Let’s not fool ourselves, leading a business in today’s world is highly complex. The rate of change is exponential and this will more than likely only speed up. The world we operate in is complex with known unknowns and unknown unknowns. We are still extricating ourselves from the COVID-19 pandemic and now we are dealing with the Russian invasion of Ukraine which is having an impact globally e.g. the price of fuel and power skyrocketing. Add into that mix the global supply chain challenges, global warming, extremism, nationalism, etc. and you have a perfect storm of uncertainty that leaders need to navigate their organisations through.
To be successful in this world, organisations need to anticipate and adapt to change, learn and pivot and deliver at speed. Not only do they face the challenges highlighted above, in most organisations they also face employing outdated management techniques, growing talent shortages, broken value chains, inflexible operating models, etc. The changes in how we managed organisations have only changed logarithmically and are not a great deal different to how we managed 30 years ago when the world we operated in was a different place.
We have seen the rise of new ways of working and they have definitely assisted in modernising management practices. One only has to consider how many organisations have embraced agile to realise that we are trying new ways to keep up with the rate of change. There are challenges though, including still believing that there is a one-size fit all model for organising the work in the organisation; still using the thinking of the past to address the challenges of now; embracing ERP systems that limit our ability to be flexible; believing that automation is the panacea for success, etc.
So how do we address these challenges in this highly complex world? I read and research a great deal and I could not find holistic solutions that addressed the challenges faced. I thus, together with my colleagues at Be Agile, developed The Elastic Organisation™ thinking framework.
At its core, The Elastic Organisation™ enables an organisation to build a solid architecture designed to deliver optimum value to its customers, shareholders, employees and community. Whilst this architecture is solid enough to stand up to the rigours of operating in this complex world, it is also flexible enough to confidently meet any significant challenges it will encounter such as COVID-19.
So – what are some of the components of building The Elastic Organisation™:
Understand the markets and customer segments you wish to operate in and then develop and offer products and services that meet your customers’ wants and needs better than your competitors;
Instead of thinking about organizational architecture, start thinking of value architecture. Design your organization around the delivery of value to your customers, stakeholders, employees and community. Here we see three key levels of value architecture:
- Strategic value streams e.g. new products, new markets, etc,
- Operational value streams e.g. call centres, supply chain, etc.
- Support value streams e.g. finance, HR, procurement, etc.
One of the key aspects when considering these different levels is that they will, in most instances, be connected to each other with synergies and dependencies. A key idea behind The Elastic Organisation™ is that you need to ensure that there is sufficient flexibility within your architecture to optimally meet your strategic, operational and support needs. The rigid ways that we used to develop organisation architecture in the past need to be replaced with interchangeable “hinges” that we can move around as required.
These “hinges” may need to be moved for any number of reasons including the organisation suddenly receiving a really large order; the organisation being faced with an external threat e.g. pandemic, cyberattack, etc. By applying this approach, the organisation can rapidly adjust the value architecture to optimally leverage the opportunities or fend off the threats.
- Ensure that you fully understand the capabilities you require to operate optimally now as well as achieve your future strategy. Far too many organisations set out a strategy and do not do a deep-dive analysis of the capabilities they will require to deliver on their strategy. These capabilities will include technology, talent, procurement, logistics, infrastructure, and ecosystems – just to name a few.
A great way to ensure that you have these capabilities is to do “back-casting”. Most organisations will do forecasting which is to take their current baseline and then forecast what they need in 12, 24, 36, 48 months’ time. In back-casting, you start off at your end goal – your strategy – and you determine the capabilities you will require to achieve this strategy at that point in time. You then go back a year from the end goal and analyse what capabilities you will require 12 months before you achieve your vision and you then repeat and analyse what capabilities you will require 24 months before, and so forth until you back-cast to your current baseline. This method gives you a much better chance of ensuring you have the capabilities in place to achieve your strategy – it might even tell you that your strategy is too aggressive or not aggressive enough.
- Understand that there is not just one way to design your organisation. Historically most organisations have chosen one organisation design model to employ – be that based on customer segments, products, geography, etc. – and they have then designed the entire organisation around that one model – most of the time, having a very hierarchical structure with all decision making being made by managers.
The Elastic Organisation™ believes that different parts of the same organisation will require different organisation design approaches and the ideal design for each part of the business needs to be applied. You may find that the IT and Product Development departments would benefit from agile organisation design approaches whilst the operations and call centre departments may benefit from more lean approaches.
One of the largest constrainers in the organisation design field is the ERP systems that organisations have heavily invested in. Let’s look at an HR ERP system – by default, these systems almost force the organisation into a traditional hierarchical structure to drive approvals, cost centres, etc. This generally results in the organisation having to run an administrative organisation design that fits in with the ERP system and then a “virtual” organisation design that is designed around optimally delivering value.