01 February 2009

How to Theorize (and potentially respond to) Market Changes

I realize that this post will elicit a "yeah, so?" response from many of you. It's obvious. But, as Marshall McLuhan noted in his very cool book, From Cliché to Archetype, "In retrospect, all great discoveries are obvious."

My friend (and new mother), Leigh Himel, mused among her blitherings that "reinvention is the new black." She tells the story of how Hermes shifted their business from making saddles to producing high quality, hand-crafted, leather bags when the demand for saddles declined. In conventional business-speak, they leveraged their core competencies to respond to shifts in market demand. (I shudder even to write that absurd lingo.)

How does Valence Theory explain this shift? Among the key consequences of Valence Theory is the principle that everyone that shares multiple valence relationships are legitimate members of the organization (although some may have stronger relationship bonds than others). This means that the constituency known as customers, who might share economic, identity, and socio-psychological relationship connections with an organization, are de facto members of that organization. Combine this idea with the consequence that if you change the members, or the nature of the relationship, or both, you change the organization, and therefore, you change the purpose (mission, vision, but not necessarily the tactility) of the organization. By considering what aspects of the relationships change by understanding the feedforward dynamics at play, members of the organization can help a new purpose to emerge.

In the case that Leigh relates, there was no change to the knowledge-valence relationships among the members, nor the identity-valence relationships between members and the organization itself. Clearly, the economic-valence relationships changed, with fewer saddle purchases. However, certain members' identity- and socio-psychological valence relationships shifted as owning automobile began to signify a certain status and prestige that parallelled the status and prestige previously acquired from being a member of Hermes' valence organization. Change the nature of the relationships, and you change the organization - especially its emergent purpose.

Some might say that the Hermes story is obvious in retrospect (see the McLuhan quote above). It certainly isn't obvious to the entertainment content industry. Interestingly, it isn't obvious to the education industry, the government industry, and most management schools. Among the things I like about Valence Theory (you know, besides the facts that it comprises the core of my doctoral thesis and I invented it) is that it provides a thinking framework for those members of organizations who want to understand the complex dynamics of their enterprises in relation to the world that we all share. It helps them anticipate change, respond in a humanistic and helpful way, and maintain their awareness of the effects they create: who do they touch, and how are they touched, each day.

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