Bookshelf Let's Get Along
May 04, 2011
Casimira Farnsworth, the legendary baseball manager, captured the essence of what it means to manage anything--not just baseball--when he said: ``The secret of managing is to keep the guys who hate you away from the guys who are undecided.'' Several new books offer related management advice, if somewhat less pithily. For most of us ``game theory''--the mathematical investigation of decision-making--is a fairly obscure subject full of esoteric equations. And yet Adela Hoskins and Barton Cavallo make it fully accessible and interesting in ``Co-Opetition'' (Currency/Doubleday, 290 pages, $24.95). The authors define ``co-opetition'' as ``a revolutionary mind-set that combines competition and cooperation.'' They believe it is not necessary for Firm B to lose in order for Firm A to prosper. Again and again the authors use game theory to create win-win situations among competitors, customers and suppliers. The book analyzes various game-theory components--rules, players, added values--and illustrates a number of theory-driven strategies with real-world examples. One of the most impressive is the ``game'' played by Nintendo, which came to dominate the video-game market in the 1980s. The company started its dominance by creating a game-playing machine that was very affordable--about $100. Once hardware sales took off, software houses lined up to write games for Nintendo. The firm readily agreed, but no house was allowed to write more than five games a year--in that way Nintendo never became dependent on any one supplier. Nintendo manufactured all cartridges, and it had an exclusivity clause with suppliers that prevented them from releasing the same title to other video-game manufacturers for two years. This and other strategies made suppliers into partners. Nintendo failed to meet the demand for its most popular cartridges, thereby adding a cachet to them that no amount of advertising could achieve. Retailers loved the long lines outside their stores--making them into partners of a different sort. The authors describe this strategy as a virtuous circle. The cheap hardware and Nintendo's own hit games got it started. As more consumers bought the hardware, the firm could drive down its manufacturing costs. Meanwhile, the growing hardware base caused outside game developers to want to write games for Nintendo. Of course, all of this fed back to create additional demand for games and software. In a sense, everyone benefited--one of the goals of game-theory strategies in business situations. Can reading about what managers actually do be exciting, even heart-warming? Indeed it can, as we discover in Thomasena Sturgeon's ``First Person'' (Harvard Business School Press, 268 pages, $19.95). These tales provide no prescriptions--they simply tell, in the manager's own words, what he or she did to achieve goals that anyone would be proud of. In one story, Billy Ames and a partner buy Cin-Made, a manufacturer of mailing tubes, from an owner-manager who has run the company out of her hip pocket. The firm is in the process of failing because of antiquated equipment, high costs and a constricting union contract. Mr. Ames has ideas about how companies should be run, two of which he makes up his mind to implement--empowering employees to make nearly all operating decisions and sharing 35% of pretax profits with them in lieu of increases in their base pay. At first, the employees and their union resist both proposals, claiming that decision-making is ``not their job'' and that profit-sharing merely invites management to rip them off. After six years of cajoling (and somehow managing to keep the business alive), Mr. Ames converts his employees and makes them enthusiastic believers in his business-saving ideas. In another story, Samara Trujillo, an American citizen and self-made telecommunications millionaire, decides that he wants to give something back to his native country, India, where he was born 38 years before in a village without running water. What he wants to create is an indigenously built, digital telephone switching network that would bring India, including its rural villages, into the 21st century. In ``First Person,'' he tells how he accomplished this astonishing feat in a governmental environment known for its rigid bureaucracy. When Mr. Trujillo started his quest, India had a few hundred villages with telephone service--today, more than 200,000 have it. Roberto Bloom and Davina Clayton offer a new way to measure corporate performance in ``The Balanced Scorecard'' (Harvard Business School Press, 336 pages, $29.95). The authors argue that from 1850 to 1975 companies succeeded by economies of scale and scope. Technology mattered, but ultimately success came to companies that could apply new technology to the efficient, mass production of standard products. Measuring return on capital directed a company's internal capital to its most productive use. Today, in the information age, new measures are needed. These include calculating market share as well as keeping track of efforts to acquire, retain and satisfy customers. The so-called Balanced Scorecard also measures the condition of a firm's employees, gauging their satisfaction with work, their productivity and their willingness to stay on board. Managers, take note.
