Organisational Transformation by Design

In the 50s, a company of the S & P500 index had an average lifetime of 60 years. Today, this lifetime is less than 20 years. To survive, companies today must change all the time and adapt to the fast-paced environments in which they operate. This is why so many of us are now working on organizational transformation. But transformation into what?
Average lifetime of S & P500 companies - Source: Innosight

Companies are transforming into more agile and adaptive organizations whose members share a purpose and are driven by values. In these organizations people enjoy high levels of autonomy and are effective at expressing their creativity and potential. This new type of organization is a living organism that is well integrated in its ecosystem and can evolve with it. It provides value and it does well.

Frederic Laloux calls these new companies teal-evolutionary , Dave Gray calls them connected companies and Niels Pflaeging would say that they have a strong value-creation power structure .

Terminology matters

Transformation may sound like we go from being A to being B and once we are B we are now in good shape. However, I prefer to speak about a 'transformation journey'. In true agile fashion, every step of the journey is valuable in itself and a great opportunity to learn and adjust the next step.

'A journey of a thousand miles begins with a single step'

Strengthening the Value Creation Structure

In his article, Niels Pflaeging explains that there are three power structures in every organisation. The Formal Structure is based on hierarchy , the Informal Structure is based on influence, and finally the Value Creation Structure is based on reputation and is the structure we tap into to actually get things done. When we have a need or identify an opportunity, we work with the people we know can provide value, independently of their hierarchy and of whether we like those people or not, as they have mastery and reputation. I agree with the author when he says that this power structure is " the least well known, the most interesting and the one with most paradigm-shattering potential ".

We can plot different organizations in a radar chart based on how powerful those three structures are:

A random company

In the fictitious company above, the strongest power structure is the formal one, and decisions are based on hierarchy and control . There is a good deal of influence of the informal structure, as information flows in pockets of people who get along (the proverbial politics). And last, there is limited room for value-creation, as people have low levels of autonomy and do not feel safe to propose and experiment.

My badminton club

This other organization is my recreational badminton club. There is a tiny formal structure: a Meetup group and a "coach" that does little else than looking after compliance. We rely heavily on influence (informal structure) and we try to make everybody happy . There is some small room for value creation (some charitable souls organizing the Christmas dinner). This is a very stable environment and we hardly ever change anything.

The Transformation Journey is made up of the actions that make the company understand and strengthen their Value Creation structure against the other two.

Most companies have drawn up an organogram showing where everybody sits in the formal power structure, have attached labels to every single employee and have written down processes and protocols describing the flows of information and how decisions are made.

The Transformation Journey is about discovering the value-creation structure, which is networked in nature, to be then nurtured and strengthened. It is about understanding the different roles and dynamics that shape that network, so that they can be encouraged and rewarded. And finally, it is about engaging in initiatives that maximise performance and reduce the barriers to innovate and adapt. In short, the Transformation Journey is about boosting the value-creation structure .

Transformation should go in this direction

A good example of this type of initiative is Connectis, the knowledge network built by Abertis, a company that operates 8,000 km of motorways around the globe. This company is a conglomerate that has reached its size by acquiring companies left, right and center. As such, it suffers of phenomenal silos between companies in different countries. To mitigate this, they have created a knowledge network that connects professionals around Communities of Practice, so communications flow directly between engineers on the ground, without necessity of crawling up the formal structure. This platform is a space where professionals can discover other professionals and create connections around value.

Two dimensions of the Transformation Journey

Once we understand the direction of the transformation we can then design that journey, every step of the way. Every initiative can be plotted in two dimensions: business innovation and organizational transformation .

The first dimension (vertical axis) is about how our organization functions within its ecosystem (market, stakeholders, competitors, collaborators, etc) - much like one cell of our body working in relation to the other cells. The second dimension is about how this cell itself functions, or its organizational design, which is shown here in the horizontal axis.

We can plot any transformational step into this chart. Any actions that involve innovation on how the company interacts with its ecosystem would be markedly vertical, while actions that involve significant change on how the company works internally would be more horizontal in the graph. I can not think of many examples where an initiative sits purely in one dimension. Any change in organizational design would have an effect on the business, and any innovation on how the company provides value to the ecosystem would have an effect on how the company internally functions.

Let me show you two examples:

Example 1 - Back in 2010 IDEO launched OpenIDEO , an open platform for collaboration where anyone can join to help and solve solve global problems. On that platform there is an international community distributed among 20 chapters and they engage in very exciting projects. They apply design methodologies well known for this company (design thinking, business design) and IDEO employees allocate some of their time to these activities, propping up the OpenIDEO community. They all provide value, they learn, and all of that boosts their brand while making a positive contribution to society. This is a clear example of how a company innovated on how they interact with their ecosystem (mainly vertically in the graph) while transforming towards a more collaborative, 'teal', organization.

Example 2 - The Polytechnical University of Catalonia (UPC) has been running the Nexus24 program to change the culture in the university so that 'collaborative work is the norm by 2024'. There are many steps to this program, but one of them was to launch a platform where anyone from the organization could propose initiatives to improve the university and others could vote for and / or join the initiative. What gets done is chosen by people in different departments, and teams are formed by emergence to deliver on those initiatives. To begin with, this change had a big impact on how employees got together around projects that they believed provided value. For this reason I have plotted this action mainly on the horizontal. As time went by, all this work had a positive impact on how the university interacted with its ecosystem, with special focus on the students. This is a great example of how to change the way this organization functions internally also what they deliver to their clients and stakeholders.

Design your Journey

The key to succeeding in this transformation effort is focusing on the journey. Every initiative, every step of this journey, should be oriented towards achieving a specific business objective . These objectives are many and differ from company to company. One architectural firm might be interested in doing client workshops differently (badly needed in this industry, trust me). Another company, like the engineering consultancy firm Mott MacDonald, might be interested in developing data science capabilities.

Whatever your situation, if you are able to connect your transformation journey with key business objectives, you will be more likely to obtain ongoing support from senior management, bringing your organization closer to the teal paradigm.

Next article

Four ingredients for organisational transformation

Links you might find interesting

Rethink & Remix is the OuiShare space for all things about business and organizational transformation for more collaborative, more value-driven and more meaningful work.

OuiShare Open Source - This is where we are opening up the knowledge of OuiShare (or, I should say, all the explicit knowledge we manage to capture)

Human Networks Festival, Barcelona October 2018. In the face of growing complexity and global challenges, humans are innovating about the way we come together to work on the answers. Join us in Barcelona at the Human Networks Festival to learn, contribute and connect.