Thursday, January 7, 2010

A matter of perspective

I enjoy Dilbert, I really do. But sometimes it grates on me.

Yes, there are many stupid company policies. Yes, there are many bad bosses. Yes, some people speak in jargon-riddled empty statements. Yes, some consultants are not worth their weight in buckets of warm spit. But, and it's a big, hairy but, there are many cases where what appears to be stubbornness or resistance to change and new ideas is in fact good business; it just appears dysfunctional to those who don't have full information.

Consider two fictional companies, Gargle and Yee-Haa, who compete in multiple industries and across different countries. Bob, product manager for photography at Yee-Haa in Lagutrop, sees an opportunity to improve market share by taking aggressive action against Gargle. When Nina, Yee-Haa's Lagutrop division president, reviews Bob's idea, she agrees that it would work, but disallows it, justifying her decision as "corporate policy."

Bob, hiding his disappointment, goes on with his work, moves jobs a few times, and eventually writes a popular management book on change. He uses Nina as the exemplar bĂȘte noire of the new economy: someone who is so wrapped up in her little bureaucratic ways that she cannot tolerate even the great ideas proposed by her hard-working and much smarter subordinates. Such as Bob.

Of course, Bob doesn't know that Gargle and Yee-Haa have coexisted in a state of tacit equilibrium: understanding that a market share war would be costly to both, they limit their actions to minor skirmishes -- a coupon here, some added features there. If one of them makes an aggressive move, this tacit equilibrium breaks, and they both lose a lot of money.

Nina, with her strategic perspective, can see the implications of local Lagutropian actions on the global, multi-country multi-industry corporation. Bob, focussed on one industry and one country, cannot.

I would venture that the Bob-Nina example explains a lot of bad bosses.

When I first read Michael Lewis's "Liar's Poker," circa 1990, it reinforced my prejudices against the financial markets crowd (as opposed to the corporate finance people, who were value creators). As I learned more in the intervening years, and came to understand the value of both sides of finance, I reread the book and found it to be sophomoric. Here's someone writing "from the trenches," as it were, passing judgment on the entire hierarchy without any attempt at understanding the different motivations and perspectives of the others.

I still enjoy Dilbert, Michael Lewis's writing, and a host of other material along the "managers and business people are stupid" line, but I don't take them seriously. It would be like a sick person choosing the opinion of a first-year medical school dropout over that of various specialists and clinical tests. The market, imperfect as it is, tends to explain things better than the anecdotes of one person.

Especially from "the trenches." Strategy is rarely created there.