The Ten Commandments of Management
“Wherever there is a successful company, someone once made a courageous decision.” “The best structure does not guarantee either earnings or returns but the wrong structure is a guarantee of failure.” These lessons from Peter Drucker, the father of modern management, have been bequeathed to the executives who are going to run the companies of the twenty-first century. Drucker, who created the concept of the social environmentalist, is hardly the only person whose ideas about the world of management have staying power. Indian guru C.K. Prahalad has said on many occasions, for example, that “The first thing a leader has to do is lead himself;” “Success comes from setting ambitious goals,” and “Leadership does not consist in changing others but in inspiring them with your own example in order to achieve the goals you’ve proposed.”
Over the course of nearly 200 years in which management has been a business discipline, thinkers, men of letters, politicians and strategists – including Machiavelli, Vladimir Lenin, Winston Churchill and Dwight D. Eisenhower – have left behind a series of phrases that are brief, simple and easy to remember. In addition, they are so important that they provide authentic lessons that every executive should take into account when they make important business decisions.
Companies such as Inditex, Sony, Terra, Citibank, Google and Wikipedia all give meaning and validity to such forceful phrases as this statement by Spanish philosopher Ortega y Gasset: “The only way to move forward is to look far ahead.” Or this phrase from Michael Porter: “The company without a strategy is willing to try anything.” Or this phrase from Drucker: “Elephants have a hard time adapting. Cockroaches outlive everything.” José Ramon Pin, a professor at the IESE [business school] and Miguel Costa, dean of the Instituto de Empresa, have worked with Universia-Knowledge@Wharton to prepare this list of Ten Commandments for twenty-first century management.
1) “Success is the ability to go from failure to failure with no loss of enthusiasm.” Winston Churchill, former prime minister of Britain
You don’t have to submit to failure, the management gurus agree. “And who knows that better than Steve Jobs, president and founder of Apple,” says José Ramon Pin, professor at the IESE Business School. “Jobs never gave up,” not even when he was fired by the same company he founded. When he was 20 years old, Jobs created Apple in his parents’ garage, working with his friend Steve Wozniak. Over a period of just seven years, Apple transformed itself into a company with 4,000 employees, and Jobs was the youngest millionaire in the U.S. His first failure came in 1980, when Apple III turned out to be a disaster. Some unfortunate technical decisions were the cause, such as the lack of an air vent, which led many of the devices to overheat even before they got started. Thousands of Apple IIIs had to be replaced. Months later, in November 1981, Apple launched a new version of that model but it also failed. Later, the Macintosh computer arrived, but sales did not meet expectations. Tensions with the board of directors intensified until Jobs was fired in 1985. However, Jobs never gave up; his entrepreneurial spirit led him to create two new companies: NeXT, which also would fail, and Pixar, which would make history in the animation industry. In 1997, Jobs became president of Apple once more. He re-launched the Macintosh and bet the future of his company on the success of the iPod.
2) “Plans are useless but planning is indispensable.” Dwight D. Eisenhower, former president of the U.S.
“The ultimate reason for planning is to achieve long-term corporate goals (both quantitative and qualitative) by developing strategies and managing resources for carrying out those strategies,” says Miguel Costa, professor of management at the Instituto de Empresa and director of marketing at SEK University. According to Costa, “Clearly, a good plan or a good idea is a good point of departure but it can lead to failure unless you make its execution possible through a process that is thoughtful, orderly and structured.” It is always possible to succeed purely by accident. However, “no one can survive forever on the returns provided by a stroke of luck, much less so in the case of a corporation. The first thing you need for a business is an idea but it can take a long time until this materializes and solidifies into a profitable business.” As a result, he explains, you should study the market and its needs. You need to adapt the product and its features to demand. You also need to organize a sales plan, set goals, achieve financing, study various marketing and communications challenges; figure out how to collect the money you’re owed; create channels for logistics, and so forth…. One example of this is the failure of Sony’s Play Station 3. “Too many planning mistakes made it hard to duplicate the success of the launch of its predecessor, the PS2,” notes Costa.
3) “The company without a strategy is willing to try anything.” Michael Porter, professor at Harvard.
When you don’t have a definite strategy, notes Costa, it seems as if everything is equally valid. It’s something quite different to get results. “It’s like giving someone a blind man’s cane or waiting for a stroke of luck.” When you don’t have a plan, “success can happen but you are assuming too many risks.” On occasion, he explains, not creating a strategy is the equivalent of designing a flawed strategy because the consequences can be equally disastrous for your company. For example, Costa cites Terra Networks’ acquisition of Lycos. In May 2000, Terra paid $12.5 billion for Lycos, more than double its market capitalization at the time. Only four years later, Terra wound up selling Lycos for just $95 million. “Only the people who made that decision will know if Terra did so with or without a strategy. If there was a strategy, there’s no doubt that it was misguided.”
4) “Elephants have a hard time adapting. Cockroaches outlive everything.” Peter Drucker, the father of modern management.
Some of the great management maxims remain nothing more than pretty words. Sometimes, however, they describe people and companies that have learned how to manage certain situations successfully. That’s the case with Bankinter, the Spanish bank. “Because of its innovations and its strategic use of technology, it [Bankinter] has learned how to survive in a market dominated by large banks,” notes José Ramón Pin, professor at IESE. Over time, Bankinter has gone from being ranked 107th among Spanish banks to becoming one of Spain’s top six banks. Few had faith in its potential back in June 1965, when Bankinter was established as the Banco Industrial y de Negocios [Industrial and Business Bank]; it was owned jointly (50-50) by Banco de Santander and Bank of America. “Now it has become the model for Internet banking, thanks to its ability to adapt rapidly to the new era in technology,” Pin adds.
5) “If you are not part of the solution, you are part of the problem.” Vladimir Lenin, former president of the Soviet Union.
Although it is not clear who coined this phrase, it is clear that most sources attribute it to Vladimir Lenin, former leader of the Soviet Union. Some critics say that this approach is merely a way to make corporate employees responsible for corporate problems that should be solved by their managers. According to Costa, “this is a phrase that continues to be quite valid. Clearly, this is what the board of directors of Citibank must have been thinking when they ousted Charles Prince during the subprime mortgage crisis in the United States. The board was confident that Robert Rubin (the new president) would become part of the solution, and we have no doubt that if he does not succeed in that regard, he [Rubin] will become part of the problem.”
6) “Fire the planners. Stop thinking, and act.” Tom Peters, author of In Search of Excellence.
According to Pin, the case of Grupo Santander provides the best example of how to take action and mislead the competition. “Emilio Botín, president of Santander, knew how to surprise his competitors by making unexpected decisions,” Pin says. His first big move came at the end of the 1980s when Santander – then known as Banco Santander – launched Supercuenta [which means “Superaccount”], the first interest-bearing account in Spain. Later, other banks imitated this move. In September 2004, Santander surprised everyone by becoming the first Spanish bank to penetrate London when Santander took majority ownership and control of Abbey, a British bank. Its ultimate coup came at the end of 2007, when it completed the largest acquisition in the history of its sector. That’s when Santander, along with two other large banking institutions, Royal Bank of Scotland, and Fortis, paid 71 billion euros for ABN Amro.
7) “The only way to move forward is to look far ahead.” Jose Ortega y Gasset, writer.
“The only way to move forward is to look far ahead,” Spanish philosopher José Ortega y Gasset used to say. Take the case of Inditex, for example, a company that was far from happy even after its rapid and successful expansion within Spain. According to Costa, Inditex “set out to conquer new markets and has transformed itself today into one of the principal fashion retailers in the world. Altogether, its eight brands -- Zara, Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Kiddy's Class -- are now available in 3,513 shops in 68 countries. That’s what it means to look far ahead,” says Costa. It’s also clear that many Spanish companies that have emerged in various sectors have not dared, for one reason or another, to jump into foreign markets or have not been prepared to do so.” In many cases, these companies have become acquisition targets of foreign non-Spanish companies that have learned that they need to look further in order to make progress.
8) “Leaders must be partners with their people.” Ken Blanchard, consultant and entrepreneur.
Juan Roig, president of Spanish supermarket chain Mercadona, has stamped his own style on his business. “Our maxim is that the customer is permanent, so the provider has to be permanent along with its workforce.” The pillar of his entire structure is that the staff knows who the boss is. “And in Mercadona, that person is not the president of the company but the customer,” Roig has said on numerous occasions. According to Roig, you have to do everything you need to do to bring value to the boss and to eliminate the ordinary. In recent years, German retailers have arrived in Spain, offering steeply discounted products and low-cost in-house brands. Mercadona found out that its customers were looking for cheap, unbranded products that nevertheless offered high quality. That’s why Mercadona launched some of its own brands. The most important was Hacendado. “All of this was achieved thanks to the personnel policy established by Juan Roig,” says Pin.
9) “The important thing is not to know the answer but to have the telephone number of the people who know it.” Les Luthiers, a group of Argentine musicians.
This is another phrase of dubious origin but it has been attributed to Les Luthiers, a group of Argentine musicians. As Costa notes, you need Internet access instead of a telephone. Nevertheless, what’s really important, whichever technology you use, is to develop a network of contacts in your sector. Thanks to the Internet, notes Costa, “we can access Wikipedia, the online encyclopedia, as well as Google, in order to find out who knows the answers. We can watch videos (YouTube) and see photos (Facebook); we can find out phone numbers and learn what each person has done, written or said (Technorati, Blogger), and where he or she works (Google maps). We can even use satellite technology (Google Earth) to view that location.” All of these web sites are just some of the possibilities offered by this network of networks, he adds.
10) “The biggest enemy of marketing people is Excel.” C. K. Prahalad, professor at the University of Michigan
Ben & Jerry’s ice cream provides the best example of how to survive without the usual statistical tests and strategies for reaching the public. “Despite selling environmentally sound ice creams and not investing in direct advertising, [Ben & Jerry’s] has become the second largest seller of ice cream after [only] Häagen-Dazs,” says Pin. One of the most common mistakes of marketing departments, he suggests, is to get carried away with the numbers and tactics of competitors.