Introduction: Why “Best Practices” Hold You Back
Like many others, I started writing a book when COVID-19 struck. In those strange times, many of our certainties — that people must go to an office to work, or global supply chains are good for economies — were challenged. As humans have a natural aversion to uncertainty, so we tend to seek out new certainties to replace the old ones with. And where there is demand, supply will rise up to meet it. I knew that, by the time I finished the long process of writing my own book, thousands of other books by thousands of gurus (old and new) explaining to us, “The Secrets of Success in Our New, New Normal World” would already be published. I knew this because a wise man once told me, “the reason there are so many gurus in the world Marcus, is that so few people know how to spell charlatan”.[1]
Though I’m British I’ve lived in Moscow for a long time, providing me an intimate relationship with uncertainty. Modern Russia, re-born from the collapse of the Soviet Union in 1991, plunged into deep uncertainty following the ‘economic shock therapy’ of 1992, which was compounded by a sovereign debt default and banking crisis in 1998. The deep recession that followed the 2008 global financial crisis brought yet more uncertainty which, later, was exacerbated by the growing geopolitical tensions from 2014 that peaked in 2022. Unsurprisingly therefore, Russia has developed a heightened sensitivity to uncertainty, which it actively seeks to avoid (see fig.1).
Fig.1: Russian Uncertainty Avoidance Against Select Other Countries (Hofstede Cultural Dimensions) [2]
Cultures with high uncertainty avoidance experience acute anxiety about the future. They crave detailed plans and predictions to create the comforting belief that someone, somewhere is in control. Yet, in a volatile world, certainty is an illusion, beyond the gift of any individual, group, or nation to provide. This is why businesses, as we entire a new “Roaring Twenties” (or “Screaming Twenties”) are struggling to adapt. They’re constantly blindsided by changes their plans about an uncertain future failed to predict. To survive, they cut costs. But to thrive? Many hope for a swiftly return to normal but, as we’ve learned, hope is not a very good strategy.
The desire for certainty may be stronger in cultures with higher anxiety, but the need to adapt is universal. In conversations with business people globally it became clear that many feel the old ways of working are simply no longer working. People are looking for something different. And that’s why I started to write this book. My aim is to introduce an alternative way to think and act, one that is both new but also rooted in timeless principles that are entirely appropriate for the complex world we find ourselves in today. From chapter one, I’ll take a broad perspective, attempting to provide insights that are relevant all. But, for the rest of this introduction, I’ll start where I was in those chaotic early days of 2020 — focusing first on Russian businesses.
The Case of Russia
Private business in Russia only became legal in 1988, so the market economy is still young and experiencing growing pains. In its wild first decade a new class of entrepreneurs took the risks required to unlock oversized rewards. In its second decade the market stabilised and the rewards went to those who did things better, not just first. During this period a different type of business leader emerged, primarily graduates of the country’s strong STEM (Science, Technology, Engineering, Mathematics) education system. Trained to seek ‘right answers’ they turned their gaze westward, where the leading businesses were. Anyone doing business in Russia at this time will recall the obsession with copying ‘western best practices’ that became the standard operating practice in most, if not all, Russian businesses.
Learning from others is wise, but blindly imitating ‘western best practices’ meant that many Russian businesses simply avoided the hard thinking needed to create a unique competitive advantage. Few tried to compete directly with western firms, so being ‘second rate’ internationally was acceptable, as long as they were better than their local rivals. Advantage came from identfying the ‘latest big thing’ from the West, (as long as it wasn’t something too new that it still had a whiff of uncertainty about it) and hiring the most expensive ‘guru’ to guide its implementation. Despite having one of the largest, best-educated populations in the world,[3] many Russians were simply not thinking for themselves — an absurdity captured in a joke by the business consultant, Ichak Adizes:
A man, seeking a brain transplant, visits a renowned brain surgeon.
The surgeon tells him he can have the brain of an Ivy League professor for $5,000.
The man thinks for a moment and then asks, “What else do you have?”
“The brain of a Nobel Prize-winning physicist. This one costs $10,000.”
The man thinks for a moment before asking, “What’s the most expensive brain you have?”
The surgeon pauses briefly. Then picks up a brain. “I have this one. Mikhail, ordinary Russian man. But this costs $50,000.”
Puzzled, the man, asks, “Why is it so expensive?”
“Ah!” replies the surgeon, “never been used!”
To their credit, Russians usually laugh when I retell this joke, but there’s a serious message: What worked yesterday, somewhere else, for someone else may not work for you today. For, as the Greek philosopher Heraclitus famously asserted, “No man ever steps in the same river twice, for it’s not the same river and he’s not the same man.” There are three reasons why a strategy of copying ‘best practices’ does not bring success: Form over substance, sensitivity to initial conditions and playing not to lose.
1. Form Over Substance
The global financial crash of 2008, triggered by sub-prime mortgage loan defaults on the US West coast, hit Russia’s economy harder than most, due to its lopsided dependence on natural resource exports. In response, then-President Dmitry Medvedev declared that Russia would modernise[4] and become an innovation-led economy. He too looked westwards for answers and his gaze fell upon Silicon Valley — the most innovative hub of the most innovative nation. Soon, massive investment was pouring into the ‘Skolkovo’ project in Moscow — Russia’s attempt to build its very own Silicon Valley. However, more than a decade later results remain underwhelming.[5]
Fig.2: Then-Russian President Dmitry Medvedev and Steve Jobs in 2010
Copying form whilst ignoring the substance — for example, copying what Silicon Valley looks like today without understanding the underlying principles it was built on and the decades of action it took to get there — is a common trap that many who seek simple answers to complex questions fall into. Physicist Richard Feynman memorably illustrated this with a story about the islanders of the South Pacific, where the US had based part of its supply chain during World War II:
During the war they saw airplanes land with lots of materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas — he’s the controller — and they wait for the airplanes to land. They’re doing everything right. The form is perfect. But it doesn’t work. No airplanes land. So I call these things Cargo Cult Science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.
As Skolkovo demonstrated, cargo cultism — copying superficial form without any understanding of the deeper substance — is not limited to the South Pacific. Success can’t be re-created by following someone else’s path. Success requires finding what works for you, here, today.
2. Sensitivity to Initial Conditions
However, even when we understand the substance, imitating the form still doesn’t guarantee the results we want due to a principle called, sensitivity to initial conditions.
In 1960, meteorologist Edward Lorenz was running multiple weather simulations that, to his amazement, produced dramatically different results despite using seemingly identical inputs. He found the cause — a single data input had been rounded down from 0.506127 to 0.506 — a tiny error, but enough to cause a massive variation in results. What Lorenz had discovered was startling. Complex systems, like weather patterns, are highly-sensitive to initial conditions. This means that even the smallest difference in starting conditions can lead to huge differences in outcomes because of feedback loops. As outputs are continually fed back into the system as inputs, (e.g. rising temperatures causes polar ice to melt, which means more sunlight is absorbed, further increasing temperatures) a cyclical relationship is created that can dramatically amplify even the tiniest initial differences and cause the entire system to develop in completely unpredictable ways.
Lorenz’s insight didn’t just apply to weather patterns. It applied to any complex system — organisations, ecosystems like Silicon Valley, or entire economies. Complex systems contain countless parts that interact with each other in non-linear ways — in other words, small changes can cause disproportionately large effects (e.g. a tiny virus that shuts down entire economies, or a new technology that re-shapes how multiple industries operate). Therefore, if we try to copy a complex system — for example, another organisation — then countless tiny differences in our starting conditions (e.g. people, ideas, technologies) will, like the rounding error in Lorenz’s weather simulations, cause wildly different outcomes. This is why copying ‘best practices’ rarely produces the same results twice.[6]
3. Playing Not to Lose
Even if we could overcome the issues of form over substance and sensitivity to initial conditions there’s a bigger problem with copying ‘best practices’ — you’re always playing catch up. While you’re focused on your major transformation project those you are imitating are pulling even further ahead. For many businesses, this is acceptable because they’re ‘playing not to lose’ rather than ‘playing to win’. Their leaders reason that, as long as they don’t get left too far behind, they can continue collecting large salaries and bonuses without ever needing to take the risk of trying to chart new paths forward and risk losing it all.
This is a viable strategy as long as all your competitors are doing the same. But, competitive markets are open markets, and some competitors are ‘playing to win’. These are the ones that look for opportunities where rivals can’t or won’t respond quickly enough to the moves they make. And when these players enter the game you’re not just playing catch up — you’re fighting for your survival.
Russia is Europe’s largest economy and attracts globally competitive businesses that are eager to capture talent, customers and profits. These are no longer the familiar western firms of the past, but new industry giants like Huawei, Haier and BYD who are already out-competing western rivals in global markets. Soon they may dominate Russian markets also. To protect their market share, Russian businesses will need to raise their game — they will need to stop copying outdated ‘past practices’ and start discovering new paths forward instead:
If your competitor’s boat gets ahead of you at the starting line, the instinct is to chase it. To tack where it tacks. But if you do, you will always be behind, because you will be sailing on the same path, subject to the same wind. And in fact, for much of the time, you will be sailing in their ‘dirty air’ — they get the full wind in their sails, which breaks up the effect of the wind on your sails. Your only hope is for the leader to make a terrible blunder. Otherwise, you will race for hours and hours, tacking dutifully behind the leader and cross the finish line behind them. If you want to end up in some place other than last, you need to tack away and plot a different course that will get you to the finish line ahead.[7]
The rise of next-level Chinese firms however is both a threat and an opportunity for Russian businesses. Competition will force them to sharpen their skills and, for those who raise their game, they may, in future, finally be able to compete against western firms on global markets. But for those who don’t adapt — they will get swallowed up by Chinese firms and local Russian firms ‘playing to win’.
What Is To Be Done?
In the 1990s, Chinese businesses faced many of the same challenges Russian businesses did: An impoverished economy, historical suspicion of private enterprise and inferior technology compared to western competitors. Yet many Chinese businesses transformed themselves into global powerhouses in an incredibly short time. How did they do this?
The first think to note is what they didn’t do. Although they actively learned from the West (often with sharp practices Westerners complained about)[8] they didn’t blindly copy ‘western best practices’. They didn’t have to. As this book will demonstrate, the East has a rich tradition of strategic thinking that can help one navigate uncertainty effectively. It is this strategic thinking that guided the rapid development of Japanese businesses in the chaotic aftermath of World War II last century, and has guided the meteoric rise of Chinese businesses this century.
However, my argument is not that Russian businesses should start copying ‘eastern best practices’ (for the reasons previously outlined: form over substance, sensitivity to initial conditions and the danger of playing not to lose). Instead, I propose that Russians should learn from the East in ways that Westerner can not (or choose not to). Eastern strategic thinking is very different from Western thinking and some have argued that Westerners struggle to grasp the Eastern approach to strategic thinking. [9] This presents Russian businesses with an opportunity.
Russia is different. While it is a European country that has gazed westwards for centuries, its national symbol — the double-headed eagle — reminds us that Russia is a country that straddles both the Western and Eastern worlds. This duality positions Russians to absorb essential lessons from the Eastern approach to strategy that elude Westerners and use these insights to outcompete rivals in the competitive game of international business. But first, Russian businesses must stop the imitation game of blindly copying so-called ‘best practices’ and, instead, harness its immense intellectual potential and start charting its own paths forward. How we can all start doing that is what part one of this book will try to explain. It starts with chapter one and the importance of NOT making strategic plans.
1/ Roger Holdsworth
2/ https://www.hofstede-insights.com/country-comparison/russia/
3/ https://www.weforum.org/agenda/2017/09/countries-with-best-education-systems/
4/ Modernisation is a theme in Russian, Soviet and post-Soviet history, reoccurring every 30–60 years. From Peter the Great, who founded his new capital — St. Petersburg — in 1703 in an attempt to modernise Russia and catch up with other European nations. Followed by Catherine the Great’s modernisation of the political and legal codes to improve state efficiency, economic growth and maintain stability as the empire grew. To Alexander I who modernised the military in response to the new age of war ushered in by Napoleon. Then the emancipation of the serfs in 1861, Stolypin’s reforms starting in 1906, Stalin’s Industrialisation of the 1930s and Gorbachev’s Perestroika of 1985.
5/ In 2008 the Global Innovation Index ranked Russia 68th in its list of global innovators. By 2021 it ranked Russia 45th, behind other ‘upper middle-income economies’ like Bulgaria, Malaysia, Turkey and Thailand. While such reports should be used critically (as, for example, methodologies change) these results suggest Russia’s innovativeness is little changed, despite the huge investments into Skolkovo.
6/ An exception to this is mechanical processes where deviation isn’t allowed. As outlined in The Checklist Manifesto by Atul Gawande, checklists can dramatically reduce preventable errors in specific situations (like ensuring medical tools aren’t left inside patients during surgery or pre-flight safety checks on airplanes). But even here, checklists serve limited goals within a larger complex system.
7/ https://medium.com/swlh/the-tragic-futility-of-investing-to-catch-up-aaf4b5c90e0f
8/ Though much complained about the practice of appropriating ideas from other countries is nothing new https://www.history.com/news/industrial-revolution-spies-europe
9/ This appears to be the central hypothesis of Derek Yuen in his book ‘Deciphering Sun Tzu’ which will be explored further in chapter eight.
