In their book The
Witch Doctors John Micklethwait and Adrian Wooldridge say, “In the witch
doctor’s world one thing is prized above all others: the ability to predict and
control the future”.
Management theorists’
efforts at conjuring the future may not be as old as the alchemists labour for
conjuring gold, but its fervor is unmatched. The idea of predicting the future
and planning for it in management is as old as Frederick Taylor and Alfred
Sloan. In fact it is even deeper than that – to military and intelligence, where
they speak of reconnaissance and good intelligence. Robert McNamara, President
Kennedy’s Secretary of Defense was one of the architects of America ’s war in Vietnam
Management theorists may
not be conjurers. But their anxiety to enable managers to predict and control
the future, “they have developed plenty of exotic-sounding techniques, such as
SBUs, PIMs, PPBSs and 3x3 matrices (to name only the most comprehensible); and
they have kept those techniques as mysterious as possible ..” It is a mute
question if they have been able to predict and control the future. The
‘management theory’ industry is growing unabated, and the more complex they
succeed in making it the more anxious are managers and the more managers are
keen on listening to them. They conjured planning into a rigorous discipline
decomposing “strategy-making into its constituent parts: mission, objectives,
external analysis, internal analysis and so on. Confronted with objections to
the rigmarole, they simply made the strategy-making process even more
complicated.” Micklethwait and Wooldridge quote a business school student
saying, “I learned a great deal about military history and Confucian metaphors.
But the only practical advice that we were given was that every company should
send teams of people from different disciplines to country hotels every year to
think about the future”.
Churchill famously said about
economists that when there were two economists there would be three opinions,
except when Maynard (John Maynard Keynes) is one of them, when there would be
four opinions. Strategic management theorists are not very different. All the
complexity they conjured would have been less frightening had they only as many
ideas of strategic planning as theorists. In this diversity the main strains can
be distilled into two:
(a)
The Harvard Business School
(b)
The Boston Consulting Group with its faith in
universal explanation of the way companies functioned believed that successful
identification of your business is as useful ‘to a coffin maker as it is to an
advertising agency’.
(a)
To make
differentiation, compete on the basis of value added to customers, so that customers
will pay premium to cover higher costs OR
(b)
Cost based:
Offering products at the lowest cost. While not losing sight of quality and
service, the focus is on cost.
Organizations which
followed either of the strategies did better than those which did not.
So, what has gone wrong
with strategic planning? Essentially there are two complaints: practical
difficulties and theoretical impossibilities. These can be summarized as: (1)
strategic planning soon becomes numbers game. (2) Statistics are not as
dependable as the planners believe. (3) Strategic planning separates thinking
from doing.
As strategy’s prospects
dimmed, growth came back on centre-stage. In Grow to be Great: Breaking the
Downsizing Cycle, Dwight Gertz and Joao Baptista concluded from a study of
1000 American companies that (a) Only 7 per cent of the best performing ones had
cut costs in previous year in 1988-93. (b) On the other hand companies
investing in growth were rewarded with a compound 15 per cent annual growth in
their share price. (c) Those investing in cost savings saw a growth of 11 per
cent.
As growth was making its
way to centre-stage, management theorists tried to reinstate Strategy to its old
glory. Scenario planning by organizations like Royal Dutch Shell had its
successes, including Shell’s famous prediction of the 1973 oil crisis.
Secondly, planning or no planning, thinking about the future remained important
to successful companies always. The new prescription was variants of Shell’s
scenario planning of asking ‘what if..?’
Miclethwait and
Wooldridge wonder, “can all this futuristic thought be translated into strategy
without falling back on the (generally bad) idea of planning?” In answer the
theorists came up with ‘strategic vision’. “Visions…define a few outstanding
goals around which companies can organize their resources; and they help to
inspire the workforce to pursue common aims...”
Can vision statements
climb down from the lofty framed walls to mundane planning? Competing for
the Future by Gary Hamel and C.K.Prahalad was the most ambitious book
trying to answer the question. For them, “competition is the battle to create
and dominate emerging opportunities…traditional strategies looked upon
companies as a collection of products and business units; Hamel and Prahalad
look upon them as a collection of skills…a company should try to reinvent its
whole industry by following a vision.”
This new idea also is not
without flaws. While visionary companies may ‘earn the applause of management
theorists’ the final winners making real money may be the plodders. Secondly,
vision bereft of resource is a mere word. Hamel and Prahalad supplemented
vision with stretch and core competencies. Stretch is the extra mile the
workforce needs to be motivated to walk to innovate; and core competencies is
that set of competencies together which provides the competitive edge to the
company. Again stretch may degenerate to flogging employees and core competence
may become ‘as unbending as five year plans’.
After painstaking
analysis and debate Mickelthwait and Wooldridge come to the conclusion that, “In
the end, all strategy is gambling on the future. Visions – no less than plans –
are only as good as those who make them. Even the dumbest lottery player can
work out that companies that predict the future correctly do better than those
that do not”.
The last word on strategy
will have to wait for quite some time. Larry Ellison of Oracle believed that
the personal computer would give way to cheap, easy to use network terminals, providing
access to a central database. On the contrary, Bill Gates remained centered on
the PC. “Doubtless, in ten years’ time
some son-of-Hamel and son-of-Prahalad will write a book saying that vision was
correct, and make it seem as easy choice; today any normal mortal confronted by
Gates and Ellison is reminded of the old jibe: ‘Two men say they ‘re Jesus; one
of them must be wrong’”. Not yet; the winner is….long time coming.
(This article is based
on the chapter on STRATEGY in The Witch Doctors by John Mickelthwait and
Adrian Wooldridge)
By V.K.Talithaya (vktalithaya@managementmasala.com)
0 comments:
Post a Comment