Article

Don't Get Hammered by Management Fads

An estimated 10,000 business books have been published worldwide over the past three years. Beware.

By Darrell Rigby

Published on May 21, 2001
min read


Mr. Rigby, a director of Bain & Company, founded and directs Bain's Management Tools & Techniques survey. An estimated 10,000 business books have been published worldwide over the past three years, many touting management "tools" promising to make their users incredibly successful by showing them new ways of doing business. Beware. Gateway's experience shows the dangers of taking advice too freely. In 1999, the company ranked number one in revenues in the U.S. consumer market for personal computers, and it appeared strong even during the tech slump last year. Management gurus credited several fashionable tools: Market Disruption Analysis. Gateway foresaw PCs going the way of pagers slow growth, unacceptable margins. Disruptive technologies, such as Net appliances, offered greater opportunity. "I'd be totally happy," said chairman Ted Waitt, "if I didn't sell a PC five years from now." Corporate Venturing. Gateway created a venture-capital arm to invest in new, diversifying businesses. The investment portfolio soon grew to $1.5 billion, about one-third of Gateway's total assets. Customer Relationship Management. Gateway sought "lifelong relationships" with customers. It expanded product variety to satisfy personal preferences. It spent hundreds of millions of dollars building more than 300 retail outlets, then set out to make Gateway the biggest non-vocational computer trainer in the country within a year. It sent out "technology ambassadors." To further cement relationships, Gateway allowed customers to buy on the installment plan. Yet by January of this year, Gateway had significantly missed its forecast, fired its CEO, sharply reduced product options, and announced a layoff of 3,000 workers. The stock price fell to $15 from $50. Mr. Waitt, Gateway's co-founder, reclaimed his former job as chief executive and set about restoring profitability in its traditional computer products. Obviously, it wouldn't be fair to blame Gateway's failures on the aforementioned management tools any more than it was fair to credit those tools for Gateway's earlier successes. Tools are just tools. Wal-Mart's numbers will probably best Kmart's regardless of who writes the best mission statement. But tools do have an impact. Just ask CarsDirect.com. CarsDirect is suing its provider of customer-tracking tools, claiming they have "substantially impaired" its ability to meet customer demand and created "significant operating losses" estimated at $50 million. Too often the primary impact of management tools is bouncing companies from guardrail to guardrail from centralization to decentralization, from focus to diversification, from loyalty to layoffs without much forward progress. Gurus ridicule modest course corrections, clamoring for radical revolutions that will turn conventional wisdom on its head. Check the titles among Amazon's most popular business books: "Leading the Revolution," "The Customer Revolution," "New Rules For the New Economy: 10 Radical Strategies For a Connected World." And who could forget "Reengineering the Corporation: A Manifesto for Business Revolution"? Until recently, there has been no Consumer Reports to evaluate such tools. But over the past eight years, Bain surveyed more than 5,600 senior executives around the world, tracking their needs, attitudes, usage rates and satisfaction with management tools over time. While 72% believe it is important to stay on the cutting edge of tools (the average company used 10 of the top 25 tools in 2000), a whopping 81% feel that most management tools promise more than they deliver. Which tools create the most pain for the least gain? It seems to be those getting the most hype: Corporate Venturing (45% of users actually abandoned this tool, one of the highest defection rates in the survey's history), Market Disruption Analysis (satisfaction scores are barely above those for Corporate Venturing), and Customer Relationship Management (the fastest growing tool, with the third-lowest satisfaction score). Meanwhile, no one really talks about the most successful tools. They're old news. But executives rate Strategic Planning as the most valuable tool in their workbench. It is the most heavily utilized of all tools (used by 80% of respondents, compared to 8% for Market Disruption Analysis), is always in the top five satisfaction scores, and garners the most loyal users. Mission and Vision Statements, Pay for Performance, and Cycle Time Reduction are other classics that consistently receive strong reviews. That's not surprising. Pick a tool, any tool, and I can cite an age-old truism that has advocated that tool's primary point for generations. Then again, for every saying (and tool), there is an equal and opposite saying (and tool) that makes just as much sense. For example: Stick to your knitting (In Search of Excellence), but don't put all your eggs in one basket (Real Options Analysis); nothing ventured, nothing gained (Corporate Venturing), but, remember, better safe than sorry (Strategic Planning); he who hesitates is lost (First Mover Advantage), but look before you leap (Scenario Planning). Tools do evolve, but it's hard to call their fundamental principles revolutionary. Managers who jump on new-tool bandwagons presuming to boldly go where no one has gone before are doomed to repeat perilous mistakes of the past. In turbulent times such as these, especially after 10 years of record-breaking prosperity that did little to hone management's skills in navigating a downturn, executives appear unusually susceptible to the siren songs of intrepid tools. According to survey respondents, success demands a longer time horizon. Seventy-eight percent advise that once you find a tool that works, use it over and over again. Recognize that every tool has strengths and weaknesses. Learn to apply the right tool to the right problems in the right way. Use proven tools prudently rather than trendy tools hastily. Astute readers will note that these are not new insights. Nearly 2,400 years ago, Aristotle pointed out that prudence lies at the golden mean between extremes. Well, we now have 5,600 survey responses supporting Aristotle's position. And as Epictetus used to say "You understand this, how long will you delay to be wise?"

Mr. Rigby, a director of Bain & Company, founded and directs Bain's Management Tools & Techniques survey.

An estimated 10,000 business books have been published worldwide over the past three years, many touting management "tools" promising to make their users incredibly successful by showing them new ways of doing business. Beware.

Gateway's experience shows the dangers of taking advice too freely. In 1999, the company ranked number one in revenues in the U.S. consumer market for personal computers, and it appeared strong even during the tech slump last year. Management gurus credited several fashionable tools:

Market Disruption Analysis. Gateway foresaw PCs going the way of pagers slow growth, unacceptable margins. Disruptive technologies, such as Net appliances, offered greater opportunity. "I'd be totally happy," said chairman Ted Waitt, "if I didn't sell a PC five years from now."

Corporate Venturing. Gateway created a venture-capital arm to invest in new, diversifying businesses. The investment portfolio soon grew to $1.5 billion, about one-third of Gateway's total assets.

Customer Relationship Management. Gateway sought "lifelong relationships" with customers. It expanded product variety to satisfy personal preferences. It spent hundreds of millions of dollars building more than 300 retail outlets, then set out to make Gateway the biggest non-vocational computer trainer in the country within a year. It sent out "technology ambassadors." To further cement relationships, Gateway allowed customers to buy on the installment plan.

Yet by January of this year, Gateway had significantly missed its forecast, fired its CEO, sharply reduced product options, and announced a layoff of 3,000 workers. The stock price fell to $15 from $50. Mr. Waitt, Gateway's co-founder, reclaimed his former job as chief executive and set about restoring profitability in its traditional computer products.

Obviously, it wouldn't be fair to blame Gateway's failures on the aforementioned management tools any more than it was fair to credit those tools for Gateway's earlier successes. Tools are just tools. Wal-Mart's numbers will probably best Kmart's regardless of who writes the best mission statement. But tools do have an impact. Just ask CarsDirect.com. CarsDirect is suing its provider of customer-tracking tools, claiming they have "substantially impaired" its ability to meet customer demand and created "significant operating losses" estimated at $50 million.

Too often the primary impact of management tools is bouncing companies from guardrail to guardrail from centralization to decentralization, from focus to diversification, from loyalty to layoffs without much forward progress. Gurus ridicule modest course corrections, clamoring for radical revolutions that will turn conventional wisdom on its head. Check the titles among Amazon's most popular business books: "Leading the Revolution," "The Customer Revolution," "New Rules For the New Economy: 10 Radical Strategies For a Connected World." And who could forget "Reengineering the Corporation: A Manifesto for Business Revolution"?

Until recently, there has been no Consumer Reports to evaluate such tools. But over the past eight years, Bain surveyed more than 5,600 senior executives around the world, tracking their needs, attitudes, usage rates and satisfaction with management tools over time. While 72% believe it is important to stay on the cutting edge of tools (the average company used 10 of the top 25 tools in 2000), a whopping 81% feel that most management tools promise more than they deliver.
Which tools create the most pain for the least gain? It seems to be those getting the most hype: Corporate Venturing (45% of users actually abandoned this tool, one of the highest defection rates in the survey's history), Market Disruption Analysis (satisfaction scores are barely above those for Corporate Venturing), and Customer Relationship Management (the fastest growing tool, with the third-lowest satisfaction score).

Meanwhile, no one really talks about the most successful tools. They're old news. But executives rate Strategic Planning as the most valuable tool in their workbench. It is the most heavily utilized of all tools (used by 80% of respondents, compared to 8% for Market Disruption Analysis), is always in the top five satisfaction scores, and garners the most loyal users. Mission and Vision Statements, Pay for Performance, and Cycle Time Reduction are other classics that consistently receive strong reviews.

That's not surprising. Pick a tool, any tool, and I can cite an age-old truism that has advocated that tool's primary point for generations. Then again, for every saying (and tool), there is an equal and opposite saying (and tool) that makes just as much sense.

For example: Stick to your knitting (In Search of Excellence), but don't put all your eggs in one basket (Real Options Analysis); nothing ventured, nothing gained (Corporate Venturing), but, remember, better safe than sorry (Strategic Planning); he who hesitates is lost (First Mover Advantage), but look before you leap (Scenario Planning).

Tools do evolve, but it's hard to call their fundamental principles revolutionary. Managers who jump on new-tool bandwagons presuming to boldly go where no one has gone before are doomed to repeat perilous mistakes of the past. In turbulent times such as these, especially after 10 years of record-breaking prosperity that did little to hone management's skills in navigating a downturn, executives appear unusually susceptible to the siren songs of intrepid tools.

According to survey respondents, success demands a longer time horizon. Seventy-eight percent advise that once you find a tool that works, use it over and over again. Recognize that every tool has strengths and weaknesses. Learn to apply the right tool to the right problems in the right way. Use proven tools prudently rather than trendy tools hastily.

Astute readers will note that these are not new insights. Nearly 2,400 years ago, Aristotle pointed out that prudence lies at the golden mean between extremes. Well, we now have 5,600 survey responses supporting Aristotle's position. And as Epictetus used to say "You understand this, how long will you delay to be wise?"