New business books

In a previous post, I urged you to go out and learn a bit more about non-IT stuff, so that you can talk to the rest of the company. I don’t usually follow my own advice, but this time I have: I’ve bought a few new business books.

Competitive Advantage This week I have mostly been reading “Competitive Advantage”. Competitive advantage is a management classic by Michael Porter. It was recommended by John Favaro during his XP2005 keynote.

In the book, Porter dissects the activities of a company in a “Value Chain”. He analyzes how companies can gain and sustain a competitive advantage. A company can either have a “differentiation” or a “cost” strategy.

The book is a 2004 edition, but I was disappointed to see that it’s essentially the 1985 version. And it shows. I haven’t read the whole thing yet, but there are only a few vague references to “methods used by Japanese companies”. For example, if we want to respond to the customer faster, Porter recommends to increase inventory or to get surplus capacity. Ouch! What about reducing inventory, increasing inventory turns, removing waste, establishing flow, reducing cycle time, building quality in…?

Rebirth of American IndustryI’m also reading Bill Waddel and Norm Bodek’s “Rebirth of American Industry“. This one is more fun and easier to read than Competitive Strategy. In the book, Bill and Norm describe the history of (car) manufacturing. From the Lean early Ford, over Sloan and Dupont’s definitely not Lean GM and back to Lean Toyota.

Their main point is this: Sloan and Dupont created a management and accounting system at GM that essentially goes against Lean, as it considers inventory an asset and labor a liability. The strengths of the early Ford and current Toyota production system is that they focus on cash flow and empower their employees to continuously improve production processes. The Toyota Production System didn’t spring fully formed from the (brilliant) minds of Taichi Ohno or Shigeo Shingo. They evolved gradually, by solving problem after problem.

The GM management and accounting practices went on to become the de facto methods in American industry. As everyone was doing it, nobody really noticed the inefficiencies in the system. Until the Japanese arrived…

I believe the same is true in software development: there’s something structurally wrong in management and accounting (measurement) of IT projects. These lead us to work in large batches (have to keep those analysts busy!), to count work in progress as value and to have long cycle times. Agile, like Lean, will always be limited to implementing a few easy technical tools that don’t require us to change the way we work (unit tests, continuous builds, refactorings), unless we can change the way we manage and measure. And if the want to do that, we have to speak the lingo. Back to Porter…

2 comments to New business books

  • Thanks for the kind words about Rebirth, Pascal. I wish I knew enough about the software business to prove the point, but I am sure that the principles in my book prove the same point in your business as a factory. How manufacturing takes place is not independent of the management infrastructure, it is a direct product of it.

    I am certain that the same is true in the software business – how the company defines profitability determines measures of performance, quality management principles, the organizational structure, employee compensation policies, etc… which, in turn, dictate how software will come to life.

    If someone wants to bring about a radical change in the software development process, they should start with accounting systems and the management infrastructure that has driven people to deploy the current process.

    So long as accounting has defined analyst utilization as the critical driver of profitability, the company will only become as agile as it can without jeopardizing analyst utilization.

    Thanks again.

  • […] Lessons from the Browser Wars : HBS Working Knowledge – An interview with the author of an HBS paper taking a new look at the benefits of being first mover using Netscape, IE and Firefox as the subject. New business books – Reviews for three business focused books. Reinventing the Internet – How trends in social software tools could enable useful enterprise knowledge systems. AMD said to be researching ‘reverse multi-threading’ tech – A new technique to make multiple processors appear as a single processor to the host OS. Code for Unbreakable Quantum Encryption – Not the first time it’s been performed, but the demonstrated speed is even faster now. Google Adds Secure Search Across Popular Business Applications – Google’s search blog can now index content from applications including Oracle, SAS, Cognos, SalesForce.com and more enhancing the scope of the enterprise the appliance can now search. Introductions don’t work – Why starting your presentation with audience members introducing themselves isn’t a good idea and some alternatives. […]