You Know You're Too Far Up The System...

A Surprise Challenge (Inside Higher Ed, April 22, 2011)

A handful of conservative candidates are challenging a relatively apolitical group of incumbents for control of a rural Montana community college’s board of trustees, politicizing what is typically a sleepy and often uncontested spring election for the body.

Among other stances, the challengers hold that the college relies far too much on federal funding — one has gone as far as to argue that Pell Grants are unconstitutional — and that the college’s faculty and staff should not have the right to collectively bargain for their salary or benefits. The views and campaign rhetoric of the challengers have upset and angered the incumbents, many of whom have never faced electoral opposition. They are now fighting back by defending their records and painting their challengers as radicals who want to force their ideology on an unsuspecting community college in order to get ahead politically.

... when your first reaction to this story is, "I wonder if they have any open management positions." (Flathead Valley Community College is 30 minutes from my in-laws, so I'd be all set.)

Brit Does Qualitative Strategy Research Without Quite Meaning To

This post at the Dabbler, while not quite ethnography, qualifies as qualitative strategy research of the (somewhat déclassé) "go ask someone who knows" school.

It is left to the reader to decide if Bath Ales has a valuable, rare, inimitable and nonsubstitutable strategic resource.

A New Tool in the Quest for a Knowledge Spiral

A seminal paper in the academic literature on organizational learning was Ikujiro Nonaka's 1994 article in Organization Science. In it, Nonaka eloquently describes how personal and codified (externalized) knowledge work together across individuals and organizations to create a "knowledge spiral". This is a compelling idea: individual learning followed by codifying some of that learning, which frees up the individual to leave behind that which can be codified to others so that she/he can learn new things. Mentoring processes can work this way. They have two benefits: one, they train a new mentee; and two, they free up the mentor to do more challenging, creative work so that he/she can learn more.

There is a new tool in the works that can aid a knowledge spiral process substantially: "intentional software". This is software that seeks to capture the intent behind knowledge work by making software development accessible to non-developers. There's an interesting article in a recent issue of Fortune magazine that describes the phenomenon (http://tech.fortune.cnn.com/2010/11/11/out-of-this-world-software-engineering/) and the company that is seeking to develop it (http://intentsoft.com/index.html). The company "Intentional Software" is led by Dr. Charles Simonyi, a Microsoft alumnus who has been working on this project for some time.

It's an exciting idea for knowledge development, obviously. If top knowledge workers could more easily codify their work, such knowledge could be shared more broadly, and it could lead to all sorts of new knowledge being developed. It's interesting, too, to think of the intellectual capital in knowledge workers being made more divisible not by sharing it with other knowledge workers, but rather by putting it into a machine. As goes the factory worker, so goes the knowledge worker, perhaps!

Thoughts After Getting Coffee With My Wife

My adviser, who is well-published, tells me that one of the keys to publishing is to have a 2x2 matrix. Management academics love 2x2 matrices, where we show the interaction of two orthogonal (i.e., independent; the level of one doesn't tell you anything about the level of the other) constructs. At the moment, behavior v. attitude matrices are all the rage.

Having gone out for coffee and a danish this morning, my wife and I were discussing the interaction of "friendly" and "competent," illustrated by this 2x2 matrix.

Obviously, we prefer our counter-help to be competent and friendly, and least prefer incompetent and unfriendly. But how would you rank second and third? It does depend on context -- this is what we would call a contingent model. My car mechanic can be unfriendly if competent. What we couldn't decide is, at the coffee shop, is it better to be friendly but incompetent or competent and unfriendly.

For those wondering, what we got this morning was an order-taker who as unfriendly and incompetent and a barista (used generically, as we weren't at Starbucks) who was friendly but incompetent.

Randy "VRIN" Moss And Bill "Dynamic Capability" Belichick

There are a good number of strategy papers that use sports as a context. This isn't so much because strategy academics like sports or that sports are more interesting than other contexts, though both statements are true. It's mostly because sports (at least insofar as on-field activities are concerned) are more transparent than other businesses. Players are a resource, there are lots of performance metrics available, there's a relatively efficient market for players, and information about their cost is usually available. Sports can be a natural experiment for various theories in strategy.

They are also useful in explaining what it means to have a valuable, rare, inimitable and nonsubstitutable resource, and what it means to have a dynamic capability.

Throughout his career, Randy Moss has been a VRIN resource. Players like Moss (one of the top five wide receivers in NFL history) are not easy to find, nor can you just go to the Patriots and buy him out if you think he'd be more valuable to you than to them. But Moss's role doesn't really change over time. He runs faster and jumps higher than most defensive corners covering him, so he can gather in long passes in or near the end zone. Over the last three years, he's done so more often than anyone else in football. In 2007, he did that more than anyone ever has in a single season, and except for one bitter exception, the Pats outperformed everyone else in the league.

There can't be much doubt that, as a player, Randy Moss is valuable, rare, inimitable and nonsubstitutable, and that this led the Pats to outperform other NFL teams. But athletes are wasting resources; Moss only has so many years left until he no longer outperforms. Nor do athletes, as a rule, reinvent themselves in ways that add to their ability to outperform the competition.

Bill Belichick, on the other hand, is a capability rather than a resource. A capability uses resources, and Belichick, and any head coach, is in the business of deploying resources as best as possible. If Belichick is special as a head coach -- and how can anyone doubt it -- it is because he is dynamic in his capability. That is, he doesn't simply deploy his resources in the same way over time. Rather, he is good at changing how his resources act depending upon that year's team and that week's opponent.

But Belichick's dynamic capability has an odd effect -- it reduces the value of his resources. With one (exceptional) exception, Belichick doesn't seem to much care about the identity or skills of his athletes. Randy Moss is a valuable resource (he's VRIN) but is value to the Patriots seems to be less than his value to other NFL teams. This is consistent with the Patriots' general approach to highly skilled players (with, again, that one exception).

This implies something interesting about management. Value in organizations may not be cumulative or even additive. Adding one VRIN resource to another, or to a dynamic capability, does not necessarily result in performance equal to the sum of the performance boost that each would add alone. In fact, in sports it's easy to see that the result can be negative. Adding one superstar to another, or giving a great coach another great player might lower performance. This implies, in turn, that management is not simply mechanical.

Professing Professionally

Daniel Drezner (a tenured professor at Tufts) and Megan McArdle (economics editor/blogger at The Atlantic) talk about why elite schools don't care about teaching. I think that Megan overstates the extent to which even the best schools don't care about teaching. Over the summer, I was speaking with a professor at one of the top business schools who protested vigorously that although research drove tenure decisions, a really bad teacher would not get tenure no matter how good his or her research.

The real question, as Dan suggests at the end, is how we tell the good teachers from the bad. There is a lot of attention being paid right now -- particularly at teaching schools -- to student evaluations and, I promise, grad students and new faculty care about their evaluations. But, if learning is the point, then student evaluations are problematic; as Dan says, most students value easy grading without too much work over disciplined learning.

Of course, how any particular school approaches this question is a matter of strategy. How does that school go to market and how does it differentiate itself from its competitors? UMass has a murky strategy, and murky is never good. UMass will never be the high quality competitor in the University industry in Massachusetts, nor is it clear how UMass can differentiate its classroom product. That leaves it with being the low cost competitor, which is good for a state school but not how UMass wants to see itself, or with focusing on campus life. As a large state school campus in the middle of cornfields, UMass has a party school reputation (just Google ZooMass). On the one hand, this is a good market positioning if your target market is underachieving high schoolers (which is exactly UMass's market). On the other hand, the Administration hates this image with the white hot passion of a thousand nuns.

One way for UMass to square this circle is to lobby against partying, which it does, while putting a lot of emphasis on teaching evaluations, which it doesn't do. This leaves UMass with a murky image and an emphasis on the school as the economical alternative for Massachusetts high school students.

There's Nothing You Can Do That Can't Be Done

I've never quite understood what the Beatles meant to tell us with this line, but it turns out to be a very nice way to think about why many innovative new products give companies only a temporary competitive advantage and as an introduction to the strategic management concept of dynamic capabilities.

Unless protected by some effective legal monopoly (for example, a patent, although even that only delays the inevitable), the introduction of even the most brilliantly useful new product is the beginning of the end of its usefulness. There's nothing you can do that can't be done, so upon introduction of your brilliant product, your competitors will start their ultimately successful search for ways to duplicate your achievement. Even if they can't duplicate it exactly, they will ultimately find a way to achieve the same result. Thus, while you might be able to price your product so as to extract above-average returns for a while, once your competitors have found a way to offer customers the same functionality, your days of above-average returns will come to a sudden end.

In real life, the situation is even worse. Developing your brilliant new product might have been costly. You might have made false starts, or perhaps only one in ten of your new product ideas might actually reach the market. For a while, you'll have the customer to yourself, but much of your "above-average return" might actually go to pay off your research and development costs not only for that product but for all of your failures, too. Your competitors, on the other hand, don't have these same costs. Because they can go buy your product and study why customers like it, they don't have to take the risks or pay the price for research and development. You've kindly volunteered to do that for them. Even worse, they'll have the chance to see how your product can be improved to better serve your customers. Free-riding on your investment, they might be able to undercut your price and still make a better overall return. We call this the second-mover advantage.

Assuming you don't have a monopoly, the only way to beat these free-riding second movers is to present them with a moving target: by the time they have managed to copy your brilliant but dated product, you have to have a second even-more-brilliant product ready to go. Thus, one of the truisms of strategy: strategy is not what you do, but what you do next.

If coming up with a new innovative product is not the key to above-average returns, what should the firm do? It can wait for someone else to be an innovator, but that has it's own problems. There is also a first-mover advantage, and letting your competitors go first cedes to them the ability to decide where the industry is going and what the product looks like. Often, the key is to develop a "dynamic capability." A dynamic capability is a organizational talent for doing something useful not just once, but serially. In this example, not simply stumbling across one innovation, but the ability to introduce a series of innovations that always keeps your competitors one step behind.

The idea that a sustained competitive advantage has to be a process, rather than a one-off, comes from Kathy Eisenhardt, a professor at Stanford who studies the tech industry. It's application there seems fairly straight-forward, but it is not only applicable to high-tech companies. McDonald's, for example, pulled itself out of a long-period of sales stagnation by expanding its menu, but once it started it didn't stop. Coffee followed fajitas followed salads followed breakfast followed nuggets. Moreover, a dynamic capability doesn't have to involve new products. Toyota, for example, has a dynamic capability in quality control. It's cars aren't the most advanced, but they work while allowing Toyota to build them more efficiently.

There's nothing you can do that can't be done, but there are things you can do next that won't be done until you've already moved on.