Only Dead Fish

Dynamic resource allocation in a crisis

There's already been a lot of speculation about what's likely to change and not change in the long-term given the current enormous challenges faced by so many businesses, but the reality is that no-one really knows. The one thing that businesses can do right now apart from fire-fight is to stay adaptive, ready to change and to learn fast (sounds familiar). The one thing that they can't afford to do is nothing.

In between there will be a whole bunch of businesses attempting to operate in a highly fluid environment and potentially solve complex and adaptive problems with overly linear, fixed or inflexible approaches. Yet in amongst this awful situation there is an opportunity to challenge the norms and assumptions that have gone unchallenged for years. Over on the Coteam blog I wrote a piece about how organisations can become fragile by trying to solve problems using the same thinking that created them (to misquote Einstein). Resilience is about more than just resisting known stresses. We might think of it as being able to absorb or react to disturbances in a way that enables you to go back to an original state. But an antifragile system (to use Nassim Nicholas Taleb's concept) is one that improves as a result of stresses and failures.

Many organisations right now are being forced to reallocate resources (budgets, talent, leadership focus) at speed but it's simply not in most company's DNA to be agile with resourcing in this way. McKinsey research (looking at 1500 US companies between 1990 and 2010) has shown that 83% of senior executives believe that strategically shifting resources is a top management lever for growth, more even than M & A or operational excellence. Yet the average reallocation of capital year to year is a mere 8%, and a third of businesses reallocate just 1% of their capital annually. That same research found that 90% of CAPEX allocation is highly correlated with last years CAPEX allocation. The companies that do actively reallocate resources deliver, on average, a 10% return to shareholders, versus 6 percent for a 'sluggish' reallocator.

Resource reallocation should be a continuous process and perhaps one of the longer-term positive affects of the massive jolt which many large businesses are feeling now will be greater fluidity in resourcing and a recognition of the need for structures and culture that support this at scale and for the long-term. In my second book Agile Transformation I wrote an in depth case study on Chinese company Haier, one of the biggest appliance manufacturers in the world. They are a fascinating business not least because they've taken a unique approach to scaled agile org design, successfully restructuring the business into 4000 'micro-enterprises', most comprising 10-15 employees. Each of these micro-enterprises (MEs) takes responsibility for specific services, from manufacturing particular component parts to design and HR, and each ME transacts with other MEs via internal platforms.

This highly devolved structure allows for a much larger degree of autonomy but also fluidity in resourcing which means greater adaptability in the face of disruption. It was notable for example, that whilst most Chinese manufacturers were just beginning to restart manufacturing at the end of February the Haier Group factories were already operating at full capacity. Agile structures combined with an agile supply chain meant that Haier fulfilled 99.8% of its orders in February which is nothing less than remarkable. 

The lesson here is not just about dealing with volatility and disruption but about recovery. About becoming more antifragile. God only knows what will happen over the next six months or longer but whilst so many businesses are battling for survival right now, those larger ones that are able to bring new levels of dynamism to their resourcing will surely be those that recover fastest.

Photo by Stephane YAICH on Unsplash

Cynefin and the Importance of Contexts

Over the years I've frequently referenced Dave Snowden's Cynefin model as a way of understanding problems and contexts (and I talked about it my books). It's fantastically useful. This ten year old film is a good, short run through:

In my experience there is rarely enough thought in strategy that goes in to the types of contexts you may be operating in, and the types of responses you may need. There is a real danger in organisations of a one-size-fits-all approach to decision-making and planning. 

I particularly like the reference in this film to the difference between categorisation models (like a 2 x 2 matrix) which are rife in planning, and a sensemaking model. In categorisation the framework precedes the data, but in sensemaking the data precedes the framework, yet the difference is critical. Categorisation is good for exploitation. Sensemaking is good for exploration. But context is essential to help us know how to respond. And importantly it helps us to understand our potential vulnerability to rapid change which is of-course, more relevant than ever right now.

Bias to Action

Richard Shotton makes a great point in this post about why marketers so often overemphasise chasing the latest fads at the expense of more established activities. A good part of the reason for this, he says, is demonstrated by a study that was made into (of all things) penalty shoot outs in football:

'In 2007 a group of Israeli psychologists, led by Professor Michael Bar-Eli at Ben-Gurion University, analysed the behaviour of goal-keepers facing penalties. They found a striking anomaly.

Despite 29% of the 286 penalty kicks studied being hit down the middle goalkeepers only stood their ground 6% of the time. The academics estimated that diving one way or the other saved one in seven penalties whereas standing still stopped one in three. So why did professionals, players at the top of the game, make the wrong decision?

The study blames the misalignment of interests between the goally and the team. The goalkeeper is interested in making a save but also not looking a fool. They know that most of their fellow goalkeepers dive and that if they concede a goal while following a different set of tactics they'll be culpable in the eyes of the manager. So the keeper, interested in protecting his lucrative career, follows the herd and dives.'

Richard warns marketers against blindly following the herd and being overly concerned with what competitors or peers are doing.

Bias to action is no bad thing. Slow decision-making often acts as a significant drag on progress within large organisations. Circular discussions, too many meetings, consensus-driven decision-making. We've all been there. A rebalance towards a smarter understanding of where it's better to act and course correct if necessary helps to unblock this. Yet we also need to appreciate that now and then it really is better to do nothing and let the answer come to you. 

Distribution vs Innovation

'The battle between every startup and incumbent comes down to whether the startup gets distribution before the incumbent gets innovation.'

Saying that large, legacy businesses should act like startups is overly simplistic and lazy thinking. There is much that big companies can and need to do to step change innovation and agility (and I've written a couple of books on just that topic of-course) but incumbent businesses are not startups and nor can they ever be. Which is why I've always liked the Andreesen Horowitz quote above (taken from this post).

In Ernest Hemingway’s 1926 novel ‘The Sun Also Rises’ the character Mike Campbell is asked about his money troubles:

“How did you go bankrupt?” Bill asked 

“Two ways,” Mike said. “Gradually and then suddenly.”

This is how disruption also happens, Slowly, then very quickly. In the early stages the initial signs go unnoticed or are ignored through complacency or arrogance. In the latter stages the incumbent business lacks the responsiveness, ability or imagination to react in the required way.

So big business needs to get way better at integrating the kind of agility and continuous innovation that can enable it to survive and thrive in an era of heightened unpredictability. But big business also has many advantages at its disposal, not least the scale, distribution, and leverage that it has acquired over years of practice and growth. So the real battle is about who can learn and acquire capabilities quicker. Can the startup can acquire scaled distribution before the incumbent understands how it can unlearn what it needs to reimagine and relearn new ways of working that can transform its approach to innovation and speed to market.

It's a much more useful way of understanding the real dynamics involved in disruption and transformation.

Data-as-a-Service

I've been writing a new report on marketing structures and resourcing and in the research process came across the concept of 'Data-as-a-Service' (DaaS) via Ashley Friedlein's annual trends post which I think is a useful way of thinking about how to set up data services to underpin a business. The idea of DaaS is that it can deliver to the varied needs of functions and stakeholders across a business  simultaneously, perhaps through the creation of modular systems. In Econsultancy’s Digital Transformation and the Role of Data report author Laura Chaibi describes it thus:

“Data-as-a-Service (DaaS) is a data framework that essentially splits data access and usage from where the data is stored, freeing the data for multiple uses with speed and ease of access and the ability to scale usage. DaaS data agility is a substructure of digital transformation acting as a reinforcement to solutions enabled through digital transformation. DaaS data can permeate all corners of businesses and how they run with the aim to amplify capabilities and sustainably scale.”

The concept reminded me of Jeff Bezos' famous 2002 mandate about every team in Amazon needing to expose their data and functionality via service interfaces. These interfaces created critical ways in which teams communicated and accessed other capabilities but more than this it created a service-oriented architecture to successive capabilities in the business, effectively establishing separated parts of the company as individual platforms. Opening up these services to external access also opened them up to external competition, helping them to stay efficient and competitive. With data now so critical to organisational capability Data-as-a-Service makes complete sense.