Archimedes is reported to have said: âGive me an [appropriate] point of leverage and 1 will turn the world.â The remark highlights a fundamental truth that the picture of strategic behavior obtained by an observer depends on the knowledge-seeking model (paradigm) through which he perceives reality.
At the present time, study of management is in the midst of a âparadigmatic revolution.â In this chapter, we explore two aspects of this revolution.
The Contingency Perspective
The major aim of an effort to understand a previously unstudied part of reality is to reduce the complexity of the real world to a model which is comprehensible and manipulable by man. But experience shows that complexity, like Salomeâs seven veils, must be peeled off one layer at a time. First to be perceived is a highly smoothed and aggregated shape of the underlying reality. Then come models of increasing complexity and sophistication which deepen the observerâs understanding.
As is typical of all young sciences, the first step in the study of organizations was directed to identifying the typical behavior of organizations.
Sociologists, who studied response of complex organizations to environmental change, came to the conclusion that organizations are myopic , resistant to change, bureaucratic, inertial. They adapt to environment in a reactive, incremental manner. When hit by a sudden discontinuity, they go into a cataclysmic crisis.
Economists, who undertook to study a subclass of complex organizations, called the business firm, arrived at a totally different perception. For them, the firm was an aggressive, perpetual seeker of maximum profit.
The picture became complicated when sociologists joined economists to formulate a behavioral theory of the firm. The firm that emerged from this research was very close to the original model of the sociologists: Its behavior had to be triggered by problems; it could handle only one goal at a time; and it engaged in âlocal searchâ for solutions to problems. The choice of the preferred solution was âsatisficing,â which meant that the firm accepted the first satisfactory solution that came along.
A matter of central importance to the present discussion is that the authors of this research labeled their results in the singular: A behavioral theory of the Firm (Cyert and March 1963-G), implying that all firms exhibit the same change-denying conservative behavior.
This conclusion is in direct contradiction to the equally singular âeconomic theory of the firm,â in which all firms are seen as aggressive profit maximizers.
Nor is it possible for a manager in Google, Apple, Amazon, Microsoft, and numerous Chinese firms to recognize themselves in the mirror held up to them by the behavioral theory .
But, if the next of Salomeâs veils is removed, at the higher level of understanding it becomes apparent that the contradiction is only apparent and not real. There are, in fact, numerous firms which are accurately described by the behavioral theory . There are also profit maximizers, and there are restless entrepreneurial firms described by the economist Schumpeter, who are creators of novel technologies, markets, and industries.
Thus, when the second veil is peeled off, managerial reality appears to consist of a range of different behaviors. Under this paradigm, attention is no longer focused on the average aggregate behavior of firms, but on the variety of behaviors, and on conditions under which they are appropriate.
The study of management is currently in a transition to this second level. A new paradigm, rather grandiosely described as contingency theory, is rapidly becoming the epistemological leverage in studies of both management and of business firms.
Readers of Ansoffâs prior workâStrategic Managementâwill recall that it was rooted in the contingency approach. As a rough approximation, of the order of two thousand different strategic behaviors were explored in the book.
This book is in the same tradition. The major contingent variables are: key success factors, turbulence levels in the environment, strategic aggressiveness of the firm, and its capability profile. Unlike the preceding book, which studied the full range of behaviors which are observed in practice, this book is focused on behaviors which should be chosen in light of the environmental imperatives, on the one hand, and the objectives and resources of the firm, on the other.
This book is a step in the emergence of practical management technology from a âsingle Model Tâ age. Until recently, a manager seeking help was offered a variety of competing approaches by consulting firms and by academics, each claiming that his approach was the best. In this book, we have related the merits of different approaches to the needs and circumstances of the firm.
Simplicity, Complexity, and Requisite Variety
As the succeeding veils are peeled off, the researcher comes closer and closer to perceiving the shape of Salome. But the complexity of the picture also increases. In the later stages, as minor details and undulations are added, the researcher is in danger of losing perception of the shape and grace of the beautiful dancer, because of his preoccupation with anatomical details. Thus, at a certain point, further proliferation of complexity (removal of the final veils) becomes dysfunctional. To use another analogy, the researcher can no longer see the wood for the trees.
How much complexity is enough for an effective response to the environmental challenges is today one of the central and vexing questions, not only in strategic management, but also in society as a whole. One answer, which had President Reagan for its patron saint, is that the responses have become too complex and that complexity should be rolled back.
An eloquent call for a return to simplicity in management was made in a 1960s Fortune magazine by Theodore Levitt who accused the railroad and the petroleum industries of having an over simplistic perception of the boundaries of their respective businesses.
As the reader has seen in the preceding chapters, the position taken in this book is that simplicity is not a âfree good,â as the economists would say, and that the price of oversimplicity is a failure to make a timely and effective response to environmental challenges and opportunities.
For example, use of control and extrapolative budgeting systems as the primary management tools was not only adequate but appropriate in the 1920s. But in the last quarter of the twentieth century, a firm whose management persists in the belief that the future is extrapolative, and the prospects are for a âresumption of growth,â is, as a minimum, headed for surprises and, as a maximum, for extinction. (Recall the statement by the current chairman of General Motors, when he took office several years ago: âGeneral Motors has unlimited growth horizons and it is the worldâs best managed company,â and compare this statement to the declining trend in the companyâs market share.)
Instead of minimal complexity , this book is based on the requisite variety principle which was enunciated by Roy Ashby. Paraphrased into the language of management, the principle may be stated as...