1
            o you know the ancient Chinese curse, “May you                           of the best books by inviting noted...
s+b’s Top Shelf
                               s+b’s Top Shelf                      Management                           M...
Seven Ways
     TO See What’s
     Next




    BEST
               05
     by Howard Rheingold



3




    BOOKS
feature...
ancient history, but the forces it set in motion are only
beginning to make themselves felt. Mr. Friedman offers
a very de...
05
     for granted today, but that would have been unthinkable       picture of the world obsolete. It is possible that i...
R&D lab that brought us such BOOKS
                                                                                       ...
05
               Steven Johnson argues that online games
            are cognitive gymnasiums that attune brains to
     ...
bomb to blow up the rock that blocks the river, so
you can fill the gorge and swim across to get to the top
of Dragon Roos...
Sailing Beyond
                                                                          Luck




                05
     ...
practices and develop business models unprecedented in
their industries. Unfortunately, although the familiar
strategy too...
05
                                                                           1. Transform the customers’ experience by el...
Prahalad, it’s not just size that BOOKS
                                                                                  ...
05
      maternal heads of households) called socios. Each socio       models Professor Prahalad describes are critical to...
05




Forces FOR
Fairness
                                                                                               ...
05
                                                                                        Elevating Enterprise
      plig...
Professor Hart is a leading scholar and innovator in
strategy and corporate environmentalism. He was the
founder of the Un...
05
      panies, Bechtel and Fluor, Main brought dams, electric-     Professor Rivoli tracks the life of a T-shirt from th...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
o you know the ancient Chinese curse, "May you live in ...
Upcoming SlideShare
Loading in...5
×

o you know the ancient Chinese curse, "May you live in ...

1,618

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
1,618
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

o you know the ancient Chinese curse, "May you live in ...

  1. 1. 1 o you know the ancient Chinese curse, “May you of the best books by inviting noted business executives, academics, and live in interesting times”? Well, it’s not ancient features best business books journalists to select and judge the and it’s not Chinese. (According to a definitive most interesting and substantive debunking by Stephen E. DeLong, a professor at the State books in their areas of expertise. Of the hundreds of books University of New York at Albany, its first verifiable that roll off business publishers’ appearance was in a 1950 short story in Astounding Science presses each year, this approach winnows out a relative few — 32 Fiction magazine.) It may not even be a curse. But it’s this year — that we believe are most unquestionably applicable to readers of strategy+business likely to engage, enlighten, and circa 2006: We are living in highly interesting times, and challenge strategy+business’s readers. It also sometimes leads to serendip- that fact is underscored resoundingly in our fifth annual itous results. New York University survey of the year’s best business books. economics professor Michael Moynihan, for example, chose Start with Howard Rheingold’s titioners, and thought leaders. C.K. Prahalad’s The Fortune at the masterful review of seven recent Former strategy+business Deputy Bottom of the Pyramid — which books about the future: These fore- Editor Ann Graham, for instance, deals with the role of the multi- cast everything from tectonic shifts looks at one of the most critical national corporation in the world’s in labor, markets, and ideas, to eco- but unseen issues in the life of the poorest markets — as one of the logical disasters and mind-blowing modern corporation: “the tension year’s most noteworthy books on scenarios of technological advance between the financial demands of globalization; Chuck Lucier and and mutation. Read them, Mr. an enterprise and the need to devel- Jan Dyer also picked Fortune as one Rheingold urges, and “you can clue op a social contract that recognizes of the best strategy books, calling yourself in to the issues that you each employee’s whole life as valu- it “a rare glimpse into the future and your family, colleagues, cus- able.” Kenneth Roman, former — for those with eyes to see — of tomers, and community will be fac- chairman and chief executive offi- the extraordinary opportunities ing in what is already shaping up to cer of Ogilvy & Mather, examines waiting in uncharted and seeming- strategy + business issue 41 be the most surprising century in the changing nature of the concept ly impassable waters.” human history.” of branding, and what marketers We hope you will find the fol- Each of the eight essays in this can do to better understand and lowing essays, and the books they survey deals with a subject of keen profit from it. highlight, as interesting as the times interest to business strategists, prac- As always, we assemble our list they describe.
  2. 2. s+b’s Top Shelf s+b’s Top Shelf Management Media Contents Conspiracy of Fools: A True Story Hard News: The Scandals at The by Kurt Eichenwald New York Times and Their Meaning for American Media Work and Life by Seth Mnookin The World Is Flat: A Brief History of the Twenty-First Century Leadership by Thomas L. Friedman Strategy Creating the Good Life: Applying Aristotle’s Wisdom to Find Meaning and Happiness A Life in Leadership: From D-Day 2 by James O’Toole to Ground Zero: An Autobiography by John C. Whitehead Marketing Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renée features best business books Mauborgne 3 The Future 27 Marketing Globalization by Howard by Kenneth Roman Rheingold ProfitBrand: How to Increase the 31 Media Profitability, Accountability & 9 Strategy by Everette E. Sustainability of Brands by Chuck Lucier Dennis and Jan Dyer by Nick Wreden 35 Leadership 14 Globalization by James O’Toole by Michael 39 Index Moynihan Best Business The End of Poverty: Economic 18 Management Books 2005 Possibilities for Our Time by David K. Hurst Books by s+b by Jeffrey D. Sachs 23 Work and Life Editors and by Ann Graham Contributors Illustrations by Leigh Wells
  3. 3. Seven Ways TO See What’s Next BEST 05 by Howard Rheingold 3 BOOKS features best business books thinking about the future: Seven new books can provoke useful insights into (if not answers to) the questions you should be asking yourself about your business, your life, and the world your grandchildren are going to grow up in: What’s happening today — geopolitically, economi- cally, technologically, socially — that wasn’t happening yesterday? What’s likely to happen tomorrow that isn’t happening today? How should I think about these hap- penings? And most important: What can anyone do to influence tomorrow’s events so that they favor survival, abundance, and meaning? These books are at best sketches of what aspects of uturism used to be an expensive nostrum, future life might look like. It’s up to you to weigh the prescribed exclusively by think tanks and authors’ insights against their biases. But if any of these dispensed by pundits, but now it has turned books seem particularly contrary to your own values, into an essential survival skill for managers, pay closer attention to them: If you want to see clues entrepreneurs, those starting out in life, and those think- to what hasn’t happened yet, you need to recognize ing about retirement. Knowing what is happening now the meaning of what is right in front of you in new is necessary but no longer sufficient: We need to find ways. Sometimes, that means looking through the clues to what is going to happen next — even if that eyes of those with whom you disagree. Precisely because knowledge turns our world views inside out. their views conflict with yours, they might be seeing In response to this expanded need for prognosti- aspects of reality that you fail to see, refuse to see, or cation, a thousand books, keynote speeches, and consul- don’t want to see. tancies have sprung forth. Skepticism rapidly set in To understand what makes 2005 radically different strategy + business issue 41 when readers, speech-goers, and consultees recognized from 1999, whether you are in Bentonville, Ark., or that an excess of foresight can be as dangerous as a Bangalore, India, start with Thomas L. Friedman’s The dearth if such foresight pursues wrong clues or promotes World Is Flat: A Brief History of the Twenty-First Century faulty explanations. This year, (Farrar, Straus and Giroux, 2005), my pick as the year’s however, has been a good one for best look at the future. The dot-com bubble may be
  4. 4. ancient history, but the forces it set in motion are only beginning to make themselves felt. Mr. Friedman offers a very definite theory of how and why your world has inexpensive broadband connec- BOOKS India and China suddenly had tivity to the industrialized world. BEST 05 changed. Mr. Friedman’s is the flavor of neoliberal glob- 3. The third flattener was the advent of “workflow,” alization theory in which the current Davos crowd is which Mr. Friedman defines as “all the software applica- steeped — which is both an endorsement of the theory’s tions, standards and electronic transmission pipes, like importance and a warning about its limits. middleware, that connected all those computers and According to Mr. Friedman, we’re halfway into the fiber-optic cable. To put it another way, if the Netscape first decade of “Globalization 3.0.” Globalization 1.0 moment connected people to people like never before, started in 1492 and was driven by conquest and empire what the workflow revolution did was connect applica- — the globalization of nation-states. Globalization 2.0, tions to applications so that people all over the world 4 starting around 1800, was driven by the first industrial- could work together in manipulating and shaping era capitalist enterprises organizing internationally words, data and images on computers like never before.” around markets and labor — the globalization of com- 4. The effect of the first three flatteners was the panies. Globalization 3.0, which started around 2000, is creation of a platform for inexpensive worldwide collab- flattening the global playing field and shrinking the oration among people, enterprises, and software, which world of labor, markets, and ideas to in turn enabled the remaining six features best business books person-to-person size — the global- flatteners. ization of individuals and small 5. If moving your help desk to groups. (For another perspective India is the flattener so many have on this, see “Carlota Perez: The come to know as outsourcing, then Thought Leader Interview,” by Art moving an entire factory to China is Kleiner, s+b, Winter 2005.) the next flattener — offshoring. And Mr. Friedman attributes Global- when China starts to benefit from ization 3.0 to 10 “flatteners,” events the new ways of manufacturing that and forces that he believes converged its cheap labor force has enabled, off- approximately at the turn of the shoring is likely to have its own glob- millennium: al economic consequences as China 1. November 9, 1989, the date begins to exert decisive influence the Berlin Wall came down, marked over world markets. a sharp transition from “a world of 6. Open sourcing is a mode of walls to a world of networks,” as Mr. production, enabled by the collabo- Friedman wrote in the New York Times, “which was crit- ration platform of Internet-linked PCs, that has poten- ically important because it allowed us to think of the tial far beyond challenging Windows with the Linux world as a single space.” A big part of Mr. Friedman’s operating system and Internet Explorer with the Firefox forecasting methodology involves finding the linkages browser. that tie geopolitical, macroeconomic, and technological 7. Insourcing is allowing a company like UPS to take events into the same story line: One enabler of his first over your entire logistics operation. When you ship your “world-flattening event,” for example, was the intro- malfunctioning Toshiba laptop via UPS, it is delivered duction of Windows 3.0, “which helped to flatten the to the UPS hub, where UPS repairs it the next day, and playing field even more by creating a global computer then ships it back to you for arrival on the third day. interface, shipped six months after the wall fell.” 8. Supply-chaining is what fuels the Wal-Mart jug- 2. August 8, 1995, the day Netscape went public, gernaut, which uses the data-collaboration platform of igniting the dot-com boom and transforming the PCs, the Internet, and barcodes to ensure that when an Internet into the World Wide Web, was significant for item leaves the shelf in a Wal-Mart in Florida, for exam- another reason. It helped lead to massive overinvestment ple, it automatically triggers the manufacture of a in fiber-optic cable. When companies like Global replacement in China. Crossing sank, their stockholders suffered, but hundreds 9. “Informing” is what Mr. Friedman calls the of thousands of highly educated knowledge workers in democratized access to personal knowledge that we take
  5. 5. 05 for granted today, but that would have been unthinkable picture of the world obsolete. It is possible that indus- a decade ago — the ability of hundreds of millions trial civilization’s inability to come up with energy of people around the world to use a search engine, free replacements for petroleum would render Globalization BEST of charge, to find out nearly anything they need to know 3.0 as outdated as the dot-com bubble. Take a look at at any time. the trend in oil prices over the past few years and it’s 10. Wireless access and voice communication over hard not to pay attention to Mr. Kunstler’s argument. the Internet are what Mr. Friedman calls “the steroids” Even if the catastrophe Mr. Kunstler fears is averted, of the flatteners: “What the steroids do is turbocharge all he asks questions that are difficult to ignore about the these new forms of collaboration, so you can now do any local impact of globalization and its perhaps unsustain- one of them, from anywhere, with any device.” able driver. Seeing the world through Mr. Friedman’s corner- Mr. Kunstler’s concerns are twofold: First, he 5 office window won’t show you what will certainly believes that the “Hubbert Peak” (the point at which happen to everyone in the future, but it might help total oil production begins to decline) has been reached, you understand and react knowledgeably when and that “the fossil fuel efflorescence was a one-shot deal Globalization 3.0 comes to your industry, hometown, or for the human race.” Second, he fears that the econom- nation. Of particular interest in this regard is Mr. ic system that grew in the era of cheap energy, and that BOOKS Friedman’s focus on the economic undergirds the globalized world that features best business books Impending Doom challenge that will be posed to the Mr. Friedman describes, will be rest of the world by Chinese and unable to function as it does now: Indian competitors in the future, and “The so-called global economy was the failure of the U.S. education sys- not a permanent institution, as tem to come anywhere near address- some seem to believe it was, but a set ing the challenge. When weighing of transient circumstances peculiar for bias while reading The World Is to a certain time: the Indian sum- Flat, note how almost everyone Mr. mer of the fossil fuel era.” Friedman quotes is a CEO, a secre- World-girdling, hyperefficient, tary of state, or a prime minister. delocalizing supply chains, Mr. This is authoritative information Kunstler asserts, have sucked capital, about what the people who run the civic association, and know-how out world are thinking, with insightful of communities. Now those com- linkages between politics, economics, munities are unprepared for a world and technology. At the same time, in which local self-reliance will Mr. Friedman’s authoritative sources also limit his world become important because the global support infra- view: The world is flattening for the elites Mr. Friedman structure will no longer be affordable: “Conditions over quotes, but he provides very few quotes from those more the past two decades made possible the consolidation of than one level below the CEO. You might miss some- retail trade by a handful of predatory, opportunistic thing as big as the fall of Communism — as the CIA did corporations, of which Wal-Mart is arguably the epit- — if the views from those penthouse windows are the ome.… In effect, Americans threw away their commu- only ones you see. nities in order to save a few dollars on hair dryers and plastic food storage tubs, never stopping to reflect on what they were destroying.” After reading Mr. Friedman, James Howard Kunstler’s Mr. Kunstler’s phrase “the Long Emergency” is The Long Emergency: Surviving the Converging both the title for his book and the name of the scenario Catastrophes of the Twenty-First Century (Atlantic he thinks is most likely over the rest of the 21st century. strategy + business issue 41 Monthly Press, 2005) is a bucket of cold water in the If you accept the author’s argument about the impend- face. If Mr. Kunstler is correct, we’re sliding down the ing end of cheap fossil fuels as plausible, his warning ugly slope of the petroleum production peak and all about the consequences is sobering: “Virtually all of the hell is likely to break loose as a economic relationships among persons, nations, insti- result, rendering Mr. Friedman’s tutions, and things that we have taken for granted as
  6. 6. R&D lab that brought us such BOOKS BEST 05 Whether you regard Joel Garreau’s vision as a disaster warning or a utopian forecast depends on what you think “human” ought to mean. Heaven or Hell? permanent will be radically changed during the Long (DARPA), the U.S. military’s Emergency. Life will become intensely and increasingly local.” technologies as computer graphics, personal computers, Even if the world’s economies and societies dodge and the Internet — all of which must have seemed sim- or avert that catastrophe, there are other huge impend- ilarly unimaginable before they were invented. ing changes to worry about. There’s the matter, for instance, of what will happen when scientists crack the secrets of evolution and intelligence. This is examined in Mr. Garreau also enlists the scenario method that was Joel Garreau’s Radical Evolution: The Promise and Peril of pioneered by Shell and refined by the Global Business Enhancing Our Minds, Our Bodies — and What It Means Network — a methodology that starts with predeter- To Be Human (Doubleday, 2005). Whether you regard mined factors (the amount of petroleum in the ground, 6 the author’s far-reaching vision of decades to come as a for example), driving forces (the need to fuel the trans- disaster warning or a utopian forecast depends on what portation of physical matter that keeps the global econ- you think “human” ought to mean. With germ-cell-line omy running), and critical uncertainties (will anyone engineering that gives your great-grandchildren extra come up with energy sources to replace petroleum when brain cells, more muscle power, or, for that matter, gills we run out of it?), then uses those elements to construct or superhuman computer intelligence, the possibilities plausible stories about the future. features best business books that technological innovation may make practical in this Mr. Garreau’s scenarios deal not just with unprece- century pose questions that used to be confined to phi- dented power to alter the external environment — the losophy, theology, and fiction. arena in which Mr. Friedman’s and Mr. Kunstler’s analy- Mr. Garreau is a zesty storyteller, a gonzo futurist ses play out — but also with the power to augment the who builds alternative universes from solid science, and human body and brain, perhaps even to replace them. he’s neither a technology booster nor a Luddite. The His driving force is what he calls “the Curve” — the questions his moral quandaries raise are among the acceleration of change and knowledge brought about by deepest questions we know how to ask: What kind of the combination of organized research and mind-ampli- creatures are we — the apelike animals from which we fying tools from computers to the Internet. This, in his evolved, or the angels we imagine we can become? If we view, guarantees more and more powerful technological accept the Darwinian explanation of our origins, where capabilities in coming decades. He focuses on what he do we want to go next, now that we’re harnessing the calls the “GRIN technologies” — genetic, robotic, very engines of evolution? Is there a “too far” for informational, and nanotechnological. He introduces biotechnology, nanotechnology, and artificial intelli- big ideas about radically better or worse futures through gence? And what would anyone be able to do about it if the stories of some of the colorful characters who have there really is a line that technology shouldn’t cross — a championed them: Bill Joy, creator of Berkeley Unix and line that could mean the end of Homo sapiens? cofounder of Sun Microsystems (who now fears that Radical Evolution paints a future that presently desktop bioengineering, runaway nanofactories, or self- seems unimaginable, with everything from IQ implant reproducing robots could end the human era before we chips to superpowered exoskeletons, microscopic facto- have a say in our fate); Ray Kurzweil, brilliant inventor ries that assemble anything you need from raw materi- and entrepreneur (whose track record at creating tech- als, and smart computers that design smarter computers, nologies lends weight to his belief that the generations but Mr. Garreau grounds his scenarios in current re- who will live for centuries are alive today), and dread- search. Much of his narrative brings readers into the locked virtual-reality visionary Jaron Lanier (who puts halls of the Defense Advanced Research Projects Agency his bet on the human capacity to prevail).
  7. 7. 05 Steven Johnson argues that online games are cognitive gymnasiums that attune brains to the current techno-social worldview. Mr. Garreau’s scenarios are Heaven, in which people Friedman 10 different “flatteners” to describe has been use techno-superpowers to create an earthly paradise; reduced by Mr. Pink to extreme, perhaps crippling sim- Hell, where intellectual power trumps wisdom and we plicity. But I find useful Mr. Pink’s insight that the most BEST become slaves to our creations, die out as victims of our valuable cognitive and social skills in an increasingly own tools, or are replaced by more intelligent robots globalized world of many-to-many media are going to who see no need to keep us around; Prevail, where be different from those that enabled success in a world humanity collectively does what it has always done of few-to-many media. before — step up to the challenges posed by external cir- “Design, story, symphony, empathy, play, and cumstances or humankind’s own inventiveness; and meaning” are the six “essential aptitudes” — human Transcend, in which we or our descendants use techno- capabilities that can be mastered through practice — logical powers to achieve the spiritual goals our great that Mr. Pink offers as an appropriate mind-set for the 7 religions have set for us for thousands of years. Like all conceptual age. His explanatory framework may be sim- good scenarios, they aren’t predictions, but believable plistic, but the essential aptitudes he describes, like Mr. pictures of different futures, intended to inform deci- Friedman’s flatteners, can help you perceive significant sions we make today. new forces in the world — in this case, interior forces With Mr. Friedman claiming a broad view, Mr. that are to some extent under your control. Read the BOOKS Garreau encouraging us to take the long view, and Mr. book quickly, try the exercises, but don’t feel the need to features best business books Kunstler trying to draw our attention to a looming abyss ponder the depths of Conceptual Age theory. ahead, let’s not neglect the interior view: What are we to Steven Johnson probes the depths of cognitive think? More important, how are we to think if these futurism more deeply than Mr. Pink in Everything Bad analyses and forecasts turn out to be accurate? I agree Is Good for You: How Today’s Popular Culture Is Actually with Daniel H. Pink’s claim that what we need is Making Us Smarter (Riverhead, 2005). Mr. Johnson A Whole New Mind: Moving from the Information Age argues that television today is becoming more complex to the Conceptual Age (Riverhead, 2005), although I and requires heavier intellectual lifting than it did in the found his harking back to the useful but limited “right past. He also thinks that the high-resolution graphic brain/left brain” metaphor and revival of John Naisbitt’s simulations and massive multiplayer online games decades-old “high-tech/high-touch” trope to be more favored by teenage males are cognitive gymnasiums retro than futuristic. where sophisticated conceptual frameworks and Mr. Pink agrees with Mr. Friedman about the rea- exploratory methodologies attune brains to the current sons 20th-century knowledge workers need a new men- techno-social worldview. tal tool kit, although he simplifies these causes to “Asia, The most challenging contemporary games, such as abundance, and automation.” The current transforma- “Zelda,” “Myst,” and “Half-Life,” Mr. Johnson claims, tion that is driven by these forces, as Mr. Pink char- require active exercise of “the basic procedure of the sci- acterizes it, is one from the information age, where entific method,” through the mental practice of what he analytical left-brain skills (“L-directed thinking”) such as names “probing,” a tactic required to test game envi- computer programming, the law, and business adminis- ronments in which the rules aren’t given but are meant tration were requisite for success, to a “conceptual age,” to be puzzled out by the player (a term Mr. Johnson strategy + business issue 41 in which right-brained skills (“R-directed thinking”) of borrows from computer games scholar James Paul Gee). pattern recognition, storytelling and meaning-making, And an abstraction-juggling strategy Mr. Johnson calls and empathy and inventiveness become paramount. “telescoping” is required when, in order to befriend the Again, the metaphor for the prince in “Zelda,” you must collect water in the jar the complex changes that took Mr. girl gave you, then water the bomb plant and use the
  8. 8. bomb to blow up the rock that blocks the river, so you can fill the gorge and swim across to get to the top of Dragon Roost Mountain, where the prince can be use to do that, and the conse- BOOKS to get things done, the things we quences of the ways we do things. BEST 05 found. Mr. Kunstler, for instance, seems to lump together The mental skills of reverse-engineering the goal “technology” and “innovation” when evaluating human- to learn what to do right now, probing for the hidden ity’s ability to meet the looming crisis of petroleum Design as Salvation rules by performing experiments, and keeping in mind depletion. But not all great innovations are technologies. nested and chained sequences of procedures, Mr. In the 1970s, in response to the first oil shock, the Johnson asserts, are not just interesting side effects of notion that families and nation-states could adapt, in game playing, but more nuanced versions of the kind of part, by installing more efficient appliances and better- essential aptitudes Mr. Pink prescribes: “If you were insulated windows led to a design revolution worth 8 designing a cultural form explicitly to train the cognitive billions of barrels of oil. Not being as dreadfully muscles of the brain,” Mr. Johnson proposes, “and you unmindful as we are today about the externalities we had to choose between a device that trains the mind’s design into vehicles, buildings, cities, appliances, and ability to follow narrative events, and one that enhanced business processes is one possible response that doesn’t the mind’s skills at probing and telescoping — well, let’s require inventing desktop cold fusion or building thou- just say we’re fortunate not to have to sands more nuclear reactors than it features best business books make that choice.” Taken together, A is possible to build in a decade. Whole New Mind and Everything Design isn’t color or pattern, but the Bad Is Good for You illuminate pos- way things work, and their relation- sible ways our intellectual coping ship to all the human and natural mechanisms may be changing, and systems in which they are embedded. point to means for augmenting and The past year was a good one adapting our mental tool sets to deal for future-thinkers who want to with a changing environment. These learn about design, with two such books are not prescriptions, but exer- exemplary books as In the Bubble: cises; not playbooks, but mental Designing in a Complex World (MIT playgrounds. Press, 2005), by John Thackara, and Massive Change (Phaidon Press, 2004), from Bruce Mau and the If the world is flattening, the energy Institute Without Boundaries. Mr. bubble is threatening to burst, and Thackara is a prime example of a science is on track to make humanity as we know it globalized knowledge worker. He lives in France, and obsolete, Mr. Pink and Mr. Johnson give us important the “design futures network” he directs, Doors of clues to how to prepare our minds. But what can possi- Perception, is based in Amsterdam and Bangalore. His bly be done to influence a future of such gigantic forces premise is, “If we can design our way into difficulty, we and daunting problems? Consider the energy problem. can design our way out.” His encyclopedic knowledge of Barring massive Malthusian disasters, today’s billions of the systemic costs of bad design is complemented by his living humans can’t go back to a world with a more ability to marshal abundant examples of designers, com- manageable population, so the question of how so many panies, institutions, and systems that are beginning to people are going to find the energy to maintain an get design right — mitigating environmental externali- industrial lifestyle without cooking the atmosphere ties that used to be invisible but are now potentially remains to be addressed. Fortunately, the very ephemeral lethal, while remaining profitable. Design is not just an abundance of the past century left us with at least aptitude restricted to specialists in the bubble — as Mr. one dimension of wiggle room. In a world designed for Thackara says, “It’s what humans do.” (The book’s title energy abundance, opportunities to redesign wasteful refers to the state of human thought and communica- systems abound. Innovation doesn’t always mean tion and technical information flow that air traffic con- inventing a new widget. The best design concerns think- trollers use to control a complex technological system ing really deeply and broadly about the methods we use that could go disastrously wrong at any moment.) Mr.
  9. 9. Sailing Beyond Luck 05 Thackara not only thinks broadly, deeply, and systemi- cally — he practices what he foresees, all over the world. Mr. Mau’s Massive Change is not about the world of BEST human history. + design; it’s about “the design of the world” — the guid- ing principle behind a beautifully realized, highly visual book created by a network of designers. Where Mr. Thackara tells us about the way design ought to inform the use of technology — and why, and how — Mr. Mau and his associates show how people today are solving by Chuck Lucier and Jan Dyer problems large and small, global and local. In the Bubble analyzes the whole system integrally; Massive Change 9 looks systemically at the major pieces, through many lenses. The image that sticks in my mind from this book is of a simple metal stove in use in Africa: The Turbo Stove is a lightweight, inexpensive device that can be assembled without tools in 15 minutes; it burns biofuels BOOKS such as peanut shells, cornhusks, straw, and animal dung features best business books with maximum efficiency, providing heat for the poor- est populations without exacerbating the problems caused by deforestation and fossil fuel use. This book is as big as the others in this collection, taking on every- thing from energy and information to markets, manu- facturing, and transport. Read all these books and you’ll know more than you Howard Rheingold (howard@rheingold.com), author of Tools for do now about what to think about, and how, when pon- dering the future. For less than the cost of a half-hour Thought (Simon & Schuster, 1985), The Virtual Community (Addison-Wesley, 1993), and Smart Mobs (Perseus, 2002), coined consultation with a futurist, and a few hours of engag- the terms “virtual community” and “smart mobs” to describe the ing reading or listening on your part, you can clue your- social phenomena that have emerged via the Internet and mobile telephony. He teaches digital journalism at Stanford and participa- self in to the issues that you and your family, colleagues, tory media at the University of California, Berkeley. The text of customers, and community will be facing in what is two of his books and many of his articles are available at already shaping up to be the most surprising century in t’s one thing to sail into uncharted waters www.rheingold.com, and his blog is www.smartmobs.com. equipped with radios, radar, and a GPS system, and an entirely different thing to sail virtually blind — like 15th-century explorers equipped with only an astrolabe, quadrant, and compass. But that’s the challenge business leaders have faced for the past decade: sailing into the open ocean of breakthrough strategy with inadequate tools. Sure, Columbus got lucky; en route to the Indies, he bumped into America. But business leaders don’t like to rely on luck any more than mariners do. We’re still a long way from radar, but the tools needed for develop- ing differentiated strategies suitable for the hypercom- petitive dynamics of our times are finally emerging. strategy + business issue 41 The need for these tools has been clear since at least 1994, when Gary Hamel and C.K. Prahalad (in their book Competing for the Future, published by Harvard Business School Press) argued that successful companies must move beyond the familiar waters of established
  10. 10. practices and develop business models unprecedented in their industries. Unfortunately, although the familiar strategy tools honed by Michael Porter (and still taught beyond existing industry BOOKS oceans are created well BEST boundaries, most are created…by expanding 05 in most business schools) worked fine in sight of the existing industry boundaries…. In blue oceans, land of established ways to do business, they didn’t help competition is irrelevant because the rules of on the open ocean of breakthrough strategy. the game are waiting to be set. The authors who followed in the wake of Professors Prahalad and Hamel admonished business leaders to The key element of a blue ocean strategy is a “value innovate!, get outside the box!, and change the rules of the innovation”: a combination of differentiation and low game! These exhortations haven’t proven useful. Some cost that sets a product line or service apart from its companies have considered innovation to be too high- competitors. Consider, for example, the story of Yellow 10 risk to try, or impossible in their situation. Others Tail, a wine created explicitly for the U.S. market and believed that they were already doing everything they launched in 2000 by Casella Wines, a small, family- could to get outside the box and didn’t know how owned Australian winery. Casella challenged the wine to do better. Many companies interpreted innovate industry’s givens: that wine is a unique beverage for to mean “develop new products,” a measure that typ- the informed consumer who requires a complex, wide ically yielded only a brief uptick range of products and is best features best business books Mapping Strategy in performance until competitors reached through marketing and launched look-alike products. There brand building that drips with eno- were no reliable, detailed guides logical terminology. other than managers’ own imagi- Casella created a blue ocean by nations and willingness to experi- introducing a fun, nontraditional ment, which all too often meant wine targeted at the U.S. drinker dead reckoning toward a hoped-for who does not normally drink wine breakthrough. — a market three times the size of That’s all changing. This year’s the U.S. wine market. Soft, sweet, three best strategy books — Blue and fruity, Yellow Tail appealed to Ocean Strategy: How to Create beer drinkers and ready-to-drink Uncontested Market Space and Make cocktail drinkers, without the tradi- the Competition Irrelevant, by W. tional focus on tannins, oak, com- Chan Kim and Renée Mauborgne plexity, and aging. Casella made (Harvard Business School Press, selection easy by offering only one 2005); MarketBusters: 40 Strategic Moves That Drive white and one red wine and by replacing the technical Exceptional Business Growth, by Rita Gunther McGrath jargon with a striking kangaroo logo. and Ian C. MacMillan (Harvard Business School Press, The result: Yellow Tail became the fastest-growing 2005); and C.K. Prahalad’s The Fortune at the Bottom of brand in the history of both the U.S. and the Australian the Pyramid: Eradicating Poverty Through Profits wine markets and the No. 1 big-bottle (750ml) red wine (Wharton School Publishing, 2005) — offer practical in the U.S. by August 2003 — and Casella Winery grew tools and analogies to help practitioners. Although none to be one of the largest wineries in Australia. of these books offer foolproof navigation, they represent dramatic progress beyond the strategy books of the past. Blue Ocean Strategy takes an analytical approach, The authors’ study of 108 business launches offers grounded in the authors’ conviction that effective strate- empirical evidence of the power of blue ocean strategies: gies must be differentiated from convention. That’s what Although only 14 percent of launches they studied were they mean by the phrase “blue ocean”: aimed at creating blue oceans, these were responsible for 38 percent of revenue and 61 percent of total profits for Blue oceans…are untapped market space, the companies they studied. demand creation, and the opportunity for Blue Ocean Strategy offers both a process and a set highly profitable growth. Although some blue of supporting tools that practitioners can use to navi-
  11. 11. 05 1. Transform the customers’ experience by eliminat- 2. Transform your offerings, either by enhancing the 3. Redefine profit drivers, the metrics your company 4. Exploit industry shifts such as gate. It begins with a “strategy canvas” that visually maps Busters have their own equivalent to Blue Ocean 5. Enter new markets (new to the current industry environment in two dimensions. Strategy’s “value innovation.” They call it a “marketbust- you) to take advantage of emerging The horizontal dimension includes the range of factors ing move,” defined as “an action taken by your firm to BEST on which an industry currently competes and those fac- deliver markedly superior performance.” Although the tors in which it invests. The vertical dimension shows authors don’t tell the reader how to make a market- levels of performance against each factor, measured qual- busting move, they catalog 40 such moves, sorted into itatively. A strategy canvas is a conceptual tool remark- five categories. Companies can use these categories to able in both its simplicity and its usefulness. It can be stimulate their thinking: used to understand the current strategy of a company Strategy by Analogy and its competitors, to communicate the strategy, and to ing or improving steps in the “consumption chain” — imagine business directions. To do the latter, Professors from the time a potential customer first becomes aware 11 Kim and Mauborgne recommend that a company cre- of a need, through purchase and use, to final disposal. ate several alternative, radically different strategies, each aimed at delivering superior value to potential — not attributes that customers most value or by reducing or existing — customers by: eliminating attributes that customers don’t like. • Reducing cost by eliminating some factors that BOOKS the industry takes for granted and uses to measure performance at the features best business books reducing other factors below the business unit level. industry standard. • Enhancing differentiation by business cycles or restructuring of raising some factors well above the the value chain. industry standard and creating addi- tional factors that the industry has never offered. opportunities by monitoring “tec- We strongly recommend Blue tonic triggers,” like new technolo- Ocean Strategy — our choice as the gies that change what is technically year’s best strategy book — to anyone feasible or affordable, changes in responsible for strategy creation and social norms or attitudes, institu- execution. It is well written, offers a tional and regulatory changes, and host of new examples, and is full of demographic shifts. ideas; every chapter is worth reading. Our favorite category is No. 3, and it is a good illustration of the authors’ approach. By “profit drivers” or “key metrics,” MarketBusters, by Rita Gunther McGrath and Ian they mean the way a business keeps track of what it sells MacMillan, takes a less analytical approach to the devel- and how it makes money. These metrics represent some opment of breakthroughs, using analogies with compa- of the most fundamental yet unexamined elements of nies successful in other industries or geographies. any business. Eight of the 40 market-busting moves Although using a tool based on analysis may seem supe- involve changing key metrics. One move is to radically rior to reliance on analogies, managers may find the change what the company sells. Broadcasters, for exam- analogies more helpful. Indeed, successful companies ple, shifted their model from offering free television to often develop value innovations through analogy. Think consumers by selling advertising, to a new model in of Starbucks’s Howard Schultz emulating the Italian cof- which consumers paid through subscriptions. Another fee shop, or Sam Walton borrowing the Sam’s Club con- market-busting move is to radically improve productiv- cept from Price Club and the Supercenter concept from ity, as National Credit Systems, a collection agency, did strategy + business issue 41 Carrefour’s hypermarkets. Moreover, recent research in when it reduced its fees from the industry standard of 40 cognitive psychology suggests that analogies are the percent of collections to only 8 percent, by improving most efficacious way to create complex innovations (like the effectiveness of letter writing — the lowest-cost and business models). most effective way to collect debt. A third move is to The authors of Market- improve cash flow velocity, ideally to achieve negative
  12. 12. Prahalad, it’s not just size that BOOKS BEST 05 Vast New Markets working capital (payables greater than receivables plus But, according to Professor inventory) as Dell Inc. does. The fourth metric-oriented move is to reduce asset intensity, by relying on contract makes the bottom of the pyramid an attractive market manufacturers or information technology outsourcers. for results-minded executives. Customers in these mar- The other four market-busting moves in this cate- kets are brand conscious (as well as value conscious), and gory involve redefining the key metrics of the company’s readily adopt new technologies — far more than do cus- customers to enhance their profitability or address their tomers in more familiar markets at the top of the pyra- pain points. Monsanto developed seeds that improve mid. Three examples illustrate the radical change in yield and reduce the use of expensive and environmen- business model required to profitably serve the bottom tally dangerous chemicals. General Electric’s businesses of the pyramid. send Six Sigma teams to help customers address their Casas Bahia, Brazil’s largest retail chain, with sales of 12 problems. UPS recently branched out from its core busi- 4.2 billion reals ($1.6 billion) in electronics, appliances, ness of package delivery into other businesses that and furniture, targets the very bottom of the pyramid: improve customers’ cash flow, like repairing Toshiba lap- Seventy percent of its customers have no consistent tops for Toshiba — eliminating steps in the process, income. Although Casas Bahia’s operations employ integrating repair and shipping activity, and reducing familiar retail best practices such as extensive use of tech- the time taken to repair a broken PC. nology and TV advertising, aggressive negotiations with features best business books We do not recommend MarketBusters with the vendors, efficient warehousing and logistics, and daily same enthusiasm as Blue Ocean Strategy. It is a slow managers’ meetings to review operations, the company’s read — more a reservoir of analogies to reference as part credit and local delivery practices differ radically from of a strategy process than a book to read from cover the norm. Casas Bahia extends credit to customers that to cover. others don’t consider creditworthy through a passbook requiring small installment payments made monthly in the store — a system that not only maintains a default C.K. Prahalad, in The Fortune at the Bottom of the rate lower than the industry average but also builds the Pyramid, studies more fundamental value innovations customer relationship and facilitates sales of additional than those described in Blue Ocean Strategy and less products. Financed sales account for 90 percent of sales familiar analogies than those offered in MarketBusters. volume. Delivery — and repossession of the product Although Fortune isn’t positioned as a business strategy should customers fail to make installment payments — book (it is also reviewed in the Globalization essay, is accomplished by a company-owned fleet of 1,000 which begins on page 14) but rather as a new approach trucks with 2,500 drivers and crew, including some to “eradicating poverty through profit,” we consider it a trucks small enough to maneuver through shantytowns. must-read for strategists. Like all of Professor Prahalad’s examples, this business Professor Prahalad’s starting point is the attractive- model works because it leverages underlying values ness of the potential market of the very poor — what he within the culture of Brazil’s poor: relationships, respon- calls “the bottom of the pyramid.” It is a huge (distress- sibility, and self-esteem. ingly so) market: In 1998, Cemex, the world’s third-largest — and Mexico’s largest — cement manufacturer, launched If we take nine countries—China, India, Patrimonio Hoy (“savings/property today”). Patrimonio Brazil, Mexico, Russia, Indonesia, Turkey, Hoy enables the very poor to pay for materials to South Africa, and Thailand—collectively, they upgrade their homes, growing Cemex’s volume in the are home to about 3 billion people, represent- do-it-yourself market, where margins are high and ing 70 percent of the developing world popula- demand isn’t cyclical. Patrimonio Hoy is built upon the tion. In [purchasing power parity] terms, this values of Mexico’s poor: the importance of family; a group’s GDP is $12.5 trillion, which represents belief in the responsibility of one generation to leave 90 percent of the developing world. It is larger behind something for the next (like a house); maternal than the GDP of Japan, Germany, France, the leadership; and respect within the community. United Kingdom, and Italy combined. This is Patrimonio Hoy does not do business with individuals, not a market to be ignored. but contracts with pools of three people (typically the
  13. 13. 05 maternal heads of households) called socios. Each socio models Professor Prahalad describes are critical to tap commits to making weekly payments of 120 pesos for at into most of the growth. least 70 weeks, and each of the three members takes a Third, customers in the United States and Europe BEST monthly turn collecting from the others. At the end of are increasingly served by the businesses Professor the first five weeks, Patrimonio Hoy delivers 10 weeks’ Prahalad describes. For example, customers from the worth of raw materials through a selected Cemex distri- United States and Europe already travel to India for eye bution partner, effectively extending credit for the surgery at Aravind, attracted by its excellent quality, remaining five weeks. As the socio continues to meet its high level of service, and low prices (significantly lower obligations, the delivery schedule (with credit exten- even after paying the cost of travel). Cemex is extending sions) accelerates. Patrimonio Hoy also offers construc- its reach into the United States, targeting workers tion and architectural assistance. Cemex’s sales have of Mexican heritage who regularly send money to fam- 13 tripled in geographies where Patrimonio Hoy operates. ily members in Mexico (almost $10 billion per year, impassable waters. + India’s Aravind Eye Care System performs 190,000 with an estimated 10 percent intended for home con- eye surgeries per year at quality levels as good as or bet- struction). To tap this market, Cemex established ter than those available in the developed world’s best Construmex, a program enabling workers in the U.S. to hospitals — at a fraction of the cost. Aravind’s doctors send money directly to cement distributors in Mexico, BOOKS benefit from the large eye-patient volumes, quickly gain- who in turn deliver building materials directly to build- features best business books ing more experience than doctors elsewhere in the ing sites in Mexico. If successful, the Construmex pilot world. Aravind’s doctors are extraordinarily productive, may transform the money transfer businesses and Professor Prahalad explains, in part because they operate change U.S. retail banking and construction lending. on two adjacent tables: Fourth, and perhaps most important, business history shows that low-cost, high-volume business mod- By the time the first operation is over, the sec- els eventually migrate across geographies and threaten ond patient is ready with the microscope traditional ways of doing business. (See “Format focused on the eye to be operated on. The first Invasions: Surviving Business’s Least Understood Chuck Lucier (chuck@chucklucier.com) is senior vice president patient is bandaged by the nurses and moved Competitive Upheavals,” by Bertrand Shelton, Thomas emeritus of Booz Allen Hamilton. He is currently writing a book out. As soon as the first patient moves out, the Hansson, and Nicholas Hodson, s+b, Fall 2005.) and consulting on strategy issues with selected clients. For Mr. third patient is put on the first table and pre- Companies serving U.S. and European markets should Lucier’s latest publications, see www.chucklucier.com. pared for the operation. take note. Twenty years ago, superior Japanese business Jan Dyer (jan@chucklucier.com) spent 11 years at Booz Allen models in machine tools, photocopiers, and auto- Hamilton working with corporations in a variety of industries. She Aravind has also vertically integrated into manufac- mobiles overwhelmed American manufacturers. How is currently working independently. ture of the lenses, sutures, and pharmaceuticals it uses many bottom-of-the-pyramid business models will (Aravind manufactures about 20 percent of the low-cost restructure American and European industries over the lenses in the world). next 20 years? The Fortune at the Bottom of the Pyramid is essential The Fortune at the Bottom of the Pyramid, while reading for four reasons. First, the powerful business sometimes tedious to read, is nevertheless an exciting models targeting the developing markets that Professor expose of the power of markets to improve people’s lives. Prahalad describes offer important analogies that every But it is more than that: It is a rare glimpse into the strategist should consider, but that few American or future — for those with eyes to see — of the extraordi- European managers in developed markets are likely to nary opportunities waiting in uncharted and seemingly experience either directly or through reports in the busi- ness press. Second, the bottom of the pyramid is crucial to the future sustained growth of major American and strategy + business issue 41 European corporations, because developing countries represent virtually all of the world’s expected population growth over the next 50 years. Although typical Western business models can be adapted to serve the top of the pyramid in developing countries, the types of business
  14. 14. 05 Forces FOR Fairness BEST private company, the East India BOOKS tory: India was once owned by a Diagnostic Perspective Company, which later transferred the country, in its entirety, to the British Crown. Although Professor Sachs tells the story to stress the importance of historical context in economic develop- ment, it also puts the history of globalization in context. Globalization is not a modern technological phenome- non ordained by the Internet or cheaper airfares. Globalization — or, more precisely, long-distance and cross-border trade and commerce — has waxed and 14 waned through the ages, manifesting itself in different ways at different times, and creating “winners” and by Michael Moynihan “losers” each time. In contrast to many past books about globalization, which exalt the process or warn of its pit- falls, this year’s crop is less doctrinaire. For the authors of the five books discussed here — four academics and one features best business books consultant — there are both devils and angels in the details of increasing global business and in its conse- quences for developing and developed countries. Their concern is how to encourage the angels and diminish the impact of the devils. Or, to ask the question more explic- itly: How can global capitalism be made more fair? Few people have more experience trying to create opti- mal conditions for economic growth than Jeffrey Sachs. He spent the 1980s advising governments that were undergoing major economic transitions, helping them handle macroeconomic challenges such as price stabi- lization. In Bolivia, he won renown for eliminating hyperinflation. In Poland, he designed a plan to reinte- grate Poland’s economy with Europe’s and led efforts to cancel some of Poland’s debt. His less successful experi- bout midway through Jeffrey D. Sachs’s ence in Russia led to a widely publicized battle with the brilliant manifesto, The End of Poverty: International Monetary Fund (IMF). More recently, he Economic Possibilities for Our Time (Penguin has been working on country-specific microeconomic Press, 2005), the author, the director of challenges with the World Bank, local authorities, and Columbia University’s Earth Institute and noted eco- nongovernmental organizations — and helping to nomic advisor to developing countries, recalls an spearhead the United Nations’ Millennium Project to epiphany he had in 1994 while lecturing academics in eradicate extreme poverty (defined as an earned income India about the benefits of globalization. Having just of less than US$1 a day) by 2025. steered Bolivia and Poland through financial crises and In The End of Poverty — my choice as the year’s best having helped them devise and implement successful book on globalization — Professor Sachs presents an economic liberalization reforms, Professor Sachs had unusually comprehensive and satisfying portrait of the every right to extol the virtues of foreign investment and global economy, and a convincing argument that good lower tariffs. Yet as he waxed eloquent about open bor- policies can go a long way toward bringing about the ders, he noticed a dour look in the eyes of his audience. end of poverty on earth. His subject has been a vexing It was then that he recalled a central fact of Indian his- problem since the world first turned its attention to the
  15. 15. 05 Elevating Enterprise plight of impoverished nations after World War II. As essential to successful development. chronicled by many authors, countless billions of dollars His grasp of the issues of development — honed in development assistance over the last 50 years have through years of fieldwork — is authoritative. He is able BEST produced mixed results. Early postwar development to describe firsthand change in countries like Poland, efforts focused on such capital-intensive projects as Russia, China, and India, before he turns to Africa and building dams, roads, and factories on the theory that outlines the dynamics of the world’s worst poverty traps. poor countries were rich in labor but starved for capital. Whereas many might write off the business potential of Foreign aid was expected to fill a “financing gap.” When regions that seem hopelessly mired in poverty and cor- these efforts failed to produce the hoped-for results, ruption, Professor Sachs reminds us that Europe faced policymakers, inspired by new models for economic what appeared to be insoluble problems as recently as growth in the 1970s and 1980s, turned toward building 60 years ago. When Adam Smith and John Maynard 15 human capital through training and education, again Keynes wrote their famous economics works, poverty with mixed effect. A third front in the war on poverty was endemic to Europe. The key to success in Europe, took the form of the “green revolution” championed by as in the Americas and Asia, has been sensible economic Normal Borlaug of the Rockefeller Foundation, who and political policies together with the cancellation of won the Nobel Peace Prize for his work in 1970. unpayable debt. Professor Sachs makes a convincing case BOOKS Improved agricultural techniques that these measures can bring simi- features best business books promoted by Mr. Borlaug and others lar results today in even the most helped end famine in many coun- poverty-stricken regions. tries, notably India. Despite the suc- cess stories of East Asia, China, and now India, however, the problems of The private sector has an essential poverty — hunger, health epidemics, role to play in lifting the developing war — have grown worse in many world out of poverty, but it must be countries, compounded by bad loans provided with the tools to do so. and corruption. Two business professors take up the Professor Sachs compares mod- theme of sustainable capitalism in ern development policies and prac- books that are strong complements tices to 18th-century quack medi- to The End of Poverty. cine. What is urgently needed, he Capitalism at the Crossroads: suggests, is the economic equivalent The Unlimited Business Oppor- of clinical medicine, with its five key tunities in Solving the World’s Most assumptions: the human body is a complex system Difficult Problems, by Cornell University Johnson (causality is never simple), complexity requires a differ- School of Management professor Stuart L. Hart ential diagnosis (similar symptoms may have many dif- (Wharton School Publishing, 2005), and The Fortune at ferent causes), all medicine is family medicine (there are the Bottom of the Pyramid: Eradicating Poverty Through no magic bullets), monitoring and evaluation are essen- Profits, by University of Michigan professor C.K. tial to successful treatment, and medicine is a profession Prahalad (Wharton School Publishing, 2005), both requiring strong norms, ethics, and codes of conduct. show how multinational corporations can develop new Early on in his work in Bolivia, the author describes growth markets while elevating living standards among his revelation upon reading, in a colleague’s paper, that the poor. The professors first presented their ideas about many of Bolivia’s problems stemmed from its moun- “the bottom of the pyramid” — a reference to the 4 bil- tainous, landlocked location and resulting high trans- lion people, living mostly in Africa, Asia, and Latin portation costs — factors wholly ignored in IMF-style America, with per capita incomes of less than US$1,400 strategy + business issue 41 analysis. Contrasting the one-size-fits-all policies of the a year — in strategy+business. (See “The Fortune at the IMF with the diagnostic approach employed in medi- Bottom of the Pyramid,” by C.K. Prahalad and Stuart L. cine, Professor Sachs argues that on-the-ground knowl- Hart, s+b, First Quarter 2002.) They present this con- edge and keen attention to local- cept as an approach to corporate strategy. (See “Sailing ized symptoms and systems are Beyond Luck,” by Chuck Lucier and Jan Dyer, page 9.)
  16. 16. Professor Hart is a leading scholar and innovator in strategy and corporate environmentalism. He was the founder of the University of Michigan’s first program in the poorest nations can be BOOKS Leap Downward,” shows why BEST viewed as potentially lucrative markets in which to 05 corporate environmental management, and later started incubate “clean” technologies. For instance, Professor the Center for Sustainable Enterprise at the Flagler Hart cites the development of fuel-efficient cars for use School of Management at the University of North in heavily polluted countries such as China and India as Carolina. In 2003, he assumed his current position at a prime opportunity that auto manufacturers have so Cornell as the S.C. Johnson Professor of Sustainable far missed. Global Enterprise. Professor Hart’s erstwhile writing partner and kin- Capitalism at the Crossroads is a generally well- dred spirit, C.K. Prahalad, has likewise written a book written and well-argued collection of ideas developed filled with examples that show how multinational 16 over several decades of research on the promise of what corporations and domestic businesses can successfully Professor Hart calls the sustainable global enterprise — develop product for, and market to, the world’s poor, “a new private sector–based approach to development and thus profit from contributing to the eradication of that creates profitable businesses that simultaneously poverty. While acknowledging that the individual pur- raise the quality of life for the world’s poor, respect cul- chasing power of one poor person is minuscule, tural diversity, and conserve the eco- Professor Prahalad points out that in features best business books logical integrity of the planet for aggregate the world’s 4 billion poor- future generations.” est people control trillions in annual Trysts and Teahouses The book provides many valu- expenditures. able examples of the experiments, An important message in The innovations, and market success sto- Fortune at the Bottom of the Pyramid ries of companies that are building is that low-income markets are high- businesses to address the specific ly diverse, echoing Professor Sachs’s needs and desires of people living in essential insight. The days of one- the poorest nations. His stories and size-fits-all marketing of branded insights are especially strong when he products such as Coca-Cola or explains what multinational compa- Wrigley’s gum are almost entirely nies do to become effective in these gone. Like Stuart Hart, C.K. markets. For example, Unilever’s Prahalad argues that it is necessary Indian subsidiary, Hindustan Lever to perform in-depth marketing re- Limited — which increased its rev- search in poor nations, and to design enues and profits by 20 and 25 percent per year, respec- products specially suited to the unique demands of each tively, between 1995 and 2000 — requires all employees local market. Also using the Unilever example, he shows in India to spend six weeks living in rural villages to get how the company has succeeded in India with a unique information directly from consumers, while the com- village-by-village marketing campaign demonstrating pany develops new products for them and works with the use of soap to combat disease. Unilever and a variety local producers to source local materials. Unilever also of other companies employ similar multilevel marketing built an R&D center in rural India. These efforts he techniques and novel distribution networks, led by vil- describes as part of a strategy to become “indigenous.” lage women who sell everything from savings plans to Even more valuable to the strategy+business reader cell phone service to iodized salt. is the void this book fills in leveraging familiar manage- ment concepts, frameworks, and language to connect business strategy to sustainability strategies. Professor John Perkins’s surprise bestseller, Confessions of an Hart devotes an entire chapter to the subject, citing Economic Hit Man (Berrett-Koehler, 2004), provides an Clayton Christensen’s work on disruptive innovation offbeat look at globalization through a personal narra- several times, and presenting a useful diagnostic tive. Mr. Perkins chronicles his experience in the 1970s approach for managing today’s businesses and creating and 1980s as chief economist for the engineering firm tomorrow’s opportunities. One chapter, “The Great Charles T. Main. Along with two other U.S.-based com-
  17. 17. 05 panies, Bechtel and Fluor, Main brought dams, electric- Professor Rivoli tracks the life of a T-shirt from the pick- ity, and roads to the developing world. Mr. Perkins lived ing of cotton in Texas to the sewing of fabric in China a high-flying life as an international executive, jetting to its import into the United States to its eventual resale BEST from country to country, meeting with presidents of as a used garment in Africa. A New Era emerging nations, and staying in exclusive, gated hotels. She decided to write her book after hearing protes- This book was inspired, he says, by the death under tors denounce globalization at a student rally. A believer mysterious circumstances of two friends, Panamanian in the benefits of free trade, she set out to prove the stu- president Omar Torrijos and Ecuadorian president dents wrong. What she found, however, was that while Jaime Roldos Aguilera. It argues that the U.S. govern- the benefits of globalization are quite real, free trade and in a thicket of trepidation, tariffs, and taxes. + ment, working sympathetically with U.S. firms, pro- free markets are rarer than one might suppose. From the moted capital projects that generated business for cotton farms of Texas to the factory floors of China to 17 American companies while encumbering developing the corridors of power in Washington, the author found countries with crushing debt. A benefit for the U.S. gov- that the T-shirt business is less an example of free trade ernment, he says, was that the resulting debt bound than one of successful companies avoiding free markets these countries to the West. wherever possible. While Mr. Perkins has written as much of a page- The Travels of a T-Shirt describes the Byzantine BOOKS turner as the subject allows, complete with beautiful world of international tariffs on clothing codified in suc- features best business books spies, afternoon trysts, and midnight visits to smoke- cessive international trade agreements. Not until she filled teahouses, his critique ultimately seems more follows her T-shirt into the market for the export of evocative of colonialism as practiced by Europeans American secondhand clothing to Africa does Professor through World War II and of cold-war politics than the Rivoli find a truly free market. In addition to proving kind of globalization we are experiencing today. Still, the point that profits often result from government pro- one does not have to accept the author’s imputation of tection, this book provides an idiosyncratic but vivid imperial intent to acknowledge that globalization as pro- view of the global economy in action, particularly her moted by the U.S., the IMF, and the World Bank has accounts of manufacturing in China and the after- often fallen short of the mark. market for the export of secondhand clothing. Michael Moynihan (mwm3@nyu.edu) is a professor of economics Operating successfully in the global economy, par- ticularly in the poorly charted reaches of the developing at New York University’s Real Estate Institute. Formerly senior advisor for electronic commerce in the U.S. Department of the Mr. Perkins’s prescription for a sustainable approach to world, requires optimism — optimism tempered by Treasury and a senior fellow at the Center for Strategic and development, like the other authors’, encourages enter- accurate, unbiased information. Each of the five books International Studies, Professor Moynihan is the author of The prises to work with nongovernmental organizations and reviewed here provides such information, and con- Coming American Renaissance (Simon & Schuster, 1996). indigenous peoples rather than through large capital tributes a valuable perspective on the critical role that projects financed with debt. In recent years, Mr. Perkins businesspeople play in globalization. How multinational himself has worked among many indigenous peoples to corporations champion capitalism in emerging markets preserve their culture. In one instance, he helped nego- will determine to a large extent whether today’s global- tiate a settlement in an obscure conflict between the ization continues as a force for fairness and growth, or Ecuadorian government and local tribes over the drilling whether it ends up malicious and maligned, entangled of oil. Mr. Perkins’s journey, though extreme, echoes the transition multinational corporations have undergone in their approach to the developing world. The era of sim- ply taking wealth out of the ground is over. A new era of working cooperatively has taken its place. Another entertaining narrative of globalization in action across multiple borders and continents is strategy + business issue 41 Pietra Rivoli’s The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade (John Wiley & Sons, 2005). An associate professor of busi- ness at Georgetown University,

×