omeone once wrote that the job of the Army chief of staff is to protect the brilliant young captains whom the system would otherwise crush. A smart new book from McKinsey & Company, the blue- chip consulting firm, has contrary advice for its big-business clientele: the chief executive's job is to destroy the system the vice presidents would protect.

"Creative Destruction" (Doubleday, $27.50) by Richard Foster, a senior partner and director at McKinsey, and his colleague Sarah Kaplan, makes a cogent argument that in times of rampant, uncertain change — right now, for instance — established companies are handcuffed by success. They lack the will or wit to turn their backs on profitable products and to pour resources into unproven but promising technologies.

Intent on serving their biggest, best customers, they overlook the threat of unfamiliar competitors until it is too late. In truth, the authors declare, one could hardly expect otherwise. The better the company, the more efficient its operations, and the more tightly it locks onto existing business.

Mr. Foster introduced that provocative theme in his still-valuable 1986 work, "Innovation: The Attacker's Advantage." Clayton M. Christensen of the Harvard Business School explored it even more impressively in "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail," published in 1997. The Christensen book, in particular, became an eye-opener for brick-and- mortar enterprises under assault from the Internet.

Of course, "the attacker's advantage" seems a strange note to sound over the rubble of the Internet economy. To be sure, the McKinsey authors understand that most new businesses fail. "That is not to say that all attackers are winners," they write. "But it is the case that most winners are attackers."

They went to press as fissures were appearing in the new economy. Yet the Internet mainstays have taken such a pounding that e-winners are far from obvious. One wonders how many old-line companies now regret being drawn into the game.

The new McKinsey book offers a skilled dissection of organizational inertia. Its second half amounts to a postgraduate course in unclogging corporate arteries and freeing the flow of fresh ideas. The authors find inspiration in Joseph A. Schumpeter, the Austrian economist, who taught that the destruction of businesses by newer, abler competitors ensures renewal of the capitalist order.

The book presents Schumpeter's teaching as a mandate for today's corporate establishment. "Destruction is as difficult to master as innovation," the authors write. "It requires overcoming the barriers of denial." One lesson of the book is to keep an eye on the industry periphery, the shadows where upstarts come and go but where pioneering concepts often take hold.

Through unmistakable allusions — but never explicitly — the book challenges a classic study of business success published seven years ago. That book, "Built to Last," dissected the sustained excellence of 18 "visionary" companies, from American Express to Walt Disney. It found many common earmarks, perhaps most memorably that great companies were led by "clock builders" — farsighted business leaders who considered the company itself as their life's accomplishment.

Those findings profoundly influenced many business readers. "People feel inspired by the very notion of building an enduring, great company," the authors, James C. Collins and Jerry I. Porras of Stanford University, wrote in a later edition.

The McKinsey authors contend, however, that companies built to last pay a price in subpar performance — "the survivor's curse," as Mr. Foster calls it. They trail market averages in total returns to shareholders (a standard never mentioned in "Built to Last"). "The golden company that continually performs better than the markets has never existed," the authors say. "It is a myth."

Regrettably, the authors are content with a glancing blow at "Built to Last." They never engage its insights point by point.

Instead, the McKinsey study leans on a database that measures the performance of roughly 1,000 companies — all the major forces in 15 industries — from 1962 through 1998. Over that span, the authors say, no company consistently outperformed the average of its industry. The only ones that could maintain superior returns were new, emerging companies, and even they did so for "a limited period, often less than a decade."

So Mr. Foster and Ms. Kaplan divide the business landscape into the quick and the dead: companies not quick enough to reinvent themselves will soon be dead. The authors note that of the original Standard & Poor's 500 companies selected in 1957, only 74 remained on the list in 1998 and only 12 outperformed the index over that span. In 25 years, they predict, two-thirds of today's most prominent corporations will have died or been acquired. "They are too damn slow to keep pace with change in the markets," the authors say.

"Creative Destruction" relies on a simple theory of how the capital markets work. The authors say that only surprise earns extraordinary returns. They found that securities analysts, relying on rigid yardsticks like price-to-earnings ratios, chronically underestimated the prospects of a young, unknown company. When earnings turn out better than expected, analysts overreact by bidding the shares to unwarranted heights.

 

The book attacks what it sees as rigidities in corporate thinking. A perceptive chapter on "cultural lock-in" deals with blind spots that produce "a collective failure of the mental processes" at a vulnerable giant like I.B.M. in the 1980's as personal computers swept the industry.

The authors draw on experimental findings from cognitive psychology to explain how executives make decisions when the marketplace confronts them with "enigmas, dilemmas, paradoxes, puzzles, riddles and mysteries." They conclude that corporate decision makers, like other human beings, find familiar facts comforting and explain away inconsistent data. These decision makers do not improve with practice — their later decisions are no better.

The book is studded with examples, although they serve more as illustration than proof. The authors trace the birth, life, death, rebirth and later decline of Storage Technology. They admire Corning, which moved creatively from ceramic cookware to television tubes to optical fiber and to working with light as information. They applaud Safeguard Scientifics, which for 25 years earned exceptional returns by investing in technology companies and spinning them off.

The book cites L'Orιal as a relentless innovator, unafraid to cannibalize its products. It introduced liposome antiwrinkle cream at $50 a jar; three years later it took it downscale at $8 a jar, but not until it had devised an even better luxury replacement.

The authors say businesses need a complete overhaul to move as decisively as the capital markets. "The market has no lingering memories or remorse," they write.

They have their doubts, however, that publicly held companies can become fleet enough. As a model, they admire private venture capital companies and leveraged buyout firms. Both impose strict control of finances, but keep their hands off operations. They inspire managers with generous profit incentives but drop the hammer on the unproductive. They never enter an industry without a strategy for getting out five or seven years later with a healthy profit.

Mr. Foster and Ms. Kaplan accurately describe a business world that moves at an ever quicker pace. In that context, their prescriptions make a great deal of sense. The reader is left to puzzle how to build a life's work with enterprises for which five to seven years is a long time.