Approach to Business Management
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A new perspective on human nature, particularly on human needs, allows us to develop a dynamic model of the organization and an integrated top-down-bottom-up approach to management. Some of the major benefits of the resulting holistic inside-out-outside-in view include expanding the boundaries of the organization, bridging the gap between plan and execution, and increasing the owners power in the management process.
Problem
“As a society, we were simply advancing toward understanding how to successfully perform increasingly larger sets of activities over increasingly longer periods of time. Unfortunately, what should have been a natural progression of our general understanding of business was diverted by historical circumstances on a dead-end road of knowledge. The quest for a fundamental theory of business was replaced by the quest for a theory of sustainable competitive advantage. Consequently, every effort to understand what it takes for a company to achieve enduring success was hampered by limitations inherent to the concept of strategy.” This quote from my 2009 essay “A Wake-Up Call for the Business Nation” provides a high-level overview of the problem.
“We are approaching the end of an era,” said David A. Garvin of Harvard Business School in 2010, while talking about the future of business education (
Unfortunately, this is not just an academic sparring match. Many venerable companies are being destroyed in front of us not because of some unforeseen outside forces, but mainly because of their leadership teams surprisingly poor understanding of how businesses work. In the early two thousands, Motorola was riding high, primarily driven by the success of its cell phone RAZR. Just a few years later, the company had to be broken down into pieces in order to survive. Its management had aggressively pushed and discounted the phone, inadvertently accelerating its commoditization, while failing to follow up with a higher-value offering. It was an episode that shares many similarities with what happened to IBM in the early nineties, when they focused too much on the PC business. The list goes on and on, but lacking a sound understanding (read “theory”) makes even the exercise of framing a mistake difficult. As a result, many executives get a “free pass” and continue to enjoy their mystical status, while the rest of the world has a hard time even perceiving that there is a problem (other than the rather-superficial problem of individual greed and lack of ethics).
While Prof. Hamel brought together a group of management thinkers to identify the moonshots that serve as guidance for the MIX initiative, I believe that the business worlds main problem is its reliance on an obsolete way of thinking. A more comprehensive, more realistic theory of (understanding and doing) business would address most of the issues identified and articulated as the MIX moonshots, as most of them actually flow from the “philosophy” issue. (The list of moonshots is not mutually exclusive and collectively exhaustive, containing overlaps and causal relationships that should be discussed at one point.)
Solution
As indicated above, the solution presented in this hack is a theory of (understanding and doing) business that provides a more comprehensive and realistic explanation of how organizations fundamentally work. To concisely illustrate its value, it is useful to momentarily think about physics. So, we know that, to analyze and understand the dynamics of a system of objects, we need to analyze all the movements within that system in relation to the same frame of reference (
I will describe the new theory as it was built block-by-block, using a few slides from my 2006 presentation “A Fundamental Theory of Business” (
1. A NEW THEORY OF NEEDS AND HUMAN BEHAVIOR
The foundation of the new theory is a new perspective on human nature. It was detailed in my 2007 article “A Business-Relevant View of Human Nature” (