Strategy (103 page)

Stories could come in all shapes and sizes: innocent and unstructured, as well as deliberate and purposeful; about technical specifications or perhaps the antics of a senior manager; elaborate or barely an anecdote; designed for regular re-telling or heard once and then forgotten; intended for a privileged few, and thus sharp and to the point, or knowingly prepared for multiple audiences, and so carefully ambiguous. Narratives could be found in minutes of meetings, presentations to clients, business plans, and even formulaic forms of analysis: in SWOT, analysis “opportunities” represented the “call,” whereas “threats” became antagonists. “As strengths are employed and weaknesses transformed, the protagonist becomes a hero.”

Eventually academics took notice, influenced by the “narrative turn,” so that stories and storytelling came to be identified not only as essential to effective leadership when formulating and implementing its strategy, but at
the heart of all communication in an organization, from low-level grumbles and mid-level pep talks up to the high-level visions. Stories were told about senior managers to show how reasonable or out of touch they might be, of past events to show how the organization was once great or had an enduring culture, of the chance insight that led to an exciting new product or the poor calculation that led to a flop. By studying stories, the development and reinforcement of institutional cultures could be explored as well as the beliefs and assumptions that underpinned them. In the constant conversations that made up any organization, this culture could be changed and even subverted, as individuals on the basis of their own experiences told their own stories that qualified or challenged those of senior management, while senior management picked up cues that led them to reappraise key assumptions.
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The narrative field became a battleground. The political practices that we discussed in the last section, as parties sought to present themselves in the best possible light and their opponents in the worst, were evident in the business world as well. Rockefeller's control of Standard Oil began to unravel as the trust's dubious claims were undermined by a muckraking journalist. Not surprisingly, one of the greatest storytelling organizations of recent times, Walt Disney Studios, was adept at fabricating stories about its own history, “as artfully constructed and as carefully edited as their legendary characters.” Disney was acclaimed for the cartoon characters, such as Mickey Mouse, and the animation techniques. But this required denying others the credit they deserved. Disney's creativity was played up and his authoritarianism played down. His studios were organized, not at all uniquely, on Taylorist, paternalistic lines, yet employees were referred to as part of a family, an image that was put under strain as union disputes broke out in the 1940s.
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This opened up the basic paradox of stories: they might have great explanatory power and be the most natural form of communication, but that could be at the expense of reinforcing explanations that suited those best able to control the means of communication while making it difficult to mount a challenge. Even the best and most liberating stories could be wide of the mark or else so ambiguous that the intended message was lost. The accomplished storyteller might derive an inspirational message from the mundane, but the inspiration could soon fade should the reality turn out to be more tedious.

The more academic business strategists tended to use their stories largely for illustration, selecting cases which made their points without always asking whether there were comparable cases where the outcomes had been quite different, or whether the same players would always get the same results by employing the approved strategic practices in slightly different
circumstances. Sometimes the stories were not only selected carefully, but their telling was also highly contrived. We have seen how those of Taylor, Mayo, and Barnard were embellished. Weick's favorite story involved an incident during military maneuvers in Switzerland, when a small unit had got lost in bitterly cold weather and was feared lost. The unit eventually returned and the young lieutenant in charge was asked how they had made their way back. Though they had assumed they would die, they had gotten back by means of a map one of the men had in his pocket by which they were able to get their bearings. When the map was examined, however, it turned out not to be a map of the Alps but of the Pyrenees.
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The strategic lesson was that with a map the unit calmed down and took action, which led to the conclusion that “when you are lost, any map will do!”
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But luck would also have been required, as there are not many routes out of the Alps. Unfortunately, there was also no way of knowing whether the story was true or not. Weick received it via the Czech poet Miroslav Holub based on an anecdote told to him from the Second World War.
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Consider another of Mintzberg's favorite stories, as narrated by Richard Pascale, who we last met working for McKinsey's researching Japanese industrial success. Between 1958 and 1974, the American motorcycle market doubled but the British share shrank from 11 percent to 1 percent. Japan gained 87 percent of the new market, with Honda alone accounting for 43 percent. Pascale challenged the established explanation for Honda's successful entry into the American market in 1959, which stressed issues of price and volume. A much more intriguing story that highlighted “miscalculation, serendipity, and organizational learning” had been missed. When Honda sent its marketing team to the United States, the intention had been to compete with midsized bikes, but Honda struggled to find dealers and was plagued by technical problems. Then they received inquiries about the small 50cc SuperCubs they were using for their own transport. So they sold them instead. The moral of the story, according to Pascale, was that over-rational explanations, assuming that what happened was intended, could result in missing the most important reasons for a marketing success. Rather than a determined, long-term perspective, he pointed to the ability of an organization to learn from experience and show agility in the face of unexpected opportunities.
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This lesson was picked up enthusiastically by Mintzberg, who referred to it regularly as he emphasized the importance of emergent strategies. He used it to show that the managers made every mistake in this case, except to learn when the market told them they were going wrong.
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He described Pascale's article as the most influential in the management literature. Other writers have developed this “lesson” further to turn it into a story about how lowly employees
can transform a strategy. Out of this single case study, a series of general propositions were developed about learning organizations.

This was not the only use made of the Honda story. This was one of the great Japanese success stories, from the company's formation in 1948 to becoming the world's largest manufacturer of motorcycles and an effective manufacturer of cars by 1964. It fascinated business strategists as a source of lessons for American companies. Andrew Mair warned, however, of the perils of extracting one episode, often imperfectly understood, and drawing large conclusions. For example, Honda had always intended to sell the SuperCub in the United States. This bike made up a quarter of those sent with the American team. The company had, however, supposed that it would first have to prove the worth of its bikes against larger models (which is why they put an emphasis on racing). The error was in not realizing that the American market was actually going to be similar to the Japanese. At any rate, sales collapsed in the late 1960s, and then Honda did have to rely on the larger bikes it had always expected would be the key to its American success. In practice, Honda's strategy followed the experience already successfully followed in Japan—it was not a leap in the dark.
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Its experience up to this point had demonstrated the importance of ruthless management and robust organization. The postwar Japanese market for motorcycles was huge because public transport could barely cope and gasoline supplies were limited. Unlike other industrial sectors, this one was barely regulated, resulting in something of a Darwinian struggle for survival. During the 1950s there were some two hundred companies competing for this market in what was known as the “motorcycle wars.” This was a time when “doing business was a turbulent and hazardous pursuit involving all manner of lucrative opportunities and nasty surprises.”
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When the wars were over, four companies were left (Yamaha, Suzuki, Kawasaki, and Honda). Of these, Honda (formed in 1948) was the most prominent. Its success was due to a number of factors. It began with Soichiro Honda's own engineering genius, combined with the financial acumen of his business manager, Takio Fujisawa. They had some wartime experience of mass production techniques and they understood the Toyota production model and the importance of supply chains. Their internal organization was very strong, with careful financial control and—particularly important—great effort put into developing their dealer network.

In the late 1950s, Honda overtook the previous domestic leader Tohatsu (which soon went bankrupt). As Honda then went on to car production, Yamaha caught up in market share and, believing its rival to be distracted, decided to build a brand new factory with the aim of becoming the market
leader. Instead, Honda mounted a strong defense leading to a fierce battle between the two (known as the “H-Y war”) in 1981. Honda's response was neither subtle nor indirect. According to Stalk, who made this clash a centerpiece of his analysis of Japanese competitiveness, this was launched with a war cry, “Yamaha wo tsubusu!” which he roughly translated as “We will crush, squash, butcher, slaughter, etc., Yamaha!” Honda cut prices and boosted advertising expenditures, and introduced a number of new products, so that having the most up-to-date motorcycle became a fashion necessity. Yamaha's bikes were left looking “old, out-of-date, and unattractive” and demand for them dried up, leaving dealers stuck with old stock. Eventually Yamaha surrendered. Honda's victory had come at a price but had deterred other competitors besides Yamaha. Stalk was most impressed by the way that Honda had accelerated its production cycles to head off the competition and made this the central lesson he drew for Americans. Although this was undoubtedly impressive, this focus played down the extent to which Honda's strategy had been brutally attritional, with its price cuts and promotions.

Hamel and Prahalad also used Honda in 1994 as an example of exploiting core competence, mocking the experience curve, demonstrating great ambition and creativity in extracting maximum benefit from the mastery of the internal combustion engine (which allowed them to move successfully into a number of related production lines, from lawnmowers to tractors and marine engines), and enabling a challenge to Ferrari and Porsche in the high-end sports car market with the new NSX. They understood the needs of customers without following them slavishly. Yet as Mair reports, the NSX was a costly failure for Honda. This was not the result of only bad luck due to an appreciating currency undermining its competitiveness, but also the choice of market. The interest in sports cars was more a reflection of Honda's culture than of its core competence and meant that it missed the developing American market in the 1990s for recreational vehicles and minivans. In other areas, a determination to make a technological breakthrough meant that they lacked a follow-on car when it was needed. More generally, the only serious diversity made possible by Honda's engine technology was from motorcycles to cars. Other products remained a minor part of its portfolio. In fact, its strategy from the mid-1980s to the mid-1990s revealed a “narrow self-definition and a technological stubbornness” and so a lack of responsiveness to consumers.

Mair raised a number of basic methodological problems with these stories. They were often based on patchy research and focused on a particular period. All the way through Honda was treated as a great success, yet during the course of its history it had made a number of major errors and at
times faced financial ruin. The failures were never deemed to be of interest. The business theorists who wanted to draw lessons might have asked why it never managed to dent Toyota's dominance of the Japanese car market or explain why companies that followed similar strategies did not do as well. Insufficient attention was paid to the less glamorous but vital aspects of Honda's approach, such as its operations and dealer management, perhaps equivalent to the disinterest in logistics often displayed by military strategists. There was always going to be more interest in sparks of genius than the tedious slog of administration. Mair criticized analysts seeing “only what they want to see” and of “acute one-sided reductionism.”
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He noted the tendencies toward polarization, as in deliberate/emergent and competence/ capabilities, as if it had to be one or the other. The data was aligned to fit the theory, while inconvenient material was ignored or fudged.

Military strategy had been launched at a time when it was believed that there were basic principles which, if applied properly, could at least increase the probability of success, even if success could not be guaranteed. It then struggled as it became apparent that the application of military force was a more complicated and frustrating business than envisaged by Jomini in the first glow of Napoleon's advances, especially as it proved hard to escape from the norm of decisive battle. Business strategy was the product of a similar bout of optimism of the mid-twentieth century, picking up on a general confidence in the possibilities of long-term planning, not only for nations but also for large companies, including the large American conglomerates. It also struggled as the limitations of the planning model became apparent, but unlike the military the managers did not have an agreed framework to provide coherence. As a result, business strategy lost its way, following many diverse paths and falling prey to temporary enthusiasms. There was a resulting tendency to prescriptive hyperbole. In a cautionary analysis, Phil Rosenzweig dismissed purveyors of business success stories for misleading their readers, sustaining the myth that there were reliable rules for success that once discovered could ensure the success of a business. He offered examples of sloppy thinking, by and large involving the standard muddle between correlation and causation, the tendency to explore explanations of success without worrying whether the same factors might be present in failures, and paying inadequate attention to the competition. The basic muddle he identified was the “halo effect,” the tendency to assign factors such as culture,
leadership, and values, responsibility for a strong performance when they are really attributions that resulted from a strong performance.
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