Presentation of March, 16th, at RC Munich Airport (Report)

My presentation was about:

Sind Unternehmer “Dominante Logiker” oder “Evolutionäre Steuermänner”
Entrepreneurs: “Dominant Logicians!” or “Evolutionary Helmsmen?”

I was made aware of this topic through a doctorial thesis written in cooperation with InterFace. Our board member, Professor Dr. Manfred Broy (Informatics, TUM) forwarded a request from St. Gallen to us: a doctorial candidate was looking for a medium-size technology enterprise in order to research the dominance of logics for founding and establishing an enterprise. To us, this sounded exciting, so we volunteered.

The doctorial thesis was about KMU’s (small and medium-sized enterprises). For me, that was the determining factor.

Well, my report is a little on the lengthy side. Here we go:

Huge enterprises with an extensive shareholder value culture are enigma to me. The current development of some huge enterprises makes me somewhat sceptical. I will soon publish a separate post on this (It’s ready now).

Consequently, my presentation was primarily about medium-sized enterprises, such as the InterFace AG:
With a turnover of more than 12 million Euros, we are responsible for a hundred people, including their families.

  • The enterprise was founded more than 26 years ago.
  • We are an enterprise full of passion.
  • We keep founding new, small firms that complement us in the IF group.
  • The most important goal of our company is not growth. Instead, we try to win people with entrepreneurial ambition and competence for InterFace.

Personally, I see myself as an entrepreneur. For an entrepreneur, the decision process starts before the company is founded:

1st decision:
do I want to found an enterprise?

2nd decision:
alone or along with a partner?
3rd decision(s): how, what are the topic, product, service, customers, and legal organization? And more …

The variance of feedback you get as the one who is making the decisions is also very interesting. While some people see you as courageous and spontaneous, others call you conservative and hesitant. Similarly, some people see you as totally brain-oriented, while others tell you how very gut-oriented you are. This is my personal experience, but I have also heard it from friends in “leading positions”.

But let us first tackle the question when a decision is really a decision:

  • You must be at liberty to decide totally free inside a given frame.
  • The consequences of your decision must be relevant for the future.
  • There must be a degree of uncertainty. Decisions that do not have the element of uncertainty are not decisions.

These are probably the most important requirements. They must be met if we are to call what follows a decision.

How to reach a decision?

I used to believe in the following rule of three:

  1. First and foremost, you have to inform yourself as thoroughly as possible.
  2. Then you must evaluate the information with care and in context.
  3. Based on this, you can think about alternatives and rationally decide which of them is the best.

Today, I no longer agree. My doubts start as early as when you collect information (sources, statistics …). Step two, too, will easily have a speculative element. And in the third step, you mostly base your decision on what is allegedly real. You gave yourself a sense of certainty that has nothing to do with reality and therefore you will have a clear conscience while making the most unwise decision.

As in logics, you cannot conclude anything from a logical conclusion that is based on a wrong concept. The result may be right or wrong.

But now let us enter the world of decision-makers. As we all know, these days, they are called managers:
In former times, my concept of a successful manager was that of a super-human. Mostly, I imagined him to be a man (!) with many great qualities:

He was intelligent and eloquent, quick-witted, charismatic and emanating authority, efficient in all his activities, slim, tanned and handsome, if possible, his appearance had a classical profile. He was a rescuer in meetings, a good listener, always understanding and competent on many levels.

He was someone who always knows what he is talking about. He has an inner belief and is mentally stable. He has a traditional moral value system and he knows “his” enterprise and the people working therein.

That was my entrepreneur-idol. That is how I, too, wanted to be. I even knew someone who seemed to fit the bill. When he was at the top, however, he was “burned out” by his environment.

Then I read the book by Jim Collins “Good to Great”. And I found out that the CEO-s of the best-performing world companies often were all but such charismatic types. The inconspicuous book keeper, who has been made CEO more from lack of alternatives than anything else, became the most successful manager of all times. And he says about himself that the only thing that probably makes him discernable from other people is his eccentricity.

During the last RISE workshop, the following question was raised: what is the value of a CEO for the company he works for? I reported about this  workshop in my IF blog entrepreneur’s diary. Indeed, the results of the workshop came as a surprise for me, too.

If I was not convinced before, then the RISE workshop confirmed that the idea of a new CEO quasi being let loose on a new enterprise and changing a lot is very utopian. Learning about and understanding the concept of an enterprise alone probably takes a lot longer than the average time span a modern CEO remains with a company.

As we can see now, the concept of the ideal manager is nowhere near as easy as it looks.
Now let us turn towards the enterprise to be helped by the manager! But what exactly is an enterprise?
Well, first and foremost, an enterprise is a “social system”. We all know social systems:

  • Sports Clubs,
  • Communities,
  • The State of Bavaria,
  • The Federal Republic of Germany,
  • Our Family or Partnership,
    and many more

However, we need more than just a “social system”: an enterprise has to be economically successful.

  • First and foremost, there are the stakeholders. They come from outside, but they certainly and rightly want to benefit from the enterprise.
  • Basically, the entire society wants to benefit from the enterprise. It is no coincident that the Bavarian Constitution links the right to free trade with the duty for all “trade” to be in the common interest.
  • In the enterprise, you find both employees and managers for whom it must be economically beneficial. They expect the enterprise to give them a fair share back for their effort.
  • The owners of the enterprise expect a suitable (and, unfortunately, often also totally unsuitable) return and increase of their capital.
  • However, there are many more stakeholders
    • The suppliers and service providers.
    • Shops and pubs near the company, part of whose business can be made in this way. Of course, what I have in mind is “our” Althaching, as well as our Chinese and Italian restaurants.
    • The local authority of Unterhaching expects its share in taxes, local clubs and the fire fighters want to be supported.
    • And there are many more people who participate in and benefit from the enterprise.

So let us note that an enterprise is not just a social, but also an “economical system”. We can call it an “economic-social (or short: eco-social) system”.

Yet there is still something missing:

  • Enterprises need a culture of their own and some sort of meaning.
  • Being social systems, enterprises develop values. It is just possible that, in these times, “trust” is particularly relevant.
  • Enterprises develop their own rules and processes. Intuitively and collectively, they define how they work and function. Little of it has been described. Much of it has never been, nor can it ever be, described.
  • Additionally, enterprises have a complex balance of externals. We are not just talking the pollution of the environment or exploitation of resources. What I mean is more the multi-dimensional, sometimes non-materialistic and permanent exchange of reality with the rest of the world.

Thus, in my mental image, enterprises are like complex organisms in an even more complex world. They are not machines rendering output as a matter of course in the form of service, products and profit in a determined and controllable way, provided you give the right input and pull a few levers at the right places. Even if the reader of some economy textbooks sometimes gets the impression that this concept is rather prevalent.

Entrepreneurs, CEO-s and managers are supposed to control the enterprise. They must show the general tendency, make all decisions, generate (more and more) turnout and profit. And all this is supposed to happen rationally, based on knowledge and logics.

Is it really legitimate to believe such a thing is possible? To be sure, people can take influence on an enterprise. Or, at least, they can give the impression that this is what they do. And the men and women at the top certainly give the enterprise its “official” face.

But how is an individual person supposed to control a highly complex eco-social system with its internalized values and processes that have been growing for many years (decades, centuries)? By collecting, analysing and evaluating data and then making decisions? As the central super brain of a huge think tank? This cannot work. By using dominant logics?

The dissertational thesis showed: that does not work, either.

But it also showed that we tend to re-invent the past as we continue living in the present. We come up with a story that sounds plausible as it minutely describes how the success – or failure – has been caused through a chain of situations, dispositions, actions and events. These stories sound good enough to convince anybody that this is how it could have happened.

However, revising all slides of strategic meetings or protocols of decision-making conferences and other sources, such as documents from the relevant time, shows that the reality was different.  The entire process was certainly a lot less rational and logical than the story that was created afterwards.

In fact, the ways of enterprises are not at all logical and rational. But they are good material for making stories out of them later. And, indeed, you need “dominant logics” for developing the logical success story.

(Translated by EG)

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