Direct & Indirect

Introducing John Kay

Friends,

Here we are. Another week dispatched to the past, another concept in the books. Slowly but steadily, we are getting to the summary cherry picking of (some of) the best ideas from (some of) the best thinkers. Seven days ago, we took a critical look at Alexander Osterwalder’s business model canvas – a tool designed to meet practical demands that ultimately fell short of the goal, at least from a strategy perspective. Today’s theory, as if by sheer coincidence, might actually end up explaining why.

Building on an original piece for the Financial Times, British economist John Kay’s notion of obliquity was first more extensively elaborated upon in the best-selling book Obliquity: Why Our Goals are Best Achieved Indirectly. As one might deduce from the subtitle, the central premise is that the more complex objectives are, the less likely it will be that they are best pursued directly.

If indeed this were the case, the implications for strategy would be obvious. Most of the targets we might define are multifaceted in nature and may change as we progress toward them.

On a surface level reading, there appears to be a point to Kay’s reasoning. In complex adaptive systems such as markets and firms where one cannot know what is to come, imprecisely defining overarching objectives (establishing a shared understanding of success instead of an explicit target, for example) is normally a superior approach. It is for this reason that strategies are much more than merely lists of financial milestones. Direct goals can become ceilings as much as floors, and always end up being gamed. Obliquity allows for necessary adaptation:

Problem solving is iterative and adaptive rather than direct. Good decision makers are not identified by their ability to provide compelling accounts of how they reached their conclusions. The most complex systems come into being, and function, without anyone having knowledge of the whole. Good decision makers are eclectic and tend to regard consistency as a mark of stubbornness, or ideological blindness, rather than as a virtue. Rationality is not defined by good processes; irrationality lies in persisting with methods and actions that plainly do not work—including the methods and actions that commonly masquerade as rationality.

It is important to note that adaptive approaches should not be confused with unstructured experimentation or exploring every single avenue. The options available in practice will always be fewer than those available in principle, not least if boundaries have been defined (as they should be). The larger point is that end-states such as goals and objectives evolve over time as the context changes and new insights are gained. Strategic challenges will, as a rule, be inherently complex in nature; if they were not, the solution would not require a strategy but merely a well-known and established process. As a result, Kay argues, the best paths forward are bound to be oblique.

But what it amounts to in practice is far from as clear. If there is not any form of objective, there will also be no way of knowing what one is pursuing (nor, therefore, whether one has achieved it even with the benefit of hindsight). As much as centralized planning fails to live up to its many promises, entirely unplanned and decentralized approaches rarely fare much better.

Kay’s proposed solution is to define core values. Complex ‘high level objectives’ such as those used in strategy can, in his view, only be decentralized effectively ‘if employees at every level [absorb] the values that motivated these objectives’. It is an argument many of us have seen before. Jim Collins made the same claim in Built to Last, as did Jim Stengel in Grow.

While I do not disagree with the underlying sentiment in value- and purpose statements – there is nothing wrong with wanting to have a positive impact on the world, on the contrary – my objections have long been to the way that evidence has been manipulated in order to fit a predefined narrative. Both Collins and Stengel have been rightly criticized for unacceptably poor methodology and it remains an all too common problem. The latest IPA report on purpose in advertising created by Peter Field, for example, is an analytical embarrassment; the only thing impressive about it is the way in which he manages to tie himself into knots in order to provide a desired result. His resorting to ad hominem attacks against those who pointed out the flaws in his report also does him no favors, particularly in light of the fact that Danone paid for it.

I digress.

In itself, the importance of intrinsic motivation is well-documented (although perhaps more nuanced than most are aware). Time and again, it has proven to drive employee performance, autonomy, engagement and more. Obviously, it behooves Kay to make note of this as extrinsic, reward-driven motivation goes hand in hand with the explicit goals that he criticizes.

However, contrary to popular belief and (in)famous TED speaker claim, the creation of intrinsic motivation is not merely a matter of having the why of the organization defined by corporate leadership. As any anthropologist will tell you, the second one writes down one’s values is the moment at which they are lost forever. The only thing it achieves is to make the language of power explicit, with inevitable gaming to follow.

A value- or purpose statement may have the appearance of a lever for obliquity on paper, but amounts to much less in practice. Culture, to use a currently brutalized word, is something that emerges and thus cannot be designed by grandiose verbiage alone. As researchers at MIT Sloan highlighted a couple of years ago, there is no correlation between the values a company emphasizes in its published statements and how well it lives up to those values in the eyes of employees.

Unfortunately, this is where things start to unravel for Kay. He argues, for example, that the world’s most profitable companies are those that do not seek profitability, yet sitting atop of the list in question are entities such as the Industrial and Commercial Bank of China, Berkshire Hathaway, JP Morgan Chase, China Construction Bank and the Saudi Arabian Oil Company. To suggest that these would not be seeking profitability is, in plain language, silly.

Similarly, Kay repeatedly refers to Franklin’s gambit, that is, ‘the process of finding a weighty and carefully analyzed rationale for a decision that has already been made’. Yet he also repeatedly falls victim to it himself. In fact, to be entirely blunt about it, the book can be argued to be one big example of said gambit; he either cherry picks companies that fit his conclusion or retcons history to the achieve the same effect. His contention that successful firms make it despite their explicit goals because obliquity is at play is a dubious one at the best of times, but made all the worse by his own (accurate) observation that ‘the mistake is to make inferences about the relationships between outcomes and processes when we cannot observe and do not understand the processes themselves’.

This is a shame because the underlying premise is a good one. Explicit goals are not universally applicable, nor necessarily the best way of getting to where one wants to be, and this has important implications for strategy. Yet it would be impossible to ignore that a thesis is only as good as its supporting evidence. Kay gives it a better go than Peter Field, but it is still not enough in my book. Or his.

Instead of talking about obliquity, it may therefore be better to simply revert back to the traditional notions of missioning and visioning. Next week, we will look closer at how.

Until then, have a lovely weekend.

Onwards and upwards,
JP