This document discusses the need for organizations to become smarter in order to adapt to today's complex world. It argues that traditional hierarchical organizational structures are designed for stability, not innovation and change. Large organizations in particular tend to become less productive and engage employees less as they grow due to increased complexity and bureaucracy. The document proposes that organizations can become smarter by combining hierarchy with open social networks to improve knowledge sharing, adopting a leadership style focused on trust and empowerment over control, and simplifying processes and structures. If organizations make these changes successfully, it could lead to improved performance, innovation and engaged employees.
2. Our agenda
1. Do we need smarter organizations?
2. Designed for the “old” world
3. The response so far
4. Bigger cities are smarter, the work is
smarter – but not organizations?
5. Why are large organizations not smarter?
6. What can we do?
7. If we get it right . . .
www.DynamicAdaptation.com Slide 2
3. Who am I?
I help leaders improve their
business results by
transforming how their
people collaborate, innovate
and share
www.DynamicAdaptation.com
Previously KM Director:
• PwC Canada
• Gov’t agency
Global lead (design / value)
PwC social network
www.DynamicAdaptation.com Slide 3
4. Do we need smarter organizations?
(Drucker, Dilbert and Debs)
www.DynamicAdaptation.com Slide 4
5. Drucker
“Most of what
we call
management
consists of
making it
difficult for
people to get
their work
done”
www.DynamicAdaptation.com Slide 5
6. The Dilbert index . . . most workers could not care
less about their work
71% Of American workers are
"not engaged" or "actively disengaged“
in their work
www.DynamicAdaptation.com Slide 6
7. What would Debs think?
Sickness absence, presenteeism and labour
turnover costs – for example - the UK
economy yearly
£26bn
Source: UK Foresight Project on Mental Capital and Wellbeing
http://www.guardian.co.uk/money/2011/jul/15/happiness-work-why-counts
www.DynamicAdaptation.com Slide 7
8. A comparison?
Large
Sheep organizations
Slow ?
Follow the flock ?
Not fun ?
Can’t fly ?
www.DynamicAdaptation.com Slide 8
10. Our organizations were designed for the “old” –
easier - world
Old world New world
Stable Complex
Repeatable processes Discontinuity
Authoritative knowledge Ambiguous
Adapted from Kent Greenes, “Knowledge Leadership, KMWorld 2011
www.DynamicAdaptation.com Slide 10
11. They used hierarchy – great for repeatability,
planning and control but terrible for innovation
KM strategy in a box
www.DynamicAdaptation.com KM WorldSlide 11
12. And in the “new” world the pressure to be
innovative is mounting
. . .Global hyper-competition
. . .Power shifting from West to East
. . .Climate change
. . .Slow growth
. . .Youth unemployment
. . .Public sector fiscal crises
www.DynamicAdaptation.com Slide 12
13. If we don’t get it right - in extreme cases - extinction!
Image source http://stevedenning.typepad.com/steve_denning/2011/01/is-the-problem-with-capitalism-that-people-try-to-fix-it.html
www.DynamicAdaptation.com Slide 13
15. The response so far . . . control culture
Source http://www.independentaudit.com/growth-strategy-means-we-need-a-stricter-control-culture/
:
www.DynamicAdaptation.com Slide 15
16. The response so far . . . Belt tightening
• Exhortations “do more with less”
• Cost controls
• Business process re-engineering
• Mergers / acquisitions
• Offshoring
• Remote working
www.DynamicAdaptation.com Slide 16
17. Bigger cities are smarter, the work is
smarter – but not organizations?
www.DynamicAdaptation.com Slide 17
18. For cities, bigger is better
With each doubling of
city population, each
inhabitant is, on
average, 15 percent
wealthier, 15 percent
more productive, 15
percent more
innovative, and 15
percent more likely to be
victimized by violent
crime
www.DynamicAdaptation.com Source: http://www.pnas.org/content/104/17/7301.full Slide 18
19. At the same time, work has been getting “smarter”
Source: http://cdn.dupress.com/wp-content/uploads/2012/10/Screen-Shot-2012-10-01-at-9.20.13-PM.png?2b7236
www.DynamicAdaptation.com Slide 19
20. “Smart” work now makes up 41% (and growing) of
jobs in the US
https://www.mckinseyquarterly.com/Preparing_for_a_new_era_of_knowledge_work_3034?srid=520
www.DynamicAdaptation.com Slide 20
21. But larger companies aren’t smarter (like cities)
Cities – get smarter
Companies
- don’t or
get less
smart
Power rules – city versus companies
Source: http://kallokain.blogspot.ca/2012/11/why-cities-live-and-companies-die.html
www.DynamicAdaptation.com Slide 21
22. In fact, average productivity drops by 25% for
each order-of-magnitude increase
In companies with
over 1,000
employees, the
average productivity
of an employee drops
by more than ¼ for
each order-of-
magnitude increase
www.DynamicAdaptation.com Slide 22
Source: http://www.cybaea.net/Blogs/Data/Employee-productivity-as-function-of-number-of-workers-revisited.html
23. Why are large organizations not
smarter?
www.DynamicAdaptation.com Slide 23
24. Three reasons larger organizations are not
smarter
1) The Maze-trix
2) Mind the complexity gap
3) Old think
www.DynamicAdaptation.com Slide 24
25. 1) The maze-trix: silos increase efficiency within a
unit but create boundaries that make co-ordinating
across difficult
Big
Cheese
Assistant
2nd Level 2nd Level 2nd Level
Cheese Cheese Cheese
www.DynamicAdaptation.com Slide 25
27. An maze-trix example - approving a contract
change request at an aerospace company
Source: http://www.bain.com/publications/articles/the-focused-company.aspx
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28. Symptoms of the maze-trix
• Exponential growth of decision points
• Unclear reporting lines
• Meeting overload
• Email overload We need to schedule a
meeting
• Slow information flows
To plan for the meeting
• Lack of “complete picture”
To discuss why we have
• Decision paralysis so many meetings
http://www.zazzle.ca/i_need_to_schedule_a_meetingto_plan_the_meeting
_mug-168219332576188320
www.DynamicAdaptation.com Slide 28
29. 2) Mind the complexity gap: Being bigger means
more bureaucracy – and that demotivates people
so higher-performing staff tend to leave
Complexity
Mgmt
& rules
% of highly engaged /
performing staff
Adapted from: “Netflix Culture” http://www.slideshare.net/reed2001/culture-1798664#text-version
www.DynamicAdaptation.com Slide 29
30. Mind the complexity gap – it kills
www.DynamicAdaptation.com Source: http://paimeiitguy.wordpress.com/2009/05/24/jim-collins-in-the-news/ Slide 30
31. Symptoms of the complexity gap
• Increasing bureaucracy and formality
• Inefficient / over-engineered internal
processes
• Decrease in % of high performers
• Decrease in % of engaged or highly
engaged staff
• Wait times for internal services
www.DynamicAdaptation.com Slide 31
32. 3) Old think: hierarchy is in our corporate blood
“U.S. corporations are historically
imprinted with a hierarchical model—
you develop something at
headquarters, you scale it, and then
you diffuse it.”
Rakesh Khurana
Harvard Business School
http://www.strategy-business.com/article/00164?pg=all
www.DynamicAdaptation.com Slide 32
33. Old think = control culture
Concentration of power
equals abuse of power . . Such
concentrations are blood clots
in the circulatory system of
society. . . The circulation of
wealth, resources, and,
especially, ideas, is blocked. In
a healthy system, information
flows are unimpeded by clots
of power or the sclerosis of
hierarchy.
Philip Slater
The Chrysalis Effect
www.DynamicAdaptation.com Slide 33
34. Old think versus new think: key elements
Old think New think
Control culture Integrative culture
People as thinking People as feeling animals
animals that feel that think
External reward Internal reward
Selfish Connected
Brain is fixed Brain is plastic
www.DynamicAdaptation.com Slide 34
35. Symptoms of “old think”
• Leadership by command and broadcast
• “SMART” performance goals
• Monetary rewards
• Fault-finding
• Low trust
http://c15056394.r94.cf2.rackcdn.com/MITSMR-Deloitte-Social-Business-What-Are-Companies-Really-Doing-Spring-2012.pdf
www.DynamicAdaptation.com Slide 35
36. What can we do?
www.DynamicAdaptation.com Slide 36
37. It can be done . . .
“30% of the top
banks we studied
were able to
improve their
efficiency while
maintaining
healthy growth”
Source: http://www.europeanbusinessreview.com/?p=6500
www.DynamicAdaptation.com Slide 37
38. . . . By combining hierarchy and networks
1. Leadership renewal
2. A new organizational
bicycle
3. Simplicity
www.DynamicAdaptation.com Slide 38
39. 1) Leadership renewal – essential elements
“The soft stuff is
• Reject the “control” culture the hard stuff”
Jack Welch
• Establish shared goals
• Connect through conversation
• Embrace emergence
• Transparency in decision making
• Build trust
• Learn to use social media
• Authentic selves (Empathy versus egotism)
www.DynamicAdaptation.com Slide 39
40. 2) A new organizational bicycle – social networking
“A bicycle makes man the most efficient mover on the earth.
A computer is a bicycle for our mind.” Wilson Miner
www.DynamicAdaptation.com Slide 40
41. The old bicycle doesn’t work very well
Emailed
Knowledge
www.DynamicAdaptation.com Slide 41
42. The new bicycle - social networking platforms
With emails . . . With social networking . .
. . . information, ideas and
questions become isolated - they
only go to the people who received
the message
. . . trying to have a conversation is
really hard
. . . it becomes a guessing game
when working on a document
together (“who made what
changes to which version?”)
. . . the information disappears
over time so that anyone joining
the conversation late has a hard
time coming up to speed
Source: http://www.pwc.com.ar/es_AR/ar/publicaciones-por-industria/assets/transforming-collaboration-with-social-tools.pdf
www.DynamicAdaptation.com 42
43. The new bicycle will enhance idea and knowledge
flows by moving from closed / push to open / pull
Email Social platform
Closed (one to few) Open (many to many)
Push Pull (subscription)
Inside Outside
Ephemeral Persistent
Broadcast User-generated
“We shape our tools, and thereafter our tools shape us.”
Marshall McLuhan
www.DynamicAdaptation.com Slide 43
44. Idea and knowledge flows have to across both
internal and external boundaries
Outside
Near-side
Inside
www.DynamicAdaptation.com 44
45. Note: Some issues will need to be addressed
Training
Intellectual
Regulatory property
requirements leakage
Records
management Security
Privacy /
Reputation Risks Confidentiality
$
www.DynamicAdaptation.com 45
46. 3) Simplicity –drivers of complexity
Source: Addressing general and administrative (G&A) complexity The next frontier in cost-cutting
www.DynamicAdaptation.com Slide 46
47. Simplicity: Its not that simple but organizations
need to work to reduce their complexity
Manage down their complexity:
• Products
• Processes
• Organizational capabilities
• Information architecture
www.DynamicAdaptation.com Slide 47
48. If we get it right . . .
www.DynamicAdaptation.com Slide 48
49. If we get it wrong . . . extinction!
“It’s not the strongest of the
species that survives, nor
the most intelligent, but the
one most responsive to
change.”
Charles Darwin
www.DynamicAdaptation.com Slide 49
50. If we get it right . . .
www.DynamicAdaptation.com Slide 50
Source: http://www.slideshare.net/dhinchcliffe/enterprise-20-summit-2012-closing-keynote
51. If we get it right . . .
Google’s share price
www.DynamicAdaptation.com Slide 51
Examples of scaling relationships. (a) Total wages per MSA in 2004 for the U.S. (blue points) vs. metropolitan population. (b) Supercreative employment per MSA in 2003, for the U.S. (blue points) vs. metropolitan population. Best-fit scaling relations are shown as solid lines.
“Computer technology substitutes for workers in performing routine tasks that can be readily described with programmed rules, while complementing workers in executing nonroutine tasks demanding flexibility, creativity, generalized problem-solving capabilities and complex communications.”Source:http://www.frbsf.org/economics/conferences/0311/alm-skillcontent-qje.pdfQuarterly Journal of Economics, 118(4), November 2003,THE SKILL CONTENT OF RECENT TECHNOLOGICAL CHANGE:AN EMPIRICAL EXPLORATION*DAVID H. AUTOR, FRANK LEVY, AND RICHARD J. MURNANE
US interaction jobs account from 41%, transaction jobs account for 44% and production jobs account for 15%. In Germany it is: 37% interactions, 38% transactions and 25% production. While in China is: 25% interactions, 31% transactions, and 44% production.The rapid growth in interaction-based jobs will soon lead to a global shortage of skilled workers for these slots. The US is predicted to be 1.5 million short by 2020 and China over 20 million shortSource: https://www.mckinseyquarterly.com/Preparing_for_a_new_era_of_knowledge_work_3034?srid=520
Nasser al-Din Shah Qajar [1] (16 July 1831 – 1 May 1896) (Persian: ناصرالدین شاه قاجار Nāṣiru d-Dīn Shāh Qājār) was the King of Iran from 17 September 1848 to 1 May 1896 when he was assassinated. http://commons.wikimedia.org/wiki/File:Nasser_al-Din_Shah_Louvre_MAO776-Edit.jpg
MIT Sloan Management Review and Deloitte -survey of managers (all levels) from companies in 115 countries and 24 industries. 3,478 respondents. From Social Business 2012
“Traditional systems rely on crude, universal policies that favor certain goals at the expense of others. Tomorrow’s systems must encourage healthy competition between opposing objectives and enable frontline employees to dynamically optimize key trade-offs. The aim is to create organizations that combine the exploration and learning capabilities of decentralized networks with the decision-making efficiency and focus of hierarchies.Gary Hamel, Harvard Business Review, 2009
We shape our tools and our tools shape us.A wonderful video by Wilson Miner entitled “When we build”Some quotes:“We shape our tools, and thereafter our tools shape us.” Marshall McLuhan“A bicycle makes man the most efficient mover on the earth. A computer is a bicycle for our mind.”
“The average life expectancy of a multinational corporation-Fortune 500 or its equivalent-is between 40 and 50 years”http://www.businessweek.com/chapter/degeus.htm
“By fully implementing social technologies, companies have an opportunity to raise the productivity of interaction workers . . by 20 to 25 percent.” McKinsey Global Institute, July 2012“companies who outperform their peers are 30% more likely to identify openness – often characterized by the greater use of social tools – as a key influence on their organization.”IBM study of 1,700 worldwide CEOs found