Creative Destruction: Why Companies That Are Built to Last Underperform the Market--And How to Successfully Transform Them
Author: Sarah Kaplan, Richard Foster
List Price: $27.50
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ISBN: 0385501331
Publisher: Currency (03 April, 2001)
Sales Rank: 29,287
Average Customer Rating: 3.63 out of 5
Customer Reviews
Rating: 2 out of 5
Doesn't deliver what it promises
This book takes some interesting insights from economist Joseph Schumpeter (who coined the term "creative destruction") and leadership expert Ron Heifetz and then goes on to make overly broad generalizations from them, supported by an extensive but questionable data analysis. The authors go on at length about the size and scope of the McKinsey corporate database that provides much of the backbone for the book's conclusions, but anyone who studies excellence or best-practices knows that you dont learn much about them by studying large, general samples; in fact, such samples are designed to rule out the exceptions. (And I'll just overlook the fact that Enron is one of the exceptional performers they highlight.) At bottom, the book fails to deliver on either of the promises in its subtitle. The primary reason seems to be that little of it is drawn from practical experience with exceptional companies. Despite its scope, the McKinsey database doesn't really answer, from a management point of view, why most companies have underperformed. (Although less systematically presented, you can get more wisdom from a practitioner's book like Tom Kelly's "The Art of Innovation.") This is most obvious as the book moves into suggestions for "how to change" these companies: neither the suggested methodology for strategic planning nor the successful case examples provide anything more than some basic, general ideas that have been better covered elsewhere in the organizational development and management literature.
The subtitle also suggests that the book presents a refutation of the arguments for corporate sustainability that Collins and Porras gave in "Built to Last". Interestingly, Foster and Kaplan disdain to address that book directly or even cite it, except in a buried footnote. This is unfortunate because they present data on some of Collins' and Porras' profiled companies that suggest they have performed far more poorly than "Built to Last" would lead you to believe; it would have been helpful to understand who was overstating what. Collins and Porras also stress in detail that built-to-last companies "preserve the core / stimulate progress"; it is not clear that "creative destruction" differs from this in any significant way. In sum, the issue of how to create long-term value will still be a big question when you've finished reading this book.
It is interesting to note, as the authors are current and former McKinsey consultants, that a majority of the underperformers in their database are McKinsey clients. If these companies failed to turn around after investing in McKinsey advice, what is the likelihood that anyone else will do it from ideas they got reading a book?
Rating: 5 out of 5
Investors Take Heed -- Buy and Hold is Oversold!
Contrary to popular belief, Foster and Kaplan show that the majority of so-called "buy and hold" companies fail to keep pace with market index funds. Fundamental changes in the marketplace have made it increasingly difficult for companies to remain competitive for sustained periods of time. The authors not only discuss these shifts in the environment, but also uncover the structural factors inhibiting companies from effectively reacting to these market changes. Traditional models of corporate planning and control combined with "cultural lock-in" prevent even the most innovative of companies from taking the difficult decisions required to evolve with the market. Foster and Kaplan convey this message, its implications, and potential remedies through colorful, easy-to-read case studies of successful and unsuccessful companies. So what can an investor do? First, understand the reasons why only a few companies have the ability to continually re-invent themselves for sustained shareholder value. Second, be thankful when an investment outperforms the market for more than a few years time and question your broker's recommendation to "hold on to the winner." Finally, realize that strong past performance is not guarantee of future returns and might even be reason not to invest in a company, since the odds are stacked against continued outperformance. This is a 'must-read' for investors everywhere!
Rating: 1 out of 5
Faulty Research & Analysis
Here's some hard data (which is not in the book): Since 1925 the best performing stock is Phillip Morris with a 17% return versus 9.75% for the stock market during the same period. Best stock since 1950 is again Phillip Morris.
$1,000 in S&P 500 in 1957 = ~ $96,000 today.
Same in Phillip Morris = ~ $3.75 million today.
So much for the authors' premise. Similar Products
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