Is A Dual Operating System the Solution for Managing In a Faster Moving World?

by Rod Collins

 

The single greatest challenge facing every business leader today is how to effectively lead organizations in a time of relentless change. As we’ve learned from the publishing and recording industries, no business model is safe when once popular brands such as Border’s and Tower Records can suddenly vanish from our shopping malls. We have also discovered that new brands in industries that didn’t even exist a mere fifteen years ago, such as Google and Facebook, can achieve levels of success far faster than anyone thought possible. Whether they like it or not, business leaders need to come to terms with the uncomfortable reality that the rules that worked in the relatively stable twentieth century may not apply in a twenty-first century world radically reshaped by the digital revolution. If managers want to manage at the pace of accelerating change, they will need new solutions.

John Kotter’s latest book, Accelerate: Building Strategic Agility for a Faster Moving World is a timely guide for business leaders who are open to management innovation. According to Kotter, businesses have trouble keeping pace with the speed of change because their hierarchical management systems are designed for efficiency rather than strategic agility. While hierarchies can be workable structures for the tactical challenges of running large enterprises, they are limited in their capacity to quickly spot hazards and opportunities, nimbly formulate strategic options, and rapidly execute responsive action.

The problem with hierarchies is that strategic work has traditionally been limited to a small number of people at the top. This is a serious handicap because, as Kotter points out, mastering the challenges of relentless change requires “a radical increase in the number of people involved in creating and executing strategic initiatives.” In addition, the longstanding habit of doing strategic work in yearly cycles is problematic in a world where hazards and opportunities that can make or break the business can happen on any given day.

Kotter’s solution for a more dynamic approach to addressing the challenges of rapid change is the adoption of a dual operating system. This is accomplished by creating a second agile network structure that complements the traditional hierarchical organization.  This second structure is not a cross-functional task force that reports to an executive champion, but rather a relatively autonomous system that is free from the usual bureaucratic processes that slow organizations down. The participants in the network are drawn from and continue to work in the hierarchical structure and serve as the catalysts for maintaining the necessary synergies between the two systems.

The key attribute that drives the effectiveness of the network is its lack of bureaucratic barriers. There is no ascription of authority in the network. Thus, anyone can propose an idea or an initiative, and no one has the wherewithal to unilaterally impose his or her will upon the network. All participants are equally empowered to build a consensus around their ideas. If one can garner the voluntary support of enough people, the network provides a powerful opportunity to rapidly develop an idea into a well-formulated strategic proposal for consideration by the company’s leadership team. Because the participants in the network are also part of the hierarchical delivery structure, key requirements for implementing a new idea are integrated into the iterative development of the strategic initiative, increasing the chances that innovations are not only rapidly formulated but are also rapidly deployed.  This enables organizations to be both adaptive and productive.

Kotter points out that, while a dual operating system might seem like new idea, it is actually a common occurrence in the evolution of many, if not most, companies. That’s because most start-ups are initially organized as informal networks. As they begin to experience rapid growth and the need to adopt a more sophisticated management structure, most companies evolve into conventional hierarchical organizations. Kotter’s key insight is that, as a company transitions from a network to a hierarchy, there is a brief period in this natural evolution when both of these systems are operating at the same time. Kotter’s proposed solution is designed to harness the dynamics of this transitory phase into a more permanent modus operandi.

The linchpin that makes this arrangement work is the CEO, who serves as the steward for both systems, making sure that they are equally balanced, sufficiently autonomous, and most importantly, effectively interdependent. This stewardship enables the two systems to coexist in an organic relationship that supports both adaptability and productivity in responding to the challenges of a rapidly changing world.

While Kotter’s solution is a workable solution—even a necessary solution for many deeply entrenched bureaucracies—it is, in all likelihood, not a sustainable solution precisely because it is so dependent upon the stewardship of an enlightened CEO. What happens when the CEO moves on and is replaced by a successor who firmly believes in “old school” management? More likely than not, as we’ve learned from GM’s mishandling of its successful Saturn unit, we can expect that once innovative leaders move on, the higher performing networks they built will run the risk of being quickly demolished by the remaining bureaucrats who see no value in any structure that they can’t directly control.

Nevertheless, Kotter’s dual operating system may be the only practical short run survival solution for companies with long hierarchical histories. It is unrealistic to expect a decades-old traditionally organized company to transform itself into an Amazon or a Zappos overnight. Before traditional companies can learn new ways of operating, they must first unlearn the old ways. The dual operating system is a useful transition strategy for accomplishing both the learning and the unlearning. As a long-term solution, however, the dual operating system may be problematic because collaborative networks not bureaucratic hierarchies are the future of management. Any major company created in the foreseeable future is far more likely to be organized like Google than General Motors.

When Larry Page and Sergey Brin first built their company, they were very proactive in making sure that Google had little, if any, hierarchical structure. They understood that, in a world radically transformed by the digital revolution, networks have become smarter, faster, and most importantly, more adaptive than hierarchies. This is the ultimate lesson that every organization needs to grasp to survive in a faster moving world. While a dual operating system is not a permanent solution for managing in a faster moving world, it is a good start for traditional business leaders who have the will and the courage to begin the job of transforming their legacy organizations into highly adaptive twenty-first century enterprises.

 

Rod Collins  (@collinsrod) is Director of Innovation at Optimity Advisors and author of Wiki Management: A Revolutionary New Model for a Rapidly Changing and Collaborative World (AMACOM Books, 2014).