Photo: NYCArthur (Flickr)
The story goes that a New Yorker (Arthur Rubinstein, in some versions) is approached in the street near Carnegie Hall, and asked, "Excuse me sir, how do I get to Carnegie Hall?" He replies, "Practice, practice, practice."
There's another version of that story that I once saw in an ad (I can't remember for what). The question was the same but the answer was: "Well, I wouldn't start from here."
As I read Anu Gawande's article in The New Yorker about health care reform, titled Getting There From Here, it was this second version of the Carnegie Hall story that I remembered. Gawande's argues that pragmatic reform of the health care system built around the mess we have is preferable to any of the start-from-scratch proposals on the table (single payer or free market).
No-one can accuse him of having a rose-tinted perspective as he summarizes: "Yes, American health care is an appallingly patched-together ship, with rotting timbers, water leaking in, mercenaries on board, and fifteen per cent of the passengers thrown over the rails just to keep it afloat. But hundreds of millions of people depend on it...There is no dry-docking health care for a few months, or even for an afternoon, while we rebuild it. Grand plans admit no possibility of mistakes or failures, or the chance to learn from them. If we get things wrong, people will die. This doesn’t mean that ambitious reform is beyond us. But we have to start with what we have."
Gawande bases his argument on the idea of path dependence. Shouldn't I already know about path dependence? I don't know. Anyway, it describes how decisions today are influenced and limited by decisions made in the past, even though past circumstances may no longer be relevant or optimum. Witness the QWERTY keyboard still going strong today even though it was designed originally to slow people down so they wouldn't jam the typebars on their typewriters.
In path-dependent processes, early events play a critical role in the market outcome. Take America's transportation system. Early decisions to base it on gasoline-powered automobiles (as well as a few well-timed interventions by the auto makers) have created an entire infrastructure that make it very difficult to do things differently.
What path dependence tells us it that, when people have devoted a lot of time and resources into a particular way of doing things and they have become efficient organizing themselves around a system, it can be really difficult and counterproductive to try and start from scratch. Applied to health care that means building on our flawed current system. Applied to business that means choosing business model evolution over reinvention (except when your industry is hit by a massive asteroid).
Such thinking doesn't need to lesson our ambition. We all can strive to get to our own Carnegie Hall. But we need to get try and get there from where we are now instead of where we might wish we were.
Tuesday, February 3, 2009
How do you get to your Carnegie Hall?
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3 comments:
I agree that complex business systems need to be guided by being aware of their past momentum, but "path dependence" also poses huge risks. Organizations tend to chase profits based on what worked in the past, and this can lead them into dark, dangerous corners of business competition. A perfect example is Detroit automakers, who mostly neglected to invest in alternative energy systems while Toyota did ... and now they are racing to catch up when the environmental context of sales changed.
The competitive landscape is littered with such mistakes:
- Hospitals who continue to rely on physician-referral networks with no online marketing programs (beyond web site shingles), despite the fact consumers use internet search engines heavily to find (high profit) health care services.
- Computer software makers such as Microsoft ignoring until very recently the trend of software moving into online free platforms.
- Advertisers who rely heavily on traditional forms of media without testing online, search, video, or social media formats.
- Mortgage lenders until recently not setting up safeguards on the quality of their loan applicants.
Businesses who make these mistakes often succeed wildly until a rapid change in the competitive market -- gas prices, competitor entry -- leads to collapse. By looking solely inward and rearward, they have failed to build a bridge for the chasm ahead.
It is exceptionally difficult to stop business momentum fueled by yesterday's profits. In the absence of visionary leadership, the best solution may be constant testing -- to use your products or marketing as part of R&D, and constantly allocate 5% of resources to try new things. It's a simple idea and may pay off in spades when the market shifts. Just ask the brand managers for Toyota Prius.
Ben,
That's a great comment and thanks for so clearly outlining the dangers of relying on what has always worked and being blind to market changes.
I think you hit the nail on the head with the idea of visionary leadership. In the absence of strategic direction, organizations are likely to chase profits and not invest in the future. But, with a clear vision and an assessment of changing market dynamics, companies can adapt and evolve and not become another mistake to add to your list.
(I'm not sure that my reference to path dependence is helpful. It may be an idea too baggage-loaded.)
this is a great debate - as new product developers we always walk a very fine line between hanging onto the old (because that's where people tend to be most comfortable) and breaking into something new. Anything really new will ask a consumer to break their current behavior pattern and that's always a much tougher sell. Some of the most successful innovations are really just better mousetraps, rather than complete reinventions. Evolution rather than revolution. This can be a bit depressing for innovation companies as revolutions are far more exciting. I prefer them, but pragmatism sometimes has to rule. The place we try to avoid is the "4-chord formula" - you can see our blog for more on that
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