In Search of Excellence | Thomas J. Peters

Summary of: In Search of Excellence: Lessons from America’s Best-Run Companies
By: Thomas J. Peters

Introduction

Embark on a journey to uncover the secrets behind America’s best-run companies with ‘In Search of Excellence’ by Thomas J. Peters. In a quest to discover the recipe for excellence, the authors analyze America’s top 15 companies of 1982, unpacking their shared attributes and unique approaches to management. In this summary, you will learn about action bias, organizational fluidity, customer obsession, fostering innovation, employee respect, setting values, profitable diversification, and embracing simplicity in the organizational structure. Digest these key concepts and start transforming your own organization toward excellence.

The Best Way to Manage a Company

This book explores the different approaches to management theory and their effectiveness in building successful businesses. The authors conducted research on America’s top 15 companies to figure out what attributes they all shared. This research was prompted by observations that Japan’s lack of business schools produced a different management culture than in the United States, leading to questions about whether Americans had adopted an overly theoretical approach. The 15 top American companies were determined by their reputation among businessmen, consultants, and business academics, as well as basic measures of growth and long-term wealth creation over a 20 year period. The book delves into the common characteristics of these successful companies and offers insights into effective management strategies.

Creating Organizational Fluidity

Successful companies have an action bias and adopt organizational fluidity to efficiently deal with complex issues. This entails creating informal communication processes and smaller task teams to encourage immediate problem solving.

What sets successful companies apart? According to the authors, those at the top all have something in common – an action bias. These companies have the ability to get things done, no matter how complex the task at hand. Unfortunately, many companies struggle to achieve this. Bureaucracy and an over-reliance on committees can hinder progress, creating a high barrier to action.

However, excellent companies have found ways to cope with this issue. They adopt what the authors refer to as “organizational fluidity”. Simply put, this term refers to an organization’s ability to resolve issues, especially those that require multiple levels of bureaucratic attention.

Creating fluidity is done by promoting informal networks for communication. This includes open door policies and even policy implementations like “Management by Walking Around”. Effective communication results in quickly addressing issues without additional layers of bureaucracy.

Chunking is another method that successful companies use to encourage action and optimize fluidity within the organization. By creating smaller groups of people to handle specific tasks, companies can nimbly deal with problems as soon as they arise. These groups may not be reflected on formal organizational charts but have proven to be the backbone of excellent companies.

Canon, for example, organized a task team to develop and launch the AE-1 camera in just two and a half years. Today, this camera is considered a groundbreaking technological advancement thanks to the swift, efficient communication and collaboration of this small team.

In short, creating organizational fluidity is key for companies to get things done. By adopting informal communication processes and smaller task teams, businesses can move beyond bureaucracy and create positive change.

The Power of Customer Obsession

In “In Search of Excellence,” Tom Peters and Robert Waterman claim that great companies have a service obsession that influences every aspect of their business, from research to sales to accounting. This emphasis on customer service is not aimed at appeasing clients, but rather improving shortfalls in other areas. For instance, IBM hires entry-level employees to handle customer complaints, instilling in them a solid understanding of how to meet customer needs. This practice builds customer loyalty. Procter & Gamble (P&G) also benefitted from customer focus by being the first consumer goods corporation to put a toll-free number on its products. This move initiated most of the company’s product improvements. Studies also show that end-users of products have better ideas for improvement than producers. Excellent companies recognize the immense value that customers bring beyond the final sale, thereby creating a powerful force that drives innovation and success.

Fostering Internal Competition for Innovation

Small businesses produce 24 times more innovation per dollar than larger firms, but some multinational corporations act small in terms of innovation. How do they do it? Internal competition fuels innovation as it creates a sense of autonomy and entrepreneurship even within large corporate structures. IBM uses performance shoot-outs while Procter & Gamble has formal policies that allow brands to actively compete. This competitive element motivates the brands to continuously improve their products, and benefit P&G’s overall sales. Large companies embrace failure and encourage experimentation. 3M is an example where a new ribbon material the company was developing failed, but the company tried using it as material for a brassiere. When that also failed, they didn’t give up and eventually developed the standard material in safety masks worn by government workers. Big companies can promote innovation by fostering internal competition and encouraging experimentation.

Genuine People-Orientation

Excellent companies have a sincere respect for individual employees, unlike those who merely pretend. By investing time and money in staff development, and setting reasonable expectations, such firms prioritize people-oriented working environments. Conversely, companies exhibiting insincere people-orientation result in two management disasters: lip service shortcomings, such as inadequate training, and gimmicks that rely on short-lived incentives to improve the management-employee dynamic. Unlike the latter, top companies adopted such policies long before they became mainstream, offering training and encouraging employees and managers to communicate on a first-name basis. Hewlett-Packard (HP) embodies a people-oriented company philosophy; in fact, 18 of 20 HP executives mentioned this approach as a primary factor behind their success. The “HP Way” has a long history, commencing in the 1940s when executives decided against making the company a “hire and fire” business, and instead managed to survive the 1970s recession without terminating anyone’s employment by taking a ten percent pay cut.

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