Transcript Corporate Strategy

Organization Theory:
Strategy Implementation Process
Steven E. Phelan
June, 2006
Complexity theory
Critical theory
Corporate social responsibility
Overview
Chaos and complexity theory
Morgan Ch 8, Beinhocker, Eisenhardt
Critical theory
Morgan Ch 9, Phelan
Corporate social responsibility
Martin, Vogel, Cameco case
What is Chaos Theory?
Chaos theory can be compactly defined
as:
"the qualitative study of unstable aperiodic
behavior in deterministic nonlinear
dynamical systems"
Famous for the butterfly effect (or
sensitivity to initial conditions) and the
concept of strange attractors
Logistic Equation
Map of x against x-1
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Chaos in the Real World
If the economy is a chaotic system
then planning is doomed
Better learn to react and learn
quickly rather than prepare
It feels chaotic, but there is little
evidence that the economy is a
chaotic system
What is complexity theory?
Based on an agent…an ant in a colony, an
electron in an atom, a worker in a company...
A complex system is defined as any network of
interacting agents (or processes or elements)
that exhibits a dynamic aggregate behavior as a
result of the individual activities of its agents.
An agent in such a system is adaptive if its
actions can be given a value (performance, utility,
payoff, fitness etc.) and the agent behaves so as
to increase this value over time.
Complex Adaptive System
A complex adaptive system is one in which
agents adapt to higher levels of fitness over time
A fitness landscape is simply a visual
representation of the payoffs from taking different
strategies
Fitness landscapes can be rugged (with many
peaks or troughs) or smooth
Co-evolution creates a ‘dancing fitness
landscape’
Key Result Areas
Some key results in complexity theory
have proved important for management
Emergence
Agent-Based Search
Patches
Emergence
Emergence
Simple rules can produce complex behavior!
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See logistic equation, for example
“Order for free” – no need for central control!
Just find the right simple rules for agents to follow
Artificial Life Example
Craig Reynold’s Boids Program
Eisenhardt uses this principle in “Strategy as
simple rules”
How-to, boundary, priority, timing, exit rules
Agent-Based Search
Exploring a rugged fitness landscape by trial and
error to try and find the highest peak can take a
long time
Using agents to explore the landscape and zero
in on promising regions may be faster
Beinhocker uses this principle in “Robust
Adaptive Strategies”
Keep moving
Deploy platoons of hikers
Mix short and long jumps
“Populations of strategies”
Patches
Stu Kauffman found that dividing an NK lattice
into several patches and minimizing the energy in
each patch without reference to the global energy
level gave better solutions than global search on
very rugged (i.e. complex) landscapes
Having sub-units optimize their part of the
problem may be better than trying to find an
optimal solution for the whole organization
Kauffman suggests that multi-divisional
organizations might benefit from less rather than
more centralized control
Complexity as Metaphor
Complexity theory has been extended
from biology and physics into other
arenas
Undoubtedly, societies, economies, and
organizations are complex adaptive
systems, too.
If an organization is like an NK model
then…
Interpretation
Adaptation (biology) rather than efficiency
(machine) should be promoted
A variety of small experiments should be
undertaken to explore the “fitness
landscape”
Rely less on central controls
Recognize that change can yield big (or
small) results and solutions can emerge
from the interaction of agents (workers)
Strengths and limitations of
flux metaphor
Strengths
We think of the limits of forecasting,
prediction, and control
We think about adaptation rather than
optimization
Limitation
Is there really an analogy between the
results of computer simulations of physical
systems and business?
CRITICAL THEORY
Organizations as instruments
of domination
Equality of opportunity – do we have it?
Arguably, life is not a level playing field
Those with poor initial endowments of resources,
especially health, safety, and education have poor
prospects
These people often don’t have a voice
Issue of hegemony and false consciousness
Concept of “Ideal speech situations”
Democracy as window dressing for the elites
Example of critical
management theory
Given that:
Marketers sometimes create needs and
sometimes meet needs
Entrepreneurs are sometimes self-sacrificing and
sometimes self-serving, and
Corporations sometimes use monopolistic
strategies and sometimes use competitive
strategies THEN
Why are the negative behaviors virtually unstudied
by management academics or even taboo
(undiscussable and subject to sanctions)?
Chomsky’s Propaganda Model of
the US Media Industry
Corporate ownership
Need to protect advertising revenues
Sourcing of news stories
Flak
Anti-communist ideology
RESULT:
Self-censorship or auto-censorship
Positive stories that support the dominant elite
Filters for business school
academics (in the US)
Career path
• “…the people who make it into positions in which they're
respected and recognized as intellectuals are the people
who are not subversive of structures of power…the whole
education system involves a good deal of filtering...and it's a
kind of filtering toward submissiveness and obedience”
(Chomsky & Otero, 2003).
• Doctoral students
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Enormous power of ‘internal’ doctoral committees
• Assistant professors
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‘Publish or perish’ in top journals.
Up or out system.
Compensation
A lot of compensation (and workload) tied to performance
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Executive teaching, summer teaching, overall workload and
level of instruction, merit pay raises, promotion to full professor
B-school Filters (ctd)
Recruitment/endowment
Radical research will affect reputation with recruiters and
other academics leading to lower rankings and less
recruitment (recruitment akin to advertising for media)
Poor relations with business also result in lower endowments
for buildings and endowed chairs
Advisory boards
Advisory boards can provide ‘flak’ to a Dean
Data sourcing
a poor standing with business also blocks access to data
collection
Relatively minor
Weaknesses
Likes all structural models it suffers from
over-determination and a lack of attention
to difference
As such, it ignores:
National institutional differences
Hegemony and competing discourses
Structuration and agency issues
Benefits
Educates us on the importance of conditioning
(positive and negative) in ideological control
Invites us to explore mechanisms to create an
emancipatory (free speech) environment
Are business researchers knowingly complicit in
the production of half-truths about business life?
Chomsky thinks this is the wrong question
I think it is a question we should all ask ourselves.
Other critical Issues
Primary and secondary labor markets
Stress and workaholism
Occupational Disease
Exploitation of people and resources
Class, race, gender, world regions
Green (environmental) issues
Poor working conditions in developing countries
and responsibilities of MNCs
Implications for strategy implementation?
Corporate Social Responsibility
Virtue Matrix (Martin)
Civil Foundation (instrumental)
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Benefits society and creates shareholder value
Choice (norms, customs) vs compliance (laws)
Varies around the world – is there a race to the bottom?
Frontier (intrinsic)
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Strategic (possible benefit to shareholders)
Structural (no benefit to shareholders)
– Governments, NGOs, corporate coalitions may trigger
investments
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Migration over time
– From strategic to choice to compliance
– From structural to compliance
Criticism of CSR
Vogel
CSR is a niche business
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To protect reputations against activists targeting high
profile brands
As a component of branding (e.g. Body Shop)
Only 2% of mutual fund assets in CSR funds
CSR doesn’t seem to pay
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High profile firms under-perform competitors
CSR irrelevant to profitability
Consumers don’t care enough to vote with their cash
Is your firm increasing or decreasing CSR spend?
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Is CSR seen as an intrinsic or instrumental obligation?
How important is CSR to your firm/industry?
Cameco Case
Who are the stakeholders and what are their interests?
What actions should Duret take to immediately to
address the crisis?
What could Cameco do to rebuild its relationship with the
nearby communities and country over time?
Is Cameco’s corporate social responsibility policy
adequate
Does Cameco get good value for its investment in
corporate social responsibility?
Are the shareholders’ interests being looked after?
Homework
Watch the DVD “Syriana” by next class
(6/30)
Interpret the film through the lenses of:
Chaos theory
Critical theory
Corporate social responsibility