Sweet and sour

One thing that stands out for me in all the coverage of the Kraft takeover of Cadbury is what I see as the startling lack of ambition of the Cadbury senior leadership. Admittedly my view is UK centric, being largely informed by reports from the BBC and Financial Times. The FT is neutral in its reporting of this acquisition and yesterday’s (20th January 2010) leader is broadly supportive of the “… the UK’s openness to overseas bidders.” I am in agreement with that sentiment. On the other hand the FT’s front page headline, “Cadbury defends sell-out” is not without questioning overtones and it sits above an image of Kraft’s chief executive, Irene Rosenfeld who is smiling broadly, which suggests that Kraft are pleased with what they have achieved.

There is a section on the FT website devoted to this takeover; it includes a video interview with Roger Carr, the Cadbury chairman in which he defends the deal, and as with the headline, those words used to describe the interview are interesting in themselves. Perhaps I am reading too much into them. The interview is revealing as much for what is not said. While there is reference to achieving shareholder value, to the derisory nature of the initial offer and to the viability of an independent Cadbury, there was no indication that the senior leadership team had the stomach for continuing to lead an independent Cadbury and achieve better value for all their stakeholders than they eventually negotiated with Kraft. That is a depressing admission and calls into question whether an eventual sale was always the objective once Cadbury’s former drinks business had been split off, an option that has been the subject of press comment for some time.

In general I don’t have too many hang-ups about business ownership but I do think that something of value will be lost in this transaction. For one thing, the intangible experience of working for a company called Cadbury will soon be a thing of the past and that may matter to a significant number of people. It is an irony that many of them may well have ‘gone the extra mile’ in helping Cadbury achieve the good trading figures that sustained the company’s defence during the takeover bid. Also the confectionery world will almost inevitably become a less diverse place. No doubt the brands will remain but I will be surprised if the character of the products does not become less distinctive over time.

So why has this happened? It would seem that £8.50 per share was a more potent representation of the Cadbury leadership’s vision than a viable, global, independent confectionery business. At least in Cambridge (U.K.) we have Hotel Chocolat to fall back on for local consolation.

Old insight, fresh perspective?

When Ralph Stacey looks at the complexity matrix (seen here being used by the medical profession) he drew up some years ago he could be forgiven for feeling a glow of satisfaction. For him it is perhaps ‘old hat’ but for many of the rest of us his matrix provides a helpful fresh perspective on the confusing economic, financial and political climate in which we find ourselves. His matrix suggests that in situations where we are far from agreement and far from certainty having recourse to rational decision making (and this I would qualify to mean linear rational thinking), political decision making or judgement based decision making will not necessarily be very effective. Brenda Zimmerman of York University, Toronto on whose analysis the above reference is based acknowledges that traditional management teaching has concentrated on decision making where (linear) reasoning, politics and judgement can be effective, which focus has left a gap in management teaching. This raises a couple of questions: how useful could the Stacey matrix be in the prevailing circumstances – which can well be described as far from certain and far from agreement? How aware are the current business leaders of this material, given that many of them will have completed their formal education before it was published?

In Stacey’s matrix this region (far from certainty and far from agreement) is divided into two zones, the zone of complexity and the zone of chaos. With reference to the zone of chaos, Zimmerman says, with no little understatement, this is a region ‘… that organizations should avoid as much as possible.’ So, looking on the bright side, let’s assume that we are in the zone of complexity. If traditional management tools are not necessarily effective in this region, what tools are there that we can use?

Some strategic thinkers are looking to see what complexity science can offer in the military sphere and this book by James Moffat serves well as a starting point: Complexity Science and Network Centric Warfare. In amongst the non linear maths there is a wealth of analytical thinking that lays down a foundation for the application of complexity science on which to build models of operations in what is described as the information age.

I don’t want to say more about complexity science here apart from commenting that its use in this context is to help break the mould of traditional command and control structures and to create the philosophical and intellectual framework for de-centralised command and control. Hold the idea of using complexity science in this way while we explore another line of thought.

A recent copy of the Economist includes a special report on the middle class, particularly in emerging markets (Burgeoning Burgeoisie, Economist, 14th February 2009 – to see the link may require a subscription). There is an interesting discussion on who or what are the middle classes but two particular correlations stand out; one between the middle class and economic growth and the other between the middle class and democracy. As the report recognises the former case is easier to make and even it is unlikely to continue without interruption through a recession. Daaron Acemoglu of the Massachussetts Institute of Technology is quoted as attributing the importance of the middle class to growth in the emerging markets to the fact that “… they are more committed than the elite to a mixed, competitive economy.” This is related in the Economist report to Maslow’s hierarchy of needs; I suspect that account also needs to be taken of an economy of exclusivity alongside the economy of wealth.  The former is a zero sum economy while the latter is not; as an emerging middle class starts out with little to lose in either economy it does not have to balance a loss of exclusivity against any gains in wealth. This brings us back to complexity science because it provides one of the perspectives for understanding the dynamics of non zero sum economics as is very ably expounded by Eric Beinhocker in his book, The Origin of Wealth.

What puzzles me in the current climate is that with all the scholarship that has gone into complexity science over the past 20 years I am not hearing more reference to its use in responding to the current uncertainties. Perhaps I am listening at the wrong windows; I hope so because I find much to attract me in the philosophical underpinnings of complexity science and much that I would like to investigate as a means of addresssing the difficulties that present themselves to me.

James Moffat acknowledges the role of the Santa Fe Institute in the early development of this field of multidisciplinary research and the institute provides a treasure trove of relevant expertise and reference material. Ralph Stacey is professor at University of Hertfordshire and was recently interviewed here.