Not that it is a secret, but figuring out Charles Koch’s political leanings doesn’t take long when reading his book, “Good Profit.” Koch, the CEO of one of the largest private companies in the world, is clear on his belief that a free market society is the most beneficial from an economic, health and quality of life standpoint.
Whether you agree with all of Koch’s political and philisophical ideas, his latest book is a good read and interesting exploration of his arguments for free enterprise.
The point of Good Profit is that companies can achieve strong success by striving to make the lives of its customers better. It goes beyond improving a specific product to anticipating what the people really need or want and then working to provide that for them. Sometimes this means creating new technology or application of a resource that makes the original business obsolete. Koch calls this “creative destruction.” According to Koch, successful businesses grow by creating value for the customer through constantly replacing products, methods and skills by superior alternatives. In this way, a business’s success stemming from a product that improves quality of life is a win-win.
“Good profit is earned through principled entrepreneurship...It is not diminishing someone’s well-being but adding to it by mutually beneficial voluntary transactions, based on respecting what the customer values,” Koch writes.
Good Profit’s subhead is “How Creating Value for Others Built One of the World’s Most Succesful Companies,” and the book delivers with numerous explanations and examples of this foundational philosophy at Koch Industries.
Koch explains in detail his company’s Market Based Management system based on the principles of free market and then frames this system within its five dimensions: vision, virtue and talents, knowledge processes, decision rights and incentives. Each dimension has a chapter dedicated to it, followed with case studies taken from various Koch enterprises. It covers not only transaction-based decision-making but also recruiting and training employees, compliance and building knowledge. Regardless of whether you agree with all of Koch’s management views, the book is worth reading, studying and contemplating for any manager.