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
Previously we explored why people are NOT your greatest asset. Simply put many leaders don’t ‘walk the talk’. But getting real value from people is easier than many think.
Gallup’s research suggesting just 13% of employees globally are actively engaged is a damning (if flawed) statistic. It has launched a thousand HR initiatives, but unfortunately many miss the point: employee engagement is not a target, it’s a starting point.
Big data - Little action …
On scale of 1-5 answer one of Gallup’s 12 key questions - is your opinion valued at work?
Your answer will probably be ‘it depends’ - sometimes your opinion is valued, sometimes not, sometimes it should be, sometimes it shouldn’t. So, how do you summarise a range of experiences over a year into a single, meaningful, number?
The answer is you don’t, not objectively. Human brains are not computational machines. We’re very poor at weighing multiple experiences over time, designating each a score and producing an accurate average. While the engagement scores presented to leaders may appear objective they are in fact deeply misleading.
Humans evolved socially - in tribes and clans to families and organisations today. When making decisions we automatically consider the social context of our responses. If challenged to provide abstract opinions (e.g. a score) we respond instead with answers that place social considerations to the fore.
The ‘objective’ data coming out of employee engagement surveys therefore are biased by responses that gift the answers people think are wanted, or game them to reflect well on themselves (or poorly on others). So much for the objectivity of numbers alone.
Employee engagement today is often assessed by interrogating staff on the issues management deem important. Instead of building fast feedback loops between the frontline and decision-makers (to communicate real opportunities or needs that leaders can respond to by directing appropriate resources) we have a process that employees feel is a waste of time and leaders a waste of money.
This deeply unsatisfying situation makes everyone in the organisation reluctant to put themselves through it more than once a year. It is disengagement by design.
Start with Engagement…
Gallup’s research may indicate a wider engagement problem, yet unverifiable opinions and arbitrary numbers is not a call to action for leaders. Organisations therefore must learn how to engage staff more naturally for, like the result of patience being patience, the reward of engagement will be engagement.
Taking the Employee Perspective™ powered by SenseMaker® is an innovative but reliable approach to engagement that lets employees freely share the daily experiences that matter most to them, whenever they happen. Anonymous responses are self-tagged to build meaningful ‘meta-data’ which is fed through to leadership for action.
While it’s unrealistic to respond to every issue, leaders want to understand what’s really happening in the organisation and why, so they can act. Taking the Employee Perspective™ allows leaders to see patterns in the meta-data in real-time and respond to the important ones - making them more responsive to both opportunities and needs.
And it is this that lies at the core of employee engagement in organisation: do your people feel they are valued members of a winning team on an inspiring mission? Getting real value from people starts with really valuing people - listening intently to them is the next step your organisation should make today.
For more information visit narrativeinsights.com today.
Leaders have a unique challenge in the 21st century. The ecosystems (the countries, markets and industries) their organisations operate in are increasingly volatile, uncertain, complex and ambiguous. And missing critical signals amongst the increased noise risks exacerbating existing fault lines in their organisation. What should leaders do?
Subject matter experts solve complicated issues at functional levels. But complex questions (e.g. top line growth, corporate culture, change or risk management) cut across specialised silos. Complexity therefore is always escalated up; making managing complexity the key strategic challenge for executives in the 21st century.
Yet complexity remains widely misunderstood; described as something ‘very complicated’ or confused with chaos theory. Complexity science itself ascribes distinct characteristics (non-linearity, emergence, unpredictability) that render traditional 'solutions' (e.g. best practice, ideal leadership styles) entirely context dependent.
To face a complex issue means to deal with a ‘brownfield’ context - never a ‘greenfield’. Complexity is located in the system (e.g. the organisation, market, population) and always has a history, yet is constantly evolving. And as we engage with it, it changes - often in unpredictable ways. This is why answers in a complex system often appear only in hindsight - though this doesn't lead to foresight (e.g. it seems obvious now that sub-prime mortgages were a bad idea, but likewise, today's Quantitative Easing is variously described as the only thing saving the global economy or creating an even bigger future crash. Only time will tell).
In a complex world context is king.
Idealised futures are an illusion - as are strategies based on certainties designed to get you there. The collapse of Michael Porter’s Monitor Group in 2012 showed that while rigorous strategic analysis can help explain how excess profits were created in the past, it's a poor predictor of how to generate them in the future. Even the best formal strategising can trap leaders into believing the future will be an extension of the past. But if the future fails to conform to expectations we are left naked and fragile, exposed to the elements.
Like King Canut ordering back the tide, we discover powerful natural forces defy command and control.
Yet, the natural world itself - of which man is a part - has adapted wonderfully to exploit complexity. Evolution works through a process of increasing variation (of options), basing selection on what works now, and replication (or starvation) of options based on hard evidence of suitability. Can leaders learn something from nature about adopting a rigorous external focus, increasing awareness of options through rapid trial and error, and creating mechanisms to amplify or dampen options in order to thrive?
Effective horizon scanning uncovers emerging signals that signal where and what to act on before its too costly or too late. Technology is a great enabler in this, if one caveat is kept in mind: technology without human interpretation is meaningless. Google may find anything you ask, but can’t tell you what to ask for. Uncoupled from humans technology merely increases the noise surrounding the signals. Data is dumb - to become meaningful information human knowledge must be applied.
Humans should be at the front and back end of technologically-aided decision-making - defining the issues to explore and discovering its real meaning. Technology therefore must be designed to fit the human - the way we are now, rather than the way we'd like us to be. It must augment our natural sense-making abilities, which have supported human evolution through millennia (a best practice case?).
Critical knowledge flows through organisations in human networks. Navigating these flows effectively can reveal the origins and dynamics of change. And as humans share such knowledge naturally, extrinsic rewards aren’t required to tap this. Humans naturally create and share knowledge in the form of narratives - ‘micro-stories’ - that are both universal (every culture has them) and democratic (no barriers exist to sharing). These are the 'water cooler’ stories that spread insights and enable other people to make sense of the world around them so they can act better in it. Harnessing these narratives is critical to making sense of and navigating complexity.
Critical knowledge can be leveraged at little extra cost.
Leaders must create the conditions for contextually-appropriate knowledge to emerge. Managing for serendipity (‘pleasant surprises’) means seeking fresh insights, rapidly field-testing coherent ideas and replicating success. But as genuine breakthroughs don’t come from established thinking patterns. Leaders must learn how to break through the hard-wired autonomic brain we rely on - which seeks first-fit, rather than best-fit, solutions - and instead become receptive to novel ideas. Strategic leadership is less about engineering future visions than it is about increasing awareness of the critical factors in our ecosystem, 'identifying the biggest challenges in them and devising coherent approaches to overcoming them'. Real strategy is about seeking the truth of the current position.
Navigating and exploiting complexity means leaders must take multiple perspectives to discover genuine insights. Going beyond objective numbers to understand the why. Rapidly testing coherent ideas as ‘safe-to-fail’ experiments. and feeding success, whilst starving failure of resources. No-one can ‘cut through’ or ‘simplify’ complexity - nor should we want to. Complexity contains rich opportunities in a changing world. Leaders employing naturalistic approaches can exploit complexity profitably.
SenseMaker® - an innovative technology first deployed by the Singapore government to detect weak signal terrorist threats - taps into mass organisational knowledge flows and helps join up disparate information from silos to form actionable knowledge. It presents whole network perspectives leaders can rapidly see and understand, helping unlock the organisation’s present evolutionary potential.
For more information about how to make sense of, navigate and exploit complexity for organisational success contact firstname.lastname@example.org
“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.” Change is universal and accelerating, meaning leaders must cut through layers of delays and distortions to understand what’s really happening on the frontline and why. Failure to do so severely limits the potential to discover the critical insights needed to make effective decisions. Leaders must learn to disintermediate.
Disintermediation is a process of ‘cutting out the middle man’ - the layers of middle-managers ‘managing up’, only letting their boss hear what they think s/he wants to hear; the consultants who provide simplistic recipes to achieving ‘best practice’, invariably past practice devoid of context; or the knot of bureaucracy people complain about but feel helpless to change. A leader must learn to hear the signals despite the noise, recognise the wood amongst the trees, and understand the cause not just the correlation.
Big data is the current tool of choice for cutting through the jungle of obfuscation. But while Google can answer any question in nano-seconds it can’t tell you what to ask, nor can it provide you with any assurances that the answers you receive are not the work of madmen, fools or snake-oil salesmen. To make effective decisions beyond the routine re-ordering of inventory, or dynamic discounts decision-support technology must not seek to replace human intelligence, but augment it.
Technology must let decision-makers:
Effective decision-support systems should not make leaders dependant on third parties - quants to devise algorithms, programmers to code them, or experts to interpret them. Systems should augment the person accountable for the decision, heightening natural human pattern-recognition intelligence through visualisation tools; triggering the novelty-receptive brain through sharing rich, knowledge-based narratives (things this blog will elaborate on over the coming weeks).
This requires systems that work with the way people really are, not the way we wish they would be. For human beings have evolved over thousands of years as social creatures in networks (clans, tribes, families, and now organisations) and our success in getting this far suggests some secret formula for modern organisations to emulate - a best practice case if you like. And it’s this: technology works when in puts people in touch with people as beneficial variation then emerges.
Shape the Future
Don't just adapt to it