Thursday, June 26, 2014

Disrupting management ideas


Over the last days we have seen a captivating debate unfolding. Jill Lepore’s article in The New Yorker on the concept of ‘disruptive innovation’ has garnered quite some attention. Not at least from its progenitor, Lepore’s Harvard colleague Clayton Christenen, who appears to be anything but amused.

Disruptive innovations - put simply - are new products or services that create new markets, while at the same time turning existing solutions to customer demands obsolete, and thus destroying existing markets and the companies that serve them. In his many books, Christensen initially developed the idea from a corporate context (such as his floppy disk, steel, or construction equipment examples) but it quickly branched out into other sectors.

The article is a fascinating read not just because it takes on an idea largely uncontested in academia and beyond. Moreover, the concept of ‘disruptive innovation’ had quite a substantial impact on the real world. Lepore writes as a historian and delineates the superficial and ideological nature of the idea. The piece is also worthwhile reading as it exposes Christensen’s ‘case study’ approach (after all, a hallmark of its intellectual birthplace) to thorough historical analysis. The latter perspective debunks and exposes the data at the heart of Christensen’s ‘disruption’ theory as utterly wanting.

Now it is always fun to question conventional wisdom and powerful ideas, especially when they come from a Harvard Business School professor recently honored as the No 1 in the Top50 Thinkers ranking. As some of our readers might remember, we also enjoyed doing a similar job on his colleague Michael Porter’s ‘big idea’ on Creating Shared Value earlier this year. But there is the danger that those skirmishes just remain internal quibbles inside the ivory tower of which another former Harvard colleague, Henry Kissinger, once said that they ‘are so vicious because there is so little at stake’…

Lepore’s article clearly goes beyond that. Two things seem worth highlighting. First, she contextualizes a management theory in a wider intellectual historical context, and second, she shows that as such management ideas are deeply ideological constructs:
"Beginning in the eighteenth century, as the intellectual historian Dorothy Ross once pointed out, theories of history became secular; then they started something new—historicism, the idea “that all events in historical time can be explained by prior events in historical time.” Things began looking up. First, there was that, then there was this, and this is better than that. The eighteenth century embraced the idea of progress; the nineteenth century had evolution; the twentieth century had growth and then innovation. Our era has disruption, which, despite its futurism, is atavistic. It’s a theory of history founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence. […] 
The idea of progress—the notion that human history is the history of human betterment—dominated the world view of the West between the Enlightenment and the First World War. It had critics from the start, and, in the last century, even people who cherish the idea of progress, and point to improvements like the eradication of contagious diseases and the education of girls, have been hard-pressed to hold on to it while reckoning with two World Wars, the Holocaust and Hiroshima, genocide and global warming. Replacing “progress” with “innovation” skirts the question of whether a novelty is an improvement: the world may not be getting better and better but our devices are getting newer and newer. […] 
The idea of innovation is the idea of progress stripped of the aspirations of the Enlightenment, scrubbed clean of the horrors of the twentieth century, and relieved of its critics. Disruptive innovation goes further, holding out the hope of salvation against the very damnation it describes: disrupt, and you will be saved."
Disruptive innovation in its reception in business, academia, public administration and politics had some rather devastating (side-)effects – as Lepore eloquently points out. The crucial lesson of her essay though lies in its unmasking of what sounds like a rather technocratic ‘theory’ as something that is deeply informed by a particular view of the world, by a particular normative take on how humans historically have evolved.
As the article points out, such functionalist and technocratic ‘theories’ totally ignore other dimensions of human life. ‘Disrupting’ – sold as a good thing and the natural way of how organizations evolve - ignores other important dimensions of human development, especially if the concept gets branched out and expedited beyond business to schools, hospitals, prisons, museums etc. The ethical implications of such a theory are totally ignored in Christensen’ framework – argues Lepore.

One central lesson of this article for everyone concerned with the role of business in contemporary society – be it academics, executives or politicians – points to the pivotal role of understanding the intellectual heritage and presuppositions of those core theories and ideas that have shaped contemporary social (incl. business) reality. In that sense, Lepore’s piece is a truly ‘critical’ contribution to management – and the set of historical ‘criteria’ by which she does the job should encourage particular management academics to move beyond the confines of their discipline. To understand the power of ideas we have to look at the broader picture of their origin, their contemporary drivers, but also their wider implications for society.


Photos (top by Andy Kaufman; middle by Nicolas Nova) reproduced under the Creative Commons license.

Tuesday, April 29, 2014

A ‘Sweet Spot’ in tackling climate change?


Today (Monday April 28, 2014) Jeremy Oppenheim was in Toronto. Oppenheim is the director of the  Global Commission on the Economy and Climate (chaired by former Mexican President Felipe Calderon, co-chairs include Lord Nicholas Stern and the OECD Secretary-General). He was hosted by Corporate Knights’ Toby Heaps for a 'high level' lunch which included some of the top brass of Toronto’s investment, real estate, insurance and academic communities. And civil society, of course, David Miller (ex-Major of Toronto and now Head of WWF Canada) was there, too.

It was, first off, a real game changing experience to see a room of 30ish ‘climate activists’ in pinstripes (or female equivalent) convening over antipasto e bistecca to discuss the plight of the planet. Oppenheim's remarks were thought provoking as they reflected the current gist among those leaders that care seriously about climate change.

Oppenheim started by highlighting that the public debate has somewhat stalled as most of conversations on climate change evoke pretty unsexy, depressing and un-cool truths. Going on and on about threats linked to climate change just makes you a boring party pooper.

At least in person – he was all but. Eloquently, engaging and thoughtfully he relayed his core points. What struck me most is that amongst the experts, the entire debate about ‘avoiding’ or ‘fighting’ climate change is yesterday’s news. Oppenheim stated clearly that – in my words - we just have to suck it up that temperatures are about to rise by two degrees. The damage is done. Today’s debate is really about how to avoid global warming to reach three or even four degrees. A sobering – and somewhat chilling assessment.

Oppenheim – no less a McKinsey director on leave from their London offices – then pointed to the currently explored strategy - which hopefully can become a game changer: highlight the 'positive' side of climate change (in my words). Or to put it this way: adapting to climate change can already make economic sense now! He ran through a couple of examples from many places around the globe. Here is just one: Deforestation in the Brazilian Amazon region has been identified as a great worry. What we see now though is that land owners in the Amazon are increasingly sympathetic to restrictions on turning rain forest into farm land: after all, the unlimited possibility of creating new farmland through cutting the forest decreases the value of their property. According to Oppenheim, those economic drivers are a huge force in favor of climate friendly policies.

It is interesting to see that a group of top business people is having this discussion. In the Canadian context, many of these will be laughed out of their Golf Clubs or seven star resorts in the Caribbean if they ever repeated to their buddies what they heard today. Canada, Oppenheim intimated with the maximum level of British politeness, is a real mess with regard to climate change action. So Oppenheim’s point was really that we have to change the story, change the way we communicate about it. Present it as a story of opportunity, rather than a story of threat. While Lord Stern’s report years ago was telling us ‘Pay a little now and you avoid being taken to the cleaners by climate change tomorrow!’ Oppenheim’s new message is: ‘You can actually make money on adapting to climate change NOW!’

I left the event with a somewhat ambiguous feeling. I was uplifted to see key players in business – from where most of the sources of carbon emissions are ultimately governed – acutely aware of the problem. I also liked the pragmatic gist of Oppenheim’s argument: We can use the current incentive structure in one of the most powerful engines of capitalism to ‘move the needle’ (I have to watch my language…) on pressing global issues. And - fair enough - there is some leeway.

At the same time, the by now worn out quote from Albert Einstein kept creeping up on me on my way home: “We cannot solve our problems with the same thinking we used when we created them.” A focus on short term economic gains for individual actors or organizations got us into this mess of climate change in the first place. And – we have to add – has prevented any large-scale meaningful response to date. So finding that ‘sweet spot’ (a quote from Jeremy Oppenheim’s McKinsey Website) where business interest and environmental needs converge may take us some way. But there can be little doubt that this is not going to really change the bigger picture.
DM
Photo by Tyler Hamilton/Corporate Knights.

Thursday, March 27, 2014

A practitioner's reflections on the problems of shared value

After our article on shared value came out in the California Management Review, and we published our last blog piece summarizing our critique, we've had a lot of response from various academics and practitioners in the corporate responsibility field. In fact, we've probably had more emails, comments and calls on this one article than we've had on anything else we've ever published. It has clearly struck a nerve. In the main, these responses have been very positive, suggesting that a lot of people have just been waiting for an article like this to come out. Here's just a smattering of some of the responses we've received (you can also read the comments to our blog post for more):

"This is a long over due excellent and comprehensive critique on the overly optimistic and shallow CSV framework that doesn't really address the real trade offs required to get to sustainable development."

"Good on you for re-framing this topic in a manner that more fully reflects the spirit of corporate social responsibility."

"It is some of the most enjoyable reading I have done in a very long time."

"Just read you CMR paper on CSV - well done. It is about time that someone took this idea apart."

Of course, many commentators, even whilst being supportive of our critique, have also pointed out some of the pragmatic benefits of Porter and Kramer's approach, like this one:

"I can see how the win-win wonderland (in Mintzberg's words) could be a diversion, but I wonder how it might crack existing inertias, and/or if any positive momentum could be leveraged for fashioning a more complete framework."

Such considerations of the lifeworld of business is a theme that is addressed in the discussion we have with Porter and Kramer at the end of our article, but is not something that we fully elaborate on. With this in mind, we thought it worthwhile to post here one of the more thoughtful and extended responses we received from a corporate responsibility practitioner. This is from Rory Sullivan, a veteran of the responsible investment community, now working as an independent advisor as well as being a Senior Research Fellow at the University of Leeds. He explores some of our points with regard to how CSR and CSV might be seen from a practitioner perspective. We thought they deserved reproducing here as they help to frame an important element of the debate in a constructive way:

"A proper analysis of the concept and value of ‘Creating Shared Value’ has been needed for some time, and your article does an excellent job of setting out the strengths and weaknesses of CSV. I was disappointed that Porter and Kramer failed to engage with the substantive points that you raised; their bludgeon of a response seemed at odds with the nuanced and careful arguments you presented in your article. While I support the broad lines of argument and analysis in your article, I would like to offer some reflections from a practitioner’s perspective:

  • Your discussion of “CSR as a Straw Man” is fair in its treatment of the academic literature (which has argued that CSR should be a corporate strategic priority). However, CSR in practice is quite different. In far too many companies, CSR continues to have limited business relevance (in terms of its influence on strategy or capital allocation) and remains far closer to philanthropy than the theoretical literature suggests (or would like).
  • On the originality of CSV: Your review of the literature ignored the many important practitioner contributions (e.g. by John Elkington, Stuart Hart, CK Prahalad) which have influenced CSR in practice. I suspect that many practitioners see CSV as a glossy reformulation of ideas such as the triple bottom line, rather than as a new framing of the debates around the role of business in society.
  • On the evidence for CSV: One of the key challenges faced by companies in practice is that ideas that work at a local level and at a small scale, may or may not work [in fact, they often don’t] when they are scaled up to the corporate level or when other companies try to replicate the experience. There are various reasons – the generalizability of approaches, the transaction costs, etc of moving to scale, the problems of taking projects and processes from one corporate culture and trying to implement them in another.
  • I’m not convinced by your argument that CSV is based on a shallow conception of the corporation in society. My (personal) reading of the Porter and Kramer article was that it was best understood as an analysis of the corporation in society, where the corporation is taken as the central unit of analysis (perhaps akin to every western individual being at the centre of their own personal narrative). In that frame of reference (which, I accept may not be what they had in mind), the concept of CSV could be interpreted as simply an argument that there are things that companies can do to make them a little more useful to (or a little less harmful) to society."
Plenty of food for thought there. Any more practitioners out there want to throw their two cents in?

Photo by Ross. Reproduced under Creative Commons licence

Tuesday, March 4, 2014

Four big problems with "Creating Shared Value"

The idea of "Creating Shared Value" (CSV) popularized by Michael Porter and Mark Kramer in the Harvard Business Review has probably done more to get corporate responsibility issues into the boardroom than anything else written in the last few years. In many respects, that is a good thing. Or at least it is until you start to realize all the big problems that are hidden behind the big ideas of CSV.

We've just published (together with Guido Palazzo and Laura Spence) a comprehensive critique of CSV in the California Management Review. The published version features a response from Porter and Kramer and a counter response from us which we think makes for quite enlightening reading (you can also download a free, but slightly different, version of our article but without this dialogue over at SSRN).

Our article sets out four main problems with CSV:

1. It is unoriginal. 
Porter and Kramer simply don't acknowledge that there is little new about CSV. People have been writing about much the same thing for decades. And the corporate initiatives they rebrand as CSV are just attempts to relabel practices that were already going ahead prior to them publishing their article. It's just that some people call those practices "strategic CSR," "social innovation," or "stakeholder management."

2. It ignores the tensions between social and economic goals.
CSV is presented as "moving beyond trade-offs" between social and economic goals. But that is only because Porter and Kramer ignore any such trade-offs that might need to be made. Sure, there are some great opportunities where business success can be aligned with social progress. But there are also a whole host of social problems, especially those caused by business, where social and economic goals inevitably conflict. CSV prompts managers to simply ignore them.

3. It is naive about business compliance
In a move very much reminiscent of Milton Friedman's famous critique of CSR, CSV "presumes compliance with the law and ethical standards, as well as mitigating any harm caused by the business". Of course, this is where all those messy "trade-offs" are hiding. But as long as you can presume them away, then you don't have to deal with them. In fact there is only one sentence dedicated to social harms, ethical norms and legal compliance in their whole article. So, let's just ignore all the occasions when firms harm people or the environment. Let's ignore all all the times they fail to uphold some of the laws and ethical customs of the places in which they operate. Then we can talk about CSV. But let's not pretend that this is a useful strategy for corporate responsibility or still less a sane way to re-legitimize business, as they claim in their article. Just getting firms to respect the spirit of the law - say in paying their fair share of taxes or respecting international labour standards across the globe - would be a much better way of re-legitimizing business.

4. It is based on a shallow conception of the corporation's role in society
CSV is supposed to be about "reshaping capitalism" but in reality it is really just more of the same of all the stuff that has given capitalism such a bad name - a blind focus on individual corporate self-interest. It will help solve some social problems, and will make some firms, and some stakeholders better off … but who are they kidding that this is going to save capitalism? What we need is a perspective that acknowledges the systematic nature of many of the problems we face, and a willingness from firms to engage in collaborative responses with other stakeholders to solve the problems that need solving. Not just those that can be cherry-picked to make a fast buck.

The point is not that CSV contributes nothing to the debate on corporate responsibility - there are some very good reasons why it has met with so much success, as we discuss in the article. But in ignoring much of which is actually problematic in the field it gives a very unrealistic picture of the challenges ahead. Managers looking to combine social welfare with economic prosperity simply deserve more than the whitewash that CSV offers them.

Wednesday, January 15, 2014

CSR in Africa: be part of it!

Today we have another guest post from our long-term friend and collaborator, Laura Spence, who is just back from the African Academy of Management Conference and had some reflections we thought would be good to share.
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Given the laudable aims of corporate social responsibility protagonists - I guess, roughly speaking, to make the world a better place - you have to wonder why so much time and effort is put into understanding social responsibility in places where really, let’s face it, the social problems are not really that big.

Should we be stressing about which company sponsors school sports equipment, or would we be better occupied to worry about schools which have no books? Is corporate lobbying one of life’s big issues or could it rather be the conflation of corporations and governments, systemic bribery, corruption and nepotism? Should we be fretting about diversity training in head offices or focusing on situations where gender, race, class, caste, religious and tribal differences mean staggering inequalities in opportunities are ingrained? It paints a pretty miserable picture when you think about it.

For all this, understanding developing and emerging countries need not be a miserable enterprise. I have just come back from the fabulous African Academy of Management (AFAM) Conference in Botswana, with renewed understanding of social responsibility – or at least a whole new set of questions to ask.

Discussion around the conference was not so very different in many respects to other Academy events, but one thing kept surfacing – we might list the relative importance of issues in developing country contexts, but is there a different philosophical starting point? Are the frameworks based on Western capitalist systems of any real help outside of the ‘West’?

As is the way of things sometimes, a glimmer of an answer came for me in one of the few moments we had to get outside of the conference. We visited, by chance, a small exhibition of local artists’ work relating to the fight against HIV/AIDs. It was produced under a cross-sector partnership between government and a local NGO with the Tswana strap line ’Nna le sea be’. This roughly translates as ‘Be part of it’.

It is just a tourist-eye view of mine of course, but this felt different to me, not an approach I would expect to see elsewhere. There is something special about the local push for the acceptance of problems and drive to pull people together to join in and be a part of the solution, reflected through a local saying used in equal measure to help someone pick up something they have dropped, or work together to reduce the tragedy of HIV/AIDS. Surely this has implications for CSR in Africa.

Alongside this, another important realisation was the different pace in Botswana. Time and again when waiting for some service or other to be provided, one is met with ‘It’s coming’ or better still ‘Tomorrow’. It is a reminder how hung up some cultures are with everything being just so, preferably yesterday. When the pace of life slows, this does seem pretty absurd, but it also acts as a reminder that transferring expectations from one part of the world is a misguided approach to just about anything, not least CSR. It is likely to be far more helpful to learn from local perspectives, achievements and solutions. But patience might be needed.

My reason for being in Botswana was as part of the team offering a PhD training workshop and a stream on small and medium sized enterprises and social responsibility in developing countries funded by the UK Economic and Social Research Council. We have six seminars planned for 2014 and 2015, a book and as a result of the fascinating time had at AFAM 2014, we will be wrapping up our project at AFAM2016 in Ethiopia.

Nna le seabe.

Laura J. Spence