Customer Reviews

The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise

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A perspective on corporate growth and change which works through the need to maintain a simultaneous focus on three 'horizons' - today's business, emerging businesses and longer term options and the implications for strategy, management and structures.

As you would expect of a book out of the McKinsey stable, this is on an issue of importance to business, is well researched and analysed and very readable and well presented. As you would also expect, it is focused on large corporates, and on strategies for their business success, as measured by exceptional growth and returns to stockholders.

It provides one important perspective on the issue of corporate growth and development, to be compared with other perspectives.

There are obvious comparisons with Collins & Porras: 'Built to Last' both in the concern with continuing exceptional performance over an extended period and in the care taken to explain the research base from which the findings are derived. However, whereas Collins & Porras are concerned primarily with values and culture, Baghai et al are primarily interested in strategies for the selection, development and management of a portfolio of businesses and the implications of those strategies for structuring, staffing and operations.

The fundamental thesis is simple and can be stated in a few propositions:

The companies that have been successful in maintaining high rates of growth with superior profitability are those that have learnt to manage well to three different time horizons at the same time - today's business, the next generation of emerging businesses, and the longer term options out of which the next generation of businesses will arise.

In order to develop longer term options into 'core profit engines', a series of measured steps (concerned with finding ways of profitably building core capabilities and markets) are required, which the authors call 'stairways'. In the nature of things, not all stairways will lead to future core businesses, so a variety of initiatives need to be carried forward together. Management of the 'stairways' should receive significant senior management attention.

The skills and temperaments required to manage current business, to develop new business and to search out viable future options are widely different one from the other. The key to maximising the profitability of today's business is excellence of execution. Emerging businesses require business builders - the typical entrepreneurial temperament, while the identification of future options requires lateral thinkers and visionaries.

In consequence, the style of organisation and internal culture most appropriate to each of these foci are also different. Large corporates tend to find difficulty in encompassing these very different cultures. The authors discuss in some depth the resulting issues of internal culture, recruitment, structuring and transition, and their strategic management.

The strength of the book is that the authors identify a key issue in business success - the development and maintenance of a vigorous portfolio of businesses over the longer term - and work through the implications with clarity and thoroughness.

The cost of that approach is that other equally significant issues are assumed or left in the background. It is necessary to balance the valuable perspective offered with others that are also important. It is also necessary to be aware of the underpinning tacit assumptions - for example, the underlying metaphor of organisation adopted by the authors appears to me to be much nearer that of the organisation as a (money) machine, than that of the organisation as an organism. There is a marked contrast with the emphasis in, for example de Geus: 'The Living Company'. This is not to say that either is wrong, only that neither is complete.

It seems like a no-brainer that companies need to grow in order to survive or compete, and this book isn't interesting because it tells us what we already know. What's interesting about this book is that the authors do a wonderful job of taking substantial research, abstracting the trends, and rendering their findings into very clear and usable models and messages that can help most managers who are thinking about growth. It was particularly interesting for me, as I work as an ebusiness consultant for a large IT integrator and many of my customers are trying to start new staircases (as described in the book) via Internet channels and I can immediately see the applicability of Alchemy to what they're trying to do.

The book is a quick read (almost comically quick, given the price) and mercifully low on buzz words. Right now, I don't see the appendix as being particularly useful, but I may find it more so later. Annotating the bibliography would have added a lot of value.

The authors have focused on one type of real options - growth options - and written a useful book on the topic. They take a high-level strategy view of the topic and do not cover the actual pricing of growth options. However, such options represent the majority of the value of most technology and startup companies. As a result, focusing on growth options can provide useful insights for managers and break through some of the short-sighted management fads (such as Stern Stewart & Company's Economic Value Added (EVA) metric) which focus on short-term profits at the expense of long-term value creation.

This book is based on research on 30 companies in Asia, Australia, Europe, and North American, selected for exceptional sales and profit growth. The research findings reveal a three-phase pattern for growth which is analyzed and illustrated with cases. The pattern encompasses the embryonic, emergent, and mature phases of a business's life cycle. The underlying pattern is a continuous pipeline of business-building initiatives that focuses on three horizons: extending and defending the core business; building emerging businesses, and creating viable future opportunities. This examination of growth strategies proves highly enlightening. The combination of insights based on solid research yields a great book. The appendix profiles each of the firms the authors' studied. Recommended. Reviewed by Gerry Stern, founder, Stern & Associates, author of Stern's Sourcefinder: The Master Directory to HR and Business Management Information & Resources, Stern's CyberSpace SourceFinder, and Stern's Compensation and Benefits SourceFinder.

How to turn a booklet into a book --> use big print and add a huge appendix (about half the book). It took four authors to write this book?

Make a nice short read in the bookstore cafe but it won't last more than a cup or two.

Here's a chapter's worth - manage three growth time-horizons simultaneously. I just saved you a cup.

However, the content IS important and useful.

Although one should always be skeptical of consultant-authored business books, on occasion they combine academic thought with practical experience to generate real insight. This is one such book.

In addition to striking a chord with big company CEO's frightened of startups (by strange coincidence a lucrative market for McKinsey), the authors discuss a variation of corporate portfolio theory that emphasizes timing as a critical dimension. This provides for a useful mental exercise, although the discussion gets a bit light at times.

Think of it as the BCG matrix for the late 90's. A simple concept that can be powerful if applied correctly, or destructive if blindly followed.

"The Alchemy of Growth" is an easy read, full of examples involving companies and products every consumer knows about. The fundamental theory presented by the book - that business managers need to devote energy and resources today toward cultivating business on each of the "three horizons of growth" - is simple enough to understand easily, but is also extremely powerful. While the book seems targeted at the CEO of a large company, the concept can as easily apply to a small company or even an individual's plan for his or her own future. The book is surprisingly free of business school mumbo jumbo and can be read quickly by a busy person. I highly recommend it.

Sustained growth is the motivation of any profit-making organization. As the authors point out, few organizations achieve sustained growth. Most have really good years, and those can be followed by really poor years. The authors see most firms faltering some point in their history unable to sustain growth.

By building growth into a business plan, the authors explain a method that will call for practical growth and help to build an enduring enterprise. Regardless of the size of a business, by following the authors' advice of managing across three "horizons" at once, the company will grow successfully and, most importantly, sustain that growth.

These three horizons reflect the company's present, short-term future, and long-term future. One must be able to manage these three horizons effectively by:
· defending and growing core businesses
· building up new core businesses for the future
· planting the seeds that may become potential businesses for the long term.

The authors point out that managing all three of these is no easy task. There will be areas where the priorities and requirements for these three horizons will conflict. This book will help leaders manage through these conflicts.

They will also learn how to:

· overcome a company's inertia
· build momentum for and through growth
· sustain growth

From the management consulting firm that brought us In Search of Excellence here its latest contribution to the literature on business growth. Based on an worldwide Mckinsey research project, the book provides CEO's with a simple framework of understanding how businesses grow sustainably and easily applied metrics for understanding growths in different horizons. Another strength of the book lies in its emphasis on a differientated approach towards talent management in different horizons of growth. The challenge lies in maintaining growth in a company's core businesses while launching new ventures. As the book demonstrated, planning for growth is not formulaic but requires the nurturing of a pipeline of business opportunities

In my career I've been through eight Mergers and Acquisitions, and currently making my way through my ninth. I'm applying many of the tenets within this book to address the restructuring that comes with defining a company's strategic plan. The three tiered horizon model, and all the supporting information provided, is relevant today, providing an easy to understand framework for steering complex conversations, action planning, and some great considerations to restructuring an org chart as a company grows and matures. It also brings relevent information to light for getting legacy employees to think about how innovation and idea generation will help position a company for tomorrow.

A few of the examples and anecdotes in this book are now outdated. At the time of writing (1997-8) the authors positioned Enron as the ideal growth company. LOL today. Overlook Enron and you have a very insightful way of working through some throny issues that companies face when preparing for, or going through, a growth phase.

Many business books are good for the first 2-3 chapters. The Alchemy of Growth is a cover to cover read. My copy now has LOTS of margin notes. :)