A fundamental aspect to consider with respect to system governance is to determine if efficiency, effectiveness and profitability is adequate to ensure system viability?
What about adaptability; applying effective change; do the right things or ‘of what to what’ from a resilience perspective, doing the right innovation and transformation. Ensure system steering that leads to a balanced system; adaptation that leads to the right system action; type and intensity.
Some key consideration:
- A viable system is any system organized in such a way as to meet the demands of surviving in a changing environment. A system needs to be continuously leveraged in order to survive and prosper.
- Simple evidence; 80% major sporting event sponsor going back 10 years ago have disappeared, brand become irrelevant of taken over by others.
- Major technological companies like Texas instruments, Kodak, Nokia ect… have basically collapsed
- Major economic disasters within the European Union; reforms in certain cases deepening economic crisis
- Gartner : According to Gartner, “almost 90% of transformation projects miss their mark
Adaptability: The New Competitive Advantage August 2011. Some key considerations:
- Globalization, new technologies, and greater transparency have combined to upend the business environment and give many CEOs a deep sense of unease.
- Since 1980 the volatility of business operating margins, largely static since the 1950s, has more than doubled, as has the size of the gap between winners (companies with high operating margins) and losers (those with low ones).
- Market leadership is even more precarious. The percentage of companies falling out of the top three rankings in their industry increased from 2% in 1960 to 14% in 2008.
- Studies of fortune 100 list from 1966 to 2006; only 19% are still featured; most failed due to failure adapt or rather effective adaptability
- The probability that the market share leader is also the profitability leader declined from 34% in 1950 to just 7% in 2007
It is therefore clear that adaptation is fundamental in surviving in a changing environment.
Many organization failed with traditional approaches such as extensive IT investment, complex strategies , Business Process optimization projects, extensive product development ; six sigma ect… ; basically doing the rights things but not generating required benefits.
That’s because traditional approaches to strategy and change though often seen as the answer to change and uncertainty actually assume a relatively stable and predictable world, they fail to understand systemic conditions.
Some considerations regarding complexity and uncertainty:
- When it’s unclear where one industry ends and another begins, how do we even measure system position? How does one understand crumbling paradigms or how does one create new industry paradigms ?
- When we’re overwhelmed with changing information, how can one determine the right signals to understand and harness change? Signals to lead to dominant influences with respect to system in focus conditions.
KEY CONDITION WITH RESPECT TO ADAPATABILITY
Ability to read and act on signals
In order to adapt, a company must have in place ability to read signals of change from the external environment, decode them, and quickly act to refine or reinvent its business model and even reshape the information landscape of its industry. This also implies having required signals that provide clear perspective , multi-dimensional signals associated within system in focus that clearly provide information with respect to dominant influences of key conditions.
Furthermore, implies understanding variety within complex organizations, ensuring that the capabilities of the systems which regulate the system are sufficient to deal with the complexity of the problems which they have to deal with.
Ability to experiment; continuous learning
In order to determine relevant leverage that achieve effective adaptability, mental models are required based on system CONTENT, CONTEX and PROCESS that clearly identify realizable adaptation initiatives. These mental model help to identify weaknesses and possibly avoid failures and provide a framework for learning. Adaptive organization should also be tolerant with respect to failure.
Manage complex multi company systems
Ability to experiment and detecting fundamental signals require organizations to think and model beyond its boundaries in order to exploit and work more closely with supplier and customers.. This implies expanding the boundaries that consider off-shoring , value nets, production and logistical network. This implies extending processes supported by IT system across multiple entities to ensure synergy and optimization; ensure control in place within autonomous systems. A system control that contains fundamental signal from the substantive environment.
Ability to mobilize
Adaptive organization require environments that encourage diversity, autonomy , flexibility by creating fluid structures allowing people to detect changes within the environment and respond quickly and proactively within a Context framework of balanced homeostatic system.
System context horizontal balance and vertical balance cannot be mutually exclusive.
- In order to cope with the environment the operations needs to match its variety to that of the environment
- In order to manage the operation management needs to match its variety to that of the operations
In dealing with adaptation within complex systems / organizations content , context and process should be studied simultaneously which fundamental to determine leverage that is most effective considering environmental , internal factors, competitive and technological conditions.