Platt Perspective on Business and Technology

Building a business for resilience 9 – open systems, closed systems and selectively porous ones 1

Posted in strategy and planning by Timothy Platt on January 29, 2016

This is my ninth 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 1-8.)

I focused on simpler businesses in Part 8 of this series,

• With more open communications and both along and across the lines of their tables of organization,
• And certainly where that would be needed for maintaining strategic alignment and operational effectiveness.

And I wrote there of business systems friction and how it arises as both a cause of and as a consequence of miscommunication, and a failure to share necessary business intelligence among involved stakeholders when it is needed by them. And I noted there in that context, that simpler lean and agile business structures and systems can provide a best available route to greater efficiency and greater resilience in the face of change, with this leading to greater competitive strength and overall profitability – by reducing the levels of this friction within the organization, by reducing the number of barriers that can cause it.

And then at the end of that posting I challenged that basic default, simply model approach. And I added in that context that I would at least begin to offer here, a brief discussion of:

• A select set of specific real-world scenarios where more carefully strategically and operationally considered partitioning can offer positive value, and where it can even become a necessity.

And as a starting point for this posting’s discussion, I repeat a clarifying comment that I added to the end of Part 8, to the effect that:

• The silo walls and local fiefdoms that I wrote of there become problematical because they arise independently of and even contrary to any overarching strategic vision for the business as a whole. And they remain problems because they are maintained in that manner too and regardless of overall ongoing consequences.

Think of this as addressing a distinction between ad hoc organizational partitioning, as opposed to planned and strategically considered organizational partitioning. I focused in Part 8 on the former, and turn here in this next installment to consider the later. And I begin that by noting that I have in fact raised a whole series of such exceptions in the course of writing and posting this blog as a whole. And to cite a few of them as opening examples for consideration here, I note:

1. The value of maintaining value preserving business systems, with their own processes and strategies when a larger business acquires a smaller one for its specialized and even unique capabilities, as they would bring value to the acquiring business as a whole, and
2. The value of walling off in-house developed research and development facilities from open-ended and unfettered communications, and both where this could lead to process interference from other parts of that business that would limit performance of the research and development effort, and where it might compromise necessary confidentiality and loss of control of proprietary information.
3. And I third that I could similarly cite is the need to wall off the collection and management and use of customer or employee personally identifiable information, to those who would need access to this for legally approved use and away from alternative use.

Let’s start this discussion with number one of that list and strategically planned out and considered business acquisitions. And in this I could be writing about IBM or Microsoft or Apple, or any of a wide range of other big corporations that have made a steady and ongoing practice of buying up smaller specialized businesses, that would bring greater value to them from being brought in than it would cost to acquire and retain them.

For purpose of this discussion, let’s call the larger acquiring business, the Magnakoure Corporation and a small cutting edge new technology business that it would bring in, and both for its new technology patents and for its systems for capitalizing on them as Technodynamek, LLC.

• Both of these businesses have been around and actively functioning for a long enough time to have developed their own business systems and their own tables of organization. And they have also developed their own standard recurring lines of communications, as networks of conversational channels that have proven themselves of ongoing value for those involved in them, along with systems for initiating novel communications lines – at least where the people who would participate in them can find each other.
• And when Magnakoure brings Technodynamek into their overall system, these communications networks will in virtually all of their details, retain ongoing value. And new business systems to business systems connecting lines of communications will be needed as well, and both as value from the Technodynamek side is moved into this now larger combined entity and as value from the now parent company of this: Magnakoure flows into its new acquisition.
• But the overall goal here is for Technodynamek to continue to operate in large part as if it were still an actively entrepreneurial, separate creative business and with its own table of organization and its own staffing and its own corporate culture – and with its own capacity to further develop its novel proprietary technologies – but with Magnakoure with its design and development and production lines, its one and only customer now. And the ongoing details of this shared ongoing effort would be held as proprietary within the overall business.
• Think of this as representing a system where a selectively, strategically porous-walled silo is developed and maintained, with gatekeepers in place who would manage any novel lines of communication that might become necessary, in adding them into the permitted information sharing flow.

Returning to the top of this posting for a moment, I noted there that “simpler lean and agile business structures and systems can provide a best available route to greater efficiency and greater resilience in the face of change, with this leading to greater competitive strength and overall profitability – by reducing the levels of this friction within the organization, by reducing the number of barriers that can cause it.” I write here of contexts where the costs and potential risks of open unfettered communications become important and where they can, as a risk management consideration come to outweigh any likely cost of friction that these selectively porous communications barriers would create.

And I will continue this discussion in my next series installment where I will pick up on the second example scenario of my above offered list: in-house developed and maintained new product research and development facilities.

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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