Author: simongterry
What’s your minimum scale?
What’s your minimum scale of operation? Disruption means businesses often have to survive declines in revenue as they change business model. Are you able to adapt to the future disruptions or will your business model be a barrier to change? Remember that the capabilities of your people will be a key element of any transformation.
Focusing on Minimum Scale of Operations
Clay Shirky wrote a telling account of the challenges facing printed media in the NY Times The insight is that inherent in any business model is a minimum scale of operations. We are used to thinking of overhead. However, Shirky points out that falling volumes can turn the infrastructure of operations into overhead. At a given scale, there’s no point continuing. The need to operate above that scale becomes a barrier to responsiveness and even survival in times of disruptive change.
We don’t pay much attention to the minimum scale when we are growing. We look for investments to make to grow the business. Our myopia only becomes an issue when we need to make changes to our business models.
Turning Growth Investments into Overheads
Often the investments in growth we make on the way up are the overheads we struggle with as we change the business model to respond to disruption:
- Need national sales offices or store network to grow? It will be overhead as you shrink. Ask any bank about the challenges of keeping branches economic as transactions, sales and advice move elsewhere.
- Need a custom built IT system? It will be overhead when competitors adopt agile solutions in the cloud.
- Need a warehousing, distribution or manufacturing operation to cater to growth? It will determine the minimum number of units your need to sell.
- Need a fancy office for your growing workforce? At least you can probably sublet this overhead as your workforce shrinks or works from home.
The business cases for each of these investments would be based on steady business volumes and predictable growth. These assumption mean that the business has ruled out the ability to handle exponential growth or any significant decline in activity. Few investment plans consider the need for agility or the impact of the investment on future changes in business model. Requiring greater consideration of optionality in an organisations approach to growth would change the business model to a more responsive one at the outset.
Investing in the Agility of People
Many organisations respond to their failure to create a responsive business model by aggressively cutting their personnel costs. Undoubtedly, disruptive change will mean a loss of jobs as business models change. In this process organisations need to take care that they don’t lose the human capital critical to the potential to respond to change.
People can be cut far more quickly than writing off one of the growth investments above. Announcing a personnel cut, often has a far more acceptable hit to the profit and loss statement for the share market. Cutting personnel can become a substitute for a strategy to respond to change in the market.
To avoid this outcome organisations need to consider on the way up that talented people can be redeployed more easily than an investment in infrastructure. Instead of investing to deskill people with infrastructure that become overhead in times of disruption, we can invest in agility and the capability of our people. Organisations also need to chose their activities to maximise the value that their people create. People can learn, adapt and create new ways to work and create value for customers. A responsive business will have at its heart a team of people working both in the business and on the business model, constantly learning new ways to be more effective, to respond to customers and to grow.
Struggling to maintain their growth, businesses facing disruption can face surprising new challenges in their scale of operations. Organisations need to plan for optionality as they develop a more responsive business model. They also need to consider the role of our employees as the engine of responsiveness.
Simple thinking is good. Clear thinking is great. Occam’s razor works.
Simplistic thinking takes simplicity too far. There is too much of a good thing.
Simplistic cuts down the complexity, averages out the uniqueness and narrows the debate. What gets left out are the insights, the opportunities to grow and the potential to do differently.
You are bothered.
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Change doesn’t just happen. Your leadership opportunity is that things bother you enough to make change. Make change happen.
There is an insight in the image above from Michelle Williams. Most people simply can’t be bothered. These are the people who say ‘surely someone is responsible for fixing that’ or ‘I am sure that change would be too hard’.
Of the few who do start to act, many abandon action at the first difficulties.
The responsibility to lead change often falls to those who chose to act differently. People want change but they can’t be bothered. When they see someone who acts, they can get on board or at least not get in the way. Authority to lead is given to those who chose to act.
Change is hard. It doesn’t just happen. Take what is bothering you. Find more people who are bothered too. Turn your collective concern into action. Persist.
That annoying bother won’t be fixed any other way.
A whole person
I have a family. I have friends. I have a community. I have networks of acquaintances and a fair few who dislike me. I also have colleagues at work.
I have purpose. I have dreams & passions. I have interests. I even get distracted. I have ambition. I also have work to do.
I have a history. I have experiences. I have learned and done a lot. I have had success, achievements and failures. I also have a resume.
I have strengths. I have talents. I have my weaknesses and I have potential. I have many roles, responsibilities and jobs at work and in life.
I perform better as a whole person. Don’t narrow my contributions.
Share the Rules, Not the Outcome, & Realise Potential
One of the remarkable discoveries of the field of study called complex systems is how order, or what physicists call a lack of entropy, can be created out of seeming randomness by individuals or agents following a small number of very simple local rules. Such systems are said to be self-organising or self-assembling, and often have so-called emergent properties that were not part of any of the rules. The study of these emergent properties teaches us that it is the local rules themselves, not the finished product, that natural selection or some other selective products sculpted to make the finished product. – Mark Paget, Wired for Culture
Management loves order. That desire for order translates to efforts to plan and specify all the outcomes in the system. Instead, we need to leverage the potential of our organisations by allowing autonomy with simple rules.
The Deadly Entropy of Specifications
Specifying everything in a complex system calcifies the ability of the system to adapt to change. This is when management becomes bureaucracy. If there is only one predetermined process and one predetermined outcome, then individual employees are just cogs in a machine of work to achieve that outcome. However, we rarely find the expected efficiency in that machine. To start, the complexity of the machine prevents us from specifying our outcomes as clearly as we would like.
In addition, people are not machines and the world is not static or predictable. People can do more. They want to help and they want to respond to their environment. They learn more, change things, interpret, and reorganise things locally. However, our fixed system of outcomes won’t allow it. We find other people and a changing environment rarely enable us to execute the outcomes as simply as we believed.
All our effort to impose order accelerate chaos. Disconnected employees, disconnected processes, silos, poor design and mismatches to the environment accelerate entropy. Our system is not broken. It is working exactly as we intended it just doesn’t prove to be effective enough for a changing competitive environment.
The chaos of disruption is just the force of our environment selecting another organisation that is more effective. The chaos of decay sets in as our predetermined outcomes fall short of the require effectiveness of those who make the selection decisions:
- our employees who can work elsewhere
- our customers who can buy elsewhere
- our communities who can support other businesses (with infrastructure, regulation, licenses to operate and valuable reputation); and
- our investors who can seek better returns elsewhere.
An Alternative: Share Simple Rules & More Potential
Most managers use a few simple pragmatic rules (or heuristics) to do their job. The challenge in organisations is that these heuristic rules aren’t discussed. Manager’s rules are all slightly different in their effectiveness. Some of these rules will survive by promotion and be shared by role modelling, but many won’t surface, simply becoming the mystery of high performance. If nobody shares their rules, there is little ability to learn from more effective rules.
Managers should focus on fostering discussion around these simple rules and encouraging people to adopt the more effective ones. Working out loud is a great vehicle to foster these discussions as it surfaces the how of work in progress. More formally, organisations are experimenting with approaches like holocracy that force the organisation to surface these conversations about the effectiveness of rules, responsibilities and approaches. In time, as these experiments continue we will discover better ways to work and to manage.
Allowing people to operate within the bounds of simple rules enables them to exercise their potential, their local information and the judgment to make the organisation more effective. Simple rules tested for effectiveness are a great bureaucracy killer. For years, Nordstrom had an enviable reputation for customer service by having the simple guideline of “Use your good judgement in all situations.”
Importantly, focusing on simple local rules allows each part of a system to play its role as it sees fit without needing to align to a fixed objective or a higher set of instructions. Employees are challenged to bring their best potential and to be more human, not cogs in a machine.
The focus of this approach is to create enduring effectiveness and a competitive advantage in the organisation based in some simple expectations of the local rules of behaviour. Culture like that represents a critical competitive advantage.
The One Thing Management Needs
No Snake Oil.
Management is complex enough. Managers are time poor. Their lives are full enough of challenge, change and complexity. They will always be tempted by the one thing that they can buy, hire or do to make life easier. Too many people offer a single magic solution.
There’s no magic solution. Anyone selling the one thing (or the 5 or 55 things) is selling snake oil. Snake oil sells. It can sell like crazy. It just doesn’t work.
Management is hard work. The complex doesn’t simplify well. The choices remain. Change is hard. People are diverse. Obstacles have to be overcome. Things don’t just happen. Management is hard work because the challenge makes it worthy work.
Managers do the hard work of leading teams to realise potential and create value. There’s no snake oil required there.
Why doesn’t your community plan involve your community?
Many organisations want the benefits of better collaboration and the potential of better leveraging the potential of their people in a community. Increasingly with the availability of enterprise social networking, social mobile apps and integration into other productivity tools, organisations have the network capabilities to create the communities at hand.
A Network with a Demanding Boss
Too many plans for enterprise social networks and communities are developed without any community participation. The organisation wants something from the network. They set about getting that goal. When realising the goal proves harder than they expect, the organisation resorts to communication, performance levers, gamification, or maybe even ‘change management’. Many of these remain efforts to impose an external rationale on a network.
If the goals of a network are imposed externally, it is not a community. It is a network with a demanding boss. Any network of this type will lose energy over time as people query the benefits of their participation.
Use the Network to Create a Community
A community comes together around a common set of purposes. Use your network to discover, discuss and align those goals. Engage the people that you would like to form a valuable community to find out how they want to engage. My work shows that people have their own great reasons for adopting the practices that accelerate value at work and build communities. Those practices are those of the Value Maturity Model – Connect>Share>Solve>Innovate.
The organisation’s goals will become a part of that discussion naturally. Everyone works for the organisation and there will be some shared purpose. By engaging people you will discover the greater potential of the community and leverage its rich diversity of talent and perspective.
Ask leaders to lead
Much has been discussed about executive participation in enterprise social networking. Often it is seen as the panacea that will make people do the ‘right things’ in the network. Even the busy senior executives struggle to participate when it is imposed on them as an externally mandated task. Again, the effort is to impose an external logic for networking.
When you focus on the community, what is clear is that what is needed is leaders. We don’t need participation from senior executives, when need people who are willing to take on the role of leader in the community to help the community to achieve its purposes. Leadership should come from senior executives, but it can also come from other community leaders, influencers and champions.
Don’t focus solely on senior executives. Focus on finding leaders willing to help create a community and drive change. These people may well be your organisations mavericks and change agents. Embrace their ability to lead.
The Value Maturity Model is an approach to help organisations create strategic value in collaboration and social networking. The Value Maturity Model Canvas helps organisations to develop agile plans for communities using participation of community members. To learn more, get in touch with Simon Terry via about.me, twitter or Linkedin.
The Unbearable Lightness of Being [a Network]
When we launched Change Agents Worldwide back in January 2013 we wanted to experiment with a new kind of organizational model. We wanted to create a commercial enterprise that was effectively, a network.
Very excited by the opportunities of helping realise the potential of the Change Agents Worldwide Network. If we are to learn how to manage the future of work, it begins with new forms of practice.
Check out some of the great lessons from new forms of working as a network in Change Agents Worldwide to date.
What matters more – the poster