Prosperity without Growth
Readers of this blog might recall the ‘secret sauce’ proposed in The Mindset for talking about Agile with executives:
…a business organization cannot improve its long-run financial results by working to improve its financial results. But the only way to ensure satisfactory and stable long-term financial results is to work on improving the system from which those results emerge.
Toyota avoided this fate until the last decade because it did not regard results as outcomes that a business achieves by requiring managers to drive people to meet financial targets. It saw that results emerge from a process in which people carefully nurture a web of relationships. These relationships, strikingly enough, emulate the behaviour in natural living systems.
The reversal of Toyota’s fortunes in the past decade suggests that many of its top managers lost the habit of thought that had previously shaped the company’s policies and actions. They lost the habit of thought that caused the company, perhaps unconsciously, to act like a living system. Toyota adopted the finance-oriented mechanistic thinking that had spawned the inferior management practices and the poor performance shown by most of its competitors after the 1970s. And because it abandoned living-system thinking for mechanistic thinking, Toyota began to embrace a virtual world of finance, not a concrete world of humans in cooperative relationships.
Johnson concludes his analysis with a broad warning:
Efforts of companies to reduce that waste by “going green” are not likely to be any more effective than efforts to improve performance by “going lean”. In neither case do these efforts change the thinking that produces excess growth. The efforts might reduce the rate of growth for a time, but they will never reverse it as long as companies adhere to the conventional wisdom from the virtual world of finance that says prosperity is not possible without growth. [Highlights by IG]
The hazards of the virtual world of finance have been conclusively demonstrated during the macro-economic crisis of 2008-2009. One must wonder what it would take to learn the applicable lessons at the micro level of individual companies.