Michael Mauboussin is the author of The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (Harvard Business Review Press, 2012), Think Twice: Harnessing the Power of Counterintuition (Harvard Business Press, 2009) and More Than You Know: Finding Financial Wisdom in Unconventional Places-Updated and Expanded (New York: Columbia Business School Publishing, 2008). More Than You Know was named one of “The 100 Best Business Books of All Time” by 800-CEO-READ, one of the best business books by BusinessWeek (2006) and best economics book by Strategy+Business (2006). He is also co-author, with Alfred Rappaport, of Expectations Investing: Reading Stock Prices for Better Returns (Harvard Business School Press, 2001).

Visit his site at: michaelmauboussin.com/

Michael Mauboussin
[Photo Credit: Kirrus, Flickr]

Michael Mauboussin: Some Influential Books Along The Journey

1980s

Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

Now nearing its sixtieth printing in English and translated into nineteen languages, Michael E. Porter’s Competitive Strategy has transformed the theory, practice, and teaching of business strategy throughout the world.

Electrifying in its simplicity—like all great breakthroughs—Porter’s analysis of industries captures the complexity of industry competition in five underlying forces. Porter introduces one of the most powerful competitive tools yet developed: his three generic strategies—lowest cost, differentiation, and focus—which bring structure to the task of strategic positioning. He shows how competitive advantage can be defined in terms of relative cost and relative prices, thus linking it directly to profitability, and presents a whole new perspective on how profit is created and divided. In the almost two decades since publication, Porter’s framework for predicting competitor behavior has transformed the way in which companies look at their rivals and has given rise to the new discipline of competitor assessment.

More than a million managers in both large and small companies, investment analysts, consultants, students, and scholars throughout the world have internalized Porter’s ideas and applied them to assess industries, understand competitors, and choose competitive positions. The ideas in the book address the underlying fundamentals of competition in a way that is independent of the specifics of the ways companies go about competing.

Competitive Strategy has filled a void in management thinking. It provides an enduring foundation and grounding point on which all subsequent work can be built. By bringing a disciplined structure to the question of how firms achieve superior profitability, Porter’s rich frameworks and deep insights comprise a sophisticated view of competition unsurpassed in the last quarter-century.

Robert Cialdini, Influence: The Psychology of Persuasion (New York: William Morrow, 1984).

Influence, the classic book on persuasion, explains the psychology of why people say “yes”—and how to apply these understandings. Dr. Robert Cialdini is the seminal expert in the rapidly expanding field of influence and persuasion. His thirty-five years of rigorous, evidence-based research along with a three-year program of study on what moves people to change behavior has resulted in this highly acclaimed book.

You’ll learn the six universal principles, how to use them to become a skilled persuader—and how to defend yourself against them. Perfect for people in all walks of life, the principles of Influence will move you toward profound personal change and act as a driving force for your success.

Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985).

The essential complement to the pathbreaking book Competitive Strategy, Michael E. Porter’s Competitive Advantage explores the underpinnings of competitive advantage in the individual firm.

Competitive Advantage introduces a whole new way of understanding what a firm does. Porter’s groundbreaking concept of the value chain disaggregates a company into “activities,” or the discrete functions or processes that represent the elemental building blocks of competitive advantage.

Now an essential part of international business thinking, Competitive Advantage takes strategy from broad vision to an internally consistent configuration of activities. Its powerful framework provides the tools to understand the drivers of cost and a company’s relative cost position. Porter’s value chain enables managers to isolate the underlying sources of buyer value that will command a premium price, and the reasons why one product or service substitutes for another. He shows how competitive advantage lies not only in activities themselves but in the way activities relate to each other, to supplier activities, and to customer activities. Competitive Advantage also provides for the first time the tools to strategically segment an industry and rigorously assess the competitive logic of diversification.

That the phrases “competitive advantage” and “sustainable competitive advantage” have become commonplace is testimony to the power of Porter’s ideas. Competitive Advantage has guided countless companies, business school students, and scholars in understanding the roots of competition. Porter’s work captures the extraordinary complexity of competition in a way that makes strategy both concrete and actionable.

Alfred Rappaport, Creating Shareholder Value: The New Standard for Business Performance (New York: Free Press, 1986).

In this substantially revised and updated edition of his 1986 business classic, Creating Shareholder Value, Alfred Rappaport provides managers and investors with the practical tools needed to generate superior returns.

The ultimate test of corporate strategy, the only reliable measure, is whether it creates economic value for shareholders.

After a decade of downsizings frequently blamed on shareholder value decision making, this book presents a new and indepth assessment of the rationale for shareholder value. Further, Rappaport presents provocative new insights on shareholder value applications to: (1) business planning, (2) performance evaluation, (3) executive compensation, (4) mergers and acquisitions, (5) interpreting stock market signals, and (6) organizational implementation. Readers will be particularly interested in Rappaport’s answers to three management performance evaluation questions: (1) What is the most appropriate measure of performance? (2) What is the most appropriate target level of performance? and (3) How should rewards be linked to performance? The recent acquisition of Duracell International by Gillette is analyzed in detail, enabling the reader to understand the critical information needed when assessing the risks and rewards of a merger from both sides of the negotiating table.

The shareholder value approach presented here has been widely embraced by publicly traded as well as privately held companies worldwide. Brilliant and incisive, this is the one book that should be required reading for managers and investors who want to stay on the cutting edge of success in a highly competitive global economy.

Richard Dawkins, The Blind Watchmaker (New York: W.W. Norton & Company, 1986).

“The best general account of evolution I have read in recent years.”?E. O. Wilson. With a new introduction.
Twenty years after its original publication, The Blind Watchmaker, framed with a new introduction by the author, is as prescient and timely a book as ever. The watchmaker belongs to the eighteenth-century theologian William Paley, who argued that just as a watch is too complicated and functional to have sprung into existence by accident, so too must all living things, with their far greater complexity, be purposefully designed. Charles Darwin’s brilliant discovery challenged the creationist arguments; but only Richard Dawkins could have written this elegant riposte. Natural selection?the unconscious, automatic, blind, yet essentially nonrandom process Darwin discovered?has no purpose in mind. If it can be said to play

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