This week I had the great opportunity to do an interview for a TV documentary on the calling of the entrepreneur on Monday, and to visit Wichita, KS and speak to a group of businessmen on Tuesday on lessons from transition economies for organizational learning. I find the opportunity to discuss economic affairs with non-academics extremely refreshing (even if at times it is frustrating). In an earlier post from October 2005 I discussed the role of non-academic mentors in my own inellectual development. Businessmen, policy makers, and journalists often have a sense of relevance which unfortunately is missed in some academic discourse. But relevance, it should always be stressed, is a virtue, not a vice, in our attempt to make intellectual progress in the sciences of man. In our attempt to understand ourselves and others we must avoid both free floating abstractions as well as momentary concretes. Instead, we must develop concepts that enable us to address the practical problems that businessman and policy makers are called upon to solve. If we don't, our intellectual exercises in conceptual analysis fail the relevance test. Theories can be rejected, I have argued, based on logical inconsistency, and lack of relevance for understanding the empirical issue under examination.
My talk on Tuesday emphasized the following lessons we have learned from transition societies that are relevant for the study of organizations: (a) adaptability, and (b) resiliency. Success requires a level of creative adaptability to constantly changing circumstances, and resiliency in the face of crisis. The societies that were the most successful were the ones that were the quickest to adapt to the changing situation, and the ones that developed quickly resilient institutions to replace the fragile institutions the defined the system prior to the current crisis. I contrasted this concept of creative adaptability with the more standard notion of creative destruction. Creative destruction normally starts in a settled equilibrium, and then an exogenous shock is introduced which destroys the old equilibrium and then individuals adjust their behavior until a new equilibrium is obtained. In contrast, creative adaptability speaks to a world of ceaseless change and uncertainty in which actors are constantly adjusting on various margins to realize opportunities for mutual cooperation and gain. To illustrate my points I reached into the sports world -- tennis and then basketball.
The first rule of competitive tennis -- introduced as far as I know by the great tennis coach Harry Hopman -- who told his players to never change a winning game, but always change a losing game during the course of a match. The great matches in history exhibit a sort of chess match with racquets in which the players are constantly adapting their natural talents and style of play to gain a competitive advantage over their opponent. The game of basketball perhaps illustrates even better the organizational principles of creative adaptability and resiliency. Basketball is a team game played by individuals and as such it requires both teamwork and creative individual initiative. There are three basic principles for success in the game. First, recognize capabilities of your team --- know who you are, know who your teammates are, and know who your team is playing. Successful teams would not have Shaq shooting 3s rather than posting up. In other words, both individuals and teams must avoid shooting themselves in the foot. Second, offense is spacing, and spacing is offense. Spacing creates opportunities. It creates room for individual creativity within the disciplined setting of the offensive system. This creativity within discipline is the key. Great basketball (like great jazz) relies on improvisation. Consider Dwayne Wade's wonderful NBA finals performances, great individual skill was utilized within the boundaries of the team. Wade not only slashed to score, but also when needed found teammates open for key shots. Third, demand excellence and accountability from each other. During GMU's run to the final four it was revealed that Coach Larranaga emphasized to his players Aristotle's comment that excellence is not a single act, but a habit. Individuals and teams must dream big in order to achieve big, but in order to achieve they need to put in the hard work to achieve that goal.
Back to organizations and societies, failure is a fact of life. Being afraid to fail results in failing to try. So you cannot create an atmosphere where failure is not built in. Constant adaptation change and resiliency in face of crisis is the name of the game.
So what have we learned from transitions over the past decade and a half? I argue that there is an amazing amount of similarity between the lessons we learn from the experience in East and Central Europe, and the principles of successful organizations. Societies and organizations must create space for their members to be creative in a discplined manner. At the society level the number 1 priority is to reduce the threat of predation from both private and public actors so that individuals will be willing to bet on their ideas and find the financing to bring those bets to life. As Adam Smith put it, the only things required to move from poverty to prosperity is peace, easy taxes and a reaonable administration of justice. At the individual and organizational level, the creativity within discpline required for success needs: (a) specified goal, (b) adaptability to changing circumstances to seize opportunties for gain, (c) resiliency against crisis, and (d) feedback and accountability.
It is all about strategizing within disequilibrium.
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Note to readers: John A. Mathews, Strategizing, Disequilibrium and Profit (Stanford University Press, 2006) is a wonderful work that everyone interested in market process analysis needs to read carefully.
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