Customer Reviews

Let Go To Grow: Escaping the Commodity Trap

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So what do you do when your main business offering is in danger of becoming a commodity item? Do you desperately cling to ever-shrinking profit margins in hopes of a turnaround, or do you take a radically different approach and open things up? Those questions and answers are discussed in a new book called Let Go To Grow - Escaping The Commodity Trap by Linda S. Sanford and Dave Taylor. Lots of food for thought here...

Contents: Grow To Build Profits, Not Just Revenue; Commodity Markets Defined; It's All About Components; Creating Business Components; Integrate Your Business Components End-To-End; Expand Your Growth Space; Liberate Your Cost Structures; From Vision To Results - The Leadership Agenda; Achieving Measurable Productivity Improvements; Practical Implementation Of The Component Business Model; Gaining The Collaborative Edge - Building The Creative Company For The Creative Economy; Endnotes; Index

With the globalization of today's business environment, it's a strong likelihood that your business offerings over time will drift (or run) to becoming a commodity. The margins will shrink along with your rate of growth. It's at that point that companies either flourish or stagnate. Sanford and Taylor make the case that by opening up your business to the use of components, as well as allowing your business to become a component in the business of others, you can create a value web that causes you and others to build whole new businesses in unique ways that were not part of the "original" plan created by holding on tight. They use examples like Li & Fung, a player in the apparel industry who can do everything from design to delivery. As a result, companies like J. C. Penny can partner with them and dramatically improve turnover, delivery, and inventory levels, all at lower cost. That allows J. C. Penny to concentrate on retailing. Another example is UPS. Rather than looking at themselves as just a commodity player in the package delivery space, they turned their business into components that other businesses could plug into. Because of that, UPS becomes a critical partner for many companies looking to better manage logistics, inventory, repair, etc. It's this "letting go to grow" which is the theme of the book, and it certainly makes a lot of sense when you step back and look at where things are going.

Even though you may *think* your business isn't a target of commoditization, I'd be willing to bet you're not looking hard enough. Business executives owe it to themselves to read through this book and think about some restructuring that may be necessary to survive in the next few years...

Disclaimer: I also work for IBM, where the author works. Nevertheless, this book is a great recipe for any 21st century organization, ... with a clear and powerful message, great examples, and an easy read of short length.

The premise is that the world is moving towards a creative economy. Organizations must innovate and grow, or shrivel and die. The day they stop innovating and creating, they will fall into 'commodity hell', with intense pressure on profit margins. To grow, they need to let go of old ossified modes of thinking and operations. They need to think not linearly, but in multi-dimensional, webby mode. Value chains should be replaced with value webs. The participation in value webs is optional, and is driven by the organization's ability to add value to the other partners in the ecosystem. This creates an options economy, where every company can choose from multiple partners for a specific service. Monolithic business models should replaced with component-based models. Organizations should do what they do best, and nothing else. They should integrate their core business components end-to-end to create a powerful plaform that would help them outsource the other components, and collaborate with other partners in a win-win-win situation.

Sustainable advantage comes from creating a value platform that enables adding/removing components with ease to create value webs. Yahoo, Amazon, eBay, Microsoft, Dell, Fedex, UPS, Walmart, IBM, P&G, GE, and many other organizations from around the world are shown as examples of organizations that have created, and are contantly improving upon, their value platforms. These platforms allow the creations of value-webs with a large number of other participants. IBM's own transformation to an OnDemand organization is described in some detail.

The entire book is less than 200 pages long. There are NO frivolous 2x2 theoretical models that oversimplify the situation and add unnecessary layers of complexity of analysis. Instead, there is a powerful, flowing narrative that shows the steps in the process of continuous transformation of the business models of organizations, to allow them to grow rapidly with ease. The chapters are organized around understanding commodity world and its dire consequences; then understanding the component business models, selecting core components and integrating them end-to-end; then creating growth space for themselves; then liberating themselves from fixed cost structures and achieving continuous productivity improvements; and finally a practical case study of component business model implementation using IBM's own transformation.

Letting go is hard to do. Some organizations, and people, will rather die than change. But if they choose to thrive in a constantly changing world, they need to pay attention to their business model, componentize it to develop flexibility, continue to transform themselves through participating in value webs, and continue to invest in and develop their core capabilities.

First of all, a disclaimer - I know Linda Sanford and have worked with her at IBM for over 20 years, and I confess that I am a huge fan, so perhaps not entirely objective! That said, this book is too good an opportunity to pass up. Being in IBM, Linda is perhaps not as well known as 'star' CEO's like Meg Whitman - but if you look at her track record, its AMAZING! She's the one who brought back the IBM mainframe business from a near-death experience, and over the past several years has been working quietly and diligently to move IBM to be one of the leading companies in not just TALKING about the value of technology, but implementing it and proving the value propositions. This book has a lot of her quiet wisdom in it - and is highly worth a read!

Stanford, an IBM executive, and Taylor provide a context for mature businesses to consider "spinning off" or "letting go" of their commoditizing aspects. They provide a good introduction to a component business model as a means to use to help with such considerations. Namely, the description of all the activities a business performs as "components" helps in identifying those to focus on and where to put less emphasis and / or to outsource. Their whole treatment provides a basic explanation and case for benefit to be derived from use of fundamental business "building blocks," i.e. a simple business architecture. They discuss the advantages of such an approach in developing a business platform for growth and practical implementation aspects such as center of excellence formation, governance and technology considerations. Cases from companies ranging from FedEx, GE, P&G, and UPS to Amazon, Cemex, eBay, and Li and Fung provide useful illustrations. The authors allude to adoption of these practices by IBM in its transformation.

The authors clearly articulate the problem, but their solution is less plausible. Having each enterprise develop its own platform is not practical, does not work and cannot scale beyond tier one partners.
Nonetheless it is an excellent examination of the CEO's dilemma "how do I optimise the enterprise's efficiency while maximising the enterprise's flexibility in the market place.

There are far too few books on growing (as opposed to starting) a business. And this book is a slow read. Like another reviewer mentioned, it is somewhat repetitive, maybe a little disorganized. Business people like to read and apply quickly. But the book provokes the business thought process which is always good.

The gist is that businesses are all interlocking. Your business receives and gives value. So far, so good. However, the reason that many businesses choose to do many things in-house is because there's a major trade-off: risk for profit.

Ex. We're a small B2B, communicating mostly online. We outsourced our phones to an answering service. It was a disaster. Dropped calls, long wait times, rudeness, garbled messages, rising prices, etc. And this was an agency approved by the related association.

Maybe a larger organization has enough resources(people, money, attorneys, etc.) to control an outsourced relationship. But this approach isn't for all businesses. And the book doesn't really address how to manage an outsourced relationships. Maybe that's the sequel.

Small businesses might get more value out of the sections that refer to providing value to others.

The author focuses on the difficulty that groups have accepting change. Her premise that letting go of old ways is a requirement for accepting new ways is spot on. I particularly appreciated that practical solutions that were outlined for dealing with recalcitrance of stakeholders. I found the book easy to read with little jargon and the writing style was light.

This book contains certainly some interesting ideas, provides nice examples of business that are transforming and offers some interesting facts (like the fact that employment in Chinese manufacturing is declining more rapidly than in the US!)

However the book (luckily only 200 pages) keeps on repeating itself from the beginning to the end of the book. The authors keep on explaining and repeating the same ideas in almost every chapter. The same examples (UPS, IBM, GE, e-Bay, P&G, Fedex, Amazon, Li & Fung) are used and reused in almost every chapter.

This business book shows the reader how to look at their business issues and gain an advantage over their competitors by embracing IBM's On Demand strategy. It encapsulates some of IBM's best thinking on how companies can position themselves for growth in today's highly competitive marketplace.

My business was at a crossroads and this was very timely. I used it for strategic planning purposes and have actually begun to retool my business with the insights it provided. A definite read for anyone in a commodity business. All my folks thought it was one of the best reads of late.