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Beer: Cracking the code of change

8 important questions on Beer: Cracking the code of change

Explain Theory O of Beer: change based on organizational capability?

Theory O managers believe that if they were to focus exclusively on the price of their stock, they might harm the organization. In this soft approach, the goal is to develop corporate culture and human capability through individual and organizational learning (changing - feedback - reflecting - further changing). US O theory companies typically have strong, long-held, commitment-based psychological contract with their employees.

Most studied companies have used a mix of O and E theory. The tension between those theories can be solved so that business can satisfy their shareholders while building viable institutions. Those companies are more likely to achieve a sustainable competitive advantage. What does Beer explore?

How one company successfully resolved the tensions between E and O strategies. But first the two theories are explained and described what their differences are.

According to Beer both theories have their limitations. Which one?

-E: CEOs distance themselves from their employees to ease their own pain and guilt. (Less chance to adopt O-style changes, fail to invest in building companies human resources, which hollows out the company and reduces sustained performance)
-O: CEOs loyalty and commitment to their employees can prevent them from making tough decisions (they hope that rising productivity will improve the situations, but this isn't enough for fundamental structural change).
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How can a company adapt, survive, and prosper over the years according to Beer?

Theory E and O must be combined. But melding E and O can bring the worst of them and the benefits of neither. Options to combine them are to sequence them (f.e. first E, then O, while it is unlikely that E would follow O, because of the sense of betrayal that would involve. ). In this way rapid improvements in economic value can be achieved, while simultaneously an open, trusting corporate culture can be developed. 

What does it require according to Beer to apply E and O together?

Great will, skill and wisdom. But precisely because it is more difficult than mere sequencing, the simultaneous use of O and E is more likely to be a source of sustainable competitive advantage. The third row in image 1 shows how E and O can be combined according to the ASDA case.

Beer compares the two ways of changing with two kinds of entrepreneurs, how?

"E" entrepreneurs have a primary goals to prepare for a cash-out. "O" entrepreneurs are driven by an ideology: the building of an institution. 

To thrive and adapt in the new economy, companies must simultaneously build up their corporate cultures and enhance shareholder value: the O and E theories of changes mus be in perfect step. What are the advantages according to Beer of this?

In the end, the integration of E and O created major change. Which results in a sustained advantage. but that advantage can come only from a constant willingness and ability to develop organizations for the long term combined with a constant monitoring of shareholder value. 

What does Beer mean with inertia? (3)

1 The tendency to repeat past actions and patterns of activities
2 Failure to recognize the need for change
3 Despite recognition, individuals may still resist change - if they disagree with the change or personally stand to lose from change (self interest vs overall organization)

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