The loss of creative capacity as a source of organizational decline

An interesting way to think about how organizations deal with disruptions in their environment, and what ultimately causes their demise, is to consider the thesis of Arnold J Toynbee on the decline of civilizations and apply it to the world of organizations.

Toynbee is the author of “A study in history“, the landmark book on the history of civilizations. The book comprises 6,000 pages, no less. Fortunately, a professor decided to write an abridged version, which allows normal people like you and me to grasp the virtuosity and knowledge of Toynbee in only… 1,200 pages in two volumes. What does Toynbee write? According to him, a civilization grows when its elite is creative enough to attract inside and outside constituents. The civilization breaks down when the elite loses this creative capacity and gives way to, or transforms itself into, a dominant minority. When this happens, the driver of the civilization becomes control, not attraction, and its unity ends.

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“Facts” Everybody Knows – Statistical Cautions about the BRICs (in honor of Igor Birman)

In business and finance, statistics and quantitative comparisons are daily companions.  Sometimes, however, key statistics can become too familiar, and reify, i.e. harden into “facts” that everybody knows.  In so doing, they play a large part in strategic surprises.

In the late 1980s, for example, the US Intelligence Community “knew” that Soviet GDP was $2.5 trillion, i.e. about 52 percent of the US GDP of $4.8 trillion.  How?  Their computer models told them so.  These models relied upon – among other things – assumptions about ruble-dollar Purchasing Power Parity (PPP).

Western academic Sovietologists also “knew” the USSR’s economy was about $2.5 trillion.  How?  Mostly, they relied on an authoritative source:  the CIA.

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How to Think like an Intelligence Analyst

To follow up on Philippe’s post about Thinking in Time:  at IE I teach a course called “Geopolitics” to Masters in Advanced Finance students, and “The Multinational Firm and Geostrategy” to Masters in Management students.  Students in those classes sometimes ask me to recommend books to help them “think like an intelligence analyst” and apply intelligence methods to analyzing business decisions.

I provide extensive bibliographies as part of my course syllabi, but often students want me to boil my recommendations down to a few key texts.  Call it a “getting started in intelligence for businesspeople” reading list.

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The use of history for business decision makers: Neustadt and May’s analogs framework

One of the characteristics of a disruption is that one has to deal with a new situation for the first time. Hence, almost by definition, one doesn’t have any prior experience to draw upon, and often no existing framework to use.

Does that mean that radically new situations must be dealt with without referring to the past experience? In their book, “Thinking in time”, Richard E. Neustadt and Ernest R. May think not. They argue that there is always an analog, ie a past situation decision makers can refer to, but on the conditions that the similarities and differences with the present situation be clearly understood.

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The Three Faces of Strategy

In their 2010 article in the MIT Sloan Management Review, “What Every CEO Needs to Know About Nonmarket Strategy”, David Bach and David Bruce Allen contend that sustained competitive advantage arises from engaging with “social, political and environmental issues” as part of corporate strategy.

I completely agree, but would make the case more strongly:  much of what passes for corporate “strategy” is actually tactics.  The same goes for much of the advice dispensed by illustrious “strategy” consulting firms.  “Strategy” sounds more important than “tactics,” so everybody calls whatever they’re talking about strategy, and then moves on to dispensing advice.  But what sounds like a linguistic quibble matters, because the distinction between these words bears directly on building a sustained competitive advantage in business.

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Welcome

Welcome to this blog about the study of strategy, surprise and disruption.