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
A short test, answer quickly: which is the odd one out? Cow, chicken, or grass.
You've heard the expression ‘the whole is more than the sum of its parts’. But this commonly-used phrase contains the breakthrough answer many organisations seek.
Neuroscientists can describe brain neurones in great detail. Ultimately, they are no more complicated than other cells. But put 100 billion of them together and consciousness emerges; an understanding of which still escapes us to this day.
This demonstrates that value is not in objects (e.g. neurones) but in the relationships between them. Multiple interactions between parts amplifies the entire value of a system: the whole becomes more than the sum of its parts.
So, what should this mean for organisations today? Let’s start with your answer to the question above:
(Interestingly for me, Russians nearly always answer chicken - perhaps deciding the age-old question whether Russians are European or Asian?).
As the world we live in is more volatile, uncertain and complex, having an object-centric, mechanistic worldview (categorising people as managers, staff, customers, suppliers etc.) rather than a relationship-centric one (what's happening and why) will make you slower to adapt to external pressures. How do you mitigate risks of disenfranchised staff with sensitive knowledge, or annoyed customers with massive networks at their fingertips if neither appear any different on the surface, until they act? By which time it’s too late or costly to recover.
Mapping how things inter-connect - through the fragmented stories people naturally share to make sense of their world - quickly reveals repeating patterns that can be acted on. You may not be able to change people (we’ve all tried), while processes can be equally stubborn, but patterns of interactions in a living system are constantly evolving: we need only map them to be able to start nudging them in positive directions.
Mapping rather than measuring (e.g. KPIs), requires qualitative approaches. Soft steps rather than hard, quantitive marches may prove more challenging to (male) westerners, steeped in the dogma of the scientific method. But while the 20th century was widely designated the American one, with success coming from imitating the scientific American business model, we’re now entering the Asian century. The key lesson may be that a predisposition to focus on the relationships between things - rather than the things themselves - will be the competitive ability of the 21st century.
The need to adapt is great, but the tools and approaches for doing this exist - what is required are the leaders with the vision to start doing this.
For more information on mapping critical relationships and knowledge flows in your organisation contact email@example.com or visit narrativeinsights.com
Russian business faces challenges that many of its leaders are ill-equipped to meet. The outside world is evolving rapidly; in unpredictable and often frightening ways. Yet discussions in Russia about the types of leadership required continue to focus inwardly on personality types, rather than what organisations must become. And to paraphrase Jack Welch: 'if the rate of change on the outside isn't matched by the rate of change on the inside, the end is near'.
My previous post compared business approaches in Johannesburg and Moscow. South African business approaches challenges by increasing the number of possible alternative solutions in play at any one time. It accepts partial failure as inevitable; discounting it as a learning cost. Better answers arise from the clash of multiple perspectives in this Darwinian process of ‘increased variation and evidence-based selection’.
Russian decision-making largely remains a linear process (visualised in the picture above from a recent Business Insider article). Decisions taken at the top - by those often furthest from the action - are passed down and compliance is expected from those on the front line. Decisions, even poor ones, are rarely challenged and initiative is still punished. This is a ‘creationist' mindset: the world is willed into action by a higher being and divergence from commands are punished as heresy.
The modern Russian culture of decision-making emerges from the soil of the Soviet Union's 'managed economy’. Technocrats would agree ideal outcomes, measure current baselines, and design steps to close the gap between today’s reality and tomorrow's ideal. While this highly-structured produced some success (e.g. victory in the space race) it ultimately failed to prevent the Soviet economy from spluttering, laying down and rolling over. But has Russian business learned the key lesson of this failure yet?
In the immediate aftermath of the Soviet collapse Russian business sought 'silver bullets' - simple solutions to complex problems - from western 'gurus' (so called as so few can spell ‘charlatan'). Yet the wrong insights were presented and drawn and even at a recent leadership conference in Moscow the debate continues as to ‘ideal leadership styles’ - is the ideal leader a mentor, servant or (whisper it) benevolent dictator? This navel-gazing misses the main point about effective leadership - it isn’t about style, but substance: it requires recognising and responding to the true nature of the challenges faced.
All decisions have a situational context. These are located in one of the three systems prevalent in nature:
'Complex' is the natural, dynamic state of things in nature (which we are part, like it or not). 'Chaos' is what nature often unleashes on us in natural disasters. While 'ordered systems' are humans attempts to guard against the threat of chaos and uncertainty of complexity. However, taken too far, the quest for order turns our organisations into rigid bureaucracies. This makes them inflexible and unable to adapt when external change accelerates, such as in the aftermath of Lehman Brothers collapse or sharp falls in oil prices.
Recognising the true nature of the challenges faced and learning the required decision-making response is critical in Russia today. Many challenges remain 'ordered' ones - requiring improvements to make processes or products better, quicker or cheaper - but existential challenges - the ones keeping leaders awake at night - are increasingly complex. This means old-style command and control leadership - even tempered with a dose of mentoring style - are simply insufficient to deliver success in today’s harsh market.
Complex challenges demand leaders become more than just captains of their ship: plotting a course in advance for the crew to follow, who - despite storms and demons - will reach the safety of the intended harbour. The tool box leaders today need to effectively navigate complexity is the subject of the next blog in this short series.
Ideas here inspired by 'A Leaders Framework for Decisions-Making' by Boone & Snowden
When attacked Russians hunker down to out-wait their opponent: Muscovites abandoned their city to Napoleon, letting his army dissipate in it; and the Soviet Union drew red lines around its main cities, as their defenders bloodily drained Hitler's army through attrition. The magnitude of these victories testifies to the potency of Russian resilience under attack.
Spending time in another BRICS country recently I was had discussions about two transformational events in South African history: the Afrikaners 'Great Trek', as whole towns upped and resettled thousands of miles away to avoid British rule; and the post-apartheid 'Great Transformation', as the country avoided a descent into a widely-expected civil war .
The reason these historical narratives are important is that they define how leaders make decisions in times of pressure in Russia and South Africa today. Faced by it's current opponents the Russian cultural reaction is to tighten belts for the long-run. While in modern South Africa the 'Great trek' provides a common reference for how far one might need to go for a solution, while the post-apartheid transition (though not yet finished) steels South African determination to defy expectations.
The different culture of decision-making reveals themselves at a practical level:
In Johannesburg - we're invited by a room full of senior decision-makers to discuss why our highly innovative approach may help meet their challenges. As risk is tolerated failure is understood in the 'great trek' towards trying ten things to discover the one that may change the entire game for them. Collectively they look for compelling reasons to conclude 'there is enough evidence to try your approach'.
In Moscow - we're challenged by gate-keepers to prove upfront that our offering is superior. Should we manage this we're ambushed by other gate-keepers on the long road to the budget holder. Failure is not an option, no risks can be taken. Case studies are demanded (even though the discussion is about innovation, which by definition has not been tried before in their market) and collectively the organisation is looking for any reason to opt out.
Decision-making is defined by cultural-historical narratives. Russia defensive stance when under threat - a failure avoidance position - is historically robust (Napoleon and Hitler were both sent packing). But the cost to Russia is huge. In this crisis state-owned enterprises will draw from the reserve fund to survive and multi-nationals will live off the fat they have accumulated. But for many Russian business owners these are not options. So cutting and running - exacerbating a brain drain that undermines Russia's long-term capabilities - is the chosen path.
This is a slow death for Russian business! But is there an alternative?
Political leaders call for economic diversification as a response - 10 or even 40 years too late - for one must diversify from a position of strength, when the resources required are in abundance. Furthermore, such calls come without instructions on how to make it happen. Witness the throwing of (now) scarcely available capital at the potential white elephant that is Skolkovo, which confused cause (an innovative business climate) and effect (a Russian Silicon Valley).
Russia doesn't have its own 'Voortrekkers' who made the 'Great Trek' 175 years ago, so must seek to evolve in line with its own cultural narrative. If Russia is to become a modern, innovative economy - one better able 'to suffer the slings and arrows of outrageous fortune' - it must exploit every opportunity that presents itself. Some of these will not work, while some will catapult the entire economy forward. The next blog in this short series will introduce pragmatic steps organisations can take to recognise the difference and help usher in a Russian spring for business.
Russia is in the grip of a brain-drain. The smartest, wealthiest and most entrepreneurial are leaving. Russia has surged up the World Bank’s ease of ‘Doing Business’ rankings but decisions are made on substance, not style. Russia is certainly at the centre of an international political whirlwind sabotaging business confidence, but its chief problems are entirely self-inflicted.
Since emerging from the Soviet Union’s chaotic implosion into the free market Russian business culture has been plagued by a destructive double-headed eagle. The first ravenous beast has been short-termism. Making a killing and exiting before the famine sets back in might be understandable following the events of 1991, 1998, 2001 and 2008 but its no less corrosive for it. It seems there are few who see themselves in Russia long-term and it shows in their business decision making.
The second pestilence is defensive decision-making. Initiative may have been punished in Soviet times but modern Russian business is as equally unforgiving of failure. Business people will buy old and inferior as long as everyone else has bought it, for ‘no-one ever got fired for buying IBM’ is being taken to Kafka-esque level in Russia. Innovation may have been the country's buzzword since the crisis but faced with the novel business buyers (even senior ones) need to know others have risked it first - for not making a mistake is the front of the mind response. This destroys innovative capacity, meaning Russian business is always playing catch up.
Clearly, new paths through the quagmire of Russia’s current macro and micro uncertainty need to be found - for the current situation will be Russia's new normal for the foreseeable future. Business must adapt and respond and silver bullets don’t exist. The latest ‘guru’ is just peddling the same old snake oil in a different bottle. Yet the business response this year has been to batten down the hatches: no budgets, no room for mistakes, no future beyond the immediate.
Unless the flow of the departing becomes an reversible torrent Russian business must become serious about innovation. This does not mean building a Russian iPhone or an electric car, but is about unleashing the knowledge workers. It's time to let a million ideas flourish today and amplify the viable ones rather than sticking a plaster on a gaping wound and hoping it’ll be better in the morning.
The biggest challenge to doing this is re-setting business culture in Russia (expats as well as locals). Senior management can and must create space for people to learn from - not fear the consequences of - failure. Designing a safe-to-fail experimental process is simple and will protect the organisation from inevitable failure that occurs when people push the boundary of what’s possible but also kick start a genuine search for the new breakthroughs that can revolutionise a company or an industry.
In a culture and time when some ‘jam today’ to stave off immediate hunger is acutely felt, it's a potentially fatal paradox that organisations are not activating their biggest sunken resource - the knowledge of one of the most highly-educated and resourceful workforces in the world. Whilst successfully activating this brings the promise of unexpected rewards, continued negligence of it will only accelerate the brain drain and death spiral of Russian businesses and erode the country's ability to bounce back in future.
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