When Change is Not Enough

When Change is Not Enough

I started my professional career as a surveyor and for the past decade or so I’ve been applying that expertise to the mapping of organisations, grubbing around in the details of processes and process improvement, enterprise architecture and strategy maps. And I’ve come to the conclusion that the only people who are really passionate about these things are those who draw them. Mapmaking is a public good and needs to funded as such. But this is a hard sell in an enterprise where the intrinsic value of process maps and architecture diagrams is not at all apparent outside the coterie of those who create them… More importantly, while drawing these various maps I’ve had the opportunity to assess their value to my clients and also to assess the sequential process model we are forced to use.

And I’ve come to the conclusion that we have been deceived, deceived by the presence of physical goods in service organisations and deceived into thinking that manufacturing models can be applied to service organisations. Wherefrom comes this deception?

Whenever we see a fow of physical goods, we see a supply chain. And we see this because it is conceptually easy to grasp and because Porter’s Value Chain is taught in every business school on the planet. But just because we see something that looks like Porter’s Value Chain doesn’t mean that that is how value is created.

Stabell and Fjeldstad, a couple of Norwegian researchers, identifed, in 1998, two other value creation logics that are far more appropriate for service organisations than that observed in a manufacturing plant: the value shop and the value network. It is easiest to illustrate them by examples… The value shop is a problem-solving set of activities and describes the value creation logic of professional services frms, maintenance shops and hospitals.

Importantly, these activities are non-linear, which causes most process modelling software to go into meltdown because they are based on a transactional view of the world. But in a professional services environment, the transaction is the consequence of the value created, not the value itself.

A hospital can be modelled as a value chain because the equipment found there necessitates the physical movement of a patient through the building. But the value creation, from the patient’s point of view, is that the requisite expertise is brought to bear on his or her problem. It’s a thinking exercise, rather than one of logistics. If you think of the patient on a bed and try to maximise the effcient use of the bed, you’ll end up with the hospitals we have. But if you think of the patient as someone who needs a range of expertise brought to bear on the problems he or she is facing, the design of the hospital will be quite different, and substantially more human, and humane…

The value network on the other hand creates value by bringing together different groups of clients. In the case of a bank, we could model deposits as the “input” and loans as the “output” but to do so we must mangle the language a little. The value creation from a borrower’s point of view is that a number of (anonymous) depositors have agreed to finance his initiative (by proxy through the bank’s lending criteria). The truer sense of the value created by a bank would be when those depositors consciously commit to supporting an initiative, rather like the share market in its origins and without the derivatives that make something that is inherently stable, extremely volatile.

Equally, the value creation of an airport is to connect passengers and their aircraft. The transaction has already occurred, the ticket has been bought, all the passenger wants to do is board the aircraft. But because there is a physical movement of passengers through the airport, we model, and build, the airport as a value chain, and create bottlenecks: at check-in, at security, at customs and at boarding.

But my refections go even further.

All this value creation logic resides in the domain that we could call the technical subsystem of the organisation. It is here that we fnd the architecture, physical resources, work processes and procedures and their descriptions, IT support and so forth. And the thinking in this domain is crystalline. When crystals grow, they change their size but not their form. The vast majority of change programmes and process improvement exercises fall into this category. The parts of the organisation under consideration change their size, up or down, but the basic form is maintained.

But there are two other subsystems to the organisation that we neglect when we follow this logic: the social and the cultural and there is a certain tragedy apparent when we realise that the vast majority of management thinking over the past couple of decades has been concerned with only 33% of the structure of our organisations.

The social subsystem describes all those activities around how we organise ourselves to get the work done. It is here that we fnd we, the people. And it is here that we study the formal structures and the informal relationships that bind our organisations together.

The cultural subsystem describes the values of the organisation, the reasons people come to work, the way one “gets ahead”, leadership and branding considerations.

And, most often, these three subsystems are dealt with in isolation. The business landscape is littered with process improvement projects that result in no changes to the organisational structure; organisational restructuring that changes not a bit the way we work, only to whom we report; and leadership training and branding exercises that fail to affect the way people are organised and how they do their work.

Beyond transformation
Dealing with each of these subsystems in isolation will, to a certain extent, result in transformative change - within each subsystem. But, just as we have reached the limits of labour productivity (see Making Hay for a post on the latest absurdity of this measure) and the limits of process effciency, so too have we reached the limits of transformative change.

To build the service organisations of tomorrow, nothing less than transmutative change is called for. We have reached the limits of crystalline thinking in our efforts to improve, we now need a way to change our organisations in such a way that the form we have after the change bears no resemblance to the form before. In nature, we see this in the change in form from the caterpillar to the butterfy; in alchemy, in turning lead into gold.

In organisations, the transmutation we will see will be from a hierarchical model to a fatter, coordinative structure that allows the correct value creation logic of the firm to shine through and systems and processes that help not hinder the creation of that value.

The method is the Strategic U-turn and follows the path shown below. Are we capable of making such change? As long as we are thinking beings, of course we are!

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual infuence, are usually the slaves of some defunct economist.” JM Keynes To the list we might add management gurus and the occasional consultant.

Everything we do in management is the result of someone else's thinking. And we are each perfectly within our rights to un- then re-think the situation in which we fnd ourselves.

Stephen Hay is an accomplished change management consultant, speaker and educator who helps service organisations consistently and continually exceed stakeholder expectations. He can be contacted through the details below.

ENDS

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