LETTERS TO THE EDITOR
Alchemy Growth Partners Sydney
Moore responds: The idea that another stage exists on the journey from Horizon 3 to Horizon 1 is enlightening. The challenges Baghai points out revolve around the ability and willingness of a management team to participate in a fundamental change of corporate identity. Several companies have experienced transitions similar to Apple’s, including Intel (from memories to microprocessors), Nokia (from a diversified portfolio of businesses to an exclusive focus on wireless communications), and Kimberly-Clark (from pulp and paper to consumer products). In each case bold leadership was required to break and recast the mold. I can see how the inertia of an established reputation could be tough to overcome.
Managing Our Way to Economic Decline and Six Rules for Effective Forecasting Robert H. Hayes and William J. Abernathy’s article, “Managing Our Way to Economic Decline” (Best of HBR, July– August 2007), offers a landmark analysis of the root causes of America’s competitive weakness at the time it was first published, in 1980. Relating this piece to Paul Saffo’s article, “Six Rules for Effective Forecasting,” in the same issue is fascinating. Hayes and Abernathy support their arguments with several exhibits that highlight “our sorry decline.” If we extrapolate the trend line they depict, we
146 Harvard Business Review
1657 Nov07_Letters.indd 146
|
November 2007
The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present.
:[[Z X i^kZ
by Paul Saffo
P
EOPLE AT COCKTAIL PARTIES are always asking me for stock tips, and then they want to know how my predictions have turned out. Their requests reveal the common but fundamentally erroneous perception that forecasters make predictions. We don’t, of course: Prediction is possible only in a world in which events are preordained and no amount of action in the present can influence future outcomes. That world is the stuff of myth and superstition. The one we inhabit is quite different – little is certain, nothing is preordained, and what we do in the present affects how events unfold, often in significant, unexpected ways. The role of the forecaster in the real world is quite different from that of the mythical seer. Prediction is concerned
122 Harvard Business Review
MANAGING FOR THE LONG TERM
|
BEST OF HBR
|
|
July–August 2007
|
Marcos Chin
Mehrdad Baghai Managing Director
are bound to conclude that disaster is inevitable. Saffo points out, however, that the Six Rules for future does not unAccurate fold linearly. Instead, events occur in a sucForecasting cession of short-term S curves of growth and decline, often within a large longerterm curve. How these trends play out depends on wild cards that can affect the while, Japan and Europe, America’s course of events. The cathartic effect other greatest challenger, reached the of Hayes and Abernathy’s article itself end of their growth curves and began is a good example: A couple of years to stagnate – a situation from which after it was published, Thomas J. Peters they have barely begun to recover. and Robert H. Waterman, Jr.’s, book Today, the focus is on China and InIn Search of Excellence took the world dia, and the prevailing view seems to by storm, and the quality movement fi- be that their growth curves will trend nally gained traction in America. inexorably upward to the top rightToward the end of the 1980s, the Jap- hand corner of the chart. But that is anese prime minister commissioned a not guaranteed. When contemplating study of his country’s future in view of the future of the emerging economies the approaching new millennium. The we might keep in mind that Hayes and report’s main conclusion was that Japan Abernathy provide one still frame of a would remain the world’s second most picture, but Saffo leads us to consider powerful economy while the United the whole movie. States would rebound, thanks to an inBob Clarebrough nate competitive spirit that would drive Independent Consultant Americans to restructure their busiWeymouth, England nesses and regain their preeminent position in the world. And, indeed, that’s what happened. Perhaps the Japanese The Making of an Expert recognized that the U.S. had been on the declining slope of one S curve but In the article “The Making of an Expert” was more than capable of jumping into (July–August 2007), K. Anders Ericsthe growth phase of a new one. Mean- son, Michael J. Prietula, and Edward T. Cokely reinforce a belief in the value of experience. They rightly emphasize the importance of acquiring expertise and point out that leadership is not achieved in a day, but rather is the result of time, effort, strategy, and determination. Experts are not born virtuosos. They first need to establish their credentials Managing Our Way to Economic Decline and then move on to build relationships with the right stakeholders and acquire skills in their domains. They D need to bring value-added contribution to the organization and eventually create sustainable advantage through hbr.org
July–August 1980
by Robert H. Hayes and William J. Abernathy
Editor’s Note: This 1980 article, with its scathing and richly documented criticism of U.S. managers’ focus on short-term financial gain
at the expense of long-term competitiveness, sent shock waves through American business when it was first published. The inroads that European and Japanese companies have made into traditional U.S. industrial strong-
URING THE PAST SEVERAL YEARS, American business has experienced a marked deterioration of competitive vigor and a growing unease about its overall economic wellbeing. This decline in both health and confidence has been attributed by economists and business leaders to such factors as the rapacity of OPEC, deficiencies in government tax and monetary policies, and the proliferation of regulation. We find these explanations inadequate. They do not explain, for example, why the rate of productivity growth in America has declined both absolutely and relative to that in Europe and Japan. Nor do they explain why in many high-technology as well as mature industries America has lost
holds since then prove its prescience. Many of the problems raised by the authors have been addressed over the years, as Harvard Business School’s Robert H. Hayes notes in a sidebar written for this issue. But the original article’s call for self-examination and action is still relevant today, as U.S. companies face similar uncertainty and emerging competition – this time from China, India, and other developing economies.
138 Harvard Business Review
|
|
July–August 2007
|
Robert Meganck
Clearly, the three horizons are more than just a novel portfolio management framework. By connecting an organization’s growth businesses to today’s core businesses, they mark a vector that describes the likely evolution of that company. A CEO’s decisions about which businesses to build in Horizon 2, therefore, will turn out to be critical.
hbr.org
hbr.org
10/5/07 7:31:16 PM
thought and practice leadership. This is the path to achieving gurudom. In Asia, the traditional value on seniority and experience, which play a role in competence building, seems to be eroding. This is unfortunate. As the article illustrates clearly, there are no shortcuts to success. Aneeta Madhok Dean, Center for Human Resources Management
advancement to identify the aspects of their own performance that they must improve. In traditional domains of expertise with explicit measures of performance – such as chess, music, and sports – hopeful contenders can respect and learn from their more skilled colleagues and actively seek out the right deliberate practice activities for improving their performance.
S.P. Jain Center of Management Dubai
Executive Summaries Ericsson, Prietula, and Cokely respond: We appreciate Aneeta Madhok’s note and strongly agree that extensive practice and preparation are necessary to acquire superior professional performance. At the same time, Madhok’s appeal for restoring the appreciation of seniority and experience in businesses throughout Asia inspires comment. In our article, we certainly present considerable evidence corroborating the need for a long period of preparation, study, and deliberate practice. However, we also demonstrate that seniority and extensive experience are often weakly – or even negatively – related to objective measures of performance across a variety of professional domains. As a consequence, we recommend that businesses develop and adopt direct, objective measures of reproducibly superior performance rather than rely on soft indicators such as seniority and experience. We believe that a focus on measurable aspects of expert performance not only aligns with Madhok’s primary goal but also increases professional respect and motivation for learning. For example, without valid measurement, aspiring managers can only trust that experienced, senior managers are indeed performing at higher levels and thus deserve the greater responsibilities and compensation they are afforded. Valid measurement replaces that faith with tangible evidence. Furthermore, measurement allows candidates for
1657 Nov07_Letters.indd 147
I have been a longtime reader and am an avid fan of the professional product that is HBR. One thing that seems a bit contradictory to the magazine’s approach, however, is the position of the Executive Summaries in the back of each issue. In almost any formal proposal, presentation, or correspondence, an Executive Summary is presented up front. I assume the current placement is to leverage the reprint business, which is certainly an important consideration. But a reader busy with day-to-day work sometimes doesn’t have time to review the entire edition. Though the Table of Contents is helpful, I would prefer to scan the Executive Summaries and decide how best to proceed. At the end of the day, Executive Summaries just get lost in the back. I think that could use some review. Mark Kramer Strategic Business Technologist Network Appliance St. Augustine, Florida
The editors respond: As magazine editors, we aim to set the stage for readers with the Table of Contents and the Editor’s Letter in the front of Harvard Business Review. We then offer the Executive Summaries as a detailed guide in the back. Though many readers already use the Executive Summaries in their current location, you’re right: We need to make sure that all readers are aware of them. Thanks for the feedback.
9/28/07 7:30:33 PM
