S&R as Post-Industrial Managerial Paradigm
An adaptive management paradigm is the missing element in current attempts to transform businesses into adaptive organizations. Because adaptive behavior is typically unplanned—often ad hoc– it is intrinsically inefficient and therefore persistently undermined by the existing efficiency-centric management paradigm. The metrics and practices fostered by this industrial age model frustrate attempts to empower people, inculcate a customer orientation, leverage adaptive technologies, and respond to unanticipated change.
Those firms that have made a degree of progress in becoming more adaptive (or at least more agile or resilient) have typically relied on what Bruce Harreld of IBM called “the heroic model” of management – counting on exceptionally talented people to break the rules without breaking too much glass.
Sense & Respond is a robust replacement of the legacy managerial paradigm. It is a fundamentally different framework of purpose, strategy, structure and governance that systematically leverages adaptive individuals, technologies and infrastructures to produce and scale adaptive organizational behavior.
The Transformational Foundations of Sense & Respond
Three essential requirements for dealing systematically with high levels of unpredictability are: 1) knowing earlier the meaning of what is happening now; 2) rapid and effective reconfiguration of modular response capabilities; and 3) a major reduction in the elements that are specified in advance by the organizational designer.
The Sense & Respond model uniquely incorporates and leverages three theoretical foundations to address these issues: system design principles, extended to deal with the specific nature of social systems; a universal and general commitment management schema; and the “sense and respond” adaptive loop of complexity theory: sense-interpret-decide-act.
- The properties intrinsic to any rigorous system design literally dissolve the perennial managerial problems of alignment, coherent empowerment, scalability, suboptimization, and customer-back behavior.
- The properties of the universal and general commitment management schema enable a modular organizational structure of roles and accountabilities, and eliminate the need for (but permit) specifying actions (i.e., process designs) in advance. The interactions between roles are codified as commitments to outcomes negotiated between “provider” and “customer” roles.
- Use of the adaptive loop to design role-specific information support systems substantially enhances the “knowing earlier” capacity –- and thus the speed and performance — of people occupying those roles.
Seen through the lens of a system designer, S&R is not only a prescription for adaptability, it is a remedy for all – too familiar managerial problems that persist and worsen as organizations get larger. Anti-systemic behavior happens all the time in business, leading to unnecessary redundancy and fostering non-productive, very expensive (though rarely measured) internal conflict. In one case where it was measured, suboptimization in a large, multiple product global firm resulted in hundreds of millions of dollars per year in opportunity costs as well as significant internal transaction costs.
Note that systems are radically different from networks and processes. Networks guarantee connection, but not interoperability or coherency. Systems do. Processes produce results called outputs. Systems produce external effects called outcomes. Outputs, such as products, advice, diagnoses and appendectomies, are things delivered by a system. Effects are outcomes realized by someone or something external to the system…such as the patient, the taxpayer, the family, the customer.
Applying Sense & Respond design principles to organizations is a new, post-industrial leadership competence. It invests any organization with important attributes intrinsic to systems, among which are synergy, role and accountability clarity, and the alignment of capabilities around a common purpose.
Sense and Respond “Role and Accountability” designs typically include a customer-facing role that makes bid/no bid decisions and dispatches resources in response to CURRENT customer needs. The role is held accountable to the customer for providing customer-defined value, and to the organization for delivering a minimum amount of revenue and profit. This means they must be qualified and empowered to make decisions traditionally reserved for general managers. In one specific case, the Role and Accountability design called for individuals in the customer-facing role to relate to the corporate office in the way entrepreneurs do to a venture capitalist — competing for budget based on the opportunities within their respective client domains. As a result, the product and services units see more of their funding coming from current customer opportunities, as opposed to the annual top-down plan/budget process. The idea is that, over time, this will cause internal capabilities to change their focus from the firm’s plan to current customer needs.
This is a change in business orientation from “firm forward” to “customer back.” It is business that co-creates value with customers, rather than extracting value from them.
Structure as Strategy
An organization that does not trust its ability to predict what needs doing can no longer rely on planning, process designs, hierarchies of authority, and command and control. Instead of focusing on operational excellence to efficiently make and sell products and services that customers were predicted to want, an adaptive enterprise must be designed to sense and respond effectively to what is actually happening. It therefore needs, as core competences, the capabilities to: know earlier (anticipate) the meaning of what is happening now; dynamically dispatch modular capabilities in response (preempt); and express strategy as a systems design of roles and accountabilities. This transforms strategy from a plan of action into a structure FOR action. The organizational design becomes the main strategic document, and policy executives must therefore acquire competence as business architects. In an adaptive Sense and Respond enterprise, leadership controls context, not process and activity.
Structure no longer follows strategy. It becomes strategy….strategy that expresses executive intent as a modular structure for action, as opposed to a plan of action. It is business on demand, rather than business as planned.