Week9 Why Hard Nosed Executives Should Care About Management Theory PDF

Preview

Summary

Why hard nosed executives should care about management theory - Prof Don...

Description

Why Hard-Nosed Executives Should Care About Management Theory Week 9 Introduction to Theory Theories should not follow the naïve belief that if a particular course of action helped other companies to succeed, it ought to help theirs too. Theory: A statement predicting which actions will lead to what results and why. Every action that managers take, every plan they formulate, is based on some theory in the back of their minds that makes them expect the actions they contemplate will lead to the results they envision. Good theories are valuable: 1) Help make predictions. E.g. Theory of Gravity-> case and effect -> predict that if we step off a cliff we will fall, w/o trying to see it happens. 2) Interpret the present. Understand what is happening and why. Sort signals that portend important changes in the future from noise with no strategic meaning. Importance: Theory plays central role in managerial decision making. Good theories are developed and improved over time. Intelligent consumers of managerial theory. Where Theory Comes From Construction of solid theory: 1) Description of some phenomenon we wish to understand - Innovations that succeed/fail in the marketplace - Carefully observe and describe in its breadth and complexity - Broad foundation of constructing theory. 2) Classifying aspects of the phenomenon into categories - E.g. Management researchers sort diversification strategies into vertical vs horizontal - Allows researchers to organize complex & confusing phenomena in ways that highlight their most meaningful differences. 3) Formulate a hypothesis - What causes the phenomenon to happen and why Process is iterative -

See something theory cannot explain or predict an anomaly that suggests smth else is going on. Cycle back to categorization stage and add/eliminate categories/ rethink them entirely Theory use to predict more accurately how phenomenon should work in a wider range of circumstances E.g. Int’l trade rules: countries w cheap, abundant resources -> competitive advantage.

o o

Michael Porter saw an anomaly in Japan that has no iron ore/little coal became successful steel producer Porter’s Theory of Competitive Clusters emerged: Clusters lead to intense competition, which leads companies to optimize R&D, production, training, and logistics processes.

Pinpointing Causation -

Not enough to identify visible attributes of phenomenon that correlates with a particular outcome. Should develop categories based on deeper meaning of what CAUSES the outcome. Not from crunching data, but from highly detailed field research on causal processes at work. E.g. Toyota’s production methods outplaced their counterparts in the USA. o Researchers need to find fundamental causes of Toyota’s ability to continually improve quality, speed, and cost. o Seeing a pattern in the way people though when they designed any process – training workers, maintaining equipment. o Conclusion: All processes are designed to create automatic feedback loops which repeatedly test the effectiveness of each new activity.

Moving Toward Predictability -

-

Identify the circumstances under which that mechanism did/did not work. “Under what circumstances will the use of this theory lead to failure?” What about those circumstances that led to failure? Allows managers to adjust the way they manage their organisations in these different circumstances. Good theories-> Circumstance contingent: they define not just what causes what and why, but also how the casual mechanism will produce different outcomes in different situations. o Enable managers to understand what it is about their present situation that enabled their strategies and tactics to succeed o Recognise when important circumstances in their competitive env are shifting so they can begin “piloting their plane” differently to sustain success in the new circumstance. o Circumstance contingent theories make success not only possible, predictable but sustainable. Work of building ever-better theory is never finished -> robust theory can disintegrate

The Importance of Failures -

Using stream of research and its proponents seek to learn when it would work, when it wouldn’t and why To know unambiguously what circumstances managers are in, they need to know what circumstance they are not in. Application to industry? Type of market? Trust a theory: statement describing how actions will vary as company’s circumstances change. Not shoddy categorization that leads to one-size-fits-all recommendations.

-

Should not emulate theoretical attributes when circumstances are fundamentally different. Instead, need a theory to guide it to the organizational structure that was optimal for the circumstances the company was actually in.

Becoming a Discerning Consumer of Theory -

-

-

-

-

When researchers are just beginning to study problem, articles that simply describe phenomenon can be valuable foundation for subsequent researchers’ attempts to define categories and then explain what causes the phenomenon to occur. Using this foundation, a theory explaining what systems work under what circumstances can emerge. Beware of work urging that revolutionary change is needed. Fallacy of jumping from description to theory. Need to know not only where, when, why things need to change, but also what should stay the same. New categorization schemes gives new insight into how to think/act in circumstance-contingent ways. Authors classify the phenomenon they’re describing into categories based upon its attributes, simply accept that the study represents only a preliminary step toward a reliable theory. Real theory should include a mechanism – description of how something works. Theory of funding helps start-ups succeed might succeed that venture capitalists do that makes the difference is meter out small amounts of funds to help the companies feel their way toward a viable strategy. Progress of theories happen when refining them to explain situations in which they previously failed. So we need to continue discovering circumstances in which a theory did not accurately predict an outcome.

When Caveat Emptor Is Not Enough -

Understanding what constitutes a good theory help researchers do a better job of discovering mechanisms that cause the outcomes Seeing the value of “When doesn’t this work?” help managers to decipher set of circumstances that they find themselves and then frame contingent statements of cause and effect that take those circumstances into acct....