23 July, 2020
The economist Milton Friedman observed that: “Only a crisis – actual or perceived – produces real change”.
Several years ago, I consulted to a technology business that for a long time had been the only player in its market. Now, however, it was close to being in crisis. Its markets were fragmenting and changing at pace; and it was losing market share to smaller, more agile tech businesses. It was struggling to compete because of its hierarchical, risk averse and segmented culture. This meant that decision-making and innovation was slow. It was clear that if they did not adapt, then they would not survive.
Disruption and change
This is not an isolated case, however. Many organisations have been designed to deliver a relatively defined product or service to stable and bounded markets. Their success has relied upon standardised processes that have enabled them to do the same basic function efficiently and productively. Our ‘worlds’ are, however, changing at pace as a historical process of social and economic upheaval unfolds around us. Globalisation, digital technology and the climate crisis are disrupting the existing order. The global pandemic is accelerating this process and triggering further levels and forms of disruption.
As the world around us reconfigures, we are all faced with a challenge to adapt. However, like the technology business, many organisations are struggling to do so and are in crisis (or close to it). A crisis represents a moment when who we are and how we exist in the world becomes increasingly problematic and damaging. For an organisation this might mean economic losses, falling morale or reputational harm. Adaptation requires changing an aspect of who they are and in doing so let go of something that partially defined them and proved helpful in the past. This means taking a hard look at who they need to be, their purpose and how they organise.
Charles Darwin notably observed that it is not the strongest or most intelligent species that survive, but the most adaptable. We can make similar arguments about organisations. Whilst an organisation might be highly successful, and in this sense adapted to its environment, this does not guarantee its longer-term survival. As societies, economies and markets are become more dynamic and uncertainty, organisations need to cultivate adaptive capacity. In my book, Disruption, Change & Transformation, I define this as the ability of a system to modify itself in response to changes in its environment (Day, 2019). This requires a different organising logic and set of conditions to what has been the norm in organisations (i.e. innovation, change and adaption are privileged over efficiency and productivity).
We already know a lot from social psychology, complexity science and organisational theory about the conditions that give rise to adaptability in organisations. These could be simply summarised as:
> A clear sense of purpose and shared values provides the basis for collaboration, self-organisation and coordinated action across complex formal and informal networks.
> High trust, self-management and shared responsibility are critical if people are to open up and share information, to take risks and to authorise themselves to make decisions.
> Diversity, variety & difference creates a potential for a greater range of responses to novel events because of alternative perspectives, a greater breadth of capabilities and the ability to combine capabilities in multiple ways. This reflects Ashby’s Law of Requisite Variety (Ashby, 1956) which states that if a system is to be able to deal successfully with the diversity of challenges that its environment produces, then it needs to have a repertoire of responses which is as much as the problems thrown up by the environment.
> High connectivity and decentralisation generate multiple paths for information to be shared across a system and limit bottlenecks or distortion of critical information that arise with excessive centralisation.
> Redundant and distributed capabilities create slack in the system which enables responses to new, unknown and unexpected events at a local level. Distribution of resources across a network increases resilience because each local unit has resources and skills to respond to local events.
These conditions require a belief in the capacity of complex systems to self-organise, the power of social networks and a deep belief that employees are: self-motivated, able to learn and desiring of responsibility.
Returning to the technology business, both intentionally and out of necessity, with help they started to re-scripting how they organised. This involved instilling a strong sense of purpose, reducing management layers, developing trust, cultivating connections and networks across boundaries, and encouraging risk taking and experimentation. The process of transition was by no means easy as managers and employees were pulled between two competing paradigms. This was confusing, frustrating and painful for all concerned. Yet, over 2 – 3 years, the organisation changed dramatically. Time will tell whether this is sufficient to ensure its long-term survival.
A crisis and an opportunity?
Creating the conditions for adaptive capacity to emerge challenges significant implicit assumptions, beliefs and practices in many organisation. Change is therefore only likely if people feel they are in a crisis and recognise they need to change.
From this perspective, the current crisis is an opportunity for organisations to invest in developing adaptive capacity. The risk, however, in a crisis they retreat to what feels familiar and fall back on ‘more of the same’. At the end of the day, in a crisis we all face a choice of whether to change or not. Our response rests on our willingness to step into the unknown and to try something different.
Ashby,W. R. (1956). Introduction to cybernetics. London, England: Chapman & Hall.
Day, A. (2019). Disruption, Change & Transformation in Organisation. Routledge.
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