In 2005 W. Chan Kim and Renée published Blue Ocean Strategy, which found that “blue ocean” launches, those in new categories without competition, far outperformed the shark-infested “red ocean” line extensions that are the norm in the corporate world. It was an immediate hit, selling over 3.5 million copies.
Bain consultants Chris Zook and James Allen’ published, Profit from the Core, around the same time. They found that firms that focused on their ”core” far outperformed those who strayed. For example, they warned that Amazon was putting itself from peril for expanding its business beyond books and predicted dire results.
Clearly, none of this makes sense. How can you both “focus on your core” and seek out “blue oceans?” It betrays logic that both strategies could outperform one another. Today, Amazon makes most of its money outside of books. Yes, new markets lack competitors, but they also lack customers. The truth is that most business research is surprisingly shoddy.
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About a decade ago, the management guru Gary Hamel wrote a highly cited article in Harvard Business Review entitled First, Let’s Fire All the Managers. He analyzed the success of Morningstar, a leading manufacturer of tomato products that operates with a flat management structure and called for other corporations to follow its lead.
“A hierarchy of managers exacts a hefty tax on any organization,” he wrote. “This levy comes in several forms. First, managers add overhead and, as an organization grows, the costs of management rise in both absolute and relative terms.” The article was created a lot of buzz and helped bolster other flat models, such as Holacracy.
Yet the “flat organization” idea hasn’t caught on. “Since 1983, the size of the bureaucratic class—the number of managers and administrators in the US workforce—has more than doubled, while employment in other categories has grown by only 40%,” Hamil recently wrote. The truth is that we need managers and trying to eliminate them is a waste of time.
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In the late 90s Fortune magazine named Enron the most innovative company for six consecutive years, right up until the company collapsed in scandal. GE’s strategy of stack ranking was seen as a model to be emulated by other firms, even though there was no evidence it worked. McKinsey advised companies to fight a war for talent.
Today, we know better. It’s obvious that Enron was incredibly dysfunctional, that stack ranking undermines a high-performance culture and that talent is something that you build through upskilling, not something you “win” in a metaphorical war. It’s mind boggling to think of all the damage that was done before those ideas were exposed.
Yet if we accept all that we need to ask ourselves which ideas are widely accepted today that don’t hold water. Every era has its own fictions, things that are accepted because they are repeated, but lack any serious foundation. They become memes replicating themselves throughout the zeitgeist, rarely being questioned. Here are three truths that will surprise you.
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When we’re passionate about an idea, we want others to see it the same way we do, with all its beautiful complexity and nuance. We want to believe that if others can just understand it, they will embrace it. That’s why most change management practices focus on persuasion, explaining the need for change and creating a sense of urgency.
But consider recent research that finds that we can’t even agree on simple concepts such as what a penguin is and it becomes clear that for any given initiative, people are bound to see it differently. The simple truth is that change doesn’t fail on its own, it fails because people resist it. If we are to bring about genuine change, our first job is to overcome that resistance.
The simple truth is that humans form attachments to people, ideas and other things and, when those attachments are threatened, we act in ways that don’t reflect our best selves. Every change strategy has to begin with that. Clever gimmicks or snappy slogans won’t bring about true transformation. We have to build a strategy to overcome resistance from the start.
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In 1988, a young management student named John Krafcik published an article in MIT’s Sloan Management Review entitled, Triumph of the Lean Production System. Based on his study of 90 manufacturing plants in 20 countries, it argued that manufacturing could be made vastly more productive, while improving quality at the same time.
These methods would grow into the lean manufacturing movement and their effectiveness has been well documented. Krafcik himself went on to have a successful career in the auto industry, taking over Google’s self-driving division, Waymo, in 2016. There is an amazingly strong case for manufacturers to adopt lean methods.
Yet surprisingly few do. In fact, a recent survey found that less than 15% of manufacturers have adopted lean methods. This dilemma is much more common than you’d think. We’ve been conditioned to believe that a good idea, once proven out, will prevail in the marketplace, but that’s not really true. There is often a large gap between what we know and what we do.
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In the 1990s, western-style liberal democracy was triumphant. The Berlin Wall had fallen and the Cold War had been won. Teams of diplomats and consultants rushed to spread the Washington Consensus, an agreed upon set of reforms that poor countries were pressured to undertake by their richer brethren.
Francis Fukuyama noted at the time that we had reached an endpoint in history, when one model had achieved dominance over all others. Yet even as he laid out the rational case, he invoked the ancient Greek concept of thymos, or “spiritedness,” to warn that even at the end of history, there would be some who would insist on going their own way, no matter the consequences.
That’s why any change, even if provably good, noble and just, will inevitably incur resistance. It’s a simple truth that humans form attachments to people, ideas and other things and, when those attachments are threatened, we see it as an outright attack on our identity and lash out. That’s why identity needs to be at the center of any change strategy, if it is to succeed.
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At some level, change is always about the stories we tell. We like to think that we humans are objective arbiters of the facts, but that’s not really true. We think in narratives. In one study, juries considered experts that shared stories far more credible than those that merely offered an analysis of the relevant facts.
Every organization tells stories, some deliberate, some not. General Electric was able to tell successful stories for decades, yet it was a false narrative and, when the facts caught up, the firm collapsed. On the other hand, Satya Nadella was able to change the narrative at Microsoft even though, objectively, the company was already doing well.
Hollywood mogul Peter Guber describes stories as “emotional transport” and that’s why we need to be purposeful about the ones we tell if we are to bring about genuine transformation. Stakeholders need to be able to see themselves as heroes in the stories we tell, working within shared values to achieve a common purpose. Our story needs to be their story.
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Pretty much everywhere you look, you’ll find bullshit. We are constantly bombarded with politicians and “experts “on TV, at conferences and on social media, spouting bullshit. An economist would tell you that it is simply impossible for so much bullshit to exist, because the market values truth, but of course that’s bullshit.
One possible reason that there is so much bullshit in the world is that there are so many bullshitters. Yet that explanation has a critical flaw. People spouting bullshit are, in most cases, completely sincere. They believe that they are truth tellers, uncovering and sharing critical wisdoms that add value and meaning to our lives.
In his famous essay, On Bullshit, philosopher Harry Frankfurt makes the case that “bullshit is a greater enemy of the truth than lies are,” because liars need to actually ascertain the truth to misrepresent it. Bullshitters, on the other hand, show complete disregard for facts. I would argue, however, that’s only half the story. We bullshit because it serves a crucial purpose.
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Shortly after I first arrived at college, my wrestling coach told my teammates and me that we would all be attending a freshman technique camp. It turned out to be something quite different than what I had expected. He didn’t teach us any advanced or esoteric method, but instead demonstrated the basics.
It was incredibly humbling. The fact that we were there in the first place, competing for a Division 1 program, meant that we had all demonstrated outstanding accomplishment. And now we were supposed to revisit the stuff we learned in peewee programs? It seemed insulting at first, but turned out to be one of the best lessons I’ve ever learned.
The truth is that in any endeavor, you are only as good as your fundamentals. While it’s easy to get enamored with grand strategies and fancy tactics, whether you succeed or fail is far more likely to depend on doing simple, basic things consistently well. In much the same way, I’ve found that simple rules can, if applied sensibly, help make you incredibly effective.
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In The Knowing Doing Gap by Jeffrey Pfeffer and Bob Sutton, the two Stanford professors show, in painstaking detail, that most enterprises fail to act on what they know. They point out that many are set up to reinforce the status quo, because mastering conventional wisdom is key to advancement.
There is a similar gap when it comes to transformation and change, but for somewhat different reasons. Decades of research and insights are largely ignored. Transformational initiatives are seen as exercises in persuasion, with practitioners designing slogans to “create a sense of urgency around change” and shift attitudes, assuming that will change behaviors.
Today we are in a change crisis. Businesses need to internalize new technologies like AI and adapt to new realities like hybrid work, but still struggle to adopt decades old skills related to lean manufacturing, agile development and cultural competency. If we are going to drive the transformations we need to compete, we need to take an evidence based approach.
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