How do top management teams make effective decisions regularly? What is the secret behind their success? The wisdom of a successful business lies in the dominant logic shared by the top management teams. The video gives you an understanding of dominant logic.
The podcast referred in the video can be found here: http://ankushchopra.com/dominant-logic-how-top-managers-make-powerful-decisions-podcast-s3e3/
For those who want to read rather than listen, the transcript is as follows:
Hi, I am Ankush Chopra. How do top managers make highly effective decisions so fast? Let’s find out.
You know that combined wisdom of the human species is condensed into our folk tales. When you access folk tales, you access hundreds of years of combined wisdom of a civilization. Similarly, the wisdom of a business is condensed into a singular concept called Dominant Logic. Let’s lear about it.
A Unique View of a Business
There is a way of looking at an industry and a business that can make you wildly successful. It is unique to every business but successful firms have the ability tot use that worldview. That conceptual model and cognitive map, when shared across the senior management of a firm, becomes the dominant logic of a firm.
Such a logic exists within the cognitive maps of senior manager and within the business processes used to make a decision.
For example, Kodak became the world leader because of the dominant logic it used. Within Kodak the dominant logic was that you make money by selling more and more consumables. Ting like film rolls and photofinishing paper.
Similarly, Gillette has had a dominant logic that success in Blades and Razor is a result of innovation and up selling. This logic has driven Gillette to invest billions in making better blades and then shifting its entire consumer base to a better and more profitable blade.
Obsolete Dominant Logic can be Fatal
Dominant logic allows the top management of a firm to make effective decisions fast. It allows senior managers to drive massive success without becoming overwhelmed with all the details of the business.
But the same dominant logic can lead tot end disruption of firms. When Kodak entered the digital era, a film less camera went against the grain of the dainty logic within the firm. People were puzzled as to why would Kodak stop making the film. If the only way to make money was to sell consumables then how can you make money if you stop selling consumables.
This led to Kodak behaving like a football team wherein one-half of the team thought the touchdown line was at one end of the field whereas the other half thought it was at the other end of the field.
An obsolete dominant logic is like an outdated GPS system that cannot lead you to your destination.
Learn all about domain logic and how you can use it to become a more effective business leader in my latest podcast.