Foresighted self renewal for Organizations

© 2016 SEDLÁK & PARTNER 22
Foresighted Self-Renewal for Organizations
Guest Professor
Robert A. Sedlák
East China Normal
University (ECNU)
Shanghai

New Perspective on Organizations – on the
Basis of the Newer System Theory
1/13/2016

Overview of systems
1/13/2016Source: Cf. Von Schlippe & Schweitzer, 2012, p. 129.
Systems
Externally Organized Systems
(Machines)
Self-Organized Systems
(Living Systems)
Biological Systems Meaningful Systems
Social Systems Psychic Systems
Interaction Group Family Organization
Cooperation/
Network
Societal functional
systems/
society as a whole

Our understanding of organizations
1/13/2016
Organizations are not tangible.
Organizations can not be touched.
Organizations can not be kissed.
Organizations can only be observed.

Organizations are highly complex social
communication systems
 The basic element of organizations is
communication; the most important
communicative event is the decision
 Organizations are operationally
closed and self-referential
 Organizations do not see what they
do not see
 Organizations can not be changed
from outside
 Organizations have one goal: to
survive
1/13/2016
Organization as social
system

Basic theses about organizations
 Organizations care about past problems in the problem-solving activities
 Organizations focus on themselves when they are left to themselves
 In principle, organizations are wasting resources
 Organizations tend to stick to once-established structures and routines,
even if they are not adequate any more
 Without leadership, members of an organization decide independently,
which of their skills they would like to bring into the organizations and which
not
 Organizations tend to be intransparent towards themselves, instead of
making themselves observable in terms of performance
1/13/2016

Examples for
Misjudgements
1/13/2016

My money's on the horse.
The automobile is just a
passing fad.
1/13/2016
The last German Emperor and King of Prussia
from 1888 to 1918
Source: Maxeiner & Miersch, 2005.
Emperor Wilhelm II.

A maximum of 5,000 vehicles
will be built, since there are
not enough chauffeurs to
drive them.
1/13/2016
German engineer, constructor and
industrialist (1834-1900)
Source: Dorau & Woeckel, 2001.
Gottlieb Daimler

There is no reason for any
individual to have a computer
in his home.
1/13/2016
Founder of the computer company Digital
Equipment Corp., 1977
Source: Schofield, 2011.
Kenneth Olsen

An electric car can not run
more than 150 km.
VW CEO Martin Winterkorn
after Tesla's Model S with a 500 kilometer range
was already available on the market.
1/13/2016
German manager, Chairman of the Board of
Management of Volkswagen AG and Porsche
Automobile Holding SE
Source: Sorge, 2013.
Figure 1: Pander, 2013
Martin Winterkorn

Tesla plans to build a
massive battery factory
With the factory that is scheduled to go into
operation in 2017 automobile sales should
increase from the most recent annual sales of
22,500 to 500,000. In this year, Tesla intends to
produce about 35,000 automobiles.
1/13/2016
Founder of Tesla and visionary
Source / Figure 2: Tesla plant gigantische Batteriefabrik, 2014
Elon Musk

Apple can not produce cars –
can it?
1/13/2016
German manager, Chairman of the Board of
Management …
Source: Dunker, 2012
Figure 3: iCar und der Konkurrenzkampf, n.d.

Examples of
Organizational Blindness
1/13/2016
Press Commentaries

Media Markt’s late reaction
1/13/2016
Example:
 Once successful electronics retailers such as Media
Markt that used the slogan “Stinginess is cool!",
have ignored the change in consumer behaviors
 Previously, the customers got advice from the
specialized retailers and then bought the device in
Media Markt at a lower price
 Today, the same customers will examine the device
in Media Markt and then buy it on Amazon
Source: Hielscher, 2009; ”Hobbyzocker“, 2009.
“Was today first in Media Markt and then in
Saturn in Passau. Media Markt 64,99 and
then best of all in Saturn: “Special Price"
69,99! […]
This is bullshit!
I just ordered here [on Amazon].”
Media Markt intends to attack Amazon

Blackberry missed the
market focus
1/13/2016
Example:
Ottava (RPO). The Canadian smartphone
producer Blackberry doesn’t recover from
the crisis. After a brief return to profit, the
company with the German CEO Thorsten
Heins informed on Friday that it is in the red
again.
Source: Research in Motion in der Krise, 2012; Smartphone-Hersteller kommt nicht aus der Krise, 2013.
Relied too long on keyboard
The former RIM management has ignored the trend for
touch-sensitive screens and relied too long on the
keyboard. Additionally, Blackberrys lag behind iPhone and
Android smartphones concerning the multimedia offer.
Now it is hoped that the ex Siemens manager Heins will
sort things out. He will provide more details about the
restructuring on June, 28th. The company will publish its
figures for the first quarter which ends on Saturday.
Research in Motion in the crisis
Hard times for Blackberry

Why do organizations
recognize changes in
relevant environments too
late?
1/13/2016

Organizations need to reduce complexity in their
observation
1/13/2016
Organizations
as social
systems
Suppliers
Employees
Internet
Customers
CompetitorsBanks
Local Authorities
 Organizations select their relevant environments to reduce complexity and to remain effective – for this
purpose they establish their own observation and evaluation patterns
 The established routines of an organization in dealing with external stimuli are designed to pick out
those signals that confirm the established internal view of the organization on the environments, and to
filter out deviating stimuli
 An organization sees what it sees, and it usually doesn’t realize that it does not see what it does not see

The dangerous self-verification process in
observations
1/13/2016Source: Peterhänsel & Sedlák, 2009, p. 5f.; Wimmer, 1999, p. 14.
“Through the results of the observation, the self-verification process of observations leads
to the establishment of stable meanings in the organization. It condenses situational
assessments to solid explanation and interpretation patterns, and to core beliefs that are no
longer easily undermined by divergent experiences.“
The constantly accepted verification determines the
observation and interpretation
The self-reference of organizations strikes!

Sensing the black swan
How can we preserve the
unusual in our environments
from being normalized in an
instant?
1/13/2016
German sociologist and social theorist (1927-1998)Niklas Luhmann

Two common options how organizations to deal with
“black swans“
1/13/2016
 Organizations don´t even sense
black swans (unusual and
deviant happenings) although
this would actually be possible,
if only they pay appropriate
attention
Option A
 On the one hand, organizations
tend to reinterpret black swans
in such a way that they are
perceived as white swans
 This means that unfamiliar and
deviant observations are
interpreted back and forth until
the world looks normal and
familiar again
 By transforming the black swan
into a white swan the
organization reassures itself
Option B

Observation of the observation
1/13/2016
Looking through
the glasses
Looking at the
glassesLooking at the observation
and evaluation pattern with the
question: Do we still have suitable
observation and evaluation
patterns to monitor our business?
Looking through the
observation and
evaluation pattern

A (company) crisis can be
explained by the fact that
requirements from relevant
environments have failed to
trigger the necessary changes
in the structure and routines in
the organization over time.
1/13/2016
Guest Professor at East China Normal University
(ECNU) Shanghai
Robert A. Sedlák

Self-renewal avoids painstaking emergency
operations
 Environments surrounding the
organizations change very fast.
Markets are becoming ever more
volatile
 Usually, organizations are not able to
keep up with this pace. They do not
change as quickly as they should
unless they are deliberately enabled
to do so
 Lack of self-renewal will result in a
period of massive emergency
operations and thus cost the
organization enormous amounts of
energy to tackle the issues
1/13/2016

Basic mechanisms of the self-renewal process
1/13/2016Source: Own illustration based on Peterhänsel & Sedlák, 2009, p. 6 ff.; Wimmer, 2007b, p.49 ff.
Selection
Variation
Organizational learning ability:
Skillful balancing between change
and stability
Increase internal processing
possibilities for innovative stimuli.
Ability to transform selected
innovations into useful routines.
Increase sources of stimuli in
order to enhance learning
opportunities.
Re-
Stabilization

Reflection points of self-renewal
1/13/2016
Variation Selection Re-Stabilization
• Cooperation with customers
• Market and environment observation
modes independent from customers
• Cooperation in the value chain and
networking
• Monitoring the competition dynamics
• Systematic transfer of knowledge in
the relevant fields of expertise
• Cooperation with the financial sector
• Internal cross-linking and cross-
disciplinary collaboration
• Dealing with discrepancies and errors
• Experimentation
• Aversion to simplistic interpretations
• Promoting innovation in personnel
management
• Dominant forms of problem attribution
• Paradoxical resource infrastructure
and creative destruction
• Managing the unexpected
• Innovative knowledge management
• Regular strategy review
• Effective management teams
 Courage to controversy
 Post-heroic leadership style
 Feeding weak signals
 Dealing with paradoxes, ambiguities
and uncertainty
• Distributing management
responsibilities to match the
organizational architecture
• Self-reflection and external reflection
 Reflecting one's own decision-
making processes and criteria on
the meta-level
 Shared relevance criteria to
observed variations
• Using the distributed intelligence in the
enterprise to make decisions
• Establish a common agreement on the
need for action
• Courage for painful choices
• Personal concerns
• Conditions of stability
• Provide orientation
• Coherent overall concept for
implementation steps
• Professional project organization
• Interaction line and project
organization
• Dealing with uncertainty
• Not overwhelm the organization
• Celebrate successes
• Maintain balance
• Monitoring of change process
• Accompanying reflection and self-
evaluation
• Evaluation of change process
• Self-change of management system
• Consideration of reciprocal exchange
relationships

Relevant questions for foresighted self-renewal to
recognize the tipping points
 Which topics matter to us and have to be observed? How do we make the
selection decision?
 How do we deal with observed trends? How do we assess their
significance? How do we develop hypotheses?
 How do we measure the trends? How do we recognize when a critical mass
is reached?
 What significance do recognized trends have for us? How do we decide
whether we should respond to a trend? How do we make this decision?
 Through which “glasses” do we look at our markets? Can we set trends and
actively influence our market?
 How do we organize the irritation and its processing? Which routines and
structures to observe and evaluate trends are necessary?
1/13/2016

Four Patterns of Change Management
1., 2. and 3. Order
1/13/2016

Levels of change processes in organizations
1/13/2016Source: Peterhänsel & Sedlák based on Wimmer (2007a), p. 13ff.
1. Order Change 2. Order Change 3. Order Change
 Organizations develop by
nature – due to their own
continuous evolutionary
change process
 Organizations are constantly in
motion. They absorb stimuli
from its environments and
adapts its routines – without
planned interventions
 This way of self-adaption does
not require any planned
interventions
 What we perceive as frozen
rigidity is the result of a
permanent, dynamic adaptation
process
 dynamic stability
 Change efforts aim at handling
the respective case for action
and subsequently follow newly
established routines
 At that level however routines
of dealing with change remain
the same
 Similar problems are handled
with the same proven routines
from the past
 What has proven to be valuable
in past is used again and again
 more of the same
 Beyond handling the concrete
case for action the organization
learns to observe itself: its specific
ways of dealing with change and
whether the established patterns
of observation and evaluation
themselves need to be altered
 What do we learn about ourselves
as an organization since we
generate such problems?
 What do we learn about us from
the way how we deal with these
problems?
 The organization leverages the
current case for change to review
and closely scrutinize its existing
patterns of solution. This “meta
perspective” helps to find new
patterns to change and to
establish new practices
 changing the change

Four different initial situations
limited in time permanent
The existing
organizational
architecture leads sooner
or later to an existential
threat
We trust in our natural
ability to adopt.
No further need
Avoid emergency
operations and
prepare in time for
surprises
Manage and avert
an acute crisis
Constantly recognizing
the existing potential for
improvement.
1. Order
3. Order
2. Order

Four different goals
1/13/2016
Genotypic
Transformation
Foresighted
Self-renewal
Crisis Management/
Restructuring
Continuous
Optimization
3. Order
1. Order
2. Order
Source: Peterhänsel & Sedlák based on Wimmer (2007a), p. 13ff.

1. Order change processes
 Organizations are constantly in motion
– in an uncontrolled manner
 What we perceive and experience as
frozen rigidity is the result of
permanent adaptation processes
(dynamic stability)
 It takes a lot of effort to ensure
stability over a long period of time
(e.g. constant quality)
 “The identical” over time keeps its
orientating force only as small
adaptations are being made again and
again
1/13/2016
1. Order

What to do if no longer can be believed
that normal evolutionary adaptation processes
will be sufficient to cope with the
organizational challenges at hand?
1/13/2016
Limitations of first order change

Targeted change interventions in organizations
1/13/2016
If an organization stops trusting in its potential to adapt to
new challenges it will implement targeted interventions.
Here, the following view is taken:
If we don‘t intervene now, damage will happen.
There are four patterns of change management.

Patterns of 2. Order Change Management
Crisis Management/Radical Restructuring/Continuous
Optimization
1/13/2016

Patterns of second order change management
1/13/2016
In management and consulting
2. order interventions have been
widely established:
Crisis management:
 The resolution of an acute, existence-
threatening problem
Radical Restructuring:
 An existence-threatening problem is
recognized; if the upcoming hardship is
not taken care of a serious crisis is
coming up
Continuous Optimization:
 Permanent maintenance of the system
2. Order
1. Order
Crisis Management/
Restructuring
Continuous
Optimization
??

Crisis Management/Radical Restructuring
(Second order change processes)
 Crisis management with short term effects on the profitability and liquidity of
an organization
 However, there is no deep-cutting, sustainable organizational transformation
Examples: Measures to safeguard liquidity, short-time working,
decommissioning of sites, shut down of production lines, sales of company
parts, mass redundancies, massive reduction of capacities etc.
1/13/2016

Continuous Optimization
(Second order change processes)
 Further development of existing success potentials
 Change initiatives such as Continuous Improvement Processes
(CIP), Total Quality Management (TQM)
 Employee suggestion system
 Implementation of quality circles to encourage employees to suggest ideas
for improvement
 Optimization of cross-hierarchical and cross-divisional management and
communication processes
 Establishment of horizontal networks
 Process optimization
1/13/2016

Requirements on the management
Radical Restructuring / Crisis Management Continuous Optimization
 It is a paradox to choose a correct time to designate
the crisis and explicate what the crisis really is, and to
take over the responsibility for the consequences
(neither too late nor too early – any chosen time might
be incorrect)
 In any case, the use of the term “crisis” has to be
related to the reality. The organization should be
confronted with the crisis
 In the short term, it is necessary to define the needs
for change and to initiate change measures to
eliminate the threat
 Establish a set of measures such as reduction of cash
outflow, maintenance of liquidity and intensive
engagement with donors
 Find the right persons to manage the restructuring and
place them effectively in the company
 Take vigorous actions at the right points
 Manage difficult negotiations with employee
representatives and trade unions
 Usually, the crisis cannot be dealt with Board means of
the management
 Develop the opportunity to continuously integrate the
observation repertoire of all involved into the
optimization process in the ongoing operating
business. The aim is to systematically identify
improvement potentials and use them to stimulate the
improvement
 Check the stimuli for change for its usefulness and
relevance and implement the selected impulses in a
timely manner (the organization interprets the
relevance of such change structures or programs
based on the seriousness of the implementation)
 Continuously involve the management since simply
initiating is not enough
 Maintain the parallelism to the normal business
1/13/2016

Patterns of 3. Order Change Management
Genotypic Transformation
Foresighted Self-Renewal
1/13/2016

Patterns of third order change management
Genotypic Transformation:
 A deep cutting transformation of
the organization is processed in a
change architecture that also
comprises a “meta-reflection
process”
 The topic of reflection is not only
the direct reason for change but
also the previous practice of
change and therefore also the
process design, monitoring,
evaluation and learning outcomes
for the organization
 This includes the change of the
change
3. Order
Crisis Management/
Restructuring
?
Genotypic
Transformation
Continuous
Optimization
2. Order
1. Order

Genotypic Transformation (1/2)
(Third order change management)
 The company has realized that if they continue on their path, hold on to their existing
strategic directions as well as organizational structures and processes, they would
sooner or later end up in a situation of existential threat
 Genotypic transformation processes are cutting deep into the company´s
organizational heritage, such as its identity, basic structures and processes
 This includes a radical re-engineering of its organizational architecture including the
related management structures
 Genotypic transformations cause a high level of uncertainty as well as an enormous
degree of anxiety and agitation which become the focus of attention over weeks and
months
 The processes involved are usually under considerable time pressure
 Its success causes an accordingly great, comprehensible, existency-threatening
pressure that makes such transformations explicable

Genotypic Transformation (2/2)
(Third order change management)
 Such transformation processes need a carefully designed dramaturgy that is able to
transform the status quo of the organization into the targeted state within a
reasonable timeframe without losing the existing performance (“transformation with
the motor running”)
 The goal of a genotypic transformation should be to cope with previous experiences
of the organization to deal with such challenges and to finally evaluate this process
in such a way that the organization can learn in a sustainable way
 The management system itself (functional/individual) is affected by the
organizational change and therefore is inevitably put under pressure
 The required organizational transformation also has a leadership change as a
prerequisite – the change begins with the self-conception of the decision-makers
responsible for the change. They need to perceive themselves as being crucial for
the change process

1/13/2016
Genotypic Transformation
 Due to the far-reaching changes, it is necessary to
conduct a careful analysis of the experiences that
made an organization to have such "unreasonable
demands" in the past
 Ensure an accompanying reflection on the process
as an indispensable criterion for success and
control
 In the initial situation, the emergency which needs
to be handled has to be appropriately
communicated so that the organization can accept
it and join the handling process
 Overcome the “change fatigue" of organizations,
because it becomes more difficult to credibly
convince the sense of urgency (because it has
been often misused in the past)
 Develop a process architecture for the change
projects to suit their specific dramaturgy.
(Dramaturgy refers to that a change project must
be designed in its inner logic following a very
specific sequence of steps. These steps are not
interchangeable/dischargeable. Each of these
steps is characterized by certain key decisions,
which require the matching processing forms.)
 Establish appropriate personnel measures to each
of these acts
 Shift from the usual certainty of results to the
certainty based on a clearly committed process

Requirements for successful
genotypic transformation
1/13/2016Source: Based on Nagel & Wimmer, 2009, p. 312
Get a common view of current
or future
threat that makes the change
necessary
Which difficulty needs to be
tackled?
Face reality!
Development, creative
communication and creation of
an attractive future
perspective,
which is supported
by everyone
Tension curve
A B
Create transparency through
vertical and horizontal
communication
Establish a common understanding on
views and perspectives
Create and maintain tension
Create a committed, reliable management team
to construct the both poles
“away from“
pushing
force
“towards“
pulling force

Dramaturgy of a genotypic transformation
1/13/2016Source: Based on Nagel & Wimmer, 2009, p. 320.
The well established
momentum of operational
business
Proactively rise to
new challenges

Phases of a genotypic transformation
1/13/2016
“Create transparency for the sense of urgency“
“Create an attractive future perspective“
“Concretization of the implementation steps“
Phase 1
Phase 2
Phase 3
“Management of the implementation process“Phase 4
“Evaluation of the change process“Phase 5

Patterns of third order change management
Foresighted Self-Renewal:
 Foresighted self-renewal enables an organization
to pick up weak and random stimuli from its
relevant environments and to use these to
develop its own performance potential in a
targeted way. It aims at systematically increasing
the organization’s learning ability
 The ability to skillfully balance between learning
and not-learning usually enables the organization
to avoid emergency operations and having to
manage self-induced crises
 The core of the self-renewal is: organizations
need routines to change the change
Crisis Management/
Restructuring
Genotypic
Transformation
Continuous
Optimization
Foresighted Self-
Renewal
3. Order
2. Order
1. Order

Foresighted self-renewal (1/4)
(Third order change processes)
 Enhancing organizational learning capability in order to achieve a strategic,
foresighted self-renewal
 The goal is the broadening of the organizational self-renewal potential
 The “learning“ of the organization itself becomes the subject of learning (of the
change)
 Foresighted self-renewal means to initiate the necessary changes in such good time
as to provide sufficient time for its successful implementation
 The foresighted moment and the future orientation provide a time budget which
makes the necessity of a radical transformations rather unlikely
1/13/2016Source: Peterhänsel & Sedlák, 2009, p. 6ff.; Wimmer, 2001.

 This targeted intervention into the self-adaption capability of an organization ensures
the decisive organizational resilience which enables the organization to perform
successfully even under very adverse environmental conditions
 The organization needs to broaden its contact points with the environment in order to
identify opportunities and risks, and create the necessary internal structure to assess
and process opportunities and risks from the outside
 This means increasing the capability to sense weak signals from markets,
competitors, suppliers and other partners in a targeted way, evaluate their relevance
and trigger necessary innovations

 The organization needs to be highly sensitive to unusual and surprising
opportunities. Furthermore, it needs managers capable of making decisions, who
pick up these stimuli in sufficient time, evaluate their relevance and drive the
required innovations and the implementation
 Self-renewal processes require a careful development of the entire HR Management
to provide the organization with high potentials who are capable of putting the
innovation power into practice; from the recruiting process, through the HR
development process to incentivizing. It requires a proper mix of targeted promotion
of home-grown high potentials and talents recruited from outside

 The self-renewal capability is based on a culture that:
– stimulates and motivates employees to share their deviant observations and
opinions for the sake of evaluating reality and constructing an adequate picture of
what “reality actually is”
– welcomes errors and unexpected anomaly as a source for learning (instead of an
attitude that immediately sanctions mistakes)

1/13/2016
Foresighted Self-Renewal
 In terms of variation, it is important to consider
relevant environments in order to recognize the
developments in these relevant environmental
segments at an early stage and to use them as
stimuli for change (e.g. specific forms of
cooperation with key customers, development
partnerships with suppliers, cooperations with
research/training institutions); it is all about the
constant fine-tuning of the environmental sensitivity
 In terms of selection, it is necessary to create
regular events to evaluate the impression gained
from various environments concerning its strategic
relevance and to draw appropriate conclusion
 Question regularly existing evaluation structures
 Establish evaluation routines at all levels to
recognize the important as well as ignore the non-
essential
 In terms of re-stabilization, it is important to replace
old routines by new in a careful and consistent
manner
 Perform well in the current situation and at the
same time to be open for suggestions, new
chances and opportunities

We would be pleased to show you further
practical examples!

Guest Prof. Robert A. Sedlák
 For over 25 years CEO and chairman of
SEDLÁK & PARTNER International Consulting
Group
 Areas of expertise
– Expert on “Foresighted Self-Renewal" for
organizations
– Development of sustainable visions for
organizations and their successful implementation
– Design and support of genotypical change
processes especially in family businesses
 Guest Professor at ECNU (East China Normal
University), Shanghai
– Topics: Newer System Theory and Learning
Management Systems in the context of teachers’
qualification
– Director of the “ECNU-S&P Research Center for
ICT-Enabled Systemic Changes and Innovations”
in Shanghai
1/13/2016

Hamburg
Shanghai
Headquarter - Ahrensburg (bei Hamburg):
SEDLÁK & PARTNER Unternehmensberatung (BDU) GbR
Schillerallee 4a | 22926 Ahrensburg, Germany
Tel. +49 4102 6993-0
Fax +49 4102 6993-37
E-Mail info@sedlak-partner.de
Branch Office - Shanghai:
SEDLÁK & PARTNER International Consulting (China) Co. Ltd.
No. 92 Tai’an Road I Changning District
Shanghai 200031, China
Tel. +86 21 6248 3599
Fax +86 21 6248 6275
E-Mail info.sh@sedlak-partner.de
www.sedlak-partner.com
Rep. Office - Barcelona:
SEDLÁK & PARTNER International Consulting GbR
Calle de Numancia 20 | 08029 Barcelona, Spain
Tel. +34 6935 18470
E-Mail info@sedlak-partner.de
Barcelona
1/13/2016
Our Office Locations

Foresighted self renewal for Organizations

Recommended

Recommended

More Related Content

Similar to Foresighted self renewal for Organizations

Similar to Foresighted self renewal for Organizations (20)

Recently uploaded

Recently uploaded (20)

Foresighted self renewal for Organizations