Market-based economies outperform those that are centrally planned…Markets are better than hierarchies at getting the right resources behind the right opportunities at the right time…A hierarchy may be an effective mechanism for applying resources but it is an imperfect device for allocating resources.
When there is a dearth of novel strategic options, or when allocational rigidities lock up talent and cash in existing programs and businesses, managers are allowed to “buy” resources at a discount, meaning that they don’t have to compete for resources against a wide array of alternatives.
- Cognitive – free of denial, nostalgia, and arrogance
- Strategic – alternatives and awareness
- Political – able to divert resources
- Ideological – embrace more than operational excellence and flawless execution
Competition, acquisitions, and bankruptcies are relatively crude mechanisms for reallocating resources from poorly managed companies to well-managed ones.