Friday, May 11, 2007

The Persistence of Old Frameworks

Sometimes, “old” works better than “new”. I say this not in defense of my age, but as a simple observation of what works and what doesn’t. For example, what did I learn from reading about “blue oceans”? Simply, that I’m a “red ocean” type of guy, at heart. And, that I really couldn't figure out what a "blue ocean" really was, or why anyone would want to jump into it? Somewhat similarly, I regularly find myself defending my continued reliance upon Michael Porter's simple, but 30 year old, five-forces model, in the face of "newer, better, more complex" models, churned out daily by academics in the pursuit of tenure. Why do I stick with Porter? Largely, because it works. Almost always, in a complex world, simpler is better than complex. The moral is: never discard "old but useful/reliable" in return for "new but complex/glitzy" without thinking it through very carefully, and certainly never merely to be au courant[I hope that my wife Marie is reading this].

The Porter model is not, however, the only "old" framework that is still around. Recently, there seems to be a renaissance of enthusiasm for the BCG Portolio Matrix [cash cows, dogs and stars, etc.] and for the Treacy triangle [which argues, much as Porter did, at one time, that you can really only be great in one "value discipline": operational excellence, product leadership, or customer intimacy]. Both of these frameworks are more than a decade old and both have experienced periods where they had nearly faded from managerial consciousness, only to return again into fashion. They are also, for me, vivid testimony to my second conclusion which is that "sometimes, old doesn't work very well anymore, and should be discarded. "

Porter's five-forces and McKinsey's 7 S, work well, despite their age, because they are not epoch-bound and because they raise questions of durable strategic import, rather than proposing answers which can be correct in one vintage and inappropriate in another. The BCG matrix, and Treacy's pyramid, on the other hand, provide answers, and answers that reflect the limitations of the time that they were developed in, at that. Here's the point: it would appear reasonable that, for eternity perhaps, it will be a sound and sober idea, when considering strategic choices, to consider what the customer wants and how powerful suppliers are [Porter five forces]. Or, for that matter, that it will always be reasonable to ask "how does our style and structure agree with our strategy [McKinsey 7 S or Galbraith's star]?" Is it still reasonable, however, in the 21st century, to embrace "the tyranny of the ands" [Jim Collins' words in Built to Last] and suggest that you can only excel in one value discipline? I don't think so! Here's a case where an old framework is no longer useful. Less true, but also reflecting an earlier way of life, when conglomerates ruled the world, is that the BCG matrix still has the answers for complex, multi-business companies. It, actually, never did, as it often misrepresented the ways in which such organizations worked, but more importantly, for me at least, is that it is so typically misinterpreted as to what it means, and how it is measured, that it leads to more, not fewer, debates about strategy, and not value-adding ones, at that.

So, Old is not necessarily bad, and New is certainly not necessarily better. How's that for a lesson?

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