This Text Refers to the Hardcover Edition:

Confronting Reality is a book about selecting strategies to execute. The examples are from very big businesses, but the principles apply to all businesses.

We live in an age of business discontinuity due to rapid globalization of competition, greatly fluctuating currencies and commodity prices, swift proliferation of new technologies and enormous surpluses of manufacturing capacity. The authors correctly state that shooting for incremental gains in effectiveness frequently won't work. Instead, a new business model that makes breakthrough advances in costs, effectiveness and reach may be the only way to survive and possibly to prosper. Confronting Reality provides several large company examples to make this point (especially EMC, 3M and Thomson).

The authors point out that are several problems that this situation creates:

1. Most leaders have never developed a new business model and don't even realize that they should be considering that.

2. Most organizations are out of touch with the current and future threats from discontinuity and from competitors' business model.

3. Most leaders don't understand what their organizations can and cannot execute, so they often select strategies that have no chance of succeeding.

4. Changing anything major about a company is a big job and most leaders don't know how to manage a major change initiative.

IBM before Lou Gerstner's arrival is cited as an example of these problems.

You also get an earful about Home Depot, Intel and Dell.

The best parts of the book came in the fourth part, How to Prepare for Change. I particularly liked the material on how leadership development has to change. That's critical reading for boards of directors.

The authors also have a process for business model analysis and redesign that is well illustrated by the examples they provide. For people who don't understand what is involved in creating a business model, this information will be very helpful in providing a context for the subject.

With so many good things in this book, why did I rate it as a three-star effort?

1. The message is wrong. Companies should always be trying to replace their business models with better ones . . . not just when being hit with or being threatened by a discontinuity. My own research (published in Chief Executive Magazine from 1992-2001) points out that this has been the key differentiating factor in successful growth for almost 20 years. The message of this book would have been a good one for 1980. But it's 2005.

2. The process focus for creating a new business model needs work. Most successful business model innovations develop from "bottom-up" experimentation. The authors place scant reliance on that possibility. They see only "top-down" opportunities. Those exist, too, but they are less important.

3. The process for business model innovation itself is incomplete. It doesn't place enough emphasis on fundamental analysis of "who, what, when, where, how, why, and how much" -- the key aspects of how you change a business model. The process described in the book is a good one for checking out a possible business model and for analyzing competitors' business models . . . but it needs more emphasis on the creative spark of locating what else needs to be done and to stop being done in order to succeed.

4. Stakeholders play an enormous role in creating new business models. This book shows mostly people creating new business models who rely on stakeholders as little as possible. That's the wrong message.

I suspect the authors got this wrong because they wanted to describe the cases they know best (and there aren't very many of those) and then to extrapolate from them.

As an example, they provide an excellent case about Joe Tucci at EMC. In the case, they contrast the new business model with the old one. The authors also explain that EMC was the fastest growing stock on the NYSE in the decade before Joe Tucci took over.

What the authors miss is that EMC prospered under former CEO Mike Reuttgers by creating FOUR improved business models sequentially replacing one another before Joe Tucci became CEO. Here was a chance to tell the story of the importance of continuing business model innovation, and the authors totally missed it.

Of the other companies who have been frequent business model improvers, only Dell is mentioned.

Unless you are an entrepreneur who has never created a new business model who is planning your next start-up, I suggest that you skip this book and read one that will help you understand how to routinely improve and replace your business models.

Donald Mitchell
http://livebetterthanabillionaireon5dollars.blogspot.com/