2016 has been a year of unexpected losses and shocks in so many fields. How can we prevent 2017 from being dominated by a zero sum game, I-win-you-lose mentality? How can we prevent the gap between super rich and everybody else from becoming an abyss? What can we all do to create benefits for everyone instead of just a tiny minority?
Step One: Start learning about how a mechanistic world view is out of date
Our reality has changed. We live in an age of complexity. This requires new knowledge, new ways of understanding, behaving and managing. The problem is that most organizations are still based on models of reality that are ‘mechanistic’ and out of date. In other words, as long as companies and business school programs exist within silos and traditional command and control hierarchies they will always be sub-optimizing. On top of that, people try to “deal with” complexity in a mechanistic way by simplifying it, cutting it up into more mechanical pieces. This reflects a complete lack of understanding of how parts and the whole interact.
Operating successfully with complexity means seeing that today we coexist with unprecedented levels of interdependencies. It is no longer true that the whole is the sum of the parts because interactions in complex reality lead to emergent properties. These are new realities that emerge from the interaction of parts and that are more than and different to the parts themselves. Attempts to simplify reality, such as the UK breaking away from the European Union, are attempts to turn the clock back to a simpler time, but that is just not possible.
An excellent book for learning more about complexity and emergence is The Emergence of Everything: How the World Became Complex by H. Morowitz.
Step Two: Start learning about how a systems view of the world is the most appropriate for our age of complexity
When we acknowledge this new interpretation of reality as complex, we inevitably see the need for an appropriate way of thinking, organizing, and acting. This cannot be the same way of leading and managing that was appropriate for a mechanistic world. What can we use instead? The answer has been around for some time now.
What leaders and managers need to learn from science is that organizations are inherently systems, i.e. an integrated whole and the properties of this whole derive from the interrelations among its parts.
This understanding applied to organizations was already clearly demonstrated by W. Edwards Deming, the founding father of the quality movement, in the 1950s in his famous sketch of “Production Viewed as a System.” Understanding organizations as systems means understanding and managing them as a whole (holistically) in context and in relation to the value chain of suppliers, customers and all stakeholders, certainly not just shareholders. This entails understanding and mapping interdependencies and a need for win-win collaboration inside and outside the organization.
The historical shift towards a systemic world-view is presented in Fritjof Capra’s book ‘The Systems View of Life: A Unifying Vision’.
Step Three: Start learning about how collaboration trumps competition
In conventional hierarchies, people need to collaborate to achieve results, but this collaboration is greatly impeded by:
- separation into silos
- cost accounting measurements that discourage a flow of collaboration
- competition among members of staff because they are measured (and promoted up the ladder) based on local considerations instead of the global achievement of the goal by the organization
Competition is drilled into people’s minds from an early age and compounded by awarding grades and a series of certificates and badges. To quote Dr. Deming, “Ranking creates competition between people, salesmen, teams, divisions. It demoralizes employees…The merit system destroys cooperation.”
The job of management is to manage and enable cooperation. Paradoxical as it may seem, in today’s complex reality cooperation needs to happen even among ‘competitors’ because the name of the game is expanding the market, making a bigger pie instead of fighting to gain existing market share. This requires breakthrough, innovative thinking (see the Thinking Process Tools from the Theory of Constraints.)
We heartily recommend everyone to read Deming’s ground breaking ‘The New Economics: For Industry, Government, Education ‘ for a fully articulated vision of a systems-based approach to management and economic life.
Step Four: Start learning about how Network Science can help decipher what happens around you
The new science of Network Theory is casting light on the nonlinear dynamics that take place in the highly interconnected world we now live in. (see Barabasi: ‘Linked: How Everything is Connected to Everything Else and What it Means for Business, Science and Everyday Life’.) Our fast changing socioeconomic environment is shaped by networks, whether we realize it or not. Social networks are one thing and they can be completely artificial, such as Facebook, in that they serve no real purpose other than providing their owners with tons of data they can then sell. But networks can be created for a purpose to achieve a common goal.
An organization can be seen as a network within networks. Rather than talking about a value chain instead of supply chain, today it makes more sense to talk about a value network. The role of leadership for complexity then becomes very clear; to guide how these networks of interdependencies occur so that the organizations within them can achieve their maximum potential.
At Intelligent Management we have taken this further to propose an operational solution for the problem of silos. It is a new organizational design that we call the ‘network of projects’. What we advocate is the transformation of the conventional silo-based hierarchy into an organization where there is full systemic optimization, made up of projects and processes, where the control mechanism is the management of buffers through statistical understanding. In this organizational design, company functions are seen exclusively as pools of competencies. These competencies are allocated to projects using a mechanism based on finite capacity.
In this systemic organization as a network of projects, leaders will be the enablers of meaningful and market-driven projects and will foster a new organizational climate, one of cooperation and win–win. We discuss this further in ‘Quality, Involvement, Flow: The Systemic Organization.’
Step Five: Start learning about sustainable network wealth
To fully embrace and thrive with this new, systemic organizational paradigm, we need a new cognitive lens, a new covenant with the concept of wealth creation and new tools to inspire and guide our people.
Far too many, and often prevailing, economic and financial models pursue an idea of value that is divorced from any concept of the general wealth and wellbeing of individuals and society. Such models are based on a systematically disproven “rational” behavior that is driven by the desire for individual profit. These models are rooted in the paradigm that if somebody wins somebody else has to lose. They call it “competition” and a gigantic and ineffective apparatus has been created to “ensure” fair competition.
The vision we propose is that of a new economics where companies takes very seriously their commitment to the future and see themselves as an ongoing generator of wealth for all their stakeholders and society at large. Accomplishing the organizational transformation required for all organizations to fulfill their role of sustainable wealth creation does call for a higher and better use of our intellect.
A new economics informed by a knowledge of systems and networks must be based on the founding assumption that no win can be based on somebody losing; that we are all interdependent and the wellbeing of individuals is critical for the wellbeing of society; that wealth must be created in order for it to be distributed and any form of imbalance will soon turn into a global loss; that individual success to the detriment of others cannot be sustained. This is what Network Theory clearly illustrates. A new economics must be founded on the assumption that individuals, organizations, large systems, networks and, ultimately, countries are vehicles for the creation and distribution of ideas, products, and services that help everyone to live better, more intelligently and harmoniously with our environment.
All the foundational work, needed for management to become a new kind of science and, as such, a major contributor not just to wealth creation but also to wellbeing, already exists. Now is the time to apply that knowledge and shift from the paradigm of Maximizing Shareholder-Stakeholder Wealth to one of Maximizing Sustainable Network Wealth.
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About the Author
Angela Montgomery Ph.D. is Partner and Co-founder of Intelligent Management and author of the business novel+ website The Human Constraint . This downloadable novel uses narrative to look at how the Deming approach and the Theory of Constraints can create the organization of the future, based on collaboration, network and social innovation. She is co-author with Dr. Domenico Lepore, founder, and Dr. Giovanni Siepe of ‘Quality, Involvement, Flow: The Systemic Organization’ from CRC Press, New York.