The secret of all victory lies in the organization of the non-obvious.
– Marcus Aurelius
Every successful organization has to make the transition from a world defined primarily by repetition to one primarily defined by change. This is the biggest transformation in the structure of how humans work together since the Agricultural Revolution.
– Bill Drayton
Ever since the innovation of the limited liability company in the 1850s[i] (and even before), humans have been experimenting with organizational structures, forms and behaviors that are best fit for the evolving ecosystem they function in and are part of. It’s a never-ending effort that is driven by the fact that it is the evolving organizations themselves that comprise the ecosystem within which they need to adapt. This dynamic feedback loop creates the conditions for organizational evolution. The organizations that evolve and change the fastest are those in environments where they compete for resources on both the creation side (e.g. employees and partners) and on the adoption side (e.g. customers and influencers).
We are witnessing an era of unprecedented pace of organizational evolution. All aspects of organizational behavior are being experimented with, tested, and adopted. Since an organization is itself a human created artifact, it is no surprise that the forces that are causing such rapid advancement in the offerings and business models organizations produce are also causing rapid evolution of the organization itself. Innovation is the mechanism of evolution. How organizations innovate, not just in the artifacts they create but in the way they behave, determines how successful they will be.
Organizations Evolve[ii]
Many of the potentially disruptive changes taking place in organizational form and function are visible today. The following list presents some plausible future states of the organization. It is by no means exhaustive but it does attempt to paint a picture of the future organization along a number of dimensions that capture many of the big forces and changes that are occurring today.
- From Menlo Park to Paramount Pictures[iii] – Organizational disciplines – strategy, design, new product development, marketing, engineering, research etc. – disaggregate. Innovation becomes an activity that is organized like a movie production.
Successful large companies coordinate the best individual and agency talent, hastening information flows and providing uniformity under their brand banners, much like movie studios. Research, design, prototyping, branding and other collaborative partner firms form a great “fluid core” of competencies. Researchers are in front of customers; designers render prototypes; marketers test minimum viable products; branding agencies “shape the story.” There is no distinct innovation boundary, it’s now one big production set.
One of the ways companies are responding is by disaggregating – becoming more network like with porous boundaries. They are becoming a collective ‘society of mind’[iv] with a number of semi-autonomous centers of specialized activity that, together, result in the behavior and actions of the organism. This is the networked company of the future. Like a movie production, all of the pieces are brought together for a specific purpose and a specific time-frame, they do their work, and then disperse. During the time together, they bring about the genesis of a new opportunity.
- Complexity breeds resilience – The ability to deal with complexity and the ability of companies to manage uncertainty and survive shocks becomes a defining trait of companies that thrive.
Volatility, uncertainty, complexity, and ambiguity (VUCA[v]) have increased exponentially over the past decade and are continuing to accelerate. The ability to come up with ideas for specific products or services or even simple business models has been commoditized. Companies now need to figure out how to pursue complex opportunities that interact with all of the components of the complex eco-system they are trying to influence. In addition, unexpected shocks from competitors, social and political events or natural ones, have made it imperative that companies be resilient in both their operations and in their strategies. Companies structure themselves for complexity and resilience and innovation is at the core of this effort. Strategies, offerings and business models that don’t reflect this soon fail.
- Just do it (now) – It’s all about speed, being faster than your competitors and failing fast. This requires an entrepreneurial approach to opportunity pursuit – one of testing and learning and scaled funding.
Speed trumps all. The need to get things done fast is forced on companies that need to operate in a world with rapidly shortening cycles. A front-end project that used to take a year, now takes 3-4 months. Comprehensive and robust front-end explorations with teams of 10-20 people that were once the norm have become a team of 2-4 with lots of outside help. Companies are structured to tolerate many failures for the one big success, as long as it happens quickly. New business efforts are structured like VC firms or Angel investors with high opportunity flow and a lot of failures for the one breakthrough.
- Rise of the global innovator – The innovation ecosystem evolves into a global network of companies, consultants and various practitioners vying for relevance and best practices.
The US is one of many countries that has a viable and growing innovation ecosystem doing innovation research, consulting and process development. China, India, Brazil and other countries use their science, technology, business and education prowess to establish new methods of organizational innovation. The constraints, speed and funding within these countries creates an environment where the most innovative products and the best practices for innovation emerge. The practice of innovation is a central focus of both government and company attention in every developed and developing country. Non US based consulting companies set up offices in the US and Europe competing on an equal footing with the best US practitioners.
- The longnow[vi] and the moonshot – Companies develop the desire, and the means, to pursue longnow and moonshot innovation initiatives and are rewarded for it.
Increasing recognition of the need to create a long-term, viable and thriving company forces corporations and their executives and boards to focus on long-term and significant initiatives in addition to meeting the quarterly demands of wall-street. Companies are willing to undertake ‘Moonshot’ projects that have decades long commitments and impacts because they have seen too many of their cohorts missing opportunities because they do not have the imagination and fortitude for truly transformational change. Growing and innovating in the core business is table stakes. Creating the next big thing is what is now valued. Investors are willing to put up big investments for the promise of a big future, but companies need to prove they can do big things over the long term.
- The boundary evolves – What gets done inside vs. outside the company changes. New ideas about what is proprietary emerge. Knowledge flow between parties grows exponentially and changes how new competencies are accessed and acquired.
It is increasingly difficult for companies to hedge against the possibility of missing out on technological advances. Companies who have invested in various forms of open innovation are seeing some benefits of recruiting the masses to do their innovating but this is only the beginning. Innovation is now seen as requiring new forms of ‘openness’. New approaches such as giving a large, external community access to previously protected but underutilized intellectual property, open contests and corporate venturing have all been successful. New forms of opening up the corporate boundary, of blurring the lines of what’s inside and what’s outside, are constantly being experimented with. Proprietary gives way to the first and fastest moving.
- The thinking-feeling organization – Emotional Intelligence is as important as IQ. Empathy is a valued skill. Organizations get good at thinking and feeling collectively
Corporations foster both collective thinking (reasoning) and feeling (empathy) in their efforts to innovate. Corporations recognize the need to fundamentally connect with their customers and future customers at an emotional level. They also need to be able to do this internally and use both quantitative and qualitative insights in an integrated way. They have figured out how to get the organization to collectively feel the relevant experiences and think about how to address them. The new skill of ’empathy’ is deeply embedded into the company’s DNA and is complemented by the ability to think and reason collectively about the insights obtained. Collective thinking and feeling is a core competence
The Innovative Organization
Some or all of these speculative futures may come to pass. At the root of it all will be how companies and other organization manage the fundamental duality of operational excellence and transformational change. These two organizational imperatives are in constant tension, and the tension is becoming more acute as the VUCA world moves faster and faster. Managing the tensions between them takes a lot of time, energy and executive attention and these are exactly the conditions under which organizational evolution takes place. New frameworks, processes, methods and tools that help the corporation balance these two sides will eventually become institutionalized. No longer will the innovation efforts of a company depend on the executive in charge. The transactional costs of managing this tension will be reduced and, as a result, the organization will operate more efficiently and effectively. Transformational change will be as much a fundamental competency as quality or new product development is today.
[i] Micklethwait, John; The Company: A Short History of a Revolutionary Idea; Modern Library; January 2005
[ii] The Inovo team of Brian Christian, Steve Schwartz, Dustin Smith, Vinny Kaimal and Dian Bouis contributed to the research and development of these plausible future states and the weak signal evidence supporting them.
[iii] Smith, Dustin; Escaping the Flat Circle of Time; Inovo Blog Post; July 2014
[iv] Minsky, Marvin; The Society of Mind; Simon & Schuster; March 1988
[v] Schmitt, Larry; It’s a Fast VUCA World; Inovo blog post; September 2014
[vi] Longnow is a term adopted from the Long Now Foundation to denote a long term perspective that is more than just about the next quarter, the next year or even the next 5 years.