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In the early hours of Wednesday November 9 2016 I was as bemused as everyone else. Donald Trump had won the presidential election and would be the 45th President of the United States. The last polls I saw had given Hillary Clinton about an 80% chance of winning and none of the commentators had seen an upset coming. As a Canadian, however, I thought that the Americans had an awful choice to make and in the end the man I wanted to lose had beaten the woman I wanted to lose…. After my initial shock wore off I started to think through what had happened and what is likely to happen from an ecological/systems perspective.
Back in March I wrote about the ecodynamics of Donald Trump. I said that it was helpful to look at society and its institutions, not as static systems, but as ecological processes. From this perspective successful social institutions are conceived in passion, born in communities of trust, grow through the application of reason and mature in power. Here they tend to get stuck in systemic traps, structures that conserve the habits that made them successful, but render them inward-looking and insensitive to the changes that are going on outside. In his book, The Rise and Decline of Nations economist Mancur Olson describes how, over time, vested interests and rent seekers clog the system and prevent meaningful change. When this happens, as their familiar narratives break down, societies often reach for outsiders, radicals on the fringes, who offer either new narratives or the revival of old ones. Trump’s narrative is the latter, the promise to “Make American Great Again”, and restore an era of growth and prosperity last seen in the 1950s and 1960s.Change, Leadership, Strategy | Tagged Anglo-Saxon capitalism, capitalism, change, community, complex systems, democracy, Donald Trump, ecocycle, ecological perspective, Hillary Clinton, Lawrence Lessig, lobbyists, Mancur Olson, narrative, NRA, power trap | Leave a comment
Over the decades organizational culture has devoured hundreds, if not thousands of strategies. One of the most recent examples is the case of Wells Fargo, where culture not only ate a long-standing, apparently successful strategy but last week also consumed its CEO, John Stumpf, who resigned under enormous pressure. The headline story in the business section of news in the past few weeks has been that over the past five years the bank has fired 5,300 employees (10% of whom are branch managers or higher) for opening new accounts without the customer’s permission. Apparently this was the unintended consequence of an aggressive strategy focused on cross-selling: if a customer has a checking account why not sell them a car loan together with credit card, mortgage and wealth management services? With the profit margin on straight lending squeezed by low interest rates, cross-selling has become the modern mantra for bankers and even used to justify mergers and acquisitions for the cross-selling opportunities they present. Objectives and targets for cross-selling were embedded into Wells Fargo’s performance management system and ridden herd on by layers of hard-driving executives. At the top was Carrie Tolstedt, Senior Executive Vice President of Community Banking, known to some within the bank as ‘the watchmaker’ for her obsessive concern with detail. An investor briefing on the business reveals a mechanistic model of the economics of retail banking with the profitability of cross-selling on clear display: customers with eight accounts with Wells Fargo are five times as profitable as those with only three (the industry average). The so-called “Gr-eight initiative” was the bank’s internal goal of selling at least eight different financial products to each customer.Change, General, Leadership, Strategy | Tagged acquisitions, banking, Carrie Tolstedt, Cartesian mindset, cross-selling, culture, ethical code, ethics, Goldman Sachs, Jack Welch, John Stumpf, mega-bank, mergers, muppets, Norwest Corporation, outcomes, performance, process, scale, strategy, Timothy Sloan, Wachovia, wells fargo | Leave a comment
“In a multi-layered complex system stability is achieved by having the big and/or slow processes govern through constraint the smaller, faster processes. Sudden change can take place in a complex system when agents at one level escape the constraints usually exercised by agents in another part of the system.” This is a quote from my book, Learning from the Links, a systems perspective on golf and management. I was making the case that in a golf swing the big, slow muscles of the torso should constrain the smaller, faster movement of the shoulders and arms that, in their turn, should limit the even quicker movement of the hands. When the hands escape these constraints, the system becomes unstable and the result is an erratic golf swing over which one has little control.
The same principle applies to all complex systems, including political ones. The Founding Fathers ensured that this was the case in the structure of the American government when they wisely arranged the different branches of government in a systems hierarchy of constraint. The House of Representatives is elected every two years, Presidents every four years, the Senate every six years (on staggered terms) and the Supreme Court is elected for life. For similar reasons James Madison favoured representative democracy and rule by experts over direct democracy and rule by faction. The intent was to create a stable system of checks and balances that could handle only modest change and would not be subject to sudden radical movements. There are similar hierarchies of constraint in parliamentary systems. An elected House of Commons turns over much faster than an appointed Senate (in the case of Canada) and the hereditary House of Lords in the UK. The Canadian Senate is the “Chamber of Sober Second Thought”, whose role is to reconsider and modify the sometimes impulsive actions coming to it from below in the systems hierarchy.
From a systems perspective, when British Prime Minister David Cameron agreed to a referendum on whether to remain with or leave the European Union he was risking that a small fast system might escape the constraints of representative democracy and the sovereignty of Parliament. It has escaped and the result is crisis and chaos. But it is also opportunity for both Britain and the EU.
The Lost Narrative of the European Union
Three years ago I gave a presentation to the International Forum on the Future of Europe in Vilnius, Lithuania. In it I suggested that the problem with the EU was that it had lost its narrative and become an anonymous, rule-driven bureaucracy of technocrats. I used an ecological perspective to show how the EU had been born in the aftermath of the Second European Thirty Year War (1914-1945) as a passionate movement to avoid further conflict among the nations of Europe. After initial success, greatly aided by the rebuilding of Europe’s shattered infrastructure (catalyzed by theMarshall Plan), it became a series of increasingly ambitious economic and political projects. In that process, however, like all successful institutions, it became much larger, more calculative, rule-driven and bureaucratic. The stories told by economists and bureaucrats are rarely compelling and, as the original narrative was lost, means became ends-in-themselves.
Economic attachments are fragile. We may work for money, but we live for story. An ecological perspective suggested that any “buy-in” would be temporary at best and that the resulting tepid commitment would fluctuate with the EU’s economic fortunes. In good times people might mildly favour the European enterprise, but in tough times they would tend to default to their national narratives and identities that are much more emotionally powerful. This is especially true if economic gains are spread unevenly and significant segments of the population feel left out and ignored. The result was widespread euroscepticism that, as Nigel Farage, the leader of Britain’s United Kingdom Independence Party (UKIP) proclaimed, was all about national identity. The Brexit Referendum became a contest between technicians in favour of the status quo and populists promising a return of a Little England narrative. The story won.
With Crisis Comes Opportunity
“Never let a good crisis go to waste” is a quote often attributed to Winston Churchill but never sourced. I think that the idea probably comes from Ancient China and perhaps the I Ching (Book of Changes). In my first book, Crisis & Renewal, I explored the role that crisis plays in the renewal of complex systems. Wind and fire, flood and pestilence clear away old growth in temperate forests and open up patches, where there is equal access to water and light. Here, young organisms fueled by nutrients from a recycled past, can flourish and renew the system.
In Britain it seems likely that the old political party arrangements no longer reflect the new divisions in the electorate. The old bitter arguments about means – varieties of capitalism or socialism – may have been replaced by a sharper disagreement about ends and alternative narratives – Little England or Great Britain? The Labour Party seems to be a “walking ghost”. It performed poorly in the referendum, with many of its members ignoring its call to “Remain”. Its leader, Jeremy Corbyn, now faces a leadership contest that, even if he wins, leaves the party divided and in poor shape to fight a general election. From the Right Nigel Farage and UKIP threaten the Conservative Party. Indeed it was this threat that David Cameron tried to quell by agreeing to a referendum in the first place. Perversely, he has succeeded only in reinforcing UKIP, clearing the way for them to become a political power domestically. So the Brexit crisis may act as a catalyst for the reform and reconfiguration Britain’s political parties, something that would be extraordinarily difficult to do in normal times.
As for the EU, it’s time for its leaders to reflect upon the entire project. Those with direct experience of World War II are nearly gone and with their passing the founding narratives of the EU become a distant memory. The administrative integration of the EU’s members needs to be needs to be slowed and even rolled back. The creation of the Euro was a bold but premature move, freezing the system when it still needed significant wiggle room. All the attention should be on a regenerating the European narrative and the creation of compelling experiences that build and maintain it. It won’t be easy. The challenge was well stated by the late historian Tony Judt in his paradoxical thesis that Europe has been able to rebuild itself politically and economically only by forgetting the past, but that it can define itself morally and culturally only by remembering it. Perhaps it’s time to start the process again with the generations born since 1945.Change, General | Tagged American government, Anglo-Saxon capitalism, complex systems, crisis, David Cameron, destruction, directdemocracy, ecological perspective, Founding Fathers, Great Britain, James Madison, Jeremy Corbyn, Little England, means and ends, Nigel Farage, renewal, representative democracy, rule by experts, rule by faction, Senate, Tony Judt | Leave a comment
It’s easy to be critical of business books. What had been a dull cottage industry until the publication of Tom Peters; and Bob Waterman’s In Search of Excellence (1982) became an exuberant enterprise that churns out a vast number of products in many subcategories. Business books, in other words, have become a big business. The motives and abilities of the writers who toil in these segments — self- help, how-to, CEO biographies, corporate narratives, big-picture panoramas, focused functional pieces, to name a few— are as widely varied as the categories themselves. Serious research-based, academic efforts, sometimes well written but often full of impenetrable jargon, share shelf space with ghostwritten executive vanity puffs: sweet confections designed to buff images. There is a steady deluge of books from consultants, for whom business books are, at a minimum, thick business cards and essential to establishing their credentials.
As is the case with every genre, a few of these books are fantastic, some are good, and many are, alas, quite bad. At times, business books can read like expanded articles, bloated blogs, or padded PowerPoint presentations. Many writers assume that success implies capability and we can all become successful simply by studying success. The evidence for this is equivocal at best and riddled with attribution bias (our tendency to take credit for our successes while blaming failures on factors beyond our control). Much business writing poses an even subtler problem: a failure or perhaps a reluctance to recognize that while the “whats” in business — desirable outcomes — are generic, the “hows” are particular, specific to each and every organization. It’s true, for example, that an enterprise’s strategy and organization must be “aligned,” but what that means and how to do it in this organization, with our people, right here, right now is much less obvious. Organizations are complex systems, in which cause-and-effect is nonlinear, path-dependent (history matters), and often unknowable in prospect. Deciding what to do (or not do), and how and when to do (or not do) “it,” is a matter of judgment and experience, as managers try to accomplish short-term objectives while keeping their longer run options open. As a result, consumers of business books that offer simplistic checklist-driven solutions run the risk of being trapped between one-off stories that cannot be replicated and universal principles that cannot be practiced because they are too abstract.
If they can’t tell us what to do, how can business books help in such a world? And how, in the age of 140-character tweets, disappearing SnapChat texts, and highly attenuated attention spans, can we justify spending hours, or a whole day, engaging with a 400-page volume? As a professional consumer (over the years, I have reviewed nearly 150 books for s+b), producer (I’ve written three myself), and avid fan, I can think of three principal reasons.General | Tagged business books, management, meaning, narrative | Leave a comment
“There seems to be something wrong with our bloody ships today…” remarked Vice Admiral David Beatty to his Flag Captain. Beatty was commander of the Battle Cruiser Fleet at Jutland, and his cool comment belied the scale of the catastrophe. It was 4.26 pm on May 31, 1916 and from the upper bridge of the battle-cruiser Lion he had just seen her sister ship, Queen Mary, disappear in a shattering blast as both main magazines exploded. Twenty minutes earlier another battle-cruiser, the Indefatigable, had vanished in a sheet of smoke and flame and, although Beatty did not know it at the time, the Lion herself had narrowly missed a similar fate only by flooding her Q turret magazine with sea water.
At the Battle of Jutland, the greatest sea battle of all time, the British Navy would lose three battle-cruisers carrying over three thousand men in less than three hours. It was not bad luck, it was bad management: the result of the Navy’s inability to manage a complex system from design through to execution. For the roots of the disaster lay in the design of the ships over a decade earlier. Thus the problem was systemic and Beatty’s puzzled comment represents one of the more dramatic instances of the bewildered reaction of a CEO to symptoms of systemic problems in the field. Continue reading →Posted in Change, General | Tagged battle-cruiser, Bismarck, complex systems, context, David Beatty, HMS Hood, HMS Lion, Horace Hood, Indefatigable, innovation, Invincible, Jutland, Nelson, Queen Mary, Trafalgar | Leave a comment
In Landmarks of Tomorrow (1959) Peter Drucker wrote “We still profess and we still teach the world-view of the past three hundred years… a Cartesian world-view.” It is a world-view redefined by Lord Kelvin (1824-1907): “… when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be.” Everyone in management knows it as “If you can’t measure, you can’t manage it”, an aphorism often incorrectly attributed to Drucker. Given his attitude toward Kelvin’s world-view, he would never have said anything like that.
The Cartesian world-view assumes that the whole is equal to the sum of its parts. It is a static, mechanical world, where all causality is linear. Inertia is the norm, conscious, deliberate thought is the only valid form of inquiry and science is the only valid form of knowledge. Drucker wrote, however, that a new world-view was emerging: “Underlying the new concepts of modern physics is a unifying idea of order. It is not causality, though, but purpose….The new world-view, in addition, assumes process. Every single one of these concepts embodies in it the idea of growth, development, rhythm, or becoming. These are all irreversible processes…” Later he contends, “We need…a strict discipline of qualitative and irrevocable changes such as development, growth or decay. We need rigorous methods for anticipation of such changes. We need a discipline that explains events and phenomena in terms of their direction and future state rather than in terms of cause – a calculus of potential, you might say, rather than one of probability. We need a philosophy of purpose, a logic of quality and ways to measure qualitative change. We need a methodology of potential and opportunity, of turning points and critical factors, of risk and uncertainty, constant and timing, “jump” and continuity. We need a dialectic of polarity in which unity and diversity are defined as simultaneous and necessary poles of the same essence.” (my emphasis)Change, General | Tagged Berlin, change, Descartes, Drucker, ecological perspective, Iraq, judgement, Kelvin, management principles, measurement, purpose, science, systems thinking, weight-loss | Leave a comment
I am now publishing my blogs both here and on LinkedIn. In this case this article is already on the site (in Latest News About the Book), so just the link is here. It’s an article I wrote last year for Leading & Change, an online magazine: Cultivating Organizations: The Background to The New Ecology of LeadershipPosted in Change, General | Tagged change, complex systems, ecocycle, ecological perspective, means and ends, The New Ecology of Leadership | Leave a comment
The story of Inky the octopus made headlines around the world this past week. In case you have been in Outer Mongolia (without the internet) Inky was a male common octopus on exhibit in New Zealand’s National Aquarium on the east coast of the North Island. One day his keepers noticed that he had disappeared. No one saw him go but they could follow his trail. He had squeezed through a small gap in the lid of his tank, slithered across the floor and disappeared down a narrow 50-metre long pipe that led to the sea. Inky was the size of a rugby ball but, like all octopi, he could get through holes the size of coins (the only limit is the size of an octopus’ beak, which can’t be shrunk).
As I was reading the story I was reminded of the ecological relationship between scale and opportunity. Inky was looking at his environment for tiny escape routes. As a result his world was full of potential to be explored. Larger scale creatures might not see these opportunities at all. We see this phenomenon everywhere in the history of innovation. While Xerox was developing its first commercial plain paper copier, the 914, it was desperately short of cash and other resources. It explored licensing the technology to IBM, who turned to Arthur D. Little, the well-known technology consultants, to get their opinion. Little surveyed potential owners of the machine. It was complex to use, could produce one copy every 26 seconds and had a tendency to set the paper alight. Every machine came with a built-in “scorch eliminator” (fire extinguisher). There is no doubt, however that everyone was put off by its size. The 914 was a large cube, roughly four feet square, and weighed an astonishing 650 pounds! It needed a separate room to house it. After a year of study the technologists dismissed the machine as being far too cumbersome and expensive. They concluded that there would never be a market for more than a few thousand of them. IBM rejected Xerox’ overtures and the rest is history. The 914 went on to be a colossal success and Xerox eventually placed (the machine was leased on a per copy charge) more than 600,000 of them.Change, General | Tagged 914, Arkansas, Arthur D. Little, Ben Franklin, change, ecology, IBM, Inky, innovation, mindfulness, mollusk, National Aquarium, New Zealand, octopus, Sam Walton, scale, Sear Roebuck, Walmart, Xerox | Leave a comment
In a blog last year, Matthew Taylor, Chief Executive of the Royal Society of the Arts wrote “Ideas about social and economic reform are only as useful as the model of change that goes with them.” I agree completely. We need to look at our current models of change and develop more useful ones. But we have to probe the foundations of our mental models much more deeply.
A review of our mainstream models of change (at least those in the private sector in the West) would reveal that, for the most part, they are firmly embedded in a modernist, utilitarian view of organizations and work. Often underpinned by assumptions from mainstream economics, individuals are seen as rational actors, making rational choices to maximize individual utilities. The change agent himself (these are usually masculine models) stands outside the system, diagnosing the conditions of those within and then acts top-down to arrange rewards and sanctions to obtain the desired behaviours.
Our mainstream models of change are overwhelmingly instrumental; the logic is one of engineering efficiency, searching for new ways and means to reach given ends that are set externally (e.g. “maximizing shareholder value”). Mechanical and architectural metaphors abound: the organization is a “smooth-running machine” based on “blueprints” or a “well-designed structure” made up of “building blocks”. The challenge is to overcome “inertia” and “resistance to change”. From this perspective, stability is the norm and change is the problem. Think of Kurt Lewin’s change mantra: unfreeze-change-refreeze. Change from this perspective is accomplished by the formulation and implementation of new context-free policies and principles that will act as “roadmaps”. Management is seen as a value-free technical practice.Change, General | Tagged Anglo-Saxon capitalism, blueprints, change, complex systems, ecocycle, ecological perspective, efficiency, engineering, Jonathan Haidt, Kurt Lewin, Matthew Taylor, narrative, objectivity, passion, power, reason, roadmap, RSA, servants of power, shareholder value, trust, unfreeze-change-refreeze | Leave a comment
On April 2 The Economist published a book review of Valuation: Measuring and Managing the Value of Corporations, a 700-page manual on corporate finance and shareholder value published by McKinsey & Company. The views in both the book and the review come across as a reactionary defense of what Lynn Stout has called the myth of shareholder value. The essential argument is that there is nothing wrong with the principle of shareholder value, just in the way that its “rules” have been either applied or ignored.
As an aside, regular readers of my blog will know that I am allergic to the notion that a practice like management consists of the application of theoretical rules or principles. It reflects a Cartesian frame of mind that thought should precede action and that principles abstracted from one situation can be “applied” in others. Hence the relentless procession of business books claiming to have discovered the “secrets” of success. In a management context “principles” turn out to be either good intentions or desirable outcomes – formal and final explanations in Aristotle’s framework. These are “true” but largely unhelpful as guides to action. For guides to action managers are interested in material and efficient causes and, unlike principles, they are specific to each and every organization. In other words, they are context-dependent, which requires an ecological perspective rather than a Cartesian one.Change, General | Tagged Andy Haldane, Anglo-Saxon capitalism, Bank of England, Cartesian Management, community, complex systems, context, ecocycle, ecological perspective, innovation, management principles, McKinsey, shareholder value model, Valuation | Leave a comment ← Older posts
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