NEWS & PERSPECTIVES

This page contains news, events, commentary and other items relevant to S&R capabilities, concepts, implementations, and people. It will occasionally include information regarding the status and use of this site.

Earlier NEWS entries have been archived in order to reduce the length of this page and make it easier to find a particular item. Use the Search bar from anywhere on the site to locate pages with content on a specific topic. Both Archived and Current NEWS pages will be included in the search.

News items from previous years can be viewed by clicking on the ARCHIVE link below.

A new page, created in June of 2010, contains selected Perspective entries dating from 2005 in the form of Posts. Viewers using MS Explorer and Mozilla Firefox browsers can subscribe to an RSS feed and be alerted to new updates when they occur. They can also interact by adding comments and asking questions.

NEWS ARCHIVE 2005-7

May 6, 2013

US Healthcare

The January 2009 essay “The Healthcare System that Isn’t, but Could Be” has been revised. It now includes discussion of an enhanced case management approach to the delivery of disease treatment. Breakthrough results from a rigorous study funded by Medicare  and conducted by Health Care Partners are cited as an example of how patient-back designs can improve outcomes while reducing costs.

Case management is not new, but applying the principles of adaptive design to case management is new.  Case management is similar to project management in that it can be an early payoff entry point for Sense & Respond in very large and complicated enterprises.

A system design that incorporates education and prevention elements with disease management capabilities transforms disease management into health management. And the scalability of S&R makes the ultimate prospect of a National Healthcare System real.

March 11, 2013

Knowing Earlier: The Human Factor

Knowing Earlier is a Sense & Respond core competence. The critical role of humans in applying  technology to “know earlier the meaning of what is happening now” was noted in our February 28, 2013 entry immediately below. Eleven days after the NY Times article that triggered that entry, Steve Lohr makes the same point– this time on the front page of the NY Times .

Electronic technologies may well have as large an impact on how humans think, organize and manage as did the printing press and the scratch plow.  A paper delivered at IBM’s Almaden Research Center offers a perspective on this possibility.

February 28, 2013

Knowing Earlier: Leveraging IBM’s Watson

A progress report on IBM’s Watson appearing in the New York Times on February 28, 2013 describes significant advances in applying cutting edge “big data” mining analytics to business.

The ability of Watson to win against the all-time Jeopardy champions was impressive.  But John Baldoni, senior vice president for technology and science at GlaxoSmithKline had an interesting insight two years ago as he watched Watson consistently come up with right answers faster. What “really impressed me,“ he said, “was that it so quickly sifted out so many wrong answers.”

A careful reader of the article will appreciate that the commercial payoffs described for Glaxo and others were due to more than Watson’s impressive technology. The choices made by humans about the categories and sources of data to be incorporated in Watson’s search were crucial.  These choices are presumably made by people in a decision-support role for other roles that will decide whether or not to act on those conclusions and recommendations.

Question: Is Watson also being used to support the decisions made by the decision-supporters?

The S&R prescription for role-specific “heads-up displays” is intended to promote just this kind of leverage. In theory there are an infinite number of decision-support level roles that could be “stacked” on one another. In practice, a second tier of Watson-enabled decision-support offers a potentially substantial boost in the quality of operational role decision-making.

October 27, 2012

Bureaucracies and Suboptimization

A bad customer experience that occurred earlier this month sheds light on the damage done by the widespread bureaucratic practice of asking the parts of an organization to meet or exceed their targets.

October 8, 2012

DSC Logistics Thinkers & Movers Award

On October 1 during the Global Supply Chain Conference in Atlanta Georgia, Steve Haeckel received the 2012 DSC Logistics “Thinkers and Movers” Award “for innovative leadership resulting in ground-breaking supply chain understanding and practices.”

DSC Logistics’ Mission Statement is to be “the premier Sense and Respond supply chain supplier.” CEO Ann Drake, who presented the Award, was a pioneer adopter of Sense & Respond concepts and prescriptions in the mid- 1990s. Here are her remarks at the award ceremony:

“As we all know, the only way you can lead effectively and successfully is if you have great people around you — people you can learn from…people who make you think.

I met Steve at an impressionable time. I was new in my position as CEO of DSC and looking for answers that would help me transform the company into the business I knew it could be.

I was on an airplane and started talking to the person sitting next to me. She told me I had to learn about Steve Haeckel because he was developing the most revolutionary concepts about how to make an enterprise able to adapt to unpredictable change.

Steve Haeckel was – and is — a brilliant thinker and author, and in the early 1990s, he was teaching these new concepts through IBM’s Advanced Business Institute and the Marketing Science Institute.

So, I read his articles and I attended his sessions. And his thinking has influenced me and all of us at DSC for nearly two decades. His concepts of “sense and respond” … and “customer back” are directly reflected in everything we do.

Back in the early 1990s, people were not anticipating the kinds of changes we all would face…but Steve Haeckel was. He told us about the change that was coming – that it would be rapid, discontinuous change and that we needed to transform our business model to be — and we’d better be– ready for anything! And he was right!

I haven’t seen Steve in many years, but I can’t tell you how many times I hear his voice in my head! And he continues to churn out ideas that will impact our future.

Steve, for all your bold and innovative thinking, we are proud to present you with the 2012 Thinkers and Movers Award.”

How Drake introduced S&R to DSC is described in these excerpts from Chapter 11 of Adaptive Enterprise.

 

August 12, 2012

S&R Department of Defense  Briefing

This is a 20 minute video of a briefing on Sense & Respond given by Steve Haeckel to Vice Admiral Arthur Cebrowski and his Office of Force Transformation staff in November of 2003.

Cebrowski reported to the Secretary of Defense. His mission was to transform the US military into a Network Centric force with the following capabilities:

• Massively distributed decision-making
• Local self-synchronization
• Shared situational awareness
• Speed of command

Project leadership was assigned to Navy Captain Linda Lewandowski (see her entry on the Expertise page). Lewandowski and Cebrowski decided that the managerial framework articulated in Adaptive Enterprise would be used as the conceptual underpinning of the project, and that the initial application would be to logistics. The project was  named “Sense & Respond Logistics.”

July 1, 2012

Post-industrial Dilemmas and Managerial Malpractice

According to Russell Ackoff, a principle figure in the development of General Systems Theory, a dilemma is a problem that cannot be solved within the current framework.

This is why behaviors that are becoming survival traits in the 21^st century are so difficult for industrial age enterprises to implement:  In the framework that explicitly and implicitly shapes the way industrial managers learn to think, they are dilemmas — behaviors that literally do not make sense.

Here’s a list of some post-industrial behaviors that don’t make sense in the old efficiency mindset, but do in the Sense & Respond framework:

• improvisation
• teams
• empowerment
• simple rules
• co-development of customer value
• markets of one
• fast prototyping
• real options

And here are some that make sense in the efficiency — but not in the adaptive — paradigm:

• strategic plans of action
• hierarchies of authority
• utilization and product quotas
• repeatable, definable, predictable processes
• supervising
• demand forecasting
• annual budgets
• optimization
• integrating existing capabilities and processes
• “line-of-sight” measurements
• value and supply chains
• matrix management

Calling for behaviors in the first list while adhering to the second list creates unsolvable problems for people in the organization. It is managerial malpractice.  

May 26, 2012

Applying Sense & Respond

Dan Forno is a retired IBM Vice President who applied Sense & Respond concepts and tools to three very different –  and difficult– managerial challenges. Forno was introduced to S&R in 1999. He saw in it a systematic and structured approach to managing the way he was naturally inclined to, but was constantly frustrated in implementing.

Forno was definitely not the only frustrated IBM manager. Listen to CEO Sam Palmisano in a 2004 interview with the Harvard Business Review:

“…CFO John Joyce………. put together a deal for his account that involved some hardware, some software, and some services. He was told he couldn’t price it as an integrated solution. And he’s the CFO!”

IBM leadership, like that of many other large organizations, issued frequent and earnest calls for One Team, empowered, customer-centric, innovative and collaborative behavior. The incompatibility between what they were calling for and a management system that relentlessly defeated such initiatives was not lost on them, but was taken as a given to be somehow surmounted by managerial heroics. Internal conflict was built into the organization’s structure and reward systems. Yet senior management was truly shocked by an external consultant report of how much business was lost by internal debates over revenue and cost allocations.

Early on in his first S&R adventure, Forno tried something different at the first review meeting held by his new manager, the CIO of IBM’s Global Services Division. His colleagues, as usual, came prepared with extensive Power Point presentations  describing in detail the latest status of all the projects under way in their organizations.  Forno showed three slides: his new Reason for Being; his Governing Principles, and a Role and Accountability Design that graphically depicted each of Forno’s projects’ objectives, customers, roles and the commitments that linked them. Everyone in the room was impressed by the clarity with which Forno described his “Sense and Respond” organization, but very surprised when he sat down after showing three slides.

The CIO asked a specific question about the status of a specific development project, and was not amused by Forno’s response, “I don’t know. The project manager is very experienced and qualified,  so I’m confident things are on track. However, I will check with him if you want.”

At which point his boss told Forno in so many words that he was henceforth to report in more traditional ways. The Supervisory instinct was so deeply engrained in him it was simply unthinkable that a manager should not be aware in detail of everything important  going on in his area of responsibility.

So Forno decided to “go stealth” with S&R. His experiences and results are described in this paper.

March 28, 2012

Meaningless Data

An article by Dennis Overbye in the March 27, 2012 Science Section of the New York Times illustrates the fundamental importance of a Sense & Respond tenet that is too often ignored in this era of “big data” –  namely, Karl Weick’s description of the three requirements for making meaning, (i.e. sense-making”). Weick’s anatomy of sense-making is referred to elsewhere on this site. It consists of an object (such as an observation); a framework (such as a theory, algorithm or statistical model); and an association between the two.

Weick is a sociologist, but apparently physicists and mathematicians have long cautioned that data unsupported by an appropriate theory is every bit as bad as, and frequently worse than, a theory without supporting experimental proof. A recent example is a September, 2011 report by a scientific team that they had experimental evidence of neutrinos traveling faster than the speed of light.  This result has now been attributed to a “loose wire” in the the experimental apparatus. But another way of concluding it was bad data was to realize that there was no theory that could support that result, because the implications of anything traveling faster than light violated so many validated predictions of Einstein’s theory of relativity. In other words, the lack of an appropriate framework literally rendered the experimental result meaningless.

Cherry – picking data to support a bias is a well known practice that is rightfully scorned but rarely abandoned. Jumping to conclusions about the implications of new data before they have been associated with an appropriate model is equally prevalent, and equally dangerous.

Any system of any type survives only by successfully iterating through the adaptive Sense-Interpret-Decide-Act cycle. Without a framework interpretation is impossible and data are meaningless. Without an appropriate framework data are useless….and so are any conclusions and decisions drawn from them.

Accordingly, two S&R core competences are Knowing Earlier , which relies on expertise in designing and implementing role-specific heads-up displays; and Managing-by-Wire , which is required when the pace of change is too fast for human decision-makers to deal with absent technological support.

January 31, 2012

Beginning  a Sense & Respond Transformation

Projects are informal organizations that overlay the formal organization and have some of the adaptive characteristics of Sense & Respond organizations . Because they are so familiar, projects can be platforms for a non-disruptive initiation of Sense & Respond transformations in large organizations. One way of accomplishing  this is described in a new Essay.

December 1, 2011

Malware Attack

A particularly vicious Trojan was inserted into the code of this site.  This was detected by Google, and the site was designated as unsafe for visitors for a number of days.  The malware has been removed, and the site is now safe for browsing.

October 3, 2011

Learning from Slime

An article in the Science Section of the NY Times calls to mind the following reference in Adaptive Enterprise (p. 44) to Professor Kuldeep Kumar’s description of slime mold behaviors:

 “….a collection of single-cell organisms …. aggregate to form a mold that can move to search for food. For slime molds, mobility is the emergent strategy and finding food the emergent purpose.”

The adaptive capacity of single-cell organisms has led to an impressive span of survival for slime molds and its amoebic components ( over a billion years ). It is a colorful illustration of the collaborative nature  of organizational adaptation, and underscores the disastrous effects, over time, of sub-optimization.

Sub-optimization is a hallmark of most large industrial era businesses. Becoming a profit center is considered a goal – even a reward— for the parts of many businesses. People get bonuses for exceeding their targets. Managers play local optimization games, such as making certain all of this year’s budget is spent in order to avoid having a lower base for next year’s budget allocations. These are destructive behaviors for the system, and therefore ultimately for its parts.

Slime molds have discovered that “I’ve got to do what’s right for me” turns out to be a poor strategy over the long run for both the mold and for its constituent parts. Collaboration entails sacrifices. And it is often necessary to reduce the performance of some elements of a system in order to improve the performance of the system—a behavior that business reward structures almost always discourage.

If amoebas can learn this, so might managers.

September 28, 2011

Wikipedia Sense and Respond Entry

Thanks to Doug McDavid, Sense and Respond now has a Wikipedia entry. It is succinct and accurate.

August 25, 2011

Knowledge Management in Post-industrial Organizations

In his critical review of The Company of the Future by Frances Cairncross, Craig Henry takes direct aim at the widely held assumption that advances in technology are the drivers of business transformation. He holds that the actual initiators of transformation are the humans who use technology to augment their ability to derive meaning out of the torrents of data that technology fosters.

“As Larry Crockett points out “Information is not just lots of data.” For data to become information they require an “interpretation.” Further, Crockett argues, “information requires an epistemologically complex ingredient, namely theory, in order to become knowledge.” IBM’s Stephan Haeckel concurs. In his epistemological hierarchy he argues that information is created when context is applied to data. Only then are patterns and relationships discerned and meaning inferred.

Computers and networks let us amass and retrieve torrents of data but in themselves do not provide context, interpretation, or theory. For those, human thought is required; and computers, so far, have shown limited leverage over these matters. The barrier to this seems to be insurmountable. As Haeckel argues, the very act of codifying knowledge so that it can be exploited by computer systems and communications networks changes knowledge into information.

Peter Drucker has observed that corporations’ new capability to capture and report on rivers of data now has a dark side. Almost all of the data relate to internal operational matters of the business. This rich trove of internal information and focus ‘on costs and efforts, rather than outward on opportunities, changes, and threats can seduce managers.’

The insights of Haeckel, Drucker, and Crockett are a powerful argument against the ….thesis ….. that … rapid and enormous advances in computing power and communication technologies must transform how we do business.”

The Data to Wisdom hierarchy Henry refers to is described in this White Paper  on knowledge development in organizations

August 18, 2011

XEROX Sentinel Update

This article  describing the continued success of SENTINEL appeared on the Xerox internal Web site in August, 2011. Republished here with permission.

July 21, 2011

Site Problem Corrected

A hosting problem, apparently associated with a corrupted update of WordPress, has been corrected. The fix required manual changes to hundreds of links on this site, all of which have been (we think) completed.  Thank you to the visitors who alerted us to the linkage issue. We ask all our visitors to let us know of any problem they experience accessing any document, image or link.

Ironically enough, the Hubspot Website Grading service raised its score for senseandrespond.com from 90 to 92 during this time.

 July 6, 2011

Sense & Respond as Predictive Control: An Oxymoron

A recent search on Sense and Respond identified this link to TEC, a free online library for technical white papers, webcasts, and product information. The lead in summarized SAP’s description of S&R this way:

Sense and Respond

Source: SAP

Description:

Predictive control, reactive control, and passive insulation enables [sic] enterprises to predict and adapt to fluctuations in customer demand. Ultimately, adaptive supply chain networks that exploit innovations to consistently improve efficiency and responsiveness are key to surviving a hyper-competitive environment.

SAP, a successful purveyor of integrated enterprise processes, is certainly entitled to define “sense and respond” any way they wish. The emphasis on prediction and efficiency and control (of activities) is sufficient to warrant an interpretation of their description as being more consistent with the industrial than with a post-industrial managerial paradigm.  In terms of the meaning and implications of sense and respond as an adaptive managerial concept, it is indeed oxymoronic.

The term “passive insulation” is, however, a valid concept for adaptive organizations – at least to the extent that it suggests the adaptive behavior of spores and other biota that survive in hard times by resorting to a form of suspended animation.  Dan Forno, an IBM Vice President who successfully applied S&R principles and methods in three large scale projects, exploited the modularity of his organizational design to outsource most of the cost (writing code) but none of the design of new applications that supported IBM Services organizations. When successive budget cuts – the first occurring within two months of approval of his plan—reduced his budget by 1/3 he simply stopped agreeing to requests for new applications, referring disappointed customers to the financial authors of the broadside cuts.  In this case, the “passive insulation” was the modularity of his design and the ability to rapidly implement a change in priorities by issuing a new Governing Principle. Together they enabled him to successfully adapt to an abrupt and drastic cut in resources.

Just as the human body adapts to life-threatening cold temperatures by redirecting blood flows from the extremities to the “vital” organs, so must adaptive organizations re-allocate resources rapidly to cope with unexpected and severe reductions in cash flow and revenue nutrients.

May 18, 2011

The Plan-Action Disconnect

A disconnect between plan and action is a common attribute of bureaucracies. As the pace and unpredictability of change increases, such disconnects graduate from a problem-solving issue to a systemic dysfunction.

Secretary of Defense Robert Gates, in a 60 Minutes interview aired on May 15, 2011, captured this dysfunction succinctly. When asked what his greatest frustration has been during his time as Secretary, he responded (paraphrased here): “The Department of Defense is organized to plan for wars. It is not organized to fight wars. In order to get anything different done, I have to personally intervene and manage it hands on.”

Two  extended and expensive wars against an exceptionally adaptable enemy that is not a nation state constitute a national security threat for which there were no plans on the shelf.  To cite but one consequence of this, an adequate response to the logistical  challenge of protecting US troops against IEDs took years, not days or weeks. And the unpredictabily of the threat has only increased. Secretary Gates, when asked what he feared most, replied: A single terrorist with a weapon of mass destruction.

The remedy for this dysfunction entails a change in the concept of planning, coupled with a change in the organization’s structure for action.  It means designing a system of roles and accountabilities for producing effects, rather than designing efficient cross-silo processes, contingencies  and outputs.

Improvisation, innovation, speed and adaptability are widely recognized as imperatives today. What seems not be recognized is that these attributes and behaviors are systematically discouraged by today’s organizational structures and managerial systems. Sense & Respond is an answer to the requirement for rapid and coherent improvisation.—-at scale.

Until mangers recognize that the planning-action disconnect is structural and managerial, and that a remedy exists, they should expect to share Secretary Gates’ frustration.

April 12, 2011

Games With Customers: How Post-industrial Firms Compete

Industrial era strategies are win/lose games against competitors to better predict, produce and sell what large groups of customers will need in the future. Post-industrial strategies are collaborative games with individual customers to know earlier and respond better to what those customers need now……as XEROX’s Sentinel System enables XEROX to know earlier than its customers — and respond quickly to — what customer users of office equipment like, don’t like and would like.

The strategic battles among post-industrial sense-and-respond firms will be waged on the terrain of “anticipate and preempt.” Anticipate does not mean “predict.” It means “know earlier,” and is a diagnostic skill rather than a predictive skill.  For example, imagine going to a doctor because you have stomach pain. The doctor palpates, probes, and sends you to the lab for tests. During this process you are emitting signals that you can’t interpret, but the doctor can. Based on this interpretation the doctor informs you that you have appendicitis and need an appendectomy. Your physician is not predicting that you will need an appendectomy, she or he is telling you that you need one now.

Knowing earlier is a S&R core competence. It entails designing role-specific Heads up Displays  to enhance the speed and quality of decisions made by empowered decision makers, and investing in  methods and technologies that systematically and continuously improve the organization’s ability to make meaning out of apparent noise.

Similarly, “preempt” does not necessarily mean responding faster; it means responding more appropriately – which often requires speed, but always requires effectiveness. Modular, rapidly reconfigurable organizations; accountability for outcomes, rather than actions; a coherent design for the “games” with customers; and an architecture of the interactions between customer and supplier roles — these are prerequisites for systematic pre-emption.

March 10, 2011

Synergy

Synergy is often cited as a primary objective of mergers and acquisitions. But its meaning, and the prerequisites for achieving it, are too often not understood — or are ignored. A notorious example was the ill-fated merger of AOL and Time-Warner, in which synergy was apparently expected to result from a combination of cross-marketing and intrinsically anti-systemic  “post-merger integration” projects.

There are two types of business synergy. The first type is “a quantitative result that is more than the sum of the parts.” This is typically produced by the economies of scope that a conglomerate achieves when it lowers the cost of doing business for its subsidiaries by sharing valuable assets such as: the brand value of a common logo; a AAA investment rating; a sales force; a tele-communications network, and so on.  The conglomerate realizes more profit than the sum of the profits the individual subsidiaries would realize without access to the shared assets.

The second type of synergy is rarer and usually much more difficult to emulate. It is “a result that is qualitatively different than can be produced by any subsidiary parts” of the organization. This type of synergy can only be achieved —and is always achieved– if the organization is a system. It is an intrinsic property of all systems. It occurs, for example, when hydrogen and oxygen interact to create water. Neither hydrogen nor oxygen is wet or drinkable. But they interact in a way that creates something that has both attributes.

Qualitative synergy is exemplified by certain restaurants that successfully differentiate themselves by creating exceptional dining experiences. They achieve this holistic effect by the way they manage the relationships between food, service, and ambiance. The result is a holistic and preference-creating system-level effect produced by products, services and ambient “clues” interacting with one another and with the customer.

Danny Meyer, the owner of Union Square Cafe, says in his Introduction to The Union Square Cookbook that he was surprised when he began garnering awards and rave reviews, because, “It was crystal clear to all of us that many other restaurants provided better service than we did…..and our food, service and decor ratings had not even made the top ten. Slowly but surely it started to dawn on us that there had to be an intangible factor that no one was talking about, rating, or perhaps even aware of: hospitality.”

The feeling of being in a friend’s dining room is a Union Square Café synergy, its secret ingredient, and its de facto value proposition.

February 10, 2011

Knowing Earlier with Watson

On February 9, NOVA previewed the Jeopardy game show match between the two most successful players in the long history of that show and an IBM computer system named Watson (the name of IBM’s founder, the name of IBM’s research facility where the system was developed over the past 5 years, Sherlock Holmes’ sidekick, and the person called by Alexander Graham Bell in the first phone call, “Mr Watson—Come here—I want…you.”)

However well Watson does in this match-up, the consensus of artificial intelligence experts is that it represents a breakthrough in dealing with the ambiguities of human speech – including puns, homophones, double meanings, slang and complex syntax. Watson interprets a question (in the case of the Jeopardy game, the question is posed as a partial answer) using “machine learning” techniques (essentially multiple layers of adaptive pattern recognition). It applies massive computing power to: 1)  sort through the results of its real time search of an equally massive database of documents, 2) select, and 3) deliver an answer. It does all this within the average of 2-3 seconds it takes a human contestant to respond.

Imagine that the Jeopardy host Alex Trebek is a physician making a difficult diagnosis with an ambiguous set of symptoms and test reports; an FBI analyst sorting through an ambiguous collection of conflicting field reports and reports from other analysts to deliver “actionable intelligence;” or a consumer trying to decide which mobile device to buy this week. If Watson were customized to support the Sense and Interpret phases of role-specific heads-up displays for the physician, analyst and consumer, they could reasonably expect orders of magnitude improvement in the speed and quality of the decisions they make.

Watson itself doesn’t “know” anything except how to execute its code. Nor does it make meaning about the implications of it outputs. But it is capable of producing good answers to unanticipated questions at lightning speed for knowers and meaning-makers.

The three Jeopardy matches with Watson will be televised on February 14-16.

January 18, 2011

2010 Traffic Report

63,000 visits produced 252,000 page views. A sample of 2,928 visits from 73 countries showed an average of 3.05 page views and 3 minutes 17 seconds duration per visit  The Google Website Grader assigns www.senseandrespond.com a grade of 90 (meaning that it ranks in the top 10% of the more than three million sites evaluated by Google.)

December 29, 2010

CUSTOMER-BACK businesses: How a bad product experience can lead to an exceptional customer experience.

The total customer experience is any business’ de facto value proposition. It incorporates product and service values along with the emotional effects resulting from the customer’s interaction with the firm’s  people, facilities, ads, bills, website, help desk, and so on. Here’s a recent example of the impact an exceptional experience can have.

The laptop would not boot after multiple tries. “Fan Error” was the message briefly seen before the computer shut itself down. A local techie advised looking on eBay for a replacement fan, which resulted in a $8.95 purchase of a used fan from a company with very high customer ratings named Green Penguin. But the replacement didn’t work, and this was reported via eBay’s feedback system. The next-day response from Green Penguin was an apology, and an offer to refund the $8.95, replace the fan and install it themselves at no cost to the customer—including shipping both ways. This was followed by a phone call in which Jeremiah of Green Penquin stated how concerned he was that a product tested by them had failed, and pledged to do “everything reasonable and unreasonable” to fix the problem. Seven days later the laptop had been  sent, fixed, returned and was working perfectly.

Green Penguin must have lost more than $100 on this deal. Certainly anyone at the company who is measured on revenue and profit took a hit on their 2010 performance. All they got in return was a customer for life who is much more impressed with the company than he would have been if the first replacement fan had worked…..so impressed that he has posted positive word of mouth about his experience with Green Penguin on his web site.

Designing a company around a specific customer experience is the ultimate customer-back strategy. A brief summary of the relationship between S&R and Experience Management can be found on the Library page in the Experience Management section. Lou Carbone’s book Clued In is the go-to primer on how to systematically create a differentiating customer experience.

November 25, 2010

ADAPTIVE STRATEGIES

Sense & Respond strategies run the gamut from reactive (listen and comply) to pro-active (anticipate and pre-empt). Reactive strategies such as Make to Order were well known in the Industrial Era, and did not usually involve sufficient unpredictability to be defeated by the efficiency-centric industrial managerial paradigm. But business emergencies are now frequent and –  like their medical counterparts– call for rapid and adaptive responses capabilities.

A short piece on Pre-emptive Responses to “organizational appendicitis attacks” has been added to the Essays Page.

November 21, 2010

INNOVATION – Enabled by Global Policies that Govern, but Do Not Dictate

The authors of The Brain Advantage (Prome, 2009) use recent brain research and psychological studies as the basis for prescriptions to help  business leaders become more effective change agents. One prescription: establish policy constraints that establish the right balance between restrictive dictates, and unbridled empowerment. Drawing an analogy from jazz musicians, they argue that:

Business leaders can similarly impose constraints that encourage rather than stifle creativity, but these must be the right sorts of “non-suffocating” constraints. What are the right sorts of constraints? First, they are broad. The conventions that constrain the jazz artist are general. They don’t dictate, for example, specific moves like “rest for two beats here” or “use a Bflat here.” In her article on “How to Kill Creativity,” Teresa Amabile advises leaders to “give people freedom within the company’s goals. Tell them which mountain to climb, but let them decide how to climb it.” The mountain-the company’s goals, vision, and mission-constitutes the broad parameters within which the innovative employee must function.

Stephan Haeckel, director of strategic studies at IBM”s Advanced Business Institute, advises companies to go further than merely using the company’s vision, goals, or mission as a guide for employees. He writes that companies should also develop governing principles that clearly define “how far managers can go without seeking approval.” For example, one governing principle might be “Always get and respond to customer feedback on new products under development.” Another might be “Always assess the market need for a new product before implementing it.” This principle could be written to include a statement of just how large a projected market must exist in order to move ahead. It is impossible to prescribe a specific set of governing principles that all organizations should embrace. The principles need to grow out of the company’s primary purpose and goals. In Adaptive Enterprise, Haeckel shows leaders how to create governing principles that are clear without being suffocating. He also shows how these governing principles, combined with a clear definition of an organization’s purpose and identification of any absolute constraints, can free up creativity. As Haeckel writes, leaders who provide this kind of clear context provide “an unambiguous framework for individual activity, aligning and bounding organizational actions without dictating what those actions should be.”

Many organizations create guiding or governing principles. That is not necessarily new. One of the key differences in Haeckel’s approach is the way that these principles drive decision making and management. Often in organizations, guiding principles serve as high-level reminders of how people should behave. However, Haeckel uses them in a more structured, pragmatic way. Governing principles are not reminders-they are boundaries for both employees and managers. He advocates giving people considerable latitude in their jobs as long as they stay within those principles. The principles “define the boundaries of empowerment to ensure that creative, unprecedented responses remain consistent with organizational purpose and policy. They help the system find the balance between freedom and clear direction.

October 28, 2010

Harvard Business Press has published Adaptive Enterprise in Kindle format. The download is available on this link at Amazon.com

October 11, 2010

CUSTOMER-BACK METRICS

 

Sometimes a cultural change can be realized simply by changing the reward metrics from firm-centric to customer-centric.  From the 1970s into the 1990s, IBM struggled with the problem of “technology transfer” — moving IBM Research innovations into IBM product divisions. Industry-leading prototypes in, for example, speech recognition, RISC-based server design and traffic management systems were recognized as breakthroughs, but were resisted by IBM product divisions struggling to deliver on schedule and on budget the products to which they were already committed. Multiple corporate-level task forces and executive edicts failed to make a dent in this problem.

Then, in the 1990s, IBM Research VP Paul Horn assigned an IBM division to each of his direct reports. He made their variable compensation dependent upon the overall performance of that “customer” division.  Now researchers were motivated to learn about the complex problems of the customers of their assigned divisions, and to apply their expertise to those problems. IBM continued, and continues, to invest in primary research, but more of IBM Research’s impact now comes from solving difficult customer problems, and IBM Research’s customer-back projects have become an annual part of divisional product and service budgets.

The change from “Eureka forward,” to Problem back” was transformative because it constituted an actual, as opposed to professed, change in organizational purpose.

September 21, 2010

ADAPTIVE LEADERSHIP

 

Large companies are beginning to incorporate “Adaptive Leadership” in their executive development programs. Often the content of these modules is focused on enhancing the adaptive skills and traits of the leaders themselves, such as:

• Listening better
• Asking better questions, and becoming more attentive to “signals on the periphery.”
• Widening their repertoire of sense-making frameworks
• Getting buy-in to new ideas from those whose participation is required
• Innovating
• Prioritizing
• Using technology appropriately

Such skills are necessary, but not sufficient. Adaptive individuals, be they leaders or followers, must collectively interact purposefully, coherently and adaptively. The hallmark of adaptive leaders is an ability to institutionalize adaptability in the organizations they lead.

In Sense and Respond organizations leadership is not a collection of techniques and personality traits. It is a set of three specific competencies:

1) creating and adapting a viable organizational Context (Purpose, Global policy constraints, Structure of Roles and Accountabilities),

2) establishing an effective governance system (Commitment Management) for coordinating actions within that Context, and

3) populating organizational roles with competent people.

Developing the competence  to design and lead adaptive organizations should be a part of every Adaptive Leadership program.

September 8, 2010

“THE POST-INDUSTRIAL MANAGER”

Marketing Management, a publication of the American Marketing Association, has published this article in its Fall, 2010 Edition. It is a response to Peter Drucker’s call for a new theory of business, and has been called a manifesto for Information Age leadership.

With permission from the publisher, the article is reproduced on this site, with embedded hot links to an expanded XEROX Vignette and a Sidebar summarizing the principles of Organizational System Design. It will also appear (later) on the website of the American Marketing Association.

September 2, 2010

INTRODUCTION TO Adaptive Enterprise

Increasingly unpredictable and rapid change follows unavoidably from doing business in an Information Age. What could be more strategically important than coming to grips with the implications?

The message of Adaptive Enterprise is that large, complex organizations must and can adapt systematically–and successfully–to this kind of change. Systematic is a property of the sense-and-respond model described in this book. Success will be determined by leadership’s competence in making a particular set of choices within the model framework.

The only strategy that makes sense in the face of unpredictable change is a strategy to become adaptive. Speed-to-market, customer intimacy, operational excellence, and organizational agility, however important, are not adequate strategic objectives in and of themselves. They are attributes of the real objective: successful and systematic adaptation. Adaptation implies more than agility. It requires appropriate organizational response to change. And when change becomes unpredictable, it follows that the appropriate response will be equally so.

These are the opening paragraphs of the Introduction to Adaptive Enterprise, published in 1999. The Introduction in full is now available on the Essays and Images Page with permission from Harvard Business School Press. It is a succinct description of the rationale and content of the Sense & Respond managerial paradigm.

August 17, 2010

“THINKING OUTSIDE THE BOX” is Crazy

When we say “think outside the box” we really mean “think in a different box.” A boxless thinker is literally insane.

We make meaning when we associate perceptions with a context. According to sociologist Karl Weick, (see March 3, 2010 post) three components are required for humans to make meaning: an object or event (either physical or mental), a framework ( a context, or “box”), and an association that links the object/event to a framework/box.  If we choose the wrong box, the result is a wrong idea….such as when we take literally something meant to be funny, or when our brain applies the rules of perspective to create an optical illusion.

The same kind of wrong ideas result when we apply inadequate models to interpret sales, the economy, climate change, or the chances of filling an inside straight at the poker table.

Sometimes we fail to see any pattern at all because we don’t have access to an adequate framework.  Until the Rosetta Stone was found and deciphered, ancient Egyptian hieroglyphics were essentially noise to archaeologists. The Rosetta Stone established an association between Egyptian hieroglyphs and ancient Greek, enabling the Frenchman Champollion to create a framework that allowed archaeologists to make meaning out of apparent noise.

Rapidly matching environmental signals to an appropriate framework is a Sense & Respond core competence, because it enables decisionmakers to know earlier than others the meaning of what is happening now.

August 4, 2010

COMMITMENT MANAGEMENT

 

Rigor and authenticity are essential attributes of inter-role negotiations about outcomes and accountability. Here is a link to David Ing’s summary of the linguistic theory that provides the rigor of S&R’s Commitment Management Protocol.

July 13, 2010

INNOVATION

We innovate all the time: finding better ways to get to the airport, adding a new ingredient to a favorite sauce, writing a poem, explaining why we missed that deadline for the third time……

Innovation is a survival trait in unpredictable times. So natural is it to human nature it seems odd to find this trait, like adaptability, so difficult to realize organizationally. One reason is that for an innovation to have any effect there must be a customer who values that effect. Matching an innovation with a customer is both critical and unnecessarily difficult in today’s large organizations.

We are our own customers when it comes to finding a better way to the airport, but who is the customer for a new idea in a large company? Finding that customer inside a sub optimized hierarchy of silos is, to put it mildly, not easy. Local budgets and metrics typically leave little room for the additional time and energy it takes to evaluate, re engineer, redeploy and harvest an unplanned initiative. Even if the idea is acknowledged to be good by a high level manager, the outcome is too often a suggestion to talk to someone else with equally tight time and resource constraints.

Out of the box innovations created in one silo are adopted in other silos only if they happen to address, and come to the attention of, someone’s existing, acknowledged and pressing problem. But this kind of timing is fortuitous and too rare. Many innovators spend less time developing and validating an idea than they do trying and failing to find an internal customer for it.

What if the organization were not chronically siloed and sub optimized? What if it were in fact designed as a system of coupled customer and supplier roles—whose interactions are defined by negotiated agreements to produce specific customer benefits? Then innovators would systematically have a robust context within which to innovate…….a context provided by internal (or external) customer roles whose needs define the problems, including those that require new and creative solutions.

Then a customer-back orientation would permeate the organization and innovation would flourish.

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June 14, 2010

SYSTEM THINKING VS PROCESS THINKING:  WHY (Synthesis) vs. HOW (Analysis)

Why questions are about purpose and effects. How questions are about process and actions.

System thinkers answer the question “Why” by first considering the external entities on which a particular event or object exerts an influence. Analytic thinkers answer “Why “by considering the actions of parts internal to the event or object.

To paraphrase John Polkinghorne’s analogy, an analytic thinker would answer the question, “why is that tea kettle whistling” with a process answer: “because the tea kettle is on a hot stove, causing energy to be transferred from the stove to the water molecules, making them move faster and faster until some of them escape through a narrow opening, thus creating sound waves audible to the human ear.” A system thinker would answer: “because I want tea.”

Analytic thinkers invariably answer Why questions with How answers.

April 13, 2010

Sense & Respond at NOAA

The largest S&R implementation to date is a multi-billion dollar systems integration project involving 3,000 people.  The smallest is a seven person organizational design for responding to what the United States National Oceanic and Atmospheric Association calls “coastal mortality events.” These include the unpredictable and devastating occurrences of whales and dolphins beaching themselves.

A previously unpublished summary of a 2001 interview with Dr. John Ramsdell describing how he applied Sense & Respond principles to deal with such disasters in near-real time has been posted on the Essays page.

March 31, 2010

Organizational System Design FAQs

Designing an organization as a system is a “Next Practice” core competence of post-industrial managers. A series of Questions and Answers on this topic as been added to the Essays Page.

March 3, 2010

The Evolution of Managerial Control

In the early 20^th century managers controlled procedures. Frederick Taylor’s colleague Frank Gilbreth created Time and Motion Study, a method of teaching workers the most efficient sequence of micro movements to accomplish their highly repetitive and largely physical tasks. Supervisors were charged with enforcing strict adherence to the prescribed sequences.

Gilbreth’s method was taught in Industrial Engineering undergraduate curricula as late as 1958, by which time the pace of change had increased to an extent that it no longer made economic sense to continue training and re-training workers at this level of detail. Over the next four decades, led by innovators such as Deming and Juran, the focus changed to statistical control of process design and execution — a more general description of the series of steps to be taken in transforming a specified set of inputs into a specified set of outputs. “Six sigma” processes are the latest twist in managerial control of processes, and  where most businesses are presently focusing their attention. This, in spite of the fact that change has become so rapid and unpredictable for many firms that improvisation and ad hoc processes have become the de facto behavior norm. And in spite of the fact that the high premium currently placed on innovation implies and requires unpredictable behavior.

The control issue for post-industrial managers is: How can organizational leaders ensure that the improvisations of empowered individuals produce coherent behavior by the organization? What replaces tasks and processes as the focus of control?

The answer is to shift the focus of control from activity to results; from outputs to outcomes; from process design and management to system design and management; and from holding people accountable for their actions to holding people accountable for the consequences of their actions.

This Sense & Respond prescription is reflected in and supported by the writing of sociologist Karl Weick, whose Sensemaking in Organizations is a must-read for anyone interested in how humans make meaning out of what goes on in the world. Weick describes three orders of control: direct supervision, control of routines, and premise control, which is essentially the control of context. The appropriate level of control is a function of the degree and predictability of change. Here’s an excerpt:

People at the top often inadvertently make their task more difficult by their efforts to make it easier. When they impose first – and second – order controls on subordinates, they create interactively complex situations….that enlarge in unexpected dimensions with unintended consequences, in ways that defy comprehension.

February 9, 2010

Organizational Alignment

For most of us, evidence of a pervasive lack of organizational alignment in the companies we do business with is all too familiar. Who has not been in the highly frustrating situation of trying to coordinate the fragmented parts of their bank, insurance company, phone service provider, on-line retailer, software provider, hospital, appliance manufacturer, newspaper provider, electrical utility, ISP or on line pharmacy? Such negative experiences are the symptoms of organizational structures and managerial practices that discourage cooperation and foster sub-optimizing behavior.

The costs to the firms themselves can be enormous. The large account executives in one multinational company report spending more than 80 percent of their time on internal conflicts, trying to make their organization appear seamless to its customers. This company learned that organizational incoherency costs it $1 billion per year because of delayed, compromised and uncompetitive responses to client requests for bids. The root causes identified were lack of clarity about accountability for results, confusion about who has the authority to make what decisions, and internal battles over the allocation among units of revenue credit and costs.

There is an innovative solution to this problem for leaders willing to learn and master a new managerial competence: redesigning their organization as a system of roles and accountabilities focused on a well-defined purpose. This does not “solve” the alignment problem; it dissolves it, because alignment is an intrinsic property of all system designs.

January 4, 2010

Traffic on senseandrespond.com for 2009 increased to 604,839 hits and 53,636 unique visits. The number of hits was artificially inflated by an estimated 138,000 hits associated with the process of recreating the site. Adjusting for this results in estimated increases over 2008 of 52% (hits) and 80% (unique visits).

December 17, 2009

“The Healthcare System that Isn’t – But Could Be” has been added to the Essays page. It describes the severe problems that arise because healthcare in the US was never designed as a system, and what would be required to do so.  The specific nature of healthcare problems, and of effective responses to them, will change dynamically and unpredictably. A system design of roles and accountabilities is the right approach to resolving healthcare issues adaptively and coherently on a national scale.

November 29, 2009

Why?

For a strategist, the most important question is WHY, not HOW.

WHY? is often much more difficult to answer because it requires thinking deeply about the purpose of an organization and its component roles. The answer to WHY  is the existential justification — the Reason for Being — of any organization of any size.

There are always two parts to the answer: what are the outcomes that the organization is responsible for producing/effecting; and who is the customer for each of those outcomes. Without the first component there is nothing to ask HOW about. Without the second, there is no reliable source of validation that organizational purpose is being realized.

HOW is a process question. WHY is a system question. That’s why organizational leaders at all levels should master the principles of system design.

September 30, 2009

The September 22 entry has been revised based on feedback from thoughtful business and academic visitors to this site. It is still less than 500 words, and still emphasizes that the crucial distinction between Make & Sell and Sense & Respond organizations is managerial in nature, and lies in their respective purpose and success metric.

A particularly interesting insight came from an army general, pointing out that the military’s customers are…….the enemy. In fact, the military is much more attuned than most businesses to the distinction between effects and outputs — for example the distinction between dropping munitions on a target and disabling, deterring or destroying the opposing force. In this case the effects are negative rather than positive values in the eyes of the “customer.” Collaboration remains a requirement, but is usually achieved surreptitiously and by misdirection.

September 22, 2009 (Revised 9-30-09)

Managing Outputs, Effects and the Co-production of Value

When a tree falls in the forest, it makes no sound. It makes sound waves. Sound is produced in the auditory cortex of listeners when sound waves trigger vibrations in their ears. If there are no hearers, there is no sound. Similarly, grass is not green if no one is looking at it. Green is an effect created in the brain of a viewer in response to stimulation by light waves of a particular frequency. If there are no viewers, there is no color.

Sound waves and light waves are outputs. So are products and services. Sound and color are effects. So are customer benefits.  If there are no customers, there are no beneficial effects and therefore no value. Users, consumers, patients, students, and audiences must actively participate in order for value to be produced. That is why value creation is necessarily a result of collaboration between producer and customer, and why structuring that collaboration is an essential competence of Sense & Respond organizations.

Both Make & Sell and Sense & Respond companies produce product and service outputs. The prototypical M&S company makes trees fall and has processes to ensure this is done efficiently for large numbers of sound-deprived customers (markets).They may be “market-driven” in the sense that they understand that sound is the underlying value—and feature that in their marketing messages — but they are organized around, and measure themselves on, the cutting and selling of falling trees.  S&R companies might produce the very same outputs, but systematically incorporate them with the outputs required of customers and of other suppliers (perhaps makers of personalized hearing devices), to ensure that individual listeners hear the sound.

The transformative difference is not in outputs, but in organizational purpose—from outputs to effects. Implementing this change in purpose necessitates changes in the way a business is managed: its structure, metrics and business model. Trying to realize a new purpose with an old management system is not only frustrating, complicated and confusing, it is ultimately futile. That is why S&R is first and foremost a managerial innovation.

Sense & Respond companies enjoy a unique competitive advantage when they extend the scope of organizational design beyond their own borders. They then become the de facto architects of customer value by 1) identifying a defined customer effect as the organization’s purpose, and 2) creating a Role and Accountability design that specifies the interactions of customer, supplier and third party roles that will achieve that effect. Their value proposition is now much more than outputs and a marketing message; it incorporates the game-changing differentiator of an extended enterprise design for co-producing the benefits that their customers value…….thereby transforming sound wave companies into sound companies.

September 9, 2009

Senseandrespond.com has been completely re-created using an open source language. This should preclude future disruptions that occur because proprietary software is discontinued or becomes unsupported by the hosting company. The effort was laborious, and the patience of visitors to this site during this hiatus is greatly appreciated.

The look and feel of the site has been improved without sacrificing ease of use and navigation. Users should now experience the same formatting when using Explorer, Mozilla or Chrome browsers. The addition of a Search function is a significant enhancement.

July 29, 2009

Predictive Analytics, Knowing Earlier, and Sense & Respond

Introducing a new term that gains wide acceptance can be a mixed blessing. Sense and Respond (in a business context) was coined as a way of distinguishing adaptive enterprises from efficiency-centric “make-and-sell” enterprises. But the term has had enough intuitive appeal for usage to outrun understanding. This is true even in parts of IBM, where both the term and concept originated.

Sense and Respond is first and foremost a managerial paradigmfor creating and leading organizations that systematically exhibit sense and respond behaviors . These behaviors are a spectrum running the gamut from the reactive (e.g. make to order), to the proactive (i.e. knowing earlier and responding preemptively).

Here are two excerpts about sense and respond behaviors. The first is from Chapter 1 of Adaptive Enterprise (p 10).

“Sense-and-respond does not always mean listen-and-comply….[it] can also mean anticipate and preempt…..”

The second is from a NY Times article on July 29, 2009 reporting IBM’s acquisition of a SW firm called SPSS:

I.B.M.’s general manager for information management, Ambuj Goyal, said in a statement that “predictive analytics can help clients move beyond the ‘sense and respond’ mode — which can leave blind spots for strategic information in today’s fast-paced environment — to ‘predict and act’ for improved business outcomes.”

In fact, Mr. Goyal is not referring to the sense and respond paradigm, but to a capability for sense-making that can enhance the adaptive performance of decision makers. “Predictive analytics” are one way of interpreting data—of sense-making. Other sense-making methods include pattern recognition, heuristics and intuition. [See especially the Nov. 1, 2007 entry below, as well as the entries for August 10, 2007, October 3, 2007, February 1, 2008 and April 14, 2008 for more on the S&R core competence of Knowing Earlier the meaning of what is happening now.]

There is a certain irony in using the term “predictive” to label tools that are created to address the problem of increasing unpredictability. As Michael Kusnic (co-author of the Appendix in Adaptive Enterprise on collaborative and adaptive decision-making) is fond of reminding us, “There are no data on the future.” The best we can do is try to make sense out of what is happening in the present, capture learnings from the past, sense when new variables, discontinuities and non-linear relationships invalidate the sense-making frameworks we are using, and adapt by changing those frameworks appropriately. In S&R language, this is called “Adapting the adaptive loop” (the Sense-Interpret-Decide-Act cycle).

Therefore, rather than moving an organization “beyond sense and respond,” stream computing and better real-time analytics actually move an organization further toward the proactive end of the sense and respond spectrum.

July 24, 2009

Commitment Management SW Available from CoThrive

Keeping track of commitments between people is an important capability for any organization. In Sense & Respond organizations it is a core competence for governing (but not dictating) the dynamically changing inter-role commitments to outcomes. This is because, unlike the vertical manager-subordinate performance evaluation structure of Make and Sell companies, the commitments that count “go sideways” in the Role and Accountability structures of Sense & Respond. (see Chapter 8 of Adaptive Enterprise, the Commitment Management Whitepaper download on the Library page,  and an HBR article by Sull and Houlder ).

CoThrive announced commercial availability of its Commitment Management Software on May 31, 2009. It is web based, and features a parsing function that extracts information in standard email notes into formal Requests, Assignments and Agreements. Negotiations, renegotiations, status reports and linkages are tracked and analyzed. There is no software to install, and no need to learn a new language. A demo and trial period sign-up can be found at www.cothrive.com.

July 22, 2009

Adaptive Enterprise Available in a Library Near You

Adaptive Enterprise is available in 377 libraries. A list of them, ranked in order of proximity to your zipcode, is available on http://worldcat.org/oclc/40417611

June 9, 2009

Turf Battles

The extract below is from a January 2006 essay. It points out that turf battles between multiple sub-optimizing intelligence units are an unavoidable outcome of the 9-11 Commission’s organizational recommendations.

“So deeply ingrained and unchallenged are the principles of the legacy management system that most readers of the 9-11 Commission report …. would …. find unremarkable the Commission’s organizational recommendation ……[But] in terms of the issues to be addressed, it is truly remarkable – precisely because it is so traditional….so static. It deals with the accountability issue by adding yet another decision-making layer at the top. The sharing and coordination issues are not addressed at all …..  And even the most casual viewer can readily see the battle lines where future turf and budget wars will be waged.”

This outcome was reported as news in a June 8, 2009 NY Times article by Mark Mazzetti, “Turf Battles on Intelligence Pose Test for Spy Chiefs.”

“….almost since its inception the national intelligence director’s operations have been criticized as being bloated and ineffective. Last year, the inspector general at the national intelligence director’s office issued a withering report criticizing it as unable to end the turf battles that for years plagued the intelligence community and were partly responsible to the failure to prevent the Sept. 11 attacks.

Even more criticism comes from current and former C.I.A. officials, who often portray the intelligence chief’s office as an unnecessary bureaucracy that gums up machinery desperately in need of streamlining.”

The wondrous aspect of this outcome is not how predictable it was, but rather how deeply ingrained is the idea that an intelligence organization whose effectiveness is dependent on its ability to rapidly adapt to unanticipated events should continue to be designed as if it were a static bureaucracy. What will it take for those responsible to realize that highly adaptive people supported by the most advanced technologies available require an adaptable organizational design in order to fully exploit those skills and capabilities?

March 6, 2009

Adapting to Economic Turndowns

Adaptable organizations, like adaptable organisms, survive in lean times. Some may even flourish if their value propositions are well-attuned to enhancing the survivability of customers.

Because of their core competences and structural attributes, S&R organizations are much better positioned than traditional Make and Sell firms to weather deteriorating economic conditions:

• Investments in anticipating (knowing earlier) the changing needs of customers enable earlier identification of the need to modify the existing value proposition.
• The modularity intrinsic to Role and Accountability structures enables rapid re-design, re-alignment and re-deployment around a new value proposition.
• Technology-supported commitment management enables the rapid propagation and tracking of new global constraints and restraints (Governing Principles).
• The ease of incorporating third parties in Role and Accountability designs facilitates outsourcing, as opposed to ownership, of capabilities and assets. This in turn greatly enhances businesses’ ability to grow and shrink their level of investment as the level of “nutrients” in the environment change.

January 6, 2009

Traffic Report for 2008: 32,604 unique visits to www.senseandrespond.com generated 346,520 hits

November 26, 2008

Dealing With Complexity in Organizational Designs

Complexity is a function of the number of components in a system and the number of possible connections between components. As the number of elements increases, the number of potential interactions increases disproportionately faster. For example, there are three possible two-way links between three different medications: Med A with Med B; Med A with Med C; and Med B with Med C.  But if you double the number of medications to six, the complexity increases five-fold to fifteen possible links. The more meds you take, the more difficult it becomes for physicians to predict the net effect on you of their interactions, a complexity issue of growing concern to drug companies, regulators, doctors and patients. (See NY Times, November 25, 2008 “New Arena for Testing of Drugs,” by Gina Kolata.)

Because of this arithmetic, when Intel increased the number of transistors on their new microprocessor chip from the 29 thousand of its predecessor to 730 million, the number of possible interconnections became larger than the number of atoms in the universe. It is impossible to test anything more than a miniscule subset of these interactions, which guarantees that combinations will occur that weren’t contemplated by the chip designers. Among them are combinations that stem from the software and devices you decide to put on your Intel-inside computer, and what you decide to do with them.

Similarly, the designers of an organization cannot predict most of the interactions that will take place in future development projects, mergers, or between two people sitting next to one another in the cafeteria or at a budget meeting. The vast majority of these interactions are irrelevant, but any one of them could be monumental in terms of its effect on organizational performance.

Unpredictability is a fundamental attribute of large complex systems — which is what climates, bee colonies, the human body, large scale microprocessors and sizeable human organizations are. But Intel chips and human organizations are special cases, because humans can specify their purpose and design them.  The managerial competences required to design, create and lead complex adaptive organizations are described in Adaptive Enterprise. One of these competences leverages the same principle that Intel applied to get their arms around chip complexity: modular design.

Modular design mitigates the problems of complexity by “chunking up” interactions into modules, thereby reducing the number of linkages that must be specified, tested and tracked. Each module is composed of elements that interact to produce a higher level (synergetic) effect at the module level. And if these modules can be clustered into higher-level “super” modules that interact to produce an even higher level effect, things get much more manageable. Furthermore, if these super modules are then clustered into “super-super” modules….. The progression can continue indefinitely, with each successive clustering significantly reducing the number of elements and interactions to keep track of, because now the arithmetic is working for the designer.

Introducing modular design to an organization significantly enhances its ability to cope with complexity, and to adapt in the face of unpredictable change. In the Sense & Respond paradigm, organizational modules are called roles, and the interactions between roles are specified as exchanges of outcomes (effects) that are negotiated between people occupying those roles — people who are accountable to one another for the production and acceptance of the outcomes agreed to. The organizational design is appropriately called a Role and Accountability Design, and features multiple levels of interacting Role modules.

Modular design is one of the principles of a post-industrial managerial competence: designing organizations as systems. An introduction to these principles is provided here. Questions and answers on organizational design topics that are beyond the scope of an introductory article can be found here .

November 12, 2008

S&R as a Project Management Innovation

The largest S&R implementation to date ($8 billion and 3000 people) involved an outsourced integration project. In this and in smaller efforts, some executives are finding that project management is an effective way of introducing S&R innovations in traditional organizations.

Why? Because projects frequently address new problems that don’t fit neatly into the existing organization: they cut across the silos. Furthermore, successful project managers know the crucial importance of articulating project objectives in unambiguous terms, and of getting everyone on the same page. They focus on outcomes, and the better ones are tolerant of people doing things differently than they themselves would.

For these leaders, S&R is a formalization and extension of the “natural” way they manage. They are quick to recognize the value of designing the project as a system of roles and accountabilities — an innovation that ensures alignment, discourages suboptimized behaviors, clarifies the relationships between project roles, and enables coherent empowerment. [Commitment management protocols and tools, and organizing information into role-specific support for sensing and sensemaking are less frequently employed innovations, because they require behavioral changes and/or investments that take time and resources to put in place.]

It has changed the way at least one executive thinks about his company: “We are essentially a very large project office that continually reconfigures its capabilities into customer-specific responses.”

September 19, 2008

Adaptive Enterprise Chapters Now Available On Line

Harvard Business School Press has made the individual chapters of Adaptive Enterprise : Creating and Leading Sense-and-Respond Organizations available on line.

Go to http://chapters.hbsp.harvard.edu and scroll down to the “Competitive Strategy” section. The Adaptive Enterprise chapters are the first entry in this category.

September 2, 2008

 

What Does “Sense & Respond” Mean in the Department of Defense?

Two articles address what their authors believe to be a widespread misunderstanding in the DOD about “Sense and Respond.” In their view, the term has spread throughout the military much more rapidly than has an appreciation of what it means.

• One of these articles, by Marine Corps Major Mark Menotti, now appears on the first page of a “sense and respond” Google search. Menotti completed Sense and Respond education, and has conducted his own research on the applicability of S&R managerial principles to Marine Corps transformational challenges. He is particularly qualified to write on the subject.  His overview of S&R is available at http://www.lionhrtpub.com/orms/orms-8-04/enterprise.html Here is his introduction:

 

What is an adaptive enterprise? What does it mean to be a “sense-and-respond” organization? These terms are becoming quite popular within the business community, and the terminology has also piqued the interest of many government agencies as well. However on several occasions, well-meaning individuals are incorrectly labeling ideas under these titles. This article will provide a condensed version of what it means to use these titles and explain why the U.S. Marine Corps should consider redesigning its current structure in order to become a “sense-and-respond” organization.

• “Sense and respond: an emerging DOD concept for national defense” is an article by Russel A Vacante in the February 1, 2007 edition of Defense A R Journal. It is now available from The Free Library at http://www.thefreelibrary.com/Sense+and+respond:+an+emerging+DoD+concept+for+national+defense.-a0167026978The article positions Sense and Respond Logistics in the larger context of the Sense and Respond managerial paradigm. The first paragraph sets forth the author’s objectives:

Sense and respond is a concept that is emerging from the context of the network-centric environment. The relative unfamiliarity of this concept within much of the defense community suggests that its meaning and necessity are not completely understood. To help make sense and respond less a catchphrase and more a well understood concept, the text that follows will address: what the term sense and respond means, why it is important to our national security, and its relationship and application to the logistics community. The goals of this article are to provide the reader with a fundamental understanding of the sense-and-respond concept and promote greater dialogue among a larger group of interested parties on this concept.

July 1, 2008

Extending Sense & Respond Logistics (S&RL) to Sense & Respond Combat Support

S&RL was a response by the DOD to the realization that “event-driven demand-pull” provisioning is inherently more effective (and ultimately more efficient) than “predict-plan-push” supply chains.  A 2007 Rand Corporation Monograph by Robert S. Tripp proposed extending S&RL to incorporate additional Combat Support capabilities…..but still within the framework of a traditional (albeit technologically enhanced) Command and Control system.

The logical conclusion of this evolution is the incorporation of Logistics, Intelligence and Operations capabilities into a coherent and highly adaptable Sense & Respond Combat System. But the more inclusive the response capabilities, the more silos and sub-optimizing performance metrics are dragged in. As it stands, extraordinarily adaptive and effect-driven war fighters must still rely on efficiency-driven “back-office” systems.

An interesting question, therefore, is how far down the technology path a sub-optimizing military can go before the lack of a corresponding managerial transition from Command and Control to Context and Coordination becomes an insurmountable hurdle.

May 10, 2008

CEOs Focus on Coping with Change…….Again

Struggling with the information age challenges of unpredictable change has occupied senior managers for at least three decades. According to a new study by IBM this continues to be the case – only more so.

In its third global survey of over 1000 CEOs and public sector leaders, IBM discovered that the number of executives expecting substantial change has increased by 18 percent in the past two years (from 65% to 83% of those interviewed). Sixty-one percent stated that they had changed successfully in the past — which may sound high, but many executives (and companies) who have not successfully adapted were presumably no longer around to be interviewed.  Market factors and access to competent people were said to be the two most significant factors affecting an organization’s ability to cope with the changes confronting it.

“Virtually all CEOs are changing their business models,” is a particularly interesting finding of this survey. It indicates that the battle ground of change management is itself changing. What was early on considered an imperative to produce adaptive product and services, and then adaptive strategies, is now becoming an issue of rapidly adapting thebusiness model. (See Microsoft’s Steve Ballmer’s assessment of how difficult this is in the Essay on Managerial Models).

Just as modular design became recognized as the best way to make products and services adaptable, so modular organizational design seems destined to become the way to make business models adaptive. This is why Role and Accountability Designs are central features of S&R organizations. Learning how to create and implement such designs will become a core managerial competence. (See Next Practices descriptions on the S&R Workshop page .)

April 30, 2008

U. S. Marine Corps Implementation of Sense & Respond Logistics (S&RL)

The Marines’ implementation of S&RL demonstrates how networks of organizational capabilities can be leveraged by role-specific OODA-loop support. (OODA: Observe-Orient-Decide-Act is the military acronym for SIDA:Sense-Interpret-Decide-Act). Real-time sensors and near-real time diagnostic software augment the ability of decision-makers to know-earlier and respond faster to what is currently happening (see the November 1, 2007 entry below). Linking these decision-making roles in a logistics network elevates an improvement in individual performances to an overall improvement in the effectiveness of the USMC logistics organization.

The success of such an implementation depends heavily on the quality of judgments made about which capabilities are subject to demands stable enough to warrant integrating them in advance as automated procedures and standard processes; and which must respond to unpredictable events. These latter must be dealt with by dynamic, instance-specific capability linkages that are orchestrated in near real time by the individuals occupying organizational roles.

The video clip at www.usmc-srl.com/MDM-2007.html describes how the marines use S&RL to respond rapidly and specifically to the maintenance needs of individual LAVs (Light Armored Vehicles).

Other recent entries on this page related to SIDA loop implementations: August 27, 2007, and February 1, February 6, March 17, and April 11, 2008.

April 14, 2008

Knowing Earlier with Metaphors

Marketing Metaphoria by Gerald and Lindsay Zaltman has just been published by Harvard Business School Press. Jerry Zaltman is an Emeritus Professor of Marketing at Harvard, and creator of a patented methodology for eliciting the deep metaphors that are common among people who encounter a particular company, product, service, experience or issue.

As the authors say in the Introduction, the method was developed, “because most of what people know, they do not know that they know – and what they say may not be what they mean—since most thoughts and other important cognitive processes occur unconsciously.” The Zaltmans provide dozens of examples of first-tier companies who have successfully leveraged this insight.

Though positioned as a marketing research innovation (and it is), their metaphor elicitation method has important implications and applications for customer-back business strategies and organizational designs. It is a tool for knowing earlier than customers what they think and feel…..a diagnostic for developing and validating differentiated value propositions, and for delivering preference-creating experiences.

March 17, 2008

Managing by Wire: The Original Article

“When pilots fly by wire, they’re flying informational representations of airplanes. In a similar way, managing by wire is the capacity to run a business by managing its informational representation. Manage-by-wire capability augments, instead of automating, a manager’s function. Fly-by-wire technology—and by extension managing by wire—integrate pilot and plane into a single coherent system. The role and accountabilities of the pilot become an essential part of the design. Autopilot, or complete automation, is used only in calm, stable flying conditions. The system design allows for considerable flexibility in pilot behavior, including the ability to override the technology if, for instance, a sudden storm arises.”

Almost fifteen years after it’s publication, the seminal “Managing by Wire” article is featured in a current Harvard Business Review advertisement. The excerpted passages in this ad provide an excellent summary of the article.

Although it preceded the publication of Adaptive Enterprise by six years, the concepts of sense-and-respond, adaptive Sense-Interpret-Decide-Act loops, roles and accountabilities, and coherence as an organizational imperative were already emerging. But if the article were written today, three modifications would be appropriate:

• A distinction would be drawn between “enterprise models” as informational representations of a business, and “role and accountability” (R&A) designs as expressions of policy-level executive intent.  In 1993, enterprise models were the creations of IT professionals, who did their best to elicit executive intent through interviews and interpretations of policy and strategy documents and executive memos and speeches. In a very real sense, “enterprise models’” were largely figments of the IT imagination – used as a basis for formulating, designing and implementing IT strategies, infrastructures and systems.
• Because both enterprise models and R&A designs are system designs, an R&A design is the ideal starting point for an enterprise model design. Both are architectures, but while there are many IT architects, there are still very few business architects. Why? Because designing organizations as systems is a new managerial competence….one not yet covered in MBA curricula.
• The analog of an executive managing a business by wire like a pilot flies a plane by wire suggests 1) that human social systems are amenable to the same kind of direction and “management” as a mechanical system….this is manifestly not the case (though it was in fact a premise of early industrial age managers); and 2) that an individual at the top of a large organization could know enough to make key operational decisions in a rapidly changing environment. The need for adaptability dictates moving general management decisions ever closer to the customer. These points would be made in an updated verson.
• The featured example would be the MBW implementation by Glen Salow at the Aetna Portfolio Management Group. This was inspired by the HBR article, and is described in Chapter 9 of Adaptive Enterprise.

The complete article is available as a download from Harvard Business School Press.

February 6, 2008

Attacking Bureaucracy with S&R Weapons

Vice Admiral Robert Conway is Commander, Naval installation Command (CNIC). Established in 2003 to align support of the fleet, its warfighters, and their families at 79 disparate Navy shore installations around the world, CNIC is a $9 billion enterprise of more than 50,000 military and civilian personnel.

Like John Ramsdell (see February 1, 2008 entry), but at the other end of the size spectrum, VADM Conway focused on the Adaptive Loop as a way of shortening decision cycles and introducing the concepts in Adaptive Enterprise. By pushing authority down to the base commanding officers, a better and faster matching of CNIC resources with customer needs was achieved. The roles at CNIC HQ Staff level now consider the base commanders and officers to be their customers, rather than the targets of top-down directives.

An interview in which VADM Conway describes the mission and direction of CNIC appears on page 34 of the February 2008 issue of Seapower. (Click on “Contents” and scroll down to Interview)

At a December 2007 year end session with CNIC regional flag officers and base commanders, Conway announced,

“We are adopting Sense & Respond because it destroys bureaucracy.”

February 1, 2008

Using the Adaptive Loop as an Organizing Principle

Dr.John Ramsdell is an expert toxicologist, and chief of the Coastal Research Branch of NOAA (National Oceanic and Atmospheric Administration), an agency of the U.S. Department of Commerce. He heads a staff of scientists, organized in five or six teams, one of which is an Analytical Response Team. This is a  multidisciplinary group of scientists whose responsibility is to determine the cause of “mortality events” — the strange and often devastating destructions of marine life that occur unpredictably in US coastal waters. Fish kills from Red Tides are one example of these phenomena. The mysterious and often fatal beaching of whales and dolphins is another.

The Analytic Response Team (ART) was chartered to enable more effective responses to these events by the managers in state and federal agencies accountable for marine resources, ecology and public health — for example, Fishery and Wildlife departments. To carry this out, the team conducts fundamental research, devising innovative technologies (such as chemical detection methods having a resolution of one-tenth the mass of elemental hydrogen), and sifting through massive amounts of input supplied by a vast global network of scientific colleagues. The challenge Ramsdell took on was to transform their value proposition from post-mortem assessments to one of giving decision-makers much more precise information, and to make it available in time to be useful in managing the event.

Soon after his appointment to this, his first managerial position, Ramsdell began looking through business books. He found Adaptive Enterprise on amazon.com in 1999, and was intrigued by the idea of designing an organization explicitly to deal with unpredictability. Recognizing that the ART was, in effect, the Sense and Interpret support for state and local event managers, he decided to design the team itself as an interactive set of roles that corresponded to the four phases of the Sense-Interpret-Decide-Act (SIDA) adaptive loop.

January 2, 2008

Traffic on senseandrespond.com increased by 27% in 2007.

29,752 unique visits to the site generated 306,444 hits.  This site continues to be the primary search result for “Sense and Respond,” and this page the most frequently visited.

December 16, 2007

Sense & Respond at a Glance

Two months before the publication of Adaptive Enterprise, The Ernst & Young Center for Business Innovation–a creation of Chris Meyer’s exceptionally fertile mind– held a Conference called “Embracing Complexity.” It attracted and featured innovators in a wide range of disciplines and was focused on how these disciplines could help organizations cope with the reality of unpredictable change — how an organization might itself become more like a complex adaptive system.

Each speaker’s presentation was captured “on the fly” by cartoonists Joe Sterling and Andy Park of Sterling Insights. These men, with no background in the concepts or terminology of the topics being presented, were consistently on the mark in their summary representations of the stories and major messages delivered by the presenters.

Here is their rendering of Sense & Respond.

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