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 / Fall 2004 / Issue 36(originally published by Booz & Company)


Ram Charan: The Thought Leader Interview

The celebrated CEO coach says leaders must learn to confront reality.

Photograph by Mark Katzman
Perhaps no term was more abused during the Internet mania of the late 1990s than business model. To most participants in the era’s economic game, business model was synonymous with strategy, and strategy, in turn, was equated with new-to-the-world products or services. Investors poured billions of dollars into startup companies that were little more than speculative sketches dressed in the fancifulness of that two-word phrase.

No wonder they failed, say Ram Charan and Larry Bossidy. They refused to confront reality.

Hence their latest book. Confronting Reality: Doing What Matters to Get Things Right (Crown Business, October 2004) is a no-nonsense template for driving business-model-based transformation in an organization. In their latest collaboration, the noted management consultant and the former chairman and chief executive of Honeywell Inc. demystify the process of devising and implementing profitable change in companies — and doing it over and over again.

Although a follow-up to Execution: The Discipline of Getting Things Done (Crown Business, 2002) — a strategy+business pick as one of the best business books of 2002 — Confronting Reality is effectively a prequel to the earlier work. It hews to the same nuts-and-bolts style that has kept Execution on U.S. bestseller lists for two years, providing templates by which business leaders can cycle through the three elements — financial targets, the external environment, and internal activities — that a complete business model must address. Even more striking, the authors provide concrete examples (from Dell, the Thomson Corporation, Cisco Systems, Home Depot, and other companies) of how successful leaders implement change by shaping four components of the organization: strategy, operations, people, and processes. Confronting Reality is probably the most comprehensive “how-to” guide available to CEOs … and those who aspire to the position.

The book is infused with the famous candor of coauthor Mr. Bossidy, but even more, it bears the imprint of Ram Charan’s deep, diversified, and worldwide experience. The 65-year-old former Harvard professor is among the world’s foremost leadership consultants; his clients over a 35-year career include GE, DuPont, Novartis, Thomson, The Home Depot, KLM Cargo, and Verizon. On the road 365 days a year, according to Fast Company magazine, Dr. Charan “does not own a home — or even rent one — has no nuclear family or significant material possessions, and he has his assistants FedEx his clean clothes to him.” He is a veritable Baedeker of the leader’s life; the 10 books he has written or coauthored (including 2004’s Profitable Growth Is Everyone’s Business: 10 Tools You Can Use Monday Morning, also published by Crown) all follow the same, thoroughly accessible guidebook format.

Dr. Charan visited with strategy+ business in a conference room at the journal’s Park Avenue headquarters in Manhattan, where, over turkey sandwiches and Diet Coke, he explained how to inject reality into companies that have drifted from it.

S+B: Most books about business strategy seek to tell readers how to locate a single point of competitive advantage that will last them for years. Confronting Reality is quite different: It’s an argument about the necessity of continual business transformation. At what point did business become so unstable that companies required that kind of capability?

CHARAN: The need has always been there, but it hasn’t really been recognized. The general tradition is, most corporate strategists and consultants look at the environment and at their core capabilities, and ask, What’s the fit with their strategy? Or a CEO will say, “Get me a brilliant strategy,” and someone will come in with a high-level strategic idea, work out a five-year spreadsheet, and say, “I will make it happen.”

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