Orthogonal thinking

One of the more insidious elements of commensuration is the normative push to treat what were qualitative differences as differences of common degree. For an organization engaged in a competitive marketplace, or a competitive reputational field more generally, this can be a problem.

An old post at Crooked Timber captures some of this, in the form of market taking versus market making. The idea is that competing on existing criteria (or in Neil Fligstein’s language, within existing conceptions of control) will benefit dominant organizations.

Fligstein (“Markets as Politics,” pp. 663-664) notes that new markets, by contrast:

“resemble social movements. Actors in different firms are trying to convince other firms to go along with their conception of the market. If they are powerful enough, they try to force their view. If there are many different firms of equivalent size, then the possibility for alliances around conceptions of control are possible.”

For my purposes, leave the social movement element of this – what’s interesting here is that competition around existing criteria and existing actors is likely to be difficult. For example, this is from the current issue of Fortune, talking about the Nintendo Wii and the company’s decision to effectively move orthogonally to Sony and Microsoft, rather than along the same pathway (unavailable online, unfortunately):

“We are successfully moving up the blue ocean,” Iwata says. “But once the blue ocean has become big enough for so many people to notice, it is going to change its color to red.”

Talk about lost in translation. Turns out there’s a name for the line of attack Iwata has been taking: the blue-ocean strategy. Two years ago business professors W. Chan Kim and Renée Mauborgne published a book by that title. It theorizes that the most innovative companies have one thing in common–they separate themselves from a throng of bloody competition (in the red ocean) and set out to create new markets (in the blue ocean). Starbucks is an example. There’s always been coffee; Howard Schultz gave us the coffee experience. Or Apple, which gave us the iPod and iTunes–and created a new form of entertainment.

Iwata set his course before the book was published, but now that he’s read it, he feels validated. “Even before someone invented the term blue-ocean strategy, we were exercising it,” he says. “It is an unwritten company credo, something that runs deep in our DNA.”

Here, the dominant institutional logic, which set the parameters along which competition was aligned, included making game systems more complicated, more powerful, more graphics-intensive. And the Wii fails along those lines. They’re effectively trying to make themselves, at least in part, incommensurable to Playstation and XBox. That’s blue-ocean.

One insight here is that a new technology allows for this kind of challenge, whether that technology is a new way to get things done (Google Apps, or web apps for instance), or a new way to organize knowledge (e.g., heterodox economics).

But there is a broader application as well, which leads to a number of insights that are under-researched. When is acting orthogonally going to put you at odds with your chosen field, and when is it going to make you a potential leader in a new one? We often get students at Columbia who apply here because it is in New York. Well, this doesn’t really get captured in ranking systems – at what point does this lead to new criteria (I remember USC and UCLA a few years back wanted to get into the business of promoting an ‘LA School’ of social science parallel to the Chicago School of social science), or else lead to an increased widening of CU from other top departments (if, say, we hired a NYC specialist, who wasn’t particularly well-known or well-respected nationally). In my current work, how and when does electronic trading become incommensurable to, rather than complementary to, open outcry trading? I’m not sure we know very well the answers to these questions, or rather, what the underlying processes that might answer these questions might be.

Actually, what’s fascinating is the timidity with which organizations approach this problem. Of course, costs of failure are high, as are creative costs of thinking about this. The very idea that you might be able to skip ahead of competitors by seeing yourself not in competition with, but across a multi-dimensional field across, other organizations, is a tricky thing to think about, much less to put into practice.

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