Book Review: “The Science of Success: How Market-Based Management Built the World’s Largest Private Company” by Charles G. Koch

This is a short book by Charles Koch, the CEO of Koch Industry (KII) about his management philosophy, Market-based Management (MBM). Having successful led Koch Industry since 1961.

The book started out describing the history of how the Koch Industries started by his dad. He joined the company due to his dad’s poor health.

Then Koch went on to describe his MBM philosophy. You can read all about them in Koch Industries’ website here. The five dimensions are:

Vision: Determining where and how the organization can create the greatest long-term value.

Virtue and Talents: Helping ensure that people with the right values, skills and capabilities are hired, retained and developed.

Knowledge Processes: Creating, acquiring, sharing and applying relevant knowledge, and measuring and tracking profitability.

Decision Rights: Ensuring the right people are in the right roles with the right authority to make decisions and holding them accountable.

Incentives: Rewarding people according to the value they create for the organization.

And the The Guiding Principles are:
Conduct all affairs with integrity, for which courage is the foundation.

Strive for 10,000% compliance with all laws and regulations, which requires 100% of employees fully complying 100% of the time. Stop, think and ask.

Value Creation
Create long-term value by the economic means for customers, the company and society. Apply MBM to achieve superior results by making better decisions, pursuing safety and environmental excellence, eliminating waste, optimizing and innovating.

Principled Entrepreneurship™
Apply the judgment, responsibility, initiative, economic and critical thinking skills, and sense of urgency necessary to generate the greatest contribution, consistent with the company’s risk philosophy.

Customer Focus
Understand and develop relationships with customers to profitably anticipate and satisfy their needs.

Seek and use the best knowledge and proactively share your knowledge while embracing a challenge process. Develop measures that lead to profitable action.

Anticipate and embrace change. Envision what could be, challenge the status quo and drive creative destruction through experimental discovery.

Exemplify humility and intellectual honesty. Constantly seek to understand and constructively deal with reality to create value and achieve personal improvement. Hold yourself and others accountable.

Treat others with honesty, dignity, respect and sensitivity. Appreciate the value of diversity. Encourage and practice teamwork.

Find fulfillment and meaning in your work by fully developing your capabilities to produce results that create the greatest value.

Notable quotes:
“Everyone is entitled to his own opinions, but not his own facts.” – Daniel Patrick Moynihan

I like the fact that book is very concise. When it comes to management philosophy book, the shorter the better. Good learning for the middle and upper managers.