The Skier Theory of the Firm
Shareholders of my heart
Nobody knows what a company is. You might feel like you know but you simply don’t.
For instance, imagine you say that it’s a place where a management team pays some suppliers and some workers to make products or to offer services that are sold to some clients. We usually think that both the management team and the workers are part of the company, which does business with another company: the supplier. But that’s only the legal choice of a definition: at the end, the management team is just paying both stakeholders, so how do you chose whom to put in the company ?
This question is just the tip of the iceberg. Lots of researchers (Coase (1937), March&Simon (1958), Segrestin&Hatchuel (2015), etc.) worked on that definition, but there’s none to rule them all yet. Therefore, nothing is settled and there’s room for propositions. But the issue may have a huge impact on the companies themselves, because definitions offer lenses through which we then see the world and act on it. So let’s see how we’ll save the world by defining firms as skiers.
Business report: how’s the snow today ?
Let’s take a skier (the company) going down on a slope. There could be variable weather conditions: those are the general conditions of the economy. The slope itself (the business sector or a given industry) has its own particularities: the amount of packed or powder snow, rocks, trees and ice. This environment is also more or less competitive, given that the slope could be empty or full of other skiers, snowboarders, monoskis (other kinds of organizations, like NGOs). There are lots of different types of skiers: children (start-ups) and seniors, small (SMEs) and tall (Shell), weak (Blackberry) and strong (Google), careful and reckless, etc.
Our skier evolves in a ski station (the state). To practice, he has to pay a pass (a tax) which finance the construction and maintenance of the ski lifts (the infrastructures), the security systems (the professional norms), and the public assistance (help for struggling companies).
Before going further, let’s get back to our company.
Companies are dopamine addicts
Our skier produces stimulus for its diencephalon (the client), whom pays with dopamine (basically, rewarding sensations of pleasure). He’s directed by his brain (the CEO), which is both rational (globally and generally, the left brain) and influenced by emotions and instinct (right brain). In that sense, it is motivated both by its perception and its interpretations of the environment. The brain’s objective is to foresee, plan and implement the right movements to the body, allowing to maximise the pleasure the skier gets from its activity.
Driven by the brain, the limbs are the different functions of the firm. As in a company, everything in your body can be developed, by caring, working out (practicing to get skilled), and by bringing the right amount of resources to what needs to be fed. But an intense solicitation of a muscle easily leads to fatigue and soreness, slowing down the entire body. Because those things hurt, the neuronal system is a super effective leverage forcing the brain to put “people first”. There is no comparable system of incitations in today’s companies to prevent from management excesses: if a muscle tear takes you down, employees exhaustion on an assembly line has no substantial impact on the organization strategy. Defining companies as humans can solve that problem.
If you breathe too fast, that means trouble
Lungs and heart are the capital providers.
The firsts are the creditors: they lend the oxygen from the outside in exchange for an interest paid in carbon. The heart is the shareholders: it receives the outcomes and reinvest the blood, allocating resources to the limbs and the brain. It can panic or relax itself, alarm or calm down the system, and needs the body to perform and work out to get strengthened (like shareholders do). The brain then have different strings of power to pull against the heart. It can retain information (subconscious), reassure an influence the heart by using abstraction or relativizing.
This vision implies for the funders :
- To be partially transparents: the body knows the status of its lungs and reacts accordingly.
- To be inside and not outside the company: everyone is on the same boat.
- Therefore to have an incomplete but huge amount of information: the brain can hide or reformulate information but it’s hard to hide too much when everything is connected. For instance, just try to hide from your lungs and heart you’re going to jump from a cliff: if it’s high enough, you can’t, they know.
The second point might be the most important, as we can imagine that business too easily leaves responsibilities when it’s not accountable for something.
Too fast too furious — Inertia is key
Right on your ski bindings, you slide fast and try to push your limits once again. Each time, you want to go a bit faster: like many, that’s where your pleasure holds. But there are others like you on the slope: the slowest don’t bother you because they’re easy to predict and avoid, but the faster they go, the more they force you to be careful, slow down, and limit your pleasure. But today’s really good, and you’re definitely the fastest on this track you really know now. 70km/h is a good speed, you begin to be deeply rooted in your trajectory but it’s comfortable.
All of a sudden, everything falls apart. You noticed the slope below splits into two. You’re also uncertain about the conditions of your track which suddenly looks dirtier. But because of the speed and your size, your inertia, you don’t get the time to think on how to react, knowing that your trajectory has always been perfect for you anyway. You don’t take the turn, and violently crash on the stony track.
You just figured out how hard it could have been for Kodak and Blackberry to take their strategic turn. We never really study inertia in business, but mastering it might be key.
Conclusion — I lied
We didn’t define companies as skiers, I forced a comparison which barely holds. A company can’t have a crush for another one, making it acting insanely and maddening its shareholders.
Actually that could be compared to a merger or acquisition.
But there’s no science in it, nothing really tangible, everything can be suited to it just because we want it to suit. Nonetheless, this comparison opens our mind on three important business issues, that could inspire the way we address them, changing our lenses:
- The body puts people first.
- It puts capital providers on the same boat with every function of the company.
- The skier metaphor highlights the concept of inertia in business, rarely addressed.
Therefore, maybe it’s an exercise we should practice more often. Let’s say, a company is a bee, shall we ?
Contributor: Madé Neumair