The 80/20 Revolution; By Richard Koch; Nicholas Brealey pounds 19.99
We all know that the West was Won by Great Men. Through their extraordinary courage, a few special men with their small teams of followers overcame all adversity until the American frontier was no more. They were the 80/20 people who made the difference. Or so we're told by the moviemakers.
And, according to Richard Koch, it's much the same today. His book draws on the Pareto Principle, which claims that a minority of top earners (with their small teams) will always account for the majority of the total.
This principle has now been extended to refer to almost everything, including, as in this book, enterprise and creativity.
Koch argues that we are living in a transitional period when managerial capitalism is being destroyed by Great People. This 20%, with their greater ingenuity, business genes and creativity, are shaping a New Economic Order.
This is because intellectual capital is the core asset of the modern age and the 20% that are able to fully exploit this are the great wealth-creators.
The one good section of this book is where the nine essentials of 80/20 success are laid out. Here is a stimulating account of the qualities needed for entrepreneurial start-up.
But as is so often the case with business books, the arguments are not supported by quantitative empirical data. This is very much an 'airport' book and like others of its type, the assertions are backed up by little more than anecdotes, and a few oft-repeated 'names'. Despite their wealth, Branson and Gates probably wish they received a dollar every time they're mentioned in publications like this.
The 80/20 Revolution neatly captures the mainstream thinking of many Anglo-American senior corporate managers. This has become fixated on the Great Leader theory of business success. It is a view far less pronounced among managers in mainland Europe, in Japan and in Asia. Perhaps it's time for a review of this approach to corporate success in view of the Enron scandal and the shrinking stock values of companies like Worldcom, Marconi, BA and others whose PR departments gave rather too much credit to the super-human actions of their corporate heads.
This book, like so many others obsessed with the charismatic leader approach, pays little attention to the social processes that make up everyday corporate realities. What produces high-performing companies is a range of intangibles such as tacit knowledge and employee motivational reward systems. These are also the reasons why relatively few people quit their jobs to become 80/20 people. They appreciate that managerial capitalism, as represented by large corporations, offers at least some opportunities for the development of their creativity.
Equally, for there to be 80/20 people, there has to be a favourable macro socio-economic environment. There must be managerial organisations that provide education, health and welfare systems and economic circumstances for encouraging entrepreneurship. There are many 80/20 people in the different countries of Africa who are unable to exploit their 'business genes'. They are, quite genuinely, victims of adverse business environments.
Nearer to home, there are thousands of people with 80/20 potential, brimming with creative, wealth-creating ideas but unable to fully exploit them.
Either because they cannot get funding for their start-ups or because they work in managerial settings where their creative ideas are ripped off by others.
The underlying assumption of this book is that managerial capitalism is giving way to a more meritocratic economic order. But where is the evidence? Koch may be on to a good thing because he's based his arguments on the Pareto Principle, which can be neither proved nor refuted. But surely the readers of airport business books will soon begin to demand that authors provide evidence to support such sweeping generalisations.
Richard Scase is author of Living in the Corporate Zoo, published by Capstone.