Organization in the Collaborative Age | The Fourth Revolution Blog

How Integrated Systems Increase Fragility and Decrease Adaptability

The more systems are integrated, the higher the potential that a mistake (involuntary or purposefully introduced) can propagate trough the entire system and pollute its overall accuracy. Hence, integrated systems are intrinsically fragile.

Promoters of integrated systems fight this issue by adding a number of filters to the entry of information in the system, de facto decreasing significantly the system flexibility and the possibility to adapt to changing needs.

John Hagel mentions that it is the same with organizations: the bigger and more monolithic the organization, the more fragile it can be. And very large, integrated organizations and systems are an impediment to change and adaptation.

The solution is hence modularity and creation of small, understandable, and interconnected entities or systems. The key lies in devising standard interfaces to deal with the interfaces. This obviously has an additional cost compared to integrated systems and organizations (it is less efficient), but on the medium term, the adaptation capability should produce better and more resilient results (thus, a higher effectiveness)

When will we stop thinking that efficiency, integration, standardization is better? Do we need some more meltdowns to prove that effectiveness, modularity and diversification is much more desirable?

Hat tip to ParisTech review, papers on the future of the organization (in French).

Why ‘Relationship Capital’ Becomes Essential for Organizations

“The modern company becomes a relationship organization and thus needs to develop a relationship capital” says the French futurist Denis Ettighoffer,

“The methods whereby ideas and related value are created in the Collaborative Economy have nothing to do with the traditional productivity enhancement methods. In the networked organization, the relationship logic replaces departmental and functional logic“.

Furthermore, “The continuous expansion of knowledge creates a rupture in the way wealth is apprehended. What creates value is not any more the physical side of work but the creative and networked component of the activity of each human contributor. Getting access to the adequate ideas and knowledge becomes as vital as getting access to rare materials or even to capital, because knowledge allows to replace physical resources that might be missing“.

Relationship capital is not yet measured consistently, although it is certainly what makes the value of the most well-known start-ups of the Fourth Revolution. In the future we can expect that this component will become one of the most important performance measurement for organizations.

When do you start focusing on developing your relationship capital?

Source: very interesting article (in French) on ParisTech Review on ‘the Company of the future‘. Translation by Fourth Revolution Blog.

How to Make Commercial Departments More Creative

Following our post ‘How Commercial Is One of the Most Creative Activities‘, let us dwell a little bit into the organization of most commercial departments – and how these organizations seem to be designed to stifle creativity rather than fostering it.

I am always amazed at how many commercial departments are run in a very bureaucratic manner, with a focus on compliance to procedures, requirements to report continuously and long-winded PowerPoint presentations even on the topic of marketing efforts or even on the status of negotiation with some prospects.

Of course, compliance is needed to make sure that certain limits are not exceeded; reporting and creating databases of commercial efforts is useful. But there needs to be space for creativity and I can’t find it in a number of commercial departments. Clever solutions need to be found to create the most compelling (and competitive) offer. This requires time to think and experiment; time to brainstorm and produce quality work (note – quality work is generally in the form of a text document, not of a set of slides). Where is that space for creativity?

Create a formal space for creativity in your commercial department and ensure for your organization a definite competitive advantage! And for my sake, reduce your addiction on PowerPoint slides: get to the work of creating real documents that will force you to put your ideas in order!

How to Leverage Contracting as a Creative Activity

Commercial activities are to be creative. Does that mean contract development and negotiation is also a creative activity? My answer is clearly yes – with some safeguards. However most organizations focus on the safeguards and forget the creative part, with sometimes dire consequences.

This Thick Contract is the result of a creative process!

Safeguards need to be implemented to protect the organization – the legalese that is often boring, sometimes useful and never to be forgotten for your piece of mind. I am talking about limits of liabilities, mutual indemnities and all these clauses that you must have in your contract to protect yourself in case things go really awry.

Still beyond this we should not forget that a Contract is there to reflect a commercial deal; and that a commercial deal is fundamentally the result of a creative process; therefore, for the contract to be successful, it needs to reflect the creative result of the negotiation (which hopefully will make the safeguard clauses superfluous).

Contract Managers in the industry are too focused on establishing compliance to a set of norms. They do not understand enough that a Contract needs to reflect the outcome of a highly creative process whereby we have developed a commercial approach tailored to the situation. The contracting process (including compliance) and format needs to be flexible enough to accommodate this creativity – without certain bounds.

Let’s transform our contracting processes to account better for the creative nature of this endeavor!

How Commercial Activities Are Part of the Most Creative Activities

I have come to realize that commercial activities – from business development to the development and the negotiation of a commercial deal or even the implementation of a general commercial model – are among those activities in a company that require the most creativity.

It requires creativity because first, it is all about creating something. Not the product of the company, of course, but another tangible deliverable that is essential: the commercial proposal, a document that will describe how we create value to the client or to the market in a way that will fit its needs.

It is also creative because it requires to develop a solution to a particular issue, often while discussing with a client to understand its particular needs. And depending on the situation, our usual commercial approach might not be appropriate, and we need to demonstrate creativity in setting up a solution that will fit the constraints and the needs.

This observation about the fact that commercial activities are fundamentally creative activities have a lot of consequences on how they should be implemented – and on the profile of the people that should do them. Did you realize it?

How Employee Engagement though Empathy is the Ultimate Competitive Advantage

Hugh McLeod at Gapingvoid says: “Employee engagement is the ultimate competitive advantage. Unlike other advantages that can be bought and sold, this one is a bit trickier. It has to be inspired“.

And true enough I lived through a number of instances where employees where fully engaged in the organization – often through decisive acts of leadership from its leaders, and that really made a difference.

Where Hugh makes a point though is that engagement is not just about leadership and inspiration. It is about creating empathy between the participants to the adventure. And thereby creating stories, the stories of the adventures of this group of people.

“Stories in business are especially powerful because they can unite everyone on a common mission. Tell everyone the story of how you got to where you are – and they’ll likely take over the rest. After all, the best books ask us to imagine our own endings…”

What about creating your own ending to the project you are on, together as a group full of mutual empathy?

How to, and Why Put One’s Eggs in a Single Basket – a Small Company Guide

Mark Twain said, “Put all of your eggs in one basket and WATCH THAT BASKET.” Well, that’s obviously the contrary of the more prudent common wisdom say “don’t put all your eggs in a single basket“! Who is right? What are the situations where it might be worthwhile follow Mark Twain’s recommendation and what are other situations where we might better follow common wisdom?

In terms of risk management, having several egg baskets spreads the risk – there is less risk that the entire egg supply disappears, while at the same time there is a higher probability that some of it will be damaged. When you put all your eggs in a single basket, there is more focus.

Large companies will tend to follow common wisdom – they diversify their risk to enhance long term survival. This leads to average performance as some activities will be under-performing. Small companies don’t have this luxury – they put all their eggs in a single basket, and watching closely and fostering these eggs, with the help of some luck, they might be much better performing. This is what allows small companies to thrive and develop (together with the typical lack of reactivity that plagues larger companies).

Typical entrepreneurs need focus. They have to put all their eggs in a single basket and focus seriously on preserving it and having it grow. Still you can’t exercise such a focus on all areas of your life. Other areas (such as your savings for retirement) need more common risk management approaches.

You need to be choosy on those areas where you put all your eggs in a single basket, but that can be very worthwhile provided you exercise a right level of attention and focus. Choose the area where you will do that and stick to it!

Why Your Organization’s Strategic Change Starts With Your Calendar

“Strategic change doesn’t just start at the top. It starts with your calendar.” says Andrew Grove, former CEO of Intel, in his book ‘Only the Paranoid Survive‘.

In that he means that the change of focus from executives must immediately be reflected in the way they spend their time. The accustomed committees of the past might not make so much sense in the new picture. More time might need to be devoted to more pressing issues related to the new direction of the organization.

In addition, people will know immediately which are the meetings which are now removed from the calendar of the executive and which are the new activities that retain its focus, and this will induce change throughout the organization notwithstanding deeper change in processes, systems and products.

Changing one’s calendar or time usage requires tremendous discipline, will power and ability to change one’s ingrained habits. Not all leaders are capable of such feat.

If you have decided to transform the organization you lead, have you actually changed your calendar? Have you at least decided to stop going to half of your previous regular meetings?

Why You Can’t Transform a Company Without Changing Its Management

When it comes to real, fundamental change, you can’t change an organization without changing its management. This applies both to changes due to the external environment (such as a major change in the key market serviced by the organization), or simply to changes linked to the change in size and nature of the organization as it grows or shrinks significantly.

This has been my constant observation in all the organizations which I have known deeply enough, when they were faced by major changes.

“I’m not saying they have to pack up their desks and be replaced. I’m saying that they themselves, every one of them, needs to change to be more in tune with the mandates of the new environment. They may need to go back to school, they may need a new assignment, they may need to spend some years in a foreign post. They need to adapt. If they can’t or won’t, however, they will need to be replaced with others who are more in tune with the new world the company is heading to.”, says Andrew Grove, former CEO of Intel, in his book ‘Only the Paranoid Survive‘.

Indeed, the most mature executives will know when to change move beyond their comfort zone; some will do the effort and some won’t; at least they are then conscious that they need to move on. The worst situation of course is when executives are not even aware they need to change; or when they languish in the reminiscence of a great, cozy past. This can lead to disastrous situations.

If the organization you lead has to go through a major transformation, you need to change. Or to move on. Don’t think you can continue being what you were before!

Why You Should Learn What Happens At the Periphery of Your Business

“Learn what goes on at the periphery of your business” says Andrew Grove, former CEO of Intel, in his book ‘Only the Paranoid Survive‘. He goes on to explain: “When I absorb news or information coming from people who are geographically distant or who are several levels below me in the organization, I will triangulate on business issues with their view , which comes from a completely different perspective. This will bring insights that I would not likely get from my ordinary contacts.”

shakeheadillusion — Can you figure out what it is if you don’t rely on straightforward observation? Watch differently -Shake your head!

In my observations it is not just about observing what happens in the industry or in the particular company. Peripheries are great places where experiments happen, and where people in your organization grow much faster than at the core because of the exposure.

Most organizations do underestimate the value that could be brought to them by their peripheries. It goes to the point where the experience of people sent there (typically, expatriates) is not valued at all by the core organization and gets ultimately lost to competition as these people leav in droves, unsatisfied by the lack of recognition.

With the Fourth Revolution, the importance of the periphery and of groups of people that are not directly within the organization will increase significantly, further from what Andrew Grove observed when he wrote his book in the 1990’s. Organizations that continue to focus excessively on their core will lose competitiveness. Watch for your periphery and leverage on it!

Why You Should Be Scared Sometimes – It Shows You Are Thinking Big Enough

“If you’re not a little afraid, and the other vendor in the room is telling you you shouldn’t be, then either ‘one of us is in the wrong room’ or you’re not thinking big enough” – says Matt Ridings in this post, written in the context of a small company’s sales efforts. Growth will necessarily happen at the expense of fear.

Matt Ridings continues – “Fear is a good thing, it’s almost universally true that ‘the larger the opportunity the larger the challenge’”. That says it all. If you’re not a little bit afraid, then maybe you are not going after the right size of opportunities.

Not long ago I grasped a great opportunity to grow significantly my company. It came with some risk associated. The risk was quite high, just not so high as to bankrupt the company after some risk engineering. I decided to go for it. Time will tell whether the opportunity will materialize.

Funny, I was about to write ‘time will tell if it was the right decision’ but that is absolutely wrong. Whether the opportunity materializes will be the result of my effort (a little bit) and of luck and other external factors I can’t control (a lot). So, the decision was the right one. Whether the opportunity materializes is something else.

It’s tough to ‘think big’ and when I re-read my post on thinking big posted in June 2012 a few months after I started my company, I see how much a way remains for me to be comfortable with the fear it entails. It is getting better though – and growth ambitions for myself and my company combine into an exciting mix!

Why the Ultimate Weapon for Cutting Losses is Changing the Manager

Following our series of posts on the issue of the psychological avoidance of cutting losses when prospects are bleak, let us once again quote Daniel Kahneman in the bestseller “Thinking, Fast and Slow“: “[because of the psychological effect leading to desperate gambles in the face of a high probability failure], the escalation of commitment to failing endeavors is a mistake from the perspective of the firm but not necessarily from the perspective of the executive who “owns” a floundering project“. As a result, “Boards of directors are well aware of these conflicts and often replace a CEO who is encumbered by prior decisions and reluctant to cut losses.” That statement can naturally be extended to any situation down in the organization.

The ultimate response to the situation of the manager or the executive that continues a failing project and cannot exit this situation of desperate gambling is thus, from the organization point of view, the replacement of the manager in charge. Unencumbered by the issue of sunk costs and sunk emotional commitment, the new manager can cut losses (which, at the same time, allows him or her to highlight that the previous manager what incompetent – while that might just have been bad luck).

However there are obviously many drawbacks to that ultimate decision; in particular, the temporary lack of effectiveness which will be created in that part of the organization until the new manager is up to speed with the particulars of the company and the business. Often, it is preferable not to use that ultimate weapon but rather opt for softer solutions such as introducing as deputy someone that will allow a new course to be taken. This last solution also allows continuity and minimizes disruption.

When it comes to cutting losses on an endeavor and if the situation has already worsened significantly, changing the manager in charge can be the only solution to save what can still be saved. The emotional attachment to sunk actions is too strong to be overcome by the people in place, even if they show outstanding capabilities.

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