When Business Cases Teach The Wrong Lessons

WHEN BUSINESS CASES TEACH THE WRONG LESSONS Rita McGrath

Jeffrey Pfeffer, in his great book “The 7 Rules of Power” declares that “success excuses (almost) everything.” Success also determines which stories about the origins of that success get told and which headlines are buried. This makes it all but impossible to know the real causes for why things worked out the way they did, inhibiting learning.

ON LEARNING, CASE STUDIES AND MISSING INFORMATION Human learning is like the scientific method. It requires us to assert a hypothesis, which can be formal or not, conduct an experiment, and see if what we thought would happen happened. We can then adjust our hypothesis to reflect the new facts we have hopefully uncovered.

KODAK’S DEMISE WAS MORE COMPLICATED THAN IT IS USUALLY PORTRAYED I was reminded of this in class last week when a participant observed that what killed off Kodak was the digital camera revolution.

That is true, but not in the way the observer meant it. In a fascinating re-telling of the Kodak Story, Ron Adner points us to the real culprit – the improvement in the quality of screens which made printing photographs at home unnecessary.

LOOKING FOR THE REINCARNATION OF PRINTING AT HP Which brings us to Kodak’s strategic decision to go all-in on printing.

Their former CEO, Antonio Perez, had made a huge name for himself at Hewlett Packard, running one of their fast-growth businesses, its division dedicated to printing labs and at home printing. He chose printing just as it was about to go into decline

INVESTING IN OPTIONS, BUT NOT COMMERCIALIZING THEM One fascinating aspect of the Kodak story is that the company was an R&D leader in many technologies that subsequently became important. I describe investments of this kind as creating “real options” in which the risk to make the investment is small, but the benefits if things work out can be huge.

NURTURING LOONSHOTS AND THE NEED FOR SHERPAS

At a high level, the problems described at Kodak are a characteristic of truly breakthrough innovations – the kind that today’s experts think can’t possibly happen. Safi Bahcall describes these as “Loonshots” and argues that they are major sources of human progress, but that we struggle to manage them appropriately, what is missing is the key role of the Sherpa – someone who knits discoveries and the organization together.

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