Lab NotesStrategy and management
The Iceberg of Ignorance
Top management sees about 5% of a company's problems, staff see all of them, and why that matters for strategy.
Sidney Yoshida, in 1989, coined the term "The Iceberg of Ignorance".
This concept suggests that less than 5% of issues are visible to top management in a given company. It is contended that executives see around 10%, and middle management around 15% of the problems. Ground-level managers see about 40% of the problems, and the staff actually see 100% of the problems.
The point here is not that the staff know everything and top management and executives know nothing, or that a fully bottom-up or democratic approach to business is the solution.
I also don't believe that Yoshida suggests that staff know more about a company than the executives or top management do. Because of course, the top brass has access to information that usually no one else does.
The key takeaway here is that everybody in an organization has some important information to share, and we need that information to make informed decisions.
The most important reflection of this is on strategy. Since strategy is nothing more than a web of interconnected choices, it is extremely important that those choices are made with access to as much information as possible.
This is why the Iceberg of Ignorance matters. While formulating a strategy, it is important that all stakeholders of an organization experience participating in the process. The organization is tapping into the collective wisdom of its own community.
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