Analysis and Verification of Theory

Theoretical foundations of business need to be thoroughly analyzed and tested in practice. Everyone in the organization should know and understand the theoretical foundations of building a business. This is easy to achieve during the organization's formative period. But once successful, the organization increasingly tends to consider its theory as the only correct one, not requiring reconsideration. Then the organization begins to operate unscrupulously. It starts acting out of self-interest rather than by the rules. It stops thinking and asking questions. It remembers the answers but has forgotten the questions. The theory of business becomes "culture." But culture is not the foundation of business; business needs theoretical premises. The theory of business must be constantly tested in practice. It is not carved in stone. It is based on perceptions of factors that are constantly changing: society, markets, consumers, technologies. Therefore, the possibility of changes must be provided for. Some concepts may exist for many years. But over time, all theories become outdated and then rejected. This happened with companies like GM and AT&T. It also happened with IBM. It is happening with the rapidly growing Japanese keiretsu. TIP OF THE DAY: Establish a procedure in your organization for discussing, systematically monitoring, and testing the theoretical foundations of your business in practice.