Note: This article was published in The Globe and Mail on March 3, 2015. The version below includes additional hyperlink references not published in the original.
On big resource projects, when does ‘no’ mean ‘no’?
By Joel Gehman and Michael Lounsbury
March 3, 2015
A recent column lamented that getting to “yes” on energy projects in Canada has never been tougher: Fossil-fuel developments, pipelines, mines, dams, transmission lines, and even wind turbines “are frequently contested, delayed or blocked.” But do such outcomes mean there is a problem? And if so, what kind of problem is it?
The argument – ‘Getting to Yes’ – assumes that “yes” is somehow on the side of angels. But a critical element of any great strategy is saying “no.” It’s Strategy 101. No organization – whether a corporation, a nation-state or a non-profit – can say “yes” to everything. Choices must be made. In his classic article “What Is Strategy?,” Harvard professor Michael Porter put it bluntly: “The essence of strategy is choosing what not to do.”
Clearly then, “no” is often the better strategic choice. And yet, organizations often fall into a “yes” trap. This is because, once set in motion, strategies are hard to reverse. There are sunk costs, learning effects, organizational inertia and network externalities, among other issues. And so, an organization can easily escalate its commitment to a losing course of action. But in real-time, as these strategic decisions are unfolding, the folly is often hard to stop.
One famous example is New York’s Shoreham Nuclear Plant. First proposed in April, 1966, the plant was expected to cost $75-million and come online by 1973. The plant was eventually completed in October, 1985, only to be decommissioned in March, 1989, having never sold any electricity. By that point total costs had ballooned to $5.5-billion. Predictably, the plant’s owner, Long Island Lighting Company, was unable to survive as an independent company. All because it refused to take “no” for an answer.
On the heels of President Obama’s recent veto, some advocates of the Keystone XL pipeline have proudly proclaimed they won’t take “no” for an answer. Perhaps their persistence in the face of “no” will prove prescient. Or perhaps Keystone XL is another Shoreham Nuclear Plant in the making. Only time will tell. But all of this suggests that perhaps Canada doesn’t have a “yes” problem; perhaps Canada has a “no” problem.
Entrepreneurs in Silicon Valley have a saying: “If you’re going to fail, fail fast.” By comparison, getting to “no” on Canadian energy projects has been taking longer and longer. That prompts some interesting questions. Why has Canada been taking so long to get to “no”? How can we get to “no” faster? Why do so many organizations keep chasing “yes” in the face of “no”? And, perhaps most importantly, what are the costs to Canada of not taking “no” for an answer?
Joel Gehman (@joelgehman) is assistant professor of strategic management and organization and Southam faculty fellow at the Alberta School of Business. Michael Lounsbury is associate dean of research, professor of strategic management and organization and Thornton A. Graham chair at the Alberta School of Business.