Building back better is not linear | Business Complexity series

Nature doesn’t do linear. We humans don’t do linear either. Nothing in life is isolated from its surroundings or static in time. Nothing is binary, black and white or a 2D flat line.  So it’s always so mad crazy how quickly our thinking can collapse into linear when we think business strategy.

I was running a strategy workshop for the board of a client the other day and it struck me how difficult it is to shift our thinking. So much of business practice, the way we run our supply chain, the way we engage with strategic partners, the way we utilise technology, the way we innovate and ‘do agile’, even the way we make decisions, is anchored in a linear mindset. A follows B, there are only win : lose trade offs, and strategic advantage is gained through competitive differentiation.

The thing is, business models of the future are not like this. In fact they’re the opposite. They’re not hierarchial, top down, closed chained. They are bottom up, open and empowered. Win : wins are preferred.

Way back in the 1990’s I learnt about lean thinking and value chains. I was donkey deep in the transformation of a supermarket giant in the UK, working as a plucky kiwi alongside McKinsey consultants, absorbing it all. I remember the management consultancy theory and thinking to myself ‘but life’s not like that’. Don’t get me wrong, value chain thinking has been a core tool in my toolbox over the years, but at it’s core, no business ever exists as a single linear chain.  We might like to map out that A is followed by B and so forth, but the reality is that there is a network of multiple chains impacting people (and planet) and they are all connected.

If you’re needing to redesign your business model, reshape your strategy or disrupt the industry you’re in, you need to be conscious of the multi perspectives at play, and consider each in turn, if you are wanting to create a more robust future.

An oft-told example of this is GM who, along with Ford and Chrysler, attempted and failed to emulate the prodigious success of Toyota’s production system. Their vast billions of dollars invested in human resources and material capital to design new production systems, wasn’t matched by “an equally strong investment in understanding how societal, organizational, and human systems intermesh dynamically over time”[1]. They adopted a linear approach that didn’t reflect the complexity of their context and so they failed to activate the potential power of their wider system. This is fundamental to the principles of Dame Ellen MacArthur’s circular economy.

2020 has been a year we’ve witnessed the brunt of linear supply chains being broken across pretty much every industry around the world. What it has shown is that the more we create businesses in a linear way, we more we bake in fragility.  And when we use blunt operational instruments and crude KPI measures, we might be hitting hard, but we bake in fragility.

As the systems thinker and anthropologist Michael Agar wrote “the linear causal models celebrated in traditional western sciences don’t work with history” [2].  It only takes one loop to break for the whole chain to fall apart. 

This is the power and beauty of complex systems; they can survive the removal of parts by adapting to change. A dark , yet powerful, example of this is ISIS and their decentralised cellular operational model. Capable of replication at scale, capable of constant self-generated evolution.

More simple systems must build redundancy, contingency, excess stock, or waste into the system.  But the future of business has no time (or budget) for redundancy, contingency or waste.

This doesn’t just apply to old, tired industries; it applies equally to businesses who are innovating in new spaces.  We might have moved beyond the production just-in-time models in vogue a decade or so ago, but when we look at how businesses are investing in innovation teams, agile thinking, and experimental design, test and learn practices, much of the same linear thinking is still at play. 

We need to break this mold if we stand a real chance of building back better. This is as much about our economic future, as it is our environmental future.

Unless these initiatives are grounded in systems connectivity in a more holistic and interdependent way (human, cultural, environmental) they will fail to deliver lasting business value.  It requires i) a greater appreciation of value from multi stakeholder perspectives. It requires ii) seeing value over time, iii) at scale and iv) in more intrinsic, intangible ways.  And it requires v) a more outside-in perspective. And in terms of revenue growth, it’s diversification not differentiation that is the greater strength here. 

Put more poetically, when it comes to redoing your business strategy or business model, think of it like music and create music beyond a single bass beat. 

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If you’re thinking about building back better, or wanting to get ahead of the curve, ask yourself how linear is our value chain? how linear are our operations? how linear is our thinking?

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Thank you for taking the time to read. If you want more on business model transformation, feel free to use my free tools page for useful models, tips and examples.  If you want to chat about your business model, or how the Tensegrity Method can help you face into 2021 stronger connect with me.

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[1] Keri Vacanti Brondo and Marietta L. Baba, the Society for Applied Anthropology Last In, First Out: A Case Study of Lean Manufacturing in North America's Automobile Industry, 2010 https://msu.edu/~mbaba/documents/Last_In_First_Out.pdf

[2] Michael Agar – An Anthropological Problem, a Complex Solution, 2004