McGrath – Who Pulls the Trigger?

This is the next post in my series, where we get an overview of the key ideas in Rita Gunther McGrath’s “The End of Competitive Advantage”. So far, I have found the book to be concise. It offers a nice jumping off point to think about how to organize difficult decisions in a firm more efficiently.

So where are we? We are working through the chapter “Healthy Disengagement”. The basic point is pretty simple — if competitive advantage is ephemeral, you will need to incorporate exit strategies into routine corporate planning. The first question is what data should you collect. See below.

The second question is easy to understand and hard to implement. It is based on human nature. No manager wants to fail. To the contrary, all managers want to look good and hopefully get promoted or step up the career ladder. For this simple reason, you cannot expect managers to report that the areas they supervise … suck. They will be overly optimistic about the chances of meeting challenges. So a better practice is for someone else to make the call that a given area is ripe for exit.

Who should do this? Rita offers three options (1) empower a roving hit squad whose job it is to ferret out the losers. Wolters Kluwer uses this approach. (2) play musical chairs with managers to keep loyalty to any given area to a minimum. Accenture does this. (3) make it part of the CEO’s job. Proctor & Gamble does this. Yahoo! Japan too.

Lafley (at Proctor) makes the good point that only the CEO has the full strategic picture in mind and therefore is in the best position to make these calls. BTW, this is what Steve Jobs did at Apple. Here he is explaining what he is doing to Apple engineers who don’t like it

BTW, this is why Warren Buffet is able to manage his diversified portfolio


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