This remarkable book provides important insights regarding how established complex organizations can reinvent themselves and prevent being buried by the competition. The key to continued growth and success is a company’s ability to leap, say, from a primary focus on chemistry to microbiology, then bioinformatics and genomics (as in the case of Novartis), or from mechanical engineering to consumer psychology to chemistry (as Proctor and Gamble has). The human ability to innovate is the primary factor needed to make this happen. The key to corporate success is movement across knowledge disciplines to create new insights regarding how products are made or how services are developed.
The author offers five principles for this process:
Understand what the key area of knowledge for the firm might be and how it is evolving.
Acquire new knowledge disciplines. Leap!
Take advantage of major shifts regarding what might be cutting-edge areas of knowledge—another leap.
Be willing to experiment to gain confidence that new knowledge is becoming dominant.
Execute change, primarily through the efforts of top management (deep dive).
The book falls into three parts: what has happened, what will happen and what needs to happen next. The key issue of the book is how established, leading firms can make leaps so that they can remain on top and not be overtaken by newer firms that might have better technology, lower costs and/or more modern processes.
In the first chapter of Part 1, Yu discusses how the old leader in the piano industry, Steinway, was overtaken by Yamaha. He introduces the concept of the knowledge funnel, whereby successful firms typically leap from craftsmanship to mass production to automation. He points out that the test is to become faster and better! To move up to new levels in the knowledge curve, one should commit resources, but paradoxically, many leading firms may not want to commit sufficient funds to make this leap—the status quo might be seen as good enough. This trap is often driven by a fear of cannibalizing existing products or processes. However, as the top management at P&G said, it is better that we cannibalize our own old products than if the competition does it!
In the next chapter, the author analyzes how the Basel-based Swiss pharmaceutical companies successfully transformed themselves by leaping from an organic chemistry focus to one on microbiology and how this evolution was further accentuated through mergers. P&G’s leap from a mechanical engineering focus to a consumer psychology focus (i.e., modern marketing) is also discussed.
In the second part of the book, Yu discusses what will happen going forward. Here, Yu sees three major developments or trends that are likely to impact a firm’s ability to leap. The first major shift is due to today’s heightened connectivity. It is now the collective brainpower of crowds that impacts this propensity, rather than the brains of single individuals.
A second key factor impacting leaping has to do with how one might leverage machine intelligence to be relatively less intuition-driven and have a greater focus on algorithmic solutions. The growth of artificial intelligence (AI) can only be positive, of course, given our significantly increased computing capacity.
The third major trend is that managerial creativity can be enhanced by shifting from a focus on analysis (big data) to more honing in on human intuition enhanced by a cross-disciplinary focus. The aim here would be to achieve creative leaps.
In sum, two intertwined trends are impacting all companies today: the rise of intelligent machines (AI) and the dramatic increase in connectivity. To take advantage of these trends, political infighting and collective inaction are “no-nos.” Creative minds are called for more than ever!
The final part of the book focuses on what needs to happen next. More effective implementation focused squarely on achieving leaps seems to be key. An entrepreneurial, decentralized spirit seems important as well, but a strong CEO will understand that he or she cannot delegate their responsibility of intervening when necessary to add impetus to the process of leaping. There might be a career risk for the CEO here, but it must still be done. This courage keeps the entrepreneurial spirit alive.
In a brief epilogue, the author recaps how leading companies tended to approach staying on top: first by emphasizing size to achieve economies of scope, then by a focus on quality control, Six Sigma and lean manufacturing. Then, the “magic” trend was to go for outsourcing. Now, it seems to be taking a leap!
All in all, I recommend this book enthusiastically. It does indeed offer valuable insights regarding how to thrive in a world where everything can be copied. To successfully outlast the competition for decades is of course always difficult, but this book shows that it can be done.
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