Accentuate the negative

A fair amount of my research and teaching focuses on how things go wrong and why. This orientation is countercultural in the world of management, where  everyone strives for (or talks about or studies) excellence and advantage and competence and capability and innovation and sustainability and ambidexterity and X where X = [any pleasant word that can be related somehow to success].

One result of this prevailing positive bias is that we have a great deal of scholarly writing that makes fine distinctions among competences, resources, capabilities (operational and dynamic), and routines. Attempts to classify mechanisms of, say, integration failure, however, receive eye-glazed dismissals for “just describing bad management.” No Tolstoyan wisdom for us–here, every unhappy firm is the same while every happy one is different.

Just why management and strategy people are so prone to positive framing of issues is overdetermined: A desire for inspiration, the search for hidden success factors, fears of spreading demoralization or cynicism, a focus on winners as models to emulate, concern about naming and blaming specific people and organizations, and probably other things I haven’t thought of all contribute to this tendency. But neglect of the negative perspective is a big mistake for the field of strategy. Here’s why:

1. We act as commentators, critics, teachers, and sometimes advisors to those who engage in competition. As such, we are always subject to what McCloskey calls “The American Question”: “If you’re so smart, why aren’t you rich?” The most realistic and straightforward answer to this question is that most of the wisdom we have to offer is inframarginal to success. It’s not that we can provide a clear path to competitive victory or wealth creation; rather, we can steer competitors away from mistakes that will likely doom them to failure.

We are in somewhat the same situation as purveyors of theory in chess–what we know is unlikely to make somebody a champion, but without it he’ll be less likely to be even average. Hence, much of what we have to offer must be aimed at elucidating patterns of error. As the grandmaster Tartakower put it, the winner of a chess game is the one who makes the second to last mistake. (Also good, “The blunders are all there on the board, waiting to be made,” and “Chess is a fairy tale of 1001 blunders.”)

2. A successful analytical method in applied fields such as engineering is to establish a theoretical limit on performance and then examine how close particular proposed solutions get to that limit. Comparison of proposed solutions then amounts to measuring the various inefficiencies to which they are subject–a negative perspective. Engine designs, for example, suffer various forms of thermodynamic loss, and improving these designs requires addressing and balancing these different types of inefficiency.

In those cases where we have enough theoretical knowledge to generate upper bounds on performance, the same approach is the natural way to proceed in strategy and management. Something like it is supposedly employed by Toyota, which sets zero-waste upper bounds on process efficiency and then sets supply-chain goals to approach those bounds by identifying and eliminating different sources of waste.

3. From a purely descriptive point of view, many features of firm policy and practice are best understood as preventing or mitigating failure modes. For example, why should an individual’s discretion ever be restricted? A group of perfectly honest and unbiased agents should in fact not be restricted, but as Madison noted if men were angels then no government would be necessary. Deviations from angelhood–opportunism and bias–are the only good reason for genuine restrictions on agent discretion.

4. As Herbert Simon noted in The Sciences of the Artificial (at least the 1st edition), artificial systems–those constructed to accomplish human purpose–are opaque black boxes as long as they function normally. When functioning normally, their behavior is basically determined by their external environment as they cope with its demands; many different internal mechanisms could be postulated that would all generate the observed behavior. But when they fail, their mode of failure reveals something about their internal structure. That’s why psychologists like to use optical illusions to analyze the human visual system (and I know that that system isn’t artificial in the sense Simon used, but in terms of evolutionary fitness it might as well be). The particular form of failures to cope with or adapt to situations gives clues as to how the system operates and produces its observed output.

5. Entrepreneurial opportunities can often be best conceived as potentially remediable failures of the current state of affairs. A shortage of respectable places for people to hang out at away from home and work? Presto, Starbucks! Small retail businesses have trouble getting the word out and running promotions. Enter Groupon. Ten different wholesale delivery trucks stop on the same couple of blocks of a commercial street. Enter–????. (Maybe that one isn’t remediable or I’ve just given out a multimillion dollar business idea. At least credit me in your memoirs if you crack that problem.)

6. Success has a thousand fathers, and it’s hard to sort out causation. Smooth operation seems natural and no one notices or remembers how it is achieved. But failures? Those are memorable and people are not complacent about getting assigned blame for them, so it ‘s often easier to extract impacted information after a failure. Even small recurring aggravations can stimulate respondents to talk to researchers. So at least for interview and archival methods of research, there are advantages to looking at things from a negative perspective.

7. All the good things everybody likes to talk about–capabilities and resources, for example–are relevant in a competitive context only when they vary somewhat across firms. Identifying deficiencies at trailing firms is integral to identifying superiority at leading firms. The context is inherently comparative, so the negative view is an equally valid way of thinking about these “positive” attributes.

8. Behavioral economics and decision theory already are dedicated to classifying and teasing apart different sorts of cognitive bias. To bring these notions firmly into strategy, we will need to see firms as succeeding to various degrees at preventing and mitigating these biases. That is a quintessential focus on the negative and how it can be handled.

9. A focus on mistakes, errors, and failures will help overcome the “happy-talk” BS reputation of so much management rhetoric. Instead of saying “We’ll work smarter, not harder, to cope with laying off 10% of your colleagues” try “By eliminating the 10% of stupid things we’re doing now that are unnecessary, we can still get all our work done even with fewer people.” I would bet on less eye-rolling and a little more enthusiasm with the latter approach.


10 Comments on “Accentuate the negative”

  1. teppo says:

    Steve: This isn’t a blog post, it’s nine posts. Lots of great stuff – will have to try to react at some point…

  2. […] Posted: October 15, 2011 | Author: stevepostrel | Filed under: Uncategorized |1 Comment » […]

  3. […] but even I have to admit that Strategy Profs is looking quite good, for instance this lovely post on strategy and failure. Love this, for […]

  4. AndyJ says:

    The question never asked; If you’re so rich, why aren’t you smart-?

    Success teaches less than failure. Yet, we hire only those who have been successful every place they went… I never recall being asked “Why were you successful ?” There is “how” but not “why”… and few ever ask “What went wrong?” Every person who has been inside as the company sailed into bankruptcy spends weeks afterwards wondering what happened and what they failed to do… Many knew it was in trouble. Most say simply “We ran out of time”

    • Bill Drissel says:

      >The question never asked; If you’re so rich, why aren’t you smart-?

      That’s because profit never needs and excuse.

      bd.

  5. Bill Drissel says:

    “neglect of the negative perspective is a big mistake” I agree.

    The things you do wrong hurt you more than the things you do right help you.

    Compare driving to work accident-free with its negative or years of healthy living compared with a single dose of poison.

    When McCloskey was still Donald, I told him the answer to the “American” question:

    The ability to recognize a good idea and the ability to recognize a good bargain are unusual enough that it’s rare to find both abilities in one person.

    This is not original with me … I’d like to find the author so I could give him credit.

    Regards,
    Bill Drissel
    Grand Prairie, TX

    • Bill Drissel says:

      I have remembered the answer to the “American” question more clearly:

      The characteristics of a good idea and a good bargain are so different that it is rare to find the ability to appreciate both in one person.

      If you know who said this originally, please reply here.
      Bill Drissel

  6. The ineffable is real. What makes Coca-Cola more successful than Pepsi-Cola (or Afri-Cola or Dr. Pepper)? What makes Kellogg more success than Post, or GM more successful than Ford? You can parse and analyze, study and debate, but at some level, you have to accept the irrefutable absolute, “It is.” In the negative, you can study Custer’s Last Stand, the demise of CP/M, and the failure of New Coke, but constructing counterfactuals must be ultimately unprofitable because (as Aristotle point out) there are an infinite number of ways to miss the target.

    It is important and useful to study what went wrong in order to avoid mistakes.

    However, the bottom line is that success is more than avoiding mistakes.


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