Archive for the ‘strategy’ Category
A while ago I asked, “what happened to resource dependence theory?” Although resource dependence theory seemed to be the dominant macro-organizational theory of the late 1970s, by the early 1990s the theory was eclipsed by institutional theory and population ecology. In the previous post, I offered some reasons for why this might have happened, but I stopped short of doing any serious analysis or a literature review. So I was happy to see that Tyler Wry, Adam Cobb, and Howard Aldrich have a paper in the latest Academy of Management Annals that tackles this question and offers some thoughts about the future of RD theory. Based on their analysis, the problem is worse than I imagined. Not only is RD theory cited less than those other theories, but it also seems to be the case that most citations to RD theory are fairly superficial. On a positive note, RD theory has become associated with a few fragmented communities of scholars who were interested in studying the particular strategies that Pfeffer and Salancik suggested actors/organizations ought to take when seeking to gain control over dependencies. From the Wry et al. paper:
[W]e conducted a systematic analysis of every study that cited External Control in 29 highly regarded management, psychology, and sociology journals between 1978 and 2011. Given the breadth of empirical domains covered by RD, our analysis focused on identifying how, and to what extent, each article used the perspective. Our results indicate that there is merit in Pfeffer’s assertion that RD serves primarily as a metaphorical statement about organizations. Though External Control continues to be cited at an enviable rate, the vast majority of citations are ceremonial—variously used as a nod toward the environment, resources, or power. Results also show that beneath an ever growing citation count is a fragmented landscape of scholars whose primary interest is in the specific strategies discussed in External Control —mergers and acquisitions (M&A), joint ventures and strategic alliances, interlocking directorates and executive succession—rather than the underlying perspective….To say that RD has been reduced to a metaphorical statement about organizations, however, belies its considerable impact. Indeed, while RD lacks a coterie of followers and has failed to catalyze a dedicated research programin the vein of NIT or OE, it has had a uniquely broad influence within management scholarship. Scholars have drawn on RD to derive key hypotheses in the study of M&A’s, joint ventures and strategic alliances, interlocking directorates, and executive succession, with the hypotheses largely supported (Hillman, Withers, & Collins, 2009).
They also suggest that its time to revive RD theory in organizational analysis. Why should we do that? Read the rest of this entry »
From the Home Office in St. Gallen, Switzerland, Tim Lehmann sent me the following call for applications:
Well, here is your opportunity: The Schwab Foundation for Social Entrepreneurship, the Huffington Post and Student Reporter have teamed up to invite ten students to form a virtual team starting 1st of February 2013 for six months to contribute to Huffington Post’s Social Entrepreneurship section. Ideally, an inter-disciplinary team of students with strong disciplinary foci in sociology, psychology, anthropology, economics, entrepreneurship studies, and political theory would form this team. We also welcome applications from social entrepreneurs. Candidates must be enrolled in an educational program such as BA, MA, MBA, or PhD.
I get Google. A billion people use the website, stick advertising on it. Amazon and Walmart destroy the competition with economies of scale. Facebook’s strategy is a little more opaque to me. Right now, it’s going gangbusters on ad dollars. Is that the main strategy? Envelope calculation: $100bn in market cap/a claimed 800m active users = $125. Does that sound right? Does that average user generate at least $125 of income for Facebook’s advertisers as a whole?
I suspect Facebook’s strategy is mixed. It’s obviously ads because young people (=discretionary income) love Facebook. But I suspect that Facebook is gearing up to be a major platform, an all purpose social space where people can do things. That leads us into the world of apps and income sharing from apps. Developer Steve Yegge made this distinction in a much hailed rant on Google+. Yegge pointed out that Amazon had built an amazing library of APIs that allowed third parties to collaborate with Amazon and mine its databases. I suspect Facebook is committed to this direction. Ads create enough revenue, but the goal is to create an appapalooza on par with Apple’s App Store. It’ll be interesting to see if that’s worth $125 a user.
My friend Michael Bastedo at Michigan recently published a new collection of essays called The Organization of Higher Education: Managing Colleges for a New Era. The book introduces the reader to cutting edge research in universities, strategy, and organizational behavior.
Chapters include Brian Pusser and Simon Marginson on global rankings, J. Douglas Toma on strategy and Anna Neuman on organizational cognition in higher education. Social movement fans should check out my chapter on movements and higher education.
I’m sort of intrigued by the various innovations emerging from the Occupy Wallstreet Movement (I posted at strategyprofs about some of the tech ones, specifically apps).
One of the cooler, more low-tech innovations (ok, ok, these have been around for a long time – but still) is the use of the “human microphone” – note that the wiki entry was initiated just two weeks ago. Occupy also has its own hand signals (and, check out the hand signals for consensus decision-making). Cool. Twinkles.
Here’s a hand signal tutorial:
I’m pretty enamored by many things (including performativity). One of them is social choice theory. I think the intuition developed by scholars like Condorcet, Arrow and Sen is fundamental for any social, political or economic setting. Now, the theory of course does not capture many issues: social influence, the origins of preferences, and more generally, contextual issues. Some might even say that social choice theory scarcely corresponds with reality. But I think it nonetheless is a very powerful theory.
What I like about social choice theory is that it fundamentally is about social aggregation. And one beef I’ve had for some time is the lack of consideration for aggregation-related issues in organization theory (and strategy for that matter). Now, sure, aggregation isn’t everything – of course contextual/organizational factors and the environment matter. But there used to be a brand of organization theory that also dealt with questions of aggregation – a portion of the Simon-March line of work was dedicated to this issue. A nice articulation of a few of the key issues can be found in Jim March’s (1962) classic (and definitely under-cited) Journal of Politics piece “the business firm as a political coalition.”
So, with colleagues I’ve been working on some papers that try to apply and amend social choice intuition in the context of organizations. In one paper we develop a formal model of organizational strategy as a social choice. In the model we specifically allow for particular influence structures to condition and shape social choices in organizations. So, ok, this post is a bleg – my colleague (in electrical engineering) and I would like feedback on this particular paper.
I take a special interest in the Moneyball movie because I used to teach the book in a class. Before I get to the academic comments, I’ll give the movie a thumbs up. It’s a fun movie and, as usual, Brad Pitt puts in a believable performance as a conflicted manager. It’s slow for a modern film, but I liked it. If you are a sports fan and you have a tolerance for chatty films, then you’ll probably like this.
Anyway, the reason I went to see the movie is that tor a while, I taught IU’s course on organizations and work. I used Moneyball to explain two concepts – market imperfections and organizational culture.
Markets are imperfect when buyers and sellers do not incorporate all the available knowledge. Moneyball is really about taking advantage of the fact that most sports team managers don’t use some very basic data to choose players. Organizational culture simply means the shared ideas in an organization that are used to interpret things and motivate behavior. Moneyball is about the conflict between people who think baseball can be successfully quantified and those who think that good coaching should be based on experience and gut feelings.
And, here’s the website for his recent book, Good Strategy, Bad Strategy: The Difference and Why It Matters. An excerpt can be downloaded here (pdf).
Looking back on it, getting an MBA at the University of Chicago (1981) is really what led me to academia. Back then, course readings were 30-40 academic journal articles. Rarely did a textbook accompany a class. As students, we knew we were there to learn the latest-and-greatest academic thinking. In our view, courses based upon some textbook anybody could get at their student bookstore for $50 had to be worth little more than, well, $50. Forget about classes taught by the grey-hairs (you know, classes in which some big-shot ex-executive sits around and regales students with war stories) — total waste of time, in our view. No, we wanted the meaty stuff. The stuff that wouldn’t be “best-practices” for another 10 years. Commercializing that knowledge, yeah, that’s where the money was.
So, I specialized in Finance (what else?) and launched into an exciting decade+ of business practice. At some point, I started consulting and, at some point after that, I was asked to work on a strategy project. I knew nothing about strategy at the time — BUT! — I knew how to read academic journals. No problem. Off to the library to read the pink strategy journal! Up to speed and 10 years ahead of practice in a few sittings. That b-school training was truly awesome. (In case you are wondering, btw, years later when I was a rookie PhD, I interviewed at Chicago. My old Micro prof, Sam Peltzman, took me to dinner. When I asked him what journal articles he was putting in his MBA course, he did a spit-take and said, “Wall Street Journal articles.” More on this later.)
I guess it would be fair to say that I found the strategy literature sadly wanting in comparison to the precision and mathematical sophistication I was used to in the Finance literature (mind you, this was as a practitioner). My reaction was: big opportunity here. This was the 90s and, for those who are not aware of it, the methodological advances in economics were really expanding at that time: game theoretic learning, evolutionary economics, behavioral economics, computational methods … cool technological approaches that held some promise in tackling the complexities inherent in the strategy problem domain. Off I went to get a math econ degree and I’ve never looked back with any regrets. (I do look back and marvel at the level of hubris that propelled me on my way — though, without it, where would any of us be in this academic hustle?)
Over time, outside of trying to stay up on promising methodological developments, I became less attentive to what people were doing in economics. Early-on, I tried to get my IO friends interested in the issues that so animated my own research. Typically, 3 minutes into describing something I was working on to a respected IO colleague, I could see the eyes glaze over and hear the responses go on autopilot. I really was a strategy guy and, clearly, the strategy literature was where my career would rise or fall. When asked, I explained it in this way, “The central question in strategy is who gets what, why and for how long. IO economists, IO being in many ways a mirror field, are interested in how the most value gets created. The dichotomy is one between distributional vs. efficiency issues. We want to tell Apple how to make more profit. They want to tell the FTC how to increase social welfare.”
This is not to say there weren’t always great economists in the bi-curious category. Of course there were. But, they were not the majority and I was smugly comfortable in my belief that, regardless of how frustratingly slow progress in strategy was, the field had little to worry about from economics. In fact, just as recently as last year, I had this discussion with one of my dearest colleagues, Jan Rivkin. I was somewhat surprised when he, in so many words, told me I was full of it. I felt sorry (for him) that I couldn’t bring him around in that discussion. Eventually, though, I knew I would win him over.
That was until about a month ago. That was about a time the paper by Chad Syverson (2011) started making the rounds. Entitled, “What Determines Productivity?” it is a wide-ranging survey paper that collects and organizes work in economics on persistent differences in firm productivity levels. Almost all the papers are from 2000 on. I found the quantity and quality of work cited, frankly, jaw-dropping. Now, those who have followed the narrative to this point will say, “Yes, but it’s work on productivity — that means the interest is still all about efficiency!” True. But, here’s the catch: “efficiency” in this work is typically measured as Revenue/Cost. Take the numerator and subtract the denominator and — PRESTO — you have the object of focus in strategy.
I’m still digesting this. It could be good news. After all, I’d love to have more outlets for my work. On the other hand, young scholars like Syverson are smart … and teched-up … and full of youthful energy. What I can say is that the bar for strategy research has stealthily gone up over last decade.
Sheen Levine (MIT) and Shayne Gary (Austrialian School of Business) are again organizing their workshop on “behavioral strategy” at the upcoming Academy of Management conference. If your work relates, consider getting involved and submitting a short proposal. Last year’s workshop was fantastic. Click below for details.
I watched one of my kids play the game “Mao” (also called Mü, Maw, Chairman Mao, etc) with her friends the other day. Fascinating. In the game players develop unspoken, secret rules that others have to figure out — the rules are emergent and evolve. Fun stuff.
Interested in playing (but don’t have any friends)? Well, of course there’s a MaoBot that you can play against online.
Another game, roughly in the same family (but even more fascinating), is Nomic – developed by Peter Suber. Here’s the premise:
Nomic is a game in which changing the rules is a move. In that respect it differs from almost every other game. The primary activity of Nomic is proposing changes in the rules, debating the wisdom of changing them in that way, voting on the changes, deciding what can and cannot be done afterwards, and doing it. Even this core of the game, of course, can be changed.
This morning I listened to an interesting interview on one of Dan Benjamin’s shows. He was talking to Erin Kissane about her new book, The Elements of Content Strategy. Say you are using a website to communicate something to someone, or enable communication between a group of people, or both. The something you are conveying or facilitating is your content. According to Kissane, the job of a “content strategist” is to figure out how best to make sure that content is assembled, presented, and maintained in a way that’s appropriate to its audience.
You might think that the term “Content Strategist” is evidence that the job market in the online sector must be picking up, because as an occupational title it’s got a slight buzzing sound around it. However, Kissane turned out to be a very thoughtful interviewee—one of those rare people who thinks about and then answers the questions they are asked. The book (which I bought and read over lunch: it’s short) is a handbook for this new occupation (or, as the author calls it, discipline). Despite a denial at the outset, it’s also implicitly a manifesto for it. Content strategists, she argues, live at the intersection of editing, curation (the dread online phrase of 2010), and marketing. They help you decide who your site is for, and what it’s for, and then develop a framework that lets you choose, care for, and publicize your content. The Elements of Content Strategy is an elegant argument for some principles to bear in mind, and a useful summary of a few heuristics you might use, while executing that task. I could have done with it to back me up at more than one meeting I’ve suffered through on the topic of Redesigning Our Website or Why Don’t We Start A Blog About That, or Perhaps The Twitter Will Excite The Kids, or what have you.
This whole Egypt thing is really sad — I find it hard to break away from the coverage (Al Jazeera live here). I lived in Amman Jordan for about a year and also worked a bit in Cairo, a beautiful city now in ruins. The footage of people getting run over by cars, journalists getting attacked (don’t mess with Christian Amanpour, Anderson Cooper, Hala Gorani!), is just plain crazy and surreal. I hope the people’s voice is heard and that a stable, democratic government emerges.
On the somewhat more positive side of things, The Guardian has a nice photo collage of innovative helmet designs that are emerging among the protesters. Click here to see other, innovative helmet variants.
Via John Gruber, Horace Dediu looks at how poorly analysts fared when it came to predicting the size of the market for the iPad. Apple sold just shy of fifteen million iPads in 2010. (starting in April, when it launched.) Every pundit with any kind of audience underestimated how successful it would be, usually by a long ways. Moreover, Philip Elmer-DeWitt notes that professional analysts (employed by investment firms and so on) did much worse than “unaffiliated” analysts with blogs, even when it came to just the previous quarter:
In our ranking of the best and worst Apple (AAPL) analysts for Q1 2011, which lists them based on how accurately they predicted seven key numbers — revenue, earnings, gross margins and unit sales — the unaffiliated analysts … took 9 out of the 10 top spots. The bottom 20 spots were all held by professionals working for the banks and brokerage houses. Taken as a whole, the numbers they sent their paying clients were off by a margin (9.04%) more than twice as big as those generated by the guys who do it for free (3.94%).
I have a limited amount of sympathy for the analysts. Predicting the future is rather harder than predicting the past. But it’s strictly limited, because even a cursory survey of the field shows that IT punditry is stuffed to the gills with people who don’t seem to know anything. Even so, the fact that everyone got it badly wrong is striking. After Steve Jobs demoed the iPad last year, I asked the undergraduates in my Organizations and Management class whether they planned to buy one, and whether they thought it would be a success. The students in this class are a broad cross-section of the Duke undergraduate population, with majors from a lot of different fields. Without exception, they thought Apple had laid an egg with the iPad and that it was impossible to see any use for the device that (a) wouldn’t be better satisfied by either a phone or a laptop and (b) would still be worth paying the asking price for. I’m teaching the same course this semester, so yesterday I asked the class how many of them owned an iPad. A small number did: a bit less than one in ten. (This in a population where, on the one hand, most could afford an iPad if they wanted one but, on the other, almost everyone already owns a laptop for schoolwork.) Then I asked how many of them knew someone outside the class who owned an iPad. Everyone put up their hand.
Is Administrative Science Quarterly really the #9 journal in management (as suggested by ISI/impact factors a few years ago)? Pl-eez! Is Management Science really #24 (as ranked by ISI in 2009) among management journals? Is the Journal of Product Innovation Management, ahem, really a better management journal than Organization Science (relegated to #13! in 2008)?
Now you can decide.
Inspired by Kieran and Steve’s ranking initiative (of sociology departments, see here), here’s an effort to crowdsource management journal rankings:
RANK HERE: http://www.allourideas.org/management
Sure, a ranking like this has lots of problems: apples and oranges (organizational behavior, strategy, org theory journals all in one), the lack of disciplinary journals (for now), etc. It’s certainly not definitive. But I think a crowdsourced ranking of management journals might nonetheless be quite informative, and it certainly won’t make the mistake of keeping ASQ, Organization Science or Management Science out of the top 5. Well, we’ll see.
Updated map of where the votes are coming from:
Our University of Wisconsin orgtheory correspondent (former orgtheory guester Russ Coff) sent me some links related to McKinsey’s test and audit for organizational strategy (given our previous post about the SMS strategy certification). The current, Jan 2011 issue of McKinsey Quarterly features ten audit-like tests for organizational strategy.
Here are the questions:
- Will your strategy beat the market?
- Does your strategy tap a true source of advantage?
- Is your strategy granular about where to compete?
- Does your strategy put you ahead of trends?
- Does your strategy rest on privileged insights?
- Does your strategy embrace uncertainty?
- Does your strategy balance commitment and flexibility?
- Is your strategy contaminated by bias?
- Is there a conviction to act on your strategy?
- Have you translated your strategy in an action plan?
(By the way: orgtheory.net answers “yes!” on all the above questions, including the bias one.)
So, I see the point of “audits” like this, though still am skeptical about whether strategies, in radically uncertain environments, can meaningfully be assessed ex ante. Nonetheless, the whole strategy audit thing is an interesting concept (and trend/fad?) that many people appear to be thinking about.
A call for papers that might interest many of you:
In Pursuit of Quality in Strategy Research:
A Paper Development Workshop
The Strategy Research Initiative in association with Administrative Science Quarterly
June 3-4, 2011
The Strategy Research Initiative (SRI) is a cross-disciplinary group organized to coordinate activities that promote high-quality strategy research. In a recent editorial (Oxley et al, 2010), Read the rest of this entry »
Ronald Coase turns 100 years old tomorrow. Organizations and Markets has the scoop, though 100 years is definitely worth celebrating here at orgtheory.net as well.
(Peter’s post also points out how The Economist gets some of the Coasean story wrong, for example by reinforcing an artificial dichotomy between the resource-based view and transaction cost economics and the matter of “organizational advantages” versus transactions costs.)
The most recent issue of Strategic Organization has an article on high-quality research in strategy: “The Strategy Research Initiative: Recognizing and encouraging high-quality research in strategy” — written by a group of mid-career strategy scholars affiliated with the Strategy Research Initiative (members are listed here).
The table below summarizes what the authors are calling for.
I found this interesting, the Strategic Management Society (respected body of academics and practitioners in the area of strategic management) is looking at creating a “strategy certification.” Here’s the logic:
You have your taxes completed with the help of a CPA and make your financial investments with counsel from a CFA. You might exercise with a certified personal trainer or a certified yoga instructor or send your invoices to be put into Quickbooks by a certified virtual assistant. So, of course, when you are developing strategy—a strategy that may require you and your organization to take considerable risks or make sizable investments and difficult decisions—you call on the insights of a certified strategist.
If only there was such a person. [More here.]
“Certifying” a strategy raises some interesting questions. So, what Certified Public Accountants do is one thing. Auditing and certifying the financials of an organization is based on the principles of comparative similarities (for example, based on rules such as the GAAP). Strategic activity, on the other hand, is about comparative differences between organizations — differentiation is the sine qua non of strategy. Organizational strategy, furthermore, is forward-looking and thus it is hard to somehow “certify” subjective assessments — where agreement is extremely unlikely — and the prospects of some radical innovation or course of action. What to one looks like an escalation of commitment, to another might look like a bold strategy. In short, I find it hard to see what exactly could be certified about an organization’s strategy.
I suppose one might think about certification and stakeholder-related considerations (indeed, these are raised in the above link), but then we get into all kinds of value-related issues. For example, I’m guessing we would get a wide range of opinions from organizational scholars on whether Wal-Mart’s strategy should be certified. This certification issue seems fraught with some of the same problems as “evidence-based management” — passing muster depends on whose evidence we are using and who is certifying. And, don’t extra-institutional actors, essentially, provide a type of legitimation that proxies certification —- protests and activism send signals that serve as a de facto, albeit ex post and noisy, certification.
Google’s latest toy allows you to search for words or phrases in its vast library of books. It will then graph the trend of the occurrences of those words over time. It’s super fun.
I created this graph searching for the following terms: organizational theory, management theory, and administrative science. As you can see, until the late 1950s “administrative science” was the most common term. “Management theory” or “organizational theory” didn’t even register until the 1940s. Around the mid-50s these latter two began to rise at roughly the same rate, surpassing “administrative science” in the late 1950s. It’s also striking that both seem to be declining now.
One reason for their decline may be the rapid rise of strategic management. If you add the term, “strategic management,” to the graph you get a really striking story. Strategic management didn’t seem to exist until the mid-70′s, but it experienced a rapid surge in popularity, quickly taking over management and organizational theory. It now dwarfs the other three in popularity. The frequency of “strategic management” is roughly twice that of “management theory,” the next most popular term.
This isn’t a very formal test, but the data from Google books seems to confirm the intuition that strategic management as a subfield of management theory has become a dominant way of thinking about organizations (although there is plenty of room for heterogeneity, like you see on orgtheory.net). For more on this topic, see this post about strategic management as a social movement.
An upcoming special issue of Erkenntnis (a journal in analytic philosophy) focuses on the topic of “reduction in the special sciences” (associated with this 2008 conference, here are some earlier versions of the papers in the special issue).
Here are some of the issues that the special issue will wrestle with:
Science presents us with a variety of accounts of the world. While some of these accounts posit deep theoretical structure and fundamental entities, others do not. But which of these approaches is the right one? How should science conceptualize the world? And what is the relation between the various accounts? Opinions on these issues diverge wildly in philosophy of science. At one extreme are reductionists who argue that higher-level theories should, in principle, be incorporated in, or eliminated by, the basic-level theory. According to this view, higher-level theories do not ultimately exhibit conceptual integrity or provide genuine explanations. At the other extreme are pluralists who take higher levels of description and explanation seriously and argue for their independence and indispensability.
As is readily evident from the abstract, one of the contributions is of particular interest to me, the piece by Jack Vromen: “Micro-foundations in Strategic Management: Squaring Coleman’s Diagram.”
Abell, Felin and Foss argue that “macro-explanations” in strategic management, explanations in which organizational routines figure prominently and in which both the explanandum and explanans are at the macro-level, are necessarily incomplete. They take a diagram (which has the form of a trapezoid) from Coleman, Foundations of Social Theory, The Belknap Press of Harvard University Press, Cambridge (Mass.)/London, (1990) to task to show that causal chains connecting two macro-phenomena always involve “macro-to-micro” and “micro-to-macro” links, links that macro-explanations allegedly fail to recognize. Their plea for micro-foundations in strategic management is meant to shed light on these “missing links”. The paper argues that while there are good reasons for providing micro-foundations, Abell, Felin and Foss’s causal incompleteness argument is not one of them. Their argument does not sufficiently distinguish between causal and constitutive relations. Once these relations are carefully distinguished, it follows that Coleman’s diagram has to be squared. This in turn allows us to see that macro-explanations need not be incomplete.
I’ll post a final/copy-edited version of the response into the comments (once we get it back).
Two weeks ago, I reviewed Between Movement and Establishment, an institutional analysis of youth advocacy groups. My big complaint was that institutional scholars needed to get up to speed and work on policy. Lots of good work on describing youth advocacy organizations, not enough on the outcomes. So what can institutionalists add to debates over organizational outcomes and policy? A few suggestions:
- Institutionalism is pretty useful for coming up with hypotheses about the creation and adoption of policies. The movement/institutional literature has good descriptions of how interest groups affect the policy environment. For example, one hypothesis is that movement generated policies usually have to be watered down to be accepted. Another hypothesis is that policy adoption waves are like management fads. There’s already a decent literature on this in org studies and public policy.
- Institutional theory has promise on the issue of implementation. Once the organization adopts policy, how does it get translated into practice? The new research on institutional work I think has promise. You have to consider what organizational leaders do to make something acceptable, or to reframe the rules so that new policy is possible.
- Outcomes – here the link is less obvious. One way that institutionalism could contribute is to discuss how culture affects the definition and monitoring of outcomes. Another insight, drawing from our former guest Michael Sauder, is that the ranking/rating of outcomes creates new incentives for organizational behavior, “teaching to the test.” I wonder if there’s an interesting story about how institutional processes change the behavior of people targeted by policy (performativity strikes again!!!!). It’s a stretch, but worth considering.
#1 isn’t bad and #2 is a straight forward application of current institutional theory. Doing #3 for real would be a home run.