Letting go at the top is not an act against…

… perfection, but against shortsightedness.

In addition to the scarcity of leaders willing to disassemble the profitable, and the natural bias of companies toward perfection, there is another reason why letting go is so hard. Economists Paul Milgrom and John Roberts studied the competencies–the winning traits–of a large number of firms in modern manufacturing and concluded that competencies of companies tended to occur in suites, or in a guilds of skills.

This natural bundling of traits makes it very difficult for contenders to challenge a successful firm. As Richard Nelson, an economist at Columbia University says, “Successful firms often are difficult to imitate effectively because to do so requires that a competitor adopt a number of different practices at once.” Companies can buy technology and human skills in a particular area. But gradually acquiring one or two competencies at a time does no good when you are attempting to displace a highly successful firm. The whole suite of mastery has to be acquired simultaneously in order for you to be competitively effective. A firm such as Disney is almost inimitable because of the difficulty of obtaining in one swift swoop its highly integrated mix of skills.

The natural bundling of traits also makes unraveling for devolution immensely difficult. To devolve demands going against all the best qualities of an organization all at once. The organic world offers a number of lessons in this regard. Biotechnology is built on the knowledge that most genes don’t code for anything themselves. Most genes regulate–turn off and on–other genes. The genetic apparatus of a cell, then, is a dense network of hyperlinked interactions. Any gene is indirectly controlled by many other genes.

Thus, most attributes in a biological organism usually travel in the genome as loosely coupled associations. Blue eyes and freckles, say. Or red hair and a hot temper. Two important consequences follow from this. First, to get rid of the redhead’s feisty temperament by evolution may also mean–at least at first–getting rid of the red hair. Animal breeders know this dilemma firsthand. It is difficult to breed out an unwanted trait without breeding out many desirable ones. Chicken breeders can’t get rid of a chicken’s aggressiveness without throwing out its egg-laying proficiencies.

Secondly, the interlocking guild of competencies, which give organisms and organizations their advantages, becomes a drawback during change. The increased interlinkage of the network economy heightens this dilemma. In the network economy, the skills of individual employees are more tightly connected, the activities of different departments more highly coordinated, the goals of various firms more independent. The net brings the influence of formerly unrelated forces to bear upon each potential move.



Comments are closed.


Archives - This site operates under a Creative Commons License.

This is a blog version of a book of mine first published in 1998. I am re-issuing it (two posts per week) unaltered on its 10th anniversary. Comments welcomed. More details here.
-- KK

© 2023