I think this is important enough that both of these cases are part of a new concept sequence, titled Business Expansion. You'll notice that the text for this concept is drawn from Ram Charan's What the CEO Wants You to Know, a book I summarised a number of years back.
Charan points out that not growing is bad. In a dynamic, competitive environment — especially if you have no sustainable competitive advantage — Charan asserts that failing to grow means that your business is slowing dying. But growing badly is also terrible, and in fact, more likely to kill your business just the same. Anyone with business experience will know stories of companies that died from over-expansion. The cure, as they say, is sometimes worse than the disease.
Charan believes that good growth has four distinct properties. In our summary of the book, we write:
Charan proposes that good growth is profitable, organic, differentiated, and sustainable:
- Profitable. Good growth not only generates profits but is also capital efficient. It needs to earn an amount greater than the company would receive by investing its money into something ultra-safe like a Treasury bill.
- Organic. Good growth nearly always flows out of the company’s existing capabilities. A corollary: a company’s job is to systematically expand its set of capabilities.
- Differentiated. Charan writes “you never want to provide a product or service that is seen as a commodity. Customers must prefer it. Otherwise, you will never make very much money”. A more nuanced take on this is that the growth must be defensible — and a differentiated product offering is merely one defensible strategy. There are others.
- Sustainable. Growth should continue year after year, instead of providing a quick spike in revenue. Growth that triggers a price war is by definition not sustainable.
However, this is a little too neat. When you look at real cases of businesses that died from expansion, you realise there is an art to this, a skill to this — and it is not as clear-cut as Charan makes it out to be. In fact, in some cases, expansion kills the business due to factors completely outside the businessperson’s control.
This new concept sequence is also to lay the groundwork for a learning experiment I want to run with members. (This is tied to both the Data-Frame theory of Sensemaking, as well as Cognitive Transformation Theory. Which took some time, because I had to lay all of that groundwork)
More on that soon!
Note: members may leave comments at the bottom of both cases.
💡 The Commoncog Membership Program is like an ongoing MBA, for a fraction of the price. Get full access to members-only articles, a rich and growing case library, plus an exclusive, members-only forum.
The Commoncog members-only forum is a private place for sensemaking on business and markets.
Here are a couple of members-only discussions I'd like to draw attention to:
A discussion about Farrell on Drucker and Cloudflare — Henry Farrell points out that Cloudflare's CEO misunderstands Drucker, who saw measurement as a tool for managers to improve their own judgment, not as a way for bosses to decide who to fire. This is in reference to Cloudflare CEO's Matthew Prince's recent WSJ op-ed, talking about firing the 'measurers' (meaning middle management) of his company.
A number of fun Personal Experience Reports with AI — A member talks about how they built an AI automation to greatly assist with a language teaching centre. Another member uses AI to run two-agent debates (one bullish, one bearish) for investment analysis, which improves their sensemaking (without tiring them out) by proposing new frames one may quickly consider or discard. Another member produced this gem, in response to "Nearly every software engineer who was open to this new frame had a prior professional experience where a core anchor in their domain was invalidated."
Member discussion on an essay that made the rounds last week: Why Japanese Companies Do So Many Different Things. I've spent eight years investigating this very question, thought this essay was AI-written garbage, and ripped into it here.
Note that you'll have to be logged in as a member to view many of these threads. You may login here.
If you need help on how to log in to the forum, see here.
Commoncog Member Events
We have a new events section on the Commoncog.com website, meaning there's a one-stop location you can go to for information about all new upcoming events as well as recordings of past events.
AI Isn't Management. Try Explaining That to Matthew Prince — By political scientist Henry Farrell. This is more about what Drucker actually said, as opposed to what Matthew Prince (CEO of Cloudflare) wrote in his self-congratulatory "we laid off lots of useless middle management who are 'measurers' because of AI yay" opinion piece in the Wall Street Journal.
Farrell makes the case that Drucker is compelling and 100% opposed to Prince's argument:
Drucker believes that the pathological versions of top-down control-by-company-president-or-CEO have much in common with political dictatorship. Management, properly understood, is a mode of human autonomy, a liberal activity in the strong sense of the word. Squashing it into mere implementation is accordingly tyrannical.
Fundamental to Henry Ford’s misrule was a systematic, deliberate and conscious attempt to run the billion dollar business without managers. [italics in original] … Henry Ford’s concept was not even unique in industry. It was widely held in the early years of the century. He shared it, for instance, with one of his most distinguished contemporaries: Lenin.” … Above all, it seemed to make possible industrialization without management, in which the ‘owner,’ represented by the political dictatorship, would control all business decisions while business itself would employ only technicians.
Drucker was suspicious, on similar grounds, of Taylorist efforts to automate business activities so as to separate out planning from doing.
Planning and doing are separate parts of the same job; they are not separate jobs
By suggesting otherwise, Taylorism verges on authoritarianism:
the divorce of planning and doing was also part of the elite philosophy that swept the Western world in the generation between Nietzsche and World War I - the philosophy that has produced such monster offspring in our time. Taylor belongs with Sorel, Lenin and Pareto. … power must be grounded in moral responsibility; anything else is tyranny and usurpation
The role of the manager is not to plan what others do, or merely to implement the plans of others, but to exercise human judgment within a moral setting to integrate social activity:
The manager has the task of creating a true whole that is larger than the sum of its parts … One analogy is the conductor of a symphony orchestra, through whose effort, vision and leadership individual instrumental parts that are so much noise by themselves become the living whole of music. But the conductor has the composer’s score; he is only interpreter. The manager is both composer and conductor. … The task of creating a genuine whole also requires that the manager in every one of his acts consider simultaneously the performance and results of the enterprise as a whole and the diverse activities needed to achieve synchronized performance
I have an advance copy from Ries's team and I’m still working my way through it, but what I’ve read so far I really like — many of the ideas in there are things that I've thought about and studied in Commoncog's cases. I just haven’t had the time to give it a proper treatment. (Though I did publish last week's There are Many Configurations of Business That Work in preparation for my review!)
In the meantime, here’s a link to a 30-minute interview between LinkedIn co-founder Reid Hoffman and Eric Ries. They spend the interview discussing the new book and what Eric hopes to accomplish with it.
I'm about 40% through the book. I recommend it. I’ll post my notes in the forum first, then follow up with a full review in a couple of weeks.
Apparently the book's cover is super shiny but I wouldn't know; I just read ebooks ;-)
Agency is for Sociopaths — Cate Hall (whose upcoming book on agency, You Can Just Do Things is due soon and you should absolutely pre-order it) with a new post that gets at why agency tends to show up in sociopath types (maybe Berkson's paradox) but you should learn to be more agentic anyway.
To be clear: Yes, many bad people are high in agency, and a lot of the people most obsessed with agency kind of suck. In fact, stop for a moment and call to mind the worst person you can think of. Odds are, they’re the kind of person liable to embrace the mantra “you can just do things.”
This correlation makes sense if, like me, you think of agency as the capacity to see and act on options that others overlook. It’s a combination of inventiveness and courage that most people lack, very often due to social conformity. Bad people don’t feel social conformity as strongly, given that they don’t view the welfare or opinions of others as important. This frees them to indulge in vicious creativity.
It would be a mistake, however, to draw from this a conclusion that agency itself is the problem. It’s more accurate to think of agency as a general-purpose, morally neutral tool, like physical strength or intelligence. And it’s a tool we should be very wary of warning people off of developing, just because there’s some population-level correlation between agency and Dark Triad traits.
A taste for violence might naturally predispose someone to learn martial arts, but that only makes it more important to encourage people who are motivated by self- and other-defense to take them up. If the good-hearted, prosocial people of the world took on 10 percent of the courage of ruthless antisocial powermaxxers, we would all be better off.
I'm going to be travelling for three weeks starting Friday, which is a little scary because it's travel with my eight-month-old daughter (to see my parents and grandparents back in my home town).
But, if nothing else, it'll be an adventure!
Warmly,
Cedric
💡 The Commoncog Membership Program is like an ongoing MBA, for a fraction of the price. Get full access to members-only articles, a rich and growing case library, plus an exclusive, members-only forum.