Fads and Management Models

Sometimes people go mad and are taken in by the folly of their times. There is a great book written by Charles MacKay titled “Extraordinary popular delusions and the madness of crowds”. Though the book was first published in 1841 the lessons are still relevant. The dot-com bubble of the 1990s, global financial crises of 2008, and the ascension of real estate prices in Pakistan to unsustainable levels in recent years all have their predecessors mentioned in that book.

But books and printed words carry pitfalls of their own and na?ve credulity of the reader or not having a well-developed critical thinking muscle make him an excellent prey. Famous Pakistani humorist Mushtaque Ahmed Yousufi said about one of such character in his book that he believes everything that he reads in the newspaper. This awe towards printed word is understandable as we have been conditioned to receive the knowledge through books throughout our education that we normally receive uncritically.

This gullibility towards fads and sophisticated business models is all the more profound in management. When a manager seeks to find a solution to the problem that he faces, on his campaign he himself or the consultant hired have at their disposal a huge pile of management literature with many management models, some of which are the craze of the day. There apart from printed words, and some models being the current craze, he also faces phenomenon the big names attached to the solutions and resultantly gets overwhelmed making him the ideal victim of buying into failure.

I am not saying that the models of solving business problems are wrong, what I am saying is that to consider them as some kind of philosopher’s stone that will yield gold whenever it touches something is wrong. What worked at a certain company is not supposed to work at your company as every company is unique. The lessons contained in an approach or model can be applied in your company but not in an off the shelf manner. Having this realization, one also needs to have a thorough understanding of the model and critical thinking muscle to seek full benefit from it otherwise it is just an exercise of going through steps.

I shall take two examples of famous models and show how they are under-utilized or are misapplied.

The first one is SWOT analyses. I have seen many companies doing the SWOT analyses as their mandatory exercise on annual basis at the time of putting down the business plan for the next year. But unfortunately, that is where it ends. Most of the time the results are never converted into strategic action plan thus wasting the precious time spent on it.

I suggest that instead of just stopping here, where most of the people stop, the management should ask itself what strategic actions can be devised based on this insight. A well carried out SWOT analyses should chart out a comprehensive landscape in which company operates and must result in a concrete plan of action. Even if the status quo advice is the outcome of this exercise, it will not be a passive status quo but an informed adherence to inactivity. We can find the policy of non-action called masterly inactivity by the British foreign office when they decided in 19th century that they will act in continental Europe only if the balance of power is disturbed. The same policy of masterly inactivity was in place by British Raj in Khyber Pakhtunkhwa (called North West Frontier Province in those days) before embarking upon forward policy.    

The second model is the famous BCG matrix model. In an agricultural commodity (single commodity) processing and bulk trading company, the management was trying to apply BCG matrix approach to managing portfolio of products. Despite repeated attempts, they could not be persuaded to abandon this approach and the reason was that this is what CEO had done throughout his life at his previous companies, all of which were carrying a range of products in its portfolio. As the commodity business is a business in which one is at the mercy of commodity prices, so the bottom line may mask the real reason of non-performance, yet the unnecessary marketing money thrown at supposed product line could have added to the bottom line because as it being a commodity company, not only its product is indistinguishable from the next company’s product but margins are also razor thin.

Now that we have seen how either management models are under-deployed (SWOT in above example), or there is lack of comprehension of the model itself to understand in which context it should be applicable, it is all the more important that team (internal or external) charged with the task of application of the model or devising of solution has certain attributes to pull up the required campaign to attain the desired results. This will be discussed in the next article, so stay tuned….

P.S. If any of you have seen any campaign success or failure (turnaround, cost-cutting, or strategy formulation etc.) at your organization and are willing to share it with me at [email protected] , I shall be grateful. Needless to say, in case I utilize the information on the blog, the identity of the organization and contributor shall be withheld.