Type 2 Organizations

Spencer shared the following quote with me last week, from Jeff Bezos’ most recent annual letter:

Some decisions are consequential and irreversible or nearly irreversible — one-way doors — and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that — they are changeable, reversible — they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.

As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.

This, I think, is the fundamental problem we’re facing. Success in the industrial, mass-production era comes from being really good at Type 1 decisions. Big choices, made at the right time, scaled to millions of customers through powerful, owned production and distribution channels. To be very clear, I don’t think this is A Bad Thing — it’s advantageous, optimal behavior in certain conditions. Once I started thinking about decisions in this way, I noticed that everything in large enterprise is designed around this principle.

Performance management exists to find great decision-makers and push them to the top of the organization. Projects don’t run without a senior bod calling the shots. Software is procured at the top and pushed down, because Integration and Business Cases and Efficiency. We aim for Big Bets because they showcase our personal decision-making ability, and because decisions are hard to make (see: rigor! pre-reads! 50-person update calls! dotted lines!), we make them infrequently in order to reduce the pain. And yet, it’s sorta working fine (see: profits! executive comp!).

A slide from a deck I’m working on

For another post: that it’s working means that we’re at Peak Enterprise, IMO.

Anyway. This all makes a ton of sense if you think the future is going to bring predictability and calm. If the world is getting more uncertain, more volatile, more unpredictable, though, it’s not advantageous to optimize around Type 1 decision-making. Thankfully (of course, right?), the software era allows for a different type of organization.

Just throwing this out there to see if it sticks: the future of work is the Type 2 Organization. It’s an organization—a decision system—built to break down big decisions and jobs into smaller pieces that can be processed much more rapidly, replacing the illusion of top-down control over the future with realtime, active control over the present. It’s an organization where very few decisions are made for others, but many more decisions are being made in the open.

This is all very well and good to talk about, but in practice it’s a complete reversal in course. Most of the things that leaders learn in Type 1 Organizations aren’t helpful in a world gone Type 2. Same goes for almost all of the processes we created to manage a Type 1 Organization. It’s not that they’re bad, they’re just not needed in an organization that’s constantly steering itself.

Anyway, when we talk about Responsive Organizations, I think this is what we’re talking about.