Over at Reason.com they have interesting text and video on the sad tale of 38Studios, New England baseball hero Curt Schillng’s collapsed videogame venture that attracted nary an independent private investor but sucked up $100 million from Rhode Island taxpayers. Some takeaways from the story:
1) When inexperienced and undermanaged quasi-public economic development corporations go chasing glamour ventures to try to cover up their state’s abysmal business climate, bad things are likely to happen.
2) When the glamour venture is headed by a star athlete with zero experience or expertise in his chosen field, and appears to have no experienced management at all, the odds go down.
3) When a venture making a totally conventional product, such as a massive multiplayer game, can’t get any private investors, there’s probably no conceivable public policy justification for a subsidy.
4) People like Schilling who claim to be against big government but then reach their hands into the taxpayers’ pockets to fund their own dreams are, at best, intellectually stunted.
5) Schillings’s pro-Bush political views may helped save the taxpayers of Massachusetts, because Democratic governor Deval Patrick turned Schilling down flat even though the pitcher is an immensely popular legend among Boston Red Sox fans.
Apparently the University of California system decided it needed to update its image, so they cooked up this. Here are the old and the new side by side:
When I see the old logo, I think of quaint values like learning and truth. When I see the new logo, I imagine little enzymes acting like keys to unlock the stains in my laundry.
UPDATE: The UC bureaucracy folds up like a tent a mere five days after this was posted. Maybe the new logo should say vox populi somewhere. (H/t David Hoopes in the comments.)
NBA Commissioner David Stern recently fined the San Antonio Spurs $250,000 and severely chastised them for the decision by Gregg Popovich, their near-legendary coach, to rest his aging stars at home rather than fly them to Miami for a meaningless (but nationally televised) tilt with the defending-champion Miami Heat. Is Stern losing his grip? Does he need an intervention and/or a forced retirement as he reaches his managerial dotage? While I haven’t heard of Commissioner Queeg–whoops, Stern–clicking steel balls in his hand or searching for the keys to the strawberries, a Caine Mutiny scenario may be approaching if he continues to deteriorate. Other firms with long-term, successful “emperor” CEOs have found their later years to be problematic. See Eisner, Michael (Disney) or Olson, Kenneth (Digital Equipment Corporation) or maybe Cizik, Robert (Cooper Industries).
Ever teach one of those classes where you’re off a beat, forget points you want to make, and ramble a little bit? Maybe your preparation wasn’t up to its usual standard. Fortunately, there isn’t an opponent in the room compounding the problem by trying to make you look bad. Barack Obama did not have that luxury tonight.
I had fun watching the president’s discomfiture, but I sure wish Romney had a better five points on the economy and that he would explain why cutting the growth of entitlements is not an optional choice. (Although his Spain remark wasn’t bad.)
I am visiting Lund University this week – and they have conclusively shown that the Resource Based View indeed is useful. Useful for what? As a door stop to their conference room. (I also sent the proof/picture to Jay, one of the originators of the theory.)
An article recently posted in Slate reviews research showing that a significant portion of the variation in IQ tests is attributable to motivation rather than ability. In one striking study researchers measured the children’s IQ and split them into High, Average, and Low groups. They reran the test offering the low group an M&M for every correct answer. As a result of this simple incentive, the low group’s score went from 79 to 97 – on par with the average group.
Ok, so incentives work. Perhaps not a big surprise on many levels.
On the other hand, there is a large OB/HRM literature invested in the conclusion that performance increases are associated with hiring employees with a higher IQ. The assumption there is that IQ measures ability as opposed to motivation.
This raises a critical question for strategy scholars. Is motivation an immutable attribute of human capital Read the rest of this entry »
Entertaining story of how the Applebee’s restaurant chain is trying to improve asset utilization by adding late-night karaoke and G-rated cut-loose partying to its traditional family-friendly but competitively besieged regular-hours dining experience. The impetus for this innovation appears to have been franchisees who went to their privately-held franchisor and asked for permission to experiment, which was enthusiastically granted.
My favorite part of this story is the superhero-like switch from regular-hours Applebee’s to creature of the night “bee’s” with the “Apple” part of the electric sign turned off, the lights switched from green to white, and the space cleared for dancing and DJs. My second-favorite part is the image of some naive soul coming in for a snack after 10:00PM–”oh, look honey, Applebee’s is still open; let’s get some pie”–and being confronted with hard-partying suburbanites belting out Foreigner tunes and dancing drunkenly. They’re going to have some delicate marketing and branding issues going forward, but it’s hard not to cheer for the entrepreneurial spirit displayed. After all, there are suburban archipelagoes of shopping centers where the only late-night place to go out will be “bee’s.”
Nicolai’s post at O&M made me aware of a new journal, Journal of Organization Design. I definitely think org design deserves to experience a renaissance/comeback, so I welcome a journal dedicated to the topic. (Though, I do think we have far too many journals in strategy/management – many of them are of suspect quality.)
I just now checked out the web site of the journal and they have some killer features, including short videos of the authors describing their papers:
- Here’s John Mathews talking about his paper, Design of Industrial and Supra-Firm Architectures.
- Timothy Carroll on Designing Organizations for Exploration and Exploitation.
- Raymond Miles on Designing the Firm to Fit the Future.
- And, here’s a longer video of Raymond Levitt discussing virtual design teams.
I like the video feature. Nice.
There is now a large stream of scholarly literature on “platforms” – loosely, third-party services designed to bring transacting parties together. Amazon.com and eBay are obvious examples. Broadly interpreted, so are services like online dating sites (see the work by Hanna Halaburda and colleagues).
With this in mind, I came across the following article: Ghostery: A Web tracking blocker that actually helps the ad industry | VentureBeat. Ghostery is an app offered by the advertising technology company Evidon. The app is used by privacy-conscious web surfers to block web tracking services. When a new tracker attempts to install a tracking cookie on a browser sporting Ghostery, the tracker is blocked and Ghostery sends the tracker information back to Evidon to be added to the company's database of web trackers, which improves the quality of the app.
The interesting twist in the business model is that Evidon then turns around and licenses its tracker database to the very ad networks its app is designed to block. In fact, says Evidon CEO Scott Meyer, “When a new web tracker comes on the scene, they often want to be listed in Ghostery. It’s proof that they’ve arrived and have influence.”
So, what do we call a service that helps side A avoid side B while helping side B pursue side A? Seems as if this phenomenon should have its own, suitably clever-yet-scholarly term.
I must admit that Andrew Hacker has been a byword for fatuousness to me for quite some time. His latest, however, is especially meretricious because it plays directly into what so many people desperately want to believe–that ignorance of algebra is AOK, so we shouldn’t bother trying to teach it. Apparently, algebra drives people to drop out of high school and fail competency tests, and these are Bad Things we can avoid by no longer teaching or testing it. (Next up–placing the thermometer in an ice bucket to cure your fever.)
Hacker’s most superficially compelling argument is that almost no workers use algebra in their day-to-day work, including a large number of people working in technical fields. (In a parody of Deweyism, he does want students to learn “citizen statistics” and “quantitative literacy” so they can understand how the Consumer Price Index is put together, although how you can understand a weighted average without understanding algebra is beyond me.) In case someone brings this job-relevance argument up at a party, here are some quick responses:
1. Jobs don’t require algebra largely because there aren’t very many people who are good at it. If no one could read, jobs wouldn’t require literacy, either, but there would be a significant productivity loss in many cases.
2. In the novel and movie The Caine Mutiny, the intellectual (though evil) character points out that in the Navy “everything was designed by geniuses to be run by idiots.” We could equally say that in the modern world everything is designed by people who know algebra to be used by people who don’t. The fewer people who know algebra, the more unnecessarily elitist that world will be.
a) It’s almost impossible to understand financial relationships without being able to manipulate algebraic formulae. You can plug and chug different numerical values into a calculator or spreadsheet formula, but you’ll have no idea about the sensitivity of results nor will you be able to check or modify the formulae.
b) Probability and statistics are doable, in a very limited and rote way, using prepared templates, for people who don’t know algebra. Anything beyond that, though, is impossible to figure out if you can’t manipulate the symbols properly. Would you trust someone to run a regression or interpret its results if they didn’t know in their bones what a coefficient represented, much less a log-linear relationship?
c) Some functional relationships can be grasped by drawing graphs without algebraic manipulation. If you need more than two dimensions or want to prove which way the curves have to move when you change assumptions, though, you’re going to have to be able to do some algebra.
d) Lots of non-STEM jobs involve spreadsheet formulas of various kinds. Media planning, job-cost estimation, tax planning, budgeting, etc. are common sorts of work for “office” employees. The people who use these spreadsheets probably could get by without algebra, but anyone who wants to write one is going to be at a big disadvantage without it.
3. It indeed would be a lot easier for people to learn algebra if it were contextualized better by being tied to applied topics in other subjects. But that approach would result in algebra becoming a more important step along the way to passing science, economics, and other courses rather than a less important part. Moreover, some of it requires rote memorization just as does learning the multiplication tables or irregular verbs in a foreign language. It will not always be fun, but some necessary things just aren’t fun.
4. Last I checked, very few jobs require writing or reading Elizabethan English, knowing about Reconstruction, drawing or painting, worrying about environmental issues, knowing the parts of a frog or flower, or understanding why potassium burns when placed in water. I bet I could reduce dropouts and improve test performance by removing those topics from the curriculum and who’d know the difference? Voc-ed uber alles!
5. Hacker’s earlier work questioned the cost/benefit ratio of college. If my hypothesis about the higher education market is correct, then Hacker’s suggestion to stop teaching algebra in high school would fuel the very phenomenon he decries.
(Note 1: Anyone who will be offended by light-hearted discussions of the Dark Knight Rises in light of the shootings at the Aurora premier should skip to another part of the Internet. I have no intention of giving murderous attention-seekers the power to hijack all media, but I am aware that not all will agree.)
(Note 2: MINOR SPOILER ALERT)
I’ve just seen the Dark Knight Rises, which was a pretty good movie–not as good as the previous film in the trilogy, unsurprisingly, but exciting and even moving at times, with lots of little moments for each minor character to reveal his true nature and seem like a unique individual.
One minor problem: Batman is supposed to be a master strategist and tactician. He’s chosen to go underground to pursue and confront his enemy, Bane, about whom he has considerable intelligence, including Bane’s background, training, experience, and physical prowess (including his main point of weakness–a mask over his mouth that keeps Bane from suffering intense pain). He can see Bane standing in front of him, a very large individual of obvious strength and questionable agility. Batman is wearing a utility belt filled with grenades, throwing blades, sleep darts, cable launchers, and bolas. He is standing in a large cavern and is capable of operating vertically by shooting lines up to the ceiling and using built-in powered winches. In short, he is in a perfect position to remain outside Bane’s striking distance while hitting him with a variety of entangling, injuring, and even killing weapons.
Out of this cornucopia of options, what does Batman choose? Of course, a head-on bull rush, followed by a slugfest and wrestling contest. That’s the combat equivalent of Neiman-Marcus starting a price war with Wal-Mart. Macho is one thing, unbelievably stupid is another. (It’s true that in the real world, people make stupid mistakes, but in fiction we want Aristotelian probability, not literalness. And if someone does go the literal route, the character’s stupidity should at least be noted by others in the story.)
The fundamental writing problem here was actually reflected way back in the Knightfall comic book series that introduced Bane–his supposed awesomeness as a combatant simply doesn’t match his capabilities. (At least in the comic book, they gave him a device that injected a super-steroid called Venom straight into his head when he needed to pump himself up for extra fighting fury. It still wasn’t enough to make him seem that tough for any foe with speed, agility, and distance weapons, but it made for a striking visual when his veins would bulge out in expansion mode.) So the Nolans gave themselves a tough writing challenge the moment they decided to use the Bane character–another example of a particular strategy causing tough execution problems.
We’re excited to have Sheen Levine join us here at StratetgyProfs.net. Sheen is currently a faculty member at the Institute for Social and Economic Research and Policy at Columbia University. His research focuses on social networks, institutions and markets. You can learn more about his research etc here. You can also follow Sheen on twitter @sslevine.
And a quick plug: if you are going to the Academy of Management in Boston (Aug 3-7), be sure to check out Sheen’s (co-organized with Shayne Gary) cool Behavioral Strategy 3.0 workshop (learn more here). It promises to be a great session with lots of interdisciplinary interaction.
Great to have you here Sheen! We look forward to your posts.
When Laura d’Andrea Tyson was the Dean of London Business School – some years ago – she put together a committee to examine and reformulate the School’s strategy. Several professors sat on that committee. When I once asked her, having a drink at her home, why none of them were Strategy professors, she looked at me for about 5 seconds baffled. Eventually, she stammered, “yes, perhaps we could consider that in the future….”.
It was clear to me, from her stunned silence (and she wasn’t easily lost for words), that she had never even considered the thought before.
I, in contrast, thought it wasn’t such an alien idea; putting some strategy professors on the School’s strategy-making committee. We had – and still have – people in our Strategy department (e.g. Costas Markides, Sumantra Ghoshal) who not only had dozens of top academic publications behind their names but who also had an eager ear amongst strategy practitioners, through their Harvard Business Review publications and hundreds of thousands of business books sold (not to mention their fairly astronomical consulting fees).
Today, our current Dean – Sir Andrew Likierman – is working with a group of people on a huge strategic growth decision for the School, namely the acquisition of a nearby building from the local government that would increase our capacity overnight with about 70 percent. Once more, strategy professors have no closer role in the process than others; their voice is as lost in the quackmire as anyone else’s.
If Sir Andrew had been an executive MBA student in my elective (“Strategies for Growth”) writing an essay about the situation, I would ask him for a justification of the need for growth given the characteristics of the market; I’d ask him about the various options for growth (geographic expansion, e.g. a campus abroad; related diversification, e.g. on-line space, etc.), and how an analysis of the organisation’s resources and capabilities is linked to these various options, and so on. But a systematic analysis based on what we teach in our own classrooms and publish in our books and journals has, it seems, not even be considered.
And I genuinely wonder why that is? Because it is not only strategy professors and it is not only deans. Whenever the topic of the School’s brand name comes up, no-one seems inclined to pay more attention to our Marketing professors (some of whom are heavyweights in the field branding) than to the layman’s remarks of Economics or Strategy folk. When the School’s culture and values are being assessed, Organizational Behaviour professors are conspicuously absent from the organising committee (ironically it was run by a Marketing guy); likewise for Economics and OB professors when we are discussing incentives and remuneration. So why is that?
Is it that deep down we don’t actually believe what we teach? Or is it that we just don’t believe what any of our colleagues in other departments teach…? And that it could be somehow relevant to practice – including our own? Why do we charge companies and students small – and not so small – fortunes to take our guidance on how to make strategy, brands, and remuneration systems only to see that when our own organisation is dealing with them it all goes out the door?
I guess I simply don’t understand the psychology behind this. Wait… perhaps I should go ask my Organizational Behaviour professors down the corridor!
Since writing the piece below – perhaps not surprisingly; although it took me a bit by surprise (I didn’t think anyone actually read that stuff) – Sir Andrew contacted me. One could say that he took the oral exam following his essay on the School’s growth plans and passed it (with a distinction!).
In all seriousness, in hindsight, I think I was unfair to him – perhaps even presumptuous. I wrote “a systematic analysis based on what we teach in our own classrooms and publish in our books and journals has, it seems, not even be considered” and, now, I think I should not have written this. That I haven’t been involved in the process much and therefore have not seen the analysis of course does not mean it was never conducted. And it is a bit unfair, from the sidelines, to throw in a comment like that when someone has put in so much careful work. I apologise!
In fact, although Sir Andrew never lost his British cool, charme and good sense of humour, I realise it must actually have been “ever so slightly annoying” for him to read that comment, especially from a colleague, and he doesn’t deserve that. So: regarding the specifics of this example: forget it! ban it from your minds, memory, bookmarks and favourites (how would this Vermeulen guy know?! he wasn’t even there!)!
That you should pay more attention to Marketing professors when considering your school’s brandname, more attention to your OB professors when considering your incentive systems and values, more attention to Finance professors when managing your endownment and, God forbid, sometimes even to some strategy professors when considering your school’s strategy, I feel, does stand – so don’t throw out the baby with the bathwater just yet. But, yes, do get rid of that stinky bathwater.
[H/T to several folks on Facebook talking about this: Nicolai Foss, Russ Coff, Marcel Bogers etc.]
We’ve talked about the extensive fraud of Diederik Stapel before, but apparently there have been retractions even closer to home: the journal Strategic Organization retracted an article. And, over at the blog Retraction Watch there is an active discussion about Dirk Smeesters’ retractions and recent resignation. A bit more in a short Wired magazine piece. A Nature journal interview with Uri Simonsohn who discovered the Smeesters fraud.
Stevie Spring, who recently stepped down after a successful stint as CEO of Future plc, the specialty magazine publisher, once told me, “I am not really the company’s CEO; what I really am is its Chief Story Teller.”
What she meant is that she believed that telling a story was her most important task as a CEO. Actually, she insisted, her job was to tell the same story over and over again. And when she said ‘a story’, she meant that her job was to tell her representation of the company’s strategy: the direction she wanted to take the business and how that was going to make it prosper and survive. She felt that a good CEO should tell that kind of story repeatedly, to all employees, shareholders, fund managers and analysts. For, indeed, a good strategy does tell a story.
All successful CEOs whom I have seen were great storytellers. Not necessarily because of their oratorical skills, but because the characteristics of the strategy they had put together lent themselves to being told like a story — and a good one too! The most important thing for a CEO to do is to provide a coherent, compelling strategic direction for the company, one that is understood by everyone who has to contribute to its achievement. For that, a story must be told.
When I say this, I am not implying that CEOs need to engage in fiction, nor do they need to be overly dramatic. In my view, a good business strategy story has three characteristics.
First, the story must provide clear choices.
Stevie Spring’s choices were as clear as her forthright language: “We provide specialty magazines, for young males, in British.” Hence, it was clear what was out; there were to be no magazines on, say, ‘music’ (that is too broad), no magazines in German (although that could be a perfectly profitable business for someone else) and no magazines on pottery or vegetable gardens (unless that has recently seen a surge in popularity among young males in the UK without my knowing it). A good strategy story has to contain such a set of genuine choices.
Moreover, it has to be clear how the choices made by the company’s leaders hang together. For example, Frank Martin, who as a CEO orchestrated the revival of the British model-train maker, Hornby, by turning it from a toy company into a hobby company, put his strategy story in just 15 words. “We make perfect scale models for adult collectors, which appeal to some sense of nostalgia.” He decided to focus on making perfect scale models because that is what collectors look for. Moreover, people would usually specifically collect the Hornby brand because it reminded them of their childhood, and with it a nostalgic, foregone era. Frank Martin’s choices were not just a bunch of disconnected strategic decisions; they hung together, and, combined, made for a logical story.
Second, the story must tie to the company’s resources.
Importantly, the set of choices has to be clearly linked to the company’s unique resources, those that can give them a competitive advantage in an attractive segment of the market. Although Hornby had been hovering on the brink of bankruptcy for a decade, it still had some valuable resources. First of all, it possessed a valuable brand that was very well-known and appreciated by people who had owned a Hornby train as children.
Additionally, the company had a great design capability in its hometown of Margate. However, these resources weren’t worth much when competing with the cheaper Chinese toy makers. The children who wanted a toy train for their birthday didn’t know (and could care less) about the Hornby brand. The precision modelling skills of the engineers in Margate weren’t of much value in the toy segment, where things mostly had to be robust and durable. However, these two resources — an iconic brand and a design capability — were of considerable value when making ‘perfect scale models for adult collectors’. It was a perfect match of existing resources to strategy.
I observed a similar thing at the Sadler’s Wells theatre. Ten years ago, before the current CEO Alistair Spalding took over, the theatre put on all sorts of grand shows in various performing arts. Yet, the company was in dire straits, losing money evening-on-evening and by the bucket. Then, Spalding took over and highlighted his leadership with a clear story. He started telling everyone that the theatre was destined ‘to be the centre of innovation in dance’.
He did this because the company was blessed with two valuable resources: (1) an historic reputation for dance (although it had diversified outside dance in the preceding years) and (2) a theatre once designed specifically with dance in mind. Spalding understood that, with these unique resources, he needed to focus the theatre on dance again. Beyond that, he made it the spider in the web, a place where various innovative people and dance forms came together to create new art, a place where stars were formed.
Third, the story must explain a competitive advantage.
The story must not only provide choices that are linked to resources, it must also explain how these choices and resources are going to give the company a competitive advantage in an attractive market, one that others can’t easily emulate. For example, Hornby’s resources enabled it to make perfect scale models for adult collectors better than anyone else, but those adult collectors also happened to form a very affluent and growing segment, one in which margins were much better than in the super-competitive toy market. It isn’t much good to have a competitive advantage in a dying market; you want to be able to do something better than anyone else in a market that will make you grow and prosper.
Thus, it has to be clear from your strategy story why the market is attractive and how the resources are going to enable you to capture the value in that market better than anyone else. The story of the CEO of Fremantle Media, Tony Cohen, for example, was that his company was going to make television productions that were replicable in other countries, with spillovers into other media. Because of their worldwide presence, Fremantle Media were better than their national competitors at rolling out productions such as the X-factor, Pop Idols, game shows and sitcoms. While their local competitors could also develop attractive and innovative shows, Fremantle’s multinational’s presence enabled it to reap more value from them. Therefore, that’s what they focused upon: shows that they could replicate across the globe. It was their competitive advantage, and they built their story around it.
Of course, a good story alone is not enough. A leader still needs good products, people, marketing, finance and so on. But, without a good story, a leader will find it impossible to combine people and resources into a forceful strategic thrust. A good story is a necessary — although, alone, not sufficient — condition for success.
My message for leaders: if you get your story right, it can be a very powerful management tool indeed. It works to convince analysts, shareholders and the public that where you are taking the company is worth everyone’s time, energy and investment.
Perhaps even more importantly, it can provide inspiration to the people who will have to work with and implement the strategy. If employees understand the logic behind a company’s strategic choices and see how it might give the company a sustainable advantage over its competitors, they will soon believe in it. They will soon embrace it. And they will soon execute it. Collective belief is a strong precursor of success. Thus, a good story can spur a company forward and eventually make the story come true.
We’re excited to welcome Melissa Schilling to StrategyProfs.net! Melissa is a Professor of Management and Organizations at the Stern School of Business, NYU. Her research focuses on strategy, innovation, and technology. You can learn more about her work here.
We look forward to Melissa’s posts!
If you have ever been unlucky enough to attend a large gathering of strategy academics – as I have, many times – it may have struck you that at some point during such a feast (euphemistically called “conference”), the subject matter would turn to talks of “relevance”. It is likely that the speakers were a variety of senior and grey – in multiple ways – interchanged with aspiring Young Turks. A peculiar meeting of minds, where the feeling might have dawned on you that the senior professors were displaying a growing fear of bowing out of the profession (or life in general) without ever having had any impact on the world they spent a lifetime studying, while the young assistant professors showed an endearing naivety believing they were not going to grow up like their academic parents.
And the conclusion of this uncomfortable alliance – under the glazing eyes of some mid-career, associate professors, who could no longer and not yet care about relevance – will likely have been that “we need to be better at translating our research for managers”; that is, if we’d just write up our research findings in more accessible language, without elaborating on the research methodology and theoretical terminology, managers would immediately spot the relevance in our research and eagerly suck up its wisdom.
And I think that’s bollocks.
I don’t think it is bollocks that we – academics – should try to write something that practicing managers are eager to read and learn about; I think it is bollocks that all it needs is a bit of translation in layman’s terms and the job is done.
Don’t kid yourself – I am inclined to say – it ain’t that easy. In fact, I think there are three reasons why I never see such a translation exercise work.
I believe it is an underestimation of the intricacies of the underlying structure of a good managerial article, and the subtleties of how to convincingly write for practicing managers. If you’re an academic, you might remember that in your first year as a PhD student you had the feeling it wasn’t too difficult to write an academic article such as the ones you had been reading for your first course, only to figure out, after a year or two of training, that you had been a bit naïve: you had been (blissfully) unaware of the subtleties of writing for an academic journal; how to structure the arguments; which prior studies to cite and where; which terminology to use and what to avoid; and so on. Well, good managerial articles are no different; if you haven’t developed the skill yet to write one, you likely don’t quite realise what it takes.
2. False assumptions
It also seems that academics, wanting to write their first managerial piece, immediately assume they have to be explicitly prescriptive, and tell managers what to do. And the draft article – invariably based on “the five lessons coming out of my research” – would indeed be fiercely normative. Yet, those messages often seem impractically precise and not simple enough (“take up a central position in a network with structural holes”) or too simple to have any real use (“choose the right location”). You need to capture a busy executive’s attention and interest, giving them the feeling that they have gained a new insight into their own world by reading your work. If that is prescriptive: fine. But often precise advice is precisely wrong.
3. Lack of content
And, of course, more often than not, there is not much worth translating… Because people have been doing their research with solely an academic audience in mind – and the desire to also tell the real world about it only came later – it has produced no insight relevant for practice. I believe that publishing your research in a good academic journal is a necessary condition for it to be relevant; crappy research – no matter how intriguing its conclusions – can never be considered useful. But rigour alone, unfortunately, is not a sufficient condition for it to be relevant and important in terms of its implications for the world of business.
My co-blogger Russ Coff’s 2010 Strategic Management Journal piece on the coevolution of rent appropriation and capability development used Tony Fadell and the development of the iPod as an example. Here Tony Fadell talks about constraints, ignoring experts and embracing self-doubt:
The microfoundations-thing is misunderstood and abused in strategy. I try not to even use the word any more – given that it gets thrown around so loosely (it seemed that every talk at an SMS a few years ago managed to slip the word in). So some quick notes on microfoundations and strategy.
The “microfoundations”-effort in strategy is focused on the notion that individual-level heterogeneity matters – a lot. This means that who an organization is composed of, who self-selects into it, who leaves, matters – a lot. Extant theories of organization and capability don’t recognize this (for example, see Kogut and Zander, Nelson and Winter): in fact they argue that mobility is trivial, or (often implicitly) assume that individuals are homogeneous (by focusing directly on various collective constructs). Organizational effects are said to trump individual effects. But, I think the nested, individual-level effects trump higher level ones (individual>firm>industry effects) – some quick supporting points:
First, mobility: Mobility is the great litmus test for where heterogeneity might lie. If a particular individual leaves (in fact, who it is matters – a lot), does that impact organizational outcomes? Individual mobility is needed since analysis of variance is confounded without it: what is attributed to the collective level might in fact be an individual-level effect. A common mistake.
Second, Lotka distribution and variance within: If you look at productive activity in any setting, you’ll quickly note that it is highly skewed. The statistician Alfred Lotka pointed this out in 1926 in terms of scientific productivity, highlighting how in any population a few people are responsible for a radically disproportionate amount of productivity (measured in various ways): articles, citations, etc. In many settings the 80-20 rule (20% of people are responsible for 80% of the output) doesn’t even begin to cover it. So, look in any setting and you’ll find radical, nested heterogeneity – more heterogeneity within the system (this is often assumed away) than across.
Of course, it could be that highly talented individuals ALL select to be in a particular setting, which then might confound imputing heterogeneity.
Now, some common misunderstandings about microfoundations. First, the above does not mean that there aren’t any collective effects (benefits of interaction, learning, routines, structures, context etc etc): of course there are! But the first-order exercise ought to be to specify, as best we can, the nature and capabilities of the individuals involved. After that collective and emergent effects can be properly tested.
Though, note that–and this is important–collective effects can also be of the variety where the whole is less than the sum of the parts. Social psychology gives us lots of examples: social loafing and free-riding, influence (a la Asch), work on nominal versus interactive brainstorming, etc. This is often not recognized as we tend to ascribe virtues (but not costs) to organizational culture, interaction, community, etc. To complicate matters, individuals of course have much control over how much discretionary effort to put into collective tasks – (ah!) depending on the context.
Second, the microfoundations notion does not mean that we all become psychologists or über-reductionists, where we jump directly to genes or general intelligence (g), or we reduce everything back to the big bang. The aforementioned are quite common caricatures of microfoundations, or points of ridicule unleashed on anyone advocating methodological individualism. Rather, more simply, it is an approach that recognizes that individuals matter – and thus individuals are used as the basis for building models of social interaction and for explaining aggregate and emergent effects at the higher level.