1. Benjamin Hunt, The Timid Corporation - why business is terrified of taking risk, Chichester, John Wiley & Sons, 2003.
The Timid Corporation - why business is terrified of taking risk
Recommended by Michael Power, Leake Professor of Accounting, and Co-Director of the Centre for Analysis of Risk and Regulation, London School of Economics, James Woudhuysen reviews a great book by Benjamin Hunt.
The Timid Corporation - why business is terrified of taking risk provides a much needed critical intervention in the governance and risk management mania that has characterised corporate regulation in the past ten years. Benjamin Hunt challenges us to reinterpret the mantras of brand management, customer focus, stakeholder dialogue, shareholder value and many more as products of an anxious society populated by defensive corporations, fearful of markets and led by empty political systems. The Timid Corporation is refreshingly provocative, and offers a timely reminder of the paradox of corporate regulation in the post-Enron world which can never restore trust. This book is essential reading for managers, politicians and academics concerned with the consequences of a culture of corporate risk aversion for genuine innovation. Michael Power
UK investment has been falling for five years. Now consumers, worried by Gulf War 2, have brought retail sales 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 moment, 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. (1)
Hunt thinks that management's fear of risk has now become institutionalised. He argues that the pioneering spirit that helped Boeing build the 747 has been lost. Instead of projecting what might go right, corporations 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 the customer' rather than creating new markets.
Business, Hunt suggests, is not propelled forward by the strong belief systems that nurtured IBM's mainframes. Nor is this a temporary mood. The fondness business has for financial devices, and for taking on board the fears of society, betrays a defensive posture toward 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's really new about the pace of change today, he says, is that if fills us not with a thrill, but anxiety. He follows his arguments through nicely in his recommendations about IT.
First of all, long-term research, though not quite extinct yet,
needs reviving. Interviewed by Hunt, the head of the Palo Alto Research Center
says that it was from the mid 1980s on that short-term financial targets began
to kill off long-term R&D. Luckily, Hunt also found that Honda has been
working on a four-foot tall humanoid robot ever since that time - and results
are now coming through.
Second, he maintains that the Internet by itself will only lead to incremental efficiency improvements. Hunt has a kind word for these: he talked to California's WebCor, which has brought the mobile internet to the world of construction. But he insists that the internet must transform the real world - by working alongside transport and mechanical engineering.
In this context, Hunt is sharply critical of those IT companies - he cites IBM, Siemens, Amazon - that have resorted to services. Services may be less capital-intensive and have a less obvious life cycle than the world of products, and be all the more attractive to IT company managements for that. But the key idea with them, Hunt argues, is to pursue a high-return, low-risk agenda and low-risk business model. For Hunt, Dell's orientation to rapid delivery is part of the same syndrome. 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 the innovative components that are made by its suppliers.
Strong stuff. You don't have to agree with every word of The Timid Corporation. But Hunt's book is recommended - and his concluding 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 for a move away from today's condescending focus on customers - a focus that, ironically, often leaves customers themselves with little more than a few brands to play with. James Woudhuysen
Benjamin Hunt welcomes feedback or enquiries about his book. Contact him on ben@nwresearch.co.uk, or visit www.wileyeurope.com. The cover to The Timid Corporation is by graphic artist Sarah Herman, who may be contacted on sarah@daisyfire.com, or visit www.daisyfire.com.
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