Despite the fact that systemic change is becoming the new normal for business success, the vast majority of transformation efforts don’t deliver the hoped-for results. Estimates vary, but transformation failure rates range from 60 to 80 percent and don’t seem to improve over time. How to beat these odds? My experience says that an excellent way is to reinvent companies like “Living Organizations” that are designed for continuous transformation.
For decades, organizations were envisioned as “machines” that always repeat the same activities in the most possible efficient way. But these orthodox models tend to collapse when dealing with fast innovation, learning and evolution at scale. They are not able to deal with the combination of an exponential rate of change and an increasing operational complexity at the same time. The involution comes from the compound effect of the two effects, and the dynamic that they have together. The rapid rate of change drives more complexity, and a higher complexity demands change. The greatest strength of such a mechanistic model used to be that it was reliable and resilient enough to maintain the status quo, which was exactly what companies wanted decades ago. However what was once its strength is now its greatest weakness, since machines can’t learn on their own, and therefore they can’t adapt rapidly.
No single organizational model has arisen to replace the old, mechanical hierarchy. But alternatives ways of organizing groups of people are emerging and succeeding. Organizations that want change to drive business strategy are, in many cases, inspired in “living organisms” that works like networked systems designed to drive steady change at speed. Self-learning is a property of living organisms endowed with neurons that can deal with perpetual experimentation, learning and adaption. Life is itself an ever-evolving strategy that has sustained over 3.8 billion years of evolution.
Living organizations optimize the balance between individual freedom (for speed) and the common good (for stability). Activating multiple neurons of talent (micro business units) enables the company to experiment rapidly with lots of singular ideas at the same time. Connecting the neurons through a single orchestrating platform gives stability to the whole, and allows the organization to scale in an exponential way.
The core building block of a living organization is the neuron: small, autonomous, and multidisciplinary teams that are enabled to deliver the experience that customers value, and are empowered to innovate, learn and evolve quickly and easily, without any fear of disrupting other parts of the value game. We can imagine these atomic and self-managed units of work as the neurons of a brain, and some firms have called them cells, pods, squads or even ‘two-pizza teams’. But independently of the name, they operate as ‘nano business units’ that bring together business, design, technology, analytics and any other capability that is needed to create and deliver something truly singular.
Additionally, living organizations need some kind of central nervous system that networks all the nano business units together so they can work as a whole. The secret is to make collaboration as frictionless as possible, because even though most innovations happen at the neuron level, innovation doesn’t have to be contained in one neuron. In this way, living organizations include some kind of networking platform that integrates the parallel work of multiple small, autonomous, multidisciplinary teams.These platforms work as an orchestrating and stabilizing element by providing cultural and functional standards to all neurons.
The perpetual evolution at scale is the keystone of remaining relevant in a volatile, uncertain, complex and ambiguous context, because steady innovation, learning and evolution make a smooth transition from one value game to another. Firms that get this right, without dramatic downsizings or restructuring, are true Value Hackers. The strategic and leadership challenge is, therefore, maintaining an organizational model that can balance seemingly incompatible forces deftly, because firms that master continuous reinvention show a remarkable degree of both speed and stability.
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