Confronting Reality

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Confronting Reality

by Larry Bossidy and Ram Charan with Charles Burck

Crown Business © 2004, 264 pages, $27.50 (ISBN 1-4000-5084-7).

Doing What Matters to Get Things Right

According to Larry Bossidy and Ram Charan, the authors of the bestseller Execution, getting things done right in this challenging and changing world requires understanding whether you can realistically make the money you hope in the game you are playing. In Confronting Reality, the authors describe how companies can use the business model to create a reality-based process for thinking about the details of their business in a holistic way. With examples from Home Depot, 3M, KLM, Cisco and others, the authors show how skilled leaders have used business-model thinking and people development to make the right decisions when faced with crises and opportunities.

Radical Change

Bossidy and Charan begin Confronting Reality by stating, “It’s time to radically change the way you think about your business.” They write that the way to start to plan a business is by asking what the nature of the game you are in is, where it is going and how money can be made in the endeavor. These questions, they explain, are the fundamentals of business thinking. Urging companies to adopt a realistic approach to their business plan, the authors write that the difference between a business’ success and failure lies in the “very nature of how people conceive the purpose and direction of their businesses.” According to the authors, the problem is that companies do not look long enough at their money-making process and fail to link the environment in which they operate with the financial targets they need to meet and the internal activities and capabilities that they need in that environment to meet their financial targets.

In Confronting Reality, the authors present a framework in which firms can organize and link these fundamental components. At the heart of this framework is a dedicated focus on understanding the realities of the world in which companies do business and how they match their goals and actions with those realities. By using the business model as the basis of their methodology, they offer companies a familiar reality-based process for analyzing and balancing goals, external realities, and internal realities such as strategy, human resources, operating activities and organizational structure.

Linking Realities

By linking these realities together, the authors explain that companies will learn sooner rather than later when their businesses are under assault, where opportunities can be found and what internal activities need to be changed. The authors describe how businesses can properly build a complete and effective business model that uses “iteration” to harmonize the external environment with financial goals and internal capabilities.

The authors write that the process of iteration makes companies see the world the way it really is. They explain that it is tied directly to the concept of “business savvy,” the instinct in successful business leaders who “possess a shrewd, instinctual feel about how to make money.” They write that business savvy is what separates those who make successful business decisions consistently over time from those who only have an occasional lucky stroke of genius.

Billy Beane’s A’s

To put faces and names on their concepts and ideas, the authors present a number of people who have devised their strategies to meet their financial targets, including Sam Walton, Michael Dell, Jack Welch and even the general manager of the Oakland A’s Billy Beane.

In major league baseball, where big city teams usually outplay teams from smaller cities because of their deep pockets and the resulting expensive talent, Billy Beane defied conventional wisdom with his business savvy by creating one of the winningest records of the past several years. By questioning the usual criteria of batting averages, home runs and runs batted in for judging players, Beane looked at their ability to get on base and take a deep ball-and-strike count instead. With his new fact-based criteria, Beane built a team of affordable talent that recognized the structural changes in his industry that put his team at a disadvantage and designed a new business model that created more value for his franchise.

In Confronting Reality, the authors explore other leaders who, like Beane, were able to recognize the world as it truly is and had the courage to change what needed to be changed to succeed. As business conditions change and companies look for better ways to grow and innovate, the authors provide timely examples of what business savvy looks like today as well as ways firms can initiate actions that offer enormous rewards. ~

Why We Like This Book

Confronting Reality does more than provide a wake-up call to companies that are feeling left behind by fundamental industry changes. It also presents a realistic picture of the ideas and questions that must be confronted to get back on track as well as a guiding business model that can put all the pieces of the organizational puzzle where they fit best together. ~

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