Platt Perspective on Business and Technology

Building a business for resilience 8 – growth-emergent bottlenecks and smoothly managing scalability 4

Posted in strategy and planning by Timothy Platt on December 24, 2015

This is my eighth installment to a series on building flexibility and resiliency into a business in its routine day-to-day decisions and follow-through, so it can more adaptively anticipate and respond to an ongoing low-level but with time, significant flow of change and its cumulative consequences, that every business faces in its normal course of operation (see Business Strategy and Operations – 3, postings 542 and loosely following for Parts 1-7.)

I have been discussing how businesses develop and evolve as they move from their initial startup stage into becoming more fully organized enterprises (see Part 6 and Part 7.) And I have focused in this, on how businesses grow in organizational complexity, and both for their operational processes and for their supportive, operations-directing strategies. And a great deal of this occurs as a shift from making one-off, ad hoc decisions and taking ad-hoc action, to developing more standardized, and experience-based processes that can be recurringly, consistently applied.

I focused essentially entirely, and I add very explicitly in Parts 6 and 7 on organizations that still remain effectively connected, for communications and for maintaining a largely still unified decision making process. And I began to discuss organizational friction in this context, but only noted that in passing. My goal for this posting is to at least begin adding in organizational complexity, and in terms of business and organizational friction.

I begin that by repeating a working definition of this phenomenon, from Open Markets, Captive Markets and the Assumptions of Supply and Demand Dynamics 5:

• Real world business and marketplace systems are in practice, shaped by intent and planning, but also by the unintended and the unanticipated. And that critically importantly includes communication mismatches, and differences in knowledge and understanding among stakeholders, and delays and uncertainties at all levels and for all participants who would carry out those plans or be affected by them.
• Real world business and marketplace systems are shaped very significantly by uncertainty as consequentially arises from all of those factors and considerations, and those factors collectively create and comprise both individual business and overall economic friction.

Friction arises from an at least partial lack of information that would be required in order to make optimal decisions, and that would be required for optimal action in execution of those decisions, when that information would be required. Friction breaks the capacity for smoothly coordinated decisions and actions. It created uncertainties, and that creates risk and that creates what should at least in principle be avoidable cost. And to put this into perspective for what I would address here, I just stated above that I will “at least begin adding in organizational complexity, and in terms of business and organizational friction.”

• The larger and more complex an organizational system, the more opportunity there is and will be for the types of information management challenges that constitute friction for it.

With that observation noted, I turn to consider organizational complexity and its consequences. And let’s reconsider the simpler systems example that I offered in Parts 6 and 7, and its functional scenario of purchasing in the face of an of-necessity limited available budget, as a starting point for that. Where does friction arise here, in this simpler, more communications-connected context?

• Communications are never perfect. And even in a tightly connected organization, people working in different functional areas cannot be expected to completely, fully know all of the priorities and assumptions made by all of their colleagues as to their current and anticipated needs,
• Or exactly and perfectly how and why they set the goals and priorities that they do.
• This means that they function in their jobs in the presence of at least some friction, even if overall openness of communications in their business can limit it and its impact.

Now let’s consider a business where different parts of the organization do not communicate across functional or organizational lines as well, or even at all for decision making concerns that the involved stakeholders see as more uniquely their own – except perhaps through limited formal channels and when explicitly acknowledged as being required. In an extreme form the communications and information sharing barriers that I write of here, can even mean businesses that are partitioned off into actively competing units by largely impervious silo walls.

• The larger the number of barriers that are in place to open communications that would align with overall business strategy and need, and the more impervious those barriers are to communications, the more friction is going to be in place in that business and the less agile and resilient it can be.

There are reasons why I often find myself thinking and acting in change management terms when I have to think and act in terms of silo walls, and the challenges that they can create. And there are closely related reasons why I write, plan and act in support of leaner and more agile approaches too – with simpler overall systems, cleaner and more reliable lines of communications, and reduced friction.

And with that noted, I acknowledge a key word in my last bullet pointed sentence here: “usually.” There are exceptions to the general principles that I have been offering here, and there can be and often are trade-offs that enter in where partitioning can even become essential, and even as a matter of legal mandate. I am going to continue this discussion in a next series installment where I will look at contexts where more carefully strategically and operationally considered partitioning is needed. And as a key part of that, I will discuss how friction can be managed there. In anticipation of that, I note in this context of this posting, that the silo walls and local fiefdoms that I write of here in Part 8 become problematical because they arise independently of and even contrary to any overarching strategic vision for the business as a whole, and they are maintained in that manner too and regardless of overall consequences. Think of this as addressing a distinction between ad hoc organizational partitioning, as opposed to planned and strategically considered organizational partitioning. I have focused in this posting on the former, and next time I will turn to consider the later.

Meanwhile, you can find this and related postings at Business Strategy and Operations – 3 and also at Page 1 and Page 2 of that directory.

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