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 / Winter 2012 / Issue 69(originally published by Booz & Company)


Best Business Books 2012: Strategy

Is the rise of EMNCs, and the development of the economies from which they come, testimony to some wisdom shared among Eastern cultures? Conversely, are the recent problems in the West, including debt crises, financial meltdowns, and economic stagnation, linked to flaws in the philosophies that underpin their societies? It is an intriguing thesis and well worth exploring, in part to better appreciate the fact that strategy is a reflection of, and embedded in, a larger context.

The authors illuminate the relationship between strategic action and its social context through a sweeping examination of ideas in Eastern and Western philosophy and literature. As the book’s title suggests, their central focus is pragmatism, by which they mean “the purposeful accomplishment of idealistic, informed, disciplined experimentation” that blends a sense of purpose and idealism with flexibility. “Pragmatism is not anything goes or opportunism without purpose,” they write. Rather, it requires learning and sound judgment.

Pragmatic strategies, say Nonaka and Zhu, succeed due to “sheer down-to-earth vigilance and flexibility.” The authors contend that pragmatism is rooted in Confucian thinking, and they find more recent evidence of it in modern Chinese reforms, citing catchphrases, such as “crossing the river by touching stones,” and Deng Xiaoping’s dictum that the color of a cat is of no matter so long as it catches mice.

At the heart of the book, the authors discuss three tenets of “enduring Confucian wisdom”: Wuli (the material–technical), Shili (the cognitive–mental), and Renli (the social–relational). Wuli, which focuses on technical efficiency, involves getting the fundamental elements of the organization working well together. Shili, which is concerned with creativity, provides a vision of a desired future. And Renli, which speaks to the value of social legitimacy, concerns achieving common goodness.

Rather than following a linear logic of setting goals and taking action, or ends driving means, these three concepts are mutually reinforcing, and each can be seen as a point of departure. When approached properly, pragmatic strategy creates a balance among the three, say the authors, that generates value “efficiently, creatively, and legitimately by getting fundamentals right, envisioning a valued future and realising common goodness.” Harmony and balance are the keys to success here; efforts to emphasize one tenet over the others will fail. Thus, strategies based on narrow financial goals or notions of efficiency that ignore social and human consideration are not only incomplete, but ultimately self-defeating.

The authors find evidence of pragmatism in Asian companies, including Honda, Canon, Lenovo, and Haier. They also discuss Nobel Peace Prize joint winners Muhammad Yunus and Grameen Bank. The revolutionary microfinance bank Yunus founded in Bangladesh is a notable example of pragmatism because of its willingness to adapt and experiment, according to the authors. But they recognize that pragmatism is not the exclusive domain of the East. It is present in the thinking of Aristotle, for example, and they note that it also resembles what Jerry Porras and Jim Collins called “core values” in their influential book Built to Last: Successful Habits of Visionary Companies (HarperBusiness, 1994). Indeed, among the first exemplars of successful pragmatism cited in Pragmatic Strategy are Bill Gates of the Microsoft Corporation and Michael Dell of Dell Inc., smart entrepreneurs whose important influences probably did not include Confucius, but whom the authors nonetheless highlight for their willingness to experiment and adapt.

In the concluding chapter of this scholarly and probing book, the authors suggest that Shared Wisdom, Global Success might have been a better subtitle. Principles of balance and a goal of achieving common goodness are indeed crucial in today’s world, and reminding ourselves of the shared wisdom that underpins managerial action is of high importance.

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