The VUCA Environment Requires Agile Organizations

There is widespread agreement that business organizations are facing an increasingly rapidly changing environment. It would seem that every book on business for the past few decades began with recognizing this reality. Today, it is commonly known as the volatile, uncertain, complex and ambiguous (VUCA) environment.

Most business leaders agree that the VUCA environment requires organization agility, but relatively few seem to have done anything significant about it. McKinsey & Co., possibly the leading consulting firm in US and the world, says their research with 2500 business leaders in 2017 suggests, however, that agility is catching fire:

In their 2019 article, “The Five Trademarks of the Agile Organization”, the most recent in their series on organization agility, McKinsey states that:

"The dominant “traditional” organization (designed primarily for stability) is a static, siloed, structural hierarchy – goals and decisions rights flow down the hierarchy, with the most powerful governance bodies at the top (i.e., the top team). It operates through linear planning and control in order to capture value for investors. The skeletal structure is strong, but often rigid and slow moving."

"In contrast, an agile organization (designed for both stability and dynamism) is a network of teams within a people-centered culture that operates in rapid learning and fast decision cycles which are enabled by technology, and that is guided by a powerful common purpose to co-create value for all stakeholders. Such an agile operating model has the ability to quickly and efficiently reconfigure strategy, structure, processes, people, and technology toward value-creating and value-protecting opportunities. An agile organization thus adds velocity and adaptability to stability, creating a critical source of competitive advantage in volatile, uncertain, complex, and ambiguous (VUCA) conditions."

It appears to me that very few companies have made significant changes that enhance agility. Mc Kinsey has some observations on what some companies, such as W.L. Gore, Patagonia, Virgin, ING, Spotify and Zappos are doing that seem to work. They say that that the trademarks of agile organizations are:

STRATEGY -- Co-create value with and for all stakeholders Shared purpose and vision, Sensing and seizing opportunities, Flexible resource allocation, Actionable strategic guidance

PROCESS -- Rapid, iterative learning and decision cycles Rapid iteration and experimentation, Standardized ways of working, Performance orientation, Information transparency, Continuous learning, Action-oriented decision making

PEOPLE -- People centered culture and leadership Cohesive community, Shared and servant leadership, Entrepreneurial drive, Role mobility

STRUCTURE -- Network of small, empowered high performance teams Clear, flat structure, Clear accountable roles, Hands-on governance, Robust communities of practice, Active partnerships and eco-system, Open physical and virtual environment, Fit-for-purpose accountable cells

TECHNOLOGY -- Enabling technology solutions, infrastructure and tools Evolving technology architecture, systems and tools, Next-generation technology development and delivery practices.

How Agile Organizations Are Created

This raises the question of how to actually create agile organizations. In my and my colleagues’ experience, the key, and usually most missing ingredient is leadership. One researcher Jay Conger, of USC, helped explain why in his book, Learning to Lead, in which he found that none of the dominant forms of Leadership Development – Personal Growth, Feedback, Conceptual Understanding and Skill Building – actually enabled a lasting change in leadership capability. He observed that each approach could have an impact in workshop settings, but had fatal flaws, that prevented lasting change. I would sum up this observation saying that they did not provide for all of what was found by one of my mentors, James Clark, and many others in the decades-long Harvard Interdisciplinary Study, that lasting change requires what I call the Essential Elements of Significant Learning: threshold levels of intensity, frequency, duration, application to real issues, environmental support, whole person learning and Socratic coaching.

Nick Petrie of the Center for Creative Leadership spent a year-long sabbatical at Harvard in 2014 to research why Leadership Development is no longer meeting the learning needs of today’s and tomorrow’s leaders. After examining the best work of leading researchers and educators, and engaging with dozens of leaders of Harvard’s schools of Education, Business, Government, Law and Psychology, other experts from universities, consulting firms and the heads of leading corporate universities, like GE, he summarized his findings as:

• The new world presents a VUCA environment – Volatile, Uncertain, Complex, and Ambiguous
• The world has changed; Leadership Development has not.

In his white paper, “Future Trends in Leadership Development”, Petrie outlined where Leadership Development needs to go:

• This new world requires new leader skills – we need to scale back the efforts to develop numerous behavioral skills, and equip leaders with complex thinking skills, such as critical, creative, strategic and systemic thinking, learning agility, self-awareness, and comfort with ambiguity. These skills require personal development/transformation -- evolution from dependent to independent and interdependent states and ways of being
• Leadership Development needs to be democratized – needs to include all organization members versus the only the top, in order to address problems of the scope now faced
• We need to empower networks of leaders/collective leadership versus individual leaders to develop alignment and commitment in organizations
• Leaders need to take responsibility for their own development, versus relying on HR, training organizations and/or their own superiors to determine it
• Socratic coaches need to support and accelerate the process of self-discovery and growth with questions, not answers

A Disruptive Approach to Leadership Development that Provides What’s Missing

Petrie also found and described some of the early attempts that appear to be scratching the surface of the new approach needed. What he didn’t find was that there is an approach to team, leadership and organization development that has been powerfully addressing all these needs, and more, for about five decades. Invented at P&G for the design of their high performance organizations, it was based on the premise that “the quality of thinking is the prime determiner of business and organizational success, and the one capability on which the business can depend in all markets and conditions.”

This methodology, sometimes known as Intentional Systems Transformation (IST), was described, by one ATD-sponsored researcher as, "...the most comprehensive, deepest, richest body of technology for supporting large systems change work that I have found." Researchers from universities like UCLA and a number of leading corporations, like DuPont have found that IST enabled business results on the order of 10X other methods.

Chad Holiday, formerly the CEO of DuPont, said, IST is “… a more complete, connected and systematic way to think and act on decisions and challenges. When I was at DuPont, I had first-hand experience with this way of thinking and working for over 20 years. I had many opportunities to apply it to hundreds of practical problems. In fact, rarely a day goes by that I do not call on this way looking at the world. Our company, and each leader in it was much better for it.”

Holiday wrote these words as part of the Foreword for the book, The Responsible Business: Reimagining Sustainability and Success, by my colleague, Carol Sanford. This book and her next one, The Regenerative Business: Redesign Work, Cultivate Human Potential, Achieve Extraordinary Outcomes, are required reading at the Harvard and Stanford Business Schools. In The Regenerative Business, she describes her work over the past three decades guiding the creation of what are arguably the most innovative, agile and high performing businesses on the planet.

These regenerative organizations have the capability to engage in enlightened disruption, and reinvent every aspect of their business, as well as regenerate whole industries, and the ecological systems within which industries operate. Thought leaders like Rosabeth Moss Kanter and Rebecca Henderson of Harvard, call them “the organizations of the future”.

The key to this approach is work redesign that develops human capability. And the core of that capability is thinking capability, or Higher Order Thinking Skills (HOTS) – e.g., conscious, critical, creative, systemic, strategic thinking.

It turns out that for most people, thinking is a habit, perhaps the most ingrained, unexamined habit they have. It is out of awareness and control, like digestion and blood circulation. Sanford says that, “the greatest single barrier to innovation is our unconscious attachment to habitual and comfortable patterns of thought.” As a result, most people, teams and organizations are severely limited by flaws like incomplete thinking, shallow thinking, closed minds, negative emotionality, jumping to conclusions, indiscriminate thinking, dependency, reactivity, thinking without discipline or principle, being stuck in the present routine, lack of focus, giving up easily, defensiveness and resistance to change. These patterns of thought underly many of the universal problems that most organizations live with as being “just the way things are”.

Developing Higher Order Thinking Skills, Leadership Capability and Agile Organizations

We can learn to overcome our bad habits and flaws in thinking and develop a wide array of thinking capabilities that can transform ourselves and our organizations

Rosabeth Moss Kanter, Harvard in a classic Harvard Business Review: “Consistently successful companies are characterized by consistently practiced regimens… The use of common disciplines for processes like problem-solving and decision-making… Which can enable professionalism at every level.” She observed that:

• Many leading companies use common disciplines (for planning, problem-solving, meetings, project management, etc.)
• This practice brings a level of professionalism, in the way work is done, like that normally associated with professional disciplines like medicine or engineering
• The practice also:
• Greatly reduces the need for hierarchical and bureaucratic control enables freedom/control that does not constrain, effective delegation
• Enables effective and efficient teamwork
• Enhances problem-solving
• Enables conflict resolution
• Helps overcome, take advantage of cultural differences
• Speeds development for succession
• Provides the foundational thinking creativity

Learning to use these kinds of common disciplines in a self-discovery process can serve as the gateway to the kinds of HOTS , such as conscious, critical, creative, systemic and strategic thinking, and ongoing learning, at all levels, that enable high degrees of responsibly autonomous, self-management, initiative, motivation, engagement, alignment and unity of effort. These capabilities, when coupled with some business acumen and understanding of the relevant science underlying the work, enable continuous performance improvement and innovation in every process, system, structure, strategy and technology that make up the design of the business. Everyone becomes an innovator, and is either driving change, taking advantage of change or rapidly adapting to the continuous change around them. This is the heart of how you create the most regenerative, agile organizations on the planet.

Methods for Agile Transformation

McKinsey & Co. has found that organization transformation efforts fail over 70% of the time. In “The Journey to an Agile Organization”, they have identified 3 major types of agile transformation approaches, with similar elements but different paths: All in (organization-wide, very intensive, comprehensive, rapid) , Step-wise (more deliberate testing and scaling), Emergent (only mind-set and capability development for leaders, bottom-up, organic diffusion). They say that without mind set and capability development, and culture change, no approach will work; and that with a clear aspirational vision, providing only these elements of change for leaders can enable successful change to unfold organically over time.

In my view, these approaches are unlikely to succeed, because they have not yet discovered thinking capability development, and because the sequence of change is flawed. They involve structural changes up front, (creating agile performance cells like cross-functional teams, or self-managing teams), a very common mistake, which will not work without the interdependent process and system changes, which require thinking capability to design, implement and operate.

What is needed ideally is a systemic, iterative approach that puts the all the essential elements of work design in place, in the order that provides for the individual, team and organization capability for lasting performance improvement. An approach that addresses the elements in a flow from the easiest to change, to the most difficult, and in the logical order required determine the design features of each. Carol Sanford outlines this in The Regenerative Business. You start with the thinking capability and process to create a disruptive strategy (that provides customers with something they really need and only you can provide). Then you provide the thinking capability to develop the uplifting governing ideas and adventurous culture required to support the strategy. Then you provide the thinking capabilities to redesign and operate the processes, systems and structures to implement and continuously improve strategic performance.

In this way, you draw people into the new exciting game to be played, equip them to play it confidently and well, and support them in winning it at higher and higher levels. This kind of approach, as far as I know, has a virtually 100% success rate in hundreds of cases, over the last 30 years.

Starting Development of Higher Order Thinking Skills for Leading Agile Organizations

• Identify a supportive executive sponsor, who will, ideally act like the sponsor of a change initiative – provide the resources, express commitment and support, be open to learning, set an example where possible, provide shelter, and take the heat as necessary
• Identify Innovator/Early Adopter leaders for receiving coaching in leadership and HOTS
• Identify an Innovator/Early Adopter internal resource person to support learning as a coach
• Provide the conditions for success – time to learn while applying methods to real issues, coaching for leader(s) and internal resource/coach, expression of commitment and support from sponsor, encouragement of interface leaders to support the testing of new approaches, openness to learning, engaging with new ideas
• Provide for the Essential Elements of Significant Learning and standards above
• Test the approach