Winter is coming. As if caught in a blizzard, the global landscape is becoming less known and less knowable. Some of this is due to well-established trends: substantive changes in demographics with corresponding changes in economic behaviour, a less predictable geopolitical landscape, and a vertigo-inducing rate of technological change. However, two effects are of particular concern because they lie within the space where executives in organisations can take action:
- The exponential increase in data. This increasingly resembles a thickening fog, with organisations befuddled by the rising risks and costs associated with simply keeping track of the onslaught of information. Whilst clearly a subset of that information is crucial, much of that information is immediately recognisably meaningless; some appears meaningful at first — but are red herrings; and some is maliciously designed to deceive and entrap. This makes discerning meaningful signals from an ocean of noise highly challenging.
- The rise in organisational complexity. This resembles a deep ‘freezing effect’, as decisions relying on a clear understanding of the state of the business become slower and slower as the time taken to understand and control that state increases with the proliferation of commercial, operational, workforce and technological features and their interrelationships. Tracing these through to clear effects and risks confidently is becoming harder and harder.
The “fog and the freeze” are a perfect storm, as the pace of the environment accelerates, the pace of response is reducing. For all of the recent emphasis on digital and agile management thinking, organisations remain attached to fixed planning cycles and traditional forecasting. The problem is that the 21st century environment really does not care about either.
Competitive advantage and the OODA loop
Both effects are lengthening the time taken to complete an organisational OODA (Observe, Orient, Decide, Act) loop. Originally developed to describe the doctrine applied to military fighter jets, a fast OODA loop allows the ability of an individual or organisation to out-manoeuvre an adversary, or survive in a fast changing environment. For the organisation, a fast OODA loop means that leaders can pursue an emergent strategy at pace, one better able to keep pace with an unpredictable landscape. Organisations with fast OODA loops can make strategic conclusions about their environment, formulate choices, execute change and assess the impact of that change on a rapid cadence. Fundamentally, speed of the OODA loop is the only unvarying foundation for sustainable competitive advantage; one where it does not matter whether your principal adversary is your competition, your customer base, your supply chain and or just the wild dynamics of the environment (more on this in Taylor Pearson’s comprehensive and practical article).
This is not a new effect. Adages such as ‘speed to market’ and ‘pace of execution’ are abound — but the nature of how speed is emphasised changes from industry to industry and with respect to the capabilities unlocked over time by new technologies that change the game in those contexts.
The OODA loop frames the vogue of organisational agility in a more tangible sense. And it matters more than it did before. Previous historical capability investment cycles used to work in months and years. Now technology delivery cycles are measured in weeks for the best performing organisations as a matter of routine. In the government space, the speed of both criminality and of the actions of state adversaries is in the space of weeks –sometimes days. Effective cyber-attack responses are required by organisations in minutes/hours.
In the future, organisations that cannot wean themselves off strategic cycles measured in quarters and years will not be fit for purpose in the future environment. This is especially vicious as not a great deal of emphasis has been placed on the agility of the “strategic management machinery”; i.e. the business functions that collectively complete an OODA loop on behalf of an organisation. Whilst not an exhaustive list, this machinery includes the following functions:
- Strategy & Performance Departments;
- Portfolio Management Offices;
- Strategic Project Finance;
- Business and Technology Design Authorities;
- Commercial Departments; and,
- Programme Delivery Functions.
The received wisdom is that is simply not possible for these functions to act coherently on a tempo of days/weeks rather than the accepted business pace of months/quarters. However, this reflects limited imagination — and an attachment to an old paradigm. Let’s sketch out the alternative.
Accelerating the Loop: The “Strategic Machinery” Spectrum
To begin to understand the alternative, it is important to revisit the way — that is the actual physical techniques — by which organisations complete their OODA loops in the environment.
As part of the first “Observation”, the organisation develops strategies (usually over months and usually in tools such as MS PowerPoint) that analyse external competitor, customer, supplier and regulatory landscapes and recommend focal points for investment. Where this is organic, design blueprints will be developed — usually under the banner of a “Target Operating Model” and this typically takes another 2–6 months, again usually in MS PowerPoint. The process of developing a well-shaped delivery programme and corresponding business case to fund it can often take yet another 2–6 months, and are usually performed again in spreadsheets and presentation tools. By this point a large amount of time has elapsed since the original “Observation” — now safely a year out of date. The platform for the analysis — presentations and spreadsheets — do not lend themselves to straightforward updates; the work will need to be done again.
This paradigm incurs large explicit drag costs. The complete cost of the overall OODA loop cycle per cycle is significant, proportional to the overhead of the complete human and technological cost of the ‘strategic machinery’. However it is the implicit costs that run the risk of ruin — making a move a year out of date is actually the best outcome this set up could achieve. Far more likely however are those that fall short of this best outcome: these include incoherence and rework between these functions, mis-scoping of the end state, introduction of unseen or unevaluated risks, inability to make choices in the interim (due to the sunk cost fallacy) and erosion of relative position vs the environment and the competition.
The alternative — an analytics led approach
In truth, each ‘strategic machinery’ function is building a different part of the same data model — that which connects environmental, investment, business capability, resourcing, relationships and benefits data.
Technology is now emerging to capture and then permanently platform this data and their interconnections. This is a game changer, as the permanent platforming of the data avoids the constant searching and consensus costs required amongst business stakeholders that each step is aligned, accurate and agreed. Huge amounts of business overhead is consumed because organisations cannot have confidence on those three areas.
Furthermore, once platformed, technology is beginning to allow this data and interconnections to run simulations of multiple scenarios quickly and cheaply. The use of this combination of strategic dataset platforming combined with organisational simulation is a set of tools we are labelling system analytics. It combines economic, investment, programme management and operating model data (including process data) to create consistent and coherent frame for strategic decision making. As with all simulations based on models, they are not perfect — indeed they are often wrong — but so is so much of what is produced using the current analogue paradigm. The Systems Analytics paradigm allows the rapid identification and modification of inaccurate scenarios on a much faster tempo. Add to that, its need for fewer humans, its repeatability, scalability and propensity for exploitation/integration by other digital tools.
The endgame — Digital Twins of Organisations
In the limit, such systems analytics technologies could be fed from a range of organisational sensors, from fleet transponders, event logs in CRM/ERP systems, ‘Internet of Things’ sensors, even bar-code scanners. Such a capability would “know” the state of the business at all times and would be permanently able to relate observations in the environment, to strategic choices, to funded programmes, to delivery expectations and their perceived impact — the whole investment chain. Such organisations would have responsiveness not far off that of steering a ship, able to make course corrections in hours and days; not in quarters. The previous “strategic machinery” would be platformed, regular, automated and operating at digital speed — not at the speed of document review and board meetings. Digital twins are already currently the disruptive emergent paradigm for the management of complex engineering assets, but the (warranted) excitement of the application of the concept to physical things is producing inattention to its potential at the organisational level. It is not an exaggeration to assert it a candidate for the signature concept at the heart of the fourth industrial revolution.
Organisations able to establish this capability before their competition will be in incredibly strong positions: able to avoid first mover risk while retaining the benefits of first mover results, able to reduce the cost of investment through substantive avoidance in programme overheads, and with a fine traceability of its entire set of organisational concerns.
And the ingredients for this capability is available today. By the end of the 2020s, my prediction is that organisational digital twin technology will be moving from ‘competitive advantage’ status to ‘required to compete’.