Tuesday, April 14, 2009

The practical man must follow the branch approach – the science of muddling through.

TO BE NOTED: From the FT:

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History vindicates the science of muddling through

Published: April 14 2009 21:07 | Last updated: April 14 2009 21:07

When I was a student, Penguin published several collections of classic articles on economics and business. They were an indispensable resource. The first book on business strategy I ever read was the title in that series edited by Dr H. Igor Ansoff. Recently I re-opened it and understood how much changes in the way we think about business strategy – and how much remains the same.

Only one article found there is still widely cited. It was written by the American political scientist Charles Lindblom and published in 1959 under the title The Science of Muddling Through. Prof Lindblom contrasted what he called the “root” method of decision-making with the “branch” approach. The root method required comprehensive evaluation of options in the light of defined objectives. The branch method involved building out, step-by-step and by small degrees, from the current situation. Prof Lindblom claimed “the root method is in fact not usable for complex policy questions”. The practical man must follow the branch approach – the science of muddling through.

John Kay, columist

Ansoff included Prof Lindblom’s article mainly to poke fun at those who acted on this advice. He told students the article was instructive, since “it describes a widely prevalent state of practice in business and government organisations”. We can imagine sniggering MBA students.

They would be chortling when Ansoff turned his attention to France’s Saint-Gobain, the glass and materials group. “Saint-Gobain, for all the modernity of its headquarters building, will remain something of an old lady, likely to move only with the slow deliberate steps of great age.”

America, and Ansoff, were pointing to the road ahead. Prof Lindblom, he explained, “is wrong when he claims the ‘root’ method to be impossible”. Ansoff’s analysis of TRW, the US conglomerate, “shows how one of the world’s most dynamic corporations goes about a methodical exploration of wide vistas of opportunities in the process of formulating its corporate strategy”. The future held no bounds. Senior management “feels that the corporation hasn’t begun to exploit the opportunities they believe that TRW is equipped, for example, to play a three-sided role in technological programmes for the solution to such pressing problems as urban renewal, mass transportation, and pollution”.

But Ansoff’s highest praise was reserved for Litton Industries, another US conglomerate. Litton – “a proverbial success story by any conceivable yardstick” – was the creation of Tex Thornton, the leader of the “whiz kids”. This group of brilliant young men had made an important contribution to US military organisation in the second world war. A letter from Thornton to Henry Ford II led Ford to hire the entire group to help the Ford Motor Company recover from the chaos left by war and its irascible founder. Robert McNamara, the most famous whiz kid, was the company’s president before being recruited by John Kennedy as US defence secretary.

Ansoff died in 2002. History has not been kind to him, or to the whiz kids. Even as Ansoff was putting together his collection in 1968, the future of Litton Industries was being questioned. Like many acquisitive conglomerates, it experienced a rapid ascent and sharp fall. Its reputation and share price rose steadily before a setback to earnings made its stock less attractive. Acquisitions became impossible. The business gradually unwound. Tex Thornton is today forgotten, McNamara was driven from the defence department by public hostility and his private doubts. He went on to preside over a substantial expansion of lending – much of it never repaid – at the World Bank. Today, he reminisces on his experiences – and the virtues of muddling through.

TRW, like Litton, would be forced to slim operations and ambition and return to its modest roots in automobile parts supply. Saint-Gobain, by contrast, is a successful multinational, with 200,000 employees worldwide. Prof Lindblom, still muddling through at 92, celebrates the 50th anniversary of his article. We should celebrate too – and applaud the relevance of his insight.

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