KEY POINTS:
The sheer scale of sub-prime bad debt (nigh on US$350 billion and counting) has a certain grandeur. The fact that so many multi-millionaires chased disaster is awesome. What superhuman force could generate such foolish unison?
The human answer is management process. Disparate companies, employing people of differing dispositions,
get bunched together by the sameness with which they do businesses. Competing for the same customers with the same "products", they force themselves towards the same competitive ends and means.
The winners are mavericks, contrarians. Their magic lies in launching into uncharted seas under which nobody else believes riches lie. Leading the 25 top innovators nominated in Business Week are digital aces Apple and Google, which would never have surfaced inside a conventional hulk, with its conservative, historical principles and practices.
Maverick innovation in products and technology is nourished and enabled by process - how companies are run, how the practical activities fit together, how they support the strategic aims. Maverick management is centred on purpose-built processes that encourage high value, facilitate imaginative variation and drive high-powered group working.
None of that permits short-sighted policies generated by short-term issues. When the internet bubble burst, Amazon's stock price slumped from US$100 to US$6. Founder Jeff Bezos, however, kept his eye firmly on the ball - the fact that the fundamentals went on improving, and never mind the shareprice. "My view," Bezos told Business Week, "is that there's no bad time to innovate."
Steve Jobs of Apple and Pixar says likewise, and it's because he stuck to his vision that Pixar's animation business made him a billion. It's not complex. The more you invest in bad times, the better the good times will be.
"Strong companies recognise this, and during a recession, they invest," says Google chief Eric Schmidt.
As usual, Warren Buffett has the perfect words: "Be fearful when others are greedy and greedy when others are fearful."
The conventionally wise are slow to act when a bubble forms. They footle around until the now-huge bubble excites their greed. Then they rush like Gadarene swine to be the first to fall.
Unlike the mavericks, corporate giants often apply short-term considerations to long-term imperatives. That's another part of their old, persistent management model. This ancient device must have everyone marching in step. All important decisions belong to the supreme commander, or chief executive. The plunge into the sub-prime morass was a strategy led from the top.
Oddly enough, Goldman Sachs is ranked as the 21st most innovative company in Business Week - for the elementary step of reversing its sub-prime positions when catastrophe struck, and recovering US$4 billion. Equally odd is the appearance of General Motors at 18th, cited for its efforts in electric cars. In reality, GM's gyrations in this now-vital area offer a convincing demonstration of poor process.
In 2003 chief executive Rick Wagoner, unimpressed by the spectres of oil shortage, global warming and fuel economy regulation, pulled the plug on an ambitious experimental project. Two years later, others had stolen a march on GM in every respect by forging ahead with their electrics.
Last year Wagoner sought to recover lost ground and bet GM's all on an unproven advanced technology. It's a standard Gadarene process. Retaliate only when forced to, get rushed off your feet, raise your bet by seeking hard-to-get technological breakthroughs - and start years behind the pacemakers.
Is there any alternative to conventional unwisdom? Importing mavericks is unlikely to gratify either party. Nor is it necessary.
Toyota, GM's nemesis, differs markedly in management process. Three Japanese authors in the Harvard Business Review argue that its success is based not on conformity, but on contradictions: the company is "stable and paranoid, systematic and experimental, formal and frank".
Toyota "moves slowly, yet takes big leaps", "is frugal but splurges on key areas". The Toyota recipe clearly parallels the principles of maverick management and shows that they can be applied within a major corporation. You don't have to be short-sighted, fearful and greedy. That is sub-prime with a terrible vengeance.
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