Biology-dna

Is Your Company Struggling to Change? A Crash Course in Organisational Biology Might Help

By Stephan Schubert, PhD

Have you ever wondered why your organisation finds it so difficult to change, why the majority of attempts to chart a new course or implement a different strategy only lead to more of the same?
Whoever wants to understand how living organisms thrive or decline turns to biology. Executive leaders could then find a useful new perspective by thinking in terms of ‘organisational biology’.

Whoever wants to understand how living organisms thrive or decline turns to biology. Executive leaders could then find a useful new perspective by thinking in terms of ‘organisational biology’.

In biology, the DNA – or genetic code – takes centre stage for explaining the marvel of life and growth through the self-sustaining process of DNA replication and cell division. In a grossly simplified way, we might say a living organism constantly recreates itself according to the blueprint provided by the DNA. Social organisations – companies, public institutions etc – are organisms, too, with their very own DNA. Left to their own devices, organisations will simply do what they usually do, and what they always did, because such is the robustness of their particular DNA - which is composed of decisions and decision architecture (D), norms and organisational culture (N), and internal politics, including personal agendas (A).

Just as replication and cell division cannot turn a mouse into an elephant, an organisation cannot transform itself unless it takes care to alter its DNA. It is equally impossible to fully understand why an organisation has made a particular decision, transformed itself successfully or failed to do so without considering the three DNA elements set out above.

Decisions and decision architecture are the most obvious DNA element – but not more important than the other two. Decision making rights and processes, the way issues are framed, and the psychology of individual and collective biases are key components of the ‘D’. Further, many executives are unware of the extent to which decision making in organisations is driven by routine processes running in the background, akin to navigation by autopilot. This goes to the heart of a longstanding controversy: whether strategies are the result of deliberate decisions and deep analysis – which is the traditional view held by Michael Porter – or whether they are mere products of chance, ‘patterns in the stream of actions’ in the words of Henry Mintzberg, which can only be understood and rationalised with hindsight. In truth, strategies are the result of both: deliberate processes and emerging dynamics.

Intel’s exit from the company’s ailing memory chip legacy business and Dell Computers’ entry into B2C sales are well publicised examples among many others, where official decision-making only rubberstamped strategic decisions effectively already taken through routine operating processes far down the corporate hierarchy. Yet organisational routines can also make a mockery of the official strategy as experienced by Sony in the late 1990s. The Japanese consumer electronics giant squandered a head start over Apple for portable digital music solutions, when its internal decision architecture translated the “digital Walkman” project into three competing products, partly incompatible with each other, and none of them supported by the company’s prominent BMG music division. Sony had in fact reorganised itself in the early 1990s into several stand-alone business divisions without any incentive to collaborate; any expectation or exhortations from top management about close collaboration across divisions were routinely ignored.

Norms and culture form the ‘N’ element of the organisational DNA. This includes mental representations that an organisation has of itself and of the outside world. Kodak infamously failed to transfer its leadership of chemical-based photography to digital markets, although the company had developed the world’s first digital camera as early as 1975. Yet the mental maps used by senior leaders were hopelessly inadequate for the digital age. Rooted in chemical science and manufacturing engineering, they did not enable Kodak to make sense of the technological shift in terms of its implications for consumer behaviour (Kodak executives believed consumers would always want to print pictures) and a new, different set of competitors for which the company needed to be prepared.

As late management legend Peter Drucker once quipped, culture eats strategy for breakfast. Executives need to realise to what extent their organisation’s future – its destiny – is influenced or constrained by its identity – the way it sees itself.

Politics and personal agendas represent the ‘A’ element that completes the organisational DNA. Like it or not, they are omnipresent wherever human beings try to organise a common endeavour. Any strategic decision that is made in an organisation is also the result of a power play, a compromise or a tactical move on the internal chess board where careers, positions and budgets are at stake. For years, all major decisions made in world football were shaped by the power struggle between now disgraced football leaders Sepp Blatter, FIFA President, and Michel Platini, UEFA President. Whether it was the award of the 2022 World Cup to Qatar, the expansion of the number of teams participating in the European Championship or the introduction of goal line technology: the two rivals would always end up holding opposite views on every single issue.

The impact of personal agendas and political ploys can be nothing short of dramatic: post-Brexit referendum, voters in the United Kingdom are slowly waking up to the uncomfortable truth that the Brexit leaders have no vision to offer, not even a plan how to negotiate with Europe. It looks like a whole country has been taken out of the EU for little more than political miscalculation and personal ambition.

How to lead change when the organisational DNA is dedicated to merely replicating the status quo? How to orchestrate a break with the past when this is required to adapt to volatile, uncertain, complex and ambiguous (VUCA) market environments? The solution is to constantly update the DNA with the aim of embedding change in it, in a similar way as a caterpillar is programmed to morph into a butterfly.

CEMEX, one of the largest building materials supplier in the world, has been doing precisely that. Over the past 25 years, the company has been continuously growing through acquisitions outside its Mexican home market. After each acquisition, the full catalogue of the acquired company’s business and operational processes is carefully reviewed by a project team composed of senior leaders across CEMEX. If a process is deemed superior to what CEMEX is currently doing, then it is championed by executives from the acquired company and rolled out across CEMEX’s entire operations. About 70 percent of its global processes have originated in international acquisitions. This practice enables a continuous rejuvenation of the ‘D’ element of the company’s DNA. Further, the company has implemented a management control system whereby all manufacturing, inventory, sales and administrative data from all group locations can be accessed in real time by all senior managers. The system supports a culture of transparency and limits any room for turf war: information is power – but when all information is shared, it cannot be easily exploited for personal gain. That way, the DNA’s ‘N’ element is designed to combat the emergence of silos, whereas the ‘A’ element is kept in check by the organisation’s decision architecture and culture.

As the CEMEX example shows, successful adaptation and change are not impossible. But their chances will increase only when executives become organisational biologists and take a close interest in their company’s DNA. They need to understand the close interplay between formal and routine decision-making, and design processes that broaden the solution space and increase chances of implementation (D). They also need to challenge the organisation’s mental map so that a new, different world view can help to envision a different future (N). Finally, they need to reduce as much as possible the space for politics and personal agendas (A), where more energy is often spent on beating the internal rival rather than the outside competitor.

Remember: if the organisation’s DNA is not altered, any expectation of successful change and adaptation is merely wishful thinking or even plain delusional.

http://www.business.dtu.dk/english/Thought-Leadership/Organisational-Biology
21 NOVEMBER 2017