My initial contact with Cognitive Edge was stimulated by a question; does anyone out there have experience of applying a complex adaptive system approach to business? The root of the question arose from an earlier one of “how do you build bodily health” and curiosity as to whether the answer to that question had insight for building organisational health.
I had developed an understanding of the physiology of the human body through research and self-experimentation, and came to conclusion that our bodies are non-homeostatic open systems, but was surprised that a big chunk of medical science is derived from model of closed-loop steady state. Thus we manage this Complex system with Complicated and Simple tools (to our detriment) , and the analogy to Business seemed worthy of further investigation.
This post might be controversial, so let me state that this is my journey, the views are my own, and the conclusions are specific to me. In self-experimentation, N=1, and your mileage may vary—and so on and so forth with all the other liability disclaimers.
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Some 10 years ago, I was the grateful beneficiary of the outstanding skills of neurosurgeons and supporting staff in the NHS. Thanks to them and my family, I am alive today. On the road to recovery and with an immune system battered by exposure to various treatments. Determined to re-build my health, I read extensively on the physiology on the human body.
I started off my research by being clear on what the mind and body are designed to do? Anthropology suggests that my (and your) genotype is at least 125,000 years old and has changed little ever since. From that time forward, the majority of the population have been hunter-gatherers, only turning to farming approximately 11,000 years ago.
The hunter-gatherer lifestyle seems to have consisted of short periods of highly intensive dangerous activity (flight or fight). Between the hunt or the fight there were long periods of languid playfulness during which hunting and martial skills were developed through relatively safe game playing. Like carnivores, we developed into continuous metabolisers, intermittent eaters and needful of long periods of sleep. Our activity and our food ingestion patterns were fractal, but followed a long term pattern.
Our physiology too reflects the power-law distribution of this life style. We have hormone networks that interplay, are non-linear and cascade, and are governed by thresholds and power-law distribution. In both activities and physiology, past events condition future events. If you have a successful hunt, you are more likely to have another successful hunt. If you exert yourself and resultantly tear but not destroy muscle, the muscle responds by rebuilding itself to adapt to the stress, giving you greater power for subsequent exertions. To be a good hunter-gatherer you needed to be able to deal with extreme and often unpredicted events. You needed to be resilient rather than robust. You needed to be a 200 metre runner more than a body builder, and the key to resilience was a healthy metabolic headroom.
At that I was living the antithesis of a hunter-gatherer/fractal lifestyle and my ignorance of the consequence was aided by bad science conducted in some of the world’s most sophisticated research establishments.. Our living system is fractal but the most influential health scientists were treating us as linear. The impact for the general population is that we are living longer, but spending more time in disability.
A quick compare and contrast;
1. Exercise. Hunter-gatherers expended high levels of energy in short bursts. This contrasts with the admonitions of our health professionals and personal trainers who recommend industrial recipe workouts in which we spend extended time ‘in the zone’ and whose impact is, paradoxically, increasing incidences of heart disease and other injuries associated with inflammation. Who needs to run 18K? I am more likely to need to sprint for 50 metres in an urban setting knowing that most assailants give up after 30 metres. We are built to explosive over short distances (flight or fight) but modern exercise regimes diminish these key ‘fast-twitch’ fibres. In fact jogging trains us to be slow, and the pedantic pace fuelled by a mis-perceived need to burn calories leads to injury through over exercising. Injury would have been a death sentence for our ancestors. We have allowed acute exercise to be replaced by chronic exercise.
2. Lifestyle. Though participating dangerous activities in bursts, hunter-gatherers did (and do) spend a large amount of time socialising, playing and developing skills. They also sleep extensively through the day. They do nothing obsessively and nothing too routine. Modern man (ie me) gets up, drives to the office, sits for 8 hours, eats in set patterns, and drives home. Jet lag or other disturbances disrupt our sleep pattern, and throughout it all, the chronic stress of modern life (paying the mortgage, career expectations) pumps out high levels of cortisol stress hormones which our chronic low-intensity physical activity is unable to dissipate.
In many ways we have lost the manual on how best to use our mind and body and we have generally not been helped by the scientific community. We have been seduced by what we can measure, and confused a fixed point of a dynamic process with a set point. We are open energy ,self-organised system in a world of stochastic energy supply and demand, but models of human physiology have been based on a steady state because that is easy to model in the lab.
Fortunately, research is changing helped in no small part by groups like Cognitive Edge whose materials (S Curve, Cynefin, Robust vs Resilient) are providing language and frameworks to aid expression on the limits of certain paradigms. The internet too has helped by catalysing communication between self-experimenters who share their results and therefore probe the limits of the understanding of experts.
One of the challenges I have set myself (and would love to hear your perspective) is how this insight can be applied to an organisation. For example, how can organisations be fractal in their behaviour in order to become more resilient in complex environments? What is the implication for social structures and ways of working? What the implications for strategy generation and execution? There will be challenges to our current models of strong leadership. How will the current cadre of senior executives react when they are told they can only control inputs but stochastic variation will take it where it is going to be. When they have been used to describe the idealised end state but then realise there are a number of paths radiating forward, and the choices we make will set the starting conditions but not the ultimate path. How will they manage building in redundancy of resource to cope with a wide range of outcomes, when their previous focus had been on just-in-time with minimal resources. Resilience versus robust would lead to quite a different future conversations in most boardrooms.
As for me? I now apply some of the learning from anthropology, biochemistry and complex adaptive systems—for the most part. I try to replace maladaptive chronic stress with brief acute stresses that bring (positive) adaption. I try to have a broad and varied diet composed of vegetables and meat, and limit the foodstuffs from the recent past (ie 10,000 years) to which my body is less well adapted. I try to get decently long periods of sleep and to maintain a quiet mind. But I live and work in the modern world, and sometimes all of best attempts come to nought. However, I do feel much, much healthier and far more resilient. For me, this stuff works and why not? I am hard-wired to live this way and I no longer fight it.
It will be difficult to apply ‘probe-sense-respond’ in business because the environment subconsciously prohibits experimentation. That would be my conclusion based on fifteen years of encouraging clients to practice safe-to-fail problem-solving. We have work ahead of us to apply it successfully.
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At Market Edge we run a business simulation, EdgeSim, in which six teams compete against each other, the winner having the highest closing cash balance. The task of is each team is to develop and market a new product, the use of which will automate certain activities in a fictional customers manufacturing process. At the commencement of the simulation, the size of the potential market is only known approximately, and early market research, based on a conceptual offering, gives a range of possible prices.
Each team is provided the same amount of working capital, and no additional funding is allowed. All investment in capacity expansion, product and process research, and marketing communication is self-funded.
Based on the early market research, it is clear that there will be a shortage of product, thereby giving teams the opportunity to raise prices due to product scarcity. The simulation is played over five rounds, and in each round the teams can target four market segments and thus have four opportunities to test pricing.
My colleagues and I have run this simulation at least two hundred times in over thirty countries during the past fifteen years and one clear pattern has emerged. With the exception of two cohorts, every group has been reluctant to follow safe-to-fail experimentation (probe-sense-respond) with pricing.
The market research report sets a guide price of $10,000 but most teams drop prices below this despite the market growing and there being a supply/demand imbalance.
The reluctance to experiment and then learn from pricing failure is not overtly due to fear of corporate retribution nor ignorance of a conceptual framework for appropriate problem-solving. At the beginning of the simulation I inform participants that no reports are being sent back to head office. The group is informed that this is a safe environment in which to experiment, and thus they are provided with a place to safely build confidence in the concept of experimentation and adaptation. In recent years I have also commenced the simulation with the introduction of the Cynefin framework, and the group has wholeheartedly (but only intellectually it seems) endorsed the concept that the market dynamics, and specifically pricing, reside firmly in the Complex domain.
Yet, and the consistency is impressive, the application of safe-to-fail experimentation fails to be demonstrated. Any upward pricing probing that succeeds in one round is immediately reduced in the next; teams who see competitors selling at higher prices (and some times with higher volume) always seek some kind of convoluted complicated cause-and-effect relationship despite having agreed less than two hours prior that this is a Complex problem where no cause-and-effect is decipherable. They attribute their competitors successful higher pricing to some spurious piece of good fortune or magic (with supporting fantastical cause-and-effect) but seldom interpret the pricing signal as option to upwardly test pricing themselves.
Even when I introduce the Rowe Pricing Model, there is intellectual acceptance of probe-sense-respond but no emotional application. The Rowe Pricing Model suggests a link between pricing and profit, and that scarcity often provides the opportunity to increase prices. After two rounds I ask the group to place the current market dynamics on the pricing triangle, and the collective agreement always places the current situation at the top of the triangle—but at no time do groups proactively price to failure despite the availability of these tools and much supportive coaching.
Interestingly, only when teams replay the simulation do they practice safe-to-fail. It seems they need to go through the whole experience once before they have the confidence to apply their intellectual understanding of the problem.
Two cohorts do buck this trend; undergraduates and a number of research scientists. It seems that undergraduates have limited fear of failure—unless they are majoring in finance and accounting. Some groups of research scientists will see the anomaly of competitors selling at higher prices and will probe to failure. The record for the highest closing cash balance is held by the research group of a pharmaceutical company. You can draw your own conclusions.
There are implications for corporate application of probe-sense-respond, particularly as it relates to strategy generation;
1. A sound intellectual framework aids communication of this is approach but by itself will not modify all the necessary activities:
2. There has to be an emotional acceptance before it can be applied, and emotional acceptance is generated exclusively through experience and at an individual level:
3. Safe-to-fail experimentation may need to be practiced many times and with low exposure before confidence is in place for the method to be scaled.
As with most things of significance, if you capture the heart, the head will justify the decision.
An alternative title for this piece could have been “Narrative research—a practical introduction.”
As stated previously, most of my clients are hard-nosed and commercially-orientated, and typically prefer to see a cause-and-effect relationship between spending and a return. They often have a science or engineering background, and have a predilection for anything that can be measured and spreadsheeted—preferably with error bars. They have huge intellectual horsepower and readily assimilate the concepts around complex adaptive systems, but less readily want to deal with the attending implications of managing ambiguity.
This preference for certainty (with error bars) is reflected in their allocation of market research spend. External reports are usually industry reports from large publication houses (also bought by their competitors) and internal research are mostly Likert scale—as is any customer satisfaction survey. Between survey periods, the numbers are poured over incessantly, but I have yet to see any business link a return on the investment for these surveys which ties in directly the resultant actions from these surveys. I think there is an opportunity to shift this experience to the better, but how can it be done?]]>
My preference when introducing new material is to use the existing tools and culture as the foundation; don’t build a new house, build on what we have. In this spirit, I introduce the power of narrative research through an accepted quantitative tool. Some clients are happy users of the Net Promoter Score (NPS). NPS was developed by Fred Reichold as means of determining a level of customer satisfaction, having determined a link between a high NPS score, and business performance. The Net Promoter Score is obtained by asking customers a single question on a 0 to 10 rating scale, where 10 is "extremely likely" and 0 is "not at all likely": "How likely is it that you would recommend our company to a friend or colleague?”.
Data suggests that businesses which provide a higher level of customer satisfaction are generally more profitable, and this is reflected in a higher NPS score. You can see how this tool, simple to use and with immediate “quantitative” feedback, might be attractive to a resource constrained business. But the real value, often overlooked, is held with the second, supporting, question; “what story, anecdote, experience, reasons did you have that prompted that particular score?” This feedback often provides the richest source of improvement opportunity, and provides a perfect entry into a discussion on the power of narrative research.
This is how we introduce narrative research.
1. At a typical quantitatively-oriented client we introduce NPS if it is not used already.
2. We ask the senior business managers (usually a group of 5-8) to undertake at least 10 market-related conversations each, and ask them to use the NPS questions.
3. We organise a 1/2 day workshop to review the data, having first transcribed the anecdotes onto stickies, one anecdote per stickie.
4. We place all the stickies on the wall, and ask the team to seek patterns in the data (opportunities for new offers, overall themes for improvement), and to identify dots (opportunities for immediate operational improvement.)
5. We ask the team members to start to summarise the opportunities on the chart (‘make your competitors colour blind’) in such a way that they are actionable, practical and pragmatic.
The output can be very powerful indeed at at least three levels.
1. It demonstrates the power of narrative research (it is holistic and detailed, qualitative and quantitative)
2. It demonstrates to the senior teams the benefits of involvement in the complexity of the market place (access to granular information, reduction of cognitive bias, disintermediation.)
3. On more than one occassion, this ‘taster’ has lead to a Big Idea which has shifted a marketplace (and business performance.)
Hopefully, if all goes well, this exercise makes the subsequent adoption of SenseMaker for mass data capture a leap of budget, not a leap of faith
The winner is Mr Steve Dawkins, and a copy of Obliquity is in the post.
Thank you too for all other responses including a number of waggish entries....and yes, Dylan Thomas did write more than "Under Milk Wood."
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It seems that this won't be the last post after all.
In the next week or so I will post a short process on how we introduce narrative research into an organisation with a high preference for quantitative research. Finally, I will introduce the concept of problem-solving leadership and how this ties into natural science and complexity.
If any of the previous blogs have been of interest and worthy of further expansion, please let me know via direct email (ijenkins@mkt-edge.com) and I will try to publish further information in the time available
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I’m not sure if I always get the whole ‘change management’ thing. I have been in full-time employment for over 30 years, and I have seen basic problem-solving or simply getting stuff done, be cordoned off for execution by a recipe-following, jargon-laden club whose membership have derailed or even prevented business improvement. I have seen real movement, real change and genuine heart-felt challenge ignored, overrun or dismissed—to the detriment of many organisations.
Let me be blunt. I have seen some ‘Change Management’ projects snuff out feedback loops; I have seem them absolve leaders from explaining weak decisions; I have seen Change Managers override warning signs, and even driven creaky transactional processes into chaos. Yesterday I heard a Change Management professional decrying a group of lathe operators who had successfully developed and implemented an improved manufacturing workflow by ‘chatting over tea,’ instead of forming a guiding coalition and then adhering to the remaining 6 or 7 steps—as per the CM manual issued in February.
I kid you not.
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Snowden has pointed out , but it is often only addressed implicitly. Bring out into the open. If you wish to tap into my problem-solving capabilities, you need to give a compelling reason to do so. This is the part, in my experience, where Change Management processes stumble because questions asked can be challenging, conversation is often difficult, and the output often highlights that leaders are not all knowing. For these reasons, the less confident frequently use stick over the carrot to ensure we avoid awkwardness, or at least accelerate quickly through the objections of the cynics and skeptics. This is unfortunate as they are often the most passionate about the success and health of the organisation.
But it need not be so. By opening up the conversation safely and with the emphasis on mutual benefit, much can be achieved by employing a context sensitive approach,.
I am currently engaged with a sophisticated company facing turbulent market conditions in the communication industry. Anticipating the need to be more resilient rather than robust, they decided to consolidate some of the activities in their engineering department, taking previously ‘complicated’ activities and making them ‘simple.’ These ‘simple’ activities included stream-lining of workflow, use of one CAD system, consolidation of a Drawing department, and unification of disparate costing system. The change management programme was overseen by a member of the Executive, but program management delegated to external Change Management ‘experts.’
Now the engineers in this organisation are a critical resource, contributing directly and overtly to the commercial strength of the organisation. They were, naturally, probing, sometimes voluble (and on one occasion volatile) about the perceived loss of control over these activities. The ‘Guiding Coalition’ were given a less than flattering sobriquet, and younger managers recruited into the team were ostracised. The most senior engineers who asked the most pointed questions were perceived as laggards, resistant to change, and with their names reported to the sponsoring Executive. They had also written over 70% of the patents in the preceding 15 years.
In response to request by the Head of the Engineering Department, I sat in one of the joint CM-Engineer meetings; on one side the consultants with rolls of brown paper and chisel-tip pens, and on the other side, Engineers with sharpened Rotring pencils and well-oiled slide rules; you didn’t any special skills to sense combative nature of the relationship
To me better understand the aim of the Change Management programme I introduced the Cynefin framework. I provided the group with a copy of Snowden Boone HBR article, and after a short break, we used the Cynefin framework as means of diagnosing the context of the problem. Both parties placed the Engineering community on the complicated side of the complex/complicated boundary. Both sides then agreed that long term success of the business was critically dependent on Engineering continued support of commercial activities in the complex domain. In fact, involvement was even more important in the uncertain climate. However, at no time in the project had any devolvement of Engineering activity to the simple domain be linked, overtly and transparently, to an increase in Engineering’s influences of complex activities.
Placing the whole change management in a broader context, there was a palpable shift in dynamics within the groun, and the collective tested the change management proposal with two questions:
1. Does this allow engineers to spend more time engaged in complex/complicated activity?
2. If not, how can the proposal be modified to allow this to happen.
As a result of conversation around these questions, the change management project was modified (in fact broadened to include the link to the complex domain) and success measures co-evolved. It wasn’t all lovey-dovey but perhaps the biggest change was a shift in climate that encouraged feedback loops. The biography of the Russian engineer, Peter Palchinsky, has now become a standard text on the internal engineering professional development programme.
This stuff works.
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I am frequently asked to demonstrate to my commercially-minded, tight-budgeted, hard-nosed, doubting-Thomased clients that there is profitable proof of pragmatic application of the insight arising from the narrative research and the Cynefin framework.
This is often difficult to do because of the issues of commercial confidentiality and the shear range of contexts involved. However, the volume and universality of the request takes this topic beyond a weak signal so a response is required. I provide a variety of case studies but one tool seems to resonate more than the others, and I am sharing that with you today.
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27 Articles.’
So insightful, practical and pragmatic has been this document for management of counter-insurgency, that the US Military requested a modified version be written for field commanders about to take up positions Iraq and Afghanistan.
The revised version was written by Dr David Kilcullen, an Australian academic infantryman with research and practical experience of counter-insurgency in Indonesia. He was tasked to crystallise his conclusions, and build upon that of Lawrence. Not to be outdone (what would you expect of an Aussie sponsored by the US), Kilcullen surpassed Lawrence by issuing the ’28 Articles.’
To me, this document is an excellent example of how to manage a complex adaptive system, where safe-to-fail experiments are essential, but where the level of tolerated failure is fluctuating and potentially fatal.
In our strategy generation process, the client identifies which of their challenges are relatively more Complex (and on the Complex/Chaos border). They then review the 28 Articles and agree which of the 28 they could localise and would aid in the resolution of the issues before them.
Clients find this tool to be extremely practical, pragmatic and applicable with a direct line to sight to the Cynefin framework all of which adds to the credibility of the framework. That it ties back to Snowden’s early DARPA-funded research is a neat bonus.
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In business we spend a considerable amount of time discussing where we are going. Yet when we introduced to other homo narrans, we seem to spend a lot of time navigating toward an understanding of the each other through references to aspects of personal history. We display metaphorically our geographic, social, intellectual, even spiritual roots. As Snowden points out, we re-establish extended familial bonds at births, deaths and marriages through the re-telling share (and sometimes embellished) family sagas. It seems to give us context about the range of conversations we can going forward; they can launching points for oral adventures, or traffic lights preventing collisions. It can of course lead to initial mis-conceptions, but I find course correction easily obtained. For example; I am Welsh, but I don’t sing. Or rather I do sing, but lustfully, not tunefully. My race does not have a genetic disposition for singing, but my culture does engage itself and identify itself through this medium—and there can’t be too many nations whose pop musicians complete their concert by leading the audience in hymn singing.
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On Saturday, some 75,000 primarily non-chapel goers will once again don their Saturday-best sportswear, and give beery thanks to the Lord as the Welsh rugby team takes the field against Australia in Cardiff. The emotion of the occasion will heightened as Shane Williams, one of the treasured players of Welsh rugby, plays his final international game.