Why is Costco so Successful

Why is Costco so Successful

Costco established the warehouse club retail business model, which relies on bargaining power, a no-frills shopping atmosphere, supply-chain efficiencies, and customer-friendly typical markups on branded products. Now, Costco is transforming its no-fuss wholesale business into a global brand.

Membership Fees

Costco has become a significant shopping destination for consumers across all income levels, as well as small businesses. This is foremost because Costco derives approximately 75% of its operating profits from membership fees.

Costco derives nearly all of its profits from membership fees, allowing the firm to sell many of its products at little to no margin, and sometimes at a loss. These loss-leading capacities are reinforced by the firm’s deployment of gasoline to drive store traffic. When blended with membership renewal rates above 85%, these characteristics give Costco a defensible competitive advantage.

Succeeding Overseas

There is little room for more household penetration because Costco already has more than 70 million members; historical sales and earnings growth forecasts may not be justifiable.

In 1985, Costco opened its first warehouse outside the U.S. in Canada. Currently, Costco has 187 locations in Canada, Mexico, the U.K., Japan, Taiwan, Korea, and Australia. Overseas sales more than doubled from 2008 to 2013. While other traditional American retailers grapple to stay competitive in international markets, Costco’s no-fuss warehouse-shopping model is a new experience for international consumers. Remarkably, people in Asian markets are acclimatizing well to shopping in bulk—although it means fastening pallets of toilet paper and enormous teddy bears to the back of their motorbikes as they whizz away from the Costco parking lot.

A Good Living Wage for Employees

Costco has long been known for paying higher wages and offering more liberal benefits than its rivals have—and generating greater sales per square foot, too.

Unlike most retailers, Costco does not see raising employee salaries and growing profits as opposing objectives. While the average hourly wage for a full-time worker at Wal-Mart is $12.81, Costco pays its workers an average of nearly $21. Costco sees the return on this investment in its low employee turnover rates: Just 10% in 2013 and 7% for employees who have worked at least one year. High employee retention permits Costco to reduce considerably on training costs.

Superior Customer Experience

  • A guarantee of quality. Their model promises fundamentally “100% satisfaction” and they mean it. Their return policy stands out among the best in many retail categories and they are exceptionally relaxed about fulfilling it. Costco will take back an empty package of any food, if you are not satisfied, and give you your money back.
  • A extraordinary selection of products that is a bit more refined than most but at a pretty good price. A typical Costco store only carries about 5,000 items, and there is a bunch of those items that rotate regularly.
  • The “treasure hunt” model. The store does have a layout, but within that layout, everything is rotated frequently to keep you looking. This would never work at Walmart or Target —because you’d get frustrated. However, at Costco, it’s part of the fun to “treasure hunt” a new find. They have a very wide selection of very different merchandise types which offers an unique convenience level as a shopper.

CEO Jim Sinegal once said, “If that stuff doesn’t really turn you on, then you’re in the wrong business.” Costco caps margins at a sacrosanct 14% on branded goods, pushes buyers to find creative ways to lower prices and add value, and gets store managers to crank up their efficiency efforts. Under Sinegal’s leadership, Costco has gained a reputation for bargain prices and surprise designer goods.

Southwest Airlines’ Brilliant Marketing

Southwest Airlines' Brilliant Marketing

More than anything, Southwest Airlines deserves credit for its exceptional marketing strategy. For decades, Southwest Airlines has convinced American consumers that it have the lowest fares, which is hardly ever the case. Southwest’s average fares have outpaced the industry by 12% since 2009.

Nevertheless, I hear repeatedly “I need a cheap last minute ticket; I suppose I’ll try Southwest Airlines.” Being able to create that perception among consumers is invaluable.

Southwest Airlines began service in June 1971 with the objective of stimulating demand through low fares and, in forty years, has become the largest domestic airline in the United States. Southwest Airlines used to be cheaper when they first started out but currently many of their flights cost more than the other airlines. Many attentive customers do not consider Southwest Airlines a discount airline anymore.

Southwest Airlines gained a low-cost advantage by flying one aircraft type on a point-to-point network to less congested secondary airports. This enabled the airline to maximize aircraft utilization and employee productivity. It’s simple fare structure allowed customers to purchase and alter their travel plans more easily than with legacy carriers. Another distinctive competitive advantage that Southwest enjoyed for years was a hedged fuel position that was the envy of the industry. Over the last decade, Southwest has lost this particular cost advantage, and has generated results that have more closely mimicked those of legacy carriers.

Southwest Airlines No Longer Low-Cost Airline

Moreover, Southwest is no longer the lowest-cost provider that it used to be, even not including fuel costs, as measured by costs per available seat mile excluding fuel expenses. Competition and surging fuel prices proved that Southwest’s low-cost advantages were merely temporary. Over the years, competitors like Alaska Airlines, Spirit Airlines, Allegiant, and JetBlue have entered the fray and mimicked this strategy.

Over the last decade, three distinctive business models have emerged in the US airline industry: (1) global network airlines, (2) hybrid airlines, and (3) ultra low-cost airlines. Southwest Airlines has purposely avoided identifying itself with a specific strategy. Instead, the airline has chosen to persist amplifying its maverick low-fare image.

Southwest Airlines revealed a modern new look

Southwest Airlines revealed a modern new look and logo on Monday. Gary Kelly, Southwest Airlines CEO said, “our collective heartbeat is stronger and healthier than ever, and that’s because of the warmth, the compassion, and the smiles of our People … The Heart emblazoned on our aircraft, and within our new look, symbolizes our commitment that we’ll remain true to our core values as we set our sights on the future.”

A Comprehensive List of Books Authored by Management Guru Peter F. Drucker

Peter Ferdinand Drucker, the father of management theory

Famed management guru Peter Ferdinand Drucker spent his life contemplating and writing about how business interests, politics, and human nature interact at companies, non-profits, and governments all over the world. His consultations had an almost legendary reputation in business circles.

Peter Drucker wrote influential works about management since the 1940s. He has written about 30 books, and from 1975 to 1995 he was an editorial columnist for the Wall Street Journal.

Books by Peter F. Drucker

“The End of Economic Man” (1939)

'The End of Economic Man', Book by Peter Drucker The End of Economic Man is Drucker’s first full-length book. It is a diagnostic study of the totalitarian state and the first book to study the origins of totalitarianism. He describes the reasons for the rise of fascism and the failures of established institutions that led to its emergence. Drucker develops an understanding of the dynamics of the totalitarian society and helps us to understand the causes of totalitarianism in order to prevent such a catastrophe in the future. Developing social, religious, economic, and political institutions that function effectively will prevent the emergence of circumstances that frequently encourage the totalitarian state.
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“The Future of Industrial Man” (1942)

'The Future of Industrial Man', Book by Peter Drucker Drucker describes the requirements for a functioning society by developing a social theory of society in general and of the industrial society in particular. In The Future of Industrial Man, Peter Drucker presents the requirements for any society for it to be both legitimate and functioning. Such a society must give status and function to the individual. The book addresses the question: “How can individual freedom are preserved in an industrial society in light of the dominance of managerial power and the corporation?” Written before the entrance of the U.S. into World War II, it is optimistic about post-World War II Europe and reaffirms its hopes and values through a time of despair. The book dared to ask, “What do we hope for the postwar world?”
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“Concept of the Corporation” (1946)

'Concept of the Corporation', Book by Peter Drucker This classic book is the first to describe and analyze the structure, policies, and practices of a large corporation, General Motors. The book looks upon a “business” as an “organization,” that is, as a social structure that brings together human beings in order to satisfy economic needs and the wants of a community. It establishes the “organization” as a distinct entity, and management of an organization as a legitimate subject of inquiry. The book represents a link between Drucker’s first two books on society and his subsequent writings on management. Detailed information is provided regarding such management practices as decentralization, pricing, and the roles of profits and of labor unions. Drucker looks at General Motors’ managerial organization and attempts to understand what makes the company work so effectively. Certain questions are addressed, such as: “What are the company’s core principles, and how do they contribute to the success of the organization?” The principles of organization and management at General Motors described in this book became models for organizations worldwide. The book addresses issues that go beyond the borders of the business corporation, and considers the “corporate state” itself.
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“The New Society – The Anatomy of Industrial Order” (1950)

'The New Society - The Anatomy of Industrial Order', Book by Peter Drucker In The New Society, Peter Drucker extends his previous works The Future of Industrial Man and Concept of the Corporation into a systematic, organized analysis of the industrial society that emerged out of World War II. He analyzes large business enterprises, governments, labor unions, and the place of the individual within the social context of these institutions. Following publication of the of The New Society, George G. Higgins wrote in Commonweal, “Drucker has analyzed, as brilliantly as any modern writer, the problems of industrial relations in the individual company or ‘enterprise.’ He is thoroughly at home in economics, political science, industrial psychology, and industrial sociology, and has succeeded admirably in harmonizing the findings of all four disciplines and applying them meaningfully to the practical problems of the ‘enterprise.’ Drucker believes that the interests of the worker, management, and corporation are reconcilable with society. He advances the idea of “the plant community” in which workers are encouraged to take on more responsibility and act like “managers.” He questions whether unions can survive in their present form if the worker is encouraged to act as a manager.
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“The Practice of Management” (1954)

'The Practice of Management', Book by Peter Drucker This classic is the first book to define management as a practice and a discipline, thus establishing Drucker as the founder of the discipline of modern management. Management has been practiced for centuries, but this book systematically defines management as a discipline that can be taught and learned. It provides a systematic guide for practicing managers who want to improve their effectiveness and productivity. It presents Management by Objectives as a genuine philosophy of management that integrates the interests of the corporation with those of the managers and contributors to an organization. Illustrations come from such companies as Ford, GE, Sears, Roebuck & Co., GM, IBM, and AT&T.
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“America’s Next Twenty Years” (1957)

'America's Next Twenty Years', Book by Peter Drucker In this collection of essays, Peter Drucker discusses the issues that he believes will be significant in America, including the coming labor shortage, automation, significant wealth in the hands of a few individuals, college education, American politics, and perhaps most significantly, the growing disparity between the “haves” and the “have nots.” In these essays, Drucker identifies the major events that “have already happened” that will “determine the future.” “Identifying the future that has already happened” is a major theme of Drucker’s many books and essays.
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“Landmarks of Tomorrow” (1957)

'Landmarks of Tomorrow', Book by Peter Drucker Landmarks of Tomorrow identifies “the future that has already happened” in three major areas of human life and experience. The first part of the book treats the philosophical shift from a Cartesian universe of mechanical cause to a new universe of pattern, purpose, and configuration. Drucker discusses the need to organize men of knowledge and of high skill for joint effort, and performance as a key component of this change. The second part of the book sketches four realities that challenge the people of the free world: an educated society, economic development, the decline of the effectiveness of government, and the collapse of Eastern culture. The final section of the book is concerned with the spiritual reality of human existence. These are seen as basic elements in late-twentieth-century society. In his new introduction, Peter Drucker revisits the main findings of Landmarks of Tomorrow and assesses their validity in relation to today’s concerns.
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“Managing for Results” (1964)

'Managing for Results', Book by Peter Drucker This book focuses upon economic performance as the specific function and contribution of business and the reason for its existence. The effective business, Peter Drucker observes, focuses on opportunities rather than problems. How this focus is achieved in order to make the organization prosper and grow is the subject of this companion to his classic, The Practice of Management. The earlier book was chiefly concerned with how management functions as a discipline and practice, this volume shows what the executive decision-maker must do to move his enterprise forward. One of the notable accomplishments of this book is its combining of specific economic analysis with the entrepreneurial force in business prosperity. For though it discusses “what to do” more than Drucker’s previous works, the book stresses the qualitative aspect of enterprise: every successful business requires a goal and spirit all its own. Managing for Results was the first book to describe what is now widely called “business strategy” and to identify what are now called an organization’s “core competencies.”
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“The Effective Executive” (1966)

'The Effective Executive', Book by Peter Drucker The Effective Executive is a landmark book that develops the specific practices of the executive that lead to effectiveness. It is based on observations of effective executives in business and government. Drucker starts by reminding executives that the measure of effectiveness is the ability to “get the right things done.” This involves five practices: (1) managing one’s time, (2) focusing on contribution rather than problems, (3) making strengths productive, (4) establishing priorities, and (5) making effective decisions. A major portion of the book is devoted to the process of making effective decisions and the criteria for effective decisions. Numerous examples are provided of executive effectiveness. The book concludes by emphasizing that effectiveness can be learned and must be learned.
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“The Age of Discontinuity” (1968)

'The Age of Discontinuity', Book by Peter Drucker Peter Drucker focuses with great clarity and perception on the forces of change that are transforming the economic landscape and creating tomorrow’s society. He discerns four major areas of discontinuity underlying contemporary social and cultural reality: (I) the explosion of new technologies resulting in major new industries, (2) the change from an international to a world economy, (3) a new sociopolitical reality of pluralistic institutions that poses drastic political, philosophical, and spiritual challenges, and (4) the new universe of knowledge work based on mass education along with its implications. The Age of Discontinuity is a fascinating and important blueprint for shaping a future already very much with us.
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“Men, Ideas, and Politics” (1970)

'Men, Ideas, and Politics', Book by Peter Drucker Technology, Management, and Society presents an overview of the nature of modern technology and its relationships with science, engineering, and religion. The social and political forces, which increasingly impinge on technological development, are analyzed within the framework of broad institutional change. Scholars and students troubled by society’s growing reliance on technological solutions to complex social and political problems will welcome Peter Drucker’s critical perspective.
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“Technology, Management, and Society” (1971)

'Technology, Management, and Society', Book by Peter Drucker This book is a compilation of thirteen essays addressing the issues of society “people, politics, and thought. Included are essays on Henry Ford, Japanese management, and effective presidents. Two articles in particular show aspects of Drucker’s thinking that are especially important. One is an essay on “The Unfashionable Kierkegaard,” which encourages the development of the spiritual dimension of humankind. The other is on the political philosophy of John C. Calhoun, describing the basic principles of lsowo0 America’s pluralism and how they shape government policies and programs.
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“Management: Tasks, Responsibilities, Practices” (1973)

'Management: Tasks, Responsibilities, Practices', Book by Peter Drucker This book is a compendium of Drucker on management. It updates and expands upon The Practice of Management. It is an essential reference book for executives. Management is an organized body of knowledge consisting of managerial tasks, managerial work, managerial tools, managerial responsibilities, and the role of top management. According to Peter Drucker, “This book tries to equip the manager with the understanding, the thinking, the knowledge, and the skills for today’s and also tomorrow’s jobs.” This management classic has been developed and tested during more than thirty years of management teaching in universities, executive programs, seminars, and through the author’s close work with managers as a consultant for large and small businesses, government agencies, hospitals, and schools.
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“The Pension Fund Revolution” (1976)

'The Pension Fund Revolution', Book by Peter Drucker In this book, Drucker describes how institutional investors, especially pension funds, have become the controlling owners of America’s large companies, and the country’s “capitalists.” He explores how ownership has become highly concentrated in the hands of large institutional investors, and that through the pension funds, “ownership of the means of production” has become “socialized” without becoming “nationalized.” Another theme of this book is the aging of America. Drucker points to the new challenges this trend will pose with respect to health care, pensions, and social security’s place in the American economy and society, and how, altogether, American politics would increasingly become dominated by middle-class issues and with the values of elderly people. In the new epilogue, Drucker discusses how the increasing dominance of pension funds represents one of the most startling power shifts in economic history, and examines their present-day impact.
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“Adventures of a Bystander” (1978)

'Adventures of a Bystander', Book by Peter Drucker Adventures of a Bystander is Drucker’s collection of autobiographical stories and vignettes, in which he paints a portrait of his life, and of the larger historical realities of his time. Drucker conveys his life story “from his early teen years in Vienna through the interwar years in Europe, the New Deal era, World War II, and the postwar period in America” … “through intimate profiles of a host of fascinating people he’s known through the years. Along with bankers and courtesans, artists, aristocrats, prophets, and empire builders, we meet members of Drucker’s own family and close circle of friends, among them such prominent figures as Sigmund Freud, Henry Luce, Alfred Sloan, John Lewis, and Buckminster Fuller. Shedding light on a turbulent and important era, Adventures of a Bystander also reflects Peter Drucker himself as a man of imaginative sympathy and enormous interest in people, ideas, and history.
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“Managing in Turbulent Times” (1980)

'Managing in Turbulent Times', Book by Peter Drucker This important and timely book concerns the immediate future of business, society, and the economy. We are, says Drucker, entering a new economic era with new trends, new markets, a global economy, new technologies, and new institutions. How will managers and management deal with the turbulence created by these new realities? This book, as Drucker explains it, “is concerned with action, rather than understanding, with decisions, rather than analysis.” It deals with the strategies needed to adapt to change and to turn rapid changes into opportunities, to turn the threat of change into productive and profitable action that contributes positively to our society, the economy, and the individual. An organization must be structured to withstand a blow caused by environmental turbulence.
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“Toward the Next Economics” (1981)

'Toward the Next Economics', Book by Peter Drucker These essays cover a wide-ranging collection of topics on business, management, economics, and society. They are all concerned with what Drucker calls “social ecology” and especially with institutions. These essays reflect ‘the future that has already happened.”, The essays reflect Drucker’s belief that, in the decade of the 1970s, there were genuine changes in population structure and dynamics, changes in the role of institutions, changes in the relation between sciences and society, and changes in the fundamental theories about economics and society, long considered as truths. The essays are international in scope.
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“The Changing World of the Executive” (1982)

'The Changing World of the Executive', Book by Peter Drucker These essays from the Wall Street Journal explore a wide variety of topics. They deal with changes in the workforce “its jobs, its expectations” with the power relationships of a “society of employees,” and with changes in technology and in the world economy. They discuss the problems and challenges facing major institutions, including business enterprises, schools, hospitals, and government agencies. They look anew at the tasks and work of executives, at their performance and its measurement, and at executive compensation. However diverse the topics, these chapters have one common theme, the changing world of the executive “changing rapidly within the organization, changing rapidly with respect to the visions, aspirations, and even characteristics of employees, customers, and constituents, changing outside the organization, as well, economically, technologically, socially, politically.
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“Innovation and Entrepreneurship” (1985)

'Innovation and Entrepreneurship', Book by Peter Drucker The first book to present innovation and entrepreneurship as a purposeful and systematic discipline. It explains and analyzes the challenges and opportunities presented by the emergence of the entrepreneurial economy in business and public service institutions. It is a major contribution to functioning management, organization, and economy. The book is divided into three main sections: (1) The Practice of Innovation, (2) The Practice of Entrepreneurship, and (3) Entrepreneurial Strategies. Drucker presents innovation and entrepreneurship as both practice and discipline, choosing to focus on the actions of the entrepreneur as opposed to entrepreneurial psychology and temperament. All organizations, including public-service institutions, must become entrepreneurial to survive and prosper in a market economy. The book provides a description of entrepreneurial policies and windows of opportunity for developing innovative practices in both emerging and well-established organizations.
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“The Frontiers of Management” (1986)

'The Frontiers of Management', Book by Peter Drucker This book is a collection of thirty-five previously published articles and essays, twenty-five of which have appeared on the editorial page of the Wall Street Journal. Featuring a new introduction, Drucker forecasts the business trends of what was then the next millennium. The Frontiers of Management is a clear, direct, lively, and comprehensible examination of global trends and management practices. There are chapters dealing with the world economy, hostile takeovers, and the unexpected problems of success. Jobs, younger people, and career gridlock are also covered. Throughout this book, Drucker stresses the importance of forethought and of realizing that “change is opportunity” in every branch of executive decision-making.
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“The New Realities” (1989)

'The New Realities', Book by Peter Drucker This book is about the “next century.” Its thesis is that the “next century” is already here, indeed that we are well advanced into it. In this book, Drucker writes about the “social superstructure” politics and government, society, economy and economics, social organization, and the new knowledge society. He describes the limits of government and dangers of “charisma” in leadership. He identifies the future organization as being information-based. While this book is not “futurism,” it attempts to define the concerns, the issues, and the controversies that will be realities for years to come. Drucker focuses on what to do today in contemplation of tomorrow. Within self-imposed limitations, he attempts to set the agenda on how to deal with some of the toughest problems we are facing today that have been created by the successes of the past.
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“Managing the Non-Profit Organization” (1990)

'Managing the Non-Profit Organization', Book by Peter Drucker The service, or nonprofit, sector of our society is growing rapidly (with more than 8 million employees and more than 80 million volunteers), creating a major need for guidelines and expert advice on how to lead and manage these organizations effectively. This book is an application of Drucker’s perspective on management to nonprofit organizations of all kinds. He gives examples and explanations of mission, leadership, resources, marketing, goals, people development, decision-making, and much more. Included are interviews with nine experts that address key issues in the nonprofit sector.
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“Managing for the Future” (1992)

'Managing for the Future', Book by Peter Drucker Bringing together the most exciting of Drucker’s many recent essays on economics, business practices, managing for change, and the evolving shape of the modern corporation, Managing for the Future offers important insights and lessons for anyone trying to stay ahead of today’s unremitting competition. Drucker’s universe is a constantly expanding cosmos composed of four regions in which he demonstrates mastery: (1) the economic forces affecting our lives and livelihoods, (2) today’s changing workforce and workplaces, (3) the newest management concepts and practices, and (4) the shape of the organization, including the corporation, as it evolves and responds to ever-increasing tasks and responsibilities. Each of this book’s chapters explores a business or corporate or “people” problem, and Drucker shows how to solve it or use it as an opportunity for change.
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“The Ecological Vision” (1993)

'The Ecological Vision', Book by Peter Drucker The thirty-one essays in this volume were written over a period of more than forty years. These essays range over a wide array of disciplines and subject matter. Yet they all have in common that they are “Essays in Social Ecology” and deal with the man-made environment. They all, in one way or another, deal with the interaction between individual and community. In addition, they try to look upon the economy, upon technology, upon art, as dimensions of social experience and as expressions of social values. The last essay in this collection, The Unfashionable Kierkegaard, was written as an affirmation of the existential, the spiritual, and the individual dimension of the Creature. It was written by Drucker to assert that society is not enough “not even for society. It was written to affirm hope. This is an important and perceptive volume of essays.
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“Post-Capitalist Society” (1993)

'Post-Capitalist Society', Book by Peter Drucker In Post-Capitalist Society, Peter Drucker describes how every few hundred years a sharp transformation has taken place and greatly affected society “its worldview, its basic values, its business and economics, and its social and political structure. According to Drucker, we are right in the middle of another time of radical change, from the Age of Capitalism and the Nation-State to a Knowledge Society and a Society of Organizations. The primary resource in the post-capitalist society will be knowledge, and the leading social groups will be “knowledge workers.” Looking backward and forward, Drucker discusses the Industrial Revolution, the Productivity Revolution, the Management Revolution, and the governance of corporations. He explains the new functions of organizations, the economics of knowledge, and productivity as a social and economic priority. He covers the transformation from Nation-State to Megastate, the new pluralism of political systems, and the needed turnaround in government. Finally, Drucker details the knowledge issues and the role and use of knowledge in the post-capitalist society. Divided into three parts “Society, Polity, and Knowledge” Post-Capitalist Society provides a searching look into the future as well as a vital analysis of the past, focusing on the challenges of the present transition period and how, if we can understand and respond to them, we can create a new future.
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“Managing in a Time of Great Change” (1995)

'Managing in a Time of Great Change', Book by Peter Drucker This book compiles essays written by Drucker from 1991 to 1994 and published in the Harvard Business Review and the Wall Street Journal. All of these essays are about change: changes in the economy, society, business, and in organizations in general. Drucker’s advice on how managers should adjust to these tectonic shifts centers on the rise of the now-ubiquitous knowledge worker and the global economy. In this book, Drucker illuminates the business challenges confronting us today. He examines current management trends and whether they really work, the implications for business in the reinvention of the government, and the shifting balance of power between management and labor.
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“Drucker on Asia” (1995) with Isao Nakauchi

'Drucker on Asia', Book by Peter Drucker Drucker on Asia is the result of an extensive dialogue between two of the world’s leading business figures, Peter F. Drucker and Isao Nakauchi. Their dialogue considers the changes occurring in the economic world today and identifies the challenges that free markets and free enterprises now face, with specific reference to China and Japan. What do these changes mean to Japan? What does Japan have to do in order to achieve a “third economic miracle”? What do these changes mean to society, the individual company, the individual professional and executive? These are the questions that Drucker and Nakauchi address in their brilliant insight into the future economic role of Asia.
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“Peter Drucker on the Profession of Management” (1996)

'Peter Drucker on the Profession of Management', Book by Peter Drucker This is a significant collection of Peter Drucker’s landmark articles from the Harvard Business Review. Drucker seeks out, identifies, and examines the most important issues confronting managers, from corporate strategy to management style to social change. This volume provides a rare opportunity to trace the evolution of great shifts in our workplaces, and to understand more clearly the role of managers in the ongoing effort to balance change with continuity, the latter a recurring theme in Drucker’s writings. These are strategically presented here to address two unifying themes: the first examines the “Manager’s Responsibilities,” while the second investigates “The Executive’s World.” Containing an important interview with Drucker on “The Post-Capitalist Executive,” as well as a preface by Drucker himself, the volume is edited by Nan Stone, longtime editor of the Harvard Business Review.
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“Management Challenges for the 21st Century” (1998)

'Management Challenges for the 21st Century', Book by Peter Drucker In this compilation of essays culled from published magazine articles and a lengthy essay appearing in The Economist in November 2001, and interviews during the period of 1996 to 2002, Drucker has expertly anticipated our ever-changing business society and ever-expanding management roles. In this book, Drucker identifies the reality of the ‘Next Society,” which has been shaped by three major trends: the decline of the young portion of the population, the decline of manufacturing, and the transformation of the workforce (together with the social impact of the Information Revolution). Drucker also asserts that e-commerce and e-learning are to the Information Revolution what the railroad was to the Industrial Revolution, and thus, an information society is developing. Drucker speaks of the importance of the social sector (that is, nongovernmental and nonprofit organizations), because NPOs can create what we now need: communities for citizens and especially for highly educated knowledge-workers, who increasingly dominate developed societies.
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“Managing in the Next Society” (1999)

'Managing in the Next Society', Book by Peter Drucker In his first major book since The Post-Capitalist Society, Drucker discusses the new paradigms of management “how they have changed and will continue to change our basic assumptions about the practices and principles of management. Drucker analyzes the new realities of strategy, shows how to be a leader in periods of change, and explains the “New Information Revolution,” discussing the information an executive needs and the information an executive owes. He also examines knowledge-worker productivity, and shows that changes in the basic attitude of individuals and organizations, as well as structural changes in work itself, are needed for increased productivity. Finally, Drucker addresses the ultimate challenge of managing oneself while meeting the demands on the individual during a longer working life and in an ever-changing workplace.
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“The Daily Drucker” (2002)

'The Daily Drucker', Book by Peter Drucker Revered management thinker Peter F. Drucker is our trusted guide in this thoughtful, day-by-day companion that offers his penetrating and practical wisdom. Amid the multiple pressures of our daily work lives, The Daily Drucker provides the inspiration and advice to meet the many challenges we face. With his trademark clarity, vision, and humanity, Drucker sets out his ideas on a broad swath of key topics, from time management, to innovation, to outsourcing, providing useful insights for each day of the year. These 366 daily readings have been harvested from Drucker’s lifetime of work. At the bottom of each page, the reader will find an action point that spells out exactly how to put Drucker’s ideas into practice. It is as if the wisest and most action-oriented management consultant in the world is in the room, offering his timeless gems of advice. The Daily Drucker is for anyone who seeks to understand and put to use Drucker’s powerful words and ideas.
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“The Effective Executive in Action” (2004)

'The Effective Executive in Action', Book by Peter Drucker The Effective Executive in Action is a journal based on Peter F. Drucker’s classic and preeminent work on management and effectiveness “The Effective Executive“. Here Drucker and Maciariello provide executives, managers, and knowledge workers with a guide to effective action “the central theme of Drucker’s work. The authors take more than one hundred readings from Drucker’s classic work, update them, and provide provocative questions to ponder and actions to take in order to improve your own work. Also included in this journal is a space for you to record your thoughts for later review and reflection. “The Effective Executive in Action” will teach you how to be a better leader and how to lead according to the five main pillars of Drucker’s leadership philosophy.
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“Managing Oneself” (2007)

'Managing Oneself', Book by Peter Drucker We live in an age of unprecedented opportunity: with ambition, drive, and talent, you can rise to the top of your chosen profession regardless of where you started out. However, with opportunity comes responsibility. Companies today are not managing their knowledge workers’ careers. Instead, you must be your own chief executive officer. That means it is up to you to carve out your place in the world and know when to change course. In addition, it is up to you to keep yourself engaged and productive during a career that may span some 50 years. In Managing Oneself, Peter Drucker explains how to do it. The keys: Cultivate a deep understanding of yourself by identifying your most valuable strengths and most dangerous weaknesses. Articulate how you learn and work with others and what your most deeply held values are. Describe the type of work environment where you can make the greatest contribution. Only when you operate with a combination of your strengths and self-knowledge can you achieve true and lasting excellence. Managing Oneself identifies the probing questions you need to ask to gain the insights essential for taking charge of your career.
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Anthologies by Peter Drucker

“The Essential Drucker” (2001)

The Essential Drucker', Anthology by Peter Drucker The Essential Drucker offers, in Drucker’s words, “a coherent and fairly comprehensive ‘Introduction to Management’ and gives an overview of my management work and thus answers the question I’ve been asked again and again: ‘Which writings is Essential?’ The book contains twenty-six selections on management in the organization, management and the individual, and management in society. It covers the basic principles and concerns of management and its problems, challenges, and opportunities, giving managers, executives, and professionals the tools to perform the tasks that the economy and society of today and tomorrow will demand of them.
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“A Functioning Society” (2003)

A Functioning Society', Anthology by Peter Drucker In these essays, Drucker has brought together selections from his vast writings on community, society, and the political structure. Drucker’s primary concern is with a functioning society in which the individual has status and function. Parts I and II identify the institutions that could recreate community, the collapse of which produced totalitarianism in Europe. These selections were written during World War II. Part III deals with the limits of governmental competence in the social and economic realm. This section is concerned with the differences between big government and effective government.
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Novels by Peter Drucker

“The Last of All Possible Worlds” (1982)

The Last of All Possible Worlds', Novel by Peter Drucker This novel occurs in the world of upper-class European society of the transitional age just before World War I. At the center of this novel are the lives of four distinguished Europeans who reach their later years around the turn-of-the-century.

  • The aristocratic Polish Prince Sobieski, a wealthy landowner, businessperson, and the Austro-Hungarian diplomat to Great Britain
  • McGregor Hinton, a mathematics historian and an immensely successful banker, who faces an ethical crisis and reviews his life, his poor beginnings, his noble secret marriage to a prostitute after she bore his deformed child, and his brushes with aristocracy.
  • A wealthy Jewish banker Julius von Mosenthal is planning a major restructuring of a bank while ruminating on the future meeting with partners Hinton and Sobieski
  • Baroness Rafaela Wald-Reifnitz—descended from the purest Sephardic Jews, painted by two great artists, devoted to music, in love with her problematic husband Arthur.
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“The Temptation to Do Good” (1984)

The Temptation to Do Good', Novel by Peter Drucker “The Temptation to Do Good”, like “The Last of all Possible Worlds”, is outstanding and brilliant. They are very important additions to Peter Drucker’s outstanding and comprehensive picture of management thinking and practice. The Temptation to Do Good features Father Heinz Zimmerman, the President of a Catholic university. Father Zimmerman faces all of the leadership challenges common to nonprofit CEOs: budgets, donors, staff conflicts, board members, and ethical issues. If you’d add to the mix student and faculty and their expectations, you’ll come to appreciate the sense and purpose of an organization more.
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Creating a Winning Corporate Strategy: Jack Welch’s 5 Key Strategy Questions

During his adored tenure as Chairman and CEO of General Electric, Jack Welch created a strategy development framework that was implemented across the vast organization. managers across General Electric used the winning corporate strategy model to gauge their businesses and make decisions about where to go next.

'Winning' by Jack Welch, Suzy Welch (ISBN 0060753943) Jack Welch advocated that strategy is not something that should be left to the management and strategy consultants. He called strategy “a living, breathing, totally dynamic game.” In his book “Winning” (with wife Suzy Welch,) Jack Welch declares the key to success is to “pick a general direction and implement like hell.”

For Jack Welch, strategy was a “killer idea” or a “winning value proposition” that can provide any organization a general direction for durable competitive advantage. He described strategy as a living, breathing story about how your organization is going to win. In this pursuit, strategy should be a tool, that is agile and can change over time, but it is not arbitrary or indiscriminate.

Jack Welch's Questions for Strategy Planning

Jack Welch’s Questions for Strategy Planning

'HBR's 10 Must Reads on Strategy ' by Harvard Business Review (ISBN 1422157989) Conceptualizing and developing a successful business strategy lies not in having all the right answers, but rather in asking the right questions. Creating a winning corporate strategy is the process of asking (and answering) the question of what needs to change and why? Jack Welch proposes a rapid, practical questioning procedure to come up with a winning corporate strategy by probing for answers to five key questions:

  1. What does the competitive playing field look like?
  2. What have our competitors been up to lately?
  3. What have we done lately?
  4. What future events or possible changes keep us up at night with worry?
  5. And, given all that, what’s our winning move?

Theme 1: What the Playing Field Looks Like Now

  • Who are the competitors in this business, large and small, new and old?
  • Who has what share, globally and in each market? Where do we fit in?
  • What are the characteristics of this business? Is it commodity or high value or somewhere in between? Is it long cycle or short? Where is it on the growth curve? What are the drivers of profitability?
  • What are the strengths and weaknesses of each competitor? How good are its products? How much does each one spend on R&D? How big is each sales force? How performance-driven is each culture?
  • Who are this business’s main customers, and how do they buy?

Theme 2: What the Competition Has Been Up To

  • What has each competitor done in the past year to change the playing field?
  • Has anyone introduced game-changing new products, new technologies, or a new distribution channel?
  • Are there any new entrants, and what have they been up to in the past year?

Theme 3: What You’ve Been Up To

  • What have you done in the past year to change the competitive playing field?
  • Have you bought a company, introduced a new product, stolen a competitor’s key salesperson, or licensed a new technology from a startup?
  • Have you lost any competitive advantages that you once had—a great salesperson, a special product, a proprietary technology?

Theme 4: What’s Around the Corner?

  • What scares you most in the year ahead—what one or two things could a competitor do to nail you?
  • What new products or technologies could your competitors launch that might change the game?
  • What M&A deals would knock you off your feet?

Theme 5: What’s Your Winning Move?

  • What can you do to change the playing field—is it an acquisition, a new product, globalization?
  • What can you do to make customers stick to you more than ever before and more than to anyone else?

Strategy Questions for Global Competition for Resources and Market-Access

Strategy Questions for Global Competition for Resources and Market-Access

'Playing to Win: How Strategy Really Works ' by A.G. Lafley, Roger L. Martin (ISBN 142218739X) In the context of global completion, both for resources and access to markets, leaders need to identify factors and attributes that will shape the future of globalization. Such a framework should provide guidance to those who will make, influence, and predict decisions about the global economic structure and develop a game plan to succeed in an increasingly global environment. Here are Jack Welch’s five strategy questions modified for the global nature of business.

  1. What does your global competition look like over the next several years?
  2. What have your competitors done in the last three years to upset these global dynamics?
  3. What have you done to them in the last three years to affect those dynamics?
  4. How might your competitor attack you in the future?
  5. What are your plans to leapfrog the competition?

Applying a strategy-development framework can help companies focus their activities and goals in ways that are more efficient and lead to a more powerful approach to growing their business. The framework helps analyze the dynamics of the current line of attack, reveal the forces currently influencing the global competition. The framework works by, in part, by recognizing that the strategy must not only be understood by everyone in the organization, but must be acted on by everyone.

Recommended Reading: Best Books for Strategy Planning

Recommended Reading: Best Books on and by Jack Welch

Strategic Success in Joint Venture Management

Joint Venture Management

A joint venture represents the prospect of two businesses that believe that they can collaborate to accomplish marketplace goals that neither could achieve single-handedly. Joint venture partnerships are essential to how multinational companies can best achieve their global business objectives and improve top-line and bottom-line growths. Alliances and joint ventures provide many benefits, including filling gaps in capabilities or facilitating entry to new markets. Through carefully structured joint venture partnerships and international alliances, businesses can combine mutual strengths and capabilities to gain the benefits of scale that they would be unable to realize without help.

Each company must strive to be exceptional in how it develops, manages, operates, and evaluates joint venture partnerships. Joint ventures frequently go wrong due to neglect of the first stage (development of strategy) and operating implementation. A frequent and detailed joint venture assessment can determine if the company’s partnerships are being operated and managed in a way that provide real value to end customers and the joint venture partners and to determine ongoing improvements to ensure that the joint venture represents a rapid and very effective mechanism for strategic growth.

Doing Business in China

Statements of Joint Venture Management Excellence

  1. The JV partners and the joint venture recognize the needs of the end-customers in order to present tangible business value.
  2. The joint venture partnership is structured and leveraged to generate multiple sources of economic value for each JV partner.
  3. JV partners pay particular attention to the ownership and governance arrangement of the joint venture.
  4. Business objectives, strategies, and processes of the joint venture partnership are aligned with the objectives, strategies, and processes of the respective JV partners.
  5. The support mechanisms and processes of each JV partner that are significant to the success of the joint venture partnership are documented, synchronized and controlled to generate measurable results.
  6. The JV partners set priorities, convey the underlying principle behind them, advocate them even when the outcomes are undefined, and provide the support that the management of the joint venture needs to stand behind those choices as well.
  7. Business and functional leaders of each JV partner offer best practices and capable processes, tools and people to sustain the joint venture partnership.
  8. The joint venture partnership is managed using best practices, processes, tools, and quality standards as established by the JV partners.
  9. Confidential information received or created by the joint venture partnership is defined and maintained in a confined environment.
  10. Regular and consistent communication and flow of information occur within the joint venture partnership and between all parties at numerous levels.
  11. Representatives of the JV partners engage in shared activities that develop mutual trust.
  12. The parties openly define the roles of the JV partners, the Board and operating management of the joint venture partnership, and then they authorize the management and operate according to the agreed definitions.
  13. Managements of cross-border joint venture partnerships consist of a diverse mix of local managers and locally capable expatriates. Companies that survive the experience of doing business in other countries can learn from this experience and develop a distinctive competitive advantage that will serve them well when entering comparable challenging markets around the world.
  14. The right environment within the joint venture partnership is established based on reciprocated trust and shared respect. By understanding the changing nature of business and the potential pitfalls of joint venture partnerships, businesses can collaborate stronger alliances that benefit both JV partners.
  15. JV partnerships operate in conformity with all governmental laws, regulations, environmental standards, and safety standards and with the codes of conduct of the JV partners.
  16. JV partners are treated as customers and favored suppliers. Profitable exploratory actions hold more meaningful lessons for companies than failures do.
  17. Joint venture partnerships use shared problem-solving tools as reciprocally agreed by the partners. Lean manufacturing and other reliable management principles are used to identify and deliver process improvements.

Businesses pursuing joint ventures would do well to contemplate on the lessons of other companies that have engaged in joint ventures to improve the chances of success.

The Very Best of GS Elevator Gossip’s Tweets

Goldman Sachs Logo If you think twitter is just a waste of time, think again. One could argue that twitter is first and foremost just noise and clutter—merely, one more time drain. Twitter can actually be good for something beyond revealing, in less than 140 characters, your whereabouts, posting unintelligent commentary, or which of your friends needs to get out more.

Consider @GSElevator, GS Elevator Gossip, a twitter account. Obscuring the thin line between the hysterically preposterous and extremely realistic, this twitter claims to dish the dirt on the happenings in the elevators at Goldman Sachs’s offices. “The first few were either conversations that I have overheard directly, or that have been told to me by colleagues,” he claims in this interview with NYT’s Deal Book column.

Here’s a sampling of some of the very best of GS Elevator Gossip’s tweets:

  • The most and least successful people all share the same trait: thinking they’re never wrong.
  • Don’t worry, some people are their own punishment in life.
  • #1: A lot of people who start their own business do it because they’re unemployable.
    #2: Yup. Look at Meredith Whitney.
  • Most people don’t understand that God cast them as extras in this movie.
  • You’ll never feel special if 100% of your friends are in the top 1%.
  • Handshakes and tie knots. I don’t have time for someone who can’t master those basic skills.
  • Relationships are like a seesaw. If one of you gets too bored or too fat, the fun is over.
  • The difference between us and everybody else is that, even in a bad year, we still make the playoffs.
  • Listening is part waiting for your turn to speak and part reminding yourself to change facial expressions every 10 seconds.
  • Only idiots get bored when we’ve all got handheld devices containing infinite knowledge at our fingertips.
  • Before people are allowed to opine about Syria, they should have to locate it on a map.
  • Too many people are smart enough to be angry, but not smart enough to be successful.
  • 'What Would Machiavelli Do? The Ends Justify the Meanness ' by Stanley Bing (ISBN 0066620104) Let’s be honest. There’s no way your guess is as good as mine.
  • Don’t apologize for being late with a Starbucks latte in your hand.
  • Most celebrities barely have high school diplomas so who gives a shit what they think on substantive issues.
  • And sometimes, people who don’t say much, don’t say much for a reason.
  • It’s okay to trade the possibility of your 80s and 90s for more guaranteed fun in your 20s and 30s.
  • 98% of people making comments about Nelson Mandela on social media would fail a history quiz on Nelson Mandela.
  • I never said I was better than anyone, just more successful.
  • When I hear, “Got a minute?” I know I’m about to lose a half hour of my life that I can never get back.
  • I never give money to homeless people. I can’t reward failure in good conscience.
  • I don’t even remember how I managed to ignore my wife at dinner before the Blackberry era.
  • Checking your phone after someone else pulls out their phone is the yawn of our generation.
  • Date women outside your social set. You’ll be surprised.
  • In life, as in sports, the boos always come from the cheap seats.
  • 'The Dilbert Principle: A Cubicle's-Eye View of Bosses, Meetings, Management Fads & Other Workplace Afflictions' by Scott Adams (ISBN 0887308589) It’s not the lie that bothers me. It’s the insult to my intelligence that I find offensive.
  • Do 50 push-ups, sit-ups, and dips before you shower each morning.
  • Some of the best moments in life are the ones you can’t tell anyone about.
  • Being spotted in economy class must be like having your parents visit you at boarding school in a shitty rental car.
  • Pretty women who are unaccompanied want you to talk to them.
  • For people who believe everything happens for a reason, that reason is that they’re idiots who make shitty decisions.
  • Act like you’ve been there before. It doesn’t matter if it’s in the end zone at the Super Bowl or on a private plane.
  • You shouldn’t retire until your money starts making more money than you made in your best year.
  • Money might not buy happiness, but I’ll take my chances!
  • I start every cell conversation with “my phone’s about to die” so they don’t waste my time.
  • I doubt alcohol kills more people than it creates.
  • There are only 2 paths to happiness in life. Stupidity or exceptional wealth.
  • If life’s a game, money is how you keep score.
  • 'Crazy Bosses' by Stanley Bing (ISBN 0060731575) Clearly the NSA doesn’t monitor Facebook. That’s where all the experts are solving this Government standoff.
  • Black Friday is the Special Olympics of Capitalism.
  • People who always fly business class don’t post photos of themselves flying business class.
  • Skirt #1: I can always tell a banker within the first 2 minutes of meeting him in a bar… because he tells me.
  • Feminists are just ugly underachievers who need an excuse for their failures.
  • It’s too bad stupidity isn’t painful.
  • Flowers and an apology are a lot easier than actually changing.
  • If she expects the person you are 20% of the time, 100% of the time, then she doesn’t want you.
  • There are no feminists when the ship hits an iceberg.
  • You can never awaken a man who Is pretending to be asleep.
  • Bribery, corruption… It’s the cost of doing business in emerging markets. As Mao said, “no fish can live in pure water.”
  • Stop talking about where you went to college.
  • I don’t care if any one comes to my funeral. It’s not like I’ll be there.
  • '21 Dirty Tricks at Work: How to Beat the Game of Office Politics' by Mike Phipps, Colin Gautrey (ISBN 1841126578) Too many people still answer the phone like they don’t know who’s calling.
  • If you abstain from smoking, drinking, and using drugs, you don’t actually live longer. It just seems longer.
  • #1: “The only reason I have a home phone is so I can find my cell phone.”
    #2: “Our maid does that.”
  • If you brag about starting at the bottom and making it to the top, you are probably still closer to the bottom.
  • The fact that most people are too stupid to know how dumb they really are is the fabric holding our society together.
  • The difference between petting and hitting a dog is it’s tolerance for pain. Same goes for 1st year analysts.
  • The Cheesecake Factory looks like a restaurant poor people think rich people might eat at.
  • I’d rather be me now, than have been the quarterback in high school.
  • If you love something, set it free. If it comes back, it tried to do better, but decided to just settle with you.
  • Don’t confuse friends, work friends, and friends of convenience.
  • Talent hits a target no one else can hit; genius hits a target no one else can see.
  • Getting an idea around is as important as getting an idea.
  • If riding the bus doesn’t incentivize you to improve your station in life, nothing will.
  • 'Throwing the Elephant: Zen and the Art of Managing Up' by Stanley Bing (ISBN 0060934220) The lottery is just a way of taxing poor people who don’t know math.
  • In sensitivity training, they say we should avoid sports analogies bc they’re sexist… Which seems even more sexist.
  • It’s sweet how my wife thinks the silent treatment is a punishment for me.
  • Getting rich isn’t hard. Any hot girl with questionable morals can do it.
  • Work hard. Eat right. Exercise. Don’t drink too much. And only buy what you can afford. It’s not rocket science.
  • Guys who mime golf swings in the office never break 100 on the course.
  • One of the biggest problems with todays society is that we’ve run out of colonies to send our undesirables to.
  • I wish I loved anything as much as I hate almost everything.
  • Truly intelligent people don’t feel compelled to talk about their IQ. In fact, I don’t even know what mine is.
  • #1: “A year from now, he’ll be the guy that starts off every sentence with “When I was at Goldman Sachs …””
    #2: “I hate those people.”
  • “Just be yourself” is good advice to probably 5% of people.
  • Blacking out is just your brain clearing it’s browser history.
  • If you can’t dazzle them with brilliance, baffle them with bullshit.
  • Remember, “rules are for the obedience of fools and the guidance of wise men.”
  • 'How to Lie with Statistics' by Darrell Huff (ISBN 0393310728) Skirt #1: “It really hurts my feelings when an ugly guy hits on me.”
  • When you tell a story, all I can think about is how much shorter it should be.
  • Right now is the oldest you’ve ever been & the youngest you’ll ever be again.
  • If you can only be good at one thing, be good at lying… because if you’re good at lying, you’re good at everything.
  • Most people wouldn’t even be the main character in a movie about their own lives.
  • My favorite part of dinner with my fiance is when she goes to the bathroom and I can check my Blackberry.
  • I say “keep the change” purely for my own convenience.

Recommended Reading on the Farcical and Factual World of Work

Sam Walton and Frugality at Wal-Mart

Sam Walton Homespun Frugality

Sam Walton, the iconic founder of Wal-Mart, loved retailing and pursued it with boundless energy. He was famously frugal and devoted to the concept of beating merchandise prices down as part of the trademark “everyday lower prices” promise to customers. Walton once wrote, “A lot of what goes on these days with high-flying companies and these overpaid CEOs, who’re really just looting from the top and aren’t watching out for anybody but themselves, really upsets me. It’s one of the main things wrong with American business today.”

Despite being America’s richest man, Sam Walton flew first class only once in his life on a flight from South America to Africa. Wal-Mart did not have a corporate jet until the retailing giant was approaching $40 billion in sales. Walton’s “corporate car” consisted of a red pick-up truck. Bernie Marcus, the co-founder of Home Depot, once recalled having lunch with Sam Walton, “I hopped into Sam’s red pick-up truck. No air-conditioning. Seats stained by coffee. And by the time I go to the restaurant, my shirt was soaked through and through. And that was Sam Walton—no airs, no pomposity.”

Wal-Mart's Small-town Roots

Under the leadership of Sam Walton, Wal-Mart stuck to its small-town roots. “Every time Wal-Mart spends one dollar foolishly, it comes out of our customers’ pockets,” Walton preached wherever he went. Some particulars on how Sam Walton’s homespun frugality is still ingrained in Wal-Mart’s culture:

  • As part of corporate policy, Wal-Mart employees are required to be thrifty as well. They were required to sleep two to a room in properties of Holiday Inn, Ramada Inn, Days Inn, and other economy hotel brands. They are encouraged to eat in family restaurants.
  • At a 2007 convention of 250 CEOs of suppliers, Wal-Mart’s third CEO Lee Scott famously raised a pen he had picked up from the Embassy Suites hosting the conference. He declared that Wal-Mart asked its business travelers to bring pens and notepads from their hotel rooms (yes, with the hotels’ logos) back to their offices and use them as office supplies. With thousands of business trips, the Wal-Mart home office in Bentonville probably accumulated thousands of dozens of pens.
  • On business or purchasing trips to New York City, Wal-Mart employees would avoid taking cabs, and instead walk or take subway wherever possible.

Such corporate-instilled policies to drive frugality across the Wal-Mart organization were more about instilling in its employees the miserly, no-waste, keep-costs-down attitude than about saving, for instance, $10,000 or more on the cost of office pens every year. Wal-Mart aimed to limit purchasing overhead expenses to 1 percent of their purchases.

Recommended Reading on Sam Walton and Wal-Mart

Management Guru Tom Peters on Benchmarking

Management Guru Tom Peters

To grow, companies need to escape of the vicious cycle of competitive benchmarking, replication, imitation that’s so much in vogue today. A company cannot simply be remarkable by following some other remarkable business.

Here is a classic video of Management Guru Tom Peters discussing the pointless exercise of benchmarking:

I hate Benchmarking! Benchmarking is Stupid! Why is it stupid? Because we pick the current industry leader and then we launch a five year program, the goal of which is to be as good as whoever was best five years ago, five years from now. Which to me is not an Olympian aspiration.

Clearly, there is no tangible benefit from attempting to imitate another business that has excelled at something. If a business pursues the leading benchmark, the company will forever be a follower. In addition, the uniqueness of the product or service or process will no longer be as unique once many achieve it.

Successful leaders don’t seek to learn from the “best in class” in their field. They seek to learn from companies outside their field as a way to innovate.

Did you know that AOL Missed an Opportunity to Acquire 20% Stake in Amazon.com?

Opportunity knocks but once. Opportunity offers no benefit to a business that is not prepared to see it, seize it, and use it to gain competitive advantage and financial success. Few companies have shunned more long-term opportunities in the pursuit of myopic strategies than AOL as illustrated by it’s failure to acquire a 20% stake in Amazon.com for half a million dollars!

Before Amazon became a powerful online retailer, AOL had an opportunity to become its most important partner.

AOL America Online For an investment of $500,000, Amazon.com founder and CEO Jeff Bezos offered AOL the opportunity to have Amazon be AOL’s exclusive retailer of books. According to the terms of the offer, AOL would split the revenues from sales of books to AOL members. Further, AOL would have an option to acquire a 20 percent stake in Amazon.com.

That same quarter, Barnes and Noble offered AOL $14 million yearly to be AOL’s exclusive partner in the book category without any prospects for revenue sharing and ownership.

Barnes and Noble’s deal would amount to $14 million of advertising revenue for AOL, while Amazon.com’s offer would amount to a $500,000 investment.

In the lookout for short-term gains, AOL chose the deal from Barnes and Noble. Thus AOL lost a chance at owning a 20 percent share of a company that pursued highly competitive businesses: first books, then electronics, then … you name it—anything retail, to become a retailing giant with an organizational culture obsessed with today’s customer.

'The Business of Happiness: 6 Secrets to Extraordinary Success in Life and Work' by Ted Leonsis with John Buckley (ISBN 1596981148) Source: Ted Leonsis in “The Business of Happiness: 6 Secrets to Extraordinary Success in Life and Work.” Ted Leonsis is the owner of the Washington Capitals and former group president and vice-chairman of AOL. When a plane that Ted Leonsis was on was preparing for an imminent crash landing, Ted he realized he might die unfulfilled and made a promise with God that if he would survive the crash landing, he would improve his life, give back, and pursue happiness. The result of Ted’s efforts are chronicled in this book. The six tenets of happiness identified by Ted Leonsis in his biographical “The Business of Happiness” are (1) life list, (2) multiple communities of interest, (3) finding outlets for self-expression, (4) gratitude, (5) giving back, and (6) higher calling. The core message is that business successes or financial accomplishments don’t necessarily bring happiness, but happiness can bring about business success and financial achievements.

The Worst Business Decision Ever (Hint: Xerox)

What crosses your mind when you think of an archetype of failing to recognize enormous business opportunities and renouncing innovations?

Xerox: The Worst Business Decision Ever

Xerox PARC, now an independent but wholly-owned subsidiary of Xerox, is celebrated for its pioneering technology inventions. It produced the first computer to use the desktop metaphor and mouse-driven graphical user interface (GUI) to let users interact with computers and software. They failed to capitalize on the huge opportunity. Someone else commercialized a large portion of Xerox’s ideas.

Xerox PARC invented the idea of icons, windows-based interfaces and dialogue boxes, point-and-click interfaces, local area networks, WYSIWYG (what you see is what you get) text editor and many other technological innovations that are at present part of the very underpinning of the personal computer industry. Years later, Xerox’s management even acknowledged, “whole companies have been built on inventions born at PARC.”

Xerox Palo Alto Research Center (PARC)

The fundamental flaw lies in Xerox’s strategy. Xerox’s leadership was preoccupied with determining ways to protect its mainstay, the copier business, from impending competition from Japanese companies. Xerox decided that it was a copier company and let go of the business opportunities in its technological invocations, even if PARC’s innovations had significant potential in the future of nascent personal computer industry. Steve Job’s innovation, the Apple Macintosh, borrowed from the work of PARC and created the first successful commercial computer with a graphical user interface.

The other choice that killed a great business opportunity was the decision by IBM that it was a computer company, not a software company. That made possible the rise of Bill Gates’ Microsoft Corporation, which went on to dominate the world of operating systems and applications software.