The Hedgehog and The Fox

I first read about the hedgehog and the fox in Good To Great by Jim Collins. The fox is clever and knows many thing. The hedgehog is a simple soul but knows one big thing.

When I first read Good To Great I was heavily impressed. Of course, by then I hadn't laid my hands on two trend busting business books: Hard Facts, Dangerous Half-Truths And Total Nonsense, and Fooled By Randomness. I now know that what was done in Good To Great was backward fact-fitting and was inspired by a desire to find a cause for success while in fact it might just have been a case of being at the right place at the right time. (Read Blue Ocean Strategy for a small critique on Good To Great).

But just because I prefer books like Fooled By Randomness over Good To Great, doesn't automatically translate into Good To Great is crap. There are elements in Good To Great which could be some value, right? Ok, I reject the theory in Good To Great that companies that are led by silent, determined type CEO's make the leap and those that are led by aggressive but not exactly humble don't. (Where in actual fact the CEO's personality may have no bearing on a company's good performance.) But one cannot, off hand, reject the fact that companies that follow the hedgehog concept are more likely to emerge superior to those who do not. The hedgehog concept looks suspiciously like core competency, doesn't it? So isn't focusing on core competency good for a company? Or for that matter should being a hedgehog help an individual. Jack or all trade, master of none sort of thing.

It does ... but only if tomorrow is identical to yesterday. Meaning, only if you can extrapolate the future based on past data.

The Black Swan on the other hand pumps for the fox. Too much focus makes a person myopic. Hedgehog is myopic. Fox has a more broader vision. The fox takes in many more inputs from the world that exists outside its own and does not take its future as granted.

Now one might want to justify the both are necessary. When things are going smooth, hedgehog is a better strategy, while in turbulent times being a fox is advantageous.

Wrong.

A Black Swan event can happen exactly when going is smooth. That is why it is a block swan event. So being a fox is always a better proposition. A fox might survive the black swan event but a hedgehog will not.

Do you agree? What is your take on the hedgehog and the fox?

5 Must Read Business Management Books

Why am I publishing this list ... because it is winter vacations for the kids. And if you haven't read these yet, now is your time to catch up. 5 should be sufficient for a short winter break.

1. Managing For Results by Peter Drucker. The mother of all Management Books. A book can be written for every paragraph of Managing for Results and I suspect many are.

2. The Goal by Eliyahu Goldratt. A business novel that will teach you a new way of thinking. I like to read this novel again and again and again.

3. The Fifth Discipline: The Art & Practice of The Learning Organization by Peter Senge. Welcome to Systems Theory. Learn why time is an essential factor in any causal system. Application of its principles will turn your life and organization around.

4. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant by W. Chan Kim and Renée Mauborgne. A remarkable book, in my mind, only because the units of analysis are events and not companies. And also because CEO's in India use the term Blue Ocean Strategy to describe all their strategy.

5. Hard Facts, Dangerous Half-Truths And Total Nonsense by Jeffery Pfeffer & Robery I. Sutton. Read this book last. You might not want to read any other management book ever after.

Note: The photograph used belongs to Zsuzsanna Kilián. Please see her galleryfor more such photographs.

Scientific Study of Companies - Beyond The Blue Ocean Strategy

Consider two finacial institutions - Fannie Mae and Wells Fargo. These are two of the few companies that apparently made the jump from Good to Great.

Fannie Mae survived only because of government intervention and Wells Fargo is taking over Wachovia (well not quite, even as I type Citi Bank announced that it has persuaded a New York judge to block the Wells-Wachovia deal (see here - you will have to skip the advertisement that comes up when you click the link)

So what happened? Why did the two great companies diverge?
Well the answer seems to be in the Blue Ocean Strategy. W. Chan Kim and Renee Mauborgne, the authors of the Blue Ocean Strategy obviously put in a lot of effort to choose the unit of their analysis. Obviously companies cannot be examples to be followed. Not when "great" companies drop like flies soon after they are pronounced great.

To quote from the Blue Ocean Strategy: "If there is no perpetually high-performing company and if the same company can be brilliant at one moment and wrongheaded at another, it appears that the company is not the appropriate unit of analysis in exploring the roots of high performance ... our study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaning the creation of blue oceans and sustained high performance."

However, I would go a step further and modify the above a little - ok I am not a INSEAD professor, so what? This is my blog ;)

All strategic moves are right or wrong within a context. Remove the context and you have a strategy that has no standing. Blindly following any strategic move - even if it is part of a best seller - cannot be called a wise move.

So, why do I think a company does well at times and poorly at others. It is because what we call a company is a binch of people. The people take decisions. Not one but a set of people. When a company does right, find out what people were involved and what was their thought process. When the same company does poorly, find out whether the same people are still with the company; they may have moved on. Or if the same people are still around, are they still stuck to their old thought process.

I am sure all business thinkers are very good at what they do. But their methods are unscientific. A measure of good scientific theory lies in its ability to predict. Post facto curve fitting is not scientific.

If I were to conduct a scientific study on business strategies, I would report the context and the decisions live, recording the thought process (as revealed by behaviour) as it happens, without drawing any conclusion. Very much like the National Geographic or such similar recordings of wild life.

I might have just hit upon a new field of management study :-))))
Remember, you read it here first!

Note: The photograph used belongs to Mikhail Lavrenov. Please go here to see more such photographs.