Executive Times
		2005 Book Reviews
		Winning by Jack Welch with Suzy Welch
		Rating: ••• (Recommended)
		Click on title or picture to buy from amazon.com
	Spinning By all means, buy and read Jack Welch’s new book, Winning. However tarnished you may feel Jack’s crown has become since his retirement from GE, there are probably two or three useful ideas you may glean from this book. Also, author’s royalties will be donated to charity, so you’re not paying his green fees, not that he plays anymore, given back problems. I heard him admit to Jay Leno that this is his wife Suzy’s book. That may be another reason to buy and read it, although perhaps he should have changed the “with” to “and” to give her proper credit. Knowing her involvement in this book, don’t expect greater insight into Welch as a person. The first book, Jack: Straight From the Gut, written with John Byrne had more personal disclosures. My review of that book in 2001 was a highly recommended four-star rating. Winning isn’t as good. Here’s an excerpt, from the beginning of Chapter 11, “Strategy: It’s All in the Sauce,” pp. 165-171: More than a few times over the past three years, I have been on a speaking program or at a business conference with one big strategy guru or another. And more than a few times, I have listened to their presentations in disbelief. It’s not that I don’t understand their theories about competitive advantage, core competencies, virtual commerce, supply chain economics, disruptive innovation, and so on, it’s just that the way these experts tend to talk about strategy—as if it is some kind of high-brain scientific methodology—feels really off to me. I know that strategy is a living, breathing, totally dynamic game. It’s fun—and fast. And it’s alive. Forget the arduous, intellectualized number crunching and data grinding that gurus say you have to go through to get strategy right. Forget the scenario planning, yearlong studies, and hundred—plus—page reports. They’re time-consuming and expensive, and you just don’t need them. In real life, strategy is actually very straightforward. You pick a general direction and implement like hell. Yes, theories can be interesting, charts and graphs can be beautiful, and big, fat stacks of PowerPoint slides can make you feel like you’ve done your job. But you just should not make strategy too complex. The more you think about it, and the more you grind down into the data and details, the more you tie yourself in knots about what to do. That’s not strategy, that’s suffering. Now, I don’t want to write off strategy gurus. Some of their concepts have merit. But I do want to disagree with the scientific approach to strategy that they propagate. It is taught in many business schools, peddled by countless consulting firms, and practiced in far too many corporate headquarters. It’s just so unproductive! If you want to win, when it comes to strategy, ponder less and do more. I’m certainly not alone in this view. In speaking with many thousands of businesspeople around the world, I can count the number of strategy questions on one hand. Virtually every other topic—from managing a temperamental employee to the dollar’s effect on trade—gets more interest by orders of magnitude. Obviously, everyone cares about strategy. You have to. But most managers I know see strategy as I do—an approximate course of action that you frequently revisit and redefine, according to shifting market conditions. It is an iterative process and not nearly as theoretical or life-and-death as some would have you believe. Given this view, you may be wondering what I’m going to say in this chapter. The answer is, nothing that’s going to get me tenure! Instead, I’m going to describe how to do strategy in three steps. Over my career, this approach worked incredibly well across varied businesses and industries, in upturns and downturns, and in competitive situations from Mexico to Japan. Who knows— maybe its simplicity was part of its success. The steps are: First, come up with a big aha for your business—a smart, realistic, relatively fast way to gain sustainable competitive advantage. I don’t know any better way to come up with this big aha than by answering a set of questions I have long called the Five Slides, because each set fits roughly onto one page. This assessment process should take a group of informed people somewhere between a couple of days and a month. Second, put the right people in the right jobs to drive the big aha forward. This may sound generic; it’s not. To drive your big aha forward, you need to match certain kinds of people with commodity businesses and a different type entirely with high-value-added businesses. I don’t like to pigeonhole, but the fact is, you get a lot more bang for your buck when strategy and skills fit. Third, relentlessly seek out the best practices to achieve your big aha, whether inside or out, adapt them, and continually improve them. Strategy is unleashed when you have a learning organization where people thirst to do everything better every day They draw on best practices from anywhere, and push them to ever-higher levels of effectiveness. You can have the best big aha in the world, but without this learning culture in place, any sustainable competitive advantage will not last. Strategy, then, is simply finding the big aha and setting a broad direction, putting the right people behind it, and then executing with an unyielding emphasis on continual improvement. I couldn’t make it more complicated than that if I tried. So What Is Strategy? Before we look at each of the three steps in some detail, a few thoughts about strategy in general. At the time I retired from GE, the company employed more than three hundred thousand people in about fifteen major businesses, from gas turbines to credit cards. It was a complex, wide-ranging company, but I always said I wanted it to operate with the speed, informality, and open communication of a corner store. Corner stores often have strategy right too. With their limited resources, they have to rely on a laserlike focus on doing one thing very well. In our Boston neighborhood, for instance, within a block of each other on Charles Street, two little shops have constantly ringing cash registers and a nonstop flow of satisfied customers. One is Upper Crust Pizza. Its space is cramped, completely unadorned, and noisy, with self-service paper plates and a limited selection of soft drinks. Customers can eat either standing up or sitting at one large, benchlike table. The staff isn’t exactly rude, but they’re noncommittal. It is not unusual for your order—given at the cash register—to be greeted with a bland “Whatever.” But the pizza is to die for; you could faint just describing the flavor of the sauce, and the crust puts you over the edge. Investment bankers, artists, and cops start lining up at eleven in the morning to see the “Slice of the Day” posted on the door, and around lunch and dinner, the line can run twenty deep. A fleet of delivery people work nonstop until closing. At Upper Crust, strategy is all about product. Then there’s Gary Drug, about half the size of a New York subway car. A large, newly renovated, twenty-four—hour CVS pharmacy is a short walk away. No matter. Gary Drug, with its single, narrow aisle and shelves packed to the ceiling, is always busy. Its selection ranges from cold remedies to alarm clocks, with tweezers and pencil sharpeners mixed in. There is a personable pharmacist tucked in back, and a wide selection of European fashion magazines in a corner up front. Everything the store sells matches the mix of the neighborhood’s quirky residents. Salespeople greet customers by name when they walk in and happily give advice on everything from vitamins to foot massagers. The store offers instant home delivery and a house charge account that bills you once a month. At Gary Drug, strategy is all about service. Look, what is strategy but resource allocation? When you strip away all the noise, that’s what it comes down to. Strategy means making clear-cut choices about how to compete. You cannot be everything to everybody, no matter what the size of your business or how deep its pockets. Corner stores have learned that survival depends on finding a strategic position where no one can beat them. Big companies have the same challenge. When I became CEO in 1981, we launched a highly publicized initiative: “Be No. 1 or No. 2 in every market, and fix, sell, or close to get there.” This was not our strategy, although I’ve heard it described that way. It was a galvanizing mantra to describe how we were going to do business going forward. There would be no more hanging on to uncompetitive businesses for old times’ sake. More than anything else, the No. 1 or No. 2 initiative was a communication tool to clean up our portfolio, and it really worked. Our strategy was much more directional. GE was going to move away from businesses that were being commoditized toward businesses that manufactured high-value technology products or sold services instead of things. As part of that move, we were going to massively upgrade our human resources—our people—with a relentless focus on training and development. We chose that strategy after getting hammered by the Japanese in the 1970s. They had rapidly commoditized businesses where we had had reasonable margins, like TV sets and room air conditioners. We ended up playing defense in a losing game. Our quality, cost, and service—the weapons of a commodity business—weren’t good enough in the face of their innovation and declining prices. Every day at work was a kind of protracted agony Despite our productivity improvements and increasing innovation, margins were eroding, as competitors like Toshiba, Hitachi, and Matsushita were relentless. Meanwhile, overseeing GE Capital in the late ‘70s, I was shocked (and delighted) to see how easy it was to make money in financial services, particularly with GE’s balance sheet. There were no union factories, no foreign competition, and plenty of interesting, creative ways to offer customers differentiated products and services. I remember the excitement in that period, seeing our people develop new private-label credit card programs and find niche after niche in middle-market industrial financing. Fat margins weren’t exactly low-hanging fruit, but close. By the time I was made CEO, I knew that GE had to get as far away as it could from any business that smelled like a commodity and get as close as possible to the other end of the spectrum. That’s why we divested businesses like TV sets, small appliances, air conditioners, and a huge coal company, Utah International. It is also why we invested so heavily in GE Capital; bought RCA, which included NBC; and poured resources into developing high-technology products in our power, medical, aircraft engine, and locomotive businesses. Now, in such changing times, how and why did GE stick with one strategy over twenty years? The answer is that strategies, if they’re headed in the right direction and are broad enough, don’t really need to change all that often, especially if they are supplemented with fresh initiatives. To that end, over the years, we launched four programs to bolster our strategy—globalization, service add-ons, Six Sigma, and e-business. More than anything, though, our strategy lasted because it was based on two powerful underlying principles: commoditization is evil and people are everything. Virtually every resource allocation decision we made was based on those beliefs. Yes, some companies can win in commodity situations—Dell and Wal-Mart are great examples of companies that have pulled the levers of cost, quality, and service to succeed in extremely competitive games. But that is really tough. You just can’t make any mistakes. My advice, then, is when you think strategy, think about decommoditizing. Try desperately to make products and services distinctive and customers stick to you like glue. Think about innovation, technology, internal processes, service add-ons— whatever works to be unique. Doing that right means you can even make a few mistakes and still succeed. That’s enough theory! Thanks to Suzy’s good writing, Winning presents the Welch theories and practices of management in a readable way that can lead readers to reflection on how to apply some of Welch’s practices in one’s own organization. To whatever extent Suzy wanted to help redeem Welch’s tarnished reputation, the spin she creates in Winning helps. Steve Hopkins, May 25, 2005
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