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November 29, 2021
The Avatars of the Strategist
This one ubiquitous job has four distinct roles.
- By
The strategist as a systems thinker
“Managers do not solve problems,” the late University of Pennsylvania systems theorist Russell Ackoff famously said, “they manage messes.” Messes emerge because it is difficult to decipher the interconnections between and among business units and the external environment. And messes are difficult to manage because it is hard to save what is valuable without causing damage.
The systems thinker’s first task is to understand the nature of the interconnections. Take, for example, rapid and frequent changes in technology. These have implications for an organization’s human-resources policies—who should be hired, how they should be trained and managed, etc. Technological change also forces the organization to evaluate its structure and work practices: Should it have a flatter or steeper hierarchy? Should employees be given substantial autonomy? And so on.
The systems thinker’s second task is to match distinct business processes to activity within the company and to set policy directives on how every unit and activity initiates and responds to change.
The systems thinker aims to see the forest as well as the trees, looking beyond the first-order effects of changes to anticipate the size and magnitude of subsequent opportunities and constraints. He then designs a response system so that if it were to fail, it would do so in noncritical ways before failing in catastrophic ones—the engineering principle of “leak-before-break.”
The systems thinker is acutely aware that feedback loops mean that success begets success and failure begets failure. The 1980 IBM-Microsoft agreement illustrates this principle. That year, IBM asked Bill Gates and his fledgling startup, Microsoft, to develop an operating system for IBM’s new personal computer. The first part of the deal that Gates structured was standard: IBM would have to pay Microsoft a development fee of $200,000 and as much as $500,000 for incremental development work. The second part of the deal is noteworthy for Gates’s recognition of feedback effects. He gave IBM the rights to use the Microsoft operating system and several related products for no additional fees, on the condition that Microsoft had exclusive rights to license the system and related software to other manufacturers.
Why did Gates introduce this second element? In their book, The Business of Platforms, MIT’s Michael A. Cusumano, University of Surrey’s Annabelle Gawer, and Harvard’s David B. Yoffie note that Gates was aware of a growing “clone” industry and calculated that exclusive licensing could be very valuable if the market for personal computers took off. And indeed it did: an entire ecosystem of hardware and software developers emerged during the 1980s and ’90s centered around Microsoft’s operating system, which drove the company’s revenues from $16 million in 1981 to $19 billion by 1999.
The systems thinker is acutely aware that feedback loops mean that success begets success and failure begets failure. The 1980 IBM-Microsoft agreement illustrates this principle. That year, IBM asked Bill Gates and his fledgling startup, Microsoft, to develop an operating system for IBM’s new personal computer. The first part of the deal that Gates structured was standard: IBM would have to pay Microsoft a development fee of $200,000 and as much as $500,000 for incremental development work. The second part of the deal is noteworthy for Gates’s recognition of feedback effects. He gave IBM the rights to use the Microsoft operating system and several related products for no additional fees, on the condition that Microsoft had exclusive rights to license the system and related software to other manufacturers.
Why did Gates introduce this second element? In their book, The Business of Platforms, MIT’s Michael A. Cusumano, University of Surrey’s Annabelle Gawer, and Harvard’s David B. Yoffie note that Gates was aware of a growing “clone” industry and calculated that exclusive licensing could be very valuable if the market for personal computers took off. And indeed, it did: an entire ecosystem of hardware and software developers emerged during the 1980s and ’90s centered around Microsoft’s operating system, which drove the company’s revenues from $16 million in 1981 to $19 billion by 1999.
The Avatars of the Strategist
Posted by ACASA on November 29, 2021 at 10:17 PM in blog post | Permalink