On strategic perception I

November 11, 2013 § 1 Comment

 In the short discussion on “The art of strategy” (October 2013) two well-known McKinsey specialists do not refer to strategic perception at all, although their comments touch on physics, resourcing, analytics, rigor, and even psychology as important concepts and metaphors in strategy discourse. Their view on perception is quite different from the famous swordsman Musashi’s who had a saying (my very free translation): “Seeing is weak, perceiving is strong”. In his world a misperception at a critical moment would cost his life and so it is with organizations – a difference in time constants perhaps. Vision without intelligent perception would be fateful for a samurai. Indeed, it is not rare to forget ‘perception’ in strategy considerations although ‘vision’ is ever present.

Here in this first part,  I will first introduce my thoughts on the fascinating topic of perception and then take up some familiar problems of the classic vision-strategy processes and finally start relating these two worlds.  This may be an unorthodox linking of the apparently separate worlds but I have been fortunate to live in both of them during my academic and not-so-academic career, and Musashi is no stranger to me either.

What is perception – in this context?

Intelligent perception could be an essential component of any vision-strategy model. The term ‘perception’ does occur in organizational studies but it is my general impression that it is typically misunderstood, hidden under trendy disguises like sense-making, sensing, framing, or awareness building, for example, its relevance underestimated, or it is just used in a popular-psychological sense and as such of not much use.

Perception is not an easy topic: the theory of perception is an evolving and moving target itself. For example, it may come as a surprise to many that there is no general theory of the observer (perceiver) even in classical or modern physics (cf. my article related to this at http://arxiv.org/abs/1309.3633). No wonder then, that such a serious theory does not exist in the organizational sciences either. I’m convinced that it will soon evolve because of the fast increase in the complexity of the organizational environment, where perception skills and capabilities become – they already are – necessary assets.

Perception is a fascinating phenomenon. It is not about recording the world or oneself – it is acting in them. The ‘in’ here is not a spelling mistake, I really do not mean ‘on’ – I believe I use the language right here: perception-action cannot be separated from the world and the perceiver without damaging the knowledge of either of them. Further, perception is directed outwards and inwards – simultaneously. Because of this intelligent perception is a most intriguing biological capacity and has a huge ‘strategic’ value when it drives the internal and external ‘behavior’ of an organism, human experience, or the behavior of a machine or an organization.  You would expect strategy researchers to be seriously interested in it.

What I talk about when I talk about perception (I borrowed this title from Haruki Murakami’s book title which he borrowed from Raymond Carver)

Perception – human, animal, artificial – is necessary in building an intelligent relationship, a symbiosis, with the unknown environments – the internal and the external. It constructs (internal) images, scenes, and many unknown mental activities related to these worlds, to recognize and represent the inherent invariances (behavior-strategically most important and informative relationships between the perceived objects or internal states), in order to plan, guide and be entangled with actions accordingly.  Intelligent perception means being sensitive both to opportunities and obstacles in reaching for something valuable; to learn and adapt to these environmental changes quickly and to learn from them, to generate intelligent perception structures (hard-,  soft-, inherited or culturally wired)  that help automate perception and action processes. This is necessary because both need to be fast and focused. In doing all this intelligent perception makes it possible for the actor-observer to release its limited resources for ever higher-level and valuable functions, and finally – it allows the organism’s full trust on its perception so much that any action can be accomplished with full power and accuracy. It may be good to repeat here that perception is not directed to the outer world only. Beneath all this lies the world of pain and pleasure, colors of mental life, aesthetics, culture, and love – which I only can imply here.

We can admire the amazing perceptual abilities in human sports and performance arts and in animal flight and fight. Of course we can experience them in our everyday life, but most of its wonders remain hidden from our awareness because we live our perceptions. Robots are still ignorant: in war they can accidentally kill anyone and they are practically useless in trying to recognize peace. Having said all this, is there anything in this description of perception that should not be an essential aspect of any strategy considerations? Could this insight be useful in the analysis of strategy processes and perhaps inform their design in organizations?


Strategy discourse – problems and opportunities

Strategy researchers discuss the need to extend strategy analysis and views to better cover what they call “demand (D) or consumer/customer side” of strategy research (and practice).  This is in contrast to the resource-based view (RBV) emphasizing the production side (cf. Priem, Butler, Li, 2013, for example; thanks Mikko Laine from Aalto DVN team, for sharing this J). This may not appear novel at all, especially to a human-centric worldview and in the familiar matters of our global, digitally driven life. However, it is a way to turn the perceiving senses to the world outside the organization. But a burning practical question remains, how to best conceptualize and organize the strategy process of firms, large companies and even nations. The vision-strategy process as it is typically applied today hides an increasing number of problems, one of them being the neglect of strategic perception.

The most amazing flaw in the organizational vision-strategy process is that it is practically never impossible to formulate a vision. In Finland, for example, we already have several national vision-strategy documents but we are in trouble. We have the national brand vision and the Team Finland strategy for 2014 (http://team.finland.fi/public/download.aspx?ID=115910&GUID={5F2A2D13-C30D-40A0-B71A-A4E2B5ADF6C0} and a recent futures document from our Government (which b totally underestimates scientific matters).  Every firm has it, even the third sector communities, universities and the minuscule departments have it.  I have never met an organization that would openly say that it was impossible for them to build a shared vision.  What a wonderful tool that works everywhere, in any conditions, and by anyone?

Vision can make the strategy process blind

Imagine an organization or a national government with a vision-strategy process actually masking the perception of its environment and adapting the strategy accordingly. Under changing circumstances this can be more typical than not in many of the present-day organizations, especially the large ones.  We Finns could sense something like that happening over the years following the collapse of Nokia – practically blind to its crucial market life – and we are now following another major scale strategy dance: the Finnish Government Program from June 2011 that has met a similar risk of slow deterioration. Again, like Nokia with its “connecting people” vision, it describes our wonderful national vision to be a “caring, open, responsible, globally aware and prosperous well-fare society.”

The way our national vision is defined in the Governmental program and has been guarded by various stakeholders and situational factors has actually fixated this vision on business-as-usual targets, blocking a perceptive, smooth, adaptive and novel way towards the national vision in the changing circumstance. Right now, as a nation we suffer from the lack intelligent perception inwards and outwards.

Strategic tools as weapons of internal destruction

Like all strategy programs, the Finnish one includes an analysis (perception) of the current environment and the foreseeable futures, and then looks at the politically agreed strategic means for reaching the goals. It is a standard process, based on difficult party negotiations after which the feasible or compromise policies are chosen to work towards the vision goals.

The worst of such strategy versions I have seen implemented are almost identical: from the higher education and university context in Finland, especially in my own ex-institute. Only about 10 or more years ago such strategy processes at universities were mostly harmless and academically eloquent exercises on discourse and documentation that could go on in parallel – with little interference – with effective real-world work and activities. Now with new power structures at our universities the situation has changed profoundly and the process has become an essential tool of both progress and survival.

I’m not arguing for the old system, but this has made the strategy process a de facto internal weapon of academic mass destruction: the power relationships dictate how different organizational units, dominant individuals, and research groups must struggle for resources and their ‘strategic position’ necessary for survival. Those who make it and succeed will be the ones defining the new strategy and gain more power – not much interest is given to the rest of the resources or the organization. In this specific context strategy process has a dissonant audience.

Many seem to think that the ‘fittest’ will survive, but a question remains, ‘in what sense the fittest’ because after destruction the weaker ones have no voice. Self-perception has not much role in these considerations when perception is fixated at external and formal outcomes. Businesses are no different, the metrics used and the weight given to different measures only vary, but they can have shared aims, often economically grounded.

Of course the classic strategy model is meant to be dynamic, sensitive, relevant, creative, and adaptive by using intelligent data, analysis, excellent leadership, and modification or re-evaluation during the vision-strategy cycle, every year or so. “Fast strategy” has even been the title of the book by Doz and Kosonen (2007) emphasizing the need to build a sensitive and fast or ‘agile’ strategy process. But ‘fast’ is relevant only when perception is intelligent. The McKinsey discussion above describes this well.

Change and volatility challenge strategy dynamics

Our Government case is no exception among the organizations suffering from the unstable environment and massive changes. The financial crisis in 2008 happened too fast for many. From the beginning, it was a challenge of perception – but it was not recognized as such. In Finland, already by 2010 we could perceive, by looking at our falling export data and its trend that something was seriously wrong: the export did not show any signs of recovery, unlike in Sweden and Germany, our two best reference countries in this context. The relative data looked scary.

In US the financial crisis was, most of all, a problem of intelligent perception but this became clear only after the crisis. The real predecessors of the 2008 events were vividly described at CISAC/Stanford on April 1st, 2010 by Charles Perrow:  “Markets, Information, and the Spreading of Risks: The Economic Meltdown and Organizational Theory”. The talk confirmed the problem of biased and weak organizational perception that had prevented many from seeing what was coming although the real signs were not weak at all. It was not a problem of misbehavior or strategic sensitivity only but a true lack of intelligent strategic perception. (https://gotepoem.wordpress.com/2011/03/19/weak-signals-or-weak-theory-of-observation/ ). This is an excellent example of the conceptual difference between the concepts of perception as recording and perception as an intelligent process, directly linked with action.

Of course, strategies are meant to meet any positive or negative futures. Despite observing the heavy economical consequences of the crisis, our Government’s perception remained separate from its action; it had the vision and it did receive the environmental information but lacked the perceptual intelligence to support action.  Furthermore, it had a grounded strategy, produced with difficulty and in addition, the backing parties were willingly or unwillingly freezing it. As a result, the Government remained not only blind but also the hostage of its own public vision-strategy process: there was no quick way out or even a chance to perceive new strategic opportunities which would have been desperately needed.

Media and the public have learned to ‘know’ what a strategy is

The situation was not made easier by the media that loves to remind of the strategy (plan) and its ‘promises’ made in 2011. Now the Finnish Government had effective and willing guards in the media – and opposition, of course. As if to strengthen the friction effect, the visible public opinion and the news-hungry media had together become significant stakeholders treating the national strategy and its vision as promises – not as an imaginary future and the means to reach it. The media and its audience had obtained the power to inhibit any strategic changes from happening. In the discourse produced, the strategy adaptation process was transformed into a ‘breaking promises’ discourse.

Lack of intelligent perception has real consequences. An example I followed closely how our dominant print media were reluctant to turn its perception on the export and innovation problems in 2011: Finland had been unable to build economically large-scale firms during the last 20 years. For a colleague of mine, it took nearly two years to get published an analysis based on these nationally significant perceptions.  Our leading business magazines and the main newspaper were not interested to write about it: they did not perceive what professor Eero Byckling had clearly perceived. Finally Eero could publish his analysis on the Finnish export and innovation system failure in a journal focusing on cultural matters (!) (cf. Kanava 1/2013). Today, these topics have become public knowledge in the media discourse, but we lost valuable time. Why does this happen in ‘broad daylight’? Is this only a specific perception problem of Finland?

The standard explanation to the national-level problem is that we are currently suffering from the same ideological and democratic crowding problem as the US.  There the democrats and republicans block each other’s way to what the opponent sees as progress: the two parties perceive totally different and divergent opportunities to reach for the national vision. The scope of the damage possible due to such a process has been a real surprise to many.

Interestingly, the same thing as in US has happened in Finland, but in slow motion – it has been the outcome of the unanimous, multi-party Government remaining true to its vision and strategy statements – being passionately guarded by the media.  Changing the original vision and strategy had been ‘breaking the promises’, a failure and not intelligent adaptation.  Now we are ‘forced’ to adapt. Surprising enough, a recent poll in Finland showed that about 50% of the citizens have been ready for significant policy changes related to taxation and retirement age, for example.  Can a strategy process be weaker than this, frozen in front of its perceptive audience, willing to change? (http://www.eva.fi/blog/2013/03/19/evan-arvo-ja-asennetutkimus-2013-kadonneen-kasvun-metsastajat/). An amusing and inspiring example of a similar adaptation by workers to the strange US Governmental shut-off situation was observed at NASA Mars project (thanks Michael Sims for sharing this: http://online.wsj.com/news/articles/SB10001424052702304500404579129810090504206).

Lack of passion for the vision

Only rarely does the formal organizational vision evoke a true passion in its audience, in the employees, and in those responsible for reaching it or among the citizen. It is no surprise that our Government has turned to a national guru who has the rhetoric and media fame and who can so re-formulate or translate (perhaps even transform) the formal visions and programs for their audiences to enjoy. Our national guru Dr. Himanen and his co-author, the famous Manuel Castells published a book in November 2013 on our national vision where they lifted dignity as a core element for our national vision. Of course, nobody is, or can be directly against such a valuable thing and many seem to accept it as a promising vision.

This is not a rare situation in companies that regularly invite charismatic speakers and showmen to ignite the audience for the implied by boring vision. In Italy, a clown became a significant political actor. Such performers and gurus are hoped to act as apostles with the ability to offer an inspiring vision – or the criticism of it – that is actually derived from the organizational situation and documents but to which they are hoped to breath signs of life.

The need for gurus has led to a curious recent event in Finland, the one now called “The Himanen case” where a visibly weak-quality national strategy-project application was accepted without open competition by the Head of Finnish Academy and the Head of Tekes, our leading and the most prestigious organizations for the national management of science and technology. The process was totally and bluntly against the standard evaluation practices and ethics in Finland.   The leaders of the two organizations willingly explained that they had been under pressure from the Prime Minister to accept the offer.

Some might think that the public process has been unfair to the guru in question since Dr. Himanen was only offering his help and (expensive) consulting business to the Prime Minister Office where they really needed help to give life to the dead-appearing Government vision-strategy plan. It became a total failure of trust in the strategy process – even before the final report of the work has become public. Now that the strategy report has appeared, it has received a chaotic reception and – to me – it seems that it will block our national perception for a year or two at least.

Organizational vision is not perception

Recently I browsed through a list of popular strategy tools in a local business magazine (Optio, 16/2013) introducing their core elements: scorecards, swots, blue ocean, lean systems, neo-taylorism, scenarios, weak signals, co-creation, change management, vriq, benchmarking, portfolios learning organization, and so on. While they do include a plethora of means to observe, analyze and model the environment, they have no serious interest in organizational perception. ‘Vision’, however, remains their basic component.

Interestingly, the term ‘vision’ actually has nothing to do with human or any other vision systems or perception. It is a definition of what an organization wants to see to happen to it, internally or externally, and it is not a matter of perceiving something. A better term would indeed be organizational imagination or dreaming – with the requirement that it must be – in some acceptable way – grounded and realistic in the eyes of its presenter or the audience.

I the next part, I will explain my view on why I believe the classic strategy process paradigm fails and suggest an alternative, opportunity perception-based concepts for supporting an effective strategy process that can match the demands of the complex and changing world. 


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