In Search of Excellence: Summary Review

This is a summary review of In Search of Excellence containing key details about the book.

What is In Search of Excellence About?

"In Search of Excellence: Lessons from America's Best-Run Companies" by Tom Peters and Robert H. Waterman, Jr. is a seminal work in the field of management and business strategy, outlining the key principles and practices of the most successful American companies and providing practical insights for improving organizational performance and competitiveness.

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In Search of Excellence, America was looking to Japan as the rising economic force. American businesses were studying Japanese management techniques and looking to learn from their successes. In Search of Excellence went against this trend, by focusing on American companies and studying what made the most successful American companies successful.

Summary Points & Takeaways from In Search of Excellence

Some key summary points and takeaways from the book include:

* A new approach to management: A new approach to management that emphasizes a holistic and customer-focused approach, rather than a narrow focus on efficiency and productivity.

* The importance of values: The importance of values and the need for companies to develop a clear sense of purpose and mission that is rooted in their values and beliefs.

* The role of innovation: The role of innovation and the importance of encouraging experimentation and risk-taking in order to drive progress and growth.

* The power of decentralization: The power of decentralization and the need for companies to empower employees and give them the autonomy to make decisions and solve problems.

* The value of customer focus: The value of customer focus and the need for companies to understand and respond to the needs and preferences of their customers.

* The importance of leadership: The importance of leadership and the need for leaders to inspire and motivate their employees, and to create a culture of trust, collaboration, and teamwork.

* The role of technology: The role of technology and the need for companies to embrace and leverage new technologies to improve efficiency and competitiveness.

* The benefits of excellence: The benefits of excellence, including increased competitiveness, greater customer satisfaction, and improved financial performance.

* The book provides an in-depth look at the practices and principles that drive success in business, and offers a roadmap for companies looking to achieve excellence and long-term success.

Who is the author of In Search of Excellence?

Thomas J. Peters is an American writer on business management practices, best known for In Search of Excellence

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Robert H. Waterman Jr. was a non-fiction author and expert on business management practices. He was best known as the co-author, with Tom Peters, of In Search of Excellence.

In Search of Excellence Summary Notes

The Search for Commonalities in Excellent Companies

The management of a company has been a subject of debate for decades. Theories on management have varied greatly, with some considering it an exact science while others viewed it as an art that relied on charismatic leadership. In the 1970s, the search for answers in managing companies was fueled by concerns over international competition, particularly in countries like Japan, where companies were growing at a much faster rate. The authors of "In Search of Excellence" sought to find concrete answers to the question of how to manage a company by identifying the commonalities among America's top 15 companies.

The authors selected the 15 companies based on their reputation among businessmen, consultants, and academics, as well as their growth and long-term wealth creation over a 20-year period. These companies were deemed excellent if they stayed in the top half of the original ranking of 43 companies for these measures over the entire period. The authors then spent six months conducting interviews and research to identify the attributes that all of these excellent companies shared.

The book's first edition, published in 1982, popularized the results of their research. The 15 top American companies were Bechtel, Boeing, Caterpillar Inc., Dana, Delta Airlines, Digital Equipment, Emerson Electric, Fluor, Hewlett-Packard, IBM, Johnson & Johnson, McDonald’s, Procter & Gamble, and 3M. These companies shared several commonalities, including a focus on customer satisfaction, a commitment to quality, a dedication to innovation, and an emphasis on employee empowerment.

Action Bias is Key to Success in Excellent Companies

In the search for excellence among top American companies, the authors of the book “In Search of Excellence” found that successful companies all had an action bias. Excellent companies know how to get things done, no matter how complex the task. However, most companies tend to get bogged down in bureaucracy and struggle to take quick action. To overcome this, top companies adopt organizational fluidity by promoting vast informal networks for communication, such as open-door policies and “Management by Walking Around”. They also use chunking or breaking things down into small groups, dedicated to solving specific problems, to optimize organizational fluidity. These small groups tend to be the true backbone of excellent companies, even though they may not show up on formal organization charts. For example, Canon organized a task team to develop and launch the AE-1 camera in just two and a half years, which is now regarded as a groundbreaking technological advancement.

Customer Obsession in Top Businesses

The most successful businesses in America share a common trait: a customer service obsession. They regard their customers not as bothersome nuisances, but as the central focus of their business. This service obsession is not just limited to sales and customer support teams, but rather it permeates throughout the entire organization, from research and development to accounting. By staying close to their customers, top businesses are able to build customer loyalty, resolve issues, and ultimately drive innovation.

One of the key advantages of having a strong customer service culture is building customer loyalty. By resolving customer issues quickly and efficiently, companies are able to build a solid customer base who trusts and relies on them for their products and services. This is exemplified by IBM, where entry-level employees spend their first three years dealing with customer complaints, and resolving them within 24 hours. This practice has yielded a better understanding of what products and services the company needs to satisfy its customers, and has helped maintain the company’s position as an industry leader.

Moreover, excellent companies understand that customer service is not just about resolving issues or building a customer base, but it also enables innovation. By listening to customer feedback, companies can gain valuable insights into what works and what doesn’t. For instance, Procter & Gamble was the first consumer goods corporation to put a toll-free number on its products. This move led to most of the company’s product improvements. A study by MIT on the innovation of scientific instruments also found that end-users – not producers – of the instruments were responsible for conceptualizing 11 new inventions.

How Internal Competition and Experimentation Can Foster Innovation in Large Companies

Innovation is essential for businesses to maintain a competitive edge in today's rapidly changing markets. However, it is often small businesses that are associated with innovation and creativity, while larger companies are viewed as bureaucratic and slow to adapt. This is where internal competition and experimentation come in.

The key theme here is how big firms can maintain their edge by promoting experimentation and internal competition. While small businesses produce 24-times more innovation per dollar than larger firms, the authors of "In Search of Excellence" found that multinational corporations could act small in terms of innovation by fostering a sense of autonomy and entrepreneurship through internal competition.

By encouraging internal competition, companies bring the competitive outside market into the company, thus promoting innovation and preventing stagnation. For instance, IBM uses a "performance shoot-out" approach where proposed products are pitted against each other, resulting in real performance comparisons between prototypes. Meanwhile, Procter & Gamble has a formal policy that allows different brands within the company to compete actively, motivating brands to continuously improve their products, which ultimately benefits the company's overall sales.

Another crucial characteristic that promotes innovation in large companies is embracing failure by encouraging experimentation and an entrepreneurial spirit. When something doesn't work out, companies should move on to the next thing. This is exemplified by 3M's approach, where failed experiments are not seen as wasted resources but as opportunities for new ideas. For example, when a new ribbon material 3M was developing failed, they tried using it as material for a brassiere. When that also failed, they eventually turned it into the standard material in safety masks worn by government workers.

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Caring for Employees: A Key Element in the Success of Top Companies

One of the key traits of the most successful companies is their deep concern for the welfare of their employees. These top companies go beyond paying lip service to caring for employees and create people-oriented working environments that invest in their development and hold them to reasonable expectations. On the other hand, companies that pretend to be people-oriented, but do little or rely on fads and incentives, are bound to fail.

The most successful companies adopted people-oriented policies long before they were the norm, such as implementing training programs and encouraging employees and managers to communicate on a first-name basis. For instance, Hewlett-Packard is a great example of a people-oriented company that has a long-standing philosophy that has been key to its success. The “HP Way” goes back to the 1940s, when executives decided not to fire employees during a recession, and the entire company took a ten percent pay cut instead.

The Importance of Inspiring Values in Excellent Companies

One of the key ideas discussed here is the importance of having inspiring values in excellent companies. These values serve as guiding principles that inspire and motivate employees at all levels of the organization. Top-performing companies have well-defined values that are qualitative in nature and focus on broader concepts like customer service, inclusivity, and innovation. In contrast, less successful companies tend to have no coherent values or focus on quantifiable attributes such as earnings per share.

Innovation is a key value that is shared by all top companies, regardless of their industry. It is seen as a crucial element of business that requires a company-wide culture of innovation, where everyone is encouraged to be on the lookout for the "next big thing." This mindset helps the company achieve consistent growth and stay ahead of the competition.

Building on Core Strengths: The Secret to Profitable Diversification

As companies grow and become successful, the urge to diversify and expand into new markets and sectors can be tempting. However, diversification is not always a guaranteed path to profitability. The economist Michael Gort's systematic study of diversification in American businesses found no positive correlation between new product launches and actual profitability.

But successful companies have found a secret to profitable diversification: sticking to their core strengths. Richard Rumelt's study on diversification discovered that companies would only branch out when they could build on their existing strengths and competencies. By doing so, they achieved a 12.4 percent return on the money they spent, which is 30 percent more than companies that diversified haphazardly.

This principle of building on core strengths is exemplified by companies like Apple, which expanded its product range from computers to music players to phones, all while maintaining its expertise in technology and design. Another example is 3M, which has over 50,000 products, but each one of them relies on the company's signature coating and bonding technology.

From Boeing to Walmart, the dominant approach to diversification among top companies is one of sticking to their core strengths. By doing so, they are able to leverage their existing expertise, knowledge, and resources to create new products and services that are consistent with their central skills and strengths.

The key takeaway is that diversification can be profitable, but only when companies build on their core strengths. By doing so, they can reduce risk, leverage their existing expertise, and achieve greater returns on their investments. In short, diversification is not just about expanding into new markets and sectors, but about doing so strategically and intentionally.

Simplicity and Lean Staff: The Key to Success for Large Companies

As companies grow, they tend to become more complex, with larger departments and hierarchical structures that can slow down decision-making and hinder productivity. In response, many companies turn to matrix organizational structures, but this can create confusion among employees about who to report to.

Excellent companies, however, find a way to maintain simplicity and a lean staff by embracing stable, unchanging organizational structures with minimal administrative, managerial, and executive layers. They also focus on hiring the right people and keeping their employees well-trained and informed to ensure they can make independent decisions.

One such company is Johnson & Johnson, which has 150 independent divisions, each with its own "chair of the board." Despite being a $5 billion company, J&J has maintained simplicity by keeping the divisional structures and minimizing bureaucracy, allowing each division to control its own marketing, distribution, and research. This approach has led to better decision-making and increased efficiency while requiring fewer people.

In contrast, diversification can be a risky strategy, as it may not necessarily lead to profitability. Instead, successful companies only branch out when they can build on their existing strengths and competencies. 3M, for example, has over 50,000 products, but each one relies on the company's signature coating and bonding technology.

Book Details

  • Print length: 392 pages
  • Genre: Business, Nonfiction, Management

In Search of Excellence Chapters

Chapter 1 :Successful American Companies
Chapter 2:The Rational Model
Chapter 3:Man Waiting for Motivation
Chapter 4:Managing Ambiguity and Paradox
Chapter 5:A Bias For Action
Chapter 6:Close to the Customer
Chapter 7:Autonomy and Entrepreneurship
Chapter 8:Productivity Through People
Chapter 9:Hands-On, Value-Driven
Chapter 10:Stick to the Knitting
Chapter 11:Simple Form, Lean Staff
Chapter 12:Simultaneous Loose-Tight Properties

What is a good quote from In Search of Excellence?

Top Quote: “Many of the innovative companies got their best product ideas from customers. That comes from listening, intently and regularly.” (Meaning) - In Search of Excellence Quotes, Tom Peters and Robert H. Waterman Jr.

What do critics say?

Here's what one of the prominent reviewers had to say about the book: "One of those rare books on management that are both consistently thought-provoking and fun to read.” — Wall Street Journal

* The editor of this summary review made every effort to maintain information accuracy, including any published quotes, chapters, or takeaways. If you're interested in furthering your personal development, I invite you to check out my list of favorite personal development books page. On this page, you'll find a curated list of books that have personally impacted my life, each with a summary and key lessons.

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Chief Editor

Tal Gur is an author, founder, and impact-driven entrepreneur at heart. After trading his daily grind for a life of his own daring design, he spent a decade pursuing 100 major life goals around the globe. His journey and most recent book, The Art of Fully Living, has led him to found Elevate Society.

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