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15 - Seven Virtues of Strategic Organization

Returning to the classic philosophy and the notion of values-based ethics, the authors offer seven virtues of strategic organizations , which in their experience seem to apply across a wide range of industries and organizations. There are likely exceptions and additions to be made, but they feel it to be a good start. Also following Aristotle's model, they maintain that each of the virtues must be balanced to be in order, applied neither too little nor too much.

In brief, the virtues are:

  1. Culture - A strong culture that creates common focus but does not smother innovation. It must be balanced between the extremes of being too disintegrated and too homogenizing.
  2. Politics - A merit-based system in which a esteem, rewards, and authority are granted to those who contribute. It must be balanced between democracy (in which everyone is equal regardless of the value they contribute) and dictatorship (in which only those with formal rank have authority)
  3. Learning - The firm must value expertise and the acquisition of knowledge. It must be balanced between being anti-intellectual (hostile to ideas) and expert-bounded (slavish to theory)
  4. Curious - The firm must have a practical approach to idea generation that gives equal weight to internal and external influences. If it is too internal, it loses touch with reality, and if it is too external, it lacks an identity of its own and becomes a follower.
  5. Time Orientation - The firm must consider both its present and its future in planning strategy. Too much orientation on the future leads to a firm that is disorganized and unproductive, too much on its present prevents the firm from being innovative.
  6. Architecture - The firm must not let organizational hierarchies result in silos that do not cross communicate. Too closed an architecture leads to a slow-moving bureaucracy that's characterized by in-fighting, but too open an architecture leads to lack of focus, important tasks left unattended, and too many people attempting to control a single idea.
  7. Change - A firm must be poised for change, and able to adapt to as necessary to respond to opportunities and threats as they are discovered. Too little willingness to change and a firm fails to evolve and becomes obsolete, but too much willingness to change and it exists in a state of constant chaos and flux.

The remainder of this chapter considers each of these virtues in more granular detail.

Adaptive Culture

During the 1980s, there was a great deal of fascination with Japanese corporations - in particular, they had a very strong culture that seemed to be a growth of Bushido, the formal warrior code that is a central and distinctive feature of Japanese culture. (EN: this is a common misperception, as the Japanese economy was rebuilt according to western theories in the wake of the second world war, in which sociologist Douglas McGregor and psychologist Abraham Maslow were foundational theorists.) However, by the 1990s, it was clear that the Japanese business culture generally works against innovation and change, and the firms that practiced it began to suffer for lack of competitiveness.

Further back in history, China developed an extremely strong culture in the fifteenth century, shortly after the emperor insisted that its massive navy and merchant fleets be destroyed - and , like the Japanese, it crumbled afterward as China's isolationism prevented it from benefitting from mercantilism and industrialization.

From these examples, it should be clear that an organization, like a nation, needs a strong culture in order to thrive and be distinctive, but failure to adapt to the changing world in which it exists will eventually lead to failure, even of the strongest firm.

Then, a reference to Peter Frost's book on organizational culture, which considered three different perspectives of organizational culture:

Frost's work suggested the Aristotelian balance between extremes of a culture that was so rigidly defined that an elaborate and heavy-handed bureaucracy effectively prevented change and evolution, and the opposite extreme of chaos and inconsistency resulting from a total lack of control.

It's suggested that some organizational theorist suggested the compromise of a strong bureaucracy that had some level of tolerance for subversives, giving them enough slack to explore changes that might be beneficial, and could then be introduced gradually to the primary culture. While such an approach would be practical in slow-moving markets, the control of innovation is crippling in an environment where change occurs rapidly, as the organization that attempts to be slow and methodical is left behind.

The notion of culture is adapted from sociology, in which it is often observed that cultural changes take place among the people of a culture. Their rulers may encourage or resist change, but do not have the power to compel change to happen or resist a change that is occurring contrary to their wishes. Given that corporate managers have significantly less power than dictators or emperors, their ability to control culture is even less of a realistic expectation - they can attempt to influence the culture of their organizations. For example, a manager can hire candidates that do not fit the mold of an existing culture, with the expectation that they will inject different skills and perspectives and challenge the status quo, as opposed to seeking candidates that will not make ripples.

Another sociological observation is that, on a large scale, there is never a singular culture: a large group of people consists of smaller groups of subcultures. The description of the overall culture may consider the traits that they have in common, or may focus on some of the most dominant or populous subcultures. When the larger group seems to change, it is likewise the result of either changes in the various subcultures as they struggle to associate or conflict with one another.

Democracy and Dictatorship

In the domain of politics, strategic orientations are encouraged to seek to achieve meritocracy.

Dictatorship, while having the benefit of a singular focus and alacrity, stifles innovation and evolution, such that it perishes from lack of relevance. Dictatorship also requires a great deal of strength and energy from the dictator - when he loses his authority or his enthusiasm, the organization winds down, and given that dictators surround themselves with supporters and sycophants, there is generally no suitable replacement nor anyone to help the dictator carry the weight.

While democracy is considered noble, it also has its issues. Getting a sufficient number of people "on board" with an idea in a democracy is very difficult - there is constant conflict and compromise, and a small number of people who have the best idea will always be outvoted by a large number of people who have a much worse one. In practice, democracy has ceded to the republic, in which the masses vote for a leader whose solution they support (because it benefits themselves), which is necessary because the masses generally fail to produce a practicable solution.

Meritocracy, meanwhile, strikes a balance between the two: anyone can suggest an idea, but there is a formal leadership who ultimately decide which suggestions are acted upon. The difficulty is in perpetuating a system and maintaining the morale of employees: if there is a sense that good ideas are being ignored, or if there is no reward for those who contribute them, the morale and trust of the organization is damaged.

In the entertainment industry, where products are short-lived, companies must continuously tap into the creativity of their employees. The executives in those industries are not capable of having a constant stream of good ideas, and their ability to recognize the value of others' ideas is critical to their success. It's far more common in the performing arts for a subordinate whose good ideas are ignored to jump ship, and for other houses to make substantial income from developing ideas whose potential others failed to recognize. And while it isn't often recognized in business, many firms were founded by visionaries whose ideas were rejected by their employers.

Naive and Expert

It is taken for granted that there is value in expertise, but experts are also dogmatic: their knowledge and experience leads them to subscribe to theories and artificial rules that they seldom question. Meanwhile, many important innovations come from the naive and inexperienced whose thinking was not bound by expert knowledge.

The author refers to a previous theory (Argyris and Schon) that differentiated single-loop from double-loop learning. Single-loop learning is applied to overcome obstacles, but ignores the question of why the obstacles arose in the first place - and as a result the problems recur and constantly need to be addressed. Double-loop leaning seeks to identify the cause of obstacles and problems, to not only rectify the present issue but to take steps to ensure that it does not recur.

The authors propose a third approach which they term "deutero-learning," which they describe in nebulous terms: "Identifying connections between different frames of reference, not just within them." In essence, rather than trying to solve a problem executing on a given strategy, step back and question whether the strategy is sound, and try an entirely different approach.

With this, the authors provide a list of suggestions from another author (Sutton) for creating a culture in which broader thinking is encouraged.

Subjective and Disembodied

The authors mention one CEO who set a goal of having 50% of all innovations for the firm come from outside of the company - the number is highly arbitrary, and could lead to dysfunctional decisions (accepting bad ideas from outside while ignoring good ones from within to hit the number), but the spirit of the initiative is worthwhile: it is important for a firm to avoid becoming too fixated on internal sources, and should be open to ideas that come from outside.

However, this needs to be kept in balance: considerable harm has been done to firms who rely on external consultants to develop organizational strategy: outsiders have no sense of the organization's identity, are too dismissive of its values, and have no vested interest in its long-term goals. Leveraging external sources also means that a firm fails to develop internal capabilities, which are to its long-term detriment.

Five warning signs are presented that suggest when a firm relies too much on outsiders:

Where these conditions exist, the consultants are not consulting: they are running the business.

It's also noted that consultants, just like internal employees, tend to fall into dogmatic patterns. The dogma of a consultant may be different than that of the organization, but it is still dogma and not innovative thinking when a consultant has a favored go-to solution in mind and attempts to fit it to any problem.

A brief mention is made of companies who have taken a different approach: they do not hire industry experts as consultants, but seek a closer relationship with their customers who have first-hand knowledge of their needs and desires. Land Rover offers customers a course in off-road driving, Levi's allows customers to design their own clothing, and Build-a-Bear enables customers to choose the features of their own soft toy. The feedback that is received directly from customers in the process of performing a real task identifies the degree to which they value the options the firm provides, and enables them to suggest ideas that might not have occurred to the firm.

Ultimately, an idea is "good" based on its own merits, not based on where it originated, and firms are increasingly leveraging outside sources for innovation.

Focus and Distraction

Another balance to be achieved is between the short and long term: firms focused on the here-and-now fail to recognize the need for change; whereas those constantly considering future opportunities fail to execute competently in the near term.

Email is an excellent example on lack of focus: while it has led to an increased quantity of communication, it has decreased its quality. Employees react in an off-the-cuff manner to everything because they do not have time to consider the long-term impact, and the constant distraction prevents them from being productive and, in many cases, even from being effective in their work. The technology of email and instant messaging has become a perpetual distraction, and the author refers to prototypes of software application that effectively blocks inbound messages when the user is engaged, as evident by their activity with the computer.

At the same time, diversion and distraction are necessary to innovation: to become too settled in a routine or too devoted to a single goal prevents people from being innovative. The chief problem with distraction is not the lack of ability to focus (psychologically, we're quite capable of switching attention very quickly and to act effectively without much deliberation), but the ability to filter - the unimportant things seem just as important as the important ones in a short-term mindset.

Constant distraction also leads to patterned behavior - the fastest possible reaction means doing what is typically done without taking sufficient time to decide whether the typical reaction is the right one. There needs to be some reflection and some incubation in order to formulate a new approach and assess whether it is worthwhile before undertaking it.

Giving people more than one task at a time improves morale and overcomes some of the boredom of work - and it enables them to shift attention, to stop grinding on a single thing even when it is not productive to do so, and instead put their attention on something else and return to the original problem with a fresh perspective. But too much diversion leads to disjointedness, frustration, and the sense that nothing is ever completed.

There's a sidebar about the value of "sleeping on it," giving the mind the time it needs to process and contextualize information often leads to a better outcome than soldiering on numbly when we have lost out enthusiasm for an idea. The author refers to a study (Scientific American Mind) in which it was found that subjects who were given a twelve-hour break were more successful in detecting hidden relations between various data, and those who had sleep outperformed every other group in making difficult inferences. Neurologists uphold that a person who is constantly bombarded with sense data and is engaged in active thought is generally unable to keep up, and some down-time is necessary for the brain to process information more fully.

A general way to get a sense of how distracted people are pertains to their general morale. People who have the right amount of variety in their work, yet not so much that they are being run ragged, generally have better morale - and they have the sense to recognize and describe then they are feeling bored by monotonous tasks or stretched too thin.

Open and Closed Planning

The authors speak at some length about the modern casual office environment, particularly at innovative companies that have done away with the veal-farm layout in favor of a more casual environment, where there is more casual dress, and even features that cater more to the comfort and enjoyment of workers than their productivity (cafes, game rooms, gymnasiums, and the like). Beyond the environment, traditional elements of the working world have also been largely abandoned - strict timetables, rigid job description, formal chains of command, and the like.

Much of this is a backlash against the stern and soulless workplace that was the result of "Scientific Management" that seemed geared to stripping people of their humanity and reducing them to drones who were laser-focused on performing very simplistic and restricted tasks.

But at the same time that the workplace has been made more leisurely, the erosion of the boundary between "work" and "life" has also resulted in the intrusion of work into private life: in particular, the technological capabilities of email and mobile have created the expectation that employees are at the beck and call of their employers at any time.

As such, there has been a backlash against the backlash, with employees seeking to keep more rigid office hours and drawing clear lines between their personal and professional lives. There are also periodic backlashes by employers - who are accustomed to the veal-pen and disclaim open architecture to be more of a play-pen where employees are not being sufficiently productive, nor taking work seriously. Among employees, there is increasing demand to have a working environment that enables them to focus and think, to withdraw from the circus into a 'library."

In all, there is a great deal of disagreement over the office of the future, and the work-style of the future. To the authors, this is another matter of achieving balance: some creative tasks require quiet time in solitude, others require conversation and collaboration. So the answer may be for a workplace to be made up of a combination of open and closed spaces.

The degree to which open/closed spaces are desired also vary according to function. The legal department, the accounting department, and human resources likely need more closed spaces than open, because of the need to have confidential conversation and to concentrate on tasks that require focused attention.

A brief mention is made to working remotely, which provides numerous benefits to organizations (the ability to save on real estate, utility bills, and the like being chief among them), but which comes at a cost of having a fragmented and disconnected workplace where people have little contact with one another, and fail to form connections or productive relationships that occur from being in a physical space with others.

Stasis and Change

Another critical balance to be achieved is a position between the extremes of being a static company that resists even healthy change and a one that is constantly making senseless changes in desperation to remain relevant. Consider the croquet game in Alice in Wonderland, which degenerates into chaos because the Queen constantly changes the rules, as an analogy to what is happening at an increasing number of companies. Aside of the pace of actual change in culture and technology, the short tenure of corporate leaders results in constantly shuffling priorities and a complete lack of stability.

An Australian group dedicated to studying cultural change in the workplace attests that people feel "caught in a perpetual cycle of organization fads" and are becoming "increasingly cynical and disillusioned" with their leadership and organizations. Companies have jumped from the extreme of resisting all change to embracing it, often without much regard for the value of a proposed change.

Ideally, change occurs in a controlled manner, considering the reason that a change must be made as well as the advantages/disadvantages of a new procedure over the present one, with a methodical analysis of intentional and unintended consequences. Sometimes, fundamental changes are necessary, but all too often organizations become exhausted by trivial and unnecessary changes that do more harm than good.

That said, it remains a virtue to be open for change, but only when change makes sense.

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