Important new book introduces the executive suite to Axiomatic Design

Reviewed: Organisation Design: Re-defining Complex Systems

While Nicolay Worren explains that his new book is intended for MBA students and executives, one can’t escape the thought that much of the learning it offers could be useful to a much larger audience. In fact, it might even be inspiring to those confronted by the complex dynamics and ambiguity in modern business design, and hoping for tools to manage that growing complexity. After all, the book’s stated purpose is to promote approaches to organization design that are focused, current, rigorous and pragmatic. In other words, its aim is to bring science to a business where it has been lacking. Organisation Design: Re-defining Complex Systems achieves that, especially with its bold introduction of Axiomatic Design.

The thing about an open scientific approach, however, is that it potentially puts organization design thinking into the minds of any employee at the very time when the structure of agile companies are flattening and employees are having more say in the design of their own work.  As the author points out, research shows “successful firms pushed decision making down the organization, achieved fast, easy and abundant sharing of information, and encouraged creativity and learning among employees.” With this book, organization design is no longer a dark art where corporate witch doctors follow arcane recipes to satisfy only a few privileged stakeholders at the top. Today, organizations are increasingly collaborative systems and, to work most effectively, employees need to understand their role in the system holistically and to act accordingly.

The book is a model of a clear-headed, systems approach in its very layout. Each chapter begins with a bullet-point overview to establish the need for what is about to be discussed. This orientation to salient needs reflects the one thing of primary importance in designing every role and activity in an organization: its purpose. If you’re unclear, for instance, how a role’s purpose supports corporate strategy (i.e. you’re not asking the right questions), you’ll never get the right solution.

While this disciplined orientation to satisfying functional requirements is not exactly new, what is new is the methodology for achieving it. Axiomatic Design, invented by Professor Nam P. Suh (MIT and KAIST universities), is emerging as a formidable tool for managing complexity. A.D. has been applied very successfully in the world of engineering and product design but this seems to be the first book advocating its application to organization design.

Axiomatic Design comprises four design stages: strategic needs, functional requirements, design parameters, and process variables. The magic of Axiomatic Design is in the way design processes zig zag back and forth to ensure coherence between each stage. In fact, as Worren points out, this coherence-checking between design and the strategy it is intended to serve, can have the effect of requiring changes in strategy—it’s a two way street.

According to Axiomatic Design, complexity is a function of coupling or interdependency. In fact, Axiom Number One is called the Independence Axiom which states “Maintain the independence of functional requirements.” For example, an employee will be more prone to make errors when there is ambiguity about who he or she reports to. While there may, in fact, be justifiable reasons for structural ambiguity, those reasons need to be assessed methodically. Here, Worren makes a distinction between necessary complexity and unnecessary complexity.

Normally, it is best to remove all complexity i.e. coupling of ambiguous or conflicting functions. Sometimes, though, complexity can be beneficial, for example, when it enables solutions impossible by any other means or when the ability to deal with complexity is a competitive advantage. With that in mind, the design exercise becomes, first, to root out unnecessary complexity and then to manage or mitigate the risks of the necessary complexity.

To assess where coupling occurs in organization design, a Design Structure Matrix is used to graph the overlaps. At the highest, most superficial level, these matrices can be very easy to understand and work with. Although Worren doesn’t go much deeper than that, the experience of Axiomatic Design as it’s applied to product design promises much more. When design analysis drills down into finer detail and greater scope, the matrix maps can become extremely dense. But that is also where patterns begin to emerge that can point to major systemic changes being required.

To date, most organization design has been based on simple economics models. That is, you pay for someone to perform whatever function you demand and that’s it. In competitive businesses today, that won’t work anymore; employee relationships are becoming as complex as the jobs they are performing. High quality employees demand autonomy and empowerment so that they have a say in the design and performance of their roles. They demand the resources they need to master their roles. And they want clearly defined roles.

The costs of not moving to complexity management in organization design are huge. First, as an organization grows, the number of interactions within the organization grows. For the most part, this is unnecessary complexity that comes with increasingly onerous coordination costs. Every relationship or process handoff is a potential problem that needs to be escalated to management.

In addition to lower performance, the other problem with ambiguity in the workplace is unethical behavior. As the author describes in cases such as Enron, Arthur Anderson and other business disasters, the source of trouble was in ambiguous policies and roles. The reason or excuse for these painful failures was the fog of complexity.

With transparent sharing of knowledge and social learning in well-designed organizations today, it’s hard to imagine empowered employees allowing such situations to develop. Where it will happen, however, is in an organization structure where there isn’t that sense of clarity and transparency, where employees feel inclined to say “it’s not my job, it’s not my problem.”

The greatest hope that shines through in Organization Design: Re-defining Complex Systems is in the promise of greater agility. Using these tools for complexity management and designing employee roles that are more entrepreneurial, organization design becomes dynamic and ongoing. Instead of being forced into a panicky reinvention whenever it’s confronted by market changes, an organization designed top to bottom for managing complexity has the resilience to adapt more readily. That’s a clear-cut edge over competitors burdened with traditional organization structures. In fact, if done right, it could be disruptive.

Everyone knows they should be proactive about change. Everyone says “We need to innovate before the anticipated crisis hits us.” Even so, no one acts until they’re finally forced to. Why? Well, when people use the word “we’, they invariably mean someone else besides themselves. In other words, we see little real innovation today because few people are ready to own the issues. There always seems to be something more pressing, like this quarter’s results or a budget crisis.

That’s the lament of Professor Costas Markides, speaking last September at Cordial, the annual leadership event hosted by Cordys. Professor Markides teaches at the London Business School (Strategic and International Management) and is the author of Fast Second: How Smart Companies Bypass Radical Innovation To Enter And Dominate New Markets. (The book, apparently, advocates letting others take the risk of invention so smart companies can exploit them when innovation is safer.)

To overcome the challenge of change inertia, innovation leaders must inspire stakeholders to assume ownership when they see change is necessary. And that requires more than just pointing to a list of good reasons for change. As mentioned, people already have reasons to change. But they don’t do anything because of all the immediate problems in their face. What’s required is the extra effort and risk to credibility that comes with a leader taking a strong stand, owning a problem and creating what Markides calls a “positive crisis”, even if it makes others uncomfortable.

Markides suggested five strategies forward-thinking companies need to embrace if they’re serious about change and innovation.

Professor Markides’ Five strategies of agile companies

• build an early monitoring system to identify future changes early enough (empower frontline workers to point to needed change)
• treat change as both threat and opportunity (while it’s important to see opportunity in crisis, it’s also important to not lose the sense of urgency)
• create positive crises to energize people into active questioning — analytical appeals are not enough
• respond to changes faster by utilizing the help of outsiders
• get everyone in the organization to adopt the behaviors that encourage agility and responsiveness to change - institutionalize these behaviors

Professor Markides’ 48 minute presentation is available on the Cordys site: Organizational Agility: The Foundation for Driving Business Transformation

Using a system-of-systems approach to build a smarter planet

IBM is urging government and corporate organizations to adopt a systemic innovation approach to solve wicked problems of waste. The starting point for the company’s report, The world’s 4 trillion dollar challenge, are a number of horrific statistics. These statistics point to waste that could be cleaned up if organizations collaborated for the greater good — and their own profit — instead of working in isolated silos.

Some of the statistics:

• More than 50 percent of the world’s food supply never makes it to consumers.
• Nearly 35 percent of all the water used each year is frivoled away by poor agricultural practices.
• The United States alone is wasting approximately 2.3 billion barrels of crude oil each year on road congestion, poor routing and other traffic issues. That squandered fuel could satisfy all the oil needs of Germany and the Netherlands for two years. In addition to direct costs, this inefficiency also has a ripple effect on oil prices, consumer discretionary spending, pollution and even the amount of talent available in the labor market.
• One quarter of the electricity generated each year is never consumed.
• Our planet’s system of systems carries inefficiencies totaling nearly US$15 trillion, or 28 percent of worldwide GDP

Why the persistent waste? As the report says, “we have optimized the way the world works within silos, with little regard for how the processes and systems that drive our planet interrelate. We’ve tuned these processes to generate specific outcomes for individual communities, nations, enterprises and value chains.”

Could you be missing something really important in your vision for systemic innovation, just because you can’t tolerate bible thumpers and fundamentalists?

Now, before you stop reading because the R word was mentioned, understand that the man provoking the question, philosopher Alain de Botton is an atheist. In a persuasive RSAlecture (and book ‘ReligionforAtheists’) he suggests too many of us have thrown the baby out with the fundamentalist bathwater. And our culture is poorer for it. If you are an organizational or systems designer trying to engage diverse communities with a compelling central vision, you could learn something from religion, if not from the religious lessons themselves. You can certainly learn from the methodologies for community building and teaching.

De Botton advocates a ‘pick and miss’ approach for finding approaches in religion that might be helpful in informing your life work and personal development.

This is a first stab at trying to illustrate the idea behind systemic innovation.

So many problems evolve from businesses being designed with one goal - making money - for one stakeholder group - investors. Any other beneficiaries, like vendors, communities, government and employees, are incidental and targets of cost reduction. This sets up an antagonistic relationship between stakeholders, which too often leads to counter-productive predation and belligerence.

Businesses designed collaboratively to anticipate the salient needs of all stakeholders will provide clear motivation for all participants to cooperate for joint success. Yes, it can be extremely complicated but today's communication tools and design methodologies, especially Axiomatic Design, can make it all manageable.

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