-centric, is that they end up innovating several versions of the same product, which confuses customers and complicates internal systems.  My favorite example Kanter offers is Kraft Foods.  Rather than innovate a brand new food, Kraft changed how their mac and cheese was packaged (buy 1 box, 2 boxes, 3 boxes, 5 boxes etc. at once).  Kanter says this is not truly “innovation”.
  
• Process.  When business leaders become excessively and disruptively controlling about how much money is allocated to each project, they will most likely fail to reach their maximum potential.  Kanter argues that adding flexibility to budgeting will help better encourage innovation.  
  
• Structure.  Sometimes businesses will acquire a fledgling company, or one that is not yet as developed as the one that acquired it.  In this sense, Kanter says the main company must find ways to incorporate this new company into its current values, since they are now the same company.  In a different chapter about core capabilities, a similar idea holds true: one set of “core capabilities” that dictate everything from processes to values to general core products should permeate into all corners of the organization.  Kanter also mentions that many fledgling companies fail when acquired by a larger organization simply because these new start-ups are held to the same expectations and well established ones.  Setting individual expectations will help encourage growth and innovation in fledgling companies.
  
• Skills.  Kanter says that innovation often takes 24 to 26 months to manifest results.  However, many people stay on the project for merely 18 months; too many employees abandon the idea before real results can actually be seen.  Getting the entire group on board and committed in the idea will create a more stable team.  
  

Michael E. Porter talks strategy in his article titled What Is Strategy?.  Porter argues that strategy is not merely operational effectiveness because OE is too easily replicated.  Real strategy is not easily copied by other organizations.  Porter writes three big ideas: (1) Strategy is doing something different than competitors, (2) Making (and knowing) that there are tradeoffs to be made with the incorporation of a new strategy, (3) Strategy requires fit within the organization’s current products and services.  

Porter uses Southwest as one of his key examples that cover all these big ideas.  Southwest distinguishes itself by providing short trips on airplanes that have no food, no TV, no first class, no lines, its aircrafts consist of solely Boeing 737’s, and fast transfers.  This complies with the first ideal, because Southwest is offering a service that is genuinely different from other airlines. They offer no luxuries, instead, prioritizing speed and simplicity.  They have also created a strategy that is almost impossible for an already established airline to copy (and thus, is a strategy).  

In the past, Continental airlines attempted to create a service within its own organization that offered similar services to Southwest.  However, they ended up losing a lot of money on this idea because it contradicted their pre-existing values and strategy, thus violating the third idea of “fit” within an organization.  When Continental tried to replicate the same idea of Southwest, it failed.  While some flights offered food, others did not, and this did not make Continental a profit, since regardless of whether a fast service plane was flying or not, food was still being served on some other flight in the organization.  Thus, the luxury of having food was never entirely swept out. 

Porter says that parts of strategy can still be copied.  But a company’s entire strategy and business plan will unlikely be copied because incorporating a new strategy requires trade-offs.  In other words, a new idea cannot generate profits without giving up a current portion of strategy, because the ideas clash and do not have proper “fit”.  If Continental really desired to make successful fast service flights that cost customers as little money as possible, they would have to give up something about their current system.  Southwest only owns Boeing 737s, and nothing else.  If Continental made that same trade-off (plane size and type variation) this would have improved their chances at success.  

The Essentials is a detailed read, but is packed with information.  I have little time to read at school and I felt that every time I sat down with that book, whether it be for even 5 minutes, I could get something out of it.  A comprehensive business management book.  

Happy New Year!