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The Decline of Detroit: An Ecological Interpretation

Posted on March 19, 2013 by David

The value of an ecological perspective is that it views organizations primarily as movements, rather than as structures and it can be used at many different levels of analysis. It can be applied, for example, to the life of a city.

Detroit is currently in the news because, after over 300 years in existence, it seems to be in a spiral of decline. A century ago Detroit was a vibrant automobile ecology with hundreds of automobile manufacturers and “penumbra” of thousands of machine shops, metal-bashers and other suppliers that comprise an automotive ecosystem. The industry is unmatched for the range of technologies and skills that it requires; Peter Drucker called it the “industry of industries”. The city grew six-fold between 1900 and 1930 and reached its maximum population of just under 2 million in 1950. Then it was America’s fifth largest city. In 2010 less than 720,000 people lived there and it was ranked #18.

Many reasons have been advanced for this deterioration. Obviously the changes in the automobile industry are a major component of the problem. The automotive industry in the city went through a lengthy consolidation phase that culminated in the Big Three oligopoly of General Motors, Ford and Chrysler. In the early 1970s the first of the “oil shocks” marked the end of the era of cheap energy on which the automobile industry had been built. The Big Three came under ferocious attack from the Japanese who had perfected their ability to build small cars with low costs and high quality via their “lean” manufacturing process. As the industry moved away from Detroit, the city lost its affluent tax base. Early in the 21^st Century both GM and Chrysler had to go through the renewing fires of bankruptcy before they could compete effectively.

Of course the ecological perspective could be applied to the auto industry as well as its component firms, but this blog is about the city and why it has faired so poorly. After all, Buffalo and Cleveland went through similar declines without quite such horrible results and Pittsburg seems to have been able to reinvent itself after its steel industry went away. What went wrong with Detroit?

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Posted in Change, General | Tagged automotive, Buffalo, Chrysler, cities, Cleveland, community, crisis, decline, destruction, Detroit, ecocycle, ecological perspective, ecosystem, Ford, General Motors, means and ends, Pete Saunders, Peter Drucker, Pittsburg, sweet zone | 2 Comments

Can Rome be Renewed? It Will Take a Miracle…

Posted on March 12, 2013 by David

Is there such a thing as a disruptive religion? Two thousand years ago Christianity certainly qualified as such. It disrupted the then-ruling establishment, making a clear distinction between those things that belonged to God and those that belonged to Caesar. Generations of its followers told compelling narratives and its scriptures made new meanings that over the centuries were adopted by millions. It prospered mightily.

The technology of saving souls, however, has not changed much since then. Thus today we do not think of religious organizations, like the Roman Catholic Church, as being subject to technological obsolescence and disruptive innovation. But they are subject to the ecological dynamics that all large-scale, successful organizations experience.

Regular readers of this blog will be familiar with the sequence: enterprises of all kinds, religious or secular, social or commercial, public or private, criminal or clean are typically conceived in passion, born in communities of trust, grow through the application of reason and mature in power. They begin their lives as small, entrepreneurial, outward-looking communities, struggling for resources and support. Often they battle against apparently overwhelming odds to promote a new product or service for which a need is not yet widely felt. If they are religious movements, they will often face overwhelming power arraigned against them. They have to create communities because in the beginning there may be no “markets”. Over time, if they are successful, those communities will become markets and a logic and strategy for the enterprise will emerge. There may be tremendous growth and a huge expansion of people and facilities. To handle that scale the organization will have to become modular (specialized) and stratified (hierarchical); it will become a bureaucracy.

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Posted in Change, Leadership, Strategy | Tagged cardinal, change, community, conclave, crisis, destruction, ecological perspective, Hans Kung, hunting dynamics, leadership, means and ends, mission, mountain, narrative, Pope, Promised Land, Roman Catholic Church, Rome, The New Ecology of Leadership, trust, wilderness | Comments Off

Innovation at Yahoo – Where Is the Gemba?

Posted on March 5, 2013 by David

Yahoo Headquarters (Courtesy Wikipedia)

This past week the management news was headlined by Yahoo CEO Marissa Mayer’s decision to ban the firm’s staff from working remotely. Annoyed Yahoo employees quickly leaked the clumsily worded memo from the head of HR. It read in part:

“To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices. Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.”

Some pundits leapt upon what they perceived as the irony of an internet giant requiring its people to get together physically. Human resource experts cited evidence that people are more productive when they work from home (although they are less innovative). Others pointed out that Mayer herself came from Google, where it is well understood that face-to-face interaction is critical to innovation. Yet more commentators suggested that the action was an old-fashioned command-and-control move to ensure that everyone was working and not either surfing the net or playing Angry Birds.

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Posted in Change, General, Leadership | Tagged change, Clayton Christensen, community, ecosystem, fission-fusion, gatekeepers, gemba, Google, Gore, herder, hunter, hunter-gatherer, hunting dynamics, innovation, leadership, Marissa Mayer, narrative, Yahoo | 2 Comments

Objectivity: The View from Everywhere

Posted on February 26, 2013 by David

Mr. Spock – The Ideal Manager?

I have been working on revisions to my Drucker Challenge Essay so that a version of it can be published in Management Research Review later this year. The reviewers felt that I needed to deal with the implications for management of the emerging concepts of ecological rationality and embodied cognition. In the original essay I contrasted these components of practical wisdom and their emphasis on acting over thinking, with the think-then-act sequence of what I called “Cartesian Management”. Cartesian management is what has been taught in the majority of the business schools since they were reformed in the late 1950s. Back then management modeled itself on the natural sciences, selecting economics as the social science to emulate.

As I explained in the essay, the ideal manager was seen as dispassionate and “objective”, rather like Mr. Spock of Star Trek fame. The manager was located at a distance from the organization being managed in order to get the “big picture”. Management researchers looked for context-free principles that would allow a manager to break an organization into its component parts, identify the challenges it faced and issue instructions to subordinates to address them. Thus the approach was thoroughly Cartesian, separating thinking from doing, mind from body and facts from values.

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Posted in Change, General | Tagged being, Cartesian Management, deliberate practice, Drucker, ecological rationality, embodied cognition, Hubert Dreyfus, Martin Heidegger, Maurice Merleau-Ponty, Mr. Spock, objectivity, phenomenology, Plato, stages of learning, Star Trek, West Churchman | 1 Comment

The Buzz of Entrepreneurs: Hunting Dynamics Part II

Posted on February 19, 2013 by David

Last week I blogged about the virtues of organizations with “hunting dynamics” – networks that could spread themselves out across an opportunity space to explore for opportunities that come and go in unpredictable ways. Once a resource is discovered, the network contracts so that all its members can gather round the resource to extract its value. After the resource has been used, the network springs back again into its extended mode to go exploring again. This so-called “fission-fusion” dynamic is found in an astonishingly variety of innovative groups, ranging from the Quakers and Nonconformist sects of the First Industrial Revolution and the Jewish diaspora to the West coast Norwegians and the Parsees of India. Physical locations like Silicon Valley and Route 128 in Boston have also been cited as examples of places that encourage these kinds of interactions.

These ecological dynamics are found everywhere in nature. One of the most startling is the pulsating networks of slime moulds found in ecosystems like forests that allow up to 20,000 individuals to form a single organization. Experimenters have used a mould called Physarum polycephalum (“many-headed slime mould”) to solve mazes and other complex problems. In one experiment researchers placed a mould in a space that had blocks of food on it laid out in the same relationship to each other as the cities of Portugal and Spain. Within a few hours the mould had created a network that resembled the highway system on the Iberian Peninsula! The moulds do this by exploring as many options as they can and then pruning the ones that turn out to be dead ends. It reminds one of Edison’s comment, “I didn’t fail ten thousand times. I successfully eliminated, ten thousand times, materials and combinations which wouldn’t work.”

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Posted in Change, General, Leadership, Strategy | Tagged change, community, complex systems, consensus, context, creativity, democracy, ecological perspective, ecosystem, Edison, entrepreneur, fission-fusion, forager, honeybees, hunting dynamics, innovation, leadership, passion, quorum, slime mould, story, The New Ecology of Leadership, Thomas Seeley | 1 Comment

Hunting Dynamics: Why Chance Encounters Should Not Be Left to Chance

Posted on February 12, 2013 by David

A few days ago Knowledge@ Wharton published an article entitled, “How Seemingly Irrelevant Ideas Lead to Breakthrough Innovation”. It cited several examples. The cushioning on Reebok’s basketball shoes was derived from intravenous fluid bags; Qualcomm’s new colour display technology is rooted in the technology of the Morpho butterfly’s wings, and so on.

These are examples of how information from distant domains can help create breakthrough innovations in a target domain. In a new, unpublished working paper Professor Martine Haas and doctoral student Wendy Ham are attempting to understand the process. While they agree that serendipity plays a role, they are trying to identify the conditions that might promote such helpful discoveries.

So far they have suggested two ways that peripheral ideas can help breakthrough thinking: the first is idea transplantation, which involves the direct transfer of artifacts, technologies and practices from peripheral fields. The second is perspective shifting, which occurs “when expertise or experience in a peripheral domain leads work group members to see the problem in a core domain differently, thus revealing new solutions.”

As they push beyond these two outcomes to look for more fundamental causes, the two researchers have distinguished between knowledge stocks and flows. Knowledge stocks are the accumulated expertise and experience that individuals have, while knowledge flows are the dynamic process whereby peripheral knowledge becomes accessible to members of a group. It is the most critical process for breakthroughs.

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Posted in Change, General, Leadership, Strategy | Tagged abduction, affordance, change, context, ecological perspective, exploit, explore, fission-fusion, hunter-gatherer, hunting dynamics, improvisation, innovation, narrative, Peirce, Quakers, serendipity, Wharton | 1 Comment

The Natural Case for Employee Engagement

Posted on February 5, 2013 by David

Yesterday the Strategic Management Bureau asked, “Is the unending search for ‘the business case’ for employee engagement a futile exercise?” and cited an article on the topic. In my response to the question I suggested that the attempt to create a link between employee engagement and the bottom line was an indication of the bankruptcy of the current management “paradigm” that assumes that there is a single rationality involved in running a sustainable business. There are at least two – the logic of the things and the logic of people. Pioneering sociologist, Max Weber called them zweckrationale and wertrationale – instrumental or task-based logic and values-based logic. The efficacy of the former is based upon its ability to deliver results; the latter is intrinsically valuable (like saying “please” and “thank you”) and requires no justification.

In zweckrationale people are instruments, means-to-an-end; they are treated as objects, as things. In wertrationale, they are people – ends-in-themselves. Over the last fifty years, ever since the reform of the business schools, we have seen the ascent of zweckrationale over wertrationale. This was accompanied by the move from the stakeholder view of the corporation to the shareholder view and the reduction of the purposes of a firm to the single one of the maximization of shareholder value.

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Posted in Change, General, Leadership, Strategy | Tagged change, community, complex systems, creativity, crisis, destruction, ecocycle, ecological perspective, ecosystem, empowerment, engagement, KPI, KSF, leadership, lean, management ethics, Max Weber, means and ends, passion, power, purpose, reason, renewal, scorecard, shareholder value model, social traps, strategy, sustainability, sweet zone, Toyota Production System, trust, value stream, wertrationale, zweckrationale | 1 Comment

Clayton Christensen at Davos: An Ecological Perspective on Innovation

Posted on January 29, 2013 by David

Professor Clayton Christensen

When interviewed at the 2013 World Economic Forum in Davos, Clayton Christensen discussed what he has called “The Capitalist Dilemma”. It goes like this: There are basically three kinds of innovation in the economy: empowering, sustaining and efficiency. Empowering (or disruptive) innovation transmutes complicated and costly products available to a few into simpler, cheaper products accessible to many. The Ford Model T is a classic example of this kind of innovation; it transformed automobiles from expensive custom-built works of art into inexpensive, mass-produced vehicles. Empowering innovations are great creators of jobs – just think of the automobile ecosystem with its highways, dealerships, gas stations, and the oil exploration, production and distribution system that supports it.

Sustaining innovation replaces old models with new products that often incorporate new technology and novel design features. But the new products are often substitutes for other similar items. Christensen cites the Toyota Prius as an example – if a Toyota customer buys one, then he or she will not need to buy a Camry. Sustaining innovations may add some jobs, but not nearly as many as the original empowering innovation. Thirdly, there is efficiency innovation, which makes existing products more proficiently. Lean production is a good example. Such innovation economizes on capital and labour – when compared with mass production, lean frees up both capital and jobs.

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Posted in Change, General, Uncategorized | Tagged Anglo-Saxon capitalism, capital, capitalist dilemma, Carlota Perez, change, Clayton Christensen, community, complex systems, context, Davos, ecocycle, ecological perspective, ecology, ecosystem, efficiency, empowering, innovation, interest rates, IRR, machine metaphor, organic metaphor, ROCE, RONA, social traps, sustainability, sustaining, sweet zone, The New Ecology of Leadership, Tyler Cowen, unemployment | 3 Comments

Why Conscious Capitalism is Not a New Paradigm

Posted on January 22, 2013 by David

Last week I blogged about my exchange with Steve Denning about conscious capitalism and his claim that it is a “new paradigm” for management. This week I want to discuss the ecological perspective on conscious capitalism and why it is better seen as a phase in the development of an ecosystem and the benefits of looking at it in this way.

So what is conscious capitalism? In their description of it in a 2011 article in the California Management Review, James O’Toole and David Vogel identify five features common to firms that practice it:

Higher Purpose: Profits are viewed as the means to some greater end, but not as the primary goal of a business.
Stakeholder Orientation: The companies commit to meet the legitimate needs of all their organizations’ multiple stakeholders.
Integrated Strategies: They integrate their ethics, social responsibility and sustainability practices into their core business strategies.
Healthy Cultures: Internally, their organizational cultures manifest a strong sense of “community”.
Values-Based Leadership: The Chief Executives of these companies typically are “servant-leaders” rather than celebrities.

Their article is entitled “Two and a Half Cheers for Conscious Capitalism”. While they applaud the efforts of business leaders to create a new model, they say that they are “skeptical of the (business leaders’) claims that their practices will, or can, be more widely adopted, let alone bring about the kind of social and environmental transformation of American business (and world society) that its advocates and adherents envision.”

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Posted in Change, General | Tagged ba, complex systems, conscious capitalism, ecocycle, ecological perspective, edge of chaos, Gore-Tex, Merck, O'Toole, paradigm, Patagonia, sweet zone, Vogel, W.L. Gore & Associates, Whole Foods | Comments Off

False Wizards Part II: A Plague of Paradigms

Posted on January 15, 2013 by David

Steve Denning

The English economist John Kay contends that the word “paradigm” is “the most overworked and abused term in the study of management.” I agree with him completely and must confess that I cringe every time I see the latest management book or idea trumpeted as a “new paradigm” or as a “paradigm shift”. So you can imagine my reaction to Steve Denning’s recent blog in Forbes “The New Management Paradigm and John Mackey’s Whole Foods” in which he reviewed a new book, Conscious Capitalism: Liberating The Heroic Spirit of Business by John Mackey, the founder of Whole Foods and Raj Sisodia a professor of marketing at Bentley College. Denning hails it as “the emerging paradigm of management” which “is as transformational as the shift from the medieval view that the sun revolves around the earth to the view that the earth and the other planets revolve around the sun. It is a fundamental transition in world-view. Once you make the shift, everything is different.”

In the past there seems to have been a tacit agreement among management gurus not to criticize each other. Everyone was very polite. Management luminaries like Tom Peters and Michael Hammer would hold forth with widely divergent messages and no one pointed out the differences or the contradictions. With the rise of the internet that seems to be changing, and although I like much of what Steve Denning has to say (especially his writing on the importance of narrative), I thought that I would call him (politely) on the paradigm question. What follows is our exchange on Forbes.

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