Disruption As The New Normal

Disruption! There must be few words more likely to provoke unease among executives and investors alike. Almost universally, the term is used in the negative sense by the mainstream; its very mention associated with disturbance, upset and impediment…

Yet its incidence is on the rise, as evidenced by any number of surveys predicting the majority of listed businesses will face market disorder in the next five years — as well as a raft of statistical studies, confirming a grim toll of companies that have already succumbed.

What is business disruption?

In a business context, disruption is an innovation or intervention which changes a market pattern, creating new value chains that typically undermine the established profitability of incumbents. That’s why it’s so feared by those who might at first appear to be the most able to resist. Over the last twenty years, we’ve all witnessed, and most likely contributed to, the reshaping of once stable industries which proves these concerns are well-founded: the rise of online retail and the demise of many brick-and-mortar giants is an obvious example.

But it would be a mistake to regard the problem as particular to — or exclusively caused by — the digital and technology sectors. That’s because market disruption is ultimately a process, not a ‘thing’ — its defining characteristic is the reimagining of the status quo, with ideas that take root in niche opportunities and later come to challenge the establishment.

And here lies the critical importance of leadership in responding to what is undoubtedly one of the biggest challenges of our time. By seeing disruption in terms of method and mindset, we can regain the initiative and turn a feared externality into a constructive force for good.

Harnessing Change as a Positive

The American writer and thinker Robert Pirsig (most famous for Zen and the Art of Motorcycle Maintenance) suggested that all systems evolve their worth in two distinct ways.

  1. Firstly, through periods of “static quality”, in which they work to maximize the efficiency and productivity of established processes.
  2. Secondly, through occasional periods of “dynamic quality” in which that order is radically disrupted and new norms are established. These step-changes, he claimed, are invariably sparked by the mavericks, shamans and outsiders who see things through a different lens.

The consequences for senior leaders are far from simple to address. How do we best manage these two dynamics, embracing the need for change without destroying the value of what we already have? And how do we balance the need for experience and incremental efficiency, with the innovation and fresh thinking that’s essential for a future we can’t yet see?

Not All Disruption is Revolutionary

It’s important though to recognize that not all disruption is revolutionary, or even of the sort typified by internet start-ups, where not to be first is to be last . Over the next decade, developments such as Big Data, Artificial Intelligence and Environmentalism will move more slowly but, in the long run, they are likely to cause even greater transformations across many more sectors. Consider, for example, the potential impact of 5G and the Internet of Things, not only on manufacturing but on customer experience, data analytics, education, connectivity…

Historically, large organizations have sought to embed and extend that phase of their life-cycle which provides the most stable and durable profits leveraging their dominance to curtail change and deter new market entrants. That’s understandable, but the problem — especially as markets become more dynamic — is that a reluctance to innovate becomes a long-term vulnerability when the barriers to entry fall. The recent rise of app-based or digital banks offering simpler and unstuffy services to younger consumers, are a topical example of how the retail banking industry was caught short — and is now racing to catch up.

Innovation Guards Against Complacency

Hence encouraging innovation, even in the stable times, is critical to avoiding complacency, and to my mind, one of the most essential values and behaviors for an organization to embrace. It’s often said that new entrants don’t require the same returns or have the same shareholder expectations as established players. That may be true, but innovation is, at least in relative terms, much more costly and existentially risky for those start-ups. For established players to be paralyzed by the desire to protect their maximal profit point, is both ironic and a dereliction of their longer-term duties to shareholders.

Leaders must step up here, making the case for sustainability through change’ and allowing space for their organizational mavericks and shamans. By definition, these will be few, and indeed it can be harmful to have too many at the top table, but listening and more importantly paying attention to more radical perspectives is critical to staying ahead of the disruption curve.

Innovation is Seldom Epiphanies it’s a Step by Step Process

So too is staying agile. Innovation seldom proceeds in giant leaps or eureka like epiphanies. Most times it requires adaptive thinking, which might mean going one way today and another tomorrow. The role of leaders is to create the mindset that drives this forward, showing a willingness to alter direction in the face of new evidence. Humility, listening, and most of all, a meritocratic culture in which the best ideas win, are among the foundations of the constructive disruption that leaders have a responsibility to foster.

As with so many of today’s leadership challenges, I believe the most effective response to the threats and opportunities we face, lies in the values our organizations live by. A vision and reward system that’s based on stasis will neither inspire or sustain — nor will it attract the talent that rightly expects greater trust in the devolved expertise of the organization. One of the hardest judgments calls for all leaders is to know when to cede their expertise and authority to others. When faced with market disruption it is never truer that the skills and qualities which got us to where we are, will not be sufficient for where we need to go.

Solutions Are Not Always Straightforward

I don’t want to imply that the solutions are straightforward. The reason for the hard toll of business failures is not only that market leaders have the most to lose. It’s also because the strategic alternatives require imagination, courage and the support of all stakeholders in what is inevitably a less than certain outcome. What’s clear, however, is that a failure to embrace evolving realities, even when those threats may not appear urgent, will ultimately lead to a greater and more harmful disconnect. In the future, we must break with the expectation that equates stability with value, and instead accept that disruption is now part of business as usual.

Unlocking Financial Success in a Flat Organization

What is a flat organization?

A flat organization is an organization where the number of layers or levels is kept to the absolute minimum. As a result, the physical separation between the executives and their colleagues is small, and direct interaction between the remaining layers is not only inevitable, but also stimulated and appreciated. In these organizations, the span of control, or a measure of how many people directly report to their leader, is large. Given this unique environment, for leaders to drive success in a flat organization they should focus on the following strategic imperatives.

Stay open to innovation

Any company that wants to outcompete its peers needs to be proactive and nimble. Organizations benefit greatly from the joint and individual creativity of their team members. However, this creativity can only be captured and harvested in an environment that embraces openness and open-mindedness. 

Openness is an indicator of employees’ willingness to share ideas openly and freely with the rest of the organization. Open-mindedness is a measure of the willingness of the organization to assess, absorb, and implement the ideas brought forward by colleagues without prejudice and with an open spirit. Openness and open-mindedness are key ingredients to building a meritocratic organization where the best idea wins regardless of who initiated the idea —  the janitor or the CEO. 

A flat organization is the most, if not the only, appropriate organizational structure to stimulate and reap the benefits of innovative thinking in an environment that is devoid of artificial barriers and unnecessary layers.

Focus on flat

Building a flat organization has both structural and cultural components. The structural component is quite intuitive, as it involves reducing the number of layers in an organization and increasing individual’s span of control. Other structural or mechanical elements include aligning job titles, decreasing the number of job titles, and creating a simplified but equitable compensation structure.

There is an equally important cultural dimension that is more difficult to broach, and is largely dependent on elements such as organization size, average tenure of the workforce, age of the organization and, of course, the reigning culture. 

Unfortunately, coworkers are naturally reserved and guarded in their interactions with leaders. Empirical studies have shown that out of caution, or perhaps self-preservation, colleagues are hesitant to speak up to share their ideas with the organization. This inherent hesitation seems equally pervasive when it comes to bringing forward creative ideas for sustainably improving company operations. 

A flat and open organization has a much better chance at removing these barriers than a steep hierarchy. If an organization is bureaucratic, its leadership autocratic, and its people unempowered, this will most certainly stifle the creativity of the workforce. It is upon the leadership of the organization to break down barriers, to engage the coworkers in open dialogue through town halls and listening sessions, to be authentic and approachable, and to make it abundantly clear that the company needs the innovative talent and ideas of all its employees. 

Why would an organization invest a tremendous amount of effort and money in recruiting talented colleagues, only to allow a culture where these talented individuals are discouraged from speaking up? This constitutes an incredible waste of talent and an unforgivable loss to the company. 

Invest in empowerment

A flat organization, where the artificial barriers between the different layers have been removed, where colleagues feel safe speaking up and sharing ideas, is an organization that will benefit from the collective creativity of its workforce. The outdated notion that the CEO or the leadership team has all the answers is nonsensical. The smartest ideas for improving process or product will typically stem from the folks closest to the challenge, not from a far-removed executive. That is why empowerment is such an important cultural attribute of the flat organization. An empowered individual, somebody who understands that he or she has the knowledge and authority to make the decision, without fear or hesitation, will be stimulated to come up with new and fresh ideas. 

In a very competitive and fast moving environment, a flat and empowered organization will outcompete its peers through the collective creativity of its workforce. It will be more innovative, agile and entrepreneurial than its competitors. These attributes will vastly benefit its financial performance, and equally important, the wellbeing of its coworkers.