Tuesday, June 07, 2011

O2 STRATEGY & BUSINESS > The Essential Advantage (audio)

Listen now (28 minutes)


Available to listen.
Last broadcast on Sunday, 22:32 on BBC World Service (see all broadcasts).


Paul Leinwand and Cesare Mainardi talk to Peter Day about their book - The Essential Advantage.
It is an interesting thesis about core competence and how most companies don’t understand what they are actually doing.
Global Business hears from them both about their ideas for turning companies around in difficult times and how management consultancy came to have such an important place in business.

Contributors to this programme

Paul Leinwand
Partner at Booz & Company in their Chicago office
Cesare Mainardi
Chief Operating Officer of Booz & Company

Peter Day's Webcomment

Obsessed with Growth
Quite a lot of rethinking is going on in the aftermath of the Credit Crunch recession. Quite a lot of business experts are expressing discomfort at the way things were.
We have been charting some of the evidence of this in Global Business: from Professor Michael Porter of Harvard Business School, from Roger Martin the Dean of the Rotman School of Business in Toronto, Canada.
I hope we will hear soon from Professor Gary Hamel on a similar theme: that companies have to think far harder than they needed to a few years ago about their purpose and the way they carry it out.
But this week’s programme comes not from the groves of academe, but the sharp end of business: the consultants.
Booz and Company has a memorable name and a notable history. It was founded by Edwin Booz in Chicago in 1914, making the company the oldest management consulting firm still in existence.
Before that time the famous business consultants were time-and-motion specialists, notably as Frederick Winslow Taylor, organising the factory floor of the Bethlehem Steel Corporation in relentless pursuit of extra productivity from the pig iron shovellers.
Taylor was an American management superstar, preaching the gospel of efficiency under the banner of his book “Principles of Scientific Management”. He died in bed (according to the epic American novelist John Dos Passos) with a stopwatch in his hand.
The management consultants who succeeded him at firms such as Booz attempted to turn his scientific management into a more flexible system.
At McKinsey, Marvin Bower led the drive to turn these shop floor technicians into professional advisors with the status of lawyers and accountants, and the fees.

Booz is another of the big name consultancies, with a history that includes the beginning of the contract system for Hollywood movies and the merger of the National and American Football Leagues.
Now two Booz principals have written a book which rather undermines a lot of the assumptions by which many companies have been run for the past several decades.
Paul Leinwand is a Booz partner in Chicago; Cesare Mainardi is Chief Operating Officer and Managing Director of the North American business. Together, they’ve written “The Essential Advantage”.
The thesis is that conventional wisdom about strategy is leading corporations astray; they are full of divisions with too much ambition, obsessed by endless expansion and ceaseless internal and external competition.
This means that many companies lack focus; they do not have the critical mass to do anything really well. They incoherently pursue what they have been huddled into doing for many years. No one has much time to think abut what they ought to be doing.
Mainardi and Leinwand think that most businesses do not realise they are in this state of confusion, thus making a (not very subtle) case for hiring the consultants.
But despite the self interest of the thesis, it is quite an important idea: that companies need to rediscover a coherence, a core competence that they can then concentrate on, something they do really well and identify with.
This strategy contrasts with the grow-at-all costs expansion inspired by financial markets hungry for endless growth.
Mainardi and Leinwand argue that companies need to seek out a “coherence premium”: a match between strategic direction and the capabilities that make them unique.
Few corporations have mastered this, they argue.
Most 20th century companies were largely interested in growth for growth’s sake. And now it is time for something different.
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