Friday, February 11, 2011

Pioneers, Town Planners and those missing Settlers.

All business activities evolve, they share a fairly common lifecycle described in the following diagram. From innovation, to custom built examples, to productisation (including the appearance of rental services) and finally to commodity (including utility services).

Figure 1 - Lifecycle (click on image for higher resolution)

As those activities evolve, their properties change from a chaotic to a linear extreme. In the chaotic stage, the activity :-
  • deviates from what has existed before and is a novel practice.
  • is dynamic and constantly changing.
  • is rare and poorly understood.
  • has high levels of uncertainty and it is not possible to predict future outcomes.
  • has no market data, competitor analysis or well understood trends.
  • has characteristics which emerge as we learn about it.
  • is strongly affected by serendipity, chance encounters and discovery.
  • is a potential source of future worth, differential and hence competitive advantage.
  • is a gamble

By the linear stage, that same activity has evolved and:-
  • is mature and rarely changes.
  • is standardised with a wealth of best practice.
  • is commonplace and well understood.
  • has a high degree of certainty and known impacts.
  • has an abundance of market data, competitor analysis and trends are well known.
  • has well defined characteristics.
  • has well defined procedures and plans for implementation.
  • is a cost of doing business with little or no differential advantage except through operational efficiencies.
  • is a known quantity.

Now all businesses consist of a mass of activities, each of which may be at different stages of their lifecycle (stage of evolution). By plotting the frequency of activities at different stages, a profile for an organisation or an industry can be created. This is shown in the figure below, to which the chaotic, linear and in-between stage of transition has been added.

Figure 2 - Profile (click on image for higher resolution)

The techniques which you use to manage each of the phases of profile (chaotic, transition, linear) are entirely different because the fundamental characteristics are different. Which is why no one size fits all approach to management exists. For example, agile development approaches are ideal for the innovation (chaotic) and early transition phases but are superseded by more structured approaches such as six sigma in the late transition and commodity (linear) stages. You can't apply one size fits all without either hampering innovation or impacting efficiency.

In many areas of management, this creates a constant yo-yo between one approach and another such as : agile vs six sigma, networked vs hierarchical, push vs pull. The answer is invariably you need a balance of both. The trick is to learn when to use each.

Given all this, here are my questions :-

1. Since lifecycle is constant and the properties of activities change as they evolve through their lifecycle, why do we organise ourselves around type of activities (e.g. IT, Finance, Operations) especially as a "typed" approach leads to outsourcing of inappropriate activities, misapplied techniques & alignment issues between groups?

2. Why don't we organise ourselves instead by lifecycle with specialist groups managing each stage of lifecyle regardless of the type i.e. an organisation based upon Pioneers, Settlers and Town Planners?

3. Most companies have Research & Development groups (equivalent to Pioneers) and common or shared service groups (equivalent to Town Planners) but Settlers seem to be invisible. Why is this? Who manages the transition from innovation to commodity in your organisation?
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