The Journal of 2020 Foresight

Reports from the Knowledge Labs about our recent findings, research topics, and interviews with lifestyle leaders who are creating their own futures.

How to stimulate your own powers of foresight. Consider the following thought provokers. Ask yourself, in these categories what are the brand new trends and forces? Which are the ones growing in importance? Which current forces are loosing their steam? Which have peaked or are reversing themselves? Which are the "wildcards" about to disrupt us in the future? POLITICAL AND TECHNICAL thought for food: Electronics, Materials, Energy, Fossil, Nuclear, Alternative, Other, Manufacturing (techniques), Agriculture, Machinery and Equipment, Distribution, Transportation (Urban, Mass, Personal, Surface, Sea, Subsurface, Space), Communication (Printed, Spoken, Interactive, Media), Computers (Information, Knowledge, Storage & Retrieval, Design, Network Resources), Post-Cold War, Third World, Conflict (Local, Regional, Global), Arms Limitation, Undeclared Wars, Terrorism, Nuclear Proliferation, Weapons of Mass Destruction, Governments (More/Less Power and Larger or Smaller Scale), Taxes, Isms: Nationalism, Regionalism, Protectionism, Populism, Cartels, Multinational Corporations, Balance of Trade, Third Party Payments, Regulations (OSHA, etc.) Environmental Impact, U.S. Prestige Abroad. SOCIAL AND ECONOMIC Food for thought: Labor Movements, Unemployment / Employment Cycles, Recession, Employment Patterns, Work Hours / Schedules, Fringe Benefits, Management Approaches, Accounting Policies, Productivity, Energy Costs, Balance of Payments, Inflation, Taxes, Rates of Real Growth, Distribution of Wealth, Capital Availability and Costs, Reliability of Forecasts, Raw Materials, Availability and Costs, Global versus National Economy, Market versus Planned Economies, Generations: Y, X, Boomers, Elderly, Urban vs. Rural Lifestyles, Affluent vs. Poor, Neighborhoods and Communities, Planned or Organic Growth. Got Knowledge?

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Tuesday, May 27, 2003

Yin and Yang Turning Points: Divergent or Convergent Industry Indicators

Chapter Two: The Ridge

By Steve Howard, CKO
The Knowledge Labs

Table of Contents
Chapter One: Basecamp
Chapter Two: The Ridge
Chapter Three: The Outpost
Chapter Four: The Tribal Territories

"Managers in the East often interpret cycles as part of Tao, a process of continual flow and change. Its principal characteristic is ceaseless cyclical motion, the ultimate essence of reality in Chinese philosophy. The yin and the yang are two phases or states that set the limits for the cycles of change in the Tao: 'The yang having reached its climax retreats in favor of the yin; the yin having reached its climax retreats in favor of the yang.' Although there are many interpretations, the yin can be seen as cooperative, supportive, partial to collective effort. The yang is competitive, aggressive, more individualistic. According to the ancient Book of Changes, all of reality including business is in a constant state of tension, reflecting a dynamic interplay between these polar opposites."

Paul Strebel, Breakpoints

Journal of 2020 Foresight: A while back you told us at the foundation of all of these 180-degree swings back and forth during the turbulent times, lies the need for either innovation or efficiency.

Trailblazer: Yes, for survival and growth. Paul Strebel says innovation is needed to cope with value competition in the environment. It is the process companies use to create a variety of possibilities and choices for adaptation to a shifting environment.

J2020F: A shifting environment refers to the expansion and contraction phases of the economic cycle.

TB: All you have to do is to figure out if the organization's industry is currently in a divergent (loosening) or convergent (tightening) period, and then plan for the next cycle.

J2020F: Kind of a turning point Yin and Yang.

TB: Exactly. If the leading indicators of industry convergence describe your current state, you can expect the next turning point to be about innovation, diversification, decentralization, expansion and loosening organization structures.

J2020F: And, if the current leading indicators line up as a period of industry divergence?

TB: Then expect the turning point to be about efficiency -- cuts in total resource costs, optimization, productivity, and an improved competitive position.

J2020F: Efficiency turning points translate into consolidation, centralization, contraction, and tightening organization structures, right?

TB: That's right. When an organization survives the turning point ending the late growth and early maturity phase, it turns to the efficiency solution.

J2020F: How do you summarize this evolutionary period that ends in another revolutionary period?

TB: An overextension of COORDINATION triggers a RED TAPE nightmare that demands COLLABORATION for growth in the next stage.

J2020F: If the extreme Agents and extreme Athletes haven?t already bolted, this is probably the time.

TB: That's right. The predominantly ACADEMIC-Associates and ACADEMIC-Academics -- the extreme Academic cluster -- take center stage.

J2020F: In what ways?

TB: The ACADEMIC-Associates are adept at developing complex systems through analytical thinking and methods. They personally identify with a department function in a staff role. Their career track remains bounded within a professional discipline.

J2020F: And the ACADEMIC-Academics?

TB: They provide expert analysis and problem solving services to other parts of the organization. They're particularly well suited for developing sophisticated policies and procedures to embody knowledge that the organization has amassed over the years.

J2020F: At this stage of the game we're describing a highly complex organization, right?

TB: Exactly. This is when tightening control translates into new coordination systems. The systems prove useful for achieving growth through more efficient allocation of a company?s limited resources in a slow-growth industry and markets.

J2020F: At the same time the leadership has to prompt field and division managers to look beyond the needs of their local and regional units on behalf of the common good.

TB: You just described what the turning point crisis was all about. While field managers retain a lot of decision-making responsibility, in this stage, they learn to justify their actions more carefully to a "watchdog" audience at headquarters.

J2020F: And that just has to transfer into more and more staff hired into and located at headquarters, right?

TB: You've seen this movie before, right? More Academic talent is needed to initiate company-wide programs of control and review for their line managers.

J2020F: Yup. This is the period of coordination through restriction and limitations using systems that build on similarity and likeness. Anything that might disturb the basic pattern is eliminated or discarded.

TB: You've been there and done that, it seems. Like fast food chains and high transaction businesses the organization at this stage has to specialize in limited products, services or segments -- take McDonald's, Domino's Pizza or UPS and Federal Express.

J2020F: I know Academics favor data and information. Is this the phase where the organization relies primarily on quantitative measurements to judge the health of the overall system?

TB: Yes. The coordination systems installed provide feedback to management procedures, processes and controls geared to maintain order and predictability.

J2020F: What does that mean in terms of reward systems?

TB: Reward systems, for example, motivate employees to preserve and expand past investments and routines. The organization standardizes compensation according to market competition studies.

J2020F: By this time the organization's structure is highly specialized, isn't it?

TB: And, that means the connections between people throughout the enterprise are narrow and specialized. Typically people know very little about what is happening outside of their own areas.

J2020F: Doesn't that make them somewhat myopic?

TB: That might be the understatement of the year. Problems aren't seen as being relevant if they originate outside of a persons own department.

J2020F: Doesn't that further complicate matters when internal priorities, resource allocation, and political problems take precedence?

TB: You bet. As this phase evolves closer to the phase-ending turning point, the complications you mentioned turn into an unspoken agreement to "not rock the boat." So novel solutions to problems and experiments with potential innovations don't get very far. They're viewed as disturbances.

J2020F: What happens when the business environment changes -- say unexpected customer or competitive shifts?

TB: As you can imagine, they go largely unnoticed.

J2020F: How about strategy and structure in this stage?

TB: Remember this is a period of consolidation. Decentralized units merge into product groups. Top management introduces formal planning procedures. They review those plans intensively.

J2020F: I take it, like in the last phase, the sales force sells to sophisticated buyers. But, they don't offer much in the way of product differentiation, right?

TB: Part of the reason is because the competition exits the industry. With fewer competitors, falling prices, low profits and margins, substantial over capacity in mass-produced manufacturing centers cost control is the key.

J2020F: So a complex structure of line staff and product groups evolves into a matrix structure? How does the organization address shifting changes in the industry?

TB: Top management initiates and administers new coordination systems. So, certain technical functions, like information technology and human resources, are centralized at headquarters. But, the daily operating systems remain decentralized.

J2020F: So some autonomy remains?

TB: Well each product group is treated as an investment center where return-on-invested capital is an important criterion used in allocating funds. Stock options and company-wide profit sharing are used to encourage identity with the firm as a whole.

J2020F: But, the only talent cluster left with high affiliation needs is the Associates. The Academic talent clusters by and large identify with their professional specialty. That makes it easier for them to change jobs when something better comes along.

TB: And, that happens at the end of this stage, if not before. This turning point is triggered by a red-tape crisis.

J2020F: How does it play out?

TB: Typically, the lack of confidence between groups intensifies. Wedges proliferate between line and staff groups and between headquarters and the field.

J2020F: How does that lead to a red-tape crisis?

TB: The proliferation of systems and programs generated by all the specialized Academic departments to maximize their own priorities begins to exceed its utility.

J2020F: So by optimizing finance, HR, IT and the like, the organization ends up becoming sub-optimized.

TB: Right. Line managers increasingly resent heavy staff direction from those who are not familiar with local conditions.

J2020F: And, I know staff people complain about uncooperative and uninformed line managers, as well.

TB: Sure. Ironically, both groups criticize the bureaucratic system that has evolved -- they continue to blame each other for it.

J2020F: I imagine the tension grows as each party clings to their own priorities.

TB: Yes, and so you have a crisis on your hands. The chaos intensifies until procedures don't take precedence over problem solving, and innovation isn't dampened any longer.

J2020F: So, until it can make it through the turning point, the organization has become too large and complex to be managed through the proliferation of formal programs and rigid systems.

TB: And after it solves the turning point issues, Yin turns into Yang -- efficiency turns into innovation and divergence.

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