Comments on The Fifth Discipline by Peter Senge
August 7, 2016
Why business is the locus of innovation in an open society
“… business has a freedom to experiment missing in the public sector and, often in non-profit organizations. It also has a clear “bottom line,” so that experiments can be evaluated, at least in principle, by objective criteria.” The Fifth Discipline, Page 15
The public sector, obviously, is constrained by bureaucracy which inhibits (prevents?) experimentation and retards speed of response. One would think that non-profits would be a good source of innovation due to 1) their focus on the public good, 2) the absence of pressure to show a quick “profit,” and 3) the prevalence of goals and performance measures other than “profit.” However, since profit is not the motive and ultimate performance measure for non-profits, by definition, these organizations have trouble showing the true results of their actions. Thus, their performance measures and effectiveness are usually based on activity and/or effort rather than results. They are captives of their own business model. The profit sector is left as the primary source of innovation due, as Senge posits, to its clear bottom line – net profit. Although “blessed” with a clear criterion for success, for-profit organizations are still beset, frequently, by the inhibitions of bureaucracy that the public sector confronts.