Bibliography

Schoemaker shows how scenario planning produces strategic insights from identifying trends and uncertainties and rigorously constructing scenarios. This process helps to improve decision making, especially avoiding the decision making problems of tunnel vision and overconfidence.

The authors address a key strategic management issue. In the resource-based view organizational capabilities have been identified as one major source for the generation and development of sustainable competitive advantages (emphasis added). With the consideration of volatile markets, environmental uncertainty, and change, the reliance on a specific set of nurturing capabilities has been called into question. This question has been answered with some form of dynamic capabilities, where the capability itself is dynamic, adapting to take advantage of the changing environment, thereby renewing organizational capabilities.

Capabilities described --
In this discussion, capability does no represent a single resource in concert with other resources such as financial asset, technology, or manpower, but rather a distinctive and superior way of allocating resources. The complex processes that form organizational capabilities are conceived as collective and socially embedded in nature, representing a collectively shared 'way of problem solving' (Cyert and March, 1963).

the primary characteristics of capabilities are --

• Capabilities are conceptualized in the context of collective organizational problem-solving. These capabilities are attributed to outstanding skills that have proved to solve extraordinary problems. Theses problems are described as complex. Complexity refers to the characteristics of problem situations and decision making under uncertainty, addressing ambiguous, ill structured tasks.
• Capabilities are close to action; conceptually they cannot be separated from acting or practicing
• A capability must work in a reliable manner. Capabilities represent a reliable pattern: a problem-solving architecture composed of a complex set of approved linking or combining rules -- proved to be successful across various situations.

Time is a basic dimension of capabilities. Capabilities development takes time and the specific way in which time has taken is relevant for the gestalt of a capability -- its configuration or pattern having specific properties that cannot be derived from the summation of the component parts.

Effective inquiry is essential for organizational teams to confront complex issues. These issues may be embarrassing or threatening, thus the discipline of team learning must be explicitly developed and exercised. Managers may find collective inquiry threatening because it brings out the thinking, facts, and rationale behind the opinions and calls for action by managers. This is process of revealing thought is necessary for the collective and individual learning. Inquiry is often not rewarded, whereas advocacy, the ability to debate forcefully and influence others is regularly rewarded, thus encouraged. Where advocacy prevails, learning does not. As managers rise to higher-level positions, they must deal with problems that are more complex. They need to learn. They need to tap into the insights of others. Since advocacy closes off learning from one another, the very skill that got the manager to where they are at becomes counterproductive in dealing with the complex problems they are now facing.

Senge identifies systems thinking as essential to addressing complex problems.

An explanation of three dimensions of exploration and exploitation and their innovation payback under low and high dynamic contexts.

Systems and organizations that use metrics practice Singerian inquiry. Accounting systems are perhaps the sine qua non of measurement, as every enterprise must have one. However, accounting systems measure only the financial health of the firm. To understand and explain the organization fully, it is necessary to "sweep in" variables from a wide variety of sources both inside and outside organizational boundaries. Managers in a Singerian organization should develop measurement standards, continuously compare organizational performance to those standards, and modify models of performance as is required to achieve the standards.

The Singerian organization has the purpose of creating knowledge for choosing the right means for one's end. Knowledge must be connected to measurable improvements. Measures of performance are judged not only by organizational standards, but also by what is good for all society. Inconsistent measurement results of a system brings up the issue of the issue of what to do about it. There are three possibilities: 1) revise the hypothesis by adding new variables, or changing the functional form of the hypothesis, 2) revise the procedure of adjusting the readings, or 3) tolerate the inconsistency until more evidence is available. The first possibility changes the measurement system's view of the world. Singer described a "sweeping in" process consisting of bringing variables and their laws to a catalog of opportunities with the intention that a Singerian inquiring system must encompass the whole breadth of inquiry in its attempt to authorize and control its procedures.

Alfred Sloan was the chief executive of General Motors. Along with Chester Barnard of AT&T in 1938, he was one of the first executives to draw attention to the need for strategy in the context of business.

Three views of environment, objective, perceived, and enacted are described and the implication of these views for the practice of strategic management.

First, this is the first book in a series edited by edited by Stacey, Griffin, and Patricia Shaw from the Complexity and Management Centre, University of Hertfordshire

• Complexity and Management - Fad or Radical Challenge to Systems Thinking (2000) - Stacey, Griffin, Shaw
• Complex Responsive Processes in Organizations - Learning and Knowledge Creation (2001) - Stacey
• Changing Conversations in Organizations: A Complexity Approach to Change (2002) - Shaw
• The Emergence of Leadership (2002) - Griffin
• Complexity and Innovation in Organizations (2002) - Fonseca
• The Paradox of Control in Organizations (2001) - Streatfield

The series intention is to develop thinking about organizations as Complex Processes of relating vs. as systems. In doing this, the authors clearly expose the failure of mainstream management thinking to explain strategic and organizational phenomena. In place of systemic (mainstream) thinking, are insights gained from complexity science that have been developed into the complex responsive process perspective. This perspective does descriptively address strategic and organizational phenomena and serves as a basis for prescriptive actions.

Second, this is not a book to be "read", it is a book to be "studied." It addresses the basis for management thought and action in regard to strategy and organizational change. The book is descriptive, not prescriptive. The most fundamental question it seeks to answer is "how does an organization become what it is?"

In answering this question, natural and social science bases for mainstream management thinking are identified and their implications examined. The conclusion is that mainstream management thinking, based on the systems perspective, cannot explain the creation of novelty, whereas the complex responsive process thinking identified as the alternative to systems thinking does explain novelty.

Given the premise that "there is nothing more important than the way managers think about the nature of their organization, particularly about how it comes to be what it is" - the book provides a comprehensive and insightful framework from which management can actually put into perspective and assess the management tools and techniques they use or are considering using.

Organization leaders seeking to develop sustainable competitive advantage will greatly benefit from the deep insights into what creates the novelty required for ongoing innovation and why mainstream thinking does not have an answer to novelty. The natural and social science bases for both the systemic and complex responsive process perspectives are comprehensively explained.

The content, issues addressed, the perspectives developed are worthy of more than a five star rating. Given the newness and challenging nature of the content, the repetition, or repetitive summaries, throughout the book were welcome. The reason for rating it four stars is due to the need to study it so intently in order to gain the understanding of what the authors have to tell us. More and better frameworks could have been provided for the information delivered. Given my intense interest in the subject, I developed several of my own frameworks to organize the content in order to gain greater benefit from the information provided.

Stearn Steward & Co.'s Economic Value Add (EVA) measure applied to corporate management to guide the firm towards value creation and away from value destruction. EVA is equivalent to economic rent or profit.

Nassim has produced an eye-opening work on uncertainty. He reveals how most truly significant events are what he calls "Black Swan" events, events with the following attributes --

• rarity -- it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility
• extreme impact -- it carries an extreme impact
• retrospective (though not prospective) predictability -- in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making is explainable and predictable.

The reasons that these significant events in history are not seen to be as unpredictable as they are is due to our human tendency towards induction -- rapidly arriving at simplified rational explanations for these events after the fact. This tends to draw out attention away from how truly unpredictable the event was prior to its occurrence. Thus we tend to disregard that there will be other Black Swan events in the future.

Some considerations to deal with the negative effects of our tendencies to over simplify, our lack of innate understanding of probability and uncertainty, and our general abhorrence of the abstract --

• Avoid narrative accounts of the events of the day, week, year, etc. Narratives are inherently oversimplified accounts of the past. This is the reason history always seems to make so much more sense with hindsight than as it is being made in the present.
• Develop your reasoning abilities to control your decisions -- downplay experiential and intuitive decision making while developing more cogitative and thinking skills.
• Train yourself to spot the difference between the sensational and the empirical
• Bear in mind how shallow we are with probability, the mother of all abstract notions
• Avoid "tunneling" -- focusing on a few well-defined sources of uncertainty, including some Black Swans, at the expense of others that do not easily come to mind
• Avoid focus, it makes you a sucker
• Keep in mind at all times that it is prediction, not narration, that is the real test of understanding the world

Area of benefit -- the key benefit of this knowledge is to improve one's strategic thinking capabilities.

Related works -- there are other works that complement The Black Swan. They reveal what strategic thinkers need to understand about our thought processes -- both their strengths and weaknesses -- and how this understanding can make us better thinkers, thus decision makers --

• Rosenzweig, Phil, (2007), The Halo Effect
• Douglas, Mark, (2000), Trading in the Zone
• Denrell, Jerker, (2004), Random Walks and Sustained Competitive Advantage
• Malik, Kenan, (2000), Man, Beast, and Zombie

Teece presents a framework for understanding the foundations of long-run enterprise success and how to sustain advantage.

Weber is considered one of the founders of the modern study of sociology and public administration. He spoke of domain assumptions, what later were labeled as paradigms, on how they guide thought and action, then over time they fail to be function reliably in the interpretation of reality, and are eventually replaced with new conceptual schemes.

One of the foundational articles bringing definition to the resource-based view of the firm and strategy, in contrast to the product, or positional, view. Until this article, there had been little examination of the broader resources of the firm since the seminal work of Penrose (1959). The resource-based view of the firm builds up organizational economics in contrast to industrial organization economics.

Wernerfelt defined resources as "anything that could be thought of as a strength or weakness of a given firm." More formally, resources are the intangible and tangible assets which are tied semipermanently to the firm. Examples include brand names, in-house knowledge of technology, skilled personnel, trade contracts, efficient procedures, capital, machinery, etc.

"Resources and products are really two-sides of the same coin. Most products require the services of several resources and most resources can be used in several products."

Recognizing that organizations are not machines, but complex self-organizing systems, Wheatley identifies principles and methods for managing, leading, and changing them.

In line with Joseph Schumpeter's theory of creative destruction, Wiggins and Ruefli found that the periods of sustained competitive advantage have been getting shorter over time. This change is not restricted too any subset of industries. There is evidence that managers have responded to this hypercompetitive environment by seeking not a single competitive advantage, but rather a series of short advantages that collectively form an advantage over time.

For a dramatic finding on sustained advantage see Jerker Denrell's Random Walks and Sustained Competitive Advantage