When executives face a challenge (or opportunity), their thoughts typically turn to questions such as “Do I have the right team?” and “Have we clearly defined the problem?” While these are important to consider, there is another question that is absolutely crucial … and often overlooked:

“What is the nature of the system we’re operating in?”

Failing to ask this question – or getting the answer wrong – has ended careers and brought down companies.

The Cynefin Framework

Dave Snowden & Mary Boone’s article Cynefin: A Leaders Framework for Decision Making featured on the cover of Harvard Business Review and is considered one most influential papers on business strategy this century. It demonstrates how understanding the systemic nature of a challenge is fundamental to determining the best way to respond to it.

Cynefin (pronounced coo-NEV-in) divides systems into four types (plus a fifth – ‘disordered’ – for when a leader doesn’t know which system they’re in), and each requires a very different approach to problem solving.

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Solving Challenges in Simple Systems

Simple systems are where there is a low level of complexity and a high level of predictability. That is, we know for sure that if we do x, we get y. This is the realm of best practice, and is best handled by a bureaucratic approach, where there are hard and fast rules that are simply never broken. Zero alcohol intake if you’re operating heavy equipment, or counting the number of surgical instruments that go into and out of an operating theatre are examples of this.

While seemingly straightforward to manage, the key risk with simple systems is disruption.   The taxi and hotel industries had many of the characteristics of simple systems, with well defined competitor sets and established ways of doing business … until Uber and Air BnB struck out of the blue. The digital marketing industry and insurance industry are examples of businesses today that face a serious threat of disruption from artificial intelligence and nimble competitors, and face the situation described in Clayton Christensen’s modern classic, The Innovators Dilemma.

If your business (or departmemt) has the characteristics of a simple system, then you should follow a two stream strategy: 1) set clear rules around best practice and ensure they’re followed and 2) set up a seperate team that answers the question: “If we were going to completely disrupt our own business, how would we do it?”. You then need to have the courage to follow that second path where it leads…because if you don’t, you can certain that competitors will.

Solving challenges in Chaotic systems

Traditional ‘command and control’ leadership is often frowned upon today, but when true chaos strikes, it is actually the appropriate way to lead. In the midst of a genuine crisis, the leader needs to grab the metaphorical bullhorn and shout “Everyone, follow me! “. Former New York Mayor Rudy Guiliani’s response in the immediate aftermath of 9/11 is a perfect example 0f this. He took charge, and helped everyone feel safe – or at least safer – in the days and weeks after the terror attacks.

However, people who naturally prefer a command-and-control leadership style (like Guiliani) need to be able to flex to other leadership styles once the immediate crisis has passed. For example, there should be a post-incident-review team that looks at the systemic factors that led to the crisis, and what can be done to avoid the crisis recurring, and this requires a very different leadership style to be done effectively – one more aligned to dealing with a Complex or Complicated systems (see below). Often, leaders who naturally lean towards a command-and-control style have a bias towards treating every difficult situation as a crisis, when in reality, the team might just be having a challenging day. Next time you’re tempted to step in and take charge, ask yourself whether this is truly the most effective response to the situation you’re in.

Solving challenges in Complex systems

Complex systems are where where startups are born and innovation takes place. They are characterised by a high degree of complexity combined with a high degree of unpredictability.  In other words, there are a lot of moving parts, and the connection between cause and effect cannot be determined with certainty in advance. In complex systems, the appropriate leadership strategy is multiple  way forward is to test the system through multiple, safe-to-fail experiments, and then measure which ones work and which don’t.

For example, a product manager might say: “We think an app that does x would be really popular with our customers. Let’s build a small, cheap minimum viable product and see if they like it. If we’re right, great. If we’re wrong…no problem, we’ll learn from this and adjust.” This is a sensible, low-risk way to test ideas that seem to have merit.

Ideally, organisations should be running multiple experiments at the same time, some of which will demonstrate more promise than others, and will then form the basis of new safe-to-fail experiments. Over time, robust, scalable, market-tested solutions will emerge (at which point, they should start to be treated as Complicated systems, rather than Complex ones – see below).

Many – perhaps most – organisations are rushing to embrace this iterative approach to projects, and with good reason. The ability to conduct quick, safe-to-fail experiments is a core organisational competency in today’s VUCA world.

But not all challenges fall into the Complex realm, and thinking that an agile approach is the answer to every problem can lead to disastrous consequences.

Solving challenges in Complicated systems

Unlike complex systems, the links between cause and effect are well known and predictable. Heart surgery, implementing enterprise IT systems and maintaining an A380 aircraft are all examples of complicated systems. When facing a complicated challenge, the correct leadership response is to call in the experts: a software implementation partner, a heart surgeon or the aircraft maintenance department, respectively. Challenges in these areas are best solved through traditional ‘waterfall’ project management approaches, and there is no ‘one’ best way to solve for them – each expert will have their own techniques and toolset, but they can all confidently predict a successful outcome through implementing their process.

Many startups target specific ‘chunks’ of complicated systems and aim to disrupt them, offering more elegant, modern solutions, or added functionality, to corporate buyers. Consequently, leaders should always be on the lookout for innovation that can improve, replace or transform complicated systems with complex, nimble alternatives.

Hybrid approaches

Many organisations are taking a ‘lipstick and the pig’ approach. They run small agile projects to rapidly build customer-facing services that deliver quick, cheap wins. This is the ‘lipstick’. At the same time, they run large, traditional programs of work to safely replace legacy systems and/or transition them to the Cloud. This is dealing with the ‘pig’, and turning it into a gazelle – and ideally one you don’t own, but just rent when you need it. This smart approach breaks the challenge down into its constituent parts (Complex and Complicated) and addresses each appropriately.

Disordered Systems

When a leader doesn’t know the nature of the system they are in, and so defaults to their preferred, ‘natural’ leadership style, which way be entirely unsuited to the situation they face. This ‘disordered’ approach can have catastrophic impact on careers and organisations. Rudy Guiliani’s inability to pivot away from the command-and-control leadership style that made him so effective in the immediate aftermath of 9/11 once the crisis had passed, ultimately led to his presidential aspirations flaming out, as he wasted all the political capital he’d built up.  As leaders face challenges, they should stop to consider the nature of the system they are facing, and what leadership approach would be most appropriate, given the circumstances. This ability to flex styles is a hallmark of the most effective leaders today.

 

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