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  1. 1. B Best Bus B Books 20 T T Contents BOOKS BEST 04 cal, 86 The Future is churn In media, old and 3 The Future new forms of Rheingold by Howard way business is by Howard Rheingold done. Inand comingEconomics Schrage In governance, follow- verging media, 91 byand conflict. of com- Michael 8 Economics by Michael Schrage 96 Marketing 13 Marketing into conflict. In bygovernance, cusp of upheaval. In of the boardroom seem Wreden Nick on the following by Nick Wreden marketing, true103 Media Minow is replacing by Nell 20 Media by Nell Minow 1 108 Negotiation 25 Negotiation by Nikos Mourkogiannis by Nikos Mourkogiannis 113 Strategy 30 Strategy marketing, and rulesbyof traditional systems are in flux. dynamics, true accountability and replacing Chuck Lucier by Chuck Lucier and such fuzzy conceptsJan Dyer leader make sense of all this? Jan Dyer 117 Governance 34 Governance best books 2006 contents by Michele Leder by Michelle Leder 121 Management 38 Management by David K. Hurst by David K. Hurst aken asas whole, the Best Business Books of a a whole, the Best today’s business126 The Business ofmake sense of perenni- environment. Defense 43 The Business of Defense Business Books political, social, technologi- 2006 reflect the of 2006 reflect by Dov Zakheim by Dov S. Zakheim the political, social,churn that is reshaping cal, and economic technologi- 130 Fiction 47 Fiction being able to in theby Jonathan Weber behind events is one by Jonathan Weber the way business done. that is and economic 135 Leadership 52 Leadership reshaping thecommunication are both con- by James O’Toole by James O’Toole old into new forms 141 Index 58 Index today’s business environment. Booksreaders of identify patterns in Best Business As unpredictable. the seemingly 2006 Best Business Books 2006 munication are both converging and coming the rules ing Enron’s example (we’re still digesting it), Enron’s example (we’re still digesting it), the such fuzzy accountability rules of the “mindshare.” In warfare, mercenaries play an concepts as boardroom seem on the cusp of upheaval. prominent role. Everywhere,In increasingly the players, is How can a corporate as “mindshare.” In war- fare, mercenaries play an increasingly promi- Our reviewers, all eminent authors and thinkers in their nent role. Everywhere, those books dynamics, fields, have singled out the players, that incisively portray and rules of and implications of theflux. the causes traditional systems are in gyrations roiling How can a corporate leaderAs readers of our all this? Our“Best Business Books” feature already know, ally popular reviewers, all eminent authors strategy + business issue 45 and thinkers see theirpatternshave singled out fields, hidden those books useful powers for any leader. This year’s best of the most that incisively portray the causes and implications 11 essays in this section — can help books — and the of the gyrations roiling
  2. 2. Best iness Bus 06 S+B’s Top Shelf The Future Negotiation The Business of Defense Yochai Benkler, The Wealth Roger Fisher and Daniel Robert Young Pelton, of Networks: How Social Shapiro, Beyond Reason: Licensed to Kill: Hired Production Transforms Using Emotions as You Guns in the War on Terror Markets and Freedom Negotiate (Viking, 2005) (Crown, 2006) (Yale University Press, 2006) 2 Economics Strategy Fiction Michael J. Mauboussin, Vijay Govindarajan and Stanley Bing, Rome, Inc.: More Than You Know: Chris Trimble, 10 Rules The Rise and Fall of the Finding Financial Wisdom for Strategic Innovators: First Multinational in Unconventional Places From Idea to Execution Corporation (W.W. Norton, (Columbia University Press, (Harvard Business School 2006) 2006) Press, 2005) Marketing Governance Leadership best books 2006 contents Paul W. Farris, Neil T. William A. Dimma, Jonathan Alter, The Bendle, Phillip E. Pfeifer, Tougher Boards for Defining Moment: FDR’s and David J. Reibstein, Tougher Times: Corporate Hundred Days and the Marketing Metrics: 50+ Governance in the Post- Triumph of Hope (Simon Metrics Every Executive Enron Era (John Wiley & & Schuster, 2006) Should Master (Wharton Sons Canada, 2006) School Publishing, 2006) Media Management Chris Anderson, The Long Joseph L. Bower and Tail: Why the Future of Clark G. Gilbert, editors, Business Is Selling Less of From Resource Allocation More (Hyperion, 2006) to Strategy (Oxford University Press, 2005) Illustrations by Joyce Hesselberth
  3. 3. TheFuture O 06 Culture, CHANGING Cities, CHANGING Climate CHANGING BEST Yochai Benkler, Henry Jenkins, Robert Neuwirth, AnnaLee Saxenian, Tim Flannery, The Wealth of Convergence Shadow Cities: A The New Argonauts: The Weather Networks: How Culture: Where Old Billion Squatters, Regional Advantage Makers: How Man Social Production and New Media A New Urban World in a Global Economy Is Changing the Transforms Markets Collide (New York (Routledge, 2005) (Harvard University Climate and What and Freedom (Yale University Press, Press, 2006) It Means for Life University Press, 2006) on Earth (Atlantic 2006) Monthly Press, 2005) 3 BOOKS best books 2006 the future Who’s in Control? by Howard Rheingold lines. The transformations these books examine lie at the heart of tomorrow’s big-picture issues: worsening global warming, sprawling squatter cities, atomizing media power, and emerging economic regions that feed as well as compete with Silicon Valley. Each of these develop- ments points to a changing balance of power — between man and his environment, between the rich and the poor, between mainstream media and upstarts, and between the U.S. and India and China — that will reshape the ways we do business in the years to come. ne way to dial the fuzzy future into sharper Such apparently unrelated phenomena as open source focus is by scanning the present environ- software, Wikipedia, political bloggers, citizen jour- ment, then zooming in on the parts that nalists, file-sharing networks, and radio spectrum strategy + business issue 45 appear to be undergoing significant change regulation are all part of a single wave of change. Do-it- right now. This year’s books about the future do exactly yourself (DIY) media — abetted by mobile phones, dig- that. Approach them as lenses, not as maps; rather than ital cameras, laptop computers, and broadband predict outcomes, they look connectivity — have expanded well beyond early closely at today’s shifting fault adopters and are changing the way people create and
  4. 4. distribute cultural products. And the insurgent DIY media are, not surprisingly, at odds with the entrenched mainstream media. Yochai Benkler’s book The Wealth of tion economy of the twentieth century.” BEST BOOKS 06 For Professor Benkler, peer production is the well- Networks: How Social Production Transforms Markets and spring of all sorts of hope. Widespread participation in Freedom presents evidence that this conflict will deter- Linux and Wikipedia, he asserts, could foreshadow a mine whether today’s digital innovations lead to greater renewed interest in government by the people. Further, wealth and liberty for a wider variety of people and com- such voluntary global collaboration has the power to act panies or to more highly concentrated power for a few “as a mechanism to achieve improvements in human centralized media providers. development everywhere” when it is applied to reduce “Information, knowledge, and culture are central to the high costs of agricultural and pharmaceutical inno- human freedom and human development,” Professor vation for the developing world. 4 Benkler writes. “How they are produced and exchanged The benefits of enhanced power of individuals and in our society affects the way we see the state of the coalitions in the political, economic, and cultural realms world as it is and might be; who decides these questions; are not guaranteed, however. Professor Benkler explains and how we, as societies and polities, come to under- how the traditional media are deploying legal and polit- stand what can and ought to be done. The change ical tactics to protect themselves from losses in the face brought about by the networked of technological disruption. He tells best books 2006 the future information environment is deep. It us why the movie, recording, soft- is structural. It goes to the very foun- ware, chip, and computer industries dations of how liberal markets and want to build controls into digital liberal democracies have coevolved media equipment that limit the for two centuries.” power of users — without, by the Professor Benkler, who teaches way, doing much to curtail the prob- at Yale Law School, argues that radi- lem of piracy. The real purpose: to cally democratized access to the recentralize the control of innova- means of intellectual production and tion and commercial use of digital distribution made possible by cheap technology. computers and the Web over the past The resulting battles raging over two decades could change govern- telecommunications, copyright law, ments, science, economics, and and digital-rights management will intellectual life in the years to come. determine “the institutional ecology In particular, he claims that shifts in of the digital environment,” says economic and social organization among online com- Professor Benkler, affecting not just what media people munities have produced fundamentally new kinds of consume, but what forms of media people produce “as institutions for creating culture and exchanging knowl- autonomous individuals, as citizens, and as participants edge. He points to the rise of “nonmarket and non- in cultures and communities — to affect how we and proprietary” production by volunteers cooperating via others see the world as it is and as it might be.” Professor the Internet on such projects as Linux and Wikipedia. Benkler makes a compelling case that too much is at The “peer production methods” behind these projects stake for us to sit back and let others — particularly suggest that the individuals involved are neither strictly those in the mainstream media who stand to lose so self-interested nor purely altruistic, but rather a mixture much — decide. of both. Individuals decide for themselves how they Although all the books in this year’s class of leading want to contribute — which piece of the Linux infra- media titles tackle weighty issues — unchecked urban structure to work on, which Wikipedia pages to edit — expansion, climate change — Professor Benkler’s mani- a process that in turn leads to a form of self-organization festo turns a much-needed spotlight on issues of great with distributed control. Linux and Wikipedia thus scope and moment that deserve far more public atten- “hint at the emergence of a new information environ- tion than they’ve yet gotten. For that reason, we’ve cho- ment, one in which individuals are free to take a more sen The Wealth of Networks as the best book about the active role than was possible in the industrial informa- future in 2006.
  5. 5. 06 Henry Jenkins’s lighter if no less serious book on for digital swords and other equipment, are organized media opened my eyes to the way big corporations and and invented by the players themselves. Economists amateur culture producers already work together. In have estimated that the virtual economy of EverQuest BEST Convergence Culture: Where Old and New Media Collide, alone is equivalent to that of Bulgaria. The extended he describes the active participation of media consumers social networking effects of playing these games with in the creation of cultural products, and argues that top- people who might be valuable social or business contacts down and bottom-up are not colliding, but rather merg- in the physical world has led to the cliché that “World ing — not always at the pleasure of the major media of Warcraft is the new golf.” companies. Just as Professor Benkler lays bare the structural Rather than the passive, manipulated consumers changes that underlie online games, open source soft- that some critics of corporate media portray, Professor ware, and Wikipedia, Professor Jenkins shows how 5 Jenkins sees a culture of consumers who manipulate today’s “mashups,” which combine and juxtapose sam- and build on the entertainment that they purchase ples from popular audiovisual works (so far, mostly ille- from major media companies. Invoking Pierre Lévy’s gally), have become an art form in their own right. theories of “collective intelligence,” he describes, for The Web site HousingMaps.com, for example, com- example, how organized online fan communities bines real estate listings from Craigslist.com with BOOKS mounted global intelligence cam- Google Maps to create an incredibly best books 2006 the future paigns to crack the secrets of the useful locator for available housing. Survivor reality television series. This Professor Benkler pieces to- is familiar turf to Henry Jenkins, gether Wikipedia, the blogosphere, the DeFlorz Professor of Humanities the Howard Dean presidential cam- and the founder/director of the paign, and the open source commu- Comparative Media Studies program nity to trace the transformation at MIT, whose previous work Textual of the power to persuade, inform, Poachers (Routledge, 1992) dealt educate, and sell. Professor Jenkins with fan communities that had creat- pieces together fan fiction, cross- ed unauthorized alternative scenarios media entertainment franchises, — entire stories, books, even films online games, and, yes, the blogo- — about their favorite characters on sphere and the Dean campaign to Star Trek or Star Wars. Such conver- reveal how the emerging “participa- gence is not without its conflict: tory culture” helps these public and When Warner Brothers tried to crack private interests coevolve even as down on an unauthorized online version of the Daily they conflict. “The power of the grassroots media is that Prophet, the newspaper featured in the Harry Potter it diversifies; the power of broadcast media is that it series, they were overwhelmed by a successful global amplifies. That’s why we should be concerned with the online protest organized by the Prophet’s creator and flow between the two: expanding the potentials for par- editor — 14-year-old Heather Lawver. ticipation represents the greatest opportunity for cul- But some media companies have learned that there’s tural diversity. Throw away the powers of broadcasting much to be gained from playing along with these self- and one has only cultural fragmentation,” he writes. generated fan communities. The most successful cre- “The power of participation comes not from destroying ators of online games realized that participants would commercial culture but from writing over it, modding pay for the opportunity to help create their own enter- [modifying] it, amending it, expanding it, adding tainment. In online multiplayer role-playing games like greater diversity of perspective, and then recirculating it, the Sims, EverQuest, and World of Warcraft, the pub- feeding it back into the mainstream media.” strategy + business issue 45 lisher determines the characters’ traits and powers, but As Professor Benkler and Professor Jenkins make the conflicts and quests, the parties and battles, the com- clear, changes under way today are transforming the munities that extend across media and into the physical entertainment industry, the nature of education, the world, the virtual economies in economics of intellectual property, journalism, scientific which players pay actual money research, and the way democracies function. But the
  6. 6. variety of sophisticated and BOOKS BEST 06 Squatters are the largest builders of housing in the world — and they are creating the cities of tomorrow. Squatter Megacities and Regional Technopolises matter of who owns, controls, and benefits from these of the pyramid” have devised a transformations will be decided by who wins political conflicts over technological power. Together, Professor unregulated systems that make urban life work. “These Benkler and Professor Jenkins paint a broad and detailed squatters mix more concrete than any developer. They picture of this obscure but all-important power struggle. lay more brick than any government. They have created a huge hidden economy — an unofficial system of squatter landlords and squatter tenants, squatter mer- The cyberworld may have grown in importance in chants and squatter consumers, squatter builders and recent years, but the world where our bodies live will squatter laborers, squatter brokers and squatter always have first claim on our attention. Thus, every one investors, squatter teachers and squatter schoolkids, of us should contemplate the fact that Homo sapiens squatter beggars and squatter millionaires. Squatters are 6 will soon become, for the first time in its history, most- the largest builders of housing in the world — and they ly an urban species. In Shadow Cities: A Billion Squatters, are creating the cities of tomorrow.” A New Urban World, Robert Neuwirth examines the There’s even a kind of extralegal respect for law and implications of that fact, along with the changes being order. You take your life in your hands when you walk wrought by the unbridled growth of squatter cities around much of Rio de Janeiro’s flatlands, but you need across the globe. At the same time, just as squatter cities not fear muggers in the city’s huge hillside favelas, the best books 2006 the future are spreading everywhere, so are Silicon Valleys. Life in squatter cities where about a fifth of Rio’s residents live. the middle of the 21st century is going to be heavily There, local drug gangs maintain law and order, making influenced by both phenomena. AnnaLee Saxenian, in sure that the only crimes that occur are theirs. The peo- The New Argonauts: Regional Advantage in a Global ple Mr. Neuwirth describes are not presented as raw sta- Economy, looks at the increasing influence and inter- tistics. They are his neighbors, his landlords, his friends. connections of expanding techno-economic regions Mr. Neuwirth stresses the need to see the squatters’ from Shenzhen to San Jose. These two global trends are nobility and desperation through gimlet eyes: “Not one already triggering massive changes at both the highest government in existence is successfully building for the and lowest economic strata. poorest of the poor. So the poorest of the poor are build- Mr. Neuwirth, a journalist, lived for months at a ing for themselves. That may not fit into any great ide- time in the vast, bustling, and surprisingly entrepreneur- ological category, and it is certainly illegal according to ial squatter cities of Rio de Janeiro, Nairobi, Istanbul, current law. But it is sensible, patriotic, and worthy of a and Mumbai. The sheer scale and pace of the world Mr. true citizen.” Neuwirth describes are staggering: Every year, 70 mil- At the other end of the economic spectrum, lion people leave their rural homes and migrate to cities. AnnaLee Saxenian, dean of the School of Information at By 2030, there will likely be 2 billion squatters in the the University of California at Berkeley, has been study- world. After reading Shadow Cities, you’ll think twice ing the ways foreign-born, U.S.-trained technology about ever again using the term slum — and you’ll def- entrepreneurs have returned to their home countries in initely have a better idea of how the hundreds of mil- recent years to create companies, industries, and entire lions of new city dwellers are coping with their poverty, industrial regions. Just as the emergence of Fairchild and and how their survival strategies will alter the world in Intel was only the beginning for Silicon Valley, Professor the coming decades. (Also see “City Planet,” by Stewart Saxenian thinks the appearance of Indian companies Brand, s+b, Spring 2006, www.strategy-business.com/ like Infosys and Chinese companies like Lenovo is just press/article/06109.) the beginning of the development of interconnected Mr. Neuwirth documents how those at the “bottom regional techno-economic hotspots. As with much of
  7. 7. 06 Talking about the Weather the rest of the globalizing economy, the new competitors ing else, Professor Saxenian’s conclusions ought to make to Silicon Valley are also its economic partners and intel- policymakers think twice about restricting the immigra- lectual heirs. tion of knowledge workers or allowing America’s institu- BEST Professor Saxenian has a deep understanding tions of higher education to deteriorate. of what makes Silicon Valley and its counterparts around the world thrive. Regional Advantage (Harvard University Press), her 1994 investigation into why Finally, there are the really large forces, the kind that can Silicon Valley and companies like Sun Microsystems and often do overshadow even important media, eco- succeeded while denizens of Boston’s Route 128, such as nomic, and political issues. Weather catastrophes have Digital Equipment Corporation (DEC), failed, has become a frequent fact of our lives, and every tsunami become a business school classic. The importance of the or hurricane whips up more passion in the debate over 7 circulation of minds, ideas, and ventures in a relatively global warming. The last of this year’s selections, Tim fluid, continually changing, open system was central to Flannery’s The Weather Makers: How Man Is Changing Silicon Valley’s success. In The New Argonauts, Professor the Climate and What It Means for Life on Earth, will Saxenian takes her earlier analysis global. Her research help you see debates about climate science and energy has revealed similar dynamics at work in the world of policies in a new light. BOOKS engineers who came to Palo Alto Tim Flannery, a mammologist best books 2006 the future from Taipei, Mumbai, and Tel Aviv, and paleontologist who serves as earned their degrees and worked director of the South Australian their first jobs in the semiconductor, Museum and professor at the PC, or Internet-based industries, and University of Adelaide, started out are now putting their experience to as a skeptic about global warming. work back at home, as entrepreneurs His book explains in scientific but and investors. understandable, even eloquent, The social, intellectual, and eco- terms what made him change his nomic ties between these “new argo- mind. Professor Flannery does an nauts,” their mentors and peers in entertaining job of quickly sketch- the U.S., and their colleagues and ing out a big picture and a long protégés in their mother countries view. An understanding of the radi- are networked into a system far more cal danger of sudden atmospheric complex, with far more cooperation temperature change requires knowl- and even sharing (alongside the tradi- edge of how Earth came to support tional cutthroat competitions), than in previous eras. If life, why the ocean is so important, and why humans Professor Saxenian is right, then Silicon Valley–style eco- burning fossil fuels for the past couple of centuries may nomic development can be good news for large popula- have unwittingly triggered an irreversible change in an tions in the developing world who would like to move environment that supports 6 billion people. up to a relatively decent standard of living, quite possi- The good news, if there is any, is that nobody bly en route to a good life (if you believe that a growing knows for certain whether these climatic changes have positive balance of trade, the availability of capital for caused irreversible damage. Professor Flannery acquaints entrepreneurial enterprise, and an expanding middle us with the evidence that we know exactly how much class collectively offer a bridge over the gulf between the carbon we are putting into the atmosphere and that we rich and the poor). The good fortune of the previously can curtail its emission enough to avoid further damage. impoverished might also bring good news as well as bad That’s where science becomes a political issue. Although for the U.S. technology industry. As long as American a few diehards will continue to argue that the science strategy + business issue 45 higher education and entrepreneurial opportunities con- doesn’t prove the existence of global warming — and tinue to draw intellectual immigrants, tomorrow’s eco- Professor Flannery introduces the fundamental research nomic development in China or India might also enrich so you can judge for yourself — the important argu- American companies doing busi- ments from this point onward focus on what we are ness in those countries. If noth- going to do about it.
  8. 8. Economics F Making Theory Real storms and tsunamis. + The solution he supports is dramatic: First, reach an international agreement to cap carbon emissions at a level where civilization might not be severely disrupted David Warsh, Eric D. Beinhocker, Michael J. by climate change. Next, estimate how quickly emis- Knowledge and the The Origin of Mauboussin, More Wealth of Nations: Wealth: Evolution, Than You Know: sions need to be cut back. Finally, divide the resulting A Story of Economic Complexity, and the Finding Financial “carbon budget” by the number of people in the world Discovery (W.W. Radical Remaking of Wisdom in and allocate emission limits to nations according to the Norton, 2006) Economics (Harvard Unconventional Business School Places (Columbia size of their populations. This course will require a Press, 2006) University Press, degree of international cooperation we haven’t come 2006) close to achieving. Just look at the failure of the Kyoto Protocol to reduce greenhouse gases. 8 What Professor Flannery makes perfectly clear is that we’re heading down a dangerous road, but we can and must do something about it. Weather has shown its terrible power to make our other concerns seem trivial. It’s hard to worry about cultural production or urbaniza- tion when you are faced with the devastation of super- by Michael Schrage best books 2006 economics Howard Rheingold (howard@rheingold.com), author of Tools for Thought (Simon & Schuster, 1985), The Virtual Community (Addison-Wesley, 1993), and Smart Mobs (Perseus, 2002), coined the terms virtual community and smart mobs to describe the social phenomena that have emerged via the Internet and mobile tele- phony. He teaches digital journalism at Stanford and participatory media at the University of California, Berkeley, and is a fellow at the Annenberg Center for Communication. or excellent reasons, effective executives traditionally view schoolbook economics with a mix of skepticism and mistrust. In their view, the equations are crudely sim- plistic even as their Greek letter formalism grows more grotesquely baroque. The widgets of Microeconomics 101, the allocative efficiencies of linear programming, and the Nobel Prize–winning Nash equilibria of game theory seem disconnected from market realities. They are like Sudoku for Ph.D.s — more puzzle-solving exer- cises than generators of actionable insights.
  9. 9. 06 Highly networked enterprises may be far less adaptable in the face of competition than their champions argue. Epiphanies and Backbiting What technically gifted entrepreneurs and numer- ing complexity, or the economics of ideas in the same ate managers have learned — or, more accurately, what way after reading them. Readers will — right along with they’ve been taught — about supply, demand, and the economists — think differently about what value BEST dynamic equilibria hits the point of diminishing returns creation can and should mean. Better yet, they won’t astonishingly fast. The grad school joke is that “In yawn while doing so. These books are accessible and theory…” means something doesn’t work in practice, even enjoyable. and “In practice…” means there’s no good theory. In global business, economics doesn’t buy executives much. In fact, however, the past 20 years have seen enor- David Warsh’s Knowledge and the Wealth of Nations is the mous shifts in economic thinking as it moves closer to finest popular history of economic discovery since the reality of practitioners. Once-heretical ideas about Nobel laureate George Stigler’s tangy 1988 autobiogra- 9 monopolistic competition and growth have been main- phy, Memoirs of an Unregulated Economist. Mr. Warsh streamed. Truly laughable assumptions about perfect has taken a provocative 1990 academic paper rationality and institutional behavior have been (“Endogenous Technological Change,” by then 24-year- scrapped in favor of models that conceive markets as old University of Chicago economist Paul Romer) and places where other things are decidedly not equal. used it as his window, lens, and X-ray machine to BOOKS Although the math is undeniably more elaborate than explore how economists have come to grips with the best books 2006 economics ever, the stories it’s telling are profoundly different. They economics of intangibles. Modeling the possible role of speak to the real world, not just to idealized abstractions “knowledge” in explaining economic growth, Professor of it. Empirical phenomena once blithely ignored as too Romer’s paper helped launch the “New Growth” school. tough to model or conveniently declared irrelevant have Capital, labor, and technology are nice, but New acquired central roles in the ongoing narrative of eco- Growth places the “marketplace of ideas” in the red-hot nomic understanding. center of its economic development model. New ideas The result? Economics as science, discipline, and — and their diffusion — enable new growth. world view has been gaining a level of business relevance Innovation über alles. that simply did not exist even a generation ago. That’s Yes, the model was simplistic; yes, its mathematics not to say a command of contemporary economic was complex. But the paper’s core nimbly addressed one thought dramatically improves chances for entrepre- of the fundamental economic paradoxes reaching back neurial success. However, giving serious thought to the to the days of Adam Smith. As Mr. Warsh observes: models today’s economics devises and confronts offers serious executives far greater situational awareness of the The problem is that the two fundamental the- dynamics that both define and drive profitable growth. orems of Adam Smith lead off in quite differ- That’s invaluable. ent and ultimately contradictory directions. Three new books do a magnificent job detailing the The Pin Factory is about falling costs and (r)evolution in postmillennial economic thought. Each increasing returns. The Invisible Hand is about stands on its merits. Collectively, however, they form a rising costs and decreasing returns. Which is the comprehensive trilogy that captures the personalities, more important principle? When Paul Romer strategy + business issue 45 histories, concepts, and controversies reshaping the dis- read back over the literature, he found that one cipline’s most fundamental debates. More importantly, of his teachers had seen the dilemma perfectly they could be useful: No one will look at the business clearly as a young man. In 1951 George Stigler implications of diminishing re- [the author of the aforementioned autobiogra- turns, increasing returns, model- phy] had written, “Either the division of labor
  10. 10. is limited by the extent of the market and, char- acteristically, industries are monopolized; or industries are characteristically competitive and demic disciplines seep into the BOOKS colleges — that truly govern aca- BEST larger narrative that Mr. Warsh has chosen to tell. 06 the [Invisible Hand] theorem is false or of little The idea development process is messy, vulgar, in- significance.” According to Stigler, they cannot efficient, and brilliant. Good concepts get lost as the both be true. inertia of an intellectual status quo is preserved by aging intellectual aristocrats with cruel tongues and long These are the bifocals of Adam Smith. Through one memories. Force of personality is often indistinguishable lens, specialization (as in the Pin Factory) leads to the from force of idea. Academic conferences and work- tendency we describe as monopolization. The rich get shops become battlefields where intellectual ambushes richer; the winner takes all; and the world gets a steady are sprung on unsuspecting scholars. Adam Smith had a 10 supply of pins, though, perhaps, not enough to satisfy its reputation as a genuinely nice man; his intellectual need. Through the other lens, the situation we describe descendants play rougher. It’s a hoot. as “perfect competition” prevails. The Invisible Hand In this war of ideas, Henry Kissinger’s academic presides over pinmakers and all others. No manufacturer aphorism is just wrong: The battles are so vicious is able to achieve the upper hand. As soon as one raises because the stakes are so intellectually large. That is, his prices, someone else undercuts what really best explains how com- best books 2006 economics him. There are exactly as many pins panies, industries, cities, and soci- as people are willing to buy. No one eties grow rich? Is there an E=mc2 of perceived the contradiction at the economic growth? Can there be? time. But then, it was only pins. A former Boston Globe econom- But the dichotomy between ics columnist, Mr. Warsh brings a increasing and diminishing returns journalist’s sensibility to these ques- for “goods” and “innovations” offers tions. He does a terrific job of show- astonishingly rich frameworks for ing how seemingly disparate ideas exploring how “ideas,” “knowledge,” — drawn from, for example, the and “things” can be combined to economics of joining a club or run- model all manner of economic ning a ski lift — can utterly trans- growth. The inherent tensions form the way economists think between increasing and diminishing about rivalry and exclusivity in mar- returns can be used to model the rise kets for intellectual property. At of entrepreneurial innovation and every step along the way, economists industrial organizations, competition within a firm and are adopting, adapting, and discarding mathematical between industries, regional economic growth, and tools designed to formally explain a nugget of insight global trade rivalries. New models and methodologies that a previous model left untouched. based on this central division have provoked fierce con- What Mr. Warsh has written is a conversational but troversy and rivalry in academe’s econosphere. substantive sociology of economic model building Pivoting deftly between microeconomic and macro- around the idea of ideas in generating sustainable economic theorists, Mr. Warsh describes how econo- growth. To hear how a Nobel laureate like Robert Solow mists of all stripes and pedigrees compete in their articulates his modeling philosophy versus how Nobel discipline’s global marketplace. He leaves no Nobel laureates Robert Lucas or Ken Arrow articulate theirs economist unlearned. From Paul Samuelson’s epochal is to discover just how conceptually and technically departure from Harvard for MIT to the University of idiosyncratic the field’s greatest minds can be. Readers Chicago’s Milton Friedman–esque culture of intellectual gain insight into how high-level economists persuade rigor to Ken Arrow’s taking up residence in Stanford, their peers. By blending personality profiles and descrip- Mr. Warsh presents the backstories, backbiting, and tions of the dueling mathematics, Mr. Warsh dem- institutional rivalries — not just competing ideas — onstrates both the economics and the politics of that drive innovative thinking in world-class universi- model building. This is how a science evolves. Yes, ties. The cults and subcultures — the so-called invisible there are paradigm “shifts,” but there are also paradigm
  11. 11. 06 Evolution and Complexity jerks, twitches, mirages, and meltdowns. Mr. Warsh he shreds the silliness and outright intellectual dishon- comfortably describes them all. esty that has kept so many flawed economic theories in Unfortunately, Mr. Warsh lacks both the quantita- contemporary curricula and policy debates for so long. BEST tive and expository chops to take the mathematical In one especially apt passage, he compares the econo- models of Professors Romer, Arrow, or Solow and make mists who keep traditional theory alive by using mathe- them accessible to his readers. The book would have matical tricks and gimmickry to the technically gifted benefited from a successful deconstruction of the high gearheads in today’s Cuba who keep their 1950s math of New Growth theory into a narrative that let Cadillacs running like new. They’re trapped in a time readers sense the virtues and limitations of formalism as warp; let’s move on. a tool for thought. This is more than a quibble, because But to what? Here’s where Mr. Beinhocker’s com- quantitative modeling is intrinsic to every issue Mr. mitment to technical exposition yields increasing 11 Warsh addresses. And excising a malformed chapter on returns. After disposing of such dysfunctional assump- Microsoft’s monopoly travails would also have improved tions as “random walks” and quests for “optimal effi- the book. The company’s adventures in antitrust really ciencies,” Mr. Beinhocker embraces the new math and don’t resonate with the provocative “knowledge eco- models of complexity economics. To do so, he draws nomics” themes that precede it. heavily on research and ideas from places like the Santa BOOKS Fe Institute, where biologists, physi- best books 2006 economics cists, and economists collaborate Eric D. Beinhocker’s The Origin of to see to what extent their mathe- Wealth takes up the technical chal- matics and metaphors can help one lenge that Mr. Warsh shirked. Where another. But Mr. Beinhocker’s great Mr. Warsh’s journalistic sensibility accomplishment is to present a vari- makes him an effective storyteller, ety of the singular ideas that can be Mr. Beinhocker’s consulting back- assembled into economic models ground has made him a master syn- that indeed help explain the “origin thesizer who packages “big ideas” of wealth.” into accessible taxonomies and ecolo- Intriguingly, although he the- gies. Mr. Beinhocker nonetheless matically brands these ideas around manages to spin fine yarns, but complexity, the narrative arc that always in the service of exposition. integrates his insights is the princi- He cheerfully describes the guts of ple of evolution. Mr. Beinhocker’s “genetic algorithms,” “fitness land- book is about the “evolvability of scapes,” and “random graph theory” in a manner that evolvability” in economic systems. That is, how do indi- any reader can grasp. Although The Origin of Wealth is viduals and institutions collaborate and compete to cre- emphatically not The New Economic Paradigm for ate value? What institutions do they create? What infor- Dummies, it’s clearly written to focus on the technical mation do they process, and how do they process it? essence of economic evolution. The intellectual overlap When do they trade as individuals? As teams? As firms? between Mr. Warsh and Mr. Beinhocker is both comple- As nation-states? How does new information — feed- mentary and creative. Comparable themes are examined back — get incorporated into the heuristics and rules from starkly different perspectives. that govern decision making? Where Mr. Beinhocker really shines, however, is in Where Mr. Warsh does a fantastic job of addressing his discussion of how “traditional economics” has been how traditional economists deal with those questions, gradually supplanted by what he calls “complexity eco- Mr. Beinhocker presents the broad array of mathemati- nomics,” an adaptive system of constantly changing net- cal tools and models that are better equipped than their strategy + business issue 45 works that reflect the evolutions of society, technology, predecessors to describe evolvability and adaptation. and business. His review and dissection of the simplistic, That’s not to say that traditional economic models and misleading, and pathological assumptions that inform math are irrelevant or obsolete; it’s just that they’ve hit “equilibrium economics” is sim- (ahem) diminishing returns. ply masterful. Without mockery, So Mr. Beinhocker runs tutorials that cherry-pick
  12. 12. businesspeople perceive and BOOKS BEST 06 Investing Post-Buffett from the interdisciplinary fields of software design, cog- should transform the way that nitive psychology, network theory, and genetic algo- rithms to explain how growth, knowledge, and growth manage innovation, risk, and opportunity. Even for of knowledge all happen. Not only are these tutorials readers familiar with the growing literature on complex- well done, Mr. Beinhocker does what you’d expect an ity, chaos, and evolutionary design, Mr. Beinhocker’s excellent consultant to do: He connects them to the real commitment to business relevance makes his book a world of business practice. This can be a self-help book usable read as well as a good one. for executives seeking business insight from a different The most significant criticism is one to be expected. genre of economic modeling. Consultants with “big ideas” aren’t content to be superb For example, Mr. Beinhocker uses the networking synthesizers and explainers. They want to change the research of Santa Fe Institute complexity theorist Stuart world as well. The last section of the book discusses the 12 Kauffman to better explain the economics of adaptation implications of these themes for business and society. in the face of disruptive competition: “The work by Let’s just say that Mr. Beinhocker discusses the business Kauffman and the others leads to a counterintuitive implications with greater nuance, sophistication, and insight. IBM’s problem with Dell was not that the blue- applicability than he does the social. Mr. Beinhocker is chip company was insensitive to change but rather that no doubt a superb business consultant; he’s overreaching it was too sensitive to change. The when he takes on society as his best books 2006 economics dense interconnections and tangles client. Diminishing returns, indeed. of interaction in IBM’s business sys- tem meant that small changes (‘let’s sell computers by mail’) could cas- Michael J. Mauboussin is an invest- cade into big problems (‘here are the ment strategist who brings an thousands of reasons why we cannot investor’s sensibility and a lust for sell computers by mail’).” new ideas to his book More Than In other words, highly net- You Know. Incorporating essays and worked enterprises may be far less letters he wrote for clients while at adaptable in the face of competition Credit Suisse First Boston, More than their champions argue. Than You Know is far more technical Traditional economists might assert than the other two books but pithier that Nobel laureate Ronald Coase and by far the most useful — and (who appears in both books) antici- therefore the best of the year. pated this situation in his classic Every serious investor or execu- paper on organizational coordination and transaction tive who oversees capital allocation or innovation invest- costs. Absolutely true. But Professor Coase was from the ments will find every other essay in this book of direct tradition of “literary economics,” which tells stories; the relevance to his or her work. Reminiscent of Nassim high-powered mathematical tools of network theory Taleb’s best-selling book Fooled by Randomness: The lets economists — and businesses! — build manipulable Hidden Role of Chance in the Markets and in Life (Texere, models. We can now “play” to learn where economies 2001), Mr. Mauboussin’s essays are rich in probabilistic of scale (increasing returns) conflict with coordination analysis and insight. His integration of behavioral costs (diminishing returns) in both organizations and finance theory, traditional investment analysis, and industries. complex adaptive systems serves as the organizing prin- Mr. Beinhocker’s book is filled with the insights and ciple for every chapter in the book. Unlike Mr. Warsh implications of these “evolutionary economics” tools. and Mr. Beinhocker, Mr. Mauboussin is writing for a He extends them to business and finance. His discussion particular kind of reader: investment-oriented but not as of how “evolutionary algorithms” offer the most useful risk-savvy as he or she should be, open to ideas but skep- intellectual resource in framing economics is remarkably tical, and unafraid of a little math but without a lot of clear and compelling. He’s done superb work in going time to read. beyond the metaphorical to give serious readers a sense Although this is not a mathematics-oriented text, of how the modeling media of “complexity economics” anyone who wants to get real value from reading it
  13. 13. Ma T By THE Numbers 06 should have a pencil and notepad at hand — not to work out problems but to annotate the ideas. The book invites the reader to conduct “back-of-the-envelope” BEST modeling of risk and value management. It’s every bit as interdisciplinary as Mr. Beinhocker’s book, but also addresses the core historic economic assumptions that Mr. Warsh surveys so well. More Than You Know not only complements those two books, it reinforces and deepens their central themes. But it does so from an unabashed investment perspective where risk and worth the investment. + reward alone determine what gets written. Mr. 13 Mouboussin examines Paul Romer’s work, for example, from the standpoint of its investment implications. Mr. Mouboussin clearly respects Warren Buffett’s investment philosophies — who doesn’t? — and his essays revolve around the notion that new theories of BOOKS by Nick Wreden adaptive systems and risk assessment mean investors will best books 2006 economics literally have to reevaluate what fundamental means. His chapter titled “Strategy as Simple Rules,” based on work by Donald Sull and Kathleen Eisenhardt, is a model of useful synthesis for investors and managers alike who look to “define direction without containing it.” Do those rules reflect the same evolutionary rules Mr. Beinhocker discusses? Of course. But they’re discussed from a perspective that illuminates both works. Because this book is a collection of previously pub- lished essays, it’s not as tightly constructed or as smooth as the others. Perhaps it is best read as a companion to Michael Schrage (schrage@mit.media.edu) is the codirector of the books of broader sweep and greater depth. That said, the MIT Media Lab’s e-Markets Initiative, senior advisor to the MIT essays do speak directly to individuals who want their Security Studies program, and the author of Serious Play (Harvard perceptions of risk and value shaken and stirred. Business School Press, 1999). The timing of these three books is hardly coinci- dental. There’s not just something in the air; ideas are swirling and software is running that have successfully called into question assumptions that have been sacro- sanct for centuries. The good news is that these are great questions. The better news is that we’re beginning to have great answers as well. That’s why these books are en years ago, typical CEOs wanted “cre- ativity” or “impact” from marketing. Today, they demand accountability. How well marketing responds to this demand will determine whether that function gets absorbed into other departments, like sales or customer service, or whether it changes to assume a strategic seat at the table, strategy + business issue 45 just as purchasing and shipping evolved into supply chain management. The strategic value of marketing is well recognized. It is critical to launching new products, ensuring cus- tomer retention, battling competition, and growing
  14. 14. rketing BEST BOOKS 06 Paul W. Farris, Neil Clyde M. Creveling, Dick Stroud, The 50- Jean-Marc Lehu, Bill Schley and Carl Martin Roll, Asian T. Bendle, Phillip E. Lynne Hambleton, Plus Market: Why Brand Rejuvenation: Nichols Jr., Why Brand Strategy: Pfeifer, and David J. and Burke the Future Is Age How to Protect, Johnny Can’t How Asia Builds Reibstein, McCarthy, Six Sigma Neutral When It Strengthen, and Brand: Strong Brands Marketing Metrics: for Marketing Comes to Marketing Add Value to Your Rediscovering the (Palgrave 50+ Metrics Every Processes: An and Branding Brand to Prevent It Lost Art of the Big Macmillan, 2005) Executive Should Overview for Strategies (Kogan from Ageing (Kogan Idea (Portfolio, 2005) Master (Wharton Marketing Execu- Page, 2006) Page, 2006) School Publishing, tives, Leaders, and 2006) Managers (Prentice Hall, 2006) Relief for the Innumerate 14 best books 2006 marketing sales. But, at the same time, marketing gets no respect. theory that worked its way into marketing genes back In downturns, it is the first function frog-marched to the when polyester suits were cool. No wonder the rest of guillotine. New products are “thrown over the wall” at the organization rolls its eyes. marketing with little warning and, much worse, little As Jim Stengel, chief marketing officer of Procter & input from marketing itself. It’s not surprising that sales Gamble Company, says, “Marketing is a $450 billion and finance spawn many more chief executives than industry, but we are making decisions with less data and marketing does. discipline than we apply to $100,000 decisions in other That said, the marketing profession has brought its aspects of our business.” Several of this year’s best new reputation on itself. Too often, marketing insists on marketing books tackle the challenge of proving market- dancing to the beat of its own drummer. It pays homage ing’s worth. to creativity or pursues the holy grail of the “big idea” when the rest of the organization runs on data. Like an untrained puppy, it chases the latest fads, like the impor- The first book, Marketing Metrics: 50+ Metrics Every tance of smells to branding. Executive Should Master, steps into the void between Understandably, CEOs are less interested in smells cause and effect to provide the measurements required than they are in answers to the question, What are we to evaluate almost every aspect of marketing and sales, getting for our money? Despite the fact that marketing including such traditional components as customer per- generally represents an organization’s second-biggest ception, product strategy, channel management, promo- expense (behind operations), many marketing profes- tion, and revenue and cost structures. It also delves into sionals have difficulty answering that question. Instead, such nontraditional marketing areas as customer prof- they (and the agencies they hire) cite concepts that lack itability, Web metrics, and even the complexities of pric- analytic rigor — “awareness,” “brand essence,” “brand ing. That last area is a real service to readers: Pricing is equity.” Or they descend into silliness — “marketec- intertwined with almost every aspect of branding, yet ture,” “brandology,” “contenterprise.” Or they recycle most branding books duck the issue with a throwaway concepts such as AIDA (awareness, interest, desire, insight — “brands enable higher pricing,” for example action), which emerged from itinerant salesmen during — that fails to explain how to leverage that key contrib- the late 1800s; the 4 Ps (product, price, place, and pro- utor to profitability. motion), which dates to the 1920s; and “positioning,” a Paul W. Farris, professor of marketing at the
  15. 15. 06 University of Virginia’s Darden Business School, and his it can be applied to any standardized process — and coauthors Neil T. Bendle, Phillip E. Pfeifer, and David despite its aura of kooky creativity, marketing really is as J. Reibstein explain each marketing metric so clearly that process-oriented as manufacturing. Look at what is BEST Six Sigma’s New Frontier even the most numbers-phobic ponytails will want to required to send out a press release, develop an ad, or incorporate them into pitches. prepare for a trade show: nothing more than a series of The book really becomes useful when it addresses “to-dos” (aka processes). calculations involving customers. The chapter on cus- Another misperception is that good Six Sigma prac- tomer profitability is exceptional, providing a clear sum- tice requires statistical fluency. Yes, statistics are mary of all the issues involved in determining who is involved, but they are elementary. A half-day of study making money for your company, and who represents and a few common spreadsheet formulas will put you on a parasite on your bottom line. The key lesson: All the road to becoming a Six Sigma black belt. The final 15 customers are not created equal. Essentially, the most misperception is that Six Sigma is only about reducing profitable, or best, customers must be rewarded. Less errors or defects. Yes, that is a part of Six Sigma, but, profitable, second-tier customers must be targeted for much more important, Six Sigma is a data-driven sys- sales and profit growth. Unprofitable customers must be tem for understanding what customers value and deliv- either made profitable or fired. ering that value to them. Isn’t that what marketing is all BOOKS In a category that suffers from a surfeit of books about? best books 2006 marketing related to personal experiences, one-off success stories Like Six Sigma for other parts of the organization, made possible by budgets and resources unavailable to Six Sigma for marketing seeks improvement by elimina- most firms, outdated theories as quaint as bloodletting, tion of variability and waste in processes. It revolves or mantras devoted to “big ideas” or “exceeding expecta- around five steps, known by the shorthand DMAIC: tions,” 50+ Metrics offers insights that crackle like new defining the problem, measuring issues associated with money. For CEOs and those in marketing trenches the problem, analyzing the data to determine causes needing accountability, this is the best marketing book of problems, improving the process, and controlling of the year. the process so that the problem does not recur. Measurement is key. But Six Sigma practice doesn’t focus on the measurements that are easy to define and Six Sigma has long been a favorite means of achieving put to use. Rather, it looks for the leading indicators that accountability in many organizational functions — enable proactive decision making. though rarely in marketing. Now consultants Clyde M. The benefits of implementing Six Sigma in market- Creveling, Lynne Hambleton, and Burke McCarthy aim ing are undeniable. But although Six Sigma for to change that with Six Sigma for Marketing Processes. Marketing Processes effectively explains what to do, it The book focuses on three marketing processes in par- doesn’t explain how to do it. How do you implement ticular: strategic, defined as product or service portfolio suggested solutions, for example, if you are unfamiliar renewal; tactical, which is product or service commer- with Pugh processes (defined in an extensive glossary as cialization; and operational, or post-launch product or a matrix consisting of “criteria based on the Voice of the service line management. These components are then Customer and its relationship to specific candidate linked by information systems that allow data to flow design concepts”)? The explanation of how would have seamlessly among all processes and integrated metrics. been greatly enhanced with a few case histories. Smaller The book is important, in part, because Six Sigma’s or resource-constrained companies in particular would outstanding track record is making many managers con- undoubtedly like to know which of the text’s many, sider its potential to tame marketing, every company’s many steps and analyses can be skipped. unruly child. Marketing managers have resisted so far, Because of the great demand for accountability, partly because of widespread misperceptions about the someone is probably working on a practical book that strategy + business issue 45 nature of Six Sigma. outlines how Six Sigma can realistically be applied to The first misperception is that it is solely a manu- marketing, backed up with actual case studies. Six Sigma facturing improvement tool. Yes, Six Sigma has achieved for Marketing Processes, which pioneers the difficult task its most publicized successes of applying Six Sigma to marketing, will undoubtedly reducing production errors, but be used as a primary resource for that book, but, unfor-
  16. 16. board will have to be redrawn: BOOKS BEST 06 Finding Green in Gray Hair tunately, it is not the handbook for accountability that then almost every creative story- marketing executives ultimately need. Senior markets can be retapped for new yields; boomers will have one more chance to rock the marketing world. Dick Stroud makes his heretical point on the first page In fact, one contributor to 50-Plus asserts, “The paradox of the introduction to The 50-Plus Market: “The prin- is that the youth market is now the market of the past ciples of marketing to a 30-year-old are the same as and the mature consumer markets are now, and will marketing to somebody aged 75. Marketing theory is continue to be, the markets of the future.” Mr. Stroud intrinsically age neutral.” further argues, backed up by research from the global Consider the mind-set of the typical marketer who media group OMD and input from top marketers will read that passage. The 18- to 35-year-old market has worldwide, that advertisers lose potential market share 16 long been perceived as the biggest gift under the and profitability every time they look to chase baby faces Christmas tree, prized by television advertisers and cov- instead of wrinkles. eted by almost everyone in consumer markets. The One reason is that the number of older consumers reasons for this are engraved on several million slide is growing faster than the number of younger ones, and presentations. That demographic slice has more dispos- they are the main purchasers of transportation, health able income. It is open to experi- care, housing, food, pensions, and best books 2006 marketing menting with new brands, whereas personal insurance. Older con- older consumers are more brand sumers can be more lucrative. They loyal (read “stuck in their ways”) and have higher incomes, enabling them less responsive to advertising. A to buy 35 to 50 percent of all travel brand becomes “cool” when blessed services, 65 percent of all new cars, by this market. and 50 percent of face care products. No wonder most people with Why is there such abysmal crow’s-feet feel as though they have ignorance of the realities of the 50- been put out to advertising pasture. plus market? One reason, of course, Studies show that only 5 to 15 is that archaic truisms are perpetu- percent of advertising is aimed at ated rather than researched. These the 50-plus market, even though so-called truths include “to be cool, this group represents nearly half you have to be young” and, my of prime-time television audiences. favorite, “their lifetime value is too According to surveys, the majority short.” Another reason is that the of those over 50 feel that advertising portrays them advertising and marketing industry is overwhelmingly poorly and 86 percent feel that advertising does not youth-centric. More than 80 percent of those who work relate to them. in the U.K. advertising industry are under 40. But do the eternal verities concerning the 18-to-35 Stroud outlines “three truths that should be embla- market still hold up? U.S. boomers, who did so much as zoned on the front covers of all books about marketing: consumers to shape marketing nostrums, have long there is no simple formula linking a person’s age to how since slipped over the outer chronological edge of this they behave as consumers; when age does appear to be category, and markets in other countries are growing linked to differences in behavior, the variations are older too. China, which many see as a potential market- small; and the behavior of older people varies by nation- ing gold mine, will soon start aging faster than any other ality.” In other words, the relationship between age and country in history. Japan, Italy, and many other coun- consumer behavior is tenuous, at best. tries, especially those in Europe, also have aging popula- If the 50-plus market is so attractive, what are the tions. Efforts to capture and hold the senior market best ways to approach it? One key is not to generalize (defined here as anyone older than 35) will affect brand- about the way seniors behave. Another is segmentation ing efforts, customer and product development, and by criteria other than age. For example, not only is 50 even profitability. an arbitrary age, but chronological age also differs from If the clichés about the 18-to-35 market are hollow, perceived age. Generally, we see ourselves as being 10
  17. 17. 06 to 15 years younger than what our driver’s license tells mity to technological standards, out-of-fashion colors, us. One method of segmentation gaining ground is increasing average age of users, declining number of cus- geodemographics. Now being used by American tomer contacts, and an aging sales force. The brand BEST Express, Reader’s Digest, and other companies, geodemo- audit must also cover communications, looking for such graphics classifies consumers according to the type of weaknesses as an irrelevant brand spokesperson, old- Help for the Aging Brand neighborhood they live in. Such markets can cross age fashioned packaging, and — horrors! — “ad campaigns boundaries. not (well) ranked in ad festivals and contests.” (Nothing So is age meaningless in marketing? No, but Mr. in this brand scorecard mentions declining sales or prof- Stroud suggests that age be considered from a physical, itability.) The audit’s results are graded according to the not psychological, vantage point. This means that com- following indexes: the potential danger of the symp- panies need to make and market products that accom- toms, how easy the problem is to solve, the potential 17 modate declining senses of touch, smell, and eyesight, as cost, and the time required. well as loss of hearing and manual dexterity. Brand Rejuvenation stresses that just because a The appendixes in 50-Plus, which cover design fac- brand is targeted at senior citizens does not mean it is an tors for senior consumers, guidelines for age-friendly aging brand. Nor can a brand’s aging be blamed on its Web sites, and a test to determine whether marketing chronological age; rather, decrepitude is based on a BOOKS strategies are age neutral, are particu- brand’s perceived age. In other best books 2006 marketing larly useful. words, a brand ages because its tar- The book successfully examines get market is not refreshed over a market that has been overlooked as time. That means rejuvenation a result of decades-old myths, lack of requires making a brand more con- research, and the narcissistic, youth- temporary, and the primary tool for oriented makeup of the advertising doing that is usually advertising, industry. This is an excellent book for although this is not an instant cure. companies looking to stay ahead of Other options include using celeb- an inevitable demographic change rities, “the weapons of choice when instead of being swamped by it. it comes to rejuvenating the brand”; cobranding; expanding distribution; and modernizing the brand’s visual Most branding books focus on build- identity. ing products into brands, but there’s But resuscitating brands should another important issue: sustainabil- really be a last resort. Rather, com- ity. How do you support and maintain a brand over panies should pursue continuous strategies to prevent time so that it continues to pay back earlier investments? the aging of a brand. This approach is less expensive and How can you pump new life into an aging cash cow? avoids potential panic. The author provides useful but How can you connect with new generations of con- sometimes confusing tools for analyzing a brand’s need sumers? According to Brand Rejuvenation, “a brand ages for rejuvenation. in the eyes of its customers and/or its consumers because Like other branding books, this one suffers from it loses its appeal, its relevance and, usually, all or part of the flaw of paying homage to the brand, not the cus- its identity.” What causes a brand to age, and more tomer. In Professor Lehu’s words, “The brand is there importantly, what can be done about it? to serve its products, which will serve it in return.” No, The first step to brand rejuvenation is to conduct a no, no! The brand is there only to serve customers brand audit to determine whether the brand is aging because, obviously, without customers, there is no and has enough long-term potential to justify rejuvena- brand. Moreover, little attention is paid to the Internet, strategy + business issue 45 tion investments. Jean-Marc Lehu, an associate pro- which would seem an obvious tool to ensure relevancy fessor of marketing at Panthéon Sorbonne University, to new generations of consumers. And the book offers provides a scorecard to help. The symptoms of aging no metrics, beyond one kludgy formula, to ensure include a slowdown of new accountability. product launches, nonconfor- The value of Brand Rejuvenation lies in making
  18. 18. Like other die-hard loyalists of BOOKS BEST 06 Asia presents unique branding challenges: a large geographic area, vast cultural differences, and hyperacute price consciousness. Eight Weeks to a Winning Brand clear the need to keep brands relevant to customers. It lished more than 20 years ago. also reminds readers that managers must be as focused on the longevity of brands as they are on successful the “positioning” theory, Johnny cannot address any launches. But although this book has a few good ideas issue related to accountability, and customers are New Paradigm for Asia to ensure relevancy, it places most of its faith in the skills addressed only as receptacles for implanted words that of individual brand managers. Brand Rejuvenation can be “owned.” In fact, customers and profitability aren’t largely ignores the most important way to ensure sus- even listed in the book’s index. How can any book on tainability: continuous interaction with customers, sup- branding be taken seriously if it has not considered the pliers, and distributors, and the willingness — indeed, customers who support brands and the profitability that the need — to use their input to guarantee that the sustains them? brand continues to deliver value. But the biggest failing of this book and the other 18 positioning clones is that it neglects accountability. Can any company claim that its positioning has improved 12 Given the strategic importance of branding and the percent over last year or that its positioning is four times resources it requires, why can’t more companies brand? better than that of its nearest competitor? Without such Why do so many products fail to become brands? In metrics, the positioning theory has no accountability, Why Johnny Can’t Brand, authors Bill Schley and Carl and without accountability, there is no credibility with best books 2006 marketing Nichols Jr. argue that branding failures result from the CEOs. Still, if you desire to know how to perform a lack of a dominant selling idea (DSI), an update on that marketing shibboleth, then this book provides a coher- old sales workhorse, the unique selling proposition. A ent, easy-to-follow road map. DSI, consisting of fusing a corporate or product name with a specialty in a customer’s mind, can deliver “more The hottest topic in Asia is how to make what is called market share, more sales, more competitive strength, the OEM–OBM leap. In other words, how can Asian more growth, and more asset value.” And hopefully, firms move from OEM (original equipment manufac- more profitability. turer) status — as the producers of all the brands dis- Johnny outlines a process for developing a DSI: played on Carrefour and Wal-Mart shelves — to OBM choosing a specialty to excel in, articulating that spe- (original brand manufacturer) status, with the cachet, cialty briefly and memorably, and creating the visual say, of a Lexus or a Sony? According to one study, fewer and other building blocks that support the DSI. The than 10 global brands originated in Asia. final step is “Ring the bell to open the New York Stock Yet all the external elements are in place for original Exchange on Monday. No reason not to think big.” Asian brands to thrive. The disposable income of Asia’s Examples of DSI include Greyhound Bus Lines’ “Leave rapidly growing population rises each year. Asian firms the Driving to Us,” United’s “Fly the Friendly Skies,” that can meet demanding OEM requirements can cer- and Maxwell House coffee’s “Good to the Last Drop.” tainly meet consumer requirements. Cheap money in Supporting a DSI requires five key elements: a great most Asian markets makes capital easy to raise. The name; a unique, ownable specialty; a tagline; high- same cultural forces — movies and television — that impact visuals; and excellent organizational performance. once propelled U.S. brands overseas are now exposing With its emphasis on being number one or number Asian brands worldwide, thanks to the global popularity two in a category and the importance of mental “own- of Japanese anime, South Korean soap operas, and ership” of a word or concept, Johnny is strongly based on Hong Kong and Taiwanese movies. the landmark book Positioning: The Battle for Your Mind, In Asian Brand Strategy: How Asia Builds Strong by Al Ries and Jack Trout (McGraw-Hill, 1981), pub- Brands, branding consultant Martin Roll attempts to

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