Creative Destruction by Richard Foster

Author:Richard Foster [Foster, Richard]
Language: eng
Format: epub
ISBN: 978-0-307-77931-1
Publisher: The Crown Publishing Group
Published: 2011-04-20T04:00:00+00:00

We are not suggesting that private equity firms, because they have embraced the concept of “limited life,” minimal corporate staff, control through contracts and incentives, and obsessive decentralization, have found the path to perpetual excellence. Despite their strengths, venture capitalists do miss markets, enter markets too early or too late, pick the wrong teams, and ride some investments longer than they should. Principal investing firms, too, blunder from time to time. Private equity firms are not infallible. Moreover, when the markets change again, and enough competition emerges, the weaknesses in their approaches may be exposed, and new corporate models will need to be found.

Nevertheless, private equity firms have performed well over the past twenty years, and at a pace that equals that of the marketplace. Moreover, they have evolved a system of management that is quite different in practice from the surviving incumbent publicly traded corporation. With this system of management, private equity firms have done as well as any group we have seen in finding ways to “create, operate, and trade” simultaneously. Even with their faults and inevitable mistakes, they offer a useful model that companies can turn to when they are seeking guidance in learning how to adopt the assumption of discontinuity.

Private equity firms offer a way to deliver what only the markets have been able to deliver so far. They change at the pace and scale of the market, thrive on creative destruction and thus thwart cultural lock-in, and control through permission without putting operational excellence at risk. And in doing so, they have created substantial wealth for their investors.

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