In this article I will show how knowing multi-ple business paradigms and strategic patternscan open up a world of opportunity for manycompanies.Many organizations starve in the midst of plenty because their paradigms in use make itdifﬁcult to recognize and take advantage of opportunities.Business can be viewed as a complex strategicgame. Being good at strategy games hinges onthe ability to see, recognize, and respond topatterns, much like chess players do.Many knowledge work-ers routinely use patterns:Building architects and soft-ware developers study designpatterns, and know when to use, or not to use, aparticular pattern. Doctors use very sophisti-cated patterns to match the symptoms of a pa-tient to a medical condition. Service techniciansrely on patterns and procedures to identify andcorrect problems. Military strategists also knowand use patterns.Among business managers and leaders, thinkingin terms of patterns is much less common. Theidea of systematically collecting and learning use-ful paradigms and patterns, is even more rare.This is slowly changing. There is an emergingideal of the business-scholar, the next generationbusiness leaders, who will not just use new para-digms, but who will be paradigm transcendent,able to choose among multiple paradigms, select-ing the one most useful to solve a particularproblem.

The BusinessStrategy NewsletterIssue 3-2009

The Tempo! newsletter contains supportingmaterial for Tempo!, a business strategybook written by Henrik MårtenssonThe Tempo! newsletter is published byHM MediaTech.Email:

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self@henrikmartensson.orgPhone:

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+46 708 56 23 65Twitter:

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Tempo!

FindingStrategicOpportunities

– Why many companies starve inthe midst of plenty, and how youcan avoid their mistakesBy Henrik Mårtensson

Let’s begin with a common scenario: A com-pany has done well for itself over a long periodof time, but the past few years competition hasincreased and proﬁt margins have dropped. Ontop of that, demand for the company’s prod-ucts has waned.What can the top level management do?Most companies use the paradigms establishedby Frederick Taylor’s

Scientiﬁc Manage-ment

. That means they strive to use econom-ics of scale, and have the hierarchical struc-tures and narrow spans of control associatedwith Theory X management.Since the problem is economic, managementquite naturally look for an economic solution.Like almost everyone else, the company usesCost Accounting. The Cost Accounting solu-tion is clear: It is all about costs. Revenue isdown, so costs must be cut.Management reluctantly does what it has todo: People are let go.The Scientiﬁc Management paradigm was devel-oped during a time when markets were expand-ing. If it could be manufactured, it could be sold.Of course there could be tough competition attimes, but the main problem was to satisfy evergrowing markets.Factory workers were often poorly educated,and came from diverse ethnic and cultural back-grounds. This was dealt with by specialization.Managers were taught to command and control.Taylor was the quintessential Theory X manager.He equated lack of education with lack of intelli-gence, and believed workers were to dumb andlazy to organize their own work. He believedworkers must be tightly controlled and that highstandards must be

enforced

.Today, we see Taylor’s ideas reﬂected in strictlyhierarchical organizations, extrinsic reward sys-tems, and very tight command and control sys-tems.From this point of view, there is indeed little thatcan be done when proﬁts go down other thancutting operating expenses.

Proﬁtsshrink!ScientiﬁcManagementCostAccountingReduceOperatingExpensesFire People

Primary

Lean Manufacturing

offers a big step for-ward. Lean is a system that can beat mass pro-duction systems. It does this by minimizingwaste.Most organizations that “go Lean” try to do soby implementing Lean practices on the factoryﬂoor only. That is good and well, but thesecompanies miss three important points:•Lean relies on

everyone

in the organizationcontributing ideas for improvements, andtaking responsibility for implementing. This ispossible only if management makes a delib-erate shift from Theory X to Theory Y.•Lean is not a mass production system. CostAccounting is not a valid accounting systemwhen using Lean. Companies that go Lean

must

replace Cost Accounting with an ac-counting model better adapted to Lean prin-ciples. For example, overhead allocation andcounting inventory as assets are not accept-able in Lean organizations, because it under-mines the ability to make correct decisions.•Strategy concerns everyone with manage-ment responsibilities in a Lean company. De-cisions are made at the top, but the entireorganization is involved in providing top man-agement with information before decisions aremade. After a strategy has been set, a formaldeployment method,

Hoshin Kanri

, is used todeploy the strategy throughout the companyand ensure that everyone knows what rolethey play in implementing the strategy.Lean provides managers with a range of optionsfor reducing

investment

(including inventory). Thisfrees up capital, and can improve an organiza-tions ﬁnancial health without cost cutting. Part of the Lean philosophy is to ensure that a companynever has excessive costs in the ﬁrst place.Lean emphasizes Management By Means (MBM),that is, focusing on process and process im-provement, rather than Management By Results(MBR) which is the most common method to-day. MBM is a great step forward because it en-ables managers and employees to be proactive,and actually do something to improve their ownsituation, and that of their company.Lean uses a hierarchical organization, and thefocus is on internal improvement. Lean is power-ful, but still leaves many possibilities untapped.