From the Bookshelf Facing up to reality By Nicole Wong Today's fast-paced business world is all about planning for change and getting the timing right Whether you own a small shop, manage a department store, or are the CEO of a multinational enterprise, you have to address the same type of critical questions. What will be fundamental to future success? Is this business really cost-effective? How can I improve profit margins and outrun the competition? The answers will form the backbone of your business strategy, but must also be reviewed regularly in order to account for the ever-shifting circumstances within your industry. In an era of frequent structural change, a company must keep examining every part of its businessexternal environment, internal capabilities, financial goalsin order to stay competitive. IBM, 3M and Home Depot are used to illustrate just this point in Confronting Reality: Doing What Matters to Get Things Right, the latest book by Larry Bossidy and Ram Charan. These companies turned business crises into opportunities by finding the right solutions at the right time: IBM cut prices for its mainframe products and a rebound followed; 3M reignited growth through corporate innovation; and Home Depot built new efficiencies in inventory management through leadership development. New strategy Many companies, however, are yet to grasp the importance of facing up to certain realities and creating a business strategy which accepts them. In the section "What To Change And What Not To Change", Bossidy and Charan elaborate on what is needed for "confronting reality". It is a model that links, analyses and harmonises all the components of a business. They also refer to the Thomson Corporation, which in 1997 was under no immediate pressure from its "external realities", but foresaw erosion in the profitability of its regional newspaper business. It therefore shifted its internal activities to publishing electronic information for professionals. Changes in personnel and within the organisation were weighed against the likely improvement in financial results in an ongoing process of "iteration". Thanks to the insight of the CEO and the strategic planning and execution of the board, the company emerged as a leading supplier of electronic information for the financial services industry by 2003. Global arena This transformation is also an example of the impact of globalisation, an issue which Bossidy and Charan identify as a major cause for the "hypercompetition" in the business world in recent years. Major corporations are now competing in a global arena and many of them are still learning to view their business from an "outside in" perspective. For example, in the past, a decline in profit might have quickly caused a manufacturer to cut production costs. Nowadays, the same manufacturer should first examine changes in consumer behaviour for signs of broader structural changes taking place in the industry. More attention should be focused on the "root cause" rather than putting a "temporary patch" on a problem. As the authors indicate, the key to success in today's business world lies in "the need to know". It also requires recognition that a new reality is taking shape and that the search for new business opportunities and solutions is never-ending. Content highlights: Globalisation has produced intense worldwide competition and made management reforms necessary Business models must include external variables, financial targets and the internal activities of a company, and constantly be revised to reflect changes in the industry The ability to anticipate changes from an "outside in" perspective is a new leadership criterion About the authors Larry Bossidy, who began his career at General Electric, is a retired chairman of the board and CEO of Honeywell International. Ram Charan, a Baker Scholar at Harvard Business School where he earned his MBA degree with distinction, as well as his DBA, is a highly acclaimed business adviser, speaker and author. Larry Bossidy and Ram Charan wrote Execution: The Principle of Getting Things Done, an international business bestseller in 2002. Ram Charan is also the author of What the CEO Wants You to Know, Profitable Growth Is Everyone's Business, The Leadership Pipeline, and Boards at Work. "Larry Bossidy and Ram Charan once again bring clarity to the fundamentals. This isn't just a book of answers...it tells you which questions to ask. Confronting Reality is essential reading."-Michael Dell, chairman, Dell Inc. Taken from Career Times 14 January 2005 Your comments are welcome at [email protected]