General Management

by Jag Singh

Essential unmodified excerpts on Management, Strategy, Organization, and Operational Excellence from classical books and articles:

Management

The Practice of Management

by Peter Drucker, 1954

What is a Business?

The average businessman when asked what a business is, is likely to answer: "An organization to make a profit." And the average economist is likely to give the same answer. But this answer is not only false; it is irrelevant.

If we want to know what a business is we have to start with its purpose. And its purpose must lie outside of the business itself. In fact, it must lie in society since a business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer.

Because it is its purpose to create a customer, any business enterprise has two-and only these two-basic functions: marketing and innovation. They are the entrepreneurial functions.

Management by Objectives

To emphasize only profit, for instance, misdirects managers to the point where they may endanger the survival of the business. To obtain profit today they tend to undermine the future.

To manage a business is to balance a variety of needs and goals. This requires judgment. The search for the one objective is essentially a search for a magic formula that will make judgment unnecessary. But the attempt to replace judgment by formula is always irrational; all that can be done is to make judgment possible by narrowing its range and the available alternatives, giving it clear focus, a sound foundation in facts and reliable measurements of the effects and validity of actions and decisions. And this, by the very nature of business enterprise, requires multiple objectives.

At first sight it might seem that different businesses would have entirely different key areas-so different as to make impossible any general theory. It is indeed true that different key areas require different emphasis in different businesses-and different emphasis at different stages of the development of each business. But the areas are the same, whatever the business, whatever the economic conditions, whatever the business's size or stage of growth.

There are eight areas in which objectives of performance and results have to be set: Market standing; innovation; productivity; physical and financial resources; profitability; manager performance and development; worker performance and attitude; public responsibility.

The Effective Executive

by Peter Drucker, 1966

What Makes an Effective Executive?

Effectiveness is a discipline. And, like every discipline, effectiveness can be learned and must be earned. Effective executives differ widely in their personalities, strengths, weaknesses, values, and beliefs. All they have in common is that they get the right things done.

Effectiveness Can Be Learned

  1. Effective executives know where their time goes. They work systematically at managing the little of their time that can be brought under their control.
  2. Effective executives focus on outward contribution. They gear their efforts to results rather than to work. They start out with the question, "What results are expected of me?" rather than with the work to be done, let alone with its techniques and tools.
  3. Effective executives build on strengths - their own strengths, the strengths of their superiors, colleagues, and subordinates; and on the strengths in the situation, that is, on what they can do. They do not build on weakness. They do not start out with the things they cannot do.
  4. Effective executives concentrate on the few major areas where superior performance will produce outstanding results. They force themselves to set priorities and stay with their priority decisions. They know that they have no choice but to do first things first - and second things not at all. The alternative is to get nothing done.
  5. Effective executives, finally, make effective decisions. They know that this is, above all, a matter of system - of the right steps in the right sequence. They know that an effective decision is always a judgment based on "dissenting opinions" rather than on "consensus on the facts." And they know that to make many decisions fast means to make the wrong decisions. What is needed are few, but fundamental, decisions. What is needed is the right strategy rather than razzle-dazzle tactics.

Know Thy Time

Effective executives, in my observation, do not start with their tasks. They start with their time. And they do not start out with planning. They start by finding out where their time actually goes. Then they attempt to manage their time and to cut back unproductive demands on their time. Finally they consolidate their "discretionary" time into the largest possible continuing units. This three-step process:

What Can I Contribute?

The man who focuses on efforts and who stresses his downward authority is a subordinate no matter how exalted his title and rank. But the man who focuses on contribution and who takes responsibility for results, no matter how junior, is in the most literal sense of the phrase, "top management." He holds himself accountable for the performance of the whole.

Making Strength Productive

The effective executive makes strength productive. He knows that one cannot build on weakness. To achieve results, one has to use all the available strengths - the strengths of associates, the strengths of the superior, and one's own strengths. These strengths are the true opportunities. To make strength productive is the unique purpose of organization. It cannot, of course, overcome the weaknesses with which each of us is abundantly endowed. But it can make them irrelevant.

The task of an executive is not to change human beings. Rather, as the Bible tells us in the parable of the Talents, the task is to multiply performance capacity of the whole by putting to use whatever strength, whatever health, whatever aspiration there is in individuals.

First Things First

If there is any one "secret" of effectiveness, it is concentration. Effective executives do first things first and they do one thing at a time.

Courage rather than analysis dictates the truly important rules for identifying priorities:

The Elements of Decision-Making

  1. The first question the effective decision-maker asks is: "Is this a generic situation or an exception?" "Is this something that underlies a great many occurrences? Or is the occurrence a unique event that needs to be dealt with as such?" The generic always has to be answered through a rule, a principle. The exceptional can only be handled as such and as it comes;
  2. The definition of the specifications which the answer to the problem had to satisfy, that is, of the "boundary conditions";
  3. The thinking through what is "right," that is, the solution which will fully satisfy the specifications before attention is given to the compromises, adaptations, and concessions needed to make the decision acceptable;
  4. The building into the decision of the action to carry it out;
  5. The "feedback" which tests the validity and effectiveness of the decision against the actual course of events.

Effective Decisions

A decision is a judgment. It is a choice between alternatives. It is rarely a choice between right and wrong. It is at best a choice between "almost right" and "probably wrong" - but much more often a choice between two courses of action neither of which is provably more nearly right than the other.

Strategy

Strategies for Diversification

by Igor Ansoff, 1957

If we let P represent the product line and M the corresponding set of missions, then the pair of P and M is a product-market strategy. For our purposes, the concept of a mission is more useful in describing market alternatives than would be the concept of a "customer," since a customer usually has many different missions, each requiring a different product.

Markets
M0 M1 M2 Mm
Product
Line 		P0 Market
Penetration 		Market
Development
P1 Product
Development 		Diversification
P2
Pn

Market penetration is an effort to increase company sales without departing from an original product-market strategy. The company seeks to improve business performance either by increasing the volume of sales to its present customers or by finding new customers for present products.

Market development is a strategy in which the company attempts to adapt its present product line (generally with some modification in the product characteristics) to new missions.

A product development strategy, on the other hand, retains the present mission and develops products that have new and different characteristics such as will improve the performance of the mission.

Diversification is the final alternative. It calls for a simultaneous departure from the present product line and the present market structure.

The Product Portfolio

by Bruce Henderson, 1970

The BCG Matrix

Market Share
High Low
Growth High *
Star 		?
Question Mark
Low $
Cash Cow 		X
Pet

The balanced portfolio has:

Pets are not necessary. They are evidence of failure either to obtain a leadership position during the growth phase, or to get out and cut the losses.

Optimum Cash Flow

Market Share
Growth *
+ or -
(cash flow modest) 		?
-
(cash flow large)
$
+
(cash flow large) 		X
+ or -
(cash flow modest)

Success Sequence

Success sequence

Disaster Sequence

Disaster sequence

Competitive Strategy

by Michael Porter, 1980

Every firm competing in an industry has a competitive strategy, whether explicit or implicit. This strategy may have been developed explicitly through a planning process or it may have evolved implicitly through the activities of the various functional departments of the firm. Essentially, developing a competitive strategy is developing a broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals. The wheel of competitive strategy at the broadest level formulating competitive strategy involves the consideration of four key factors that determine the limits of what a company can successfully accomplish. Context in which competitive strategy is formulated The essence of formulating competitive strategy is relating a company to its environment. Although the relevant environment is very broad, encompassing social as well as economic forces, the key aspect of the firm's environment is the industry or industries in which it competes. Forces driving industry competition In coping with the five competitive forces, there are three potentially successful generic strategic approaches to outperforming other firms in an industry:

  1. Overall cost leadership
  2. Differentiation
  3. Focus
Three generic strategies The converse of the previous discussion is that the firm failing to develop its strategy in at least one of the three directions - a firm that is “stuck in the middle” - is in an extremely poor strategic situation. Stuck in the middle

Competitive Advantage

by Michael Porter, 1985

While Competitive Strategy concentrates on the industry, Competitive Advantage concentrates on the firm.

Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering, and supporting its product.

The value chain displays total value, and consists of value activities and margin. Value activities are the physically and technologically distinct activities a firm performs. These are the building blocks by which a firm creates a product valuable to its buyers. Margin is the difference between total value and the collective cost of performing the value activities.

The Generic Value Chain Value activities are therefore the discrete building blocks of competitive advantage. How each activity is performed combined with its economics will determine whether a firm is high or low cost relative to competitors. How each value activity is performed will also determine its contribution to buyer needs and hence differentiation. Comparing the value chains of competitors exposes differences that determine competitive advantage.

The Innovator's Dilemma

by Clayton Christensen, 1997

Most new technologies foster improved product performance. I call these sustaining technologies. Some sustaining technologies can be discontinuous or radical in character, while others are of an incremental nature. What all sustaining technologies have in common is that they improve the performance of established products, along the dimensions of performance that mainstream customers in major markets have historically valued. Most technological advances in a given industry are sustaining in character.

Occasionally, however, disruptive technologies emerge: innovations that result in worse product performance, at least in the near-term. Ironically, in each of the instances studied in this book, it was disruptive technology that precipitated the leading firms' failure.

First, disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits. Second, disruptive technologies typically are first commercialized in emerging or insignificant markets. And third, leading firms' most profitable customers generally don't want, and indeed initially can't use, products based on disruptive technologies. By and large, a disruptive technology is initially embraced by the least profitable customers in a market. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.

Sound market research and good planning followed by execution according to plan are hallmarks of good management. Because the vast majority of innovations are sustaining in character, most executives have learned to manage innovation in a sustaining context, where analysis and planning were feasible.In dealing with disruptive technologies leading to new markets, however, market researchers and business planners have consistently dismal records. In many instances, leadership in sustaining innovations - about which information is known and for which plans can be made - is not competitively important. In such cases, technology followers do about as well as technology leaders. It is in disruptive innovations, where we know least about the market, that there are such strong first-mover advantages.

This is the innovator's dilemma.

What, then, does account for the success and failure of entrant and established firms? The concept of the value network-the context within which a firm identifies and responds to customers' needs, solves problems, procures input, reacts to competitors, and strives for profit - is central to this synthesis. Within a value network, each firm's competitive strategy, and particularly its past choices of markets, determines its perceptions of the economic value of a new technology. These perceptions, in turn, shape the rewards different firms expect to obtain through pursuit of sustaining and disruptive innovations. In established firms, expected rewards, in their turn, drive the allocation of resources toward sustaining innovations and away from disruptive ones. This pattern of resource allocation accounts for established firms' consistent leadership in the former and their dismal performance in the latter.

the essence of strategic technology management is to identify when the point of inflection on the present technology's S-curve has been passed, and to identify and develop whatever successor technology rising from below will eventually supplant the present approach.

The typical framework of intersecting S-curves illustrated in Figure below is a conceptualization of sustaining technological changes within a single value network, where the vertical axis charts a single measure of product performance The conventional technology S-curve Because a disruptive technology gets its commercial start in emerging value networks before invading established networks, an S-curve framework such as that in Figure below is needed to describe it. Disruptive technologies emerge and progress on their own, uniquely defined trajectories, in a home value network. If and when they progress to the point that they can satisfy the level and nature of performance demanded in another value network, the disruptive technology can then invade it, knocking out the established technology and its established practitioners, with stunning speed. Disruptive technology S-curve A crucial strategic decision in the management of innovation is whether it is important to be a leader or acceptable to be a follower. Volumes have been written on first-mover advantages, and an offsetting amount on the wisdom of waiting until the innovation's major risks have been resolved by the pioneering firms. "You can always tell who the pioneers were," an old management adage goes. "They're the ones with the arrows in their backs."

Three classes of factors affect what an organization can and cannot do: its resources, its processes, and its values.

Resources include people, equipment, technology, product designs, brands, information, cash, and relationships with suppliers, distributors, and customers. Resources are usually things, or assets—they can be hired and fired, bought and sold, depreciated or enhanced. They often can be transferred across the boundaries of organizations much more readily than can processes and values.

Processes include not just manufacturing processes, but those by which product development, procurement, market research, budgeting, planning, employee development and compensation, and resource allocation are accomplished. One of the dilemmas of management is that, by their very nature, processes are established so that employees perform recurrent tasks in a consistent way, time after time. To ensure consistency, they are meant not to change - or if they must change, to change through tightly controlled procedures. This means that the very mechanisms through which organizations create value are intrinsically inimical to change. Some of the most crucial processes to examine as capabilities or disabilities aren't the obvious value-adding processes involved in logistics, development, manufacturing, and customer service. Rather, they are the enabling or background processes that support investment decision-making. These typically inflexible processes are where many organizations' most serious disabilities in coping with change reside.

An organization's values are the standards by which employees make prioritization decisions. A key metric of good management, in fact, is whether such clear and consistent values have permeated the organization. Clear, consistent, and broadly understood values, however, also define what an organization cannot do. One of the bittersweet rewards of success is, in fact, that as companies become large, they literally lose the capability to enter small emerging markets. This disability is not because of a change in the resources within the companies—their resources typically are vast. Rather, it is because their values change.

Despite beliefs spawned by popular change-management and reengineering programs, processes are not nearly as flexible or "trainable" as are resources - and values are even less so. The processes that make an organization good at outsourcing components cannot simultaneously make it good at developing and manufacturing components in-house. Values that focus an organization's priorities on high-margin products cannot simultaneously focus priorities on low-margin products. This is why focused organizations perform so much better than unfocused ones: their processes and values are matched carefully with the set of tasks that need to be done.

For these reasons, managers who determine that an organization's capabilities aren't suited for a new task, are faced with three options through which to create new capabilities. They can:

The reasons why innovation often seems to be so difficult for established firms is that they employ highly capable people, and then set them to work within processes and values that weren't designed to facilitate success with the task at hand. Ensuring that capable people are ensconced in capable organizations is a major management responsibility in an age such as ours, when the ability to cope with accelerating change has become so critical.

Organization

How Do Committees Invent?

by Melvin Conway, 1968

A contract research organization had eight people who were to produce a COBOL and an ALGOL compiler. After some initial estimates of difficulty and time, five people were assigned to the COBOL job and three to the ALGOL job. The resulting COBOL compiler ran in five phases, the ALGOL compiler ran in three.

Two military services were directed by their Commander-in-Chief to develop a common weapon system to meet their respective needs. After great effort they produced a copy of their organization chart.

Consider the operating computer system in use solving a problem. At a high level of examination, it consists of three parts: the hardware, the system software, and the application program. Corresponding to these subsystems are their respective designers: the computer manufacturer's engineers, his system programmers, and the user's application programmers. (Those rare instances where the system hardware and software tend to cooperate rather than merely tolerate each other are associated with manufacturers whose programmers and engineers bear a similar relationship.)

Any organization that designs a system will inevitably produce a design whose structure is a copy of the organization's communication structure.

Operational Excellence

Manifesto for Agile Software Development

2001

We are uncovering better ways of developing software by doing it and helping others do it. Through this work we have come to value: That is, while there is value in the items on the right, we value the items on the left more.

Kent Beck Mike Beedle Arie van Bennekum Alistair Cockburn Ward Cunningham Martin Fowler James Grenning Jim Highsmith Andrew Hunt Ron Jeffries Jon Kern Brian Marick Robert C. Martin Steve Mellor Ken Schwaber Jeff Sutherland Dave Thomas

© 2001, the above authors this declaration may be freely copied in any form, but only in its entirety through this notice.

Principles behind the Agile Manifesto

Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.

Welcome changing requirements, even late in development. Agile processes harness change for the customer's competitive advantage.

Deliver working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale.

Business people and developers must work together daily throughout the project.

Build projects around motivated individuals. Give them the environment and support they need, and trust them to get the job done.

The most efficient and effective method of conveying information to and within a development team is face-to-face conversation.

Working software is the primary measure of progress.

Agile processes promote sustainable development. The sponsors, developers, and users should be able to maintain a constant pace indefinitely.

Continuous attention to technical excellence and good design enhances agility.

Simplicity--the art of maximizing the amount of work not done--is essential.

The best architectures, requirements, and designs emerge from self-organizing teams.

At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly.

Starbase Tour and Interview with Elon Musk

by Trevor Sesnic, 2021

Musk overviewed his five step engineering process, which must be completed in order:
  1. Make the requirements less dumb. The requirements are definitely dumb; it does not matter who gave them to you. He notes that it's particularly dangerous if an intelligent person gives you the requirements, as you may not question the requirements enough. "Everyone's wrong. No matter who you are, everyone is wrong some of the time." He further notes that “all designs are wrong, it's just a matter of how wrong.”
  2. Try very hard to delete the part or process. If parts are not being added back into the design at least 10% of the time, not enough parts are being deleted. Musk noted that the bias tends to be very strongly toward "let's add this part or process step in case we need it.” Additionally, each required part and process must come from a name, not a department, as a department cannot be asked why a requirement exists, but a person can.
  3. Simplify and optimize the design. This is step three as the most common error of a smart engineer is to optimize something that should not exist.
  4. Accelerate cycle time. Musk states "you're moving too slowly, go faster! But don't go faster until you've worked on the other three things first."
  5. Automate. An important part of this is to remove in-process testing after the problems have been diagnosed; if a product is reaching the end of a production line with a high acceptance rate, there is no need for in-process testing.