Name: In Search of Excellence
Rating: 4.1 (39 reviews)
Author: Tom Peters and Robert H. Waterman Jr.

Introduction

What’s in it for me? Learn the secrets of the most successful companies in history.

The path to the holy grail of business management has proved elusive. While many loyal Lancelots and management consultants have fought the dragons guarding the secrets of management, few have survived.

Well, at least until 1982, when Tom Peters and Robert H. Waterman Jr. decided to unsheath Galahad’s sword and head straight to the source. No, not some castle, but the people who actually ran the most successful companies in American history. And if the authors didn’t find the holy grail of business management, then maybe it’s not meant to be found – they certainly vanquished a few myths on the way.

In Search of Excellence is the result of their quest – an instant classic that shows how the great companies built their successes and faced their challenges.

After reading these blinks, you’ll have learned

how to grow without sacrificing a small business’s flexibility and innovation;
why just walking around constitutes a great management strategy; and
why Procter & Gamble lets its brands fight against each other.

Key idea 1 of 8

For decades, people have debated the best way to manage a company.

Every business leader wants to know the best way to manage their company. But why are there so many different approaches and schools of thought?

Well, management theory has long been a topic of general concern and disagreement among academics. In the 1930s, Harvard’s Chester Barnard rejected long-held ideas about bureaucratic management that were put forward earlier by thinkers like Max Weber. Barnard’s work kicked off a debate about whether management was an impersonal, objective and exact science, or more of an art relying on charismatic leadership.

In the 1970s, when the authors began their research, a key area of concern among management theorists was international competition – especially in countries like Japan, where companies were growing at a much faster rate.

Observers noticed that Japan’s lack of business schools had produced a different management culture than in the United States. This observation led to questions about whether Americans, with all their management classes, had adopted an overly theoretical approach.

The authors decided to find some concrete answers amid the speculation. So they assembled a list of America’s top 15 companies – boiled down from 43 contenders – and spent six months conducting interviews and doing research to figure out what they all had in common. Their results were popularized in the book’s first edition, published in 1982.

The 15 companies were selected using two criteria:

The company’s reputation among businessmen, consultants and business academics.
Basic measures of growth and long-term wealth creation (like average return on capital or average return on sales) over a 20 year period. Companies were deemed excellent if they’d stayed in the top half of the original ranking of 43 companies for these measures over the full period.

So, according to these criteria, in 1982 the 15 top American companies were: Bechtel, Boeing, Caterpillar Inc., Dana, Delta Airlines, Digital Equipment, Emerson Electric, Fluor, Hewlett-Packard, IBM, Johnson & Johnson, McDonald’s, Procter & Gamble and 3M.

But what attributes did all of these companies share? Read on to find out.

Key idea 2 of 8

Excellent companies know how to get things done.

So, what do successful companies have in common? Well, the authors noticed that all the top companies they surveyed had an action bias. That is, these firms had the ability to get things done, regardless of the complexity of the task.

Although most companies want to believe they have an action bias, not many do. Instead of getting things done, most businesses get tangled up in bureaucracy. After all, when countless committees have to sign off on any given decision, there’s a high barrier to action.

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Key idea 3 of 8

Top businesses stay close to their customers.

As Lew Young, former editor-in-chief of Businessweek, once observed, too many companies regard the customer as basically a bothersome nuisance who damages carefully laid business plans. But excellent companies take a different approach.

America’s top companies have a service obsession. Meaning, the needs of the customer intrude into every facet of the business, from research to sales to accounting.

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Key idea 4 of 8

Big firms can maintain their edge by promoting experimentation and internal competition.

Did you know that small businesses produce 24-times more innovation per dollar than larger firms?

So what about the excellent – and huge – multinational corporations surveyed by the authors? Although these companies are big, they act small in terms of innovation.

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Key idea 5 of 8

The most successful companies sincerely care about their employees.

There’s another thing excellent companies have in common, and that is a deeply ingrained respect for individual employees.

In other words, top companies sincerely care about their employees and create people-oriented working environments. Management respects individual employees, invests time and money into their development and holds them to reasonable expectations.

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Key idea 6 of 8

Excellent companies are powered by inspiring values.

As a manager, what can you do to mimic highly successful companies? Well, you might start by establishing some company values.

That’s because excellent companies set out qualitative values aimed at inspiring employees at every level of the company.

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Key idea 7 of 8

When excellent companies branch out, they build on their core strengths.

As a company becomes more successful, there’s always the temptation to buy out the competition or branch out into new markets and sectors.

This is called diversification, and it can be done by creating a new products or buying a company in a different sector – with the ultimate hope of making more money.

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Key idea 8 of 8

Even large companies run best with a simple, lean organizational structure.

Success has its own challenges. And one of the drawbacks of growth is that as a company expands, it hires more people, ends up with larger departments – and finds itself with a super-complex organizational structure.

So, imagine a small company with a functional organizational structure. Employees are grouped together according to whatever function they perform, such as marketing, legal work or sales. In this structure, it’s clear whom people should report to – be it the manager or the CEO.

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In Search of Excellence summary