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 email@example.com
Writing a blog for a few months now I’ve been intrigued by what seems to generate the most interest. By a factor of 3 to 1 it’s articles with the title ‘9 reasons to …’ or ‘3 things that …’. Either people are so busy they want to scan and capture insights quickly (“there are 3 here, what are they?”) or for some reason(s) numbers just resonate.
I normally write my blog then think of a title that best fits. This time, as an experiment, I'm starting with the title I think will generate the most hits (despite posting this in the dead summer season). So, now to try crowbar some insights into my list of 5 - as I’m sure that’s what most authors do anyway:
The World According to Dunbar:
4 - Casual conversation groups are limited to around four people. This appears to be due to the fact that we cannot get more than four people into a circle small enough to hear what the speaker is saying. Therefore, if you want decisions made quickly by a committee limit it to four people.
6 - Conversely, if you want your committee to brainstorm new ideas you'll need more than six. Less than this simply leads to a starvation of ideas and ‘premature convergence’ around sub-optimal positions as dissenting voices are less likely to be raised and more likely to be isolated if they do.
8 - The size of the average, well-off Victorian family (Britain end of 19th century) from where the phrase ‘children should be seen and not heard’ comes from for, with so many people round the dinner table, rules were needed to limit the noise. As families diminished in size and sheared off extended family members children are increasingly tolerated. The problems organisational leaders have with Generation Y are not because the children have changed but the environment has. It’s time organisations caught up with this.
12 - Is the number of people who are truly close to you, whose death would leave you devastated (not upset, but heartbroken). Jesus having 12 disciples was no coincidence.
150 - The Dunbar number suggest the optimal human social network size, beyond which bureaucracy encroaches. The relationship of the size of the neocortex relative to the brain seen across the mammalian world frames the extent to which humans can personally maintain relationships with other members. This relatively large group size helped humans safely venture out of Africa in the search for new habitats and has endured since in the size of the optimal military unit, local councils or modern start ups.
Yet, we shouldn’t be seduced by numbers alone. Without context they have little value. In his excellent book Professor Dunbar shares an anecdote of an enlightened head of a TV production team who, like an increasing number of leaders, recognises the important of organising people around the way they naturally are rather than the way HR would like them to be. But whilst keeping his production unit to a team of 150 he watched in horror as they lost cohesion, fell out and dissipated after a move to a new office. The culprit was eventually discovered - the coffee room, which had been the communal meeting and sharing place but had not followed them to the new office leading to poor maintenance of the intricate bounds of social cohesion. Numbers may be important, but they matter little without context.
If you'd like an opportunity to discuss how going beyond numbers to help your organisation address the issue of managing Generation Y staff successfully contact Marcus Guest at firstname.lastname@example.org or visit narrativeinsights.com
Complexity brings existential threats to organisations. It’s a rare industry not challenged by early or advanced stages of disruption: publishing is under open-source siege; music and film industries by P2P (peer to peer) sharing; education establishments by MOOCs (mass open online courses); computers by mobile; ‘fin-tech’ (financial technology) is challenging traditional financial firms; while even the consultancy model - long protected by big brains erecting barriers to entry - is threatened by the rise of technology-based analytics and tools unbundling their value proposition.
Banking disruption is one of the most dramatic. As the cost of internet-enabled smartphones rapidly moves down the cost curve, payments by mobile phone is ‘hurtling towards the $1 trillion mark’. Mobile money is fast ‘becoming a substitute for paper-based banks as it enables people who cannot get to a branch or ATM to use financial services.’ In Kenya, two-thirds of the population use mobile-money. Weighed down by regulatory and PR burdens, banks in the developed world may struggle to compete with nimble, unencumbered competition from ‘left-field’ exploiting these new growth models.
However, incumbents would be wrong to see the challenges (or solutions) as technological ones alone. Central to markets are people, yet modern organisations, taking their lead from classical economics continues to view wo/man not as s/he is, but as they would like them to be. The efforts of Leon Walras in the 19th century to bring to economics the precision of physics in describing human social behaviour have been widely criticised for the flawed assumptions in his general equilibrium model. We are not ‘sovereign in tastes, steely-eyed and point on in perception of risk, and relentless in maximisation of happiness’ as parodied by Nobel prize winning economist Daniel McFadden in 2006. We aren’t rational, nor adept at optimising gains, and as the Dutch proverb goes ‘he who has choice, has trouble.’ We instead make decisions ‘not only cognitively, but also strategically and viscerally.’
Yet, consensus continues to accept what the general equilibrium model tells us about human behaviour, despite it’s many flaws. Consensus remains unresponsive to the insights of social scientists that can prove the real homo sapien bears little similarity to the artificial homo economicus. Even in the face of surmounting evidence this view remains entrenched; while the likes of Milton Friedman even argue that the model could be correct even if the assumptions are not.
While organisations continue to bury their hand in the sand about the real drivers of human behaviour they will continue to see the changes around us as purely technological ones. The anti-tax campaigns against the darlings of the technology revolution - Google and Apple most notably - may therefore confuse decision-makers as to the real causes (for example, endowment, aversion-loss, certainty, recency effects and sociality of choice) and blind them to the opportunities they must exploit in order to survive in our complex world.
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