I’ve worked in organisations that range from the very small to the enormously large; ones that are owned by private equity companies, ones that are ASX listed, ones that are owned by families, ones that are subject to partnership arrangements, and ones that are not-for-profit. The consistent experience across all of them has been a sense that organisations are never living up to their true potential: they’re always years behind where they could be.
I’m sure you’ve had a similar experience - someone starts touting the benefits of an open plan office when you know all those supposed benefits were debunked twenty years ago, or your CEO says that engagement really matters but, when pressed on the issue, has no idea why or how to address it. All of these things link back to the same issue - we have heard about some kind of change in, or idea from, the ‘outside world’ which makes us think that some kind of change is required in, or would benefit, our organisation…
The pace & size of the change required to remain relevant (and, thus, competitive)
I hypothesise that the pace of change that our organisations adopt, and the enormity of the step change required to keep up to the evolution curve, links back to two things:
1. where your organisation sits on the Rogers innovation adoption curve; and
2. how ‘heavy’ your organisation is with ‘fixed’ assets.
Where your organisation falls on the Rogers innovation adoption curve
The Diffusion of Innovation (by Rogers) is a theory that seeks to explain how, why, and at what rate new ideas and technology spread. It categorises adopters of ideas and technology into 5 categories - innovators, early adopters, early majority, late majority, and laggards.
This theory is applicable to how we go about the business of running our organisations. That is, to the approaches we adopt to organising our people, what systems we implement, what causes we put our corporate support behind… even to the level with which we document our processes.
If you’re an innovator business, you’re on the evolution curve - you’re accurately reading the times that you live in, and you’re responding to it. You’re constantly making incremental changes in order to remain completely relevant. As Hannah Gadsby recently said in Nanette, “Artists don’t invent zeitgeists, they respond to it.”
If you’re an early adopter, then you’re quite close to the curve. You’re able to quickly see the merit of any evolution that is occurring, and how it is or is not applicable to your business. You’re not leading the way in terms of ideas, but you’re a great first follower.
If you’re in the early majority, this is where we will start to see step-change ‘revolutions’ in your business, rather than constant adaptive behaviours (‘evolution’), in order for your business to ‘keep up’ with where society actually is.
If you’re in the late majority then you’re probably going though large step changes to keep up. This kind of organisation either can’t perceive how the context that they’re operating in has changed, or they’re too heavy with fixed assets to respond in a timely manner… they make changes because someone in the company once heard that was a good thing to do, or because they’ve suddenly gotten a very rude awakening about how far behind the times they are (Nike and it's sexist work culture, much?).
If you’re a laggard, then your organisation is probably seeing massive negative impacts to its bottom line as it fails to keep up - it’ll either shape up, or it won’t be around for much longer.
How heavy your organisation is with fixed assets
I think of organisations as full of ‘assets’ - these aren’t just your typical balance sheet assets, but they are all things that make a business what it is - that exist somewhere on the spectrum between ‘fixed’ and ‘flexible’.
Fixed assets are hard to change- they’re the 10 year lease, the EBA, any long term contracts without much wriggle room in them, data centres, that computer system you spent a fortune on, and the policies and processes that are documented down to the nth degree such that no one has any room to do anything creative.
Flexible assets are easier to change- they’re policies that provide people with sensible limits while still allowing for some freedom in execution, they’re cloud-based working, they’re short term leases, they’re contracts that get you great prices on the basis of you being a great client (and not great prices on the basis of you being locked in forever).
One of the major impediments to evolution in an organisation is if it is heavy with ‘fixed’ assets. The typical organisation cares about its bottom line far more than anything else, so it attempts to create certainty about its bottom line through:
1. locking down variables (such as employee behaviour) that can influence costs; and
2. entering into long term deals as a way of obtaining better prices.
But by doing so, we make it really hard to respond to the evolution that is happening in our society, and we’re forced into being ‘behind the times’ for a period before we’re ready to spend the money and the effort required to make a step-change that will bring us closer to the evolution curve.
Why is it so difficult to be an innovator or an early adopter, when we know that the world is changing at an unprecedented rate and our organisational survival depends on it?
1. The typical organisation incentivises us to operate in the short term, which is completely at odds with the long-termism and foresight that being an innovator requires.
It is difficult to be an innovator or an early adopter because the typical organisation (that is, one listed on a stock exchange, or one which is owned by a company which is listed on a stock exchange) is beset with a short-termism and risk aversion that is slowly killing the very great potential of our companies.
Annual reporting, and the consistent push for revenue growth, means that we stop investing in things that may fail (or which don’t have any quantifiable short-term benefit), but which could be game changing in the long run. It forces us to become an “early majority” at best, once we’re sure that adopting some new way of being will deliver the results we want it to. That is, our desire for certainty (in order to meet the demands of our shareholders for as much profit as possible) means that we stop doing anything until it’s a surebet. You can't lead the pack with that level of risk aversion.
We need to move the needle away from short term results, to longevity and legacy, if we’re going to see organisations do truly amazing things.
2. The majority of us are too scared to be creative, or to justify (in the short term) the contribution of those that are
Creativity is, by its very nature, uncertain. We don’t know what it will produce, and we don’t know if that thing will be commercialisable or have a quantifiable positive benefit that we can point to. Creativity provokes all of our very human fears about mess, failure and judgement, and organisations very rarely demonstrate the emotional maturity required to create a safe space in which people can be messy, potentially fail, and do so without judgement.
3. We don’t actually believe that our organisational survival depends on it (our organisation hasn’t died yet, after all)
I think about the revolution going on in the legal services sector... I remember being told as an article clerk (a baby lawyer) to see my billable rate as “1/3 to the partner, 1/3 for overheads, 1/3 to you.”* Commercial clients can see those kinds of margins and have demanded a different service offering in the form of fixed fees, or lawyers that they can second to their businesses for a day or two a week at more usual contractor rates. While this revolution hasn’t killed the big firm model (yet), it has noticeably cut into its market share. Automation will be the next big transformer of the legal sector, with Deloitte estimating that 39% of jobs could be automated.
4. Even if our organisational survival did depend on it, we’ll be able to shirk any accountability for its survival that should be ours
The above statement might sound horribly cynical, but I don’t think it is - from my perspective, this is simply human nature in action. When we’re in structures that leave us feeling like we’re not 100% in control of the decisions that we make, the majority of human beings will do things that lack integrity because they feel like it’s not really them who is making the decision (check out the Milgram Experiment for the data on this). So, we stop seeing the success of a company as something that we’re collectively responsible for. Instead, we console ourselves that we’ve done our bit, and if it failed, it failed.
So, why isn't your company leading the pack?
- It is operating in a context that prioritises certainty over creativity.
- It has too many fixed assets that are preventing it from making continuous adaptations.
- It doesn't have the emotional maturity to facilitate creative approaches.
- People don't feel personally accountable for the success of the organisation, because the way that it is structured removes any real decision making from them.
If this made you think, please share it.
*I did the math – only 1/5 was going to me, and, usually, I was working so many hours that I was financially no better off than if I had become a workaholic barista.