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How to adapt to volatile, dynamic conditions

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As a rule of thumb, highly volatile markets and dynamic environments are best planned for with an "emergent strategic design" approach which is highly dependent upon continual learning. The need for emergence and adaptability relative to more planned, formal design increases as the environment becomes increasingly volatile and unpredictable. Here are some examples of who's doing it, where it's come from and some of the benefits being realised.

Firstly, here's some theory.

Henry Mintzberg and colleagues at the McGill University (Montreal) developed the learning model of emergent strategy formation in the 1980s, basing it on the premise that the “complex and unpredictable nature of the organization’s environment, often coupled with the diffusion of knowledge-bases necessary for strategy, precludes deliberate control..". Decisions emerge from complex processes whereby most importantly, individual managers are empowered to interpret the intended strategy and to adapt it to changing external circumstances as they are happening, rather than realising after the event, say during the post-implementation, after action review, when it's too late and market-share has already been lost.

Two key "soft" traits required at every level, above all others, for emergence planning to work, have been identified as opportunism and curiosity, starting with the CEO. Mintzberg advocates strategy-making be an iterative process involving experimentation, feedback and learning, and so, there will be moments where curiosity must prevail over uncertainty. If the boss needs high levels of certainty and exhibits anxiety or even aggression in the face of the unknown, then he or she will not be sufficiently adaptable for such a volatile environment nor embrace emergent planning. This is likely to be the case where decision-making processes have already become highly bureaucratic.

General Electric's ex-CEO, Jack Welch, reportedly began his transformation of the company by making major reductions in the overly bureaucratic strategic planning mechanisms that were in place in the early 1980s. Over the next few decades, other leading corporations such as Intel, Honda, Royal Dutch / Shell Group, Exxon and Google have followed more successful "emergent" planning strategies. At Intel, reportedly a key historic decision to abandon memory chips and concentrate on microprocessors was the result of a host of decentralised decisions taken at divisional and plant level that were subsequently acknowledged by top management and developed into a strategy.

For optimised execution of the drilling plan in oilfield operations, for instance, we recommend a team-driven learning practice, conducted before, during and after operations (the "LBDA" methodology for short!). This is one that both BP and Shell have used extensively to reduce cost in pre-empting risks and opportunities, and then adapting accordingly, as the drilling and well completion plans are executed. Where time and efforts are invested in doing this properly, the gains are considerable. Non-productive time (NPT) as a hard measure of improvement is usually in excess of 20% lower versus baseline data. Safety gains are also virtually guaranteed.

As Jack Welch at GE proclaimed in the 1980s, a learning culture is required which rests on the organisation demonstrating many "soft" attributes. Here are some of those attributes:

Trust is high: teams exhibiting poor trust try to avoid failure through working longer hours, experience less job satisfaction, take less pride in their work, and more readily blame others for their shortcomings (Dee, 1995a). Where there is trust, there is a willingness to share the learnings gained from failure as well as success. As former US Secretary of State Madeline Albright has written on the importance of this, "History never repeats itself exactly, but we ignore its lessons at our peril".

Flatter hierarchies: team leaders who are able to "suspend the hierarchy" and serve as equal team members are most successful (DuBrin, 1995). Effective teamwork requires that team members feel free to contribute freely, despite formal hierarchies - whether staff or contractor. This type of freedom is characteristic of high performing teams (McIntyre and Salas, 1995).

Highly interdependent: one basic concept asserted by the leading thinkers in this area (Senge, Ross, Smith, Roberts, & Kleiner) is that teams need to recognise that they have "common territories." The implication of "common territories" is that individual team members recognise that they need one another in order to take action (Senge et al., 1994) and so achieving common interests is more important than formalised hierarchies and competing objectives. An example in the work place is GE's "Workout" (http://j.mp/1SY426l), which entailed everyone getting involved in eliminating defects and waste, and ensuring this was highly valued across the organisation.

Highly collaborative: collaboration won't work where any one person or group craves the limelight at the expense of the others - where "hero managers" tend to be rewarded, for instance. Ensure that "wall-flowers" are drawn out and consulted and that prolific talkers are managed. Early indicators of collaboration and rewarding collective efforts can be seen in the use of language - "we", "us" and "ours" versus "I", "my", "you" and "yours". Individuals will work much harder at retaining their individuality, status or reward than on team goals, where the organisation is structured in this way.

Open and curious dialogue: dialogue should be considered a "core team competency" because of its impact on team effectiveness and team learning. Dialogue helps to bring faulty assumptions (mental models) to the surface so that they can be challenged in a constructive way. Dialogue requires four processes for success (Senge 1994):

1. Invitation

2. Generative Listening

3. Observing the Observer; and

4. Suspending Assumptions

Chris Argyris also recommended this in order to challenge how entrenched thinking is currently creating undesired results and unintended consequences. He called this "double loop learning".

In the +20 years I've been working with organisations and individuals seeking performance improvement, I've seen movements towards adaptive and emergent learning, as well as movements against - within the same organisations. I've seen movements towards adaptive and emergent learning, as well as movements against - within the same organisations. Some individuals are simply more suited to doing this than others it seems. The practice of Six Sigma, a highly valued contemporary methodology, has introduced considerable improvements in defect elimination, however with its focus on high control, so it risks constraining in other parts of the business where continual adaptation, rather than control, is required (its DMAIC methodology being Define, Measure, Analyse, Improve, Control).

Highly adaptive, emergent strategic thinking rests utterly upon having a highly involved and empowered workforce. It continues to be talked about as an imperative, and how your organisation is doing in practice, is worth reviewing on a continual basis. For anyone wanting to explore modern management ideologies in more depth, a pithy book on management gurus and ideas with other useful reference material is the Economist's "Guide to Management Ideas and Gurus", by Tim Hindle http://j.mp/1HYdaBo.

Today's world is changing fast, and in some terrifying ways, as we've recently seen in world affairs. It's my opinion that these principles must apply even more if we are to respond more appropriately and more effectively to these changes.