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The Business Consultant: March Madness
Thursday, March 11, 2010
Partner Insights

With March comes blustery weather, the delicious anticipation of a favorite college basketball team making it to the Final Four and signs of spring. For me, there are other signs: economic uncertainty, continued market turbulence and questions about our business in 2010 and beyond. 

In earlier columns, I discussed some of our efforts to prepare for the business equivalent of March Madness. This got me thinking: how do we sustain this forward looking effort?  Is it really worth continuing once we have everything dialed in? My thinking and research revealed important information I’m going to share with you.  


Jim Collins, in his 2009 book How the Mighty Fall and Why Some Companies Never Give In, describes a common pattern in the decline of once-great companies. He divides the downward spiral into five stages; the first is “Hubris Born of Success.”  He cites common attitudes at this stage:

  • Success is viewed as an entitlement.
  • The rhetoric of success, “We’re successful because we simply do these things,” replaces understanding and insight, “We’re successful because we understand why we do these things and under what conditions they would no longer work.”
  • The role of luck is discounted or ignored by presuming success is due entirely to the superior qualities of the business model and management.
  • A decline in learning orientation takes place, as leaders lose their inquisitiveness and don’t maintain as steep a learning curve as when they first began the business.

Let’s focus on the last marker, as this can spell the difference between continued success and growth—or mediocrity and eventual failure—for you. You might be thinking, “Hey, we take continuing education for our license renewals—we’re learning, right?” 

That’s not the learning I mean. I’m talking about a total, pervasive, cultural change in organizational thinking.

W. Edwards Deming, a leading pioneer in quality improvement, said this about organizations and learning:

  • “There is no substitute for knowledge.” 
  • “The most important things cannot be measured.” Deming believed it was not easy to understand the critical factor to success in advance. Think about the market downturn of 2008-2009. The triggering factors were observable, but few understood their implications in advance.
  • “The most important things are unknown or unknowable.” 
  • “Experience by itself teaches nothing.”  This sounded odd to me, considering the old saw, “Experience is the best teacher.”  However, Deming was on to something. He believed in applying information against a framework of knowledge about a system.  Without a mastery of the underlying system, he discovered information was often misinterpreted with disastrous consequences.  This has huge implications for advisors and managers in our industry.

About a year ago, I said that all businesses are adaptive systems operating in a complex adaptive economy, using social and physical technologies to survive. A 1983 Royal Dutch Shell study found one-third of the 1970 Fortune 500 companies were off the list and estimated the average lifetime of the largest industrial companies to be less than 40 years. So, learn and adapt—or die. In the long run, the only sustainable competitive advantage your organization has is its ability to learn faster than your competition. So how can you do this?

Peter M. Senge, in the 2006 edition of his book The Fifth Discipline may have the answer. He says there are five major components, or disciplines, necessary to build a learning organization, including personal mastery, mental models, building a shared vision, team learning and systems thinking. While many firms have individuals who have the right stuff, such as personal mastery or shared vision, truly successful learning and adaptive firms have the systems thinking discipline to integrate all components. What this means is a firm utilizing all five disciplines continually expands its learning capacity.  It has gone beyond adaptive learning—survival—to generative learning—creating its future.


To move your organization to a level of generative learning, you need to understand and employ Senge’s five disciplines.  This column is only long enough for a brief overview:  

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