"The Adaptive Enterprise", Greg Lowes, Nov. 21, 2002, 10:30 a.m.
Greg Lowes, Practice Leader, Strategy & Change, IBM Business Consulting Services, at "Strategy on the Edge: Charting the course in turbulent times", Strategic Leadership Forum, at the Design
Exchange, Toronto, Nov. 21, 2002, 10:30 a.m.
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Strategy not as a static target.
Objective: Present and help you understand a new model to look at your business.
Different approach from predict and plan.
Assertion: you can't predict the future, so how can you create a response?
Will walk around the adaptive model.
Will address why you want one.
How you go about injecting sensing and responding behaviours.
There are two ways of looking at business models:
1. Industrial age model:
Could predict what would happen in the next planning cycle.
Then the trick is then how execute on this.
This works well in stability.
Focus on making and selling
2. The network age model (or sometimes called the e-business model) assumes that you can't predict.
What can you do about this?
Need to change to sense, and then find an organizational response for the timeframe.
It's an open system, to sense what's out there, and then assemble a response.
There's a continuum in organizational orientation from offers to requests
Business scope: products and markets
Core knowledge: process know-how
Structure: integrated mass production hierarchy
Organizational priority: efficiency and predictability
Profit motive: Economies of scale
Business scope: Capabilities and customer values
Core knowledge: Systems know why
Structure: Modular mass customization
Organizational priority: Flexibility and responsiveness
Profit motive: Economies of scope
Adaptive model in two parts:
Change is discontinuous
Need to dispatch
Adaptiveness and sensing and responding can be in multiple ways:
One extreme is reactive: listen and comply
The other extreme is proactive: anticipate and comply
e.g. a doctor
Becoming adaptive requires three core competencies
Today, not focusing on sensing.
We want to drive capabilities from the customer's request back.
At an organizational level, we want to design our business as a system.
Focus with clarity, on the customer
"Firm-forward": what products and markets in the strategy, communicating, and then hoping.
"Communicate and hope" doesn't work in an unpredictable environment.
Secondly, form around capabilities
When predictable, efficiency was key.
Like a bus company
Schedule, as make, then sell.
Sometimes, an alternative
Sense customer value, and then respond.
To design an open, adaptive system, how do you do this?
A challenge in traditional strategic planning is incoherent behaviour.
Need to focus on getting away from incoherent behaviour.
Clarity of purpose
So we don't have to deal with conflicting mission statements
How to trade one off against the other
As a leader, can reduce this ambiguity
What behaviours are appropriate
We will always do ... and we will never do ...
Also guiding principles
Relationship between parts
An example of reason for being:
General Motors exists to make money by making motor cars
A good example: we exist << for something >> by << doing something >>
GM was a good place for car designers, but this purpose reorients the purpose as a place to make money.
How would you come out with a similar statement for your firm?
To create a system design, also need capabilities and roles
We want to design a network of capabilities
Capabilities are given a structure by a system design.
e.g. GM making money by making motor cars draws on multiple capabilities
These come to life by adding accountable roles, towards a system outcome.
To design a system, you need to define the capabilties, and then define what roles owe what to whom
Role owners are accountable for outcomes
Senior leaders are accountable for giving accountabilies to others.
Leaders are accountable for the total system outcome.
How do we govern this?
A commitment management system.
Need to connect customer-back with capabilities.
You need to be able to dispatch capabilities to very granular dispatches.
There's an important role, of a dispatcher.
Can dispatch at a central role and at the individual level (e.g. the taxi driver).
Needs to keep track of commitments of capabilities, and the deliverables between role.
You see this behaviour in matrix organizations.
Returning to the Sense & Respond model, as a whole
Senior leader's role, to reduce ambiguity through a reason-for-being.
Why do this?
To align the organization to being customer-back.
Significant reduction of internal transaction costs.
Clarity of roles, accountabilities and authorities
Incorporate partnres and suppliers
Designed for change, as opposed to predicting.
There are five areas that the leadership team needs to focus on
Do we understand our reason-for-being?
High-level business design.
Adaptive role design -- how to populate people and skills.
Execution mode, commitment management
Suggests a change in the way senior leaders work:
Not a focus on efficiency.
1. Most important to create organizational context -- reason-for-being
2. Create a commitment management system
3. Populate the roles with appropriate people.
Controlling or reducing ambiguity. Comfort with ambiguity gives individuals an ability to respond, as they're empowered.
If senior leaders are good with handling ambiguity, then they're limited in their scope.
Could result in sub-optimizing at the interests of each individual leader, rather than at the whole
From a network of capabilities to a network of roles. Explain the transition.
The network of capabilities is to respond to a customer.
What makes it come alive is someone who is accountable.
Need to also connect the people in roles.
The network of roles is not an organizational reporting structure, but the relationships which get set up a the moment to satisfy requests.
A set of examples that have gone through this process, and organizational types that respond well to this.
None that is end-to-end, but most.
An example: IBM Global Services
Need to go to market satisfying customers.
A capability network that can be reconfigured.
Any large matrixed organization would satisfy this.
Worked with an HMO in California, though purpose and bounds, into commitment.
Question of who they own allegiance to: customers, hospital, doctors, ...
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