Business Exposed140
Firms that adopted ISO 9000 norms started doing signicantly
more “close to home” inventions at the expense of truly new,
exploratory innovation. The “more of the same” patents, induced
by the ISO 9000 processes, crowded out the discovery of truly
new techniques and products.
How come? Well, by denition, ISO 9000 minimizes deviations
from “the best way of doing things” in the rm. Yet, often, the
best innovations are discovered by accident. Just like random
genetic mutations can produce whole new species in nature,
random deviations from the norm in organizations sometimes
turn out to be “mistakes” which become the rm’s next big
blockbuster product. Think of how the Post-It note came into
existence: a bloke named Spencer Silver was working in the
3M research laboratories in 1970 trying to nd a super-strong
adhesive. Spencer developed a new adhesive, but it was ridicu-
lously weak. It was so weak that although it stuck to objects,
it could easily be lifted off. It was a clear error. Yet, ultimately,
this super-weak adhesive became 3M’s famous, money-spinning
Post-It note.
Although usually deviations from the norm merely produce
mistakes, which should get corrected quickly, if you rule out
all mistakes, you will never be fortunate enough to develop a
“mistake” that turns out to be your Post-It note. ISO 9000 annuls
all deviations from the norm. But, as a result (unintended), you
become a lousy inventor.
How bad practice prevails
When speaking to executives, I always make a point of quizzing
them about their management practices. Quite often, when I
interview or just talk to a manager about his company and try
to gure out why it is organized or managed in a particular way,
I hit upon something which I don’t understand: some practice,
management technique, service specication or incentive system
which I fail to grasp why they do it like that (just to name a few
candidates: detailing in pharmaceuticals, buy-back guarantees in
1416
n
Myths in management
book publishing, insane working hours in investment banking).
And when I ask, “I am not sure I understand; can you explain a
bit more?”, I often get a long and wafy answer (which suggests
to me that they don’t quite know why either . . .).
And when I then, stubbornly, poke a bit harder (“Sorry, but I still
don’t get it . . .”), the interviewee might get annoyed, and then I
will receive the momentous reply “Look, Freek, everybody in our
business does it this way, and everybody has always been doing
it like this; if this wasn’t the best way to do things, I am sure it
would have disappeared by now.”
I never quite bought this answer but, frankly, did not quite know
how to refute it.
Because our well-established theories of economic organization
would propagate exactly that: the market is Darwinian. Firms
with bad habits and practices have a lower chance of making it
in the market in comparison to smart rms that do everything
right. Therefore, those rms will go out of business quicker and,
although it may take a while, the ineffective practices will die
out with them.
But I still thought they were wrong. I now think I have gured
it out. Bad practices can spread and persist in industries. Let me
attempt to explain to you how and why.
The trick is bad management practices can survive, despite
making rms worse off, just like viruses can persist among
humans. Because they are contagious, and spread quicker than
they kill, the virus (or management practice) can continue to
persist and not die out.
Moreover, what’s unique about industries is that if everybody is
employing the practice, everybody is equally bad. Yet, because
competition is based on relative competitive strength, rms
might not even notice that they are worse off for continuing the
silly habit. Customers might complain about them (e.g., “all the
high-street banks are equally terrible!”) but don’t have a choice;
they have to pick one anyway (just as they would if the banks
were all excellent). Hence, the banks don’t suffer.
Business Exposed142
Many of these management practices
(like TQM and ISO 9000) do act like
viruses, spreading from one rm to
the next, in spite of harmful conse-
quences. This also implies that, just
like a virus, the practice continues to
exist. It may seem paradoxical but
it is possible that, although a particular management practice
lowers rms’ effectiveness, and everybody would be better off
without it, it persists over time.
You can put these things into simulation – which I did, just to
show that it works – and quite easily model the diffusion and
persistence of harmful management practices. So, next time
a manager tells you they do it because everybody has always
done it and they’re sure that therefore it must be the best way
of doing things, just smile at him and say “Ah! That’s not neces-
sarily true; just because everybody is doing it and has been
doing it like this forever, does not mean that it is the best way
of doing things.”
‘‘
Many management
practices act like viruses,
spreading from one firm
to the next, in spite of
harmful consequences.
’’
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.