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.
Solving challenges in Complex systems
The emergence of Agile methodologies is a perfect response to the Complex nature of the digital world. Companies set up small, multi-disciplinary teams to deliver projects in a series of short, iterative two-week ‘sprints’. They produce a tightly defined piece of functionality, test for benefits, then repeat. It’s a great way to efficiently and safely unlock value in situations where it is impossible to predict outcomes far into the future, and where the impact of failure is low.
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
Many traditional businesses are in a transitional phase. They want to embrace digital and all of its benefits, but they are saddled with large legacy IT systems that underpin core business processes like finance, HR, payroll, customer relationship management, and so on. These systems need to be modernised and/or transitioned to the Cloud, and boards and executive teams are wrestling with the challenge of how best to do so.
Unlike Complex systems, challenges in the Complicated realm are predictable. That is, there are well-established ‘right’ ways to do go about solving for them that lean on decades of learning and process. It’s often a long, hard slog, involving large, interlocking programs of work. It’s not ‘sexy’, but when the risks of failure are catastrophic, it’s the right way to go. You don’t build an app to replace your core banking system: you call in ‘heavyweights’ like Oracle, HP or TCS (and then manage then closely!)
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. (For the purists out there, I know I’ve stretched the metaphor, but I liked it too much to delete!) This smart approach breaks the challenge down into its constituent parts (Complex and Complicated) and addresses each appropriately.
Failing to identify which system you are in can have serious consequences for your career and for your organisation. So as you consider your next initiative, think about the nature of the system you are facing, and plan accordingly.
In my next post I’ll look at how organisations should respond when facing challenges in Simple and Chaotic systems, as each of these require quite different approaches.