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Porterian and Peterian Performance

13 July 2018

What makes an organization effective? After Peter Drucker, Michael Porter and Tom Peters became the most prominent writers about the performance of organizations, but with quite different perspectives. For Michael Porter, in his book Competitive Strategy, an effective organization positions itself in the marketplace for competitive advantage. For Tom Peters, in his book In Search of Excellence (with Robert Waterman), an effective organization executes excellently whatever position it has. One of these guys might eat in a restaurant that is different, the other in a restaurant that is solid (although I suspect that, personally, they might opt for the opposite).

What makes an organization effective? After Peter Drucker, Michael Porter and Tom Peters became the most prominent writers about the performance of organizations, but with quite different perspectives. For Michael Porter, in his book Competitive Strategy, an effective organization positions itself in the marketplace for competitive advantage. For Tom Peters, in his book In Search of Excellence (with Robert Waterman), an effective organization executes excellently whatever position it has. One of these guys might eat in a restaurant that is different, the other in a restaurant that is solid (although I suspect that, personally, they might opt for the opposite).

Porter described competitive advantage as either cost leadership or differentiation, namely providing lower prices or unique offerings—say, fast food fusion or high-end poutine. And both strategies can be pursued with a wide or narrow focus—for example, through a single outlet or a whole chain. Accordingly, in his writings on health care, Porter is a fan of specialized hospitals (as in cardiac surgery), not general ones. In his terms, general hospitals hardly have strategy: they tend to be neither differentiated nor cost leaders.

But might Porter be looking for strategy in the wrong place? General hospitals have a focus that must be the most common strategy on earth. I call it “local producer.”1  From the corner shoemaker to the national post office, they provide some undifferentiated service at regular prices in a geographic niche (a community, a country). In fact, I recall Peters being a great fan of just such an organization: a garbage collection firm in San Francisco. The CEO had a little garbage truck on his desk, and explained his success as being “…because I love garbage!”

Would you rather go to a hospital that does unique things, or ordinary things correctly? That, of course, depends on whether you have an ordinary problem, like appendicitis, or a complicated one, like a special heart ailment. Given the time and the money, I imagine that both Porter and Peters would not hesitate to fly to a specialized hospital for the latter treatment, whereas both might go to a local general hospital for the former, especially if it is urgent. Their choice would be made, in one case, on the basis of strategy, in the other, on the basis of location. But not only that: the quality of the service would also be uppermost in their minds.

Accordingly, to be truly effective, a Porterian organization has to be Peterian: it has to have a great strategy with wonderful execution. True, some organizations can get away with being more Porterian than Peterian—if their market position is really good. When I shopped at IKEA years ago, they were notorious for running out of stock. (Someone in the company once told me that it was because the founder hated planning!) But in other respects—design, layout, meatballs and more—IKEA executed brilliantly. So I went back.2  The problem with this, however, is that enticed customers can tire of going home disappointed.

A truly effective Peterian organization, however, need not be Porterian. Excellent execution can be enough. I imagine that both these guys might eschew a differentiated garbage collection company in their community, maybe even a cost leader, for one that is clean and reliable. Thus, in this battle that I have concocted of these two titans, while together both win, apart I believe that Peterian effectiveness usually wins. Who needs an effective strategy effected ineffectively? I used to seek out restaurants that were truly novel, until I realized that many of them failed to blend their fancy ingredients. (That is called synthesis, beyond analysis.) Now I celebrate restaurants that do classic dishes, and not just novel ones, splendidly.

Porter does include customer service as a form of differentiation. Isn’t this Peterian? Not quite. For Porter, this is a strategic choice—calculated—perhaps to offer more extensive service, aside from  more attentive service. For Peters, service is not so much a calculated choice as a driven imperative: a philosophy of doing business, a way of life, done with soul. A management fixated on strategy—the grand and the glorious, from the top—can lose sight of what is happening on the ground. Don’t we all know companies with great strategies to which we shall never return?

Too much calculation can get in the way of managing with soul.  On the desks of people who manage like this, you are more likely to find a financial report than a garbage truck. What they love is Shareholder Value. But surely we have enough cold love in our economies. So please: a little more attention to Peterianism, with or without Porterianism.

© Henry Mintzberg 2018. Coming in the new year, a collection of my TWOGs entitled Bedtime Stories for Managers (Berrett-Koehler).

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1See my book Managing the Myths of Health Care (2015) on strategy with regard to hospitals (pages 173-179).

2One such IKEA experience of mine is described in “Opening up Decision Making: The View from the Black Stool” (with Ann Langley, Pat Pitcher, Elizabeth Posada, and Jan Saint-Macary) Organization Science (May-June 1995).

Need a strategy? Let them grow like weeds in the garden

29 June 2018

Hothouse Dick sitting among the weeds, photo by HM


Searching for a strategy? Here’s how to get one, according to just about every book and article on the subject. I have stylized this a wee bit, in what I call the “Hothouse Model of Strategy Formulation.”


The Hothouse Model of Strategy Formulation

1. There is one prime strategist, and that person is the chief executive officer—the planter of all strategies. Other managers may fertilize, while consultants can offer advice (sometimes even the strategy itself—but don’t tell anybody).

2. The planners analyze the appropriate data so that the CEO can formulate the strategy through a carefully controlled process of conscious thought, much as tomatoes are cultivated in a hothouse.

Hothouse Dick sitting among the weeds, photo by HM


Searching for a strategy? Here’s how to get one, according to just about every book and article on the subject. I have stylized this a wee bit, in what I call the “Hothouse Model of Strategy Formulation.”


The Hothouse Model of Strategy Formulation

1. There is one prime strategist, and that person is the chief executive officer—the planter of all strategies. Other managers may fertilize, while consultants can offer advice (sometimes even the strategy itself—but don’t tell anybody).

2. The planners analyze the appropriate data so that the CEO can formulate the strategy through a carefully controlled process of conscious thought, much as tomatoes are cultivated in a hothouse.

3. The strategy comes out of this process immaculately conceived, then to be made formally explicit, much as ripe tomatoes are picked and sent to market.

4. This explicit strategy is then implemented, which includes developing necessary budgets as well as designing the appropriate structure. (If the strategy fails, ''Implementation'' must be blamed, namely those dumbbells who were not smart enough to implement the CEO’s brilliant strategy. But if these dumbbells are smart, they will ask: “Why, if you are so smart, didn’t you formulate a strategy that we dumbbells were capable of implementing?” You see, every failure of implementation is also a failure of formulation.) 

5. Hence, to manage this process is to plant the strategy carefully and watch over it as it grows on schedule, so that the market can beat a path to the produce.1


Wait, don’t go off and start formulating your strategy quite yet. Read the next model first.

A grassroots model of strategy formation

1. Strategies grow initially like weeds in a garden; they don’t need to be cultivated like tomatoes in a hothouse. They can form, rather than having to be formulated, as decisions and actions taken one-by-one amalgamate into a consistent pattern. In other words, strategies can emerge, gradually, through a process of learning. The hothouse, if needed, can come later.  

2. These strategies can take root in all kinds of strange places, wherever people have the capacity to learn and the resources to support that capacity. Anybody in touch with an opportunity can come up with an idea that can evolve into a strategy. An engineer meets a customer and imagines a new product. No discussion, no planning: she just builds it. The seeds of a possible new strategy are planted. The point is that organizations cannot always plan where a strategy will begin, let alone plan the strategy itself. Accordingly, productive strategists build gardens in fertile ground, where all kinds of ideas can take root and the best of them can grow.

3. Individual ideas become organizational strategies when they pervade the organization. Other engineers see what she has done and follow suit. Then the salespeople get the idea. Next thing you know, the whole organization has a new strategy—a new pattern in its activities—which might even come as a surprise in the C suite. After all, weeds can proliferate and encompass a whole garden; then the conventional plants can look out of place. But what’s a weed but a plant that wasn’t expected. With a change of perspective, the emerging strategy can become what’s valued, much as Europeans enjoy salads of the leaves of dandelions, America’s most notorious weed.

4. This process of proliferation can sometimes be consciously managed. Once an emerging strategy is recognized as valuable, its proliferation can be managed the way plants are selectively propagated. This may be the time to build that hothouse: turn that emergent strategy into a deliberate strategy going forward.

5. There is a time to sow strategies and a time to reap them. Blurring the distinction between sowing and reaping can damage a garden—and an organization too. Managers have to appreciate when to exploit an established crop of strategies, and when to encourage new strains to replace them.

6. Hence, to manage this process is not to plan strategies, but to recognize their emergence and intervene when appropriate. A truly destructive weed, once noticed, is best uprooted immediately. But one that seems capable of bearing fruit is worth watching, in fact sometimes worth pretending not to notice, until it bears fruit or else withers. Then hothouses can be built around those that offer the hanging fruit, low or high.

OK, now you are all set for strategy, by forgetting the word, getting involved in the details, and doing a lot more learning than planning.

© Henry Mintzberg 2018. First posted, with some different text, on 23 October 2016. This version will appear in my forthcoming book Bedtime Stories for Managers. For considerably more on this, see the books Strategy Safari and Tracking Strategies.

1Aside from the work of Michael Porter, see Dick Rumelt’s book Good Strategy/Bad Strategy. Neither author would, of course, quite subscribe to this characterization of their work, but both offer the best of the hothouse approach.

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Opportunity for the G6

7 June 2018

 Elaine MartinLa Malbaie: scene of the G7 meeting. Photo credit: Elaine Martin

Will the G7 collapse in Quebec?  Then what, in a world has had it with an American President who is out of control—personally and politically—as well as with a Congress that lacks the decency to stop him. Shall we all just wait, heads in sand, for this to pass, so that noble America can once again replace nasty America?

We would do better to face the reality. A great many Americans not only voted for Donald Trump, but continue to support him. When he goes, how can trust in America be restored when we know full well that next time, or the time after, back could come the likes of him, or worse?

 Elaine MartinLa Malbaie: scene of the G7 meeting. Photo credit: Elaine Martin

Will the G7 collapse in Quebec?  Then what, in a world has had it with an American President who is out of control—personally and politically—as well as with a Congress that lacks the decency to stop him. Shall we all just wait, heads in sand, for this to pass, so that noble America can once again replace nasty America?

We would do better to face the reality. A great many Americans not only voted for Donald Trump, but continue to support him. When he goes, how can trust in America be restored when we know full well that next time, or the time after, back could come the likes of him, or worse?

This tells us that the problem goes deeper than Donald Trump, far deeper: American society is dangerously out of balance, ironically in much the same way that the communist regimes of Eastern Europe were out of balance, just on the other side of the political spectrum. The public sector dominated those regimes; the private sector dominates America.

This problem has been festering since Thomas Jefferson expressed the “hope [that] we…shall crush in it’s birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength...”(sic). Unfortunately, the founding fathers addressed another problem, the one that provoked their revolution: excessive power in government. Hence, they imposed checks and balances on the public sector, with no comparable checks that might have limited the power of any other sector in society.

Half a century later, the U.S. Supreme Court recognized corporations as “persons” in the eyes of the law, and took that over the edge with a decision in 2010 that extended the rights of these and real persons to fund political campaigns to their hearts’ content. In effect, the Supreme Court of America legalized bribery in the United States, and the country has not been the same since.

Who is to blame? Hillary Clinton blamed the “deplorables” who supported Donald Trump. Were they more deplorable than the established people who drove so many of them to support him: not only Hillary Clinton and the people of Goldman Sacks, but everyone else who benefits from tax advantages, union busting, meagre wages for workers, and the rest. If I want to see this kind of deplorable, even here in Canada, I look in the mirror.

Into this swamp came Donald Trump, ostensibly to drain it. Instead, he has been wallowing in it, providing the U.S. with more of the same business as usual, not least his own. Thank you Donald Trump for putting the handwriting on the wall.

A healthy society balances the collective power of governments in the public sector with the commercial interests of businesses in the private sector and the communal concerns of citizens in the plural sector (or “civil society,” if you prefer). In such a society, the three sectors hold each other in check while cooperating for constructive change. Canada maintains a better balance than does the U.S., as does Germany, France, and Japan, all members of the G7, as well as the Scandinavia countries, New Zealand, Uruguay, Costa Rica, perhaps South Korea, and maybe Brazil when it gets its act together again. The G8 lost Russia; this G7 will likely lose America, in one way or another. That’s not crisis; it’s opportunity.

Imagine a city with weak government and no police force. Gangs would roam the streets and battle with each other, or else carve up the place for their own convenience. This is our “global village”, dominated by three superpowers. A G6 has the opportunity to begin countering this, perhaps joined later by other democratic nations that have no aspirations for superpower status or recent histories of belligerence. Is this impossible? Hardly: we see the budding of it in the Trans-Pacific [Trade] Partnership that proceeds without the United States. We need solutions that seem impossible until they become obvious.

© Henry Mintzberg 2018. See Rebalancing Society…radical renewal beyond left, right, and center.