From Black Swans to Grey Rhinos: Four Ways Academics Can Help Managers

As academics, our job is to help managers tune into the rustling leaves or cracking twigs of an approaching challenge -- or opportunity -- before it's upon them. To do that, we must focus on the parts of the environment that matter most, and make sure the tools we carry are fit for purpose.

In his famous book, Nassim Taleb admonished us to beware of "black swans" -- disasters so rare that managers disregard them and academic models exclude them, and for which we're therefore not prepared.

Personally, I think this concern is overdone. The real danger is "grey rhinos": while they are hard to miss in the zoo, they are surprisingly difficult to spot in the South African brush, obscured as they are by the vegetation.

By the time they're visible, they are already storming towards you, leaving little chance to react.

A recent roundtable discussion involving leading edge thinkers and practitioners from business academia, corporate strategy departments, and McKinsey vividly illustrated both the promise and the challenge of turning academic research into actionable insight.

Academics are often criticized, on the whole fairly, for working in ivory towers far removed from the needs of real-world executives on the ground. In my view, we can do a great deal more to realize "gains from trade" between our two worlds.

First and foremost, we need rigor. The rigor of abstract analytical models, and behavioral rigor that looks at how individuals, groups and institutions actually behave.

So far, we have expected too much from research that might be analytically rigorous, but still does not describe reality accurately, particularly of work that comes out of economics, such as game theory or financial economics.

When we confuse beautiful models with messy reality, we all suffer.

In the run-up to the financial crisis of 2008, for example, many policy-makers deluded themselves into thinking that markets could regulate themselves, while regulators remained blissfully unaware of the business models and structures that had developed in the financial sector.

Academics and their models share the blame for these oversights.

Behavioral work, though, is far more promising. We're learning more and more about behavioral biases and the way individuals really make decisions.

Now we need behavioral and evolutionary economics to step up and show us how organizations make decisions -- and why we can expect them, quite predictably, to make bad decisions, and stick with the wrong behaviors.

As academics, we don't spend enough time looking at the way strategic decisions are really made. Often, what we call "strategy" is less about navigating to a distant shore and more about allocating resources between competing projects (or people) in the here-and-now.

Even our infatuation with innovation may have to do more with making sure the organization keeps its focus on customers (as opposed to internal politics) than it does with new products and services. Strategy acts as a motivating and disciplining device, which helps avoid organizational pathologies.

There's also a growing body of research, in institutional and evolutionary economics and economic sociology, looking at the web of relationships within a sector and in the economy: how complex production systems emerge, evolve and interact, and how value migrates within and between sectors.

Whether you call these webs "industry architectures", "ecosystems", or "organizational fields", they are a "lens" for viewing reality that can show us some very valuable new perspectives.

These ideas have some big implications for competition that we're only just beginning to understand. In many sectors, winning does not just mean "finishing first"; it means changing the rules of the game to your own advantage.

Consider how Google and Facebook have redefined the way we interact with information -- while also creating ecosystems that collaborate and compete with Apple.

Finally, academics and consultants can come together to revisit popular ideas, even those that have profoundly shaped practice such as such as Clay Christensen's investigation of disruptive innovation, or Michael Porter's "Five Forces."

Sadly, though, I believe that mainstream academic journals are not interested in testing or updating strategy frameworks, for all their stated interest in practical implications.

As academics, we can add value by being objective and rigorous about the conditions under which established views work well, and when they don't. We can also point out some new, valuable ideas that don't get enough play in the popular business press and the consulting community.

In all of these areas, what really excites me is the prospect of a stronger link between practitioners and academics, so we can leverage the research we have done and shape the research we need to do.

Together, we can simplify reality without distorting it, and uncover the "social laws" that we don't yet understand, but which shape our world.

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