In search of excellence

The Xpragmatic View #140
April 4, 2010
by Marc Buyens (@mbuyens), Xpragma
marc.buyens@xpragma.com
url: http://www.xpragma.com/view140.php
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Numerous studies try identifying what is needed to become an excellent company. However, is our perception of excellence the correct one?

While searching for another publication, we accidentally came across 'Are "Great" Companies just Lucky?', an article by Michael E. Raynor and Mumtaz Ahmed, both from Deloitte Consulting, and Andrew D. Henderson, associate professor at the University of Texas, The article was published in the Forethought section of the April 2009 edition of the Harvard Business Review.

In the article, the authors question whether studies that try uncovering the practices of high-performing companies such as described in the bestsellers 'In Search of Excellence' and 'Good to Great' do indeed succeed in identifying the "real" exceptional companies.

According to the authors, in many cases, the perceived exceptional performance of these companies does not deviate from the rest in a statistically relevant way that justifies the label "exceptional". Therefore, their outlier position might as well be the result of other random factors, such as pure luck.

We are no experts in these matters, but their conclusion is not really a surprise. At least, history has already shown us numerous times that the observed excellence of the past is no guarantee for the success of tomorrow. Remember Toyota.

However, we think that there is a more fundamental flaw. In above mentioned studies and the analysis made by the authors, all thinking is based upon the assumption that continued growth and financial success equals excellence.

Of course, there is a reason for this. The financial results of a company and its stock price are more or less the only types of information that are readily available and that easily allow comparing a large group of companies.

And of course, growth and financial success are most likely an indication that things are not going too bad. But are they the only indicators? Or the most important ones?

We don't think so.

However, the real issue is not that we don't have the right metrics to do the perfect comparison. The real issue is our assumption of the "right direction". Is ccontinued growth the right direction?

They might not look so, but companies are also some kind of ecosystems. And, as with all systems, with growth comes complexity and degradation of certain abilities.

According to evolution specialists, we humans have more or less the right size for being an intelligent creature on earth. For our intelligence, we need a brain of a certain size. However, it would make little sense being twice as big to accommodate a bigger brain since we would run into other types of physical limitations due to gravity etc.

Same goes for companies. So, as Umair Haque wrote in his The Great to Good Manifesto, perhaps companies should better abandon this vision of greatness, of outperforming the market. We have already seen enough examples of where this can bring us. Perhaps companies should just try to be "good" companies, better in balance with their internal and external environment.

Being good. No more need for making comparisons to identify the so-called "best practices". Everyone knows what it takes to be good.

If you want it, of course.

About Marc Buyens

Marc Buyens is analyst, management consultant and owner of Xpragma. He started Xpragma in 1999 after a 20+ years career in the IT sector. Today, he provides advice, training and mentoring services focusing on the intersection of technological evolution, organisational change and business strategy: a messy world of unfulfilled promises.

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