June’s “Conversation” in HBR is with Paul Ormerod and it is about strategy and failure. He is a “theoretical economist” (yikes!) and he ahs a book with an enticing title: Why Most Things Fail. He makes a convincing argument that we are much less in control than we think we are.
This is a critical point in our approach to strategy. I think strategic planning comes way too much from a control mindset—that you can predict the future, control the variables, and manufacture success in a very cause-effect way. The editor’s last question and Ormerod’s response are important:
If most companies are doomed to fail, and outcomes of strategy can’t be predicted, how can companies improve their odds?
They can start by abandoning business advice that takes the form of “Ten ways to beat the competition,” since it’s impossible to predict the outcome of a given strategy. If there really were ten rules, everyone would follow them and succeed. Companies should embrace the inherent randomness that drives success and failure and that o amount of cleverness or information can overcome. The companies that are most able to explore and innovate—something akin to random mutation—and then rapidly and flexibly adapt when an innovation succeeds or fails, will do best. I know the New Coke story is told too often, but it’s relevant here. Coke reacted rapidly and flexibly to the disaster, abandoning its meticulously crafted strategy. Imagine if Coke had stuck rigidly with its plan because that was its carefully considered, predetermined strategy?
Isn't a “theoretical economist” someone who failed the personality test to become an accountant? Just a passing thought...
Posted by: Virgil Carter | June 27, 2007 at 05:03 PM