Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
Now accepting keynotes for 23Q4-24Q2
Every year, I create three main presentations. For 2024, they are:
What to Do When You Don’t Know What to Do: Adaptive strategy in an age of uncertainty.
Regression Toward the Meme: Why modern leadership falls into old traps - and what to do about it.
The Efficiency Illusion: Uncovering the hidden costs of digital commerce.
If you want to book me for your event, workshop, or corporate speaking slot, just send me an email. To make sure I am available, however, please do so at your earliest convenience; my schedule is filling up fast - and I will be raising my prices on January 1.
More information can be found here.
A couple of updates before we go-go
Winter has come. My neck of the proverbial woods is now fully covered in snow. Rather lovely, well, except for the two-a-day shoveling. My daughter absolutely loves it, but then she was born to endure this kind of weather.
Every year before Christmas, I compile a list of reads that I recommend. This year will be no exception, but I would like to add a few suggestions that come from you. So, if you have a book that you absolutely love (to be clear, it does not have to be on strategy), send me an email explaining why and you might just make it into the holiday special.
On the topic of books, Steve and I are working hard on finishing ours. It is all coming together very nicely; most is now written, we merely need to edit it all together.
The final webinar will take place once the book has been completed. Given that it will be focusing entirely on the pragmatic, including the introduction of the ABCDE and ICE frameworks, we will likely make it two hours to allow for an in-depth Q&A. More information to follow.
The next paradigm
A new era of strategy
In June this past summer, as some of you may recall, I delivered a keynote at Techsylvania, the largest tech conference in Eastern Europe. During the talk (a recording of which you may watch here), I mentioned the inevitability of change and how, as I somewhat jokingly put it, shift always happens.
It turned out, as James O’Loughlin was kind enough to inform me, that the phrase had been used previously in complexity related work by Michael J. Mauboussin, who currently heads a research department at Morgan Stanley’s Counterpoint Global. And so, I read his piece, and realized that not only had Mauboussin reached many similar conclusions to myself, but also that I ought to explain precisely why I think the understanding of complexity is so absolutely crucial to strategy, akin to how he did in respect to investments.
Of course, I have already done so in the past - almost every newsletter touches upon it either explicitly or implicitly - but given the continuous influx of new readers, it may clarify where I am coming from.
So.
As Mauboussin notes via reference to Thomas Kuhn’s seminal The Structure of Scientific Revolutions (1962), large-scale scientific change often emerges out of a four step process:
A theory is formed to explain a given phenomenon.
Scientists begin to test the (prevailing) theory further by collecting empirical data. As they do, they discover facts that appear to contradict it.
The theory is stretched, especially by those with a personal stake, in order to accommodate the new findings. This often includes the dismissal or discounting of certain data.
A new theory emerges that overtakes the old, offering superior fidelity to the facts and greater predictive power. This leads to what is called a paradigm shift (hence “shift happens”).
It appears to me indisputable that the above fits only too well to describe the present state of strategic management doctrine.
Although those who cannot be bothered to put the frameworks that they use into a historical context may believe otherwise, most modern theories are built upon the same underlying idea: organizations are, by and large, deterministic. That is to say that we may analyze our collective pasts, predict our individual futures, plan accordingly, control the outputs, and be the masters of our own fates.
From this determinism also follows material reductionism; if everything is a matter of cause and effect, it stands to reason that we may break down processes to their smallest components. If we just do the right things right, success is sure to follow - that is the promise of strategy.
It does not require much investigative dedication to realize that the facts contradict the conclusion. Although we are frequently told otherwise, there is significantly more to making one’s way to the promised land than merely drawing the correct map (more on that in the premium section).
Most serious people, I believe, know this. However, the knowledge rarely causes appropriate action. As human beings, we find it easier to stretch the theory (or otherwise tinker with it) than to undertake a more radical shift. And so, we create “exceptions to the rule”, extend the original thesis far beyond what it ever permitted, and come up with new language (e.g., the term “causal ambiguity”) to cover up our ignorance.
Granted, to Mauboussin’s point, it is understandably difficult to rapidly devalue a theory into which substantial time and resources have been invested; there are both economic consequences of admitting relative ignorance and emotional stress involved in acknowledging sunk costs as irrelevant. But I struggle to think of another honest approach. If a theory fails to match reality, we may either change the theory to match reality or attempt to change reality to match the theory. Only one thing will work.
Strategic plans still fail more often than not. Companies still go under. Sustainable competitive advantages are still much more frequently found on the pages of best sellers than in actual markets. This, to me, simply does not do.
Complexity science explains why we see the results that we do. It is the new theory that overtakes the old; significantly more coherent to the facts, and with far greater predictive powers. It fundamentally disproves the numerous flawed assumptions necessary to make the old models work - rational agents, controllable environments, market equilibriums, risk-reward variance, the omniscient strategist, and so on - and scientists working in the field have won Nobel prizes as a result.
Other fields, such as physics and biology, have already moved on to the new paradigm, thereby unlocking a whole new level of cutting-edge scientific understanding. Strategic management, meanwhile, remains stuck in the dark ages, promoting leeches and bloodletting when there is advanced medicine available.
And in the meantime, patients die.
Until next time, have the loveliest of weekends.
Onwards and upwards,
JP
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