Business Success: Models for Adaptive Organizations

Prior articles offered complexity science, chaos theory, and evolutionary biology as models for understanding organizational dynamics in a volatile economy. Further exploration into various aspects of these models unveils concepts for improving organizational adaptability.

A Living Systems Modelchaos image

Leading an organization based on living systems requires an understanding of organizational evolution. “The focus shifts from what is to what is becoming, from structure to dynamics.”

The following steps describe the pattern of change in living systems:

1. Innovation
2. Complexification and Convergence
4. Bifurcation and Chaos

The steps originate in science but have a direct application in the corporate world. Their role and interrelation are critical to understanding adaptability in an emergent organization.

Innovation

Innovation is essential for maintaining adaptability and resilience. The combination of advances in technology and globalization put pressure on many organizations to adapt or die. Both of these are seen as irreversible. And the speed at which they occur continues to increase. The impact of a high level of innovation is felt through the next step.

Complification and Convergence

As advanced technologies inject new information into the system, complexity increases. However, there are limits to the complexity an organization can handle. To accommodate increased complexity, new levels of organization must be created to control and coordinate the existing levels. As a result, an organization “always converges progressively toward more embracing and coordinated multilevel structures.”

Convergence is seen across the globe as many corporations are partnering, forming alliances, merging, and diversifying into multiple lines of business. Global business standards and regulations are a result of this phenomenon.

What happens when a global company reaches its limit of complexity is unknown. Based on the new science, the next step in the sequence may be chaos.

Bifurcation and Chaos

Scientists have known for decades that as complex systems evolve, chaos and uncertainty increase. Today, computer models are able to simulate the evolutionary path with mathematical precision. The models show the attractors that form the pattern of the evolutionary trajectory.

The evolutionary trajectory can be plotted to show a graphical pattern providing a visual depiction of an attractor. There are several types of attractors. A system that evolves toward a fixed point over time is defined by stable-point attractors; a cyclically recurring state is characterized by period attractors; and an emergent system of order is defined by strange or chaotic attractors. As chaotic attractors are plotted, a shape emerges that has definite boundaries and patterns. The beautiful shapes of the plots prove that chaotic attractors are neither arbitrary nor disorderly.

Bifurcation occurs when a complex system changes trajectory. It is characterized by a change in pattern and a shift from one set of attractors to another. In the real world, complex systems evolve out of a specific initial state until a pattern emerges. If the evolution comes to rest, the process is ruled by static attractors. If the patterns are cyclical, the system is regulated by periodic attractors. If neither of these occurs, the system is controlled by strange or chaotic attractors.

Strange or chaotic attractors are pervasive in our global economy. The recent collapse of the world’s financial markets and its domino effect around the world demonstrates this pattern. Catastrophic bifurcations are occurring as many large financial institutions seek equilibrium amid the chaos.

Chaotic attractors do not operate with total randomness. Scientific analysis has unveiled a subtle order that emerges. Complex systems self-organize through a natural phenomenon known as cross-catalytic cycles. Following periods of instability and chaos, these cycles allow complex systems to return to dynamic stability where they can grow and prosper.

Business Success: The New Paradigm

In traditional organizations, strategy management is usually static and reductionist. The focus is on short-term gain, optimal allocation of resources, process improvement, and increasing competitive advantage. The approach to change is incremental, with the assumption that a slight change in the existing strategy or variation in the organizational structure will do the job.paradigm_shift_logo

As mentioned earlier, two fundamentally different organizational models are offered. The traditional model, based on Newtonian science, is linear, rational, and reductionist. It is based on the idea that organizations are made up of individual units that can be managed separately. Units such as people, products, tasks, and expenses can each be optimized to support the whole. Change as predictable and controllable with a final end state characterized by stability. According to Laszlo and Laugel in Large-Scale Organizational Change, “This notion is rooted in calculus with which Newton expressed his immutable laws of physics—smooth, continuous, differential equations that lead toward a fixed equilibrium.”

The emergent model is on the opposite end of the spectrum. It sees organizations as emerging from complexity with their parts interconnected and relating as living systems. Behavior emerges and is experienced on an organizational level. It cannot be reduced to incremental units. Rather than implementing change, the emergent or living systems model is always adapting to stay in balance. Change, as defined by the old model, is continuous. The wisdom or intelligence of the organization does not just reside with leadership but is assumed to be distributed across a wide variety of people and systems.

By understanding the rules, principles, and behaviors of each model, organizations can select the best path based on the specific situation. For example, if a company needs to manufacture a product, a clear linear process with a predefined path and time frame is optimal. However, when pressures from outside or deep within an organization require adaptation, it is rarely predictable or controllable. The constant need to innovate, a pressure felt by many in the global economy, is a good example. The intelligence of the organization to meet this goal is far superior to that of the top management team.

To illustrate how our traditional change methodologies and structures limit adaptability, imagine if traditional business rules and processes are applied to the neurons in the brain.
Organize the neuron in your brain, the most complex, infinitely diverse organ that has ever emerged in evolution, as you would a corporation. The first thing you’ve got to do is appoint the Chief Executive neuron, right?

Then you’ve got to decide which are going to be the Board of Directors neurons and the Human Resources neurons, and then you have to write an operating manual for it. Now, if you could organize your brain on that model, what would happen? You would instantly be unable to breathe until somebody told you how and where and when and how fast. You wouldn’t be able to think or see. What if your immune system were organized on this basis? First you’d have to do some market research to determine what virus, if any, was attaching you, right? Then you’d have to have marching orders for all the various aspects of your immune system.

Feel free to share your thoughts and comments.

Business Success: Collaborating for the Future

Cisco, the world’s largest provider of Internet networking and communication equipment, is powered by collaboration. With 22 current worldwide initiatives, chief executive John Chambers claims that it would be impossible to manage his company using his old style of command and control. Collaboration enables Cisco to foresee changing trends and act quickly.

Management of changeAccording to Chambers, one of Cisco’s strengths is its ability to foresee impending market transitions. “Cisco is able to predict trends six to eight years ahead even in the highly volatile technology market by recognizing early-warning signals its customers unwittingly put off. To capitalize on these ‘market shifts,’ Chambers gave up his command-and-control style and made decision making highly collaborative.”
Cisco organizes for collaboration in several ways.

No Hierarchy
Chambers claims that he found it difficult to let go of his usual command-and-control style, but he disciplined himself to change his behavior. Specifically, in meetings, he gave his team time to think. He began to see that his team often made decisions that were just as good, if not better, than his. And because they were involved in the process, the members of the team were much more invested in the execution. However, not all managers were able to make the adjustment. When this collaborative leadership style was implemented throughout Cisco, 20 percent of the top management team went elsewhere.

State-of-the-Art Technologies
Among Cisco’s offerings are several technologies that enable collaboration. PC software for online meetings is powerful and efficient. But the real collaborative power comes from the company’s next-generation videoconferencing that connects customers and team members world wide.

Collaborative Teams
Cisco has a highly matrixed structure of cross-functional teams called councils and boards that collaborate on projects. Because of the highly sophisticated conferencing software, Cisco employees collaborate in real time much like social networking groups. “The power of collaboration is not in adding more people to the process but in getting immediate input from smart people and thinking through the problem as a group.” This is critical to the success of the company. Individuals and teams from anywhere in the world can gather quickly for an intimate virtual meeting using their state-of-the-art videoconferencing technology.

Verbal and Financial Motivation
To begin a project, Cisco puts people together who speak a common language and engages them in reaching their goal. The leader then drives the team through execution. People are motivated to engage with strong leadership and compensation tied to team performance.

Clear and Consistent Communication
Chambers states: “Clear and consistent communication was and is very, very important to making this whole thing work.” Top management has developed a clear and consistent vocabulary to ensure that information is dispersed and shared consistently worldwide.

Quick Alignment of Resources
When resources are low, flat management and collaboration may save the day. Team members are encouraged to help each other and reallocate resources. Risk taking is also necessary to make a quick change of direction. Team members must be tolerant of failure.
Chambers claims that the new challenges keep him motivated and competitive. His passion for collaboration and willingness to share decision making infuses the whole system with new energy to fuel the vision and stimulate innovation.

Seven Realities that Jeopardize Business Survival: Part II

In Information Revolution, Jim Davis, Gloria J. Miller, and Allan Russell discuss the

message-in-a-bottle “Seven Realities that Jeopardize Business Survival.” Each reality illuminates the need for new business models as well as styles of leadership. Here is Part II.

Business Reality 4: The Only Constant Is Permanent Volatility

This is a common theme but bears repeating: The company that is most agile and adaptable will gain and maintain a competitive advantage. Instead of just relying on past results to predict the future, companies need to tap into current trends through social networking, Web analysis, and employee feedback.

Business Reality 5: Globalization Helps and Hurts

Globalization presents many advantages, especially to small companies seeking a worldwide presence. Any company that is connected to the Web can strategically partner, outsource, or insource with relative ease. The downside is increased complexity when dealing with international languages, standards, and cultures. Strong communication skills are essential for navigating this terrain.

Business Reality 6: The Penalties of Not Knowing Are Harsher than Ever

In the new era of billion-dollar corporate scandals, personal accountability at the highest levels is not only prudent, it is now legally mandated. The Sarbanes-Oxley Act was designed to systematize ethical behavior. In addition to the need for strong, honest leadership, information systems to handle this complex business data are essential.

Business Reality 7: Information Is Not a By-Product of Business; It Is the Lifeblood of Business

The seventh business reality is a direct result of the first six. Due to shrinking business cycles, level playing fields, changing rules, volatility, globalization, and the cost of ignorance, information has become the lifeblood of many businesses. Today, accurate, accessible, actionable information is necessary to compete in the global economy. There are strong pressures to achieve more results while spending less time and money. Companies need up-to-the-minute information about their customers, suppliers, competitors, and markets.

These realities also point to the need for new business models as well as for visionary leadership. With the complexity of business today, decisioning throughout the entire organization has to operate like a well-oiled machine. The sections to come expand on optimal organizational structures as well as the core competencies, or success factors, necessary to operate at this level.

Come back for more business intelligence and change management focused blogs by The OLIVIAGroup! Feel free to comment with questions, insights, or additions to this post. To receive alerts when the next blog is published, click on the RSS feed to subscribe.
Visit www.OLIVIAGroup.com to learn more about Business Intelligence and hiring Olivia Parr Rud for your next conference!

Seven Realities that Jeopardize Business Survival: Part I

In Information Revolution, Jim Davis, Gloria J. Miller, and Allan Russell discuss the “Seven Realities that Jeopardize Business Survival.”[i] Each reality illuminates the need for new business models as well as styles of leadership. business_survival_life_ring

Business Reality 1: Business Cycles Are Shrinking

In today’s Web-enabled economy, speed within all parts of the business model is the great differentiator. To accommodate changing markets and consumer preferences, product development and testing that used to take years has been shrunk to months or even weeks. Today, the first to market often enjoys the competitive edge.

This shortened cycle challenges managers to make decisions with less time for consideration or analysis. As a result, they must depend on a combination of accurate, actionable information and intuition. And their decision must be in alignment with the overall strategy of the company.

Business Reality 2: You Can Only Squeeze So Much Juice Out of an Orange

The goal of improving operational efficiency drove a majority of the investment in the last decade. Initially the returns were high and provided a competitive advantage. However, now that enterprise resource planning (ERP) software is available, the field has been leveled. The next step is greater innovation and agility.

Business Reality 3: The Rules Have Changed; There Is No More “Business as Usual”

The days of following a typical path to business success are over. The same factors apply: profitability, customer satisfaction, stakeholder value, and competition. However, the path to success is very different and is fraught with new challenges:

  • Mergers and acquisitions have hindered agility and cohesiveness.
  • Productivity advancements have increased expectations from both customers and management.
  • Advancements in IT have overwhelmed the abilities of some companies to manage and leverage the knowledge.
  • The technologies that were introduced as the key to success often failed because the human issues were overlooked.

Stay Tuned for Part II and come back for more business intelligence and change management focused blogs by The OLIVIAGroup! Feel free to comment with questions, insights, or additions to this post. To receive alerts when the next blog is published, click on the RSS feed at the right of the page to subscribe.

Visit www.OLIVIAGroup.com to learn more about Business Intelligence and hiring Olivia Parr Rud for your next conference!

 


[i]             Jim Davis, Gloria J. Miller, Allan Russell, Information Revolution (Hoboken, NJ: John Wiley & Sons, 2006), xv.