This post is a natural complement to my post about management. Where people management is concerned with micro effects, strategy is concerned with macro effects, though the two are often intertwined in interesting ways, often against the background of evolving market trends, which make for interesting reading. Below are my thoughts on some business strategy books that I have read.

Good to Great (2001)

This was mentioned during one of our strategy sessions. The authors used a systematic, data-driven approach to analyze how companies transition from “Good” to “Great” (defined as having 125% and >300% higher returns than general stock market, respectively). Startups were discounted due to their financial volatility, and since the authors used public filings in their analysis large privately held companies were also excluded.

Some trends they observed in companies that transition from Good to Great are:

• Good-to-great companies are found across both high-growth and stagnant industries.

• External celebrity CEOs are negatively correlated with company success, while CEOs that were promoted from within were postively correlated with success.

• CEO compensation has no correlation with company success.

• Having a well-defined strategy does not guarantee success.

• Technology accelerated success rather than igniting it.

• Mergers and acquisitions do not guarantee success, merging two mediocre companies results in a larger mediocre company.

The chapters have individual lessons that derive from these trends:

• Prioritizing hiring good leaders over fleshing out strategy, since conditions can change that render old plans obsolete, but a good team would be able to adapt to those changes

• Be rigorous in recruiting and retention.Rigorous is maintaining a high standard with clearly communicated expectations. Ruthless is being demanding while also leading people on and letting them languish. Spend a lot of time during the recruitment process rather than risking rapid turnover later.

• Build a balanced team with distributed responsibilities instead of what the authors called the “genius with a thousand helpers” structure.

• Successful companies embrace changing market conditions and consumer tastes and adapt quickly, rather than holding on dogmatically to their original “mission”.

While there is certainly a strong business case for market value as the indicator of a company’s success, I don’t see it as the only trait that matters.

Lights Out (2020)

I had reservations about this book and another book that covered the fall of General Electric (“Power Failure”). On the one hand, I appreciate the value of learning from your mistakes, and complex mistakes that arise from large organizations are interesting. On the other hand, hindsight is 20/20 it’s easier to hypothesize why something fail than why it succeeds, especially from the outside.

According to the author, GE’s problems were:

• Spiraling underperformance of the turbine division due to the global transition to wind and solar which was covered up by accounting

• CEO transition in 2001 overlapping with the 9/11 attacks, which affected GE’s core business of airplanes, insurance and power generation

• A complex organization: workers often reported to multiple bosses, including finance

• A changing financial landscape, including the passage of Sarbanes-Oxley Act which made GE Capital unable to absorb fluctuating performance