“Operating systems are like underwear — nobody really wants to look at them.” – Bill Joy, Co-Founder of Sun Microsystems
A while ago, I introduced my thoughts about the elements of a “corporate operating system” as the enablers of success and resilience in today’s VUCA world.
The elements I proposed were:
- Purpose — Know your WHY!
- Strategy — Consciously choose WHAT to do!
- Objectives and Key Results (OKRs) — Stay focused and track outcomes!
- Evidence-Based Decision Making — Observe and orient!
- 1st Principles Thinking — Resist proxies and processes!
- Leadership — Go beyond managing!
- Systems Thinking — Mind the impact!
Meanwhile, after posting the first two installments (on Purpose and Strategy, see our blog), I received some inquiries about why I consider exactly these elements vital.
With go3consulting celebrating our 10th anniversary next month and having worked with hundreds of teams in large European organizations over this decade, the observation of many recurring patterns makes me believe that the proposed elements are vital for the success of an enterprise.
Let me use the opportunity and the observed patterns to contextualize the proposed “Corporate OS” elements. (approx. 8 mins reading time!)
The first element describes a rallying point; call it “purpose,” “mission,” or even “strategic direction.”
When we founded go3consulting in 2013, the three of us in the room at the time (the ominous “G-O” three) had worked in the past for strongly purpose-driven companies, notably Apple. When things were going south at Apple in the ’90s, we still passionately tried to “make a contribution to the world by making tools for the mind that advance humankind.” Because we believed in this purpose set forth by Steve Jobs in the early days of Apple.
For go3consulting, we fathomed a similar purpose: “Contributing to the success of our clients by applying our experience in the management of digital products.”
In our observation, many teams and companies lack such a clear impetus.
The context seems obvious to us: Over the past three decades and into the foreseeable future, digital technology has kept and will keep disrupting traditional business models and, with that, implicitly company purpose at the macro level. At the same time, the continuous change to match this digital technology progressing from infrastructure to core product component and a potential source of competitive advantage keeps upsetting organizational structures and assignments at the micro level. Combining these two factors can lead to fear, uncertainty, and doubt or disengagement of employees.
A – credible – purpose that “clicks” with everyone, much like what we as go3’s founders experienced at Apple, helps drive (worst case, accept) the required continuous change while simultaneously providing guardrails for the way forward. Without it, many of the necessary measures will appear random and will ultimately fail due to a lack of spirited support. For this reason, I consider “Purpose” an essential component of the proposed “Corporate OS.”
Another pattern we see in scarily many organizations is a lack of choice. There is little to no agreement on which initiatives to pursue. As a result, multiple initiatives and projects pile up on each other, overburdening staff while failing to produce relevant outcomes in meaningful timeframes. In short, there needs to be more strategy.
“Strategy” sounds grand and awe-inspiring. But that’s precisely not what it should be. Strategy – in the words of renowned strategist Roger Martin “…is a set of interrelated and powerful choices that positions the organization to win.”Nothing less and nothing more.
Making strategic choices is vital to an organization’s ability to deliver. Without choices, there is “busyness” and cost but little impact.
Based on our observations, several factors contribute to this indecision issue. Primarily, the organization’s structure often hinders the ability to make clear and concise decisions. More often than not, these structures are based on pre-digital business models and technology architectures, giving rise to numerous projects and committees to bridge the resulting gaps. As a result, de facto matrix structures are formed. Matrix structures are known for indecisiveness and the tendency to escalate decisions to the executive level (and had, therefore, largely been abandoned as formal structures decades ago). Consequently, the executive level becomes overwhelmed or does not have the relevant information to make the required choices, pushing them back to the organization where they are not taken and either contribute to overwork or slow down, or both.
Secondarily, we sense with various executive teams a hesitancy to make “strategic” decisions in a fast-changing world (think COVID, Ukraine, Xi, Trump, …). This seems grounded in a world-view where strategies are still perceived as monolithic long-term commitments.
Still, not making choices is not an option. Instead, it constitutes a choice in itself, namely, to cease control over your destiny.
Hence, I believe “strategy” has to be a vital component of a “Corporate OS.”
This leads to the third component, which breaks my almost MECE design as it is a method rather than a foundational principle. As a matter of fact, I consider it an amendment to “Strategy,” as OKRs lend legs to strategies.
OKRs (Objectives and Key Results) are fundamentally a way to regularly (re-)set a limited (!) number of goals and focus their execution. That way, OKRs also deal with two key strategy anti-patterns we frequently encounter.
One is the “grand-strategy” anti-pattern. A seemingly sensible set of high-level goals is derived – often with the help of an outside consultancy – presented once as a well-designed set of slides to managers and at a series of town hall meetings and then is never heard of again. Most definitively, the “Grand Strategy” is therefore not regularly used to guide and inform dicey decisions.
The other frequently encountered anti-pattern is what we call the “Laundry List-Strategy” anti-pattern. A collection of rather concrete but often unrelated goals is forged into some well-sounding “pillars” of a strategy, for example, “operational excellence,” “digitalization,” or the like. The list is then operationalized by assigning projects to various units of the organization. PMO tracks project execution. Outcomes and changing contexts typically don’t matter from there on.
Well-implemented, OKRs ensure outcome-oriented strategic focus across organization layers, promote the regular adjustment of initiatives based on changing circumstances and learnings, and foster the overall organization’s involvement. Therefore, I consider OKRs (or a derivative like NCTs) indispensable for effective strategy operationalization and vital for a “Corporate OS.”
Evidence-based Decision Making
OKRs, or rather the Key Results, lead to the next element: Evidence-based decision-making. Choices impacting a product’s or organization’s future must be “de-risked” and maximized for business value using data and experiential evidence.This is not meant to promote analysis paralysis but a healthy balance of evidence-infused certainty and potential consequences.
We observe too many anti-patterns to describe them here. HIPPOism, succumbing to the highest paid person’s opinion, political compromises, splitting the difference to typically end up creating a fraction of the impact with multiples of workload, or project plans without outcome-based feedback loops are some of the more prevalent.
Consequently, I regard evidence-based decision-making as indispensable for maximized business value and the “Corporate OS.”
First Principles Thinking
First principles thinking is an approach to developing original solutions to complicated problems and, in a way, takes evidence-based decision-making one step further. Applied by, e.g., Aristotle and Elon Musk, it requires digging deeper into a situation until only the foundational truths are left. Solutions, then, are to be found by building from these truths.
We find it important because, increasingly, organizations tend to apply frameworks and templates in a “copy-paste” fashion without trying to understand the situation at hand or the solution applied fully. There appear to be multiple reasons, from “expert” advice to particular methods being “fashionable” or well-regarded by upper management. Often, it is simply (time-) pressure, so the next-best framework is applied to do something to address perceived issues. This reasoning by analogy – “it seems to work for others, so let‘s give it a shot” – best case produces incremental results. More often, outcomes range from frustration to bungled projects.
To find novel, fruitful, and sustainable approaches suitable for a specific context, first principles thinking needs to be an integral part of a “Corporate OS.”
In times of uncertainty and change, managing is not sufficient. Safeguarding success takes more than maintaining and optimizing existing systems and structures. Applying leadership beyond just managing means engaging in first principles thinking, developing innovations to address arising challenges, and driving the necessary change beyond the defined responsibilities of role and title.Leadership inspires colleagues and empowers employees to pursue winning initiatives.
Identifying a specific anti-pattern as the root cause of the leadership deficit we perceive in many corporations is challenging. However, the hierarchical and often bureaucratic structures of traditional industrial companies, which are heavily process-oriented, are likely contributing factors. In addition, a European cultural penchant for consensus may further contribute to it.
While we are not advocating “moving fast and breaking things,” our observations lead us to believe that “leadership” is a critical ingredient of the “Operating System” of a successful enterprise.
Systems thinking is a holistic approach that focuses on how a system’s parts interrelate and how a system works as a whole.
Humans are wired for cause and effect. So we are puzzled if nothing happens at the flick of a light switch.
Many structures don’t operate that way. Instead, they constitute complex systems that defy superficial cause-and-effect relationships and hence, often our human, supposedly logical, thinking. Businesses are no exception. They are composed of many elements and individuals that are highly interconnected on multiple levels to serve their overall purpose. Many of these connections are feedback loops that keep things close to equilibrium or in an “acceptable state.” Or even form the flywheels that feed exponential change.
Still, with our innate “if-then” wiring, we tend to try and manipulate single interconnections only. “If we lower the price, we will sell more“ would be a typical pattern. While the intended effect may happen, any number of other effects like bandwidth problems, overwhelmed support staff, piling product returns, and so on may also be – albeit unintended – consequences.
„If the team is overwhelmed, let‘s hire more people“ is another typical pattern. Unless we are looking at an industrial production team, where more staff directly corresponds to more widgets being churned out, the unintended effects often include more and longer meetings for coordination, less facetime with supervisors, diminished time to think through task setup on the part of the supervisor, and so on.
„The road to hell is paved with good intentions“ is a familiar saying. If unintended consequences for the overall system are not considered, even the best ideas may wreak havoc on a business.
For this reason, I regard systems thinking as a vital part of a „Corporate OS.“ It ties up the other principles above and provides overall checks and balances.
Why not “Agile”?
Before I go: I have been asked why I have not included some “Agile” process model in the proposed OS. Frankly, it is unnecessary. OKRs and evidence-based decision-making imply something like a Deming/PDSA (Plan-Do-Study-Act) or OODA (Observe-Orient-Decide-Act) cycle to be applied. The amount of analysis depends on the context. Fast-moving contexts may require something akin to OODA – if there is more time to reflect and hypothesize, the process may be more like PDSA. Evidence-based and circular, at any rate.
Over the following weeks, I will elaborate more on the individual elements. To provide more context, meanwhile, here are two other frameworks worthwhile looking at:
The 14 Management Principles Every Manager Needs to Know
Clifford Chi translates Henri Fayol’s 130-year-old management principles for our time.
Click to view!
The McKinsey 7-S Framework
Mindtools summary of Tom Peters’and Robert Waterman’s seven elements for organizational success.
Have a great start into the week,