Monday, January 16, 2006

An Alternative to Anarchy

Chaotic Behaviour

When faced with complexity, many organizations and individuals resort to primal behavior. The queasiness of being out of control often generates these symptoms:
  1. Baby Throwing (along with the bath water). Wholesale abandonment of what was not working along with what was starting to work. The greater the sense of panic, the more frenetic the thrashing between various strategic initiatives. Each of these cycles is often accompanied with a fresh crop of executive managers.
  2. Paralysis. Lack of confidence in decision-making. A despair-ridden death march as profit margins slowly vaporize and innovative opportunities flit by ungrasped.
  3. Fascism. Charismatic leaders riding the waves of popular paranoia for personal benefit for questionable agendas. The shifting sands of complexity provide poor footholds for accountability and objective measurement.
  4. Cynicism. Change fatigue and the inability to connect with meaningful purpose often rapidly diffuses a creative workforce, stifling innovation and fostering attitudes that accelerate the state of deterioration.
Is there an alternative to this entropic spiral? Is it possible to navigate the perils of complexity with hope and constructive leadership? I believe so.

I obtain my optimism is from a variety of sources. One is my own experience of creating productive micro-environments in the face of some of the challenges described above. The other includes a variety of encouraging leaders and expert observers that provide practical advice for navigating the fray, and principles for thriving in the midst of chaos. Here are a few of these sources.

Dave Snowden and the Cynefin Centre

The Cynefin Centre is a non-profit entity that has emerged from the IBM research Center on organizational complexity. Dave Snowden provides some significant insight into effectively managing complex environments outlined in his paper "Multi-ontology Sense Making: A New Simplicity in Decision Making."

In this article Dave identifies four quadrants in the landscape of management:

  • Process Engineering - Ordered, rule-driven environment.
  • Systems Thinking - Ordered, principle-driven environment.
  • Mathematical Complexity - Unordered, rule-driven environment.
  • Social Complexity - Unordered, principle-driven environment.

His main point is that by understanding the management context, you can effectively select your management approach. For unordered, complex contexts, typical of the environments described above, Dave suggests that the key management skill is sense-making, the ability to monitor and assess emergent actionable patterns.

In socially complex environments, Dave recommends a management methodlogy that is summarized by the acronym ABIDE: Attractors, Boundaries, Identities, Dissent, and Environment. The objective is to get executives thinking about how to establish an environment and manage attractors (qualities or entities that encourage productive interaction toward overall goals) and remove barriers (the conditions that interfere with productive interaction), focussing on personal identities and appropriate intervention. This is contrasted with traditional approaches of trying to use deliberate practices of goal setting and mission statements to manage in this context.

Dave uses this story to illustrate his concepts:
Imagine organising a birthday party for a group of young children. Would you agree a set of learning objectives with their parents in advance of the party? Would you create a project plan for the party with clear milestones and empirical measures of achievement? Would you start the party with a motivational video or use PowerPoint slides? No, instead like most parents you would create barriers to prevent certain types of behaviours ("the bedrooms are off-limits"), you would use attractors (party games, toys, videos) to encourage the formation of beneficial, largely self-forming identities; you would disrupt negative patterns early to prevent the party becoming chaotic or necessitating the draconian imposition of authority. At the end of the party you would know whether it had been a success, but you could not define (in other than the most general terms) what that success would look like in advance.
Clayton Christensen and Michael Raynor
Authors of "The Innovator's Solution"

I recently read this book and was impressed with the comprehensive research and helpful summary of key innovation principles. The authors paint a powerful picture of what it takes for organizations to continue creating and sustaining successful growth in an increasing complex environment. Here is a pertinent quote:
"A surprising number of innovations fail not because of some fatal technological flaw or because the market isn't ready. They fail because responsibility to build those businesses is given to managers or organizations whose capabilities aren't up to the task. Corporate executives make this mistake because most often the very skills that propel an organization to succeed in sustaining circumstances systematically bungle the best ideas for disruptive growth. An organization's capabilities become its disabilities when disruption is afoot."
A summary of key principles:
  1. Growth is essential for survival. Continuous innovation is essential for growth.
  2. Disruptive innovators can successfully displace incumbent competitors by attacking the bottom end of the market, and working their way upward. Powerful competitors are naturally motivated to ignore or run away from these disruptive opportunities.
  3. Disruptive strategies can target the low-end market or a new market of non-consumers, a market that has a latent demand for an emerging product or service.
  4. The value of the product is related to how much it helps a customer to "get a job done". Understanding the goals of the users drives effective marketing segmenting and avoid the critical overhead of overperformance.
  5. Companies need flexible and exploratory strategies, and high commitment, in order to successfully pursue nonconsumption opportunities (vacuum of unexpressed demand in the market).
  6. Architectures tend to value interdependence in order to optimize performance, or modularity in order to optimize flexibility. Interdependent architectures require well-integrated companies to manage the entire value chain profitably. Modularization allows innovation excellence in a value niche fueling significant growth in a "not good enough" market. However, once performance exceeds market requirements, the capability is quickly devalued and the innovation is reduced to a commodity.
  7. Rather than using architecture as a defensive mechanism, envision the entire value network and predict where the value will shift as various parts of the network mature. An example is the shift in value from the IBM personal computer to the Microsoft operating system module.
  8. Focusing on core competence is a sure method for short-circuiting innovation and strangling the ability to build a disruptive strategy. The authors write, "Competitiveness is far more about doing what customers value than doing what you think you're good at."
  9. Organizations often need to create alternate structures in order to effectively exploit disruptive strategies and opportunities. Failing to do so results in diminishing growth for sustaining activities. Disruptive innovators need to combine a deliberate strategic planning along with the parallel ability to develop in emergent strategy based on the disruptive activity feedback.
  10. Disruptive innovation is more apt to be sustained when the investment is focused on short-term profit, rather than long-term growth and share value. This creates the continuous stream of resources necessary for ongoing innovation and success.
The authors like to use the metaphor of how Wayne Gretzky plays hockey. Instead of skating to where the puck is, he has the uncanny ability to skate to where the puck is going to be.

Here is some final advice:
  1. Create strategies that existing competitors will be happy to ignore walk away from.
  2. Understand what the customers goals and values are. Organize yourself around this view of the market.
  3. Don't rely on your existing competencies. Work hard to develop competencies where the money will be made in the future.
  4. Value managers with effective problem-solving skills over those with proven track records in sustaining the existing business.
  5. Be impatient for profit. Keep growing so you can be patient for growth.
The Innovator's Solution is an essential handbook for helping innovation leaders understand how to practically apply the principles of sustained success in an increasingly complex global market.


Being successful in a complex environment doesn't need to be a crap shoot. There's a wealth of concrete examples demonstrating how companies have managed to thrive despite the challenges. Often these principles are counterintuitive to knee-jerk protective or survival strategies. Rather than panic, it is possible to change our mindset and behavior and achieve ongoing success in the face of complexity.

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