The Dynamically Adaptive Organisation
Becoming a more responsive and fit-for-purpose
organisation by navigating constant change.
Adaptive Organisations
Everyone is talking about adaptive organisations, but what does that really mean?
In recent months, there has been a proliferation of articles talking about Adaptive Organisations — how organisations need to become more responsive to change in order to cope with the uncertainty that characterises their environment.
Partly this is an attempt to reframe existing frameworks like agility/business agility to expand their influence beyond just IT delivery. There is also a genuine realisation that many of the ways we currently govern and run our organisations are becoming increasingly less fit for purpose as they struggle to cope with an increasing rate of change.
The Organisation-as-Machine
Most current concepts of an organisation are based around the idea of the organisation as a machine — define the right processes and systems, set the system running. It will tick away predictably, producing whatever widget or service the organisation produces. Like all machines, the running can be tweaked — a nut tightened here, a belt loosened there to improve the efficiency of its operation, or it can be extended, a new attachment to produce a new product or to dispose of waste more effectively. But fundamentally, the machine ticks on endlessly. If you want to change the operation of the machine, you need to tear it apart, redesign and rebuild it.
This is a view of the organisation developed during the industrial revolution, when steam power and mechanisation revolutionised the way we worked. As we mechanised our industries, so we also mechanised our concept of work and the way work was organised.
We are no longer in the industrial revolution. We are well into the information revolution and while the emergence of knowledge work has again changed the way we work, we are yet to change our concept of the way work is organised.
Our knowledge work is still trapped in an industrial framework, and that framework is showing severe signs of stress.
The impact of V.U.C.A
We all know the concept of VUCA — Volatility, Uncertainty, Complexity, Ambiguity, but we struggle to apply it to our organisations. VUCA requires constant change and adjustment, but our view of the organisation-as- machine requires us to create static structures that need massive effort (and disruption) to redesign and rebuild every time we need to change.
We see this in the constant cycles of organisational restructuring — organisations are constantly redesigning and rebuilding their organisational structures, often from the ground up. Consultancies make their living supporting this pattern through systems like zero based design — literally starting from scratch and redesigning from the ground up.
What organisations find is that while their fresh new zero-based design (implemented at great cost and causing massive disruption) works for now, within a few years at most, it is no longer right for where they find themselves now. The design is tweaked as far as it possibly can be until it breaks, then the cycle starts again.
In a VUCA world, we spin through these endless cycles of redesign and rebuilding on a faster and faster cadence. While it makes consultancies rich, it leaves organisations with rigid, out of date organisational structures. We recently conducted a survey1 of C level executives across 80 large Australian companies and found that over 50% of them felt that the way they were organised was misaligned with their strategic direction and market needs. At the same time, they expressed a reluctance to make the change needed due to the disruption and cost they would incur to do so.
The Organisation-as-Living System
If the way we see organisations currently traps us in an endless cycle of expensive and destructive redesigns, is there a different way to view the organisation that frees us from the constraints of organisation-as- machine?
In recent years, drawing on insights from complexity science, a new concept of the organisation has begun to emerge based not on a mechanical view but instead seeing the organisation as a living system or ecosystem.
This fundamentally alters the way we view change within an organisation. Unlike machines, living systems are in a state of constant change. If they are injured, they heal. If conditions change, they adapt (within limits, of course). If a tree falls in a rainforest, you don’t need to burn the whole thing to the ground and replant from scratch to repair the damage. New plants, adapted to the new niche that just opened up, will grow. If conditions get dryer or wetter, old plants will naturally make way for new plants better adapted to the environment.
Living systems are dynamic structures that adapt and change to match their conditions. Living systems respond to VUCA through evolution and growth, not destruction and redesign.
The Dynamically Adaptive Organisation
The change in frame from organisation-as- machine to organisation-as- living system allows us to create organisational structures that evolve and change naturally over time rather than requiring extensive redesign.
This is the Dynamically Adaptive (DA) organisation – an organisation that, by harnessing the ability of living systems to respond to change through evolution and growth, is able to dynamically adapt to its changing conditions.
“Dynamically Adaptive Organisations: organisations that are dynamically evolving, changing, and adapting to meet the difficulties of the internal and external VUCA environments that enterprises must navigate every day in order to weather and thrive through the storms of disruption.”
Ponton & Gadzinski – Govern Agility 2024
As old products fade, the DA organisation will naturally produce new products to fill the gap because they are in tune with their changing market conditions. As old organisational structures become unfit for new conditions, the organisation will naturally respond by growing new structures that are better adapted. As old governing principles become constraints rather than enablers, the organisation will respond by evolving new governing principles that enable new and better adapted ways of working.
Given that organisations are made up of people and people are naturally creative and adapt to change with creative solutions (when unconstrained by process or culture), groups of people are naturally Dynamically Adaptive. What holds them back are the constraints of process and culture — we aren’t allowed to do that because either the process or the culture says that we can’t, or that others should be the ones to do it.
How do we get there?
In order to respond as a living system rather than as a machine, organisations must foster a culture that not only allows, but encourages people within the organisation to experiment with new ideas and ways of doing things. Processes and governing structures must be seen as flexible things to be experimented with rather than rigid structures to be adhered to.
The switch to a DA organisation is not just an organisational change but a mindset change for the people within the organisation. As we know, these mindset changes are the hardest of all to achieve. We have been waiting over 20 years for the magical “agile mindset” to emerge in organisations, and so far there are few signs that it will at any scale beyond a few individuals.
In the meantime, an organisation that wants to move towards being Dynamically Adaptive must do so as an intentional act. Those within the organisation who have the power to do so must guide the organisation towards the new model. We would argue that if they have the power to do so, they have the responsibility to do so as well.
There is a principle within developmental psychology called scaffolding, whereby individuals and groups can access mental models they would not ordinarily have access to because the environment they operate in enables or scaffolds them to do so. For example, for people who have not yet developed the magical “agile mindset”, if they worked in an environment where all the structures that surround them are operating according to agile principles, they could operate in that way. Even if they do not possess the mindset themselves.
It is the responsibility of leaders within organisations that wish to become Dynamically Adaptive to build and maintain that scaffolding that allows the organisation to function in a Dynamically Adaptive way.
To this end, we propose five lenses through which the organisation should examine itself –
- The Value Lens: how the organisation delivers value to its clients, customers, and stakeholders
- The Leadership Lens: how the organisation’s leaders guide the organisation
- The Governance Lens: how the organisation’s governing structures and processes enable the delivery of value
- The Structural Lens: how the organisation aligns its people to deliver value
- Developmental Lens: how the organisation develops its people and prepares them for change
The Value Lens
Organisations exist because they deliver value to someone. If they no longer deliver value (value that someone is willing to pay for), the organisation will cease to exist. All other things, including making money, are possible because the organisation delivers value.
The way organisations deliver value, and who they deliver that value to can, and will, shift over time. Many organisations have ceased to exist because either the thing they produce is no longer valuable enough for people to pay for it, or because someone else is able to deliver that value faster, better or cheaper than they can. Customers develop new expectations. Competitors develop new products. Technology advances. Organisations must continuously look at the way they deliver value and assess whether that needs to evolve.
When organisations suddenly find their value offering to be no longer desirable, they are forced to either radically restructure or disappear. Kodak failed to adapt to digital and vanished. Nokia radically reinvented itself several times, from running pulp and paper mills in the 1800s to a phone manufacturer in the 20th century and now a manufacturer of telco network hardware in the 21st. We celebrate such companies for being able to innovate themselves out of disaster. Each of those transitions though was marked by a desperate need to change or die. How much better (and less stressful all round) if, instead of having to reinvent yourself in the face of impending doom, organisations were able to quietly adapt and go on delivering value long term.
Organisations that want to be Dynamically Adaptive must have a clear view of the value they provide to their customers and other stakeholders, and how that perception of value is shifting over time. Is what they are doing becoming more valuable? Or becoming a commodity? Where are alternate sources of value emerging today? In the future?
You may think that all organisations understand this already, but in our experience, while many organisations understand the products or services they offer, they do not understand the underlying value of those products and services. So as that value shifts, they are caught unaware by products that are no longer in demand or competitors disrupting the market with new innovative offerings.
A deep understanding of value is critical for DA organisations.
The Structural Lens
The organisation’s structure — the way its teams are organised, determines how effectively the organisation is able to deliver value. Organisational structures can enable the efficient and effective creation of value, or, more commonly, they can hinder the delivery of value.
Organisations are traditionally organised by functional area — IT over here, Product over there, Commercial somewhere else. But in order to deliver value, all of these groups are needed. So to coordinate value delivery that cuts across organisational silos, we typically fall back on projects to bring a team together from multiple business silos to deliver something. So value creation within the organisation becomes an endless series of projects, each looking after its small piece of value but with no regard for the larger enterprise picture.
The shortcomings of projects are well known, but in the absence of an organisational structure that actually gathers people together and aligns them to the way value is delivered, organisations are forced to use them.
There have been recent steps to move towards better aligned structures — aligning teams into value streams or release trains or suchlike. These structures are a good step forward because they gather together all the people needed to deliver value from across the organisation. And structure them so that value can flow smoothly, rather than getting delayed in organisational bottlenecks or split amongst endless projects.
The problem we are finding with these structures is that when they are created under an organisation-as-machine model, they also become fixed structures. So when value shifts, they are no longer aligned. Many organisations find that their once efficient release trains or value streams start becoming less effective over time but, because of the prevailing model that required change to be large and uncomfortable, they delay restructuring them.
A DA organisation understands that the organising structure they have today is fit for purpose today and today only. In order to remain fit for purpose, the structure must be fluid and changeable — as one value stream starts to dry up, the organisation should dynamically repurpose people into areas that are growing strongly or to explore emerging value streams.
Organisations structures that are fixed and rigid are doomed to fail suddenly and spectacularly because they can not respond to change. Or they require regular and expensive rebuilding from the ground up to adapt.
Organisational structures must be designed to be flexible and able to shift easily, so the organisation can adapt to change.
The Governance Lens
When you mention Governance in most organisations, the reaction you get is usually horrified looks and shudders. Governance stirs up images of endless status meetings, long forms and wasted time. These are signs that the organisation’s governance systems are not doing their job.
Governance should enable delivery of value by providing guide rails for people to operate within. These guide rails maintain quality, financial viability, legality and so on. All too often, though, governance becomes a box ticking exercise that impedes rather than enables the delivery of value. The most common reason for this is that at some point, the way value needs to be delivered changed, and while people are trying to adapt to the new reality, the governance structures, being rigid and inflexible, are stuck. We see this often when organisations shift their ways of working to enable faster delivery only to find that their new fast moving teams are trying to go through the same slow, clunky release process that they always went through. Instead of having to do it once or twice a year, they now have to do it monthly, weekly or every day. Or the financial governance process that consumes the whole organisation in budgeting activities for months and locks them into a yearly or longer plan, which is hard to change.
Governance structures suffer the same organisation-as-machine problem that other organisational structures have. They are built to be rigid and inflexible and require re-design and rebuilding to change. Worse, people within the organisation build their careers around maintaining and enforcing this rigid governance and actively push back on attempts to change it.
Governance, like all other aspects of a DA organisation, should be designed to be flexible. The important thing with any system of governance is the outcome it is trying to achieve — the company remains financially viable, what we release adheres to the law and so on. The mechanism by which that outcome gets delivered, the how, the governance process itself is unimportant and should be subject to regular change.
The organisation should be experimenting continuously with new governance processes that achieve the same governance outcomes but do it in a faster, more efficient way. Governance should be designed around guide rails that help people stay within reasonable boundaries, rather than forcing them to adhere to rigid processes that trap them into a single way of doing things.
The governance outcomes themselves are also subject to change (although on a longer timescale). An outcome that was very important for the products an organisation used to produce may no longer be as relevant for the new products they are working on. The organisation should assess which outcomes are required in each area of the organisation and design governance around those. Rather than trying to fit one size fits all processes to everyone.
A DA organisation continually reviews its governance structures and ensures that they remain enablers rather than constraints. They focus on governance outcomes rather than process adherence.
The Leadership Lens
The difference between an organisation and most living systems is that living systems respond blindly to change — they adapt to survive, and that’s it. Organisations on the other hand have plans. They have goals. Organisations can’t just adapt blindly, they must adapt intentionally.
That intentional direction setting comes from the organisation’s leadership. That does not mean top down control, rather it means guiding and nurturing changes that take the organisation in the right direction while allowing the exploration of alternative direction to provide the organisation with already explored pathways if conditions change.
This means that the organisation’s leaders must stay focussed on the big picture. In another recent survey of C level executives, we discovered that while 100% of them understood that their role meant spending most of their time in the steering and direction setting space. Over 90% of them actually spent most of their time on operational matters. We refer to this as being “stuck in execution”3.
Leaders within DA organisations must break free of the execution trap and focus on ensuring that the organisation is evolving in the right direction. Ensure that the direction of evolution is still the right direction for new and emerging conditions.
To do this, leaders must work to build a culture of trust within the organisation. Lack of trust is the primary reason leaders become stuck in execution. Lack of trust in the progress reports generated by the organisation’s governance structures leads to leaders sitting in endless low level status update meetings and steering committees. Lack of trust in the decisions made by people in their teams leads to a culture of escalation and leaders being involved in every low level day-to-day decision.
Leadership is also responsible for the evolution of the organisation’s culture and identity — who are we, and what are our values? These, along with the rest of the organisation, will change and shift over time.
Leaders who wish their organisations to become Dynamically Adaptive must trust the decisions and experiments being made by the people in their organisation. They must stay abreast of what is happening to endure directional correctness, but must trust that the details are being handled by others. If they become distracted too much by operational details, they will lose sight of the big picture and the organisation will become internally focused and lost.
Directional correctness should be set through communication of strategic intent, rather than by individually vetting every change being made. Give the people in the organisation a clear view of the strategy and direction along with the reasons for that, and they will respond with execution intent — how they intend to implement that strategy. This two-way conversation — leadership giving directional intent and the organisation responding with execution intent, is what ensures that the organisation remains on track.
The Development Lens
In order for an organisation to change and adapt, it must develop new skills and abilities over time. Organisations learn and develop just as people do, but in order for an organisation to develop, Its people, must be enabled to change and adapt as well. If an organisation does not develop, and develop its people, it will end up stuck and unable to move. No matter how much progress an organisation makes in other areas, if its people are stuck and unable to change, it will be stuck and unable to change.
The organisation must continuously assess the skills and capabilities that it possesses, which skills and capabilities are likely to be required given the current direction of growth, and where investment needs to be made to acquire them. It is also important to have a view of which skills will no longer be required. Rather than hanging onto old skills that are no longer strategically important, people and resources can be redirected into new, more valuable areas.
Any view of the future is, naturally, imperfect. No prediction, no matter how well informed, is 100% accurate. If an organisation relies entirely on implementing its chosen direction, it will eventually fail because they picked the wrong direction. Just as in other areas, the organisation must allow diversity to flourish in its skills and capabilities. Areas of the organisation should be free to experiment with new skills, just as they are with new processes and governance structures.
That way, if the chosen direction proves fruitless, there are many other paths already being explored within the organisation, one or more of which may give a clue to a new direction.
The other key aspect to organisational development is change, specifically preparing people for change. It is a well accepted fact that people are naturally resistant to change, and that this is one of the biggest struggles organisations have when implementing new things.
Fortunately, this well known fact is a myth. What people resist is not change, but badly managed change. People are resistant to change that is forced upon them with no explanation or reason given. When they are suddenly told that things will be different and not given any reason why, they naturally resist. Poorly communicated. Poorly explained. Developed in secret by small groups of executives and forced upon people who had no part in its creation? Does this remind you of any organisational reorganisations you have been through?
When people are able to shape the change that is occurring, when they understand the reasons why change is needed, they become willing participants and even drivers of the change. The organisation must involve all of its people in change. Not just a few at the top. Change is part of everyone’s job, and everyone in the organisation should be given tools for shaping and managing change and an opportunity to put those into practice in whatever job they do.
Conclusion
Organisations are not machines. They are complex systems that exist in a complex and ever-changing environment. And the pace of that change is accelerating. Old ways of leading, governing and running organisations are no longer fit for purpose. To survive long term, organisations need to become Dynamically Adaptive — able to change and adapt as the environment changes.
As Charles Darwin said in “The Origin of Species”: “It is not the strongest of animals that survive, nor the most intelligent. Instead, it is those most adaptive to change”.
Or, as W Edwards Deming put it — “It is not necessary to change. Survival is not mandatory”.
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