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Face the brutal facts

Face the brutal facts

Jim Collins, author of Good to Great, says "a data driven approach" is what makes a great company tick and distinguishes it from others, and marks the people who lead it.

Jim Collins, author of Good to Great, says "a data driven approach" is what makes a great company tick and distinguishes it from others, and marks the people who lead it.

In times of uncertainty, most people are wired to look at what other people are doing. "But leaders turn to data and empirical evidence rather than social proof," said Collins, in his keynote address at the SAS Premier Business Leadership Series in Las Vegas last week.

"It is important to have good data," he says, and to "face the brutal facts".

"Change begins when you pick up the facts and you confront the brutal facts.

"If you don't have the mechanism to confront real facts, you won't be great."

At the same time, Collins says, one should "never confuse great with big".

A great company delivers superior performance, and makes a distinctive impact on the world it touches.

If the company disappears, will it leave a hole? "An organisation that does not meet that test is not great," he says.

It is also about "lasting endurance" that goes beyond a market cycle or a leader. He asks, does it have superior performance, distinctive impact, ability to continue to deliver superior performance, a proven approach beyond the individual leader?

Collins says three factors figure in great companies who innovate differently: fanatic discipline, productive paranoia and empirical creativity. "The true productive paranoids are constantly confronting the facts."

He says analytics plays a great role in innovation. "Do something creative and validate it," he says. If you are truly disciplined and truly empirical the inevitable happens -- "a wonderful blend of creativity and discipline" which he says is a "super rare skill".

He concludes: "Greatness is a matter of conscious choice and discipline".

Competitive forces

Another keynote speaker, Michael Porter of Harvard Business School, issued a "call for action" for businesses to "take the lead in competitiveness".

Porter's presentation was linked to the ongoing presidential campaign in the United States. He says there are lots of discussion about the economy in the current debates, but asks, "Are we talking about the right things?"

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A lot of people are worried about the United States not performing well and having a vital economy. "A source of great concern is who else is going to take leadership in the global economy and what are their philosophies? What is going on in America? Why are we facing this chronic disappointment in terms of economic growth?

"I don't think we are having an honest and realistic discussion in America about this issue," he says.

"This is not about the recession," he says. He says while the United States had a severe recession, "the problem is much more fundamental."

America's business environment is still strong but has been eroding in many areas, he says. A survey of Harvard Business School alumni finds business leaders see a deepening US competitiveness problem.

"Offshoring has hugely exceeded onshoring," he points out. The US is not just moving out call centres and R and D facilities. "This is not data that would suggest the country is vibrant and competitive" and the US as a place to do business is eroding, he says.

On the upside, the survey also found that the US has preserved its university system, professional management, and is still a great innovation environment in science and technology, the protection of property rights, and capital markets.

It also has the "critical mass or cluster of companies" creating innovation, like Silicon Valley. "These things take forever to create, we have been able to preserve these," he says.

But the US can not take them for granted, he says. "We have to create a business environment that allows us to be highly productive so the average worker can generate high level of value for everyday of work."

A fundamental question, he says, is are we creating an environment to allow competitiveness in this country to be maintained and improved?

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Common concerns

This "a call for action, not despair", says Porter.

An area he espouses and which can apply to other countries is to "strengthen the commons", or the environment that businesses depend on. The commons refers to outside things companies that depend on, and if they are better, the companies benefit.

"We all depend on the commons," he says. "It is outside of our walls as a company but is key. Many companies as they pursue globalisation lost the idea of a commons at home."

"We can't take it for granted or thought it was somebody else's job," he says. "Take ownership and do something individually or with [your] peers."

Some of the things companies can do include improving skills by having an apprenticeship programme, in partnership with a community college.

They can also upgrade supporting industries by mentoring local suppliers. Another area is participating in research in the company's field.

Companies can also work with other businesses by collaborating on regional business improvement or bolstering regional cluster development.

He says business has to change the way it deals with government, shifting away from "self interest towards general business environment improvement".

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Porter underscores the importance of having key structures for national competitiveness, and number one, he says, is education. "There has to be a broad platform of education that has to be present in any successful country," he says.

"Almost everywhere the world, if all you have is high school or limited education in this global economy, there is a big pressure on wages and that creates inequality and inequality creates political struggles," he says.

Every child has to have a strong foundation of the basics. They have to learn how to do maths, they have got to learn how to reason and write, he says.

"We can't graduate kids that haven't learned, we have got to test them, we have to have the whole system accountable into moving those kids along."

Once the students get to university, he says, we need more focus on STEM (science, technology, and maths) and the knowledge intensive fields.

Education is also an area where "businesses can step up a little bit more".

The business community needs to start helping build this path between the university training and getting a job in a great company.

He puts forward the idea of "clusters". This is where you have a critical mass of companies and institutions in a particular field, like automotive, aerospace, biotechnology or entertainment and media. Having these "deep clusters" drives productivity, he says. "If you have a cluster around you, you can innovate more rapidly."

"You can do all the things you need to do and take advantage of [it] because you have capable suppliers," he says. "You create an ecosystem for innovation and productivity improvement."

"We have proven if a country wants to get advanced and sophisticated, it has got to build clusters."

"One of the reasons why Hollywood remains a centre of innovation in entertainment and in visual innovation and media and movies is that the best film schools in the world are in Hollywood," he says, and the best universities produce the people in this field.

You have to link education closely to the needs of the economy, to the region and to these clusters. "That is the holy grail," he says.

Sidebar:

Michael Porter's 'five forces' have been influencing businesses since these first came out in the Harvard Business Review in 1979. He rewrote the article in 2008 in which he reaffirms the five forces that shape industry competition: Threat of new entrants, bargaining power of buyers, threat of substitute products or services, bargaining power of suppliers, and rivalry among existing competitors.

In this video, the author asks the Harvard Business School professor, that if he were to rewrite the article again, given the changes in the economy and business technology, what would he have focused on?

Send news tips and comments to divina_paredes@idg.co.nz

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