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A changing basis of competition

An organism’s fitness for natural selection determines how successfully it can adapt and thrive in the earth’s turbulent history. Successful leadership is defined by how well s/he delivers on the current basis of competition (how you win), which in turn depends on the business environment. In the post-Industrial era (since the Industrial Revolution through the mid 2000, before the explosion of the Internet), the basis of competition was efficiency in producing physical goods. If management knew the input, they could reasonably predict the outcome by controlling the production process, focusing on lean manufacturing, eliminating defects. This gave rise to management tools such as Weber’s bureaucracy, time and motion studies, the Balanced Score Card, Linear Programming, Green belts, Six Sigma methodology, and Enterprise Resource Planning. All of these tools were designed to improve efficiency, solving for known variables in a stable business environment. They focused on optimizing all inputs, including raw materials, equipment, and even people (HR standing for Human Resources is the vestiges of this Industrial era).

Today’s dramatically more VUCA (volatile, uncertain, complex and ambiguous) environment has changed the basis of competition from efficiency to constant learning and innovation. This is similar to how organisms in a fast-changing environment must adapt: any organism that doesn’t change as fast as its environment faces extinction. 

What it means to be a great leader today

In pursuit of maximum efficiency, businesses viewed emotions as unwelcome intruders and even symptoms of pathology that organizations had to get rid of [1]. The basis of competition called for standardization, which required no variances from such idiosyncrasies as emotions and self-organization—so we dehumanized people. Corporate Legal departments systematically attempted to eliminate all elements of emotions and touch in the workplace, because they represent messy, unpredictable legal liabilities. This dehumanization turned the workplace sterile, void of human connection. 

However, the new VUCA environment changed the basis of competition yet again. Now it calls for reclaiming what the Industrial era disowned. The best way to deliver on the new basis of competition (learning and innovation) is through learning by trial and error, diversity of thought, and self-organization, all of which require unleashing unique, idiosyncratic thinkers with diverse perspectives. 

Today’s great leaders must respect workers as individuals and trust them to respond to unforeseen environmental perturbations on their own. Rather than be supervised and micromanaged by those who are disconnected from the realities on the ground, we need those at the edge of the organization to respond to unpredictable changes in the rapidly changing environment. We can no longer succeed by squeezing the last drop of productivity from people to efficiently produce error-free, predetermined output. Things on the ground change too quickly; what we measure and control today may be completely irrelevant tomorrow. 

This new basis of competition requires us to shed the vestiges of the Industrial era and reclaim human connection in the workplace. Great leadership today means allowing workers to create a self-healing, adaptive organization, complete with idiosyncrasies and failures in trials.

As innovation practitioners, we notice a couple of important points on human learning. First, learning by trial and error can help us build a mechanism to capture the imperfect logic of human learning in the algorithm of machine learning. Arrive at a good-enough minimal viable product, quickly market test it, and pivot or persevere for a hockey-stick growth curve: this process produces much faster results than perfecting the solution before launch.

Second, if we are aiming to fail fast as we focus on discovery and exploration in delivering world-class products, then we must seek the learning from a fail-fast mindset, rather than focusing on increasing the speed at which we fail. Radical innovation is not about innovating business processes but facilitating self-organized learning, which can quickly adapt to the rapidly changing environment. 

Nurturing the ecosystem

To allow self-organization to work, individuals must put the interest of the organization before their own, even if it means their individual self-interest is not optimized in the short term. Similarly, organizations must act in the best interest of the greater good of an ecosystem, even if it means a short-term disadvantage, knowing that it’s an investment that will pay greater dividends in the long run. The new basis of competition calls for trust, reciprocity, and ethical behavior for the greater good of the entire organization—indeed, the entire planet. It is no longer prudent to maximize short-term earnings by sacrificing employee morale, exploiting the environment, or crushing the competition with a zero-sum game mentality. The new basis of competition calls for nurturing an ecosystem upon which incremental products and services can be built, which is much more enduring than destroying current competition, because surely others will spring up. 

There are some important questions we must ask as we seek to improve our organizations and the people who bring them to life. For example, what is an ecosystem in our context? Why does it matter? How will we know what we do is working? Today’s VUCA leaders must accept that controlling employees and situations at lower levels stifles innovation and often creates unexpected negative results at higher levels. This is why the critical mass of a wide base with high moral and ethical standards in individual leaders, organizations, and nations are needed now more than ever. 

This is the power of ecosystems. Embrace these principles and produce radical innovation to lead tomorrow—or disappear into the sunset as dinosaurs of a bygone era. Together, we are stronger.

Dr. Sunnie Giles is President of Quantum Leadership Group. She is a global expert on innovation and is the author of the book, the New Science of Radical Innovation. She helps catalyze radical innovation by harnessing VUCA through training, consulting and coaching. Readers can connect with her our network or on her website.

[1]Gabriel, Y., 1998. Psychoanalytic contributions to the study of the emotional life of organizations. Administration & Society30(3), pp.292-315.

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