In the 1950’s, Haloid Corporation thought it had a winning product. Through some clever engineering, it had created new technology that was leaps and bound better than anything that had come before it. The only problem was that nobody wanted to buy it.
Then the company’s president had an epiphany. If no one wanted to buy their copy machines, maybe some would be willing to lease? That, it turns out, was a multi-billion dollar idea and the company, now known as Xerox, became one of the world’s leading companies.
It’s a common question thrown at me by entrepreneurs, venture capitalists, or the more cynically minded corporate leaders.
That is, why bother trying to innovate if no matter what they do, large companies can no longer maintain a sustainable advantage and their life spans are just getting shorter and shorter? Isn’t it better to hasten Joseph Schumpeter’s process of creative destruction and move capital and employment from inefficient dinosaurs to more vibrant and agile upstarts?
Gallup has found that one of the most important decisions companies make is simply whom they name manager. Yet our analysis suggests that they usually get it wrong. In fact, Gallup finds that companies fail to choose the candidate with the right talent for the job 82% of the time.
Bad managers cost businesses billions of dollars each year, and having too many of them can bring down a company. The only defense against this massive problem is a good offense, because when companies get these decisions wrong, nothing fixes it. Businesses that get it right, however, and hire managers based on talent will thrive and gain a significant competitive advantage.
“It is simple math,” the strategist said in a tone that sounded suspiciously similar to how I explain things to my six-year-old daughter. “Decreasing churn by a percent — a single percent! — creates tens of millions of dollars of value. A point of market share creates five times that amount. Our growth investments are years from providing that kind of return.”
Yesterday’s announcement by Microsoft that insider Satya Nadella would take over as CEO hardly seemed to inspire investors. The company’s stock price barely budged, no doubt in part because Nadella had been the rumored frontrunner, but also perhaps because he was widely seen as the “safe” choice. But does that imply that an outsider CEO would be better for Microsoft? The evidence says otherwise.
It’s always tempting at this time of year to try to make a definitive list of the best ideas from the past 12 months. But then we end up debating what counts as best — important? useful? original? all three? — and compiling extremely long lists, struggling to shorten them, and over-thinking it all, when the point should just be to gather some really good reading for you for any free time you happen to find over the holiday.
