What's the killer stalking your organisation? It isn't disruption.

The first blog post in a new series to accompany our latest research topic of 'Design for Speed'.

Change and disruption are as likely to be opportunities as they are threats.  Which of the two they are depends on how – and most importantly how fast – you respond to them. Help us crowd-source the best ways to respond fast.

Most organisations aren’t designed in a way that supports strategic speed.  Instead, most are designed to optimise the balance between cost and control, with the organisation’s strategic response speed determined by what’s left over. 

However, the big threat to your organisation isn’t that its costs are too high, or that it’s controls aren’t 100%.  The big threat is that the world changes faster than you can respond, so you become increasingly irrelevant (at which point costs do become an issue, and control weaknesses do come to the fore).

Instead of seeking to optimise cost and control, an alternative is to set reasonable constraints on cost and control, and then within them to design your organisation for speed.

Such a major organisational change would only make sense if your ability to respond wasn’t quick enough. Chances are that it isn’t.  Organisational design for strategic speed is a very new area, so most organisations won’t know how fast they are, nor have anyone responsible for it.  Equally, most organisations aren’t moving as fast as they would like, nor as fast as they need to be.  But, there are things you can and should do. 

We first started thinking about this topic a few months ago in response to an inquiry from a potential client who wanted to know how they could change their organisation structure to increase the speed of their change projects.  Naturally, we developed some suggestions for them – but we also researched to see what others are doing about this.

We found very little on the topic, beyond lots on “agility” (which is a related but somewhat more limited concept).  So, we’ve decided to organise an “open source” effort to learn more about “Design for Speed” – and to share what we learn.  Here are the sorts of questions we are looking to answer:

• Who should be responsible for organisational performance? Who tends to be today – even if  informally?
• How can we tell if an organisation isn’t responding fast enough? What are the warning signs?
• How can we usefully measure speed of strategic response? (We have an approach, but we want to see how generally applicable it is.)
• What do we know already about approaches to increasing organisational speed? Are there “tweaks” that can be made that have a big impact on speed, or is a fundamental rebuilding needed?
• Is there a reliable process for redesigning an organisation for speed? 

If you are interested in this topic, here are some ways we would love to have you involved:

1. Join the Linked In group.
2. Participate in one or more of our “Design for Speed” roundtable discussions to explore this in more depth.
3. Share what your organisation is doing to improve organisational (strategic) speed – or any of the components of the strategic response cycle.
4. Point us towards good examples of what others are saying about Design for Speed (or other related topics).
5. Ask to attend one of our breakfast seminars where we share a bit more about the Design for Speed idea, and you have a chance to discuss it will other business leaders.
6. Introduce us to the person in your organisation who has responsibility for (or should be interested in) organisational speed.
7. Let us know you are interested and would like to be part of activities (yet to be defined) in future.

And, please do feel free to share these thoughts and ideas with others you know who might find them of interest.

Until next time!

Are fishermen always liars?

We all know about the stories fishermen tell of the one that got away. I'm wondering if fishermen aren't liars in a different sense. To catch a fish, they offer something: a worm, a fake bug, something. But, it's not what it appears to be. It's a hook disguised as something tasty (at least to a fish). In essence, it's a lie. It only works because the fish can't tell the difference. It's not a fair exchange, it's basically theft.

Maybe that's ok if you're lying to is a fish. But what about lying to people? How many businesses only work because they know more than their customers, because their customers can't tell the difference? However many, the truth is they aren't creating any real value, they're just lying, cheating, and stealing.

What to do when you just don't know

Exec teams and Boards spend a lot of time focused on risk and risk management.  Rightly so in today's world.  But, there's something else - different from risk, but often confused with it - that senior executives and Board members should be equally, if not more, concerned about. It's radical uncertainty. John Kay, in a recent column in the FT (The other multiplier effect, or Keynes's view of probability - http://on.ft.com/OslEcY) touched on this topic:

Keynes believed that the financial and business environment was characterised by “radical uncertainty”. The only reasonable response to the question “what will interest rates be in 20 years’ time?” is “we simply do not know”.

I suspect that admitting "I don't know, we don't know, it can't be known" is difficult for many business leaders - particular on any topic related to their business.  There's a lot that could be said about why that is, and the sometimes negative consequences.  But, there's a different angle I'd like to explore.  If you accept that your business is facing some degree of radical uncertainty, how does that change the way you ought to think about strategy?

A lot of strategic thinking is based on the assumption that you can forecast the future (or at least assign realistic probabilities to a known range of outcomes in the future) and then pick the actions most likely to give you what you want.  But, "radical uncertainty" means you can't even know the full list of possible outcomes, much less how likely each one is. No matter how well you do your analysis, there are just going to be some key decisions where that way of thinking doesn't work .

Of course, it's not all fog and darkness either.  Businesses have more data, more analytical tools, more knowledge available to them than ever before.  And, our ability to model complex business ecosystems and see previously unexpected interactions and outcomes has also improved. But, most of these tools work best for "how" sorts of things: How many new customers are we going to get if we spend £x? How long will it take develop the next version of our product? Plus, they are based on extrapolation from the past, which means that they only work as long as the future looks a lot like the past.  Don't assume that's going to be the case.

So, what does this mean for strategic thinking - particularly at the top team level?  At minimum, since you almost certainly face some degree of "radical uncertainty", it's worth discussing as a Board how that very fact might need to modify your decision making process. Even better, consider this question: "If we can't know for certain what will result from our actions, are there still things we would want to do or be - for themselves, not for what they bring?"

SWOT analysis - the AK47 of strategy tools

Discussing an upcoming strategy workshop with a new client recently, they said they wanted to use SWOT as one of the key tools.  SWOT analysis is an almost universally known strategy tool, but - for those who don't compulsively collect strategy tools - it's simply a listing (usually in a 2 x 2 grid) of an organisation's Strengths, Weaknesses, Opportunities, and Threats.   It's basic, sometimes seemingly too basic.  It's the AK47 of strategy tools - widely used (particularly by organisations that can't afford the latest and greatest), robust, can be used  with almost no training. Plus, it's surprisingly effective. And, a bit like the AK47, it's been around for a while: SWOT analysis, or perhaps an early precursor to it, was developed in the 1960s by Albert Humphrey, an American consultant who eventually moved to London (I gather for love, like so many other good consultants).

As I was opening my mouth, getting ready to explain to my client that we really might want to try something a bit more modern, and a bit more sophisticated, I stopped.  In a flash, two thoughts struck me: 1) If sensible business leaders have been using it for so long, and so widely - particularly in organisations, like this one, that didn't have the luxury of faffing about things that don't work - it must be good.  2) When I've used it, even when I didn't expect much from it, it always was useful.

After the meeting I thought for a bit about why it is so effective, when lots of other strategy tools have come and gone.  It focuses attention on  the "here and now" reality of the situation a business faces. And, it covers the waterfront.  It focuses attention on external and internal issues, it focuses attention on the positive as well as the negative.  Organisations often have a bias to focus more heavily on one end or the other of these dimensions; SWOT highlights where there might have been insufficient attention.

But, perhaps most importantly, it stimulates useful discussion and debate. When it comes to strategy, it's generally not the facts that matter.  The interpretation of facts - what they mean and what, therefore, should be done about them - is where the real value lies.

There is no China after China

Does it happen to you that a thought sometimes just appears, and then won’t go away? That happened to me when the phrase “there is no China after China” flashed across my mind.

I’d been thinking about how low-cost labour in China has driven much of what’s been happening in the global economy: massive imports of low-priced goods dampening inflation leads to central banks allowing an excess of liquidity, then to a global asset price bubble, and then (eventually) to the inevitable re-pricing and the exposure of a growing number of financial institutions as bankrupt.

What struck me wasn’t the long chain of consequences with a disruptive ending. (It’s just one example of the intertwined and unexpected nature of our global economy - which creates what we call The Age of Discontinuity.) What struck me was that a key idea that has been true for a long time probably won’t be true in future: “there is always somewhere with cheaper labour”. Not just slightly cheaper – but lots cheaper; enough cheaper to drive major shifts in economies, enough cheaper (and enough of it) that businesses have to respond. This has been true for the last 20 years or longer, if not about China then about some “somewhere”. It’s been true for so long, it’s probably an unexamined part of the mindset of many business executives and a key part of the strategy of a growing number of businesses.

But, the real cost of labour in China has started to go up and there’s reason to believe that we aren’t far from the point where China’s labour surplus is effectively used up. “So what?” one might say: there’s always somewhere else – Indonesia, Peru, Nepal, somewhere. But, around the globe, there’s no labour market nearly the size of China’s. While there might be enough additional low-cost labour for any one company, here are lots of companies where a key element of the strategy is lower cost – ever lower cost, lower than competitors’ costs – and a large part of expected future profits are predicated on having this lower cost. And it can’t be that they all will get the low cost labour they expect – there just won’t be enough at low enough cost.

I can’t know what the full implications in will be as we reach the end of new pools of low-cost labour joining the global economy. At one level, it will probably be a great thing; it should mean the end of the massive unemployment so pervasive in the developing world with huge benefits in terms of length and quality of life. But, for business leaders in the developed world, it means a need for a major rethink about competitive advantage and growth plans – a rethink that won’t get started without a recognition that “there is no China after China”.