A Small Attempt to Model Organizational Evolution

Read this post in: French

Last few months were, for me, pretty insightful. I tried to spread and nurture some ideas about organizations, collaboration and complexity, met people, chatted online with others, read, assisted or talked at events…  The last pebbles of wisdom came for The Age of Paradox, from Charles Handy, whose S-curve metaphor quasi magically fitted my intuitions. Little by little, I have now built a somehow practical model of organizational maturity which drastically shows the need for enterprise to step into the 2.0 world.

This is what I wanted to share with you today.

Phase #1: the simple enterprise

Most companies start simple, with a few people gathering their skills on an idea. Decision making, tasks assignment and direct interaction with clients and all stakeholders are straightforward.  As every entrepreneur knows, initial company’s growth is often a synonym for efficiency drop and P&L decrease, since administrative tasks, indirect structural costs and middle-term forecasts add financial and human pressure on its early development.

Overcoming these obstacles is one of the main burdens of start-ups and young businesses. Innovation sparks, knowledge capitalization is eased by a common vision on business, and further growth usually stands for sustainable efficiency and market shares increase.

Phase #2: the complicated enterprise

As organizations grow in size, original simplicity gets harder and harder to maintain. In The Pursuit of Wow, Tom Peters considers the ideal size of organizations to be around 150. Beyond this size, knowing everybody in person becomes impossible (think about the Dunbar number, which has the same value), and intermediate layers of power and delegation begin to develop. Beyond this phase, whether they want it or not, to go on growing, most companies enter the complication realm.

Most today’s big companies and groups are complicated. To afford growth and efficiency increase, more and more processes are setup to ensure reliable operations and risk mitigation, thus relegating the core competencies of decision making and innovation to the periphery. The vision, if any, is now supported at board level, no more at individual level. New layers of control and supervision appear, silos are created and knowledge acquisition is formalized as an attempt to gain efficiency through specialization.

As big companies get bigger, unless sustained by a never-ending expanding market, internal growth and innovation reach a tipping point, and companies rely on mergers and acquisitions to keep on steadily growing. As a matter of fact, at some stage of complication, companies do not create jobs anymore. In France, a study from INSEE showed that big organizations and groups rather destroy internal jobs; they transfer them to subsidiaries, contractors and subcontractors, and, even this way, only very barely participate in job creation. Similar studies, conducted in other countries, showed the same results. Knowledge, and acquisition of new knowledge, are still a key factor for innovation and efficiency. To compensate for the fact that it cannot be brought in by external stakeholders anymore, the complicated enterprise shifts to another organizational paradigm, and becomes a learning enterprise, putting an overall important effort into training.

Threats to the complicated enterprise

What we are witnessing today in most business sectors is the inability for big companies and groups to reinvent themselves fast enough to cope with the threats they are now facing. Optimization of business processes and costs reduction only marginally affect organizations’ efficiency and growth. Faster evolving markets challenge organizations’ ability to react to customers’ demand, and to reorganize internally accordingly. Decision making is more and more paralyzed by process-based operations and chains of control, thus affecting companies’ agility.

Furthermore, organizations now have to face important internal challenges. Baby boomers, once the lifeblood of business, are now retiring at increasing rate, depriving companies of crucial knowledge and expertise. At the other end of the population pyramid, Generation Yers are today experiencing a totally new experience in the way they communicate and interact. This isn’t about tools, about technologies and the way they use them. The internet is radically changing their and our lives, enabling a radically different perception of ourselves, transforming the very nature of information, challenging hierarchies, management and workflows.

Without a shift, complicated organizations will soon enter a delusional phase, leading to increased efficiency loss.

Phase #3: the complex enterprise

To answer these threats, organizations need now to embrace complexity, instead of persisting into increased complication. I already wrote about the necessary shift they need to undergo to harness the power of networked collaboration, to step from hierarchy to wirearchy, as Jon Husband defines it. This paradigm’s shift comes at a cost; while present organizational strategies still show efficiency improvements, the challenge of adopting Enterprise 2.0 concepts and practices will necessarily see it dropping for some time. Coexistence of both structures will not ease things out, until companies get a clearer view of the new induced competitive advantages.

Here is an attempt to summarize some key organizational changes involved during the journey from simplicity to complexity:

Simplicity Complication Complexity
Organizational Theory Knowledge-Based View Learning Enterprise Micro-Foundations of Dynamic Capabilities
Attractors Stakeholders (vision) Shareholders (wealth) Clients (service)
Growth Model Internal M&A Ecosystem
Knowledge Acquisition Formal Training E-Learning Social Learning
Knowledge Capitalization Best Practices Good Practices Emergent Practices

Future doesn’t belong to complication, and simplicity is far behind most companies. Pioneering Enterprise 2.0 is a bold, but soon to be unavoidable, step into business redesign.

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34 Responses to A Small Attempt to Model Organizational Evolution

  1. Jon Husband says:

    Handy has been my major inspiration for the past two decades. He is a wise person, and the organizational world needs more humanists like him who also understand the rhythms and dynamics of organizing to get things done.

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  3. Noah Raford says:

    Nice post. You are aware that this closely parallels Dave Snowden’s Cynefin Framework? “Parallels” might be putting it too lightly. If you haven’t seen it, you should check it out. You’ll be pleasantly surprised. If you have though, you really should give credit where it is due.

    • Thierry de Baillon says:

      Thanks for your comment, Noah. I highly respect the works of Dan Snowden and his colleagues of Cognitive Edge, and I have neither the ambition to compete with Cynefin nor the intent to use their findings and methods without giving credit. While Cynefin is a cognitive framework, this one is primarily functional, and I don’t believe that chaotic behavior, for instance, has its place in organizational structures. But I might be wrong, and would feel flattered if both frameworks overlap beyond terminology or common CAS concepts.

      • Tom Graves says:

        Bleakly amusing to me, Thierry, because I’ve recently had a fairly strong disagreement with Dave Snowden over the opposite assertion, namely that I believe ‘chaotic behavior’ _does_ have several very important roles within organizational structures – ideation, innovation and business-continuity planning being some of the more obvious examples. There is also an increasing range of business areas where ‘chaotic’ techniques from improvisational theatre, for example, are proving highly valuable. I do agree with your point about Cynefin as a cognitive framework rather than a function-oriented framework, though.

        • Thierry de Baillon says:

          Very interesting point of view, Tom.
          My opinion is that, in organizations, entropy is naturally low and tend to decrease whenever possible. If you look at a creativity workshop, for example, most effort is put into breaking down complication or enabling individual vs collective behaviors. Also, truly ‘chaotic behavior’ lead to deterministic systems, while complexity allows for infinite evolving states, leveraging individual capabilities. In that sense, chaos is not an option for Enterprise 2.0. But, well, this is only theory…

  4. Bas Reus says:

    Great post. From simplicity via complicated to complexity, it is a subject that we are trying to grasp here. Maybe complexity is a result of diversity as well. Diverse people and insights is different from standard, predictable and ‘following’ behavior. As we have access to more knowlegde and points of view, our behavior is becoming more complex as well.

    One of the interesting things is that with the access to more infirmation, we have to deal with more complex situations, because there seem to be more points of view on the same situations. I think it’s a good thing, but needs a ‘paradigm shift’ if you like to make advantage of it.

    Ok, my 2 cents here, nothing more than some thoughts but hopefully leading to something here.

    • Thierry de Baillon says:

      Golden cents here, Bas.
      Linking complexity to knowledge diversity is a fascinating aspect. Enabling individuals to interact and build solutions differently in a networked organization for sure enrich lead to new challenges. I stumble for some times on the decision-making process in communities. Should we so consider the ability to filter information as a significant part of this process?

  5. Ralph-Christian Ohr says:

    Hi Thierry,

    congratulations to this pinpoint post.

    I think, your framework describes the evolutionary phases of enterprises very well. It clearly points out that most of us work in a complicated, rather than complex environment – which is yet to come. It further emphasizes that organizational structures need to significantly adjust in order to stay competitive and in particular innovative.

    I’d appreciate if you can provide me with a recommended source, describing the ‘complicated-complex’ transition (summarized in the table) a bit more in detail.

    Thanks and have a great weekend.
    Ralph

    • Thierry de Baillon says:

      Thanks Ralph,
      you are highlighting here something on which I for the moment don’t have a lot of clues. My feeling is that the ‘complicated-complex’ transition, as you name it, the fact that both types of structures are coexisting at the same moment in the same space, is what companies engaging into Enterprise 2.0 are experiencing right now. How should we deal with that other than experimenting and evangelizing on a daily basis? I am afraid I don’t know.
      Mostly interesting is the fact that you, Bas and Paula converge on the same question: how can we embrace complexity in a ‘simple’ manner, while being drawn down by complication. This is a somehow quantic situation.

  6. A nice post with good ideas. I approach these frameworks with a specific problem in mind: systems need to be as simple as possible. The simpler the system, the more likely it is to work. Therefore it is very important that we clearly understand the concept of simple.

    Understanding simple also means the following:
    - understanding the opposite of simple, which I will call for the moment call ~simple.
    - understanding how to measure the changes in systems as they go from simple to ~simple. I will for the moment call the units of measure between simple and ~simple DS (for Delta Simplicity.)
    - understanding how to build systems that have the fewest DS units as possible that solve a given problem.

    Now it may be that the framework you describe is addressing a completely different problem. But it seems to me that any framework that is serious about complexity should include a clear definition of simple, a word that describes ~simple (I use complex, but I know you are using that in a different meaning, as does Cynefin) and a clear path that systems travel as they go from simple to ~simple.

    • Thierry de Baillon says:

      Thanks Roger. Your concept of ~simple is really interesting. As you say, we don’t give the same meaning to complexity.
      In complicated organizations, solving problem involve reducing complication, through iterations for instance, but simplicity ends up attached to the system, or to a sub-system, as a whole. This fits well with Lean or BPO. At the other end, considering a system as complex involves simplicity, not as a whole, but as self-similar rules.
      To keep your math analogy, I think of complication as ~simple, and of complexity as (simple). Not opposition, but congruence.

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  8. Rotkapchen says:

    So while I recommended the book to you, you read faster than me and I’m off on his “Gods of Management” right now (can you tell I have focus issues?). Without the necessary context I’m not going to make a definitive statement. I can only say that I’m not sold on the model. Particularly for the types of issues Mr. Sessions regularly raises, it does nothing to address them. That is, the beauty of complexity is that it’s a ‘collective’ of simple patterns that assemble themselves into an ever larger pattern, each following some set of ‘rules’ that allow for a larger connected pattern to emerge.

    It’s that paradox of the simple ‘being’ the complex that I’m still trying to help make clearer for Roger.

    2.0 is about simple elements that honor the larger context that they are or could be part of — providing the flexibility to ‘grow’ into a larger whole, not of itself, but in combination with other parts. Classic example: Legos

    • Thierry de Baillon says:

      I know that I don’t give many answers here. I mainly tried to figure out the why of the necessary journey from complication to complexity, and this raises known as well as new questions. The ‘Russian dolls’ aspect of complex systems is one of them. Since we are stealing dealing with a dual paradigm, complication | complexity, how can we empower the latter without being entangled with the first? SHould we embed one in another, or consider this a ‘quantic’ paradox? What is your opinion?

      • Rotkapchen says:

        Let me confer my quantic source. Hmmm. Maybe there’s a dimension here I still need to come to terms with. In “ReWiring the Corporate Brain”, Danah Zohar says we’re embracing “a move away from absolute truth and absolute perspective, toward contextualism” [man, and I highlighted that at least a decade ago, how soon we forget] “…toward an acceptance of ambiguity and paradox, of complexity rather than simplicity.”

        I still have to come to terms with the deeper meanings of these terms as expressed in these contexts. That is, they’re absolutely ‘right’ for the way people think about the term ‘simplicity’, but as you unravel a sustainable instance of complexity, it’s the perfect plurality of simple repetitions. In that way it is also codified (it’s own repeatable, binary code). Indeed, it’s the perfect design, embodying mystery, heuristic, algorithm and binary code all in one. The perfect paradox.

  9. I really like this blog post. I will certainly follow you on foot as we are sharing the same ideas. Keeping track of each other will help us to tackle the more intertwined organisational issues in organisations which are operating in complex situations. I recently made a 10-minutes video clip about what KM is. In this video clip I also touched on some of the issues you described in your blog post. You can watch the video here: http://richardlalleman.squarespace.com/journal/2010/2/23/what-is-knowledge-management-experimenting-with-imovie.html

    Richard

    • Thierry de Baillon says:

      Thanks Richard. Very interesting video and blog! Fact is that the more interesting experiments and initiatives I’ve seen up to now in the Enterprise 2.0 field were KM related, not marketing or HR. I will follow your blog closely myself too :)

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  13. Amy says:

    Very interesting point of view, Tom.
    My opinion is that, in organizations, entropy is naturally low and tend to decrease whenever possible. If you look at a creativity workshop, for example, most effort is put into breaking down complication or enabling individual vs collective behaviors. Also, truly ‘chaotic behavior’ lead to deterministic systems, while complexity allows for infinite evolving states, leveraging individual capabilities. In that sense, chaos is not an option for Enterprise 2.0. But, well, this is only theory…

  14. barry libert says:

    great post – congratulations.

  15. There are some great insights in your post. I’ve witnessed first hand how the complication stage can actually affect the rate of new hires. As you mentioned, a lot of work is simply contracted out, and during this shift, many company employees can be caught off guard. As a member of GenY, I found it interesting when I got a hold of my company’s handbook for dealing with people of my generation. It had all sorts of outdated and awkwardly described behaviors relating to my peers. I don’t think the generation of my parents can quite grasp how quickly technology has changed the social world. And if you’re not a part of it, how could you possibly understand it?

    • Thierry de Baillon says:

      And if you’re not a part of it, how could you possibly understand it?

      Complication impedes our ability to make sense of how a system works, since the way things change is hidden from the structure in place. I guess this is less a generational than a behavioral divide. Don’t you think?

  16. With the recent passing of Steve Jobs, much has been said about his core principles and the way he ran Apple.

    I’d like to hear your thoughts on this. Your model is surely beneficial in understanding some of the success Apple has had in recent years.

    For instance, it’s been said that Apple’s software teams are kept relatively small (everyone knows everyone in the room) and that they transfer, as a group, from one project to the next.

    It seems like Apple knows how to get the most out of their people — innovation, timeliness, quality of work, etc.

    • Thierry de Baillon says:

      Sorry for taking so much time to answer, Alan.
      I don’t know much about Apple’s internal management, but yes, I do believe that a small team-based organization may lead to distinctive competitive advantages.

      Roger gives here a pretty insightful explanation to that: economy.
      But I would give two other reasons which, in my opinion, might have an important impact:

      Trust: small groups of people working together develop a high level of trust, and inherently share a sense of “membership” in the way Charles Handy developed.

      Diversity: keeping teams small help fostering diversity. Growing in size dilutes the benefits of divergent thinking as people tend to gather around think-alike groups, and I do believe that diversity is an important catalyst for innovation.

      What do you think?

  17. If it is true that Apple keeps its teams relatively small (and presumably, its projects relatively small as well), it would explain a lot about its overall success. A project of 6 people for 6 months is about a $750K project. A project of this size is the largest project that a group can do with any reasonable assurance of success. Once the project expands beyond this, the success rate drops precipitously. If you are interested in the studies here, see my Web Short, “The Relationship Between IT Project Size and Success Rates.” at http://bit.ly/oRxqGH

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