Database Reference
In-Depth Information
long periods, that is,
built to last
organizations. The study reached the conclusion that the cause
of the excellence displayed by these companies lay in eight prominent attributes that they shared
in common.
The eight attributes were
1. Stick to the knitting
2. Close to the customer
3. Productivity through people
4. Autonomy and entrepreneurship
5. Hands-on and value driven
6. Bias for action
7. Simple form and lean staff
8. Simultaneous loose-tight properties
Each of them had a characteristics pattern of actions, position, posture, and process associated
with them. The conclusion drawn was that, if others imitate these eight attributes, they too would
become excellent.
The eight-attribute plan proved to be a disappointment because, within 5 years, two-thirds of
the companies in the sample had slipped from the pinnacle. A number of other studies followed
since then, but none can be judged to have found the best way for all companies to excel in busi-
ness. For instance, except for General Electric, of the top 12 companies that made up the Dow
Jones index in 1900, none survive today. Almost 40% of the names that made up the Fortune 500
10 years ago have disappeared, while of the 1970 list, 60% have been acquired or folded up. Clearly,
the best-run and most widely admired companies are unable to sustain their market-beating levels
of performance for an extended period of time. The very processes that enable them to survive over
the long term thwart them from renewal and reinvention and, finally, fossilize them.
This seems to suggest that one of the fundamental tenets of business that a company should
be
built to last
is seriously flawed. Rather than aiming for continuity, enterprises should aim for
changes or variations to ensure
built to perform
organizations (see Section 15.6 “Performance
Prism”). Analogous to Michael Porter's concept of the value chain that essentially reflects costs
at various stages, one can conceive of a casual
performance chain
running from activities to costs
to revenues to the valuation of the enterprise in the capital markets. Enterprises should inno-
vate, renew, and reinvent themselves and their businesses to survive in the turbulent market
environment.
15.2 Aspects of enterprise Value
From the perspective of the collaborative enterprise, it is evident that a single stakeholder cannot
sustain an appreciable ROI for itself at the cost of the other stakeholders. For instance, shareholder
value cannot be maximized indefinitely by reducing product quality or customer service, negotiat-
ing arbitrarily lower rates from suppliers/vendors, or cutting down remuneration of the employees.
An ROI for different stakeholders is not in opposition to each other; it is not a
zero-sum game
. We
have already seen concrete proof of this in the last century when manufacturing quality and cost
were mistakenly believed to be in opposition to each other. As it has been shown in the 1990s, an
enterprise can achieve excellent quality
at reduced costs.
