Monthly Archives: November 2012

Strategic Risks and Opportunities to Accelerate!

In the November HBR there’s a new piece by seminal uber guru of change management John Kotter called Accelerate! in which he proposes that organisations formally adopt a second, fundamentally different, strategic system of management to complement their operational management practice.

He claims, and my experience mirrors and agrees, that while traditional hierarchies and management processes do well at keeping the lights on in the short term, “what they do not do well is identify the  most important hazards and opportunities early enough, formulate creative strategic initiatives nimbly enough, and implement them fast enough.” Despite 15+ years of attempts to improve these processes, the pace of change is simply outstripping the ability of this system to cope. Organisation that face real threats or eye new opportunities or compliance requirements try – and fail – to cram through some sort of major transformation using change processes.

Kotter’s been researching, mentoring and watching transformation programs for more than 40 years and it may well be that these traditional change processes (many of which he influenced) did work in the past. In my own 25+ years observing hundreds of transformation programs of different scales, only a handful could be said to have delivered on their original promise. Irrespective of just when the myth may have started to overshadow the reality, Kotter now sees that the old ways are not going to work any longer and is prepared to call the Emperor naked.

His solution, in a nutshell, is to leave the traditional management structure to do what it does best – work on the assumption that your market will remain stable long enough to execute a pre-formulated strategy and ask most people to shut up, take orders, and do their jobs in a repetitive way. This will deliver returns for a while – until the environment changes to such an extent that your strategy is no longer relevant. This reminds me of Stuart Kauffman‘s use of the concept of fitness landscapes in evolutionary complexity.

In parallel with the traditional structure, Kotter proposes that you proactively engage a ‘strategy system’ which uses a structure of a distributed, loosely coupled network of peers across the organisation who’s passion for new ideas brings them together to develop more holistic situation awareness to identify extreme risks and opportunities and iteratively evolve new execution models to deal with those. This more agile approach ties in with much of the current state of the art in complexity and extreme risk management which proposes running many ‘safe to fail’ experiments in order to have the best chance of landing on the next fitness peak in the landscape.

The role of the traditional organisation structure is to facilitate the strategy system and foster new structures which may, in turn, one day evolve (devolve?) into another traditional management organisation suited to the next landscape.

In order to provide some kind of continuity and overall stakeholder / shareholder returns, it seems to me that the Board of Directors or equivalent governance body needs to have an influence on the assurance of informed decision making which sits at the intersection of the two systems.

Peter Whyntie, Executive Director of Compliance Australia recently wrote an article in the Chartered Secretaries magazine entitled “Strategic risk management – the neglected element of ERM'”. The article is behind a membership wall, but you can listen to a podcast summary here. Peter comes from a risk management perspective and, it seems to me, arrives at a similar place. Longer term strategic risks need to be seen through a much wider lens that the traditional risk and control structure found in operations management. The key difference is that strategic risk assessment is externally focused using the lens of your risk appetite.

My impression of much of Kotter’s earlier work is that it has been internally focused around leadership, culture and change management within the organisation. The strategy system he proposes now is focused externally and places the organisation in a role as an adaptor and adopter, resilient to change and co-creating in a complex environment where the distinction between internal and external is being redefined.

The take away from both of these is that you need to be more aware of your external environment and the assumptions you make as to how fit you are to exploit it and survive in it. This will require participation by a broader group of stakeholders who can help to formulate a more holistic common operating picture and show that there are many different senses of common sense out there.

An extreme impact exercise is a good place to start a process which leads you to exercise the unexpected.

Social media risk exposure owned by no one and everyone

A ‘survey’ reported in CFO Journal yesterday asked people what they believed their greatest risks were related to social media and which part of their organisation manages social media policy and regulatory compliance.

The risks were the usual suspects of disgruntled employees, information leaks, and customer dissatisfaction.

The surprising thing for me was the distribution of policy (and presumably risk) ‘owners’ across the organisations of those surveyed: Don’t know 29.7%, Social media 19.3%, Legal 17.4%, HR 12.3%, Risk Management 10.8%, No one 10.5%.

Who owns the policies and who owns social media risk in your organisation?

WIth such a broad range of owners, it’s unlikely that any kind of standards or experience based practices are mature here and it suggests to me what a long way we have to go before social media management is part of the fabric of a modern organisation. Most importantly, it also suggests just how exposed organisations are and will likely be for some time to threats arising through the vector of social media.

My initial reaction when I saw the article link tweeted by @Manigent was to moan about another claim that social media policies were a form of risk management or mitigation. A policy should reflect the culture and the norms – a policy does not in itself change behaviour. WIthout the education, monitoring and sense of value in the intent of the policy, it will be ignored. It seems to me that if a risk related policy was important enough, you’d have a consistent role across organisations that was responsible for that risk.

One answer in the ‘greatest risk related to social media’ survey question was “Our culture doesn’t get it” – now, if more people understood that, it could lead to real risk management and genuine mitigation.


Resilience – Synchronisation, Synthesis and Memory

The recent events leading up to and during the Sandy storm in the United States will provide a great deal of fodder to the blogosphere over coming weeks and months – some of it useful. Hopefully some of the experience and insights will register somewhere deep down in  the instincts of the key stakeholders in government and emergency management as well as those who either profited from or suffered losses as a result of the storm.

Encouraged by a professional interest and driven by an inherent obsessive compulsive appetite to drink from the fire hose of real-time data feeds, I was glued to the Twitter feed for many hours. This experience alone was educational in that it helps you to see how, even in such a short message format, the consistency of content and style helps you to develop (or imagine) a cast of characters playing out in a vast story. Emergency management agencies and official government public information channels were quite rightly, measured and clear and projected a trustworthy, capable impression. I found some commentators offered mind opening insightful views, while others were clearly using the storm to push their own, often unrelated, agendas. I developed a sense of what was sensationalist vs what was genuinely incredible.

With my mind still boggled this morning, I saw a blog post by Andrea De Maio at Gartner pointing out that while social media was a good, scalable channel for communication, it didn’t offer any help for strategy development and day to day management. “Proof that social media is nothing else than a tool that many people as well as governments decide to rely upon when something out of the ordinary happens.”  The suggestion I took away was that social media fails to support the development and formation of strategy which occurs during ordinary times when people are “chatting about sport results,  or favorite actors, or how to bake”. In an extreme event, when people “feel compelled to collect and relay information that can help other people, then it is time for authorities to join the chatter, search for patterns, use this additional and powerful channel.”

In my 30 or so years of watching operational and strategic contexts, it seems to me that these observations are not about social media – but rather about business and society and in saying so, demonstrates the amazing and rapid maturation of social media to reflect, influence and co-create business and society.

Unlike previous strategy and execution environments, the technology of social media allows you to listen and partake in a never-before-experienced tsunami of diverse conversations aligned through a consistent underlying theme. In this case it was Sandy, it might otherwise be your customers, your brand, your product or your competitors.

On the surface, this may appear as a very large, very fast, stream of random noise. Research shows that too much noise in our neural networks, in particular too much noise with out of the ordinary spikes, can limit our ability to interpret and retain information. Classic signal-to-noise research confirms this and highlights the ability to cancel certain consistent patterns of background noise in order to improve fidelity of the signal. We do this kind of thing all the time in our own processing of sensory inputs in order to avoid melt-down and pay attention to things which are out of the ordinary. The trick is to know what is noise and what is signal.

Interestingly, new research indicates that the act of identifying something as being ‘out of the ordinary’ is not a fully automatic pattern matching algorithm in our robot-brains but rather requires some of our cognitive attention bandwidth.

A strategy is a set of principles which you can use to navigate a network of possibilities to steer you towards a goal. Our brains have had a lot of practice doing this kind of thing and I believe that social media offers us a glimpse into a network analogy for social interaction which any strategic thinker would do well to understand.

In order to regulate how much attention we pay to certain things, our brain has a way of surfacing things which ‘operational sensor’ think are important. In a grossly simplified way, these signals have a similar challenge to those of Tweets. It may be that our brain has found a way to selectively synchronise multiple impulses, assess the energy of those impulses and synthesise these into an appropriate directed amplification – in the words of the researchers – “We propose that selective synchronization renders relevant input effective, thereby modulating effective connectivity.”

Social media analysis techniques are evolving and, by coincidence or not, applying selective synchronisation concepts. Software developed by the CSIRO in Australia offers hope of improved situation awareness during out of the ordinary, extreme events.

This leads me back to Andrea’s post – in which he refers to the CSIRO technology, but seems to only see the data analysis/situation awareness element and not the bridge towards cognitive processing patterns and human behaviour.

I’ve had the good fortune to work with clients from the bottom up and the top down in the strategy to execution space in commercial organisations and government, including national security and emergency management. I have never seen a reliable, repeatable process for strategy design and successful execution. At this stage of my journey, I believe that is because traditional strategy assumes that we live in a complicated but controllable – ordinary – world and that unexpected events are exceptions. The real world is complex, you’re fooling yourself if you think you can control it. The best strategy is to become exceptional at adaptation and resilience and this requires an out of the ordinary ability to sense emerging changes.

As long as they get a time to reflect, people can learn a lot from extreme impacts – just ask an emergency commander.

The Sandy Social Media experience will be one more set of connections in our collective network of interaction and memory and, in time, we will all learn to manage strategy with selective synchronisation to achieve more effective connectivity.