From black swans to
grey rhinos: Four ways
academics can help managers
In
his famous book, Nassim
Taleb admonished us to beware of “black swans,” disasters so rare
that managers disregard them and academic models exclude them—and
for which we’re therefore not prepared.
Personally,
I think this concern is overdone. The real danger is “gray rhinos”:
while hard to miss in the zoo, they are surprisingly difficult to
spot in the South African bush, obscured as they are by the
vegetation. By the time they’re visible, they are already storming
toward you, leaving little chance to react. As academics, our job is
to help managers tune into the rustling leaves or cracking twigs of
an approaching challenge—or opportunity—before it’s upon them.
To do that, we must focus on the parts of the environment that matter
most and make sure the tools we carry are fit for the purpose.
A
recent roundtable discussion involving leading-edge thinkers and
practitioners from business schools, corporate-strategy departments,
and McKinsey vividly illustrated both the promise and the challenge
of turning academic research into actionable insights. Academics are
often criticized—fairly, on the whole—for working in ivory towers
far removed from the needs of real-world executives on the ground.
In
my view, we can do a great deal more to realize “gains from trade”
between our two worlds, and in this article I set out four areas
where that can happen.
How being rigorous helps improve decisions
First
and foremost, we need rigor. But there are different types of rigor:
the rigor of abstract analytical models, and behavioral rigor, which
looks at how individuals, groups, and institutions actually behave.
So far, we’ve expected too much from research that might be
analytically rigorous but still doesn’t describe reality
accurately. I’m thinking particularly of work that comes out of
economics, such as game theory or financial economics, which can help
but also can obfuscate.
When
we confuse beautiful models with messy reality, we all suffer. In the
run-up to the financial crisis of 2008, for example, many policy
makers deluded themselves into thinking that markets could regulate
themselves, while regulators remained blissfully unaware of the
business models and structures that had developed in the financial
sector. Academics and their models share the blame for these
oversights.
Behavioral
work, though, is far more promising. We’re learning more and more
about behavioral biases and the way individuals really make
decisions. Now we need behavioral and evolutionary economics to step
up and show us how organizations make decisions—and why we can
expect them, quite predictably, to make bad decisions and to stick
with the wrong behavior. The more we know about organizational
pathologies, the better the outcomes we can achieve.
Strategy doesn’t work the way we think it does
The
importance of investigating these organizational dynamics speaks to a
related issue: as academics, we don’t spend enough time looking at
the way strategic decisions are really made. Often, what we call
strategy is less about navigating to a distant shore and more about
allocating resources among competing projects or people in the here
and now. Even our infatuation with innovation may have to do more
with making sure the organization keeps its focus on customers (as
opposed to internal politics) than it does with new products and
services. Strategy acts as a motivating and disciplining device,
which helps avoid organizational pathologies.
By
leveraging behavioral and evolutionary work, we can get a much
clearer picture of the organizational reality of strategy and a
better understanding of how to add value through cognitive issues
(such as the use of the right frameworks and analogies) and a focus
on the most relevant parts of the business environment. And without
focusing too much on the negative, we need to understand strategic
failure better and to identify the process that drives it.
Winning doesn’t just mean finishing first
There’s
also a growing body of research, in institutional and evolutionary
economics and economic sociology, looking at the web of relationships
within a sector and in the economy: how complex production systems
emerge, evolve, and interact and how value migrates within and
between sectors. Whether you call these webs industry architectures,
ecosystems, or organizational fields, they’re a lens for viewing
reality and can show us some very valuable new perspectives.
These
ideas have some big implications for competition—implications that
we’re only just beginning to understand. In many sectors, winning
doesn’t just mean finishing first; it means changing the rules of
the game to your own advantage. Consider how Google and Facebook have
redefined the way we interact with information, while also creating
ecosystems that collaborate and compete with Apple.
New landscapes demand new maps
Finally,
academics and consultants can come together to revisit popular ideas,
even those that have profoundly shaped practice, such as Clay
Christensen’s views on disruptive innovation or Michael Porter’s
five forces. Models like these are widely used and accepted because
they’re user-friendly, make things simpler, and reassure executives
that they’ve acted on well-substantiated knowledge.
But
should established firms try to be disrupters? Is Porter’s famous
model universally applicable? Academic research on such questions is
limited, and some of that work suggests the answers are not
clear-cut; there are many “ifs” and “buts” that popular
frameworks lack. Sadly, though, mainstream academic journals aren’t
interested in testing, refuting, or updating strategy frameworks, for
all these publications’ stated interest in practical implications.
As academics, we can add value by being objective and rigorous about
the conditions under which established views do and don’t work
well. We can also point out some new, valuable ideas that don’t get
enough play in the popular business press and the consulting
community.
In
all of these areas, what really excites me is the prospect of a
stronger link between practitioners and academics, so we can leverage
the research we’ve done and shape the research we need to do.
Together, we can simplify reality without distorting it and uncover
the social laws that we don’t yet understand but shape our world.
Michael
G. Jacobides
http://www.mckinsey.com/Insights/Strategy/Synthesis_capabilities_and_overlooked_insights?cid=mckq50-eml-alt-mip-mck-oth-1411
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