In Search of Excellence Summary: Thomas Peters and Robert Waterman

In Search of Excellence Summary

In Search of Excellence Summary provides a free book summary, key takeaways, review, top quotes, author biography and other critical points of Thomas J. Peters and Robert H. Waterman Jr.’s famous book. This is a business classic. It offers models for eight paths to excellence. And, all of them based on common sense and simplicity. So, let’s walk the road.

Authors Robert Waterman and Tom Peters performed research from 1979-1980. This book In Search of Excellence shows the findings of that study. They explored the traits common to the top firms in America. The authors picked a sample of 43 firms from 6 key industries. Then, they reviewed the companies’ practice closely. They did this research two decades ago. But, their findings offer a model of 8 principles for excellence which still hold true. These principles may look like common sense. But, this study was the first to find these traits systematically. There’re many stories to validate the key points in the book. We recommend this business classic to everyone doing business.

“The most dis­cour­ag­ing fact of big corporate life is the loss of what got them big in the first place: innovation.”

This Summary Will Help You Learn

  • Which eight principles describe America’s best-run firms; and
  • How to use these principles.

Take-Aways

  • McKinsey’s 7-S Framework includes staff, shared values, style, systems, structure, strategy, and skills.
  • People are not rational every time. Stress the significance of that “messy stuff.”
  • Form “a bias for action” by enabling an extensive network of open, informal communication.
  • Technology or cost doesn’t drive top firms. Instead, consumer needs do.
  • Support entrepreneurship and independence. Bear and encourage failure.
  • Respect your people. Give them high-level training.
  • Excellent firms are value-driven. They have a highly-defined set of guiding principles.
  • Be lean. Keep your processes and rules as simple as possible.
  • Focus on your core business.
  • Give maximum autonomy when setting your company’s central direction.

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In Search of Excellence Summary

McKinsey’s 7-S Framework 

Peters and Waterman started their research when US business was facing substantial competitive pressures. It was because of rising global competition, especially from Japan. They wanted to identify what made great US firms so great. With their findings, the author wanted to offer techniques other firms could use. They started their study by reviewing 7-key factors. The authors made it into a matrix. Shared values were in the mid, while other factors surrounded it. This was the McKinsey’s 7-S Framework:

  • Shared values
  • Style
  • Systems
  • Skills
  • Staff
  • Structure
  • Strategy

They used this model to focus on what constituted management excellence. Peters and Waterman began with 75 firms. Later on, they narrowed the sample down to 43.

So, how did the authors pick their models of excellence? They started with a list of firms. These included companies which everyone in the business area believed to be excellent. They included firms from 6 main industries. Then, the set the minimum standard for excellence. These were:

  1. The firm reported growth over a two-decade period.
  2. It was at present in excellent financial health.
  3. The firm had a history of innovation in launching new goods/services.
  4. It responded quickly and successfully to changing environment and markets.

Finally, they came up with 43 such firms. Some of these companies are still popular two-decades later. For example, Disney, Hewlett-Packard, Exxon, Johnson & Johnson, Boeing, McDonald’s, etc.

Emphasize that “Messy Human Stuff”

These great firms showed one main discovery. That is, sound management doesn’t follow the old norm of “hard-headed rationality.” Such rules lead the teaching of business at B-schools. They focus on finding “logical, detached explanation” for every decision. Excellent firms are also great at getting the numbers and examining them. But, they also stress the significance of “soft skills.” These include making workers feel like winners or customer devotion. They leave room for the “messy human stuff.” Such firms know that people are not logical always. And that, emotions and feelings drive people. The 8-principles in top firms on great management center people.

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Some basic understanding about using rationality form basis of these principles. Rationality might drive the business engine, but it has some pitfalls too. Especially, if you depend on it extremely. These likely demerits include an extra judgmental and negative attitude. Besides, there’s also resistance to experiment and make mistakes. Plus, there’s more support for inflexibility. Not only this, such a mindset discourages informality. 

In contrast, the factors which motivate people to emerge from non-rational brain traits. For example, people like thinking of themselves as winners. Even if they’re not as high as they believe to be. So, many firms recognize employees by giving awards.

People find it simpler to learn with simple processes. Hence, you must’ve just a few guidelines, rather than a whole list. Positivity is much better at encouraging people than negativity. The eight principles of top firms are people-centric, positive reinforcers. 

“We wonder whether it is possible to be an excellent company without clarity on values and without having the right sort of values.”

First Principle: “A Bias for Action”

The top firms have a bias for action. They’re always ready to react fast and effectively. They use many short-term task forces that small teams of people. These task forces take steps in a short span. This is the opposite of working with a bigger team that works for months. Such task forces cut across the old structural barriers in the firm. They conjoin to respond to a specific project. These groups leverage from their member’s critical skills.

Some firms like Walt Disney promote communication through a “first name” policy. Others, like Delta and IBM, have an “open door” policy. A practice named “chunking” also encourages such action approach. Chunking means breaking things up to make the work process smoother. It can take many forms. For example, forming task forces, creating quality circles, setting project centers, etc. It involves using the task force as a building block within the company. These forces often structure and follow up fast. They don’t need to give too much documentation.

Willingness to Innovate and Process Simplification

Great firms’ readiness to innovate also encourages action. They’re ready to take risks on new things and make mistakes. A sort of playfulness is linked with such innovation. For example, at HP, product designers keep models of their new products on their desks. This is so that everyone can try them out. If the experiments are failures, the firms end their development. This process is similar to playing poker. You know when to fold and when to hold. Experiments which work are developed further. Simplifying processes also promotes such bias to action. This simplification includes narrowing plans down to just a few targets. Plus, not keeping lengthy memos. This builds a clear action plan.

Second Principle: “Close to the Customer”

Great firms have another critical principle. They’re in close touch with their consumers. These firms are dedicated to giving customers a reliable and quality service. Customer orientation is their main driving force and not technology. Or being a low-cost provider. For example, IBM became a market leader due to its commitment to service. And not only due to its technology. 

Commitment to customers means taking steps which mightn’t make financial sense in short-run. But, in the long-term, it pays off regarding consumer loyalty. For example, Frito spent thousands of dollars to restock a store. Even if it only needed a few packs of potato chips. At times, its salesmen would assist in cleaning a store after an accident. Such acts of going the extra mile added to the firm’s success.

These companies also stress the significance of placing consumer interests first on their staff. They train their team to build such an orientation. There’re many examples of consumer focus. For example, McDonald’s dedication to cleanliness. Or, HP’s focus on meeting quality objectives in its MBO program.

“Along with bigness comes complexity, un­for­tu­nately. And most big companies respond to complexity in kind, by designing complex systems and structures.”

For many firms, such emphasis also meant getting their niche. Like smart technology manipulation, better segmentation, pricing skills, etc. Technology and cost often don’t drive great firms. Instead, they’re quality driven, encouraged by service. Being close to the consumer means having excellent listening skills. It’s about understanding what the customers want. This way, customer input results in future development and innovation. Hence, most of the actual innovation comes from the customers.

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Third Principle: “Autonomy and Entrepreneurship”

To create entrepreneurship and freedom, great firms motivate people to be innovative. They encourage them to be champions at exploring and creating. These companies want their managers to encourage the development of new ideas. For example, a firm may recognize a product champion who’s often a loner but has faith in a product. Great firms acknowledge that such champions are leaders. Hence, they give support to help pioneers prosper. Plus, such firms can tolerate failures. They understand that experiments can’t always work. And that people need to make many attempts and go through failures. For example, through this approach, 3M came up with over 50,000 products. And, this is how they launch 100 major products every year.

Fourth Principle: “Productivity Through People”

Great firms respect their people. This includes giving training, setting SMART expectations and providing freedom to take initiatives. Diverse firms show such people-orientation in diverse ways. Delta encourages the “family feeling.” HP practices “managing by wandering around.” They both build a great culture in which people can prosper. This approach may result in hoopla and celebration. But, all of this works well. People feel good and stay motivated. 

Fifth Principle: “Hands-On, Value-Driven”

Great firms are value-driven and practical. They know what they stand for. Plus, they take the value creation process very seriously. There’s a clearly-defined list of guiding principles. All employees are expected to walk and talk about these values. These firms weave many legends and stories to embed the values in their culture. But, they confine the content of these beliefs to just some core values. 

Sixth Principle: “Stick to the Knitting”

The great firms focus on their core business in which they’re great. For example, 3M focuses on goods which use its coating and bonding know-how. It aligns itself with firms which expand in related areas. In contrast, firms which diversify too much are less successful. Researchers like Richard Rumelt validate that firms which focus on their core do better. 

Seventh Principle: “Simple Form, Lean Staff”

Such firms adopt the principle of “lean staff, simple structure.” They try to have simple processes and rule. Management layers are as few as possible. Such simplicity allows them to be more flexible in responding to changes. 

“Nothing is wrong with financial measures, mind you. Can’t live without them. But they’re far from the whole picture.”

Eighth Principle: “Simultaneous Loose-Tight Properties”

Lastly, these excellent firms follow a mix of individual freedom and central direction. They do have strict controls. But, they’re also open and flexible to change. The essence is that the firm allows co-existence of overall direction and individual freedom.

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In Search of Excellence Review

In the book, there is the discussion regarding America’s best-run firms, in the book of Robert Waterman and Tom Peters there is a focus on the McKinsey’s 7-S Framework that how a company can effectively focus on the management if the company. Regarding the framework, there is the analysis of the “staff, shared values, style, systems, structure, strategy, and skills”. The organization needs to give the abnormal state preparing, and there is the need to center around the arrangement of controlling standards in the center business for the advantage. It is known that are stress activities can be a hurdle in the company and the employee or company can face issues if they are facing stress. Moreover, it is known that communication needs to be effectively concerned in the company so that employees can understand the goals in an effective way. Furthermore, it is noticed that technology or cost cannot help the company to grow, or cannot drive top firms.

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With the assessment of consumer needs, the company can grow; the company also needs to support entrepreneurship so that there could be new ideas and new talent in the company. The company needs to provide high-level training, and there is the need to focus on the set of guiding principles in the core business for the benefit. It is realized that is pressure exercises can be an obstacle in the organization and worker or organization can confront issues if they are facing pressure. Also, it is realized that correspondence should be adequately worried in the organization with the goal that workers can comprehend the objectives in a compelling way. With the appraisal of customer needs, the organization can develop; the organization likewise needs to help business enterprise so that there could be new thoughts and new ability in the organization.

In Search of Excellence Summary: Thomas Peters and Robert Waterman

In Search of Excellence Quotes

“The problem is not that companies ought not to plan. They damn well should plan. The problem is that planning becomes an end in itself.”

“There is little place in the rationalist world for internal competition. A company is not supposed to compete with itself. But throughout the excellent companies research, we saw example after example of that phenomenon.”

“We all think we’re tops. We’re exuberantly, wildly irrational about ourselves. And that has sweeping im­pli­ca­tions for organizing. Yet most or­ga­ni­za­tions, we find, take a negative view of their people.”

“The small group is the most visible of the chunking devices. Small groups are, quite simply, the basic or­ga­ni­za­tional building blocks of excellent companies.”

“Despite all the lip service given to the market orientation these days, the customer is either ignored or considered a bloody nuisance.”

“The most dis­cour­ag­ing fact of big corporate life is the loss of what got them big in the first place: innovation.”

“We wonder whether it is possible to be an excellent company without clarity on values and without having the right sort of values.”

“Along with bigness comes complexity, un­for­tu­nately. And most big companies respond to complexity in kind, by designing complex systems and structures.”

“Nothing is wrong with financial measures, mind you. Can’t live without them. But they’re far from the whole picture.”

About the Authors 

Thomas J. Peters is a speaker, professional agitator, and author. His famous works include The Circle of InnovationThe Little BIG Things, and Re-Imagine!Thriving on ChaosLiberation Management Robert H. Waterman Jr. is a director at a leading consulting firm. He’s also the writer of many books, including The Renewal Factor and What America Does Right.

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In Search of Excellence: Lessons from America's Best-Run Companies
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In Search of Excellence: Lessons from America's Best-Run Companies
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  • Publisher: HarperBusiness
  • Edition no. 0 (02/07/2006)
  • Paperback: 400 pages
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In Search of Excellence: Lessons from America's Best-Run Companies
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In Search of Excellence: Lessons from America's Best-Run Companies
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  • New York: Harper & Row, 1982
  • Hardcover
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