About a decade ago, I was talking with Jeff Pfeffer as he raved about Competing for the Future, the 1996 strategy classic written by Gary Hamel and the late C.K. Prahalad. Jeff drives me crazy sometimes -- he is never wishy-washy anything. But I always listen closely to him because, after all, he is one of the most productive organizational researchers on the planet and one of the three or four most influential organizational theorists of all time. Jeff argued that the book was so important because it not only contained new and emotionally compelling ideas -- some backed by strong data, others that were important to test with good data in the future -- it contained more intriguing ideas per page than any popular and well-written business book he had ever read.
Well, there is a new book that qualifies for the same praise: Standing on the Sun: How the Explosion of Capitalism Will Change Business Everywhere. The ideas here come rapidly but it is so well-written that you don't realize how thoroughly and intensely you are learning new things and the rate at which your assumptions are being challenged. I am biased, but I credit Julia Kirby for this rare magic. Chris is a smart guy, but he has never edited me so perhaps I am not giving him enough credit. Julia -- an "Editor at Large" at HBR -- is the best and smartest business writer I have ever worked with. There are a lot of good editors out there who make your prose and flow better, but Julia is the only one I know who not only makes your ideas better, she relentlessly adds new ones and challenges you with logic and data when she thinks you are wrong or your logic is sloppy.
Chapter 5 on "Pseudocompetition," for example, unmasks and brings down much of the current hype about size, scale, and competition. At one point, we hear about a Harvard Business Review author who claimed that "industries were in flux, with many becoming more disaggregated and competitive as many others become more concentrated." Well, Julia checked the facts, and as the book says "No dice." This guy was largely wrong, something called the Hirschmann-Herfindahl indexes (the gold standard for measuring market power) showed that -- except for a couple "small potatoes" industries -- every other industry is becoming more concentrated.
To get out of the weeds, this is the most complete and creative book I know on how the world economy is changing and what it means for the strategies and tactics that leaders all over the world need to implement. Reading the book is a compelling journey, as Meyer and Kirby first explain the key features of the new capitalism that is emerging around the world and then provide advice for businesses and leaders in this new world.
I found the "operating principles" developed in Chapter 9 to be especially especially interesting . These include:
Rule One: Learn to See Results in Color
Old formulation: Measure financial returns to shareholders.
New formulation: Measure the real value sought by stakeholders.
Rule Two: Internalize Externalities
Old formulation: Externalize every cost you can.
New formulation: Own your impact, negative and positive.
Rule Four: Give it Away Until You Charge for It
Old formulation: Focus on your particular value-adding capability and outsource all the rest (except where transaction costs are prohibitive).
New formulation: Pursue collaborative gains through invisible handshakes.
The surrounding discussion around these and the other operating rules are wonderful, and each helped me think of the capitalist world we now live in through a new perspective. Indeed, Rule Four challenges some of the ideas -- or at least translations -- about "core competence" that emerged from Competing for the Future. And I find Rule Two quite interesting in light of what Apple is learning about the responsibility it needs to take for the alleged mistreatment of employees at supplier Foxconn where wages just went up 25% as well as the environmental impact of suppliers who build their products -- in fact, they just announced environmental audits. These recent moves by Apple suggest they are stepping up to "own" both their positive and negative impact -- and as Chris and Julia suggest, they aren't doing this out of the goodness of their hearts, they are doing it because it is necessary for protecting Apple's reputation and legitimacy.
Standing on the Sun is not a quick and mindless read. But if you want an unusually well-written book that is chock-full of new insights about the capitalist world we now live in and about what leaders and businesses can do to survive and thrive in these deeply weird and disconcerting times, this is the book for you.