Can We Live With Failure?

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Even as we work to a master plan that is heading in a general direction, nations and businesses operate in silos, observes Ram Shivakumar, Clinical Professor of Economics and Strategy from The University of Chicago Booth School Of Business. The body of knowledge around strategy is multi-faceted, and many disciplines have something to say about strategy. By Kannan Chandran

How would you define strategy today?

RAM SHIVAKUMAR: The Greeks originally used the word ‘strategos’ to refer to the man tasked with safeguarding the city state of Athens. That meant building alliances, sometimes competing and on occasion going to war. Now, the word is used for almost anything.

Strategy in an organisation must be aligned with the environment — markets, suppliers, competitors, governments, constraints imposed by macro economic conditions, among others.

Into this mix, disruption comes when somebody does something that changes the opportunity set. One firm introduces something that makes another firm’s product obsolete. This guy has disrupted the market. What should the first guy do? That’s a question of strategy. What do I do when someone has changed the demand for the product?

You are always going to get competitors. Strategy is fluid.

Everything is happening a little faster than it might have pre-Internet.

How has social media affected strategy?

SHIVAKUMAR: It’s made it possible to communicate with vast numbers of people in a mass way, and yet in a quasi-personalised way. It allows us to engage with the market and non-market, influence and shape their opinions. What social media has done is to force firms to be proactive and reactive.

Does the younger generation strategise differently?

SHIVAKUMAR: People – young and old — have shorter attentions spans. Young people don’t read the newspapers that much. They get the news fed to them. They get the headlines. Whether we are young or old, we have a finite attention span. Younger people are not going to read deep, thought pieces. In education, the emphasis is on delivering shorter pieces of information.

How do organisations that can see the writing on the wall strategise?

SHIVAKUMAR: People sometimes think every problem has a good solution. If you’ve started a company, had some good days, and it’s been struggling, maybe the strategy should be to close it down. To exit.

There are no good solutions for some firms. Radioshack and Yahoo are firms that have been around for decades. They have had their moments as leaders in their respective fields. Both have changed CEOs over the last decade. It is possible that some firms are not going to get back to their glory days and their choices lead to pretty modest futures.

Sometimes closing down a company is not a bad idea.

Strategy is saying, this game is not going to work, so it’s time to go and play another game.

Are people more accepting of failure?

SHIVAKUMAR: In the US, the rate of start up growth has slowed for the last 15 years. The number of younger firms has been declining. More young people prefer to work for a firm. Fewer people start their own companies. This is in the US, where relative to the rest of the world there’s much greater tolerance for failure.

The masses are risk averse. People still think about getting a job. I think people don’t want to fail. There’s an aversion to failure.

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