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May 14 2012

Prospering by hanging in there

Published in system theory, decision-making, bounded rationality, Blog by Jukka Luoma | Comment (0)

How do businesses become successful? One should always ask Michael Porter (Harvard Business Review, 1996: 64) first, according to whom "competitive strategy is about being different." This is good advice, but difficult to follow through.

As noted in a recent blog post, "in most industries, firms pretty much do the same thing." In the end, this is not all that surprising. Companies hire the same kind of people (and consultants), with the same kinds of educational backgrounds, who use the same kinds of strategy tools and frameworks (and theories?), and who have been acclimatized to the same management culture. So the pool of cognitive resources is pretty much the same. Plus the regulatory pressures, demand, and so on, are roughly equal for all firms.

Nevertheless, there is surprising amount of performance heterogeneity. From a system theory standpoint, given that the initial conditions are pretty much the same, one has to come to the conclusion that heterogeneity arises from the system's feedbacks. Successful become more successful over time, and things like that. The implication? Rather than "be different" the prescription seems to be "hang in there", survive selection, and the system's positive feedbacks (bargaining power, brand equity, capabilities, slack resources, etc.) will reward you in the long-term.

This leaves me wonder if Giovanni Gavetti's recent proposition—concerning strategic leaders' (his term) superior mental abilities as an explanation of superior performance—is plausible. Superior leaders, according to Gavetti, are able to see and convince people to pursue cognitively distant opportunities, which—by virtue of their distant nature—are less contested. Given the similarities across firms, how likely it is that people’s wild ideas are good? Perhaps not that likely. Perhaps Gavetti’s proposition is true if revised. Perhaps the strategic leader’s superior cognitive capability stems from his or her ability to mentally resist bold, visionary moves and stick with the present, what is achievable and brings modest results in the short-term.

May 09 2012

On fostering innovation: When the time is ripe—yeah, when is it?

Published in innovation, decision-making, bounded rationality, Blog, academia by Jukka Luoma | Comment (0)

One may say that the task of an organization’s management is not to innovate but to create a platform for innovation, as well as to find and select the right people, groups and even whole organizations (e.g., start-ups) to produce them. According to the behavioral theory of the firm this activity, like any other organizational activity, tends to be based on various heuristics, or rules of thumb. Organizational innovativeness and success, therefore, rely partly on the validity of search and selection heuristics for talent and skills.

Feb 22 2012

Marketing science as technology? Notes on the Winter AMA conference

Published in Technology, relevance, conference, academia by Jukka Luoma | Comment (0)

Feb 22 2012

Inertia is good for you: an individual perspective on organizational inertia

Published in psychology, inertia, decision-making, Blog by Jukka Luoma | Comment (0)

In the TV Series How I Met Your Mother, one of the characters, Marshall, a young lawyer, leaves his friends at a bar one night by saying:

Jan 25 2012

Quantitative management research: torture or interrogation?

Published in research, institutions, academia by Jukka Luoma | Comment (2)

In recent times, there has been a lot of discussion about the questionable practices of scholars, universities and publishers. In a related fashion, the economist Ronald Coase once said that "if you torture the data long enough, Nature will confess." He referred to a common research practice of flexibly changing one's model, collecting more data and using different measures until you find interesting and publishable results; it is likely that at some point you will find statistically significant results purely by chance. For a qualitative researcher, flexibility is a good thing. In fact, going back and forth between data and theory is the primary mode of doing qualitative research. However, in quantitative research, flexibility is somewhat counter-intuitively considered a bad thing. Let me explain.

Jan 18 2012