Archive for the ‘strategy’ Category
Moneyball and Business Ethics
Filed under: books, complexity, critical thinking, decision-making, ethics, management, reporting, strategy |
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I’m finally getting around to reading Moneyball, Michael Lewis’s best-selling ode to the study of baseball statistics (and the source material for the new Brad Pitt movie of the same name). It’s one of the most engaging books I’ve read in a long time — something that won’t surprise those of you who happen to have read The Big Short, Lewis’s lively account of the 2008-2009 financial collapse.
What did surprise me as that Moneyball isn’t really a book about baseball. It’s fundamentally about epistemology. Epistemology is the critical study of knowledge itself — how we get it and how we use it. And though Lewis doesn’t (as far as I can recall) use that word, Moneyball is all about epistemology: the epistemology of baseball, yes, but much more than that. It’s fundamentally about how managers should use information to achieve better outcomes.
Moneyball holds important lessons for business managers generally, but in particular it holds lessons about business ethics. But the messages aren’t the obvious ones you’d expect from a book on baseball — they aren’t about the ethics of labour negotiations, for example, or the incomplete alignment of the twin goals of satisfying your fans and making money.
Three key lessons of the book, as far as I can see, are as follows:
1) The numbers matter. So, don’t guess — measure. In baseball, this means scouts need to look closely at a player’s stats, rather than relying on the fact that he’s got a “nice swing” or a “body made for baseball.” In business, it means measuring actual performance — not just bottom-line financial performance, but social and environmental performance, too, rather than just relying on the vague feeling that your company is “doing OK.”
2) The numbers don’t come out of thin air. The numbers you have available to you aren’t just a feature of the universe around you. The numbers represent what happens to have been measured. The “bottom line” (net income) is no more a natural feature of business than “Earned Run Average” is a natural feature of baseball. Both are artefacts of a particular system, one with a particular history and its own set of biases.
3) Numbers can lead you astray. Managing based on the numbers someone else more-or-less arbitrarily decided to keep track of can result in disaster. This is especially the case when those decisions are rooted in idiosyncratic interests or biases. Lewis points out, for instance, that early baseball stats didn’t bother to record the number of walks a batter earned — mostly because one of the early promoters of baseball stats, a journalist named Henry Chadwick, happened to be a fan of cricket, a sport where there’s just no such thing as a ‘walk.’ Chadwick decided not to keep track of how many walks a batter achieved. The result was that there was no way to track which batters had the good judgment to watch a high-and-inside fastball sail past instead of swinging at it. It matters to their performance, but for a time there was no way for coaches to include it in their management strategies. The exact same point can be made about various elements of social and environmental reporting.
The overarching lesson, here, is about the need for (pardon the pun) a measured approach to the use of numbers in business. Numbers matter, and they matter a lot. The old saw that “you can’t manage what you can’t measure” is surely a vast overgeneralization, but one that contains a kernel of truth. But what matters even more than the numbers is knowing what the numbers mean, and what they can and cannot tell you.
PETA Promises Porn With a Purpose
Filed under: activism, advertising, entertainment, food, marketing, NGO, protest, sex, strategy |
Comments (1) Is it just me, or has PETA jumped the shark? The always-provocative animal-rights organization is at it again, this time announcing that it’s planning on starting its own porn site to draw attention to the plight of animals. And once again it’s alienating groups that it ought to consider allies.
See this version of the story, by Madeleine White, for the Globe and Mail: PETA to launch porn website: Is this still about animal rights?
The animal rights group, known for its naturalist ways, has registered the domain name peta.xxx and plans to launch a pornography website in December that “draws attention to the plight of animals….”
Not surprisingly, many feminists (in the broadest sense of the term) have objected. The general line of argument is that you’re not really accomplishing anything if you’re raising awareness for one cause (say, animal suffering) by doing damage to another cause (say, sexual equality). When PETA uses naked bodies, they are almost always female bodies, portrayed and instrumentalized as sex objects. Porn, in other words, is pretty problematic as a consciousness-raising tool.
Now none of this assumes that all porn is automatically a bad thing. It is, by definition, naughty, and certainly controversial, but there’s little reasoned objection against portrayals of nudity or sexuality per se. Any sane objection has to be rooted in things like objectification, which is not a necessary ingredient of porn, though it is certainly a common one. Of course, no one knows yet just what kind of porn PETA has in mind, but the group’s history suggests that we shouldn’t expect anything terribly progressive.
Why does the group use such tactics in the first place? PETA claims that they have no choice:
Unlike our opposition, which is mostly composed of wealthy industries and corporations, PETA must rely on getting free “advertising” through media coverage.
But that’s not exactly true. According to PETA’s financial report, the organization has about a $36 million budget, overall, out of which it spends about $11 million on “Public Outreach and Education.”
It perhaps goes without saying that any for-profit corporation that tried to set up such a website to draw attention to its product would draw fire, too. But of course it is utterly unthinkable that Coca-Cola or Microsoft would set up an entire porn site just to draw attention to their products. That’s not to say that lots of companies don’t use sex in their advertising, but no mainstream company would ever go so far as to use actual porn to reach an audience. But then, PETA isn’t a for-profit corporation, but rather a not-for-profit corporation, one that exists to promote animal rights. But is objectification of female bodies for a cause different than objectification of female bodies for money, ethically speaking? PETA will surely say “yes.” After all, this is porn for a good cause, not just for its own sake, and not just to generate filthy profits. But it’s worth remembering that PETA’s values, and the goals it seeks, are far from universal. We’re not talking about, say, world hunger or literacy. And there are all kinds of for-profit companies that produce products that make the world a better place in tangible, agreed-upon ways.
Maybe the problem with PETA isn’t (just) that their campaigns objectify women, but that they are cavalier about doing so. They’re single-minded in pursuit of their objectives, and sex is just one more tool for them to use in pursuing it. An organization that’s supposedly committed to getting us to think about the plight of animals can’t afford to be seen as clueless about other ethical issues.
Ethics as Strategy and Marketing
Ethical decision-making can helpfully be thought of as a matter of strategy and of marketing. This way of framing ethics is, I think, likely to be particularly useful in talking about ethics with either MBA students or business executives.
First it is worth noting that there is of course a cynical sense in which ethics can be a matter of strategy and marketing, and that’s when companies adopt an ethical posture because they see it as a good strategic move or as a smart marketing maneuver. That’s a good topic, but it’s not what I’m talking about here.
What I’m talking about is the sense in which very often, in the world of business, acting on one’s ethical convictions requires that one think in terms of strategy and marketing. An example may help.
Picture yourself working in a team-based work environment. Now imagine that the team decides to adopt a particular course of action, but it is one that you, after careful consideration, sincerely believe to be ethically problematic. OK, so you’re pretty sure you’re right.
Now what?
Well, knowing that you’re right doesn’t do much to change things, at least not automatically.
First comes a strategic decision. You need to choose a strategy, a course of action tailored to the situation. At the most basic level, your first strategic decision is whether to act or not. Maybe you’ll decide that discretion is the better part of valour, and end up holding your tongue. Maybe the issue is too small to be worth rocking the boat. But if the issue is worth pursuing, you’ll need to decide on a strategy for doing so. The thing that makes strategic decision-making difficult is the thing that differentiates strategic decisions from other sorts of decisions, which is that strategic decisions are decisions that need to take into consideration the decision-making of other people or institutions. (The contrast, technically, is with what are called “parametric” decisions, decisions that need only take into account facts about the non-decision-making bits of the world, such as “what is the weather like today?” or “how much money is in my pocket?”) So, in making a strategic decision about whether and how to voice concerns, you will need to think carefully about how other people are behaving, and how they will react to you — in other words, you need to think about what their strategies are likely to be, which is no trivial problem. That is the essence of strategic decision-making.
Next comes a marketing decision. (For practical purposes, the marketing decision might not be separable from the strategic one, but I’ll separate them for discussion purposes here.) Once you’ve decided that your strategy will indeed be to voice your concerns, how will you actually broach the topic? At a team meeting, or by means of quiet discussion with one or more key team members? If you need to seek like-minded allies, who will they be? And what will your sales pitch be? Will you cautiously express moral doubt, or will you pound your fist on a desk and declare the current course of action “unacceptable”? And just what will you be trying to sell the team — a small-but-meaningful shift in course, or a total about-face? The point is that you have not just to arrive at an opinion, but to sell it, too.
What we see here is that ethics is more complicated than simply knowing (or figuring out) the right thing to do.
But what I think we also see here is one more way to connect ethics with issues that managers and MBA students already take seriously. It’s a way of pointing out that ethics is far from the “soft” topic it is often accused of being. As someone with a Ph.D. in philosophy, I know that ethics is far from “soft” because I know a fair bit about the incredibly technical theoretical literature on the topic. But to many in the world of business, ethics is considered soft (while accounting, for example, is hard — firmly rooted in concrete realities). Pointing out that solving practical problems in ethics requires, among other things, solving challenging problems in strategy and marketing is yet another way to attempt rescue ethics from unfortunate perceptions of the topic.
Walmart & Free Shipping: Who Will Suffer?
Filed under: competition, consumers, CSR, internet, marketing, pricing, profits, retail, SME, strategy |
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Once again, Walmart is making headlines with a business practice that will be good for its customers, and bad for its competitors. Here’s the story, by Stephanie Clifford for the NYT: Wal-Mart Says ‘Try This On’: Free Shipping
For years, Wal-Mart has used its clout as the nation’s largest retailer to squeeze competitors with rock-bottom prices in its stores. Now it is trying to throw a holiday knockout punch online.
Starting Thursday, Wal-Mart Stores plans to offer free shipping on its Web site, with no minimum purchase, on almost 60,000 gift items, including many toys and electronics. The offer will run through Dec. 20, when Wal-Mart said it might consider other free-shipping deals….
Not surprisingly, Walmart’s competitors are alarmed. Smaller on-line businesses don’t get the kinds of sweet shipping rates that Walmart gets from UPS and FedEx, and they don’t have the regional distribution centres that allow Walmart to keep its shipping costs low. It’s pretty clear that this move by Walmart is going to put serious pressure — maybe even fatal pressure — on some of its competitors.
Just 2 quick points to make:
1) It’s worth noting (for the benefit of those who don’t know) that Walmart’s profit margins are already razor-thin. Yes, the make big profits overall, but that’s due to their mind-bogglingly huge volume of sales. On a per-sale basis, their profit is very small. So the money for shipping a given product (for free) isn’t coming out of the profits on sales of that product — the profits just aren’t there. Something has to give. One possibility is that it really is a short-term gimmick, perhaps intended precisely to drive competitors out of business. That would potentially count as an instance of predatory pricing, which would be at least arguably unethical and potentially illegal — in spite of the short-term benefits to consumers.
2) Normally when we think about Walmart’s effect on competitors, we think about its effect on its very small competitors, the ‘mom & pop’ operations. But I wonder whether that’s the case here. I’m no expert on the structure of the industry, but it seems that the companies most likely to be hurt are Walmart’s large and mid-sized competitors, i.e., companies that occupy roughly the same strategy space as Walmart. It seems to me (and it’s just a hypothesis) that most small retailers will have significantly different business strategies than Walmart, and hence won’t be competing directly with Walmart in ways that would let them fall victim to this latest maneuver. If I’m right, then if Walmart really can sustain this free shipping policy (and they haven’t claimed they’ll even try to) it would be very bad for its medium-sized and large competitors. If that’s the case, will people have the same kinds objections as they tend to have when Walmart’s consumer-friendly strategies are instead bad for small businesses?
The Business Ethics Blog 