Students of business history know to take car companies seriously. The era of scale economies was ushered in by a car company - Ford - on its innovative assembly line. While economies of scope were unleashed by another - Toyota - with its equally innovative total production system. So, has Lotus - a British sports and racing car company - just signalled the rise of the the next great step in the evolution of business?
The high-end car market is fierce and Lotus’ new CEO can only afford to innovate frugally - improve without investing. He asks ‘for all three existing car models to be broken down into their parts and laid out on tables and asks all 900 company employees to tag the parts using a traffic-light system: keep, renegotiate supply/redesign, or discard. This ensured everyone understood why these changes were being proposed and resulted in weight savings of 10% and £3,000 from the components bill. It also led to the overall quality of the cars being improved’ (1) and this was all achieved without an expensive re-design of the cars themselves.
Why does this have the potential to signal a radical new breakthrough in business?
Speed and flexibility drive competitive advantage in rapidly changing and unpredictable markets. Resource intensive major projects with long lead times and even longer pay backs are increasingly harder to justify. But this doesn’t mean organisations need to go into defensive mode, just protecting what they have by cutting costs further. It simply means business leaders should adapt better and, helpfully, Lotus has shown the way in three simple steps:
1. Work with finely-grained objects - like the Lotus CEO, break things down to the lowest practical level of action. Rather than re-design the whole car he looked to question the right of each component to be there in its current state. However, if you’re in a service organisation DON’T confuse people for car parts (people are more complex than component parts!). Instead the unit of analysis should be narratives (the micro-stories) that spread like wildfire around your organisation, shaping how people act. Become aware of them and adopt pragmatic steps to get more of the ones you want and less of those you don’t want
2. Leverage distributed cognition - Getting everyone involved not only helps create buy in but more importantly taps into one of the most important maxims of the new business paradigm: answers are already known, but just very widely distributed. Your challenge is to bring those knowledge-rich perspectives online - seeing what’s really happening through the eyes of those who know this best: customers, employees, suppliers etc. Again, capturing the narratives people share and exploring them with tools such as SenseMaker® lets you do this quickly in real-time
3. Ensure disintermediation - finally, and most importantly for business leaders, you must get your hands dirty. As Rumelt states in his excellent book ‘Good Strategy/Bad Strategy’ “Leaders who stay ‘above the details’ may do well in stable times, but riding a wave of change requires an intimate feel for its origins and dynamics.” Don’t let middle-men - internal middle-managers or external ‘experts’ - get in the way of seeing things with your own eyes as this is the only way you can effectively match what is possible (to do) with what is (really) needed.
The next stage in the evolution of business is here and it’s frugal. The barriers to entry are no longer capital-based ones but knowledge-based. Are you on board?
#TheNewSimplicity #SmarterOrganisations #SenseMaker
(1) This story was covered in the UK Sunday Times February 2015 http://www.thesundaytimes.co.uk/sto/business/Industry/article1516483.ece though I came across this in the excellent 'Cynefin Mini-Book' p6 http://www.infoq.com/minibooks/cynefin-mini-book
… the simple answer appears to be that too few Russians understand what the word charlatan means.
For example, I received an invitation recently from a respected business association in Russia (one I’ve done work with) to attend a seminar with “one of the world’s currently most famous gurus in developing business.”
Never having heard of this particular guru - whose focus is unsurprisingly on anti-crisis measures - I looked him up on Wikipedia. His page is the picture above and in summary reads: page deleted due to ‘unambiguous advertising or promotion’ and ‘no references to support claims of notability’.
While I have no idea if the above ‘guru’ is a charlatan or not it does shows how easily Russia buys the snake oil salesman’s pitch every time. Simply put, business leaders here (or those that promote or attend such seminars) are particularly susceptible to the ‘myth of the silver bullet’ - the one right answer that will solve all their complex problems in one easy step.
In crisis times ‘silver-bullet seekers’ are particularly vulnerable to smooth, self-promoters. But if businesses in Russia continually have the wool pulled over their eyes by those with style but not enough substance to convince even Wikipedia editors that their notability is genuine, then who does the fault lie with?
So, let’s take a moment to look at some other - non-guru dependent - options for real anti-crisis measures. How about actively engaging the 87% of employees who, according to Gallup, are not currently actively engaged at work at all? Wouldn’t this deliver a massive return on your current monthly payroll investment at negligible extra cost.
This may actually be easier to do than you think. Most (though not all) people who work in your organisation have a deep understanding about what’s really happening on the frontline and why. They are often deeply immersed in what they are doing and have insights into what could be done better. Few, if any, external consultants or ‘gurus’ have this deep appreciation of your local context. So, you’d be better off listening intently to your people that you pay anyway than throwing good money after bad listening to someone else with little or no understanding of your operating context.
In a complex world this is the new simplicity: answers are already known - they are just widely distributed amongst all the people in your network. Your challenge as a leader is to tap into those knowledge flows and discover yourself how to nudge your organisation towards a viable future.
So, instead of paying for the same old snake oil that will have little to no chance of solving your business problems overnight learn to start unlocking the evolutionary potential of your present.
#SmarterOrganisations #SenseMaker #ThinkTankNetworks
Being the boss is great. You call the shots. But it has its darker moments too. The weight of the organisation’s survival - all those careers, livelihoods, and their families welfare - can rest heavily on a leader’s shoulders. In their honest moments leaders will admit that the critical decisions they’re making moment to moment, about everything happening in and around the organisation, are being taken with incomplete information and their actually just winging it.
If you’re a leader there’s nothing wrong with this state of affairs - everyone else is doing it too and if it wasn't you winging it then some other chancer would be. And if you think your organisation is luckier to have you than a thousand others it could choose from - then you’re probably right. As long as you're providing clarity and consistency in your decisions then you’ve got a big part of the job right.
But what about those 50/50 calls - the ones you know you could go either way with? Do you listen to your head and spend more time and money analysing things, or just go with your gut, again? But how do you justify option A to the pretty smart and powerful people in your organisation who all think you should choose option B (and vice versa)?
If you find yourself in this situation (and the likelihood is you are, increasingly often) then you’ll know how tangled complex issues feel, as the imperfect information you have in front of you suggests that opposing courses of future action are equally viable.
A business school education tends to hinder rather than help in situations like these. So leaders tend to act based on how they are rather than how the situation is: weak leaders will take the defensive option ("what will I get blamed least for if it goes wrong?") while seemingly strong leaders will attack ("that's my decision - now get behind it!"). Although there is a place for attack (in situations where time is running out) neither leadership style is advisable, though both predominant in Russia today.
The challenge is that complex questions can only be understood in hindsight (e.g. has central bank QE saved economies since 2009 or just built up an ever bigger bubble? Time will tell). It’s why you could do your last job better if you had the chance again. You lived through it, learned about it and gained valuable experience about what not to do. And this highlights the best option leaders have in making decisions about complex issues - ‘forced hindsight decision-making’.
Aircraft manufacturers discover their planes' performance parameters not by sending one up with a crew just because the Chief Engineer is sure they’ve designed and built a fail-safe aircraft, but by simulating performance in an environment that is safe to fail. In a flight simulator they can gain evidence (not just theory) about the viability of their choices in a way that is easy to recover from if things don't go as expected.
This rapid, low risk/low cost discovery of what doesn't work is not only one of the most important features of evolution on our planet but can also become a key part of the DNA of leadership decision-making in organisations faced by complex issues. Simulate the actions proposed in a safe-fail intervention and see what evidence (not hypotheses) comes back at you to guide your decision-making further.
The techniques to launch portfolios of multiple safe-to-fail simulations that nudge your organisation towards a more viable future state at lower risk and cost are available. So, do you dare to win?
#NavigatingComplexity #SmarterOrganisations #OrganisationalHealth
Faced with uncertainty leaders, especially ones far away in head offices, respond with increased control: alignment is sought, standards are mandated, discretionary spending slashed, and variation from pre-planned budget must be explained. The result - too often - is an organisation in the periphery that is more brittle and clumsy; unable to respond as fast as rivals to emerging opportunities, harming its capacity to survive and thrive in challenging times.
Despite having 21st century tools, management mindsets are stuck in the 20th century. Economies of scale and scope, effectiveness through efficiency, and survival of the fittest dominate. But even a cursory glance at any ecosystem (a natural or manmade one - like an economy) shows that it’s not the fittest that prosper but the ones best able to adapt to local conditions. This explains why giant tortoises have prospered for millions of years (an ability to adapt to a changing environment - not because they are a master race) or why Nokia and RIM didn’t, despite being market leaders.
Centralised decision-making - the 'head office head lock' - makes succeeding on the front line harder
For a century management thinking has been shaped by the metaphor of ‘the organisation as machine’ with the fastest and most efficient best placed to succeed. Aspirational targets are imposed, performance tolerances (KPIs) established, processes re-engineered for optimisation, and the people (the cogs) aligned. But when driving a speed boat in a storm the sea usually wins. Reaching safe harbour requires a ship for all seasons, but this would be a major feat of engineering - and prohibitively expensive in this climate. Yet there is a natural, cheaper alternative.
An organisation, like any organic group (e.g. a bee hive, a human brain, a stock market, the global economy) is a complex adaptive system (CAS). This means it has an inbuilt capacity to adapt intelligently to change at high speed (think about brain functionality, or sudden shifts in stock prices in response to good/bad news). It’s change management without the coercion and resistance.
A CAS is best understood in three parts (see the picture above):
The major insight here is that increased organisational variation (loosely-coupled alignment) improves the range of locally appropriate options leaders can select from to respond to unpredictable circumstances
Like human consciousness, each organisation has it’s own higher system (it’s culture, or health) that enables it to rapidly and appropriately respond to local circumstances. And just as attempts to re-engineer a brain would destroy its consciousness, head office attempts to engineer local organisational capacity from afar risks retarding local capability to better adapt to local circumstances than rivals - something needed now more than ever.
It’s time to stop engineering organisations and start cultivating them instead.
#SmarterOrganisations #OrganisationalHealth #ThinkTankNetworks #ExaptiveStrategy
September 1 - first bell - traditionally marks the business season kick off in Russia. But this fall the big question is, what will happen next? Will we see a further softening in the oil price, the Rouble and business confidence or will this be ‘it’, the beginning of the long road back to the good times?
The answer is that no-one knows, especially the experts. The future is an unknowable country, and there are no guide books. Reality changes quicker than people can write about it. Yet the economic fundamentals aren’t good - global demand is declining, currency wars are erupting, and political tensions in such climates tend to remain sharp.
So, in the current environment should organisations stick or twist?* Sticking - striving for ever-greater efficiency - risks cutting into bone, scuttling organisational resilience. But twisting - getting ahead of rivals by building capabilities to adapt better and faster to a volatile and uncertain world requires leaders to think and act anew.
The decision - what CEOs are paid the big bucks to get right - will determine the ‘vector’ (the direction and speed) of Russian business this year and next. For, while it's true that a few big macro-issues matter a lot, the hundreds of thousands of micro-decisions leaders make today can matter far more.
So, is this it?
*For those unfamiliar with this term it comes from the British version of Black Jack - pontoon - when if a player doesn’t want another card s/he 'sticks' and 'twists' if s/he takes another card (believing it to be a winning one)
#ExaptiveStrategy #NavigatingComplexity #SmarterOrganisations
Shape the Future
Don't just adapt to it