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01/03/2007

Michael Porter, Charles Handy and Other Important Matters in Business Management

Written by Professor Feng Li for the Newcastle University Business School Magazine

In the past few months, I had the rare pleasure of attending two separate events, by arguably two of the greatest management gurus of our time – Michael Porter and Charles Handy.  Two completely different events but it was interesting to hear those famous ideas directly from ‘the horse’s mouth’, so to speak.  More importantly, these events made me reflect on the value of my own research and executive education.  When I was asked to contribute a piece to the Business School magazine, I am only too happy to oblige and share some of my random thoughts with you.  I will not bore you with the basics of Michael Porter or Charles Handy, since most of our readers should already be familiar with them.  If not, then perhaps you should come and join our AMBA accredited MBA Programme (or DBA if you already have an MBA) at Newcastle University Business School. 

The Michael Porter event was a full day workshop in London by the great man himself – well, perhaps not quite a full day event, because it started at 9:20 am and finished at 4:35 pm, with long breaks in the morning and afternoon and a proper three course sit-down lunch.  Nor was it entirely by the man himself, because he was joined during questions by one of his ex-students and currently a City high flyer; the Director of Ashridge Business School; and Robin Oakley, formerly BBC and now CNN European Political Commentator (and a few others to introduce him but whose names or affiliations I could not remember).  The workshop was held at the QE2 conference centre in London, and to my surprise, attended by a good 500 people!  The ticket price of the event was almost £1,000 per person; and even taking into account of group bookings and multi-events discounts etc, this workshop should easily bring in an income of between £300,000 to half a million pounds from the registration fees alone!  There were also quite a few corporate sponsors of the event and I am sure the price tags would not be modest either.

Given the high ticket price, the event was mainly attended by management practitioners and people from large public sector organisations, with a few token academics (I was only able to attend this event because the Business School managed to secure a two for one deal from the Association of Business Schools ABS –my colleagues have all chosen Henry Mintzberg).  There is no doubt that Michael Porter is a great, inspiring speaker, but even so I was astonished to see 500 successful, ambitious executives (or aspiring executives) of private and public institutions eagerly taking notes when the great man talked about what is – and isn’t – strategy, and the famous five forces of competitive analyses.  I am sure many people in the audience have MBAs (in fact, I bumped into one of my ex-MBA students from Strathclyde currently working in a big bank in London).  They should be familiar with all those theories and ideas Porter talked about.  I for one am familiar with not only everything he eloquently talked about during the workshop (ok perhaps not some bits on corporate philanthropy he rushed through at the very end because we run out of time), but also perhaps every criticisms of his theories and frameworks.  So why so many bright, successful management practitioners and civil servants are prepared to spend a day (and maybe two if travel is considered for many from outside London) and pay so much money for something they should have studied in University, or could have easily read about by picking up any airport book on strategy?

Ok, Michael Porter is one of very few people in the world who can confidently say that he trains 25 new CEOs of billion dollar businesses each year through his executive development programme at Harvard.  He has been repeated voted one of the most influential management gurus of our time.  His theories and frameworks have been taught at different levels throughout the world.  However, much of what he talked about was first published in the 1980s (and 1990s), including even some of the examples he used.  If we believe the business environment has gone through some radical changes in recent years, are those theories and frameworks developed for a different era still valid?  How do you carry out the five forces of competitive analyses today when the boundaries between industries, sectors, channels, products and services are all becoming blurred, radically redefined or even completely eroded?  Of course you can always adapt and stretch those theories and framework for the new situation, but at the end of the day they were developed for a different era and such adaptations might not be the most effective way to make sense of the new world and come up with new solutions.  So wouldn’t the money and time be better spent on exploring new theories and ideas that have emerged in recent years – ideas that have been developed specifically for the new era – for the networked, knowledge-based, information economy?

Since I was familiar with the ideas, I quickly turned restless and became one of the ‘smart Alec’ students and spent considerable time observing the audience and how they reacted.  I could visibly see that some people in the audience were inspired by his talk.  From my conversation with other attendees during coffee breaks, some of them were genuinely excited about what they could do when they get back to work the next day (without realizing any potential limitations of his theories and frameworks).  This made me reflect on the value of my own research, executive education and consultancy.  When I conducted executive short courses especially during the early days of my career, some of the less diplomatic participants had on occasions challenged me– diplomatically of course - on why he (always a he, usually a rapidly rising star in the corporate world with growing responsibilities) should pay thousands of pounds to listen to someone (i.e. little me) who had never managed a business?  I am sure many of my MBA students would have wanted to ask the same question – only held back by the fact that if they wanted their MBA Certificates they would have to pass my module.  So for quite a few years now I always answered this question at the beginning of an executive programme or a MBA class before they even had the chance to ask me.

It is true that many academics do not have the kind of practical management experiences and domain knowledge as many of the participants.  However, what academics possess are the unique ability, skills, methods and techniques – the theoretical and methodological underpinning – to identify, analyse, and conceptualise emerging trends under uncertainty and chaos and long before the situation becomes obvious.  This skill set, together with the knowledge they acquire by applying such skills in different contexts, enable academics to develop deep understanding of complex situations in a coherent and consistent manner.  If through executive courses, MBA classes and consultancy, academics could help management practitioners acquire some such knowledge and skills, and combine them with their own practical experience and domain knowledge, the practitioners are then in a position to do things that the academics could not do!  Information (or knowledge if you prefer) is a unique commodity: its value depends on the context of its use – by whom and for what.  That value can vary enormously.

Charles Handy is arguably the biggest management guru on this side of the Atlantic.  However, ‘Breakfast with Charles Handy’ in a Quayside hotel in Newcastle was a very different event.  It was organised by AMBA so the price tag was much lower, only £25 (I have to say my own ‘Breakfast with CEOs’ events in the past have charged much higher ticket prices, either in the UK, Singapore or even China).  The event was only attended by about 25 people, mainly ex-MBAs. 

Different from the Michael Porter event in London, this was really a book launch to publicise Charles Handy’s new book in the North East: Charles Handy – Myself and Other More Important Matters.  After a full English Breakfast and some small talks, Professor Handy went on stage and talked for about 40 minutes.  This was then followed by a live interview with a FT (Financial Times) journalist, and then book signings.  Realising I was a Business Professor, he quickly wrote ‘Feng, Good Luck!’ before signing his name and handing the book to me.  I still don’t quite understand what exactly he meant by that – perhaps I will need it as an academic!

At the age of 75, Charles Handy is as sharp and inspiring as ever, and he is actively involved in book writing and corporate speaking.  During the event, he reflected on his own life and how his thinking about business management has evolved over the years.  Of all the things he said, two points stuck in my mind.  One is that it is relatively easy to advise people, and organisations, to make changes and bravely embrace changes, but to actually implement and live through those changes is not easy.  However, in order to reach new heights sometimes we have to take the plunge during certain critical points in our lives – and in the lives of organisations.  He does not regret making several such plunges during his own life time despite the various problems he and his family experienced during those changes.  For organisations, it is often not even a choice.

The second point, which he said was a summary of his life time’s thinking about business management and about life itself, is expressed as a series of S Curves (see Figure).  He believed that everything in life can be expressed as an S Curve.  It will go through different stages.  To start something it usually dives below the starting point because of the initial investments required and the delay for returns to come in; and then it will climb the slope of growth until it reaches maturity at the very top of the curve before taking a nose dive again.  For organisations – and individuals – it is critical to start investing in the next S Curve renew before the previous one reaches maturity and starts nose diving – i.e. from Point A and A’ instead of B and B’.  However, identifying the starting point of the next S Curve (A, A’) is never easy because it is when things are better than ever and still getting better – and convincing others, and oneself – to abandon something that is successful and still growing for something uncertain is never easy.  However, if you wait until the S Curve starts to decline (B, B’), then it is the worst time to start a new S Curve – because by then you will have diminishing resources to start something new.  This applies to an organisation as well as the careers of individuals. 

I was suitably encouraged and inspired by both Michael Porter and Charles Handy, for different reasons perhaps.  On the one hand I am glad to see the gurus of our time are still so active after so many years - and impressed by the respect they command.  However, I am also concerned with the speed of progress and the time it takes for an idea to become widely accepted and adopted; and for people and organisations to abandon the familiar and bravely embrace new challenges and opportunities.  For many years we have argued – and have convincingly proved - that the world has changed and the business environment is not what it used to be.  It calls for radical changes in business theories and practice – and perhaps a new generation of organisation and management theories.  The transition to the knowledge-based economy, combined with continual rapid development and proliferation of ICTs in every aspects of our work and every day life, have enabled organisations large and small to do many things in ways that were not possible in the past.  As such, the study of e-Business might provide the basis for a new generation of organisation and management theory.  I hope many of the new ideas in e-Business will become widely adopted long before I reach the age of 60 (or 50)!