Adaptive Organization Model: Solid Advice from Boston Consulting Group

July 12, 2010 at 7:07 am Leave a comment

There is useful advice to the Project Concentrus work effort in this article by the Boston Consulting Group. It talks about the adaptive organization. This needs to be a design element in building the new economic vitality organization for Snohomish County.
The Adaptive Public-Sector Agency
By Larry Kamener, Martin Reeves, and Jeffrey Chua
Boston Consulting Group
May 10, 2010
Introduction
Today, governments and businesses encounter a world in which information—ubiquitous and dynamic—is growing more quickly than our ability to process, store, or even comprehend it. The circulation of this information within increasingly interconnected global systems is causing a constant shifting of key variables, making them difficult to forecast. Like the private sector, the public sector needs to become more adaptive to this dynamic environment, while it also meets rising expectations to deliver better services more effectively. One senior European politician noted that the role of the public sector is about to increase—but governments have a duty to dramatically depart from previous levels of effectiveness.
Today, the ability to adapt to a changing world is probably the single most important capability of successful companies in the business world. Adaptive organizations embrace experimentation in order to keep pace with incessant change. They guide their companies through a process of managed evolution—in which activities and strategies continuously evolve in response to change.
Response to change in the major delivery agencies in the public sector, by contrast, is often anything but agile and adaptive. Long periods in which nothing seems to change are suddenly interrupted by large-scale reorganization or realignment. These responses are too infrequent to cope successfully with continual change, and they often end up using outdated operating models to address current problems. They are also very disruptive and based on the questionable assumption that the end state can be known precisely, when increasingly it cannot. Furthermore, the emphasis is mostly on structure—that is, moving around the organizational boxes—rather than learning or building new capabilities. This is why the private sector is moving away from traditional organizational models of strategy and organization to more agile and adaptive ones1.
Notes 1 See “<a title=”People Advantage” target=”_blank” href=”http://www.bcg.com/documents/file41224.pdf”>People Advantage</a>,” published in March 2010 as the fourth BCG Perspective in a seven-part series on the future of strategy.
A Challenge for the Public Sector
In the wake of the financial crisis, the bar has been raised for the delivery of government services. There has been an unmistakable shift in the legitimacy of and social expectations for the public sector. To meet society’s higher expectations, public-sector organizations need to build adaptive capability—the ability to detect signals in the environment and act upon them promptly. At the same time, they also need to promote an environment of stability for other stakeholders, where it is feasible and relevant. This approach will require new processes for planning and learning, new capabilities, new organizational constructs, and new leadership models.
New Processes and Capabilities
Strategic planning typically relies on analysis, forecasting, and optimization to create durable plans. But turbulence and uncertainty increasingly undermine the utility of the long-range forecasts and plans that result from these efforts. Instead, responsive organizations establish iterative learning processes in adapting to change. These processes enable an organization to introduce variations into its routines and processes; to select the most promising variations through such mechanisms as stage gates, portfolio management, pilot projects, or limited tests; to amplify selected variations by scaling them up and—where appropriate—hard-wiring them into specialized routines and structures; and to modulate all these components in response to the environment2.
New Organization and Leadership
The choices that managers make in modulating variation, selection, and amplification are at the heart of an adaptive organization—embodied in their decisions and behavior. Large organizations need to be aware of the challenges that they are likely to encounter in developing adaptive capabilities. Traditional approaches to managing scale—such as delegation and specialization—can be highly efficient under stable conditions, but the hierarchical structures they produce are too rigid for the rapid learning and change required in turbulent environments. Yet such management paradigms die hard, especially when they have been the basis for historical success, are the bedrock of management education, and offer the comforting illusion that an organization can perfectly foresee and control its destiny.
Notes 2 See “<a title=”Adaptive Advantage” target=”_blank” href=”http://www.bcg.com/documents/file37859.pdf”>Adaptive Advantage</a>,” published in January 2010 as the second BCG Perspective in a seven-part series on the future of strategy.
Lessons from Business
Private-sector organizations—even large, established ones—are beginning to discover ways to overcome the barriers to adaptability. These organizations display five key attributes.
Modular organizational units provide flexibility in a changing environment. Standardized interfaces enable an organization to rapidly recombine its parts in a “plug-and-play” fashion to produce variations in products and processes with low cost and risk. They also allow agencies to make rapid shifts in resource allocation.
The free flow of knowledge and power, which is enabled by decentralized decision making, allows organizations to detect and respond quickly to changes. Often this attribute is reinforced by a culture of constructive conflict and dissenting opinions and by power structures that are not overly rigid or are in flux.
A limited number of guiding principles replace detailed standard operating procedures, which are impractical for managing unpredictable change. Adaptive organizations favor simple universal principles over strict rules in determining how individuals and teams should interact and how decisions should be made.
Adaptive values encourage individuals in the organization to shift their focus from avoiding failure to pursuing experimentation. Adaptive values also promote productive dissidence, cognitive diversity, and an external orientation in order to allow a faster and more accurate response to a changing environment.
Leadership through context setting acknowledges that, in adaptive organizations, strategies are allowed to emerge rather than be dictated. Therefore leadership’s role is to shape the context for decision making rather than to specify and oversee the execution of an instruction set. The emphasis shifts from command and control to contextualization and catalysis.
Even some large industrial players can become highly adaptive, as Cisco Systems demonstrates. Early on, Cisco relied on a hierarchical customer-centric organizational model to become a leader in the market for network switches and routers. However, as the company’s core market matured, CEO John Chambers created a novel management structure of cross-functional councils and boards to facilitate a move into 30 adjacent and diverse markets (ranging from health care to sports), as well as into developing countries.
Cisco transformed itself from a company in which a few people made all the decisions to one with a decentralized, externally focused council structure. Furthermore, employees were allowed to form boards even without a formal leader, thereby increasing agility and exploration. In this way, the company built a culture that is more amenable to risk taking and more accepting of failure. As a result, it has successfully met Chambers’s aggressive target of generating 25 percent of revenues from new markets by 2010.
Adaptive Strategy in the Public Sector
Public-sector agencies and businesses typically face similar barriers to change. Both types of organizations can rely on delegation and specialization in hierarchical structures to manage large-scale efforts, and they often value uniformity, efficiency, and obedience above experimentation and tolerance of failure. But organizations in the public sector face some additional hurdles to change, such as weaker incentives to innovate, lack of competition, regulatory constraints, restrictive industrial agreements, and cultures that are often hostile to change.
Still, these challenges are being overcome in a number of leading public-sector agencies. Consider, for example, the Victoria Police, the primary law-enforcement agency for the state of Victoria, Australia3. In 2003 and 2004, it saw crime patterns begin to change as organized criminals became far more sophisticated and fluid than their predecessors, shifting readily among fraud, drugs, armed robbery, extortion, and homicide as new risks and opportunities arose.
At that time, the Victoria Police was organized much like a typical corporation with centralized and decentralized divisions. For example, five centralized divisions within the crime department handled different “products” of police work, and squads within each division specialized even further. For instance, within the violent-crime division there was a homicide squad. The investigation of lesser crimes, like burglary, was assigned to detectives who were not part of the crime department but were instead in a “branch system” deployed throughout the agency’s five geographic regions.
The structure enabled the detectives within the centralized divisions to develop deep expertise and strong teamwork. But it prevented the agency from dealing with immediate or emerging threats that fell outside a division’s or squad’s charter—or cut across one or more boundaries. That meant that the police had plenty of intelligence about the organized-crime networks, but the information was buried in different parts of the organizations: within specialized squads and local investigative units. As a result, savvy groups of criminals were able to retreat from activities where the police were making inroads and quickly exploit new “markets,” such as identify theft.
In 2005, the Victoria police initiated a new model for managing major crime. The key objective was to evolve and adapt to the changing environment without the need for disruptive large-scale reorganization. Important features included the following:
-More frequent reviews are undertaken for reassessing crime risks and for resizing squads—or for creating new ones.
-Recruits are required to gain experience in several squads, rather than just one.
-Shifting the task of assigning officers to investigations from individual squads to the crime-department level enables the forming and reforming of cross-squad investigations to accommodate shifts in criminal activity.
-New terms for classifying investigations and time spent on them foster better resource allocation and new tools for analyzing internal communication patterns.
-Training and development activities were added to support transitions.
Today, the siloed culture of the old squads is nearly gone, and the level of collaboration between squads has increased substantially. There is far greater transparency on how resources are aligned against strategic priorities, and these resources can be readily re-allocated when these priorities change.
Although initially quite controversial, the new model has subsequently gained widespread acceptance and support. It is credited with enabling the Victoria Police to move resources rapidly and effectively to investigate potential arson following the devastating February 2009 bushfires. In the words of one senior police officer, “The new approach to managing major crime is a vast improvement on the old model. We are now much more dynamic in the way that we respond to emerging threats.”
Developing adaptive capabilities is a powerful strategy for public-sector organizations facing unstable environments. It involves not only different ways of operating but also different ways of thinking about strategy, leadership, and change. The first step in embracing adaptive advantage is therefore to create awareness of the challenges and opportunities presented by the changing environment.
Leaders of the public sector can begin the journey by asking themselves the following six basic questions:
-How is the environment for our services changing?
-How are expectations about our role and added value changing?
-Is our current organization capable of adapting to the changes in our environment and new expectations?
-If not, what are the key barriers to achieving adaptive capability?
-What can we learn from adaptive players in industry?
-How do our processes, culture, leadership, and information infrastructure need to change to help us become more adaptive?
Building adaptive capability will be a key success factor for public-sector organizations that are poised to take on empowered roles in much more challenging environments.
Notes 3 See “<a title=”If Cops Can Change, So Can Corporations” target=”_blank” href=”http://www.bcg.com/documents/file14727.pdf”>If Cops Can Change, So Can Corporations</a>,” published in February 2006, in BCG’s Opportunities for Action in Organization series.
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Entry filed under: Adaptive Organization, Best Practices, Organization Case Studies, Organizational Development. Tags: , , , .

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