When Are "Best Practices" Not Best Practices?
“What’s best practice?” Just about any manager seeking to improve corporate performance has fielded this question from leadership. The theory is that the manager should find a successful company, find out what practices have made them successful, mimic those practices, and expect success.
Blindly worshiping at the altar of best practices is dangerous. The problem is that practices that work incredibly well in one circumstance can be ill-suited for another circumstance.
Even if your company has successfully overcome a problem in the past, it is always worth asking if the circumstances have changed in a way that means your approach needs to change as well.
Consider Cisco Systems. During the 1990s the company gobbled up dozens of small companies for relatively reasonable price tags. It developed a process to identify attractive opportunities and seamlessly and quickly integrate the companies into its core business. Business school case studies and glowing articles described the approach as a best practice way to growth through acquisition.
But over the last few years Cisco’s approach has notably changed. Cisco has made bigger acquisitions, like spending $6.9 billion for set-top box manufacturer Scientific-Atlanta and $3.2 billion for online conferencing provider WebEx.
Instead of rapidly integrating all acquisitions, it is giving some acquisitions significant autonomy. For example, when Cisco acquired home networking provider Linksys in 2003, it kept the business separate, even going so far as to appoint a team of “blockers” to make sure that Cisco’s core DNA didn’t unintentionally infect Linksys’s DNA.
Cisco’s circumstances have changed. As Cisco has grown, so have its growth targets. Small acquisitions that sustain its existing business won’t be sufficient to move its growth needle. So it is now searching for targets that can be “platforms” that allow the company to move into different market segments and follow different business models. It has quite appropriately changed its tactics to achieve these objectives.
All in all, Cisco has spent $2.5 billion in the past five years to acquire 44 companies that extend its core business, and $11 billion on a handful of platform deals. Cisco expects core-extenders to be integrated within two months; platforms can take up to two years. As Ned Hooper, Cisco’s head of business development, told the Wall Street Journal, “We can't buy a company and tell it to do as we see fit if we don't have a true understanding of the marketplace.”
For just about any business challenge, there really is no such thing as absolute best practices. Best practices are very dependent on the specific challenge, context, and capabilities of the company.
Before blindly copying a competitor’s best practice, or assuming a historic best practice will continue to provide positive results, ask three questions:
• Are market circumstances similar?
• Are corporate contexts similar?
• Is the practice “modular,” with few interactions with other corporate systems?
If the answers to these questions are yes, then mimicking best practice can succeed. If the answer to any of these questions are no, think twice. Following so-called best practice might lead to disappointing results.
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Scott D. Anthony is the president of Innosight, an innovation consulting and investing company with offices in Massachusetts, Singapore, and India. He has consulted to Fortune 500 and start-up companies in a wide range of industries. During 2005–2006 he spearheaded a yearlong project to help the newspaper industry grapple with industry transformation (Newspaper Next).
Comments
Cisco have learned a valuable lesson. I mean creating a buffer zone between the core DNA and the acquired companies. The best practices should be those that integrate local practices and cultures - otherwise you will create a culture of resentment and alienation. It is best to send a team to the smaller company to find out what makes them work best within their own terms, otherwise it is like those anthropologists such as Bronislaw Malinowski and Margaret Mead who described phenomena with preconceived ideas of what they wanted to see - later it was payback time when the subjects of their research got to tell other researchers what was going on from their perspective. Force feeding best practices leads to dire consequences later.
- Posted by Stephen Pain
April 24, 2008 5:44 AM
I agree with Scott's views. A very relevant example from the developing economy such as India is Tata Group. This over hundred years old group has been a major industry group based in India with business interests ranging from Steel, Automibile, Information Technology, Hospitality, Telecom, Power, FMCG and Retail has gradually upped its ante inthe Global M&A scenario. In all the cases they have adopted stratgies according to the sitution. For example when they bought over Tetley, they left the company in its original state and its only after many years there seems to be some integration move. The Corus acquisition too is following the same foot steps. Mind you in most of these acquistions, the acquired company is much bigger than the acquirer. even then Tata's have been successful. The reasons as I see them are -
1. Let the senior management team from the acquired company continue with day-to-day operation and minimal interference from Tata's.
2. No aggressive moves such as shwoing the doors for existing employees.
3. No relocation of manufacturing units.
4. Form a strategic coordination group with key members from both the companies on board.
Even Oracle has followed a less aggressive poilcy when it comes to their M&A policies. We ca see a stark difference right from PeopleSOft to Siebel to Hyperion to i-flex solutions. The difference is stark specially with its approach towards i-flx solutions. They have carved out a financial services vertical and are trying to integrate the company in this vertical with independent management reporting to Oracle.
- Posted by Sudhir PJR
April 25, 2008 4:53 AM
Best practice has become one of the most overused terms in business. In reality there are too many “better practices” out there masquerading as “best practices.” Simply put, a best practice must:
• Effect a measurable change in performance
• Apply to a broad spectrum of organizations
• Be proven in practice
• Exploit proven technologies
• Ensure an acceptable level of control and risk management
• Match the skills and capabilities of the organization
- Posted by David Axson
April 30, 2008 6:22 AM
When are "Best Practices" not Best Practices? As soon as that label is pasted on them. When solving new problems, we tend to look at what has worked in the past. We should constantly be striving to create "Next Practices." We can read about and examine what has worked in the past as a guideline, but new ones should constantly be developed.
- Posted by oddpodz
May 9, 2008 4:29 PM
When Are "Best Practices" Not Best Practices?
Scott
I think you have one excellent point. The theory is that the manager should find a successful company, find out what practices have made them successful, mimic those practices, and expect success.
Blindly worshiping at the altar of best practices is dangerous. It is like a fake coin that passes many hands only to be found out later.
I thank you
Firozali A. Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa
- Posted by Firozali A. Mulla MBA PhD
May 30, 2008 3:50 PM