How the Mighty Fall

I have become a fan of Jim Collins ever since I laid my hands on Good to Great and I have tried implementing some of the concepts in my company. I must admit though that the success of the implementation is not as good as what I would have liked it to be and that is because of my own weakness in following through and persevering. For example, I have tried to implement Stop Doing List in order to streamline some of the redundant work processes but I did not follow through and make it a part of the company's internal system. I find Stop Doing List very useful as companies usually rush to implement new work procedures and very seldom spent time at simplifying or omitting outdated or redundant policies and as a result, as a company grows, it also becomes more bureaucratic and less efficient. I have the impression that somehow we feel more secure if there are more processes irregardless of whether the process actually add values or not. Anyway, back to the review of Jim Collins' relatively new book titled How the Mighty Fall which was released after the 2008 financial crisis. The book is concise and is easy to read. What is appealing is that it teaches us to avoid some of the common pitfalls of failed companies and I always believe that it is important to learn from mistakes and learn from history. The book also enables us to do a "self-check" and assess for our own whether our company is on the way to greatness or heading towards oblivion.

The following are some excerpts from the book which I find useful and I hope you will find it useful too:

1) "All happy families are alike; each unhappy family is unhappy in its own way".

2) There are five stages of decline as defined by Jim Collins:

a) Stage 1 (Hubris born of success) kicks in when people become arrogant, regarding success virtually as entitlement, and they lose sight of the true underlying factors that created success in the first place.
b) Companies in Stage 2 (Undisciplined pursuit of more) stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence, or both.
c) In Stage 3 (Denial of risk and peril), leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data.
d) In Stage 4 (Grasping for salvation), when the enterprise is being thrown into a sharp decline visible to all, the critical question is, How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place?
e) Stage 5: Capitulation to irrelevance or death.

3) Motorola's founding culture which instills a belief that past accomplishment guarantees nothing about future success and an almost obsessive need for self-initiated progress and improvement.

4) ........ concept of hubris is defined as excessive pride that brings down a hero, or alternatively (to paraphrase classics professor J. Rufus Fears), outrageous arrogance that inflicts suffering upon the innocent.

5) ........ innovation can fuel growth, but frenetic innovation - growth that erodes consistent tactical excellence - can just as easily send a company cascading through the stages of decline. (Personally, I think this is an important point. We must ask ourself whether we are losing focus and is pursuing growth without a clear and defined vision. With limited resources, we must use our resources wisely. Sometimes, we also have the tendency to undertake many new ventures without ensuring its successful implementation. A product which is not implemented is wasted energy and resources!)

6) ....... those who resisted the pressures to succumb to unsustainable short-term growth delivered better long-term results by Wall Street's own definition of success.

7) Packard's Law states that no company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. (Are your organization attracting talent for your company to continue to grow?)

8) Any exceptional enterprise depends first and foremost upon having self-managed and self-motivated people - the #1 ingredient for a culture of discipline. (This should be the goal of all managers or leaders, i.e. the ability to create a team of self-managed and self-motivated people. Imagine the wasted energy if as a manager/leader, you have to spent countless hours managing and supervising your people to perform their tasks to the best of their abilities and most of the time, the results are inferior compared to works performed by self-motivated people)

9) When bureaucratic rules erode an ethic of freedom and responsibility within a framework of core values and demanding standards, you've become infected with the disease of mediocrity.

10) ......... need to build an excecutive team and to craft a culture based on core values that do not depend upon a single heroic leader. (Does the industry or client recognise you or your company? If it is the former, you still have a lot to do in terms of building a great company)

11) ......... while no leader can single-handedly build an enduring great company, the wrong leader vested with power can almost single-handedly bring a company down.

12) When making risky bets and decisions in the face of ambiguous or conflicting data, ask three questions:

a) What's the upside, if events turn out well?
b) What's the downside, if events go very badly?
c) Can you live with the downside? Truly?

13) For businesses, our analysis suggests that any deterioration in gross margins, current ratio, or debt-to-equity ratio indicates an impending storm.

14) One common behavior of late Stage 3 (and that often carries well into Stage 4)  is when those in power blame other people or external factors - or otherwise explain away the data - rather than confront the frightening reality that the enterprise may be in serious trouble.

15) Stage 4 begins when an organization reacts to a downturn by lurching for a silver bullet. (Great managers/leaders realise that the recipe for a fast turnaround or silver bullet is "There is NONE. It takes consistent effort over a duration of time in order to turnaround a company to set it up for future growth. Short-term measures only give the company some breathing space in order for it to pursue sustainable long-term growth).

16) The signature of mediocrity is not an unwillingness to change. The signature of mediocrity is chronic inconsistency.

17) "Never forget," Lazier (Professor Bill Lazier of Stanford Graduate School of Business) would say. "You pay your bills with cash. You can be profitable and bankrupt".

18) ......... the right leaders feel a sense of urgency in good times and bad, whether facing threat or opportunity, no matter what.

19) The right people will drive improvement, whether standing on a burning platform or not, and they never take well to manipulation.

20) ....... culture isn't just one aspect of the game - it is the game.

21) Nucor's CEO, DiMicco's philosophies:

a) ....... culture in which management was in service to employees, not the other way around.
b) ....... it is better to hire people with the right work ethic and character and teach them how to make steel than to hire people who know how to make steel but lack the Nucor work ethic and character traits. (I support this statement whole-heartedly. What is important is Attitude!)
c) Instead of focusing on employee rank and status, Nucor emphasized performance (This is important. With this, managers/leaders are sending out a message: If you are good, you will be appreciated. With this, everyone will work towards excellence. To me, good work performance, of course, with good moral/ethics, should be the sole criteria in rewarding employees).

In summary, this is a book which should be in every aspiring managers/leaders' reading list. If you feel that you don't need to read, couldn't be bother or are too busy to learn, you are already in Stage 1 of decline!

YNWA - Carling League Cup 2012 Champion!

WHAT THE DOG SAW and other adventures

Malcolm Gladwell can definitely writes and tells a story. All of his books that I have read so far are very easy to read and what I like most is that it makes me thinks about many so called conventional wisdom. As such, the title of the book is apt as Malcolm Gladwell looks at things from many different perspectives. While I was writing this post, I wondered whether Mr. Gladwell's works can be categorised as business and management books and if I were to teach a subject in business and management, would I include his works as part of my teaching material? I would say yes and it depends on how you look at knowledge. For me, to be a good manager and run a successful business, we need to be innovative and be able to look at things from many different perspectives and if you look at Mr. Gladwell's works, you will realise that there are plenty of references to human psychology and how we tends to see the world as collective human being. Isn't that important in order to be a good manager, i.e. to understand human psychology better? This book is actually a compilation of articles published in The New Yorker and as usual, the range of subjects is astounding ranging from Ketchup, Dog Trainer to more serious issues such as Criminal Profiling and Talent Myth. If we cannot learn anything related to business and management from this book, I am sure the joy of seeing the world from a different perspective will be equally satisfying and show us just how interesting our lives can be.

Similar to my review of Outliers, I would recommend that the whole book to be read in order to do justice to Malcolm Gladwell's literary skills and story-telling abilities. Nevertheless, the following are some of the lessons which I find useful from the book and wish to share with all of you:

1) The pitchman must make you applaud and take out your money. He must be able to execute what in pitchman's parlance is called "the turn" - the perilous, crucial moment where he goes from entertainer to businessman. (Of course, this sounds like common sense now but it is important to remind ourselves that it is important to be able to entertain and at the same time, make business. What is the use of being a good entertainer but is unable to generate sales?)

2) The turn requires the management of expectation. (To me, this is the keyword to everything and not just on sales. If your wife expects you to give her a 10-carat diamond ring for your 25 years wedding anniversary but you give her a 9.5-carat ring, you can imagine the dissapointment. But if your wife expects a 1-carat wedding ring but you gave her a 9.5-carat ring, I am sure you will be treated like a king. The same goes with salaries, bonuses, Client's expectations, etc. It is a delicate balance here as well because if you underpromise too much, you may not last until the day where you overdeliver. Again, like I said earlier, it's not easy to be a good manager and no one should be under the illusion that there is a silver bullet that can solve every problem)

3) 'I know how to ask for the money'. And that's the secret to the whole damn business. (To technical people, this word seems dirty as generally, technical professionals don't ask for the money and in some countries, talking about money alone may seem to be against the professionals code of ethics. It makes me wonder whether this is why that it has become such a norm in Malaysia that some clients have no remorse whatsoever when they don't pay their consultants. To me, it is ok to ask for the money as long as you discharges your duty professionally and you have carried out your work in the best interest of the public and the Client. At the end of the day, it is a fair trade and we should have no shame asking for what is rightfully ours. Anyway, this deviates from the key message of this point, i.e. one must have the ability to be able to convert one's services into business and receive the money for it. A lot of people can give good presentations/sales pitch or even provided the services but did not manage to convince the potential client that his products/services are worth the money. The ultimate aim for any business is that people would feel happy to pay for your products/services and will feel that it is worth it!)

4) From an experiment by Kahneman and Tversky, a group of people were told to imagine that they had $300. They were then given a choice between (a) receiving another $100 or (b) tossing a coin, where if they won they got $200 and if they lost they got nothing. Most of us, it turns out, prefer (a) to (b). But then Kahneman and Tversky did a second experiment. They told people to imagine that they had $500 and then asked them if they would rather (c) give up $100 or (d) toss a coin and pay $200 if they lost everything and nothing at all if they won. Most of us now prefer (d) to (c). What is interesting about those four choices is that, from a probabilistic standpoint, they are identical. Nonetheless, we have strong preferences among them. Why? Because we're more willing to gamble when it comes to losses, but are risk averse when it comes to our gains. That's why we like small daily winnings in the stock market, even if that requires that we risk losing everything in a crash. (Does that sound familiar - have you ever wondered why so many people lose money in the stock market? It is important that we understand our own psychological weakness)

5) ....... to succeed in the world he could not be just a dog whisperer. He needed to be a people whisperer. (This statement is about Cesar Milan, the famous dog whisperer/trainer. At first, he was not very successful despite his skills and his life only changes for the better when he realised he needs to be a good communicator with fellow human beings as well. This is a recurring theme in my previous post, to be successful in life and your career, it is not just your technical skills that are important, you must be a good communicator and not a lone ranger)

6) Power-law problems leave us with an unpleasant choice. We can be true to our principles or we can fix the problem. We cannot do both. (Sometimes, effective solution may seem harsh and lack of compassion but to be soft and undecisive may cause more problems in the longer term. As such, to be an effective manager, one has to be decisive)

7) ........whether we revise our judgment of events after the fact..........(An important question if one is involved in forensic investigation or passing judgement about others. Sometimes, we can easily point finger at others and give statements such as "The failure is obvious. It is amateur mistakes" with the benefit of hindsight. Therefore, it is important that we ask ourselves the question, what would I have done if I were in the same position at that time with the same amount of information)

8) "Creeping determinism" - the sense that grows on us, in retrospect, that what has happened was actually inevitable - and the chief effect of creeping determinism, he points out, is that it turns unexpected events into expected events.

9) ....... consequences of creeping determinism: in our zeal to correct what we believe to be the problems of the past, we end up creating new problems for the future.

10) Stress wipes out short-term memory. People with lots of experience tend not to panic, because when the stress suppresses their short-term memory they still have some residue of experience to draw on. (For example, it is probably good to give pressure to students to study hard but when it is close to the exam day, it is detrimental to their performance if they are under too much stress)

11) Choking is about thinking too much. Panic is about thinking too little. Choking is about loss of instinct. Panic is reversion to instinct. They may look the same, but they are worlds apart.

12) ......... performance ought to improve with experience, and that pressure is an obstacle that the diligent can overcome.

13) The usual prescription for failure - to work harder and take the test more seriously - would only make their problems worse (This is in relations to choking in relations to stereotype threat resulting in the person taking the challenge too seriously. In the book, Malcolm cites examples that black students aren't as good at test-taking as white students, or that white students aren't as good at jumping as black students. Because of such stereotyping, good black students would tends to choke or think too much during a test which results in their poor test scores. This is simlar to good students taking important exams. If they think about the consequences if they don't do as well as they are expected in the exam, the pressure will makes them choke. So, while pressure is good, one must be mindful whether such pressure is suitable on a particular person).

14) We have to learn that sometimes a poor performance reflects not the innate ability of the performer but the complexion of the audience; and that sometimes a poor test score is the sign not of a poor student but of a good one.

15) Risk homeostasis - under certain circumstances, changes that appear to make a system or an organization safer in fact don't. Why? Because human beings have a seemingly fundamental tendency to compensate for lower risks in one area by taking greater risks in another. (For example, car safety features have improved tremendously over the years but does it reduce the fatality rates. It doesn't seem so. When the car safety features improve, we simply drive faster and tailgate closer. So does it reduces the risk of fatalities by improving car safety features. In a company, it can also suffer similar risk homeostasis where the more checklists produced will just encourage employees to pay less attention to their own works. Worth pondering isn't it? For me, we must not get the wrong message here. It doesn't mean that we have to stop improving car safety features because it doesn't seem to help in reducing risks of accidents. What is more important that we are aware of the risks that we are taking when we decide to drive faster. With improvements to the system, at least we have a choice whether we want to reduce the risk or we decide to take the extra risk. The key is awareness!

I am sure some of you can also relate to risk homeostasis in management where the more you check or manage your subordinates, it seems they will become more careless because they know you will check and solve their problems.)

16) ......final lesson of the late bloomer: his or her success is highly contigent on the efforts of others.

17) "What IQ doesn't pick up is effectiveness at commonsense sorts of things, especially working with people," Richard Wagner, a psychologist at Florida Sate University says.

18) It argued that flawed managers fall into three types. One is the High Likability Floater, who rises effortlessly in an organization because he never takes any difficult decisions or makes any enemies. Another is the Homme de Ressentiment, who seethes below the surface and plots against his enemies. The most interesting of the three is the Narcissist, whose energy and self-confidence and charm lead him inexorably up the corporate ladder. Narcissists are terrible managers. They resist accepting suggestions, thinking it will make them appear weak, and they don't believe that others have anything useful to tell them.

19) The broader failing of McKinsey and its acolytes at Enron is their assumption that an organization's intelligence is simply a function of the intelligence of its employees. They believe in stars, because they don't believe in systems.

20) The talent myth assumes that people make organizations smart. More often than not, it's the other way around. (I would modify this statement a bit. An organization will not be smart if it don't have a system despite having talent. I would disagree with Malcolm Gladwell here as talent within a proper system will make the organization better. In the case of Enron, it looks like they just let their so called talented people do whatever they like without a proper system)

21) ....... if everyone had to think outside the box, maybe it was the box that needed fixing.

22) One of the most important things is that you have to come across as being confident in what you are doing and in who you are. How do you do that? Speak clearly and smile.


In summary, this book once again opened up my eyes on seeing things from many different angles. It certainly makes me a better manager if I remembers the lessons learned from this book (I hope). For that, I would recommends Malcolm Gladwell's books to anyone who is open-minded and is willing to look at things from another person's (or dog's) perspective.

By the way, Happy Chinese New Year and let's hope that this Water Dragon year brings us good health and joy.

Outliers: The Story of Success by Malcolm Gladwell

Malcolm Gladwell is one of my favourite author simply because he can put across interesting idea in a very easy to read and comprehend manner. His works have actually influenced the way we look at things and the famous concept of tipping point is made famous in his earlier book. The book Outliers was actually published in 2008 and I have only recently completed reading this wonderful book. This book strikes a chord in me as it explains success in a way which is logical and not from the usual mainstream media of attributing success to hard work, brilliance, bla bla bla. I am not saying that hard work, brilliance, etc. is not important in one's success but we know from real life experience that there are a lot of people who are hardworking, brilliant, etc. and yet have find success to be elusive. While some have attributed that to luck, feng shui, etc., it is Malcolm's brilliant explanation which put things into clearer perspective. This book also taught me a great deal of how to make full use of circumstances in order to excel in one's chosen area.

Some excerpts from the book are summarised here to give some general idea about the book but I would strongly advise that one read the entire book which is fun and easy to read:

1) .......the values of the world we inhabit and the people we surround ourselves with have a profound effect on who we are. (Something which I try to practise now, i.e. if I want to be happy, I will surround myself with happy people and if I need inspiration, I will surround myself with positive and successful people. People to avoid at all cost: moaners and negative people)

2) It is those who are successful, in other words, who are most likely to be given the kinds of special opportunities that lead to further success. It's the rich who get the biggest tax breaks. It's the best students who get the best teaching and most attention.

3) Ten thousand hours is the magic number of greatness. (This is one of Malcolm's quirky theory - ten thousand hours are about the time required in order for someone to become good in a particular area. So, have you contributed ten thousand hours to your area of expertise?)

4) Practice isn't the thing you do once you're good. It's the thing you do that makes you good. (This is an important message especially to talented people. Don't waste your talent by thinking that you are talented and don't need practice)

5) "that intellect and achievement are far from perfectly correlated" (This is becoming more obvious now as aspects such as EQ are being studied more and more and which seems to give better correlations to success. For me, as a human being, we can only be successful if we are good as a human being, i.e. ability to work in a group, communicate with fellow human being, possess inner calm, etc. This probably explains why so many brilliant technical people are not as successful as people expect of them simply because they may be brilliant working on equations, machines, etc. but have failed as a human being)

6) .....practical intelligence includes things like "knowing what to say to whom, knowing when to say it, and knowing how to say it for maximum effect." (This is very important - the art of communication! Have you came across someone in your life who is brilliant but every words that came out of his mouth is either sarcasm or downright insulting? I certainly do and most of the time, these are brilliant people, brilliant on technical subjects but with obvious flaw in practical intelligence!)

7)........ in the end almost none of the genius children from the lowest social and economic class ended up making a name for themselves (This may sound sad but am afraid, I also believe in this harsh reality. Children from the lowest social and economic class are at an disadvantage because most often, they lack the confidence, social skills, etc. which is important in order to make a name for oneself).

8) .......no one - not rock stars, not professional athletes, not software billionaires, and not even geniuses - ever makes it alone (Technical people - please take this point seriously. Working with people is very very important. One cannot have the attitude of couldn't be bothered about the other lesser being)

9) Successful people don't do it alone. Where they come from matters. They're products of particular places and environments.

10) Those three things - autonomy, complexity, and a connection between effort and reward - are, most people agree, the three qualities that work has to have if it is to be satisfying.

11) ......... if you work hard enough and assert yourself, and use your mind and imagination, you can shape the world to your desires.

12) Cultural legacies are powerful forces. They have deep roots and long lives. They persist, generation after generation, virtually intact, even as the economic and social and demographic conditions that spawned them have vanished, and they play such a role in directing  attitudes and behavior that we cannot make sense of our world without them. (Malcolm argued that cultural legacies have much larger influence on us than we think)

13) Our ability to succeed at what we do is powerfully bound up with where we're from,.......... (Don't get the wrong message! It doesn't mean that we cannot be successful if we happen to be borned in less privileged surroundings. What is important is that we realise what we lack and then work harder to overcome those disadvantages. Realisation is key. Of course, we will have to work harder or make sacrifices in order to break through but the success will be sweeter)

14) But Korea, like many Asian countries, is receiver oriented. It is up to the listener to make sense of what is being said. (This book makes me realise the obvious. Asians, because of cultural legacies are usually very indirect when it comes to communicating comments / criticisms. As such, direct criticisms are usually frowned upon and can be even termed as downright rude. In the book, it was demonstrated that one of the reasons for high incidences of plane crashes in Korea previously is due to this cultural weakness where the second pilot is afraid to point out the errors of his captain (not directly anyway) even though at the end, it costs him his live and many others)

15) Who we are cannot be separated from where we're from - and when we ignore that fact, planes crash (For me, the main message is we must accept our own weakness and then work towards managing it)

16) Working really hard is what successful people do,............

17) Success is a function of persistence and doggedness and the willingness to work hard..........

18) Superstar lawyers and math whizzes and software entrepreneurs appear at first blush to lie outside ordinary experience. But they don't. They are products of history and community, of opportunity and legacy. Their success is not exceptional or mysterious. It is grounded in a web of advantages and inheritances, some deserved, some not, some earned, some just plain lucky - but all critical to making them who they are. The outlier, in the end, is not an outlier at all. (This essentially summarises the content of the book - are outliers really outliers and cannot be explained?)

In summary, this book is such a wonderful read and while I don't think some of Malcolm's theory is tested or proven, it will at least open up your mind and look at some of the things in the world from a different perspective. For that alone, this book is worth the time. Good luck and Happy Halloween.