Archive for August, 2015

Innovation and the Western Business Model

Sunday, August 2nd, 2015

Adapted from a Post by Arthur Gogatz from the World Innovation Team

The Western Business Model (WBM) has been used for centuries. It describes the way the world traditionally does business. The foundation of the WBM is that business is war. Anything you buy helps someone and equally hurts someone else. If you buy products from Company A, it’s good for that company, for the owners and their employees and families, but it’s bad for all their competitors and for the employees and families of those competitor firms. A few years ago I visited the Wharton School of Business at the University of Pennsylvania in the USA. It was the first day of classes for their MBA Program and on the desk of each student was a book, which the school was giving them. It was the first one they were going to read. The title of the book was “The Art of War”, which is a book written centuries ago by Sun Tzu, a General in China. It’s about warfare strategies. Since business is war, the successful firm traditionally resembles the successful military unit in structure. One of the basic principles business takes from the military is: individual employees (including the managers) and individual customers are not important as individuals. Traditionally in warfare the individual soldier was not held to be important. Men were in fact called upon to sacrifice their lives for the preservation of the nation and usually the country with the largest army won the battle and the war. What was essential was to win the battle. Casualties were expected. In business, no individual employee is crucial to the firm’s success, not even the CEO. This is because in the army if an officer is killed, the battle continues and other soldiers step up and take command. Two classic examples in business are Steve Jobs of Apple and Howard Schultz of Starbucks. Schultz worked for Starbucks, when it was only a retailer of whole bean coffee. Schultz urged them to open coffee bars, which at that time didn’t exist. When the management of Starbucks declined, Schultz quit and opened his own chain of coffee bars, and named them “il giornale”. After success, he returned to purchase Starbucks, mainly because he recognized that “Starbucks” is one of the best names ever, (in English) for a company. Jobs started Apple and built it into a successful company. Eventually both Jobs and Schultz ran afoul of their boards of directors and were booted out of their own companies. Under the WBM no one individual is more important than the firm. In ironic twists both Jobs and Schultz later returned to take command at the same companies which dumped them. The military advises soldiers not to get too close to others in their unit, because you may have to watch them die. This is especially true for officers, who need to send men into battle. The WBM stresses not to be friends with your colleagues, because if they leave the firm, they’ll probably wind up at the competition. Yesterday that colleague was your friend, but tomorrow they could well become your enemy. Colleagues may get sick or even fired but the firm must go on. Rules, regulations, orders, obedience, uniforms, titles, chain of command. That’s the military but it’s also a firm. Flow charts, business attire, tell the boss what he wants to hear, office culture, titles, it’s much the same. Why is the direction of a firm always located on the top floor of a building? Does it help the managers to be up there? Are they able to see things more clearly by being physically above their lower ranking colleagues? With smartphones, laptops, tablets, and apps that let us teleconference and instantly communicate, the average businessperson today can work anywhere, including remotely at home. Why then do most firms still demand that employees use a sick day or a personal day if they are going to be away from the office? “If you’re not here, where I can see you, I assume you’re not working” is the prevailing way of thinking.  It might be tradition, but it’s also a lack of trust, and trust is the most important word in any relationship. Companies today continue to try to control everything within their reach, but when you teach people creativity the first and most important thing you do is try to get them to stop trying to control everything. The desire to control everything kills your creativity because it reduces the size of your world to a size you can cope with, (handle) and unfortunately that’s a very small, limited world. Unfortunately, the Western Business Model opposes Innovation. In order to make people in a firm more creative you’ve got to weaken the grip of the WBM. Any firm, which emphasizes control will never innovate. The only way to teach people to be highly creative, (regain the full and vibrant creativity they had as children) is by getting them to open up rather than by encouraging them to build defenses, by getting them to take risks rather than rejecting new things and people, and by getting them to stop trying to control everything and everyone. Systems, rules, procedures, business chic, titles, time clocks, all come from the Western Business Model which is based upon a progressively outdated military system.