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When is best practice not best practice?

15 Oct

For a good 10 years now since the Asian Financial crisis of 1998 that I have been telling companies to be very careful of “best practices.”  In theory is sounds good, but in reality it may be more detrimental then helpful.    

The irony to “best practice” is that every best practice company did not becomes best practice by copying other. They became best practice through evolution, learning and relearning – continuous improvement. Embedded in their culture is an attitude of finding new ways of working. Its a mindset thing.

When non best practice companies start to try and adopt best practices of others, usually at the behest of expensive consultants, the loose sight of the fact that being best practice is a mindset and not simply mimicking a process. Even if it was down to mimicking a process, how many companies can really do it and do it well? Very few.

My advise to companies has always been, rather than take one big leap- learn to make small frequent changes. Over time the culture of change and improvement  will quickly set in.  Unfortunately, when expensive consultants throw cliches like – “you can’t cross a chasm in two small jumps” our minds quickly see the problem as having to cross a chasm and having to do it in one big step.  

The reality is no “non best practice” organization has the agility to jump chasms. Organizations are like ships. To turn a ship, one first turns a small trim rudder before making the big rudder turn. Organizations far better just by focusing on taking the next step, and the next and the next and soon each step will be a leap.

I am please that the Harvard Business Review has finally put put an article in support of my position. At least I know that I have been on the right tract all along.

 

Enjoy the article.

 

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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Posted by on October 15, 2008 in Business, Transformation

 

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