Ecology versus Engineering: Why Reverse-Engineered Strategy Is No Better Than A Paint-by-Numbers Kit

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A Paint-By-Numbers Kit

Recently there has been a lively discussion on LinkedIn about the similarities and differences between Kim and Mauborgne’s Blue Ocean strategy and Michael Porter’s strategic frameworks. What became clear in the debate is that the shared methodology behind both approaches was one of reverse engineering: find examples of successful companies and “reverse engineer” the generic reasons for their success. Then these “success factors” are presented as desirable outcomes or required achievements for companies that also wish to be successful. Porter looked for clues in the structure of industries, while Kim and Mauborgne emphasized the organizations themselves.

At the root of the reverse engineering of strategy and its use in this way is an “as if” argument. When Kim and Mauborgne examined the emergence of the outrageously successful entertainment company, Cirque du Soleil, they ignored the character of its founders and their experiences, the firm’s idiosyncractic history and the unique rural Quebecois context in which it had developed. Instead they are argued that it was “as if” the Cirque had implemented their “Blue Ocean” strategy and had reinvented the circus in a way that all but eliminated competition.

“As If” Arguments; Useful for Prediction, Not Explanation

The economist, Milton Friedman, was the best-known proponent of “as if” arguments, albeit in a rather different context. In his famous essay “The Methodology of Positive Economics” he countered the arguments that assumptions in economic theories should be realistic by contending that the goal of positive economics was prediction and that the realism of the assumptions did not matter. Now there are arguments to be made against this point of view even in economics. For, as Paul Krugman has pointed out, small deviations in behavior from the assumptions can have huge economic effects, especially during turbulent times when these deviations can be significant. But when it comes to management the case for “as if” arguments fails completely. For the goal of management theory is not prediction but explanation: we want to know how organizations really become successful. Desirable outcomes based on “as if” arguments are not very helpful; they beg the entire question.

An example from baseball makes this point. Outfielders in professional baseball catch most fly balls successfully. From the perspective of a physicist it is “as if” they can calculate the velocity of the ball off the bat, predict its trajectory and run to the spot where it will land. We know that they don’t actually do this; instead they maintain a constant angle of gaze between their eyes and the ball. If the ball rises in their field of view they run away from it; if it’s dropping they run toward it. The constant process of adjustment allows them to be at the right place by the time the ball becomes catchable.  They gain this skill through practice and feedback built upon a platform of native capability powered by high motivation. They improve their performance through deliberate practice and expert coaching. Teaching them physics and how to calculate the trajectories of ballistic objects will not improve their ability to catch baseballs.

It’s the same with successful companies; while they all seem to arrive at the right place strategically, they don’t get there by “implementing” any abstract “scientific” principles. They get there by high levels of motivation (and no one gets up early to maximize shareholder value), a guided process of trial of error, practice and feedback. Trying to teach them abstract principles derived from other successful companies is not helpful in this effort.

So what are abstract reverse-engineered strategic frameworks useful for? They are very useful, perhaps uniquely so, for attracting resources. Lenders and investors are not interested in idiosyncratic stories of trial-and-error. They need to know that the firms that they are financing are “money machines” that will be able to produce reliable and ever-growing streams of cash. Reverse-engineered strategic frameworks bolster their confidence that this is the case. Similarly, boards of directors want to be able to get a compact appreciation of what the management groups they supervise are doing; these strategic frameworks help management create effective “elevator speeches” that capture the essence of what firms are trying to do and help them to gain the support of their boards.

The Rationalist Delusion and “Implementation”

Thus reverse-engineered strategic frameworks are the logical equivalent of a “paint-by-numbers” kit: they illustrate outcomes, not inputs. They show what a masterpiece might look like, but even in this role they are no substitute for it; they lack the detail, subtlety, depth and power of the original. And, of course, they give us no clue as to the contexts and experiences, processes and resources that it takes to create a masterpiece. Unfortunately this realization does not seem to have penetrated management thought. This result is what has been called the “rationalist delusion”.

The rationalist delusion is the misconception that thought can be separated from action and that in strategy formulation should precede implementation. This results in the belief that firms can execute abstract strategies that have been developed ahead of time. This leads to the perennial challenge of “implementation”. In the process of reverse engineering strategies from successful companies, much detail is lost. As far as the strategists are concerned this detail is irrelevant; they are looking for universal “success factors”. But in the process of trying to implement these strategic concepts every firm will have to work out what their detailed implications are; they will have to add detail. How do they do this? They can’t do it with a paint-by-numbers kit. Even the most detailed kits are aggregates, summaries, of myriad particulars that went into creating the overall effects. In order to create similar effects in organizations we need to understand the action implications at all levels of the organization. It’s not an intellectual exercise. We need to become artists like those that created the original masterpieces. This requires practice with feedback and high motivation in contexts where there is the freedom to experiment and to make mistakes.

Ecology versus Engineering

The bottom line is that there are no short cuts to excellence. Every organization that aspires to greatness is caught between stories from the past that cannot be replicated and abstract principles that cannot be implemented. The rationalist delusion that thought can be separated from action is just that; a delusion. We should be paying attention to the contexts that create excellence in our own organization, not the excellent outcomes that occurred in others. Our focus should be on fostering communities of trust and practice, disciplined yet free, from which strategies can emerge organically through doing and learning. In short, we need to take an ecological, developmental perspective of individuals, organizations and strategy, not an engineering one.

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2 Responses to Ecology versus Engineering: Why Reverse-Engineered Strategy Is No Better Than A Paint-by-Numbers Kit

  1. warren says:

    Excellent! The company/franchise I was
    involved with, was founded on the principles
    of allowing the people and franchises to
    develop at their own pace, and within their
    own market/community conditions. There was
    a ‘foundation’ of procedures and philosophy,
    which kept the ‘human condition’ first and
    foremost. No reverse engineering as such.

    As the old guard passed on, and the new guard
    took over, the concerns, and even foundational
    objectives were changed. ‘Reverse engineered’
    standards came into play, with procedures and
    profit (procedures and profit benefitting the
    head office)…taking precedence over the
    founders visions.

    As this new ‘reverse engineering’ and philosophy
    became too much…it was time for me to get out
    and move on.

    Excellent Post David 🙂

  2. David, excellent information and timely as we start preparing for ISO. I will make this mandatory reading for our engineering group.