Theory of the Business
What underlies the malaise of so many large and successful organizations worldwide is that their theory of the business no longer works. (Peter Drucker, HBR, 1994)
The word most love to hate – theory. But a theory is nothing more than an explanation about:
- What matters
- How to get what matters
- Why the how leads to the what
- When the assumptions about what, how or why no longer hold true
Whether we realize it or not, it is our theories that drive behavior at work. When you clearly understand your theory you can you begin to test it – to try to figure out when it will NOT work. All good theories have clearly defined boundaries, and your understanding of these boundaries is critical.
Some of you reading this article work in organizations that continually change assumptions before the theory of your business is obsolete. Others work in organizations that have successfully reacted to a radical change and are operating with new and effective theories.
I suspect most of us work in organizations where the rules of the game have radically changed but our theories have not. One indication would be your organization is trying to do more with less. People around you are not thriving; they are focused on simply surviving.
I’ve never seen a time in my life where so many of us have an opportunity to learn so much. Don’t miss this. Keep your eyes and ears open, participate as much as possible, and think hard about what is going on around you. Don’t allow yourself to be spoon-fed easy answers by people peddling expediency.
What are you and your leadership doing about why you missed the change in assumptions and why you continue to allow yourselves to be bound by an obsolete theory? If you can’t identify and address the “why”, it will happen again.
About the Author: Bret L. Simmons
Welcome to my blog! Please feel free to share your thoughts in the comment section of my posts. I publish all constructive, non-anonymous comments. 
Brett, Why don’t the people whose opinions count the most in a business change their theories (mental model) for interpreting data about their environment?
I believe psychology offers the appropriate theories for interpreting the data around your question. I have some trepidation bringing these theories into the discussion. Discussing business theory is a safer conversation. They are about pure logic.
People seem to love to hate “psychological theories,” more than any other type of theory. I suspect that the root of that hatred may be that psychological theories embrace feelings, which is dangerous territory for many people. But feelings are facts to me so I’m going to push on.
Pioneering family therapist Virginia Satir had several theories — survival rules, change model and coping stances — that help me interpret why the people whose opinion count the most in an organization missed the change in assumptions and why they persisted in using an obsolete theory.
Some people may have been unable to transform their survival rules, such as I MUST always look like I am in control. It’s easier, at least in the short term, to maintain the illusion of control by maintaining the status quo.
Some people fear the inevitable chaos that comes with making a change. Until there is a clear and present danger, a crisis, they do nothing.
Some people may cope with the situation by blaming someone for the problems. It doesn’t matter if it’s an insider or outsider anyone will do.
We can’t get to the business theory until we clear the psychological debris that prevents the people whose opinion count the most from behaving congruently. And that requires helping these people safely work with their feelings.
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Bret L. Simmons Reply:
August 20th, 2009 at 6:02 pm
Steve, I appreciate your very thoughtful comment. I agree with you that eyes can glaze when we talk abut theory. Business theory is difficult enough. But theory is not a dirty word. It is a very friendly concept, and a powerful one. Mental models is another good term. I like the term dominant logic as well.
Thanks for sharing! Bret
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Great post, Bret. It seems to me that part of the problem involves that pesky human nature. We tend to see things the way we want or the way we always have. We tend to believe that the things that have brought us success in the past will keep on being just as effective. And it’s dreadfully hard to decide to reverse an earlier decision. I think that’s why when companies are threatened with a new technology or business process, most companies put money into their old ways, not into the new.
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Bret L. Simmons Reply:
August 20th, 2009 at 6:05 pm
You are spot on Walley – lots of good stuff in what you are saying. I’ve got a few posts in mind in the future that address some of the stuff you are talking about. Thanks! Bret
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