The dictionary definition of obliquity is:
a. A deviation from a vertical or horizontal line, plane, position, or direction.
b. The angle or extent of such a deviation.
In attempting to achieve our goals, we often take the most direct route possible. It turns out, writes Kay, that this is often counter-productive.
One of the more vivid examples from the book, was the topic of fighting forest fires. Initially, the US forestry department had as a goal to put out all forest fires as soon as they occured. This turned out to be a disastrous policy, since forest fires are part of the natural regeneration of fires. In other words, in order to minimize the amount of damage done from forest fires, the forestery department, had to slowly learn that best way of fighting forest fires was to allow certain fires to go unchecked.
Similar forces are in play in the economy. The well known top level objective of maximizing shareholder value is probably best achieved by not pursuing every profitable opportunity. Kay lists various examples, among them the chemical company ICI. He noted that in the postwar period until the 1990s, that ICI’s top-most objective was “the responsible application of chemistry”. Under the pursuit of this goal, ICI achieved admirable results and created substantial value for its shareholders. In 1997, the orientation of the company shifted towards maximizing shareholder value. A series of acquistions and re-engineering efforts were made in the direct pursuit of profit. The result was a destruction of shareholder value. ICI ceased to exist as an independent company in 2007.
Jack Welch was quoted to say: “Shareholder Value is the dumbest idea in the world…The job of a leader and his her team is to deliver commitments in the short term while investing in the long term health of the business. Employees will benefit from job security and better rewards. Customers will benefit from better products and services. Communities will benefit because successful companies and their employees give back. And obviously shareholders will benefit because they can count on companies who will deliver on both their short term commitments and long-term vision.”
In other words, Jack Welch – historically one of the greater creaters of shareholder value achieved that distinction by not pursuing the maximization of shareholder value directly.
The reasons that the direct approach often fails are many according to Kay:
Pluralism: There are many solutions to a problem, not just one. Often the direct or most obvious route is not the best solution. True innovation requires thinking outside of the box – a highly indirect undertaking.
Interaction: The objective and its attainment will shift through the interaction of various players. Lowering price for instance in order to get market share may be counterproductive. If competitors lower their prices to meet your initiative, the direct approach just leads to lower profits for everyone.
Complexity: Complex environments are unpredictable. They are like the weather. We may know a lot about the individual variables that influence the weather – but we don’t know all of them. In addition, predicting weather patterns requires knowledge about initial conditions – information that is outside of our reach. As complexity science has shown, weather prediction can only be approximate at best. Economic systems are in many ways similar to weather systems. Who could have predicted the turmoil caused in the mobile phone industry by the introduction of the iphone?
Incompleteness: We are always working from incomplete information.
Abstraction: High level goals and objectives such as “maximize shareholder value” are abstract in the sense that even if you have increased shareholder value by a greater amount than your competitors, did you really maximize it. What was the overall potential?
What are the implications for business? Typically strategy attempts to clarify top-line goals as much as possible. Often substantial market analysis and evaluation of organizational capabilities is involved in setting those targets.
The traditional way of implementing these organizational goals and objectives is then for managers to take the overall goals and break them down into action items for their departments and teams.
This traditional process is the direct approach.
Obliquity implies that this process more often than not will be unsuccessful – or at least not optimal. What obliquity requires is an ability to change direction in pursuit of top-level goals – and perhaps even an ability to question those goals if better opportunities should present themselves.
In my experience, the oblique approach begins with leaders taking ownership of the goals and objectives. I worked for a pharmaceutical company that was in the business of selling generic drugs in the oncological sector. An opportunity arose to actually acquire a company with patented pharmaceutical products in their line of business. Since this was not their normal business model, they wanted buy in from their top managers before going ahead. The top 60 managers were invited to deliberate on this new strategy and its implications. The board was not willing to go forward without a consensus decision from these 60 managers. They realized the risks to the business and the changes that would have to occur were not insignificant. Right from the beginning of the implementation of this new strategy, they realized they needed buy-in from all key leaders in the organization.
Understanding the risks involved and reaching consensus was done through a large participatory process where each person had the opportunity to voice their concerns and listen to others’ perspectives at the same time.
I think this type of ownership should be no different for so called “normal” strategic initiatives. Only if leaders throughout the organization have a sense of JOINT ownership of the strategy, the oblique approaches that will be necessary to be successful will not be explored. Each leader will break down the strategy into as direct and as linear a process as possible, often conflicting with the actions of others inside the company.