Management by Matrices: Strategy

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Saturday, April 9, 2011

Building an Organizational Grammar

My latest column for The Hindu Business Line - Building an Organizational Grammar
Full text follows
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The full potential of a language can be explored once a grammar systematises key patterns. The user can focus more on creating and communicating ideas and less on creating the structural means to do so.

Similarly, a formal grammar for organisations would enable them to focus greater energies on manifesting their purpose, without constantly reinventing the basic building blocks for doing so.

In this article an attempt is made to understand some of the conceptual units that could make up such a grammar.

Competencies and purpose

The first building block of the organisation is a collection of competencies or areas of expertise. This translates into an overarching purpose (or purposes) for the organisation. Purpose, as such, is an insight-driven discovery, but the insight is usually built upon the bedrock of manifest and un-manifest competencies.

Additionally, purpose is usually an overarching theme that may be able to successfully capture multiple dimensions of the competencies contained within the organisation. The glue that unites competencies with purpose is a shared vision.

The physical manifestation of competencies and purpose could take two forms. Firstly, it clearly influences the areas in which the firm will choose to operate in. Secondly, and, more importantly, it manifests in the choice of leaders who need to be fully aligned with both the competencies and purpose of the firm.

Platforms, Applications and Components

Platforms form the third building block of the organisational grammar. A platform essentially represents a market facing or internal facing proposition that the firm has to offer. A firm may have one or more platforms with possibly overlapping competencies and purposes. A product or service line is one example of a platform.

A platform is, in turn, a collection of one or more ‘applications'. Applications are fully functional, meaningful units, and can be replicated easily. For instance, an e-commerce application used by a firm in one service platform to distribute its products may easily be replicated across platforms.

A component would be small, repeatable units of competencies which may be contained within multiple applications. A component in isolation may not be meaningful, but creates value when it aggregates with other components. A collection of inter-related components would usually make up an application. Of course, components, in turn, may aggregate amongst themselves to form larger components. The linguistic equivalent of a component-application-component paradigm would be a word, sentence and paragraph.

In a really well-designed organisation, it will be evident that the very competencies and purpose that form the first building block of the grammar are found even in the smallest components, applications and platforms in the firm. This is not unlike a fractal, and its feature of ‘self-similarity'.

Applications of a Grammar

A clear understanding of the grammatical elements available in an organisation can become an important guide to actually designing the structure of the firm. Often, one finds firms where components are embedded so deeply into applications and platforms that they aren't well understood outside them, leading to frequent attempts at reinventing the wheel. Organising around grammatical elements will ensure that everything that is created in the organisation finds its full expression. Knowledge management would be a critical element in a ‘grammatically structured' organisation, in order to ensure that component level expertise is consolidated centrally and redeployed as required.

The second arena in which a grammatical element based approach helps is in the identification of talent to place into those elements. While some people are component level thinkers, others may think at a platform level, and still others may excel in conceptualising visions of future states.

A third area in which a grammar-based approach helps is the effective design of conglomerates which operate in multiple spaces, while operating within its overarching purpose or competency areas. Too often one comes across cases of destructive diversification that have nothing to do with the competency-purpose-platform skills of the parent firm.

While this is only a brief attempt at visualising what a formal grammar for firms might look like, it is not difficult to see that a clear, well-tested grammar may have a lot of applications that help organisations fully utilise their creative energy, with both market-facing ramifications (increased revenue, etc,) and internal implications such as enhanced fulfilment.

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Sunday, January 30, 2011

Organizational Culture Change

Check out my latest article at The Hindu Business Line - Organizational Culture Change. Full text follows:
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The changing culture is a complex problem faced by many organisations. It's a lot like repairing the engine of a moving vehicle. While new firms have the luxury of gradually building the culture that best serves their interest, larger organisations tend to find themselves ‘stuck' with cultures that may be completely at odds with their stated vision or strategy. The big question then is whether it is possible to change culture mid-course. The answer may lie in understanding how culture is created in the first place.

Individual & organisational values

The crux of culture is values — in simple terms values expressed in the form of behaviours is what is perceived as culture. Values themselves may be of two kinds — individual and organisational.

The source of organisational values is usually the values of the founders. However, with time, as the firm transitions the values could change. This could be due to a lack of attention paid to the developing culture, particularly when meeting the demands of rapid growth. This takes the form of indiscriminate addition of individuals whose values may be at odds with the founding values. While organisational values may be documented formally, the ‘real' organisational values are informally “stored” in the minds of members of the organisation.

Individual values may be of two kinds — expressed, and suppressed. Expressed values are those that members of an organisation choose to express in their behaviour based on their assessment of what is required in the organisation or ‘what works'. The other values possessed by an individual member may be suppressed, at least in the organisational context. It is this interplay between “stored” organisational values and individual values that develops into “culture” in the manifested form. The metaphor of an iceberg could represent this interplay. What is seen above the surface is culture, but what lies beneath is the cause — the complex, ever-evolving dynamic of organisational and individual values.

The right culture

The next question that arises is — what is the right kind of culture for a particular organisation. The simple answer to this would be — the culture in which there is no conflict between organisational and individual values, and where organisational values themselves are aligned to what the organisation seeks to achieve. It is important to recognise that the culture manifested at any time is indeed already the most appropriate culture for the current interplay between organisational and individual member values.However, this culture may happen to be completely counter-productive to the organisational goals, owing to degraded organisational values or high conflict between individual and organisational values. Any attempt to transform culture by simply manipulating the manifest dimension of culture will not succeed unless the underlying interplay of values is not addressed.

Thus, culture transformation must address both organisational and individual values. On the organisational values front, one may first need to begin with an assessment of what the organisation's values really are. If the current state of values is a diluted version of the original intent, a fresh rediscovery or redefinition of values may need to take place in order to define an ideal state.

On the individual values front, the first intervention should be at the ‘input' stage, where new members are inducted. If a well-defined organisational identity or value is in place, it is not difficult to identify and add individuals who are in alignment. The bigger challenge is for existing members. Here, the solution is likely to be a more gradual one. It may involve a reassessment of all levels in the hierarchy to determine the “culture” icons best suited for leadership roles in the “new world” as it were. Leadership roles are the key fulcrums upon which culture is reinforced. This is because leadership behaviours typically tend to activate the relevant values in followers (provided the followers subscribe to those values at least partially). Over time, a culture transformation process would start to work on the organisation's memory, replacing negative versions of the organisation's values that are “stored” in the minds of members with fresh versions, till the new version becomes the new normal.

Setting right a malfunctioning or poorly aligned organisational culture is undoubtedly a complex process and may require an intuitive, right-brained mindset on the part of the designers, as well as multiple iterations to arrive at the right solution.Finally, culture needs to be an integral component of organisational strategy, as it is the foundational building block upon which the organisation's purpose can be manifested into reality.

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Wednesday, May 19, 2010

Organizations as fulfilment engines

My latest piece for The Hindu Business Line - Organizations as fulfilment engines
Full text follows:

What is the true purpose of an organisation? Is it merely the creation of wealth, or must there be a higher purpose to it? The East may have some answers to this question.Indian culture, as a result of its philosophical foundations in Vedic traditions, has never eschewed wealth. However, it has repeatedly stressed that the real purpose of life is a higher fulfilment whose end goal is self-realisation.Thus, material wealth of any form cannot become the end of any enterprise or human life. It may certainly be one of the outcomes, but is not the central purpose.Our institutions in all spheres - be it business, education or Government - seem to be losing sight of the higher purpose of their existence and have increasingly started viewing themselves as a means to an end. What then could be the higher purpose that an institution must seek to address itself to?

While there could be many ways of looking at this issue, one possible answer is that the reason for the existence of any institution is to provide an arena for fulfilment for its end-users (customers) and constituents (employees and other stakeholders).What might such a fulfilment-centred organisation look like across these two dimensions of external and internal stakeholders?

CUSTOMER FULFILMENT
The big question here is - which customer purpose is this organisation trying to fulfil? Unfortunately, the industrial era mindset is one of viewing customers as being no more than `wallets' waiting to be tapped. This is not to suggest that such firms are unethical - they are only responding to shareholder and investor expectations by behaving in a manner that only focuses on financial goals.Additionally, given the complexity of large organisations and the degrees of separation between the producers and end-consumers, it is no surprise that organisations view customers as abstractions.

The post-industrial world needs to view customers and their needs in the light of purpose fulfilment. Every customer is essentially seeking fulfilment of some sort through the consumption of goods and services. This fulfilment could be at a basic level of survival, or at the highest level of self-actualisation.

What if a business organisation were to align itself to this hierarchy of needs and claim as its mission the goal of raising the customer to higher levels of fulfilment? This may mean the creation of increasingly sophisticated products for which there may not be a market at the moment. The exact opposite of this is seen in many privately- owned electronic news media outlets. In the interest of `what sells', these outlets cater to the lowest in their `customers' instead of raising the bar to challenge their customers to evolve. They need to realise that producers of goods and services have a moral responsibility towards customers. In fact, this is a far higher form of corporate social responsibility than the contribution of a share of profits towards social causes.

THE INTERNAL PERSPECTIVE
Within the organisation two axes of fulfilment must be clearly defined - the first is the fulfilment of customers through the work done by a worker, and second is the fulfilment of the worker himself, and the two reinforce each other. However, as pointed out earlier, the distance from the actual customer, and the abstract way in which tasks are parcelled out means that the average worker no longer feels connected to the customer's purpose or even his own purpose.The way out of this alienation is to erase the boundaries between the firm and its customers, and allow customers to `infiltrate' with their views and allow these to actively influence corporate strategy.

The second dimension i.e. the worker's own fulfilment. This involves a systemic reevaluation of how careers are viewed from the traditional give-and-take transactional model to a fulfilment-oriented model. In the latter model, a service mindset (seva) will be very important. Seva, in the Vedic/ karma yoga context, is a work offered without any anticipation of reward, because the work itself is the reward in that it offers an opportunity to expand oneself from one's narrow selfish ego, towards a greater humanity.While this may seem like lofty idealism, it is easy to see its practical function. Activities performed without anticipation or anxiety for future rewards must necessarily bring greater focus to the work at hand, and hence, a greater quality in the outcome, as well as greater fulfilment.

In conclusion, India is well placed due to its unique cultural and historical context to bring alive the vision of fulfilment-centric organisations. The question then is whether we will choose to replicate the path taken by the West and its attendant pitfalls, or will we at some point integrate the best of the East with the West.

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Tuesday, December 8, 2009

Strategic Obsolescence

My latest column for The Hindu Business Line - Strategic Obsolescence. Full text follows:

A major cause of the failure of most organisations is their inability to foresee their own obsolescence and remaining stuck in their old ways of doing things. In this article I argue that every organisation must actively plan for its own obsolescence, and work in parallel on future opportunities. In other words, becoming obsolete should be part of the core strategy of a firm.

This entails taking a flexible view on the core purpose of the organisation. Not surprisingly, most firms tend to ignore the possibility of extinction until it’s too late. This is because most of firms’ energies are involved in improving upon past metrics, and very less energy is devoted to the future that is emerging.

Studies show that the average Fortune 500 company only exists for about 40 years. This means that even the largest, most well-managed organisations, are woefully short on vision when it comes to evolving with the marketplace.

Model of innovation

The accompanying graphic demonstrates the implications of strategic obsolescence. Every new industry begins with an early wave of innovators or market creators who create a new market.

First movers have the freedom of pricing and tend to use this to their advantage by skimming the market. As more and more players get in, efficiencies increase and prices fall further as a result. At one point, the market is saturated and prices and efficiencies plateau out. At this point, in most industries the incumbents begin looking for growth by setting up subsidiaries in new markets, and doing more of the same.

Meanwhile, some new innovator may introduce a disruptive product that may act as a perfect substitute to the current product and still be just as competitive on all dimensions. Alternatively, another innovator may be working in a direction where future Government policies are headed (example Green Energy). This is when large, bulky incumbents are taken by surprise and end up facing the possibility of extinction.

A company that invests in its own ‘strategic obsolescence’ will start aggressively investing for the future at every downward slope of the Z depicted in the graphic (similar to the S-curve concept commonly used to depict innovation). Incidentally, the downward slope of the Z also indicates a transition from innovative product to commodity.

Examples

A number of industries demonstrate a lack of planning towards strategic obsolescence. American automakers who have always resisted green/ hybrid vehicles may have well found themselves at the cusp of a lucrative new opportunity had they invested in that opportunity many years back. Instead, they face imminent bankruptcies.

Similarly, the conflict between traditional electric utility companies and new green technologies is likely to play out in a similar manner as Governments invest in and incentivise these new technologies, while the existing players may lobby for their own self-preservation.

A lot of technology companies understand this idea quite well because the rate of obsolescence of technological products is far higher than any other sector (the ‘Z’ in their case would be more like a steep step).These firms have entrepreneurial teams that are constantly working on determining what the next wave is likely to be, and iterating new innovations to meet the challenges of the future.

An alternative approach seen today is the acquisition of early stage ventures that are already working on disruptive ideas, and incubating those ideas (even if they turn out to be failures in the future).While it may appear counter-intuitive to invest in one’s own obsolescence, it must be kept in mind that other firms working on disruptive innovations are already doing so. The options then are to either invest for obsolescence or face unexpected extinction.

In conclusion, it is important to view extinction as a given and thus not get too attached to the idea of a core product line that remains static, and oblivious to the changes in the environment. In other words, the firm not only ‘exists’, but is actually a living, breathing entity that is constantly ‘becoming’.

Being indicates status quo, while becoming indicates a vibrant, creative outlook that is open to an ever-changing environment.

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