Entrepreneur’s Diary #71 – About The Necessity To Make Irrational Decisions

During the last decades of the last century (millennium), huge concerns like Siemens AG had all the resources you can imagine at their disposal. The enterprise had capital to drown in and it boasted the best engineers of the world. They had an excellent reputation, the market expanded in the best possible way and their world-wide network in politics and business was perfect.
Nevertheless, these old and formerly so powerful enterprises are no longer existent in many of the segments they used to dominate. In the few areas where they are still successful, there is quite some competition. More often than not, they are endangered to become meaningless in these areas as well in the near future.

Simultaneously, new companies developed. Some of then are but a few decades younger than the old ones. And they quickly outstripped the old and formerly so powerful enterprises. As I see it, this is a fascinating development. So what exactly happened?

What strikes me is that the old enterprises tried to be very strict about only permitting “rational decisions” and “rational behaviour”. There was a high degree of planning in these organizations with the sole purpose of making “irrational decisions” well nigh impossible.

The new firms, such as Amazon, Apple, Cisco, Ebay, Facebook, Google, Microsoft, Oracle and many more – well, even SAP -, on the other hand, largely benefited from their “irrational decisions”.

The well-organized “not-permission” of “irrational decisions” is probably a relevant but not the only reason for the demise of an enterprise. Many things that probably belong together add up. Here is what comes to mind:

  • An antiquated concept of management (even in the 1980ies, Hans Ulrich demanded an “Change in Management” – “Wandel im Management” in St. Gallen);
  • The inability to change (creativity, civil courage, constructive disobedience, thinking in a different and new way or asking for criticism is often still the exception to the rule today);
  • An enterprise culture that no longer matches the current concept of humanity (better lunchrooms, shop committee sentiment and posters in the lift are not the definition of culture);
  • Questionable dogmas repeated like mantras and manifested (You always have to be the leader on the market or You cannot make a profit with end devices),
  • Wrong goals and achievement agreements that lead you astray (employees often have to work contrary to their personal interests in order to work in the interest of the enterprise);
  • An erroneous project understanding (V-model, waterfall without chances of iterative improvement thanks to learning-by-doing, over-tooling instead of Kaizen);
  • An Anglo-Saxon concept of entrepreneurship superimposed over the traditional German concept of entrepreneurship (with share holder value becoming the top priority of the enterprise);
  • A prevailing “bias” in the management and parts of the entire enterprise (leaders separate themselves from the enterprise, they loose contact with the basis, irrational fear and allegedly appearing threats prevail), and, last not least:
  • We throw ethics over board, both when dealing with customers (unacceptably high corruption rates), providers (making use of the power we have over them) and employees (reducing human beings to being a means to an end).

And if some of these issues ring true for huge concerns, then it should not come as a surprise if, regardless of their hundred-year-old history, entire market sectors go to young companies in a very short time.

(Translated by EG)

Click here Drehscheibe for all the articles of my entrepreneur’s diary.

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