Academy ol Mamgemeiv EXICUTIVI. 1989. Vol. III. No. ?, pp. 29-}6 Creating Competitive Advantage: Welding Imagination to Experience David K. Hurst Executive Vice-President Federal Industries Metals Groups G ood afternoon, and thank you both for the introduc- tion and for the invitation to be with you here today. The ideas that I want to talk about emerged as a result of a traumatic experience our organization went through in the early 1980s. Our company was acquired in a wildly over- leveraged buyout on the eve of the worst business downturn since the Great Depression. Almost overnight we went from being a moderately well-run, growth organization to an insolvent wreck.' We were thrown from Order into Chaos, and in the months that followed we were forced to reexamine every aspect of our business operations. The crisis was so great that we were compelled to articulate and reconsider everything we believed about the nature of people and the role of business organizations. In short, we were compelled to make [•xplicit our own personal and organizational philosophies. It is a process that continues in our organization today. I have since come to believe that this reaction is the natural response of both individuals and organizations when aced by crisis. It is essentially what happened in the well- uiown Tylenol-tampering incident, when the managers at lohnson and Johnson, faced with a problem falling well outside their standard operating procedures, were forced to all back on their credo — their statement of their most fundamental values — in their search for a guide as to what action they should take. Philosophy So. my topic today is really philosophy and itsapplica- icKi to experience. I want to throw some light on the philo- -ophical assumptions that 1 think underlie much of our ronventional thinking about cognition in people and their ;)ri;<inizations,-' I want to suggest what I think is a more lclptui philosophical framework and finally, give you some II tistrations of how this framework is a useful guide to action, iome of you may feel that what follows is pure fantasy, but u will have to agree that at least it's in the right setting! Of course. I am not a professional philosopher. Yet I am a philosopher, and I believe that all of us are philos- ophers. Eor behind the daily activities of people and their organizations there is a hierarchy of frameworks of assump- tions, many of them tacit, about how the world works, a series of philosophies or theories-in-use. This afternoon I want to explore some of the upper levels in this hierarchy. My justification for talking to this audience about philosophy is that it seems to me that management science and practice in North America is in a state of intellectual disarray, not dissimilar to that faced by classical physics in the early part of this century. Judging from the behavior of managers and the advice given to them by consultants, the majority of management practitioners and theorists believe in a mechanical, Newtonian world where objects and events are simply located in time and space. Such a world can be observed accurately by a detached, objective observer and acted on systematically by a rational manager. Just as is the case with classical physics, this framework works well when we deal with stability and the routine organizational interac- tions that fit the machine model on which it is based. But. I want to argue, it breaks down as soon as we leave this same middle ground and have to deal with radical change and creativity — with the renewal of established organizations and the genesis of new ones. The theory breaks down as soon as we have to deal with the complex imaginative processes that, I believe, are so critical to the creation of competitive advantage. Orie-World Theory I like to think of this prevailing management philos- ophy of radical realism as a "one world" theory of the universe; the belief that we live in one world, a mechanical or perhaps electrochemical machine or computer of which we are part. One-world theories have been around for a long time. The early Greek philosophers developed several of them. They would never have thought of the world as a machine; for them it was an organism, alive and self- creating. Nevertheless, it was their preoccupation with the physical world, with substance, that laid the foundation of our own preoccupation in the West with the prediction and control of the material world. In contrast, another one-world theory — that of Eastern mysticism — dismisses our percep- tion of the physical world as an illusion and has led many cultures to a fatalistic withdrawal from material concerns. 29