Pragmatic Strategy Pragmatism is enjoying a renaissance in management studies and the social sciences. Once written off as amoral, relativist and opposed to the ideals of Truth, Reason and Progress, it is now regaining inl u- ence in public policy, international relations and business strategy. But what can pragmatism teach us about strategy? How can prag- matic strategies help businesses to succeed? This innovative book presents a pragmatic framework for shaping and solving strategic problems in a practical, creative, ethical and i nely balanced manner. To achieve this, the authors draw from Confucian teaching, Ameri- can pragmatism and Aristotelian practical wisdom, as well as busi- ness cases across industries and nations, particularly from emerging economies. With signii cant theoretical depth, direct practical im- plication and profound cultural sensitivity, the book is useful for executive managers, public administrators, strategy researchers and advanced students in the search for pragmatic strategies in an inter- connected, fast-moving world. ikujiro nonaka is Professor Emeritus of the Graduate School of International Corporate Strategy, Hitotsubashi University. He is also Xerox Distinguished Faculty Scholar at the University of California, Berkeley and First Distinguished Drucker Scholar in Residence at the Drucker School and Institute, Claremont Graduate University. The Wall Street Journal has identii ed him as one of the world’s most in- l uential business thinkers and his contributions to strategy have been recognised by the Emperor of Japan and the Japanese government. zhichang zhu is Reader in Strategy and Management, teaching strategy for the MBA programme at the University of Hull Business School. His formal education stopped when he was 16 due to Chi- na’s ‘Cultural Revolution’. Zhichang was a Maoist Red Guard, then worked as a farm labourer, a shop assistant, a lorry driver, an en- terprise manager and an IS/IT/business consultant in several coun- tries. Without a high school certii cate or a university i rst degree, Zhichang earned a British Masters and a Ph.D. and holds visiting/ consultancy positions in China, Germany, Japan and the USA. Pragmatic Strategy Eastern Wisdom, Global Success Ikujiro Nonaka Zhichang Z hu cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, S ão Paulo, Delhi, Mexico City Cambridge University Press The Edinburgh Building, C ambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: w ww.cambridge.org/9780521173148 © Ikujiro Nonaka and Zhichang Zhu 2 012 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2 012 Printed in the United Kingdom at the University Press, Cambridge A catalogue record for this publication is available from the British Library Library of Congress Cataloguing in Publication data Nonaka, Ikujiro, 1935– Pragmatic strategy : Eastern wisdom, global success / Ikujiro Nonaka, Zhichang Zhu. p. cm. Includes bibliographical references and index. ISBN 978-1-107-00184-8 (hbk) – ISBN 978-0-521-17314-8 (pbk.) 1. Strategic planning. 2. Pragmatism. 3. Confucianism. 4. Management. 5. Comparative management. I. Zhu, Zhichang. II. Title. HD30.28.N66 2012 658.4’012–dc23 2012007356 ISBN 9 78-1-107-00184-8 Hardback ISBN 9 78-0-521-17314-8 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party Internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Contents List of i gures page v i List of tables v iii List of cited classics i x Preface x v PART I WHY PRAGMATISM, WHY NOW? 1 1 I ntroduction 3 2 S pirits of pragmatism 2 4 PART II WHAT DO PRAGMATIC STRATEGIES LOOK LIKE? 75 3 S trategies in a pragmatic world 77 4 S trategy as purposeful emergence 127 PART III WHAT TO DO, HOW TO DO IT? 163 5 D ealing with wuli–shili–renli 1 65 6 Timely balanced way-making 2 31 7 Orchestrating WSR, orchestrating the i rm 2 76 PART IV THINK WHEN WE LEARN 323 8 Q uestioning the conventional paradigm 3 25 9 P ragmatism East and West 370 Notes 4 10 References 4 80 Index 5 12 v Figures 1.1 S tructure of the book page 18 2.1 S pirits of pragmatism 26 3.1 N o one touches a strategy but it is always with us 81 3.2 S trategy: a multi-function tool in our hands 95 3.3 T he 6Cs of strategy 105 4.1 S trategies as multi-path system emergence 129 5.1 W SR, a Confucian worldview 172 5.2 W SR, the strategy bottom line: generating value efficiently, creatively, legitimately 1 76 5.3 S ecuritisation as a % of total funding: British banks 1 84 6.1 T imely balance: get it just right 238 6.2 P ragmatism-upon-time: the Confucian way-making 241 6.3 B alancing change–continuity 246 6.4 D iversii cation vs focus: successes and failures 2 57 6.5 B alancing expansion–focus 260 6.6 Expanding multilayered b a , focusing on situated problems 265 6.7 Mayekawa’s ‘Total heat solution’: an expansion–focus view 267 6.8 Toyota’s success and setback: an expansion–focus view 271 7.1 Skill sets useful for timely balancing wuli–shili–renli 277 7.2 Huawei: integration with a purpose 2 86 vi List of figures vii 7.3 H uawei’s business model: growing into each other with clients 287 7.4 P ragmatic strategy: timely balancing wuli–shili–renli 299 7.5 T he i rm as a path-dependent w uli–shili–renli constellation 300 7.6 T he meaning of Honda 3 19 9.1 A ristotle meets Confucius: different paths to practical wisdom? 394 Tables 2.1 H isap’s performance: start-up years page 53 3.1 K ey factors that shape China’s reform 84 3.2 C ompeting cochlear implant logics 1 02 4.1 ‘ Bad guys’ and ‘good guys’: a ‘strategy without intent’ view 1 45 4.2 A sample of w u -forms signii cant to strategy 153 5.1 R obust strategy based on the WSR bottom line 226 5.2 W SR: common concerns, local narratives 228 6.1 T he y in–yang of this-worldly process 247 6.2 E xpansion–focus companions 258 9.1 C ontrasting Aristotelian and Confucian practical teaching 404 viii Cited classics Daodejing (道 德经 ), also known as L aozi (老 子 ). In 81 chapters, just over 5,000 words, compiled during the Zhou Dynasty (周 , 1111–249 bc ), probably in the sixth century b c. A classic attributed to the Taoist sage Li Er (李 耳 , believed to be a contemporary of Confucius), it is not a philosophy for the hermit who withdraws from social affairs but for the sage-ruler who engages in the world wisely with- out forced interference. The subtlety of this classic is that, while it advocates ‘non-action’, it supplies practical advice for making one’s way in the world. The ideal is not doing nothing, but doing things naturally. An English translation we recommend is Roger Ames and David Hall’s D aodejing: Making This Life Signii cant – A Philosophical Translation (Ballantine Books, 2003). Daxue (大 学 , G reat Learning ). In ten chapters, part of a classic L iji (礼 记 , R ecord of Rites ) and one of the Sishu (四 书 , F our Confucian Canons: Analects, Daxue, Zhongyong, Mencius ). It is a collection of treatises written by Confucian scholars in the third and second centuries bc, with later commentaries by Zhu Xi ( 朱熹 , 1130–1200), the leading neo-Confucianist in the Southern Song Dynasty (1127–1279). With a social, political and moral orientation, this classic has as its core the ‘eight wires’ that translate humanity into the actual experience of achieving harmony between persons and society. We recommend the full translation and commentary by Chan Wing-Tsit in his A Source Book in Chinese Philosophy (Princeton University Press, 1963). Guoyu ( 国语 , C onversations of the States ). A classic compiled in the fourth to third centuries b c. The version now available is believed to be the work of Zuo Qiuming (左 丘明 , 556–451 b c) , a disciple of Confucius. It is accepted as an authentic record of ix x cited classics conversations in various states during the Spring and Autumn Period ( 春秋 , 722–481 bc) . Huainanzi ( 淮南子 ). In 21 chapters, written by Liu An (刘 安 , ?–122 bc ), Prince of the Huainan Domain of the Han Dynasty (汉 , 202 bc– ad 220) and the guest scholars attached to his court during the second century b c . It is a Chinese philosophical classic that integrates Confucianism, Taoism, the Y in–yang School and Legalist teachings, and had a great inl uence on the later Neo-Confucianism, Neo-Taoism and East-Asian Buddhism. An English translation is available in John Major e t al ., The Huainanzi: A Giude to the Theory and Practice of Government in Early Han China (Columbia University Press, 2010). Liji (礼 记 , R ecord of Rites ). In 46 chapters, this classic describes the social forms, governmental systems and ceremonial rites of the Zhou Dynasty (周 , 1111–249 b c ). It was believed to have been written by Confucius himself, but is more likely to have been compiled by Confucian scholars from memory during the Han Dynasty, after Qin Chi Huangdi’s (秦 始皇帝 , China’s i rst emperor) ‘burning of books and burying alive Confucian scholars’ in the short-lived Qin Dynasty (221–202 bc ). An English translation is available in James Legge’s T he Sacred Books of the East , vols. XXVII and XXVIII (Oxford University Press, 1879–1910). Lunyu (论 语 , A nalects ). In 20 books, a collection of sayings by Kong Qiu ( 孔丘 , Confucius 551–479 b c ) and some of his disciples, recorded by Confucian scholars during the Spring and Autumn ( 春秋 , 722–481 b c ) and the Warring States Periods (战 国 , 403–221 b c) , a time of continuous political struggle, moral chaos and intellectual conl ict. Generally accepted as the most reliable record of Confucius’ teaching, L unyu looks to ideal humans rather than a supernatural being for inspiration, with a profound belief in good society based on good government and harmonious human relations. For an English translation and commentary, we recommend Roger Ames and Henry Rosemont’s The Analects of Confucius: A Philosophical Translation (Ballantine Books, 1998).