Five Org Design Things N° 1
Nine barriers to change; Nudges; Scalable learning; Learning at scale; McDonald's & Walmart are software.
Barriers to Change
Common barriers to digital transformation, according to a pretty broad study from Capgemini:
- Lack of urgency: companies know change is coming, but current success impedes their desire to do something about it.
- Lack of vision among top leadership: change happens top-down, not bottom-up.
- Lack of direction: the company knows they have to do something, but aren’t sure what to do or how to do it
- Old people: they’ve seen previous technology projects get other people fired
- Prevalence of legacy technology: old, expensive systems and processes are hard ($) to maintain and hard to connect to
- Innovation fatigue: change is tiring, yo!
- Making a case: innovations have unpredictable ROI
- Incentives: currently they’re designed to keep the legacy alive
This is a little bit “The water is wet!”, but it’s still useful.
Nudges, for the win
Interesting stuff here. The basic idea behind a “Nudge”: build a set of automatic but reversible actions into a system to encourage good behavior. Here’s Cass Sunstein, author of Nudge, in an interview with New Scientist:
How do you design a nudge? It’s a problem-centered approach, rather than a theory-centered approach. So if we had a problem of excess complexity making it hard for people to make informed choices, the solution would be to simplify. If people aren’t enrolled in a program because it’s a headache to sign up, automatic enrollment seems like a good idea.
Is nudging generally preferable to strategies like taxes and prohibition?
The advantage of a nudge is that it’s more respectful of freedom of choice. It always belongs on the table, but if you have a situation where, say, polluters are causing health problems, some regulatory response is justified—a criminal sentence or a civil fine.
Over the last 40 years, return on assets for all public companies in the United States has declined by 75 percent. Even companies that achieve high levels of profitability have been toppling out of their leadership positions at twice the rate they did back in the 1960s. Companies that make it onto the S&P 500 list in the United States used to remain in those august ranks for an average of 75 years back in the 1930s; today the average life on the S&P 500 is less than 15 years—an 80 percent reduction in life expectancy. Survival—the most basic measure of performance—has become more and more challenging.
Fundamentally different types of institutions may be necessary that break those constraints and harness new tools and practices to simultaneously drive both accelerated learning and high levels of efficiency in rapidly evolving environments. To do so, we need to rethink the rationale for firms.
...and Learning at Scale
From the talent side of the equation the key requirement for institutional success is to move from scalable efficiency to scalable learning. Near-constant innovation is the only way to respond successfully to near-constant disruption. Said differently, the rate of learning, innovation, and performance improvement within the institution must match (or exceed) that of the surrounding environment if the institution is to survive (or thrive). Given that innovation is inherently a human activity–one performed by talented individuals–it follows that talent will pull institutions into the 21st century.
This is from an article published in 2009. There’s a great phrase in here: scalable pull.
Also aligns with my belief that institutions and individuals need each other, and that powerful culture is a lever for growth. One of the things I disagree with most in the thinking around Holacracy is the deep separation of culture from work, and that leadership, relationships, and care are inappropriate tools for getting work done. Used responsibly, they’re the tools that create pull in organizations.
McDonald's and Walmart are Software
McDonald’s, for example, grew big by designing a system, the McDonald’s franchise, that could then be reproduced at will all over the face of the earth. A McDonald’s franchise is controlled by rules so precise that it is practically a piece of software. Write once, run everywhere. Ditto for Wal-Mart. Sam Walton got rich not by being a retailer, but by designing a new kind of store.
This is from an awesome essay by Paul Graham from 2004 called, “How to Make Wealth.” I go back to it a ton for inspiration.
But I’d forgotten about the reference comparing a business to software. Really smart, and yet more relevant today than it was a decade ago.