Strategy making in a complex world

November 8, 2010

Reactions on how to solve the financial crisis of 2008/2009 produced no real, innovative solutions – just more of the same. Most of the proposals aimed at solving the dilemmas caused by the crisis can be reduced to two basic solutions, the first being more rules, better rules and new rules, to control those now being identified as having been primarily responsible. The second response centres around an adaption of an old solution used in the past when things went wrong, namely to fix the incentives. The reality is that in a free-market system with democratic practices it is not possible to control complex adaptive systems – not with rules or with incentives. Winston Churchill once said: “It is not enough that we do our best; sometimes we need to do what’s required.”

We need to seek solutions at a higher level of complexity. The following principles can be helpful in guiding our search for new practices that will produce systemic and sustainable business performance for the long term:

Normative governance. Rules, regulations and policies have a place when it comes to enabling certainty, and exercising control and governance. This is, however, not sufficient to ensure ethical and values-based decision making. An organisational values statement, as an integral part of its aspirational descriptions, is already a prominent feature in most organisations where strategising is practised. When the organisational value system has been relegated to posters and image-building tools, however, it is misused as just another form of rules. Organisational values need to be revitalised to become the central, normative guidelines in all of the firm’s decision-making processes. In this way, normative values need to become the highest form of corporate governance.

Contextual sensitivity. Organisations operate in a specific context, which means that the ‘truth’ of one organisation is not the ‘cure’ for another. Organisational wisdom needs to be discovered locally, in collective efforts, by involving the multiple stakeholders of the enterprise. Cure-all solutions need to be treated with great care and inquiry. Dialogues to discover the specific, local interpretations of macro best practice trends is an important strategic practice, aimed at enhancing the adoption of universally accepted ‘good’ strategic ideas.

Democratised workplaces. Participation, involvement and open dialogue between all stakeholders of the firm form part of the new norm. People will always resist any form of imposition or force (if they have any self-respect). Stakeholders are eager to be involved as part of the solution, rather than to be treated as part of the problem. Transparency and a deep respect for the perspective of others seem to be helpful departure points for building industrial democracy.

Personal relationships as the new currency. Without positive relationships between people, it is impossible to leverage the benefits of individual and collective wisdom in organisations. Creating, developing and maintaining positive, open relationships with the key stakeholders of the firm have become the primary tasks of leaders.

Individual energy as scarce resource. Organisational performance is the result of many virtuous interactions between people internal and external to the firm. These interactions are dependent on the individual energy of role-players to constructively engage, with a positive attitude, to meet and exceed expectations – every time, every day. The demands of a globalised world, where there is no ‘down-time’, but there is an ever-increasing performance and delivery baseline, call for extraordinary efforts from individuals if companies are to succeed. Individual energy, as the source of high aspirations, positive deviance and performance excellence, needs to be nurtured on a continuous basis. Helping and assisting individuals to ensure that their ‘energy bank’ stays full, is a hallmark of those organisations with the title: best company to work for. People and their individual strengths (the right people, deployed in key seats, as Jim Collins would advise) are the basis for viable and sustainable organisational performance.

Strategy and the disciplines associated with ‘good’ strategy-making still form the basis for moving organisations to a higher level of conceptual and pragmatic understanding of their current realities and future aspirations. Strategy, as the act of producing greater certainty for stakeholders at a particular point in time, is necessary but not sufficient for organisational survival. We need leaders who display both the moral will and the moral skill to lead us into an uncertain future (where there are few guarantees), with the necessary wisdom.

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The Cynefin Company (formerly known as Cognitive Edge) was founded in 2005 by Dave Snowden. We believe in praxis and focus on building methods, tools and capability that apply the wisdom from Complex Adaptive Systems theory and other scientific disciplines in social systems. We are the world leader in developing management approaches (in society, government and industry) that empower organisations to absorb uncertainty, detect weak signals to enable sense-making in complex systems, act on the rich data, create resilience and, ultimately, thrive in a complex world.

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