My colleague Linda Sanford has just published a book, Let Go to Grow: Escaping the Commodity Trap, co-written with Dave Taylor. The book's basic premise is that the Internet, globalization, and deregulation have given rise to an ultra-competitive marketplace in which many products and services have become commodities. It then presents a sequence of management principles to not just help a company survive the commodity threat, but actually turn it into a growth opportunity by letting go of outdated business models and management systems and bringing innovation into all aspect of the business.
I have worked closely with Linda for many years now, and can attest without hesitation that when it comes to business transformation, she knows what she is talking about from first hand experience. Linda led the successful transformation of IBM's mainframe business business in the 1990s, when that business was essentially in free-fall because the industry was undergoing a major technology and architectural transition. Several years later she similarly led the revitalization of IBM's storage systems. In between she restructured IBM's industry and application solutions business. When IBM's On Demand initiative was launched in October 2002, we were appointed as co-leaders. I led the customer facing On Demand activities and Linda led IBM's own transformation to become a showcase On Demand Business, a position she still holds. When it comes to business transformation, Linda has surely "walked the talk".
Let Go to Grow begins with some sobering marketplace realities that every business faces. I was struck by some statistics that illustrate how difficult it is to manage a business: of the 172 companies that have appeared in the Fortune 500 list between 1955 and 1995, only 5 percent grew their revenue above the overall inflation rate, and only 16 percent of 1008 companies tracked from 1962 to 1998 have survived. And, this is before the more recent commoditization pressures that the Internet, globalization and deregulation are now imposing on so many businesses. To survive these pressures, let alone to grow revenue and profits, a business has to rise above the commoditization challenges and somehow define a differentiated, compelling value proposition for the marketplace.
The book then presents its vision of the future of business in this environment based on concrete case studies of a number of companies to illustrate its theme, including GE, eBay, Dell, Cemex, Toyota, Southwest, UPS, Federal Express and IBM itself. In a nutshell, businesses have to let go of their traditional control mechanisms and organizational practices. They need to evolve from the monolithic, hierarchic organizations that have been the norm for companies for the last hundred years but are inadequate for today's fast changing, dynamic marketplace. Instead, they need to open up their business by building and participating in value webs with a number of companies, coordinating their individual capabilities to create a collaborative business eco-system. These value webs can only be built on a common business platform, based on componentized, standard interfaces, on top of which each business then adds its unique value.
Open, standard business components are the equivalent of interchangeable parts in the manufacturing of products, from computers to consumer electronics to automobiles. It is also the way every successful technology-based infrastructure has been built over the years, from the electric grids, to telecommunication and broadcast networks, to the Internet and World Wide Web. It is, in my opinion, the application of basic engineering principles that have worked so well in discipline after discipline over the years to the world of business.
Let Go to Grow is a handbook, based on real experiences, on how to transform a business based on such principles. It acknowledges how difficult it is for a business to change, even when it has no choice, which accounts for the high proportion of companies that do not survive over time. You are asking a business, its management and overall workforce to change its very culture, which in all likelihood is the same culture that has accounted for its success in the past. Leadership is absolutely necessary, both to articulate the vision and need for change, and to operationalize the vision and link it to execution.
Let Go to Grown is a relatively short, easy to read book. It presents its principles and advice in concrete, simple language. It is a book that everyone interested in understanding the business environment in the 21st century and what to do about it should read.