Do not focus on customers

Ben Hunt’s The Timid Corporation argues for more investment in long-term research and development, rather than customer focus groups.

UK investment has been falling for five years. Now consumers, worried by Gulf War 2, have brought retail growth to its weakest level in three years. The coalition’s military tactics seem to be a further exercise in risk aversion. It’s a good time, then, to read one of the few management books to have come out on the subject – Ben Hunt’s The timid corporation: why business is terrified of taking risk.

Hunt thinks fear of risk has become institutionalised. He says the pioneering spirit that helped Boeing build the 747 has been lost. Instead of projecting what might go right, firms worry about what might go wrong. Abdicating from social and technological leadership, they “listen to society” through post-Enron ethics committees and self-regulation, and “listen to customers” rather than creating new markets.

Business, Hunt suggests, is no longer propelled by strong belief systems like those that nurtured IBM’s mainframes. And the fondness business has for financial devices, and for taking on board the fears of society, betrays a defensive posture to the real world.

Hunt is most coruscating when he attacks what he calls the myth of the unpredictability of markets. He asks: what?s new about market turbulence?
What is new about the pace of change today, he says, is that it fills us not with a thrill, but anxiety.

To improve matters Hunt makes some sensible recommendations for IT. First, long-term research needs reviving. Interviewed by Hunt, the head of the Palo Alto Research Center says that from the mid-1980s short-term financial targets began to kill off long-term R&D.

Second, the Internet alone will lead only to incremental improvements in efficiency. Hunt insists that the Internet must transform the real world by working in conjunction with the transport and mechanical engineering industries.

In this context, Hunt is sharply critical of those IT companies – he cites IBM, Siemens, Amazon – that are concentrating on services. Services may be less capital-intensive than physical products, and may be all the more attractive to IT managers for that. But services present a high-return, low-risk business model, says Hunt. He sees Dell’s orientation for rapid delivery as part of this trend. Dell’s supply-chain successes, and its zero inventories, go hand in hand with low R&D expenditures and an unwillingness to do more than grab innovative components that are made by its suppliers.

Strong stuff. You don’t have to agree with all of it, but Hunt’s book is recommended – and his rallying cry against risk aversion is attractively original. It is not the slogan “tolerate mistakes”, which Hunt rightly believes lacks ambition. It is, rather, a clarion call for “purposive experimentation” and a move away from a condescending focus on customers – a focus that, ironically, often leaves customers with little more than a few brands to play with.