There is an article on Financial Times called “Why Sony Did Not Invent the iPod“. If you don’t have a FT account don’t worry about it – the article is not particularly important. It is like countless articles and books that have flowed from the professional management cult, citing a Harvard wizard by the name Clayton Christensen who reaps all sorts of awards for his managerial insights. It preaches a famiar theme – game changing, innovative products wreak haoc on industries and some companies do a lousy job of recognizing and dealing with it.
Included in the article is the assertion, “Narratives of industry evolution often represent fairy tales constructed by corporate financiers, or ambitious chief executives.” I would add to that, ‘fairly tales constructed by business school professors and other gurus’.
The idea that business folks rationalize the status quo when challenged with game changing products is valid enough, but it is just as valid – even more so perhaps – that corporate financiers, ambitious (and otherwise) chief executives – and especially management gurus in institutions that have built their reputations, careers and bank accounts on the status quo construct fairly tales to rationalize the status quo when confronted with a different management paradigm. How else are we to explain the Toyota versus General Motors domination swap?
Over the years, General Motors management proffered explanations for their eroding market share and profits ranging from Toyota ‘buying market share’, the Japanese government underwriting Toyota, GM’s hourly wage agreements, their structural costs and their legacy costs … everything but the idea that Toyota was managing by a completely different set of principles. One by one all of those explanations were corrected, at no small expense to all of GM’s stakeholders – employees, suppliers, customers, comunities and American taxpayers – yet GM is still the same struggling mess lurching from solution to solution it was twenty years ago.
The gist of the FT article is a theory concerning the failure of many mergers and acquisitions intended to counter the industry disruption new products have created. It says, “Established companies in an industry are naturally resistant to disruptive innovation, which threatens their existing capabilities and cannibalises their existing products. A collection of all the businesses which might be transformed by disruptive innovation might at first sight appear to be a means of assembling the capabilities needed to manage change. In practice, it is a means of gathering together everyone who has an incentive to resist change.”
Take a look at this rogues gallery from the good professor’s web site. What is it if not a “gathering together everyone who has an incentive to resist change”? What has this group done to challenge the long standing basic principles of management assumed to be irrefutable by their colleagues and decades of graduates from the schools paying their salaries? The answer is nothing. By and large, this group still believes that GM can put itself right with innovative products, and that its management methods and processes are just fine.
The ‘fairy tales’ told by the professional management cult wholly ignore the fact that, while Toyota did a lot of good things in the course of running roughshod over General Motors cranking out disruptive, game changing, industry redefining products is not one of them.
Get a load of the management disruptioin this video from a small company called Aluminum Trailers in an out of the way place in northern Indiana. ATC is doing to the small trailer industry what Toyota to the auto industry and, as the video shows, they are doing it by taking a fundamentally different approach to management. I can imagine what sort of intellectual fairly tales the professional management cult would construct to rationalize ATC.
The professional management experts break the fundamental rule of lean – they miss Dr Deming’s essential point. Failure is ascribed to personal failing, rather than flawed processes. If the company is doing poorly, the problem is the CEO and his lack of vision, charisma, leadership skills, knowledge of strategy, inability to comprehend financial ratios, ignorance of brand management essentials, etc…, etc…, etc… How such idiots came to be CEO’s – an extraordinary occurrence – is never explained. Of course they are not idiots, they are very intelligent people, but they are executing incapable management processes.
Of course innovative products can be very disruptive – the high tech world proves that routinely. Of course supply chain innovation can be extremely disruptive – just look at P&G founder about to respond to Dollar Shave Club, and Walmart grapple with Amazon. And of course the folks whose careers are vested in the old model often look foolish and go down hard.
Management innovation is just as disruptive – more so than products because most companies can catch up if they are behind the product curve while clinging to a failed management model is often a death sentence. Those steeped in old management thinking sooner or later look just as foolish and go down just as hard, whether they are executives, financiers … or award winning college professors.