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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The Journal of 2020 Foresight
Monday, May 19, 2003  

180 Degrees of Separation: Vital Signs for Innovation or Efficiency

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

"I doubt that managers can or should act to avoid revolutions. Rather, these periods of tension provide the pressure, ideas, and awareness that afford a platform for change and the introduction of new practices."

Larry Greiner

Journal of 2020 Foresight: Last time we talked about the lifespan of an organization, you said when we examine the Start-up, Growth, Maturity, Decline, and Reinvention stages one-by-one, each phase is both an effect of the previous phase and a cause for the next phase. What did you mean by that?

Trailblazer: To move ahead companies must consciously introduce planned structures that are 180 degrees different than what worked in the recent past.

J2020F: And, we discussed how each stage evolves through a mostly incremental growth phase with only minor periods of upheaval, only to end with a chaotic period of turmoil.

TB: For instance, the organic, creative, ad hoc looseness in the start-up phase has to be reversed 180 degrees to begin the growth phase.

J2020F: An AGENT-Agent innovates a new disruptive technology, business model, or a radically new science in the start-up phase.

TB: That's right. Paul Stebel says that for survival and progress, every organization needs to master fundamentally two sets of competencies -- innovation and efficiency. He says innovation takes on the challenge of responding to the competition by increasing the value of its products and services in a new way.

J2020F: So, while innovation creates the variety of new possibilities and choices to adapt to a shifting business environment, what about efficiency?

TB: Well, efficiency cuts total resource costs and boosts an organization's competitive position. That means beginning in the innovative start-up state, over the lifespan of an organization we'll experience several swings between decentralization and centralization as the organization's strategy shifts between innovation and efficiency.

J2020F: How does that oscillation process play out?

TB: In the beginning, and whenever the strategic emphasis is on enhancing adaptability through innovation, the company needs to turn 180 degrees and loosen its decision-making reigns.

J2020F: Moving from a tightly controlled top management handful to the troops in the front lines?

TB: Right. Top management has to delegate authority and responsibility to those closer to the point of contact with the customers.

J2020F: Aside from the organic start-up, in which other organizational states?

TB: In the late growth, mature organization with a divisional structure and in the latest stage, the reinvention state with the network organization structure.

J2020F: And, efficiency?

TB: When the emphasis needs to shift to efficiency, the idea is to tighten decision-making for coordination purposes, as in a strong central headquarters structure in the growth and late maturity / decline states.

J2020F: Now, what about economic cycles. They can come and go regardless of what state an organization is currently in, right?

TB: We see cyclical swings back and forth between diversification and consolidation.

J2020F: I'm guessing as the economic cycle contracts the organization consolidates its product offerings, while they diversify their product line when it expands.

TB: That's true. Each of the typical turning points between innovation and efficiency, or between expansion and contraction corresponds to a loosening divergent or a tightening convergent organization strategy.

J2020F: Divergent in what way?

TB: Usually a way from a structured, centralized, or coordinated organization structure and decision-making approach.

J2020F: To what?

TB: Towards a more unstructured, decentralized hierarchy designed to deal with the competitive environment changes and increased complexity. This is the innovation-driven, adaptive period.

J2020F: And the opposite?

TB: The reverse begins with a convergence away from an autonomous organization and decision-making process and moves to a more coordinated, centralized structure -- designed to economize on scarce resources.

J2020F: How do you know when it's time to trigger a turning point?

TB: Well, if the organization, the marketplace, or industry is in one period, the next turn will be the opposite.

J2020F: So, if your organization is in a divergent state, then look for signals of emerging convergent forces.

TB: That's right, because at the next turn of a business cycle the organization will be pushed into a chaotic transition period.

J2020F: If they are ready, the talent culture will resist the needed change less. They will be able to make minor adjustments to assimilate the opposite set of behaviors required.

TB: With enough time, a shift of 180 degrees can be accomplished more incrementally. But, if the organization leaders, especially in Human Resources, keep their head buried in the sand, they will miss the early signals.

J2020F: And we already know that the abrupt change triggers a more radical disruption. And that gut-wrenching crisis forces everyone to accommodate it to survive, whether they want to or not. So, if I've been in a prolonged economic contraction and my organization has been converging, how do I know a cycle of divergence is nearing?

TB: According to Paul Stebel, you look for some of these leading indicators in your customer-base, among your competitors, in your supply chain and distribution channels:

Declining growth rates reveal an increasingly saturated market for your standardized commodity product;

Declining returns force competitors to cast about for new market niches as cost reductions and operational improvements squeeze as much margin as is practical;

Customers sever loyalties and attract new competitors into the market;

New product development springs out of new technology, different supply sources and new resources; and

Divergence is well under way when changes in distribution channels produce competitive advantages.

J2020F: And, leading indicators of convergence -- having enjoyed a period of economic expansion or growth in a business cycle?

TB: Customers -- the segmentation between customer groups looks increasingly artificial and starts to break down;

Competitors -- convergence becomes obvious when you see increasingly similar products, services, and images;

Potential competitors -- nobody shows up on the radar as potential entrants into the marketplace;

Supply chain -- neither a different set of suppliers or resources provides a significant source of competitive advantage; and

Channels -- the bargaining power that you and your competitors had enjoyed shifts downstream to your distribution channels.

J2020F: OK. Let's see. We've got organizations with a lifespan that lasts somewhere between 10 and 40 years. At any one time it can face a growth phase turning point or one driven by expanding or contracting business and economic cycles.

TB: And, over an organization's lifespan moving through several stages as it grows and declines, a company cannot return to a previous growth solution. It must adopt a new solution or it won't move ahead.

J2020F: Also, you've told us that a strength in one phase, or a solution to a previous crisis, taken to an extreme in the next evolutionary phase becomes a new weakness.

TB: Yes, it triggers a crisis that forces an urgent search for a new solution.

J2020F: But, the pattern is predictable, right?

TB: That's right. Too much creativity in the start-up phase of a small, young organization triggers a leadership crisis that is solved through a more directive management practice in the next phase. However, the tightening that comes from too much direction causes a crisis of autonomy.

J2020F: So, the 180-degree change triggers the need for delegation in the next phase, right?

TB: Yes. But, too much delegation creates a crisis of control from the loosening emphasis. In order to grow, the organization returns to a tightening structure that concentrates on coordination.

J2020F: But, too much coordination leads to, what?

TB: To a red tape nightmare from excessive tightening.

J2020F: And that leads to?

TB: That leads to collaboration through the next loosening wave.

J2020F: Which almost brings us back full cycle to the start-up first phase. We'll talk about that next.

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