Creating The Future in a Time of Great Change

By Rod Collins

 

In times of great change, managers can get themselves into serious trouble if they rely too heavily on past experience. Their extensive industry knowledge and thorough understanding of proven business models may actually become deadly liabilities if markets are suddenly and rapidly transformed by game-changing technologies. Unsuspecting market leaders can be quickly overtaken and even extinguished if they fail to understand that, in fast-changing times, past expertise is no guarantee of future performance. Border’s, Blockbuster, and the Encyclopedia Britannica are notable examples of market leaders who were summarily displaced by innovative upstarts that didn’t know much about the past but had a clear sense of the future.

The fundamental job of management is to create the future, and until very recently, managers have long used a reliable assumption to successfully deliver their key responsibility: The past is a proxy for the future. For more than a century, this prime assumption served as the core belief for navigating the business landscape. That’s why business leaders worship at the alter of data and analysis. The more they know about the past, the better they can forecast the future.

But what happens when the past is no longer a proxy for the future? What happens when the arc of change suddenly shifts from incremental to disruptive?  These are questions that Gary Hamel ponders in his most recent book, What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation. And if Hamel’s answers to these questions are correct, the survival of many corporations and their managers may very well depend upon their letting go of familiar assumptions and embracing the unprecedented realities that now define business in the twenty-first century. If they want a different future from Border’s, Blockbuster, and the Encyclopedia Britannica, they need to accept the increasing evidence that a nineteenth century management model is unsustainable in a twenty-first century world.

With the rapid convergence of accelerating change, escalating complexity, and ubiquitous connectivity spawned by the transformational power of the Internet, we have been suddenly thrust into a world where the past is indeed no longer a proxy for the future. And while the future may be very different, it is not necessarily unmanageable; it just needs to be managed differently. That’s because the future no longer begins with a managerial elite charged with orchestrating our institutions; rather, the future today is more likely to start on the fringes in a hyper-connected world far from the control of those who think that they are still in charge. Hamel points out that, while the future may no longer be an extrapolation from the past, it is nevertheless hidden in plain sight. Quoting the author William Gibson, Hamel reminds us “The future has already happened, it’s just not evenly distributed.”

According to Hamel, companies miss the future not because it’s unpredictable or unknowable, but because it’s unpalatable and disconcerting. They miss the future because both they and their leaders need to quickly learn that “organizations lose relevance when the rate of internal change lags the pace of external change.” This means the most important question for any organization is: “Are we changing as fast as the world around us?” If companies are to thrive in a world where the past is no longer a proxy for the future, they are going to need to change the way they change.

The sudden emergence of accelerating change means that everything now changes exponentially. Unfortunately, business leaders don’t have much experience with exponential change. They are much more seasoned in the ways of discipline and efficiency shaped by a management ideology where control is the principle preoccupation of most management systems. However, in times of accelerating change, it isn’t the most controlled or the most efficient organizations that survive, but those that are the most adaptable and resilient.

Traditional organizations are not designed to be adaptable or to manage at the pace of exponential change; they’re designed for maintaining the status quo and for steering incremental change. And when they do make large-scale changes, it’s often in the face of a traumatic crisis. As Hamel observes, “Review the history of the average corporation and you’ll discover long periods of incremental change punctuated by occasional bouts of frantic, crisis-driven change.” When exponential change supplants incremental change as the norm, the capacity to change without trauma becomes essential for the simple reason that the severe stress of never ending crises is unsustainable for most human organizations. That’s why Hamel advocates, “Building organizations that are as resilient as they are efficient may be the most fundamental business challenge of our time.”

The greatest impediments to building resilient organizations are the control systems that have served as the standard of management excellence. Resilience requires innovation, creativity, exploration and experimentation. To be resilient, managers must have a capacity for iterative learning, which means that they must have a willingness to take risks, to sometimes fail, and to learn from what are hopefully small failures. While embracing explorative failure may be a hard adjustment for control-oriented managers, they may not have a choice because avoidance of small failures in times of great change may turn out to be the fastest pathway to ultimate failure in a world where only the innovative survive.

If companies are to cultivate the innovation that they need to be resilient and adaptive, Hamel argues that they need to make sure that the senior leaders don’t dominate the strategy discussion. Instead, the conversation about company strategy needs to be shaped by individuals who are emotionally invested in the future rather than experienced in the past. This means expanding the diversity of those who shape strategy. Hamel suggests, “One simple way of increasing diversity is to overweight every team and decision-making body with individuals who are younger than the company average, have worked in other industries, and aren’t based in the head office.”

Creating the future in a twenty-first century world reshaped by change, connectivity, and complexity requires a paradigm shift in the ways we manage organizations.  Managing great change is only possible if we change how we manage. Those business leaders who have the courage to embrace new assumptions and new ways of thinking by building organizations that are designed to adapt rather than to control will be better poised to create the future in a time of great change.

 

Rod Collins is Director of Innovation at Optimity Advisors and author of the upcoming book, Wiki Management: A Revolutionary New Model for a Rapidly Changing and Collaborative World (AMACOM Books, November 1, 2013)