“It is not the strongest of the species that survive, nor the most intelligent, but the one that is most responsive to change.”- Charles Darwin
- Our modern day expectation of control or hierarchy in the management of complex systems is giving way to panarchy, and we must endure the consequences of our false expectations and embrace the coming change.
- Lasting success in a system governed by panarchy, the ecologist will tell us, comes through resilience—the capacity to adapt, which is heightened by balance, variability and diversity.
So there I am, writing 4 parts of a story about bloody Roller Coasters to organize my thoughts on how I think businesses are affected by and can use Business Model Generation to navigate through panarchy. In my attempt to keep my thoughts organized starting off on 2 axes – the 2D panarchy version. And Chris, thanks, you’ve provided at exactly the right time the right message for me to go 3D with my thoughts.
So far the axis I used on Alignment (Connectedness) and Funding Rotation (Capital) were the start. The third axis defined to better understand how ecosystems work, is resilience (and if you look at the below picture you may imagine where my Roller Coaster analogy has come from…).
The axes as I see them relevant for businesses determine the dynamic characteristics of each cycle:
- Funding Rotation sets the limits to what is possible – the number and kinds of options available to invest (smaller amounts of) money in. E.g. fast levels of money rotation will be there when a cycle passes through the lower parts of the cycle – think about the speed of a roller coaster at the bottom of a downhill part. While at the top sides of the cycle more careful investments need to be made, or even cost saving programs are run – imagine you’ve just been pulled up to the highest point of the roller coaster at the beginning of the ride.
- Business Alignment determines the degree to which a business can control its own destiny through internal controls, as distinct from being influenced by external variables. E.g. the difference between driving Open Innovation or even Internal Crowd Funding initiatives vs. Disruptive (Business Model) Innovations from new competitors.
- Resilience determines how flexible a business is to adapt to change, to unexpected disturbances and surprises in the system (including internal and external forces) that can exceed or break the Business Alignment.
The front loop (green part in the picture) of Panarchy is all about Exploitation. Exploitation is about efficiency, increasing productivity, control, certainty, and variance reduction – optimizing resources, partners, activities, or in short: the left hand side of the Business Model Canvas.
The back loop (red part) is about Exploration. Exploration is about search, discovery, autonomy, innovation and embracing variation – exploring new value propositions, customer/market segments, ways to reach and deliver them, playing and pivoting with the right hand side of the Business Model Canvas.
Ambidexterity is about doing both.However, any company need at given stages in the adaptive cycle a different balance between Exploitation and Exploration. Keeping ambidexterity within controlled levels is key to a company’s resilience. Resilience to internal or external disruption, to non controllable forces from beyond its market or ecosystem, is what can make a company survive for a long time (whether through a well defined purpose or other means). If the balance moves beyond the borders, a company can get stuck in a rigidity (during exploitation) or poverty (during exploration) trap. Being stuck for too long, not being able to adapt or bounce back can cause the collapse of the company or in a worst case scenario the ecosystem.
HOW and WHY collapses happen is best explained in the book Thinking in Systems: A Primer, by the late Donella H. Meadow, edited and published by Diana Wright in 2008, fifteen years after the author completed the draft manuscript and seven years after her sudden death. Anybody wanting to get insights in the “why” our ecosystems, our panarchies work the way they do MUST read this book first (and then I’m more than happy to take any additional questions).
For this post it is just important to keep in mind that if you want to build and grow your company resilience is not optional.
When I started to organize my thoughts on this theme, I ran into Navigating the Back Loop: Fostering Social Innovation and Transformation in Ecosystem Management, co-written by Reinette Biggs, Frances R. Westley and Stephen R. Carpenter, which included the below perspective on Panarchy.
It’s an interesting perspective, and I will come back to it in a later post once more, though along the ride I have become to believe there’s something wrong with it (actually… I’m always questioning, reality testing what I see or read). Here’s my challenge: the 3 phases of transformation. They make it seem like one comes after the other, time after time. But is Resilience something you build and rebuild? I believe Change Preparation, Navigating Transition, and Building Resilience of the Transformed System are actually all together making up Resilience. To me being resilient means you’re always adapting to changing environments and external forces or at least ready to do so.
Now I’ll be honest with you: it’s my thinking. I believe that change is the only constant in life, and that therefore resilience is not something you ‘build’. It is the ability to adapt and respond to unforeseen or uncontrollable circumstances, without losing your identity (or purpose if we follow Chris Houston).
In yet another great reading, Designing the new enterprise: issues and strategies, Dion Hinchcliffe writes:
Organizations are trying to change to adapt to a rapidly transforming world, and being changed even more by external forces outside their control know this has been a prime focus of mine. Technology in particular is the author of so much of what is reshaping markets, communities, corporations, and even our cultures. The growing question is whether our organizations will break under the loads of so much change
Guess the answer to the growing question is: ensure your resilient enough to avoid breaking. Besides being a great article there’s a very interesting picture to support the story:
I won’t comment on the ‘enterprise core’ as such (though I’m always surprised why People and Strategy are projected at top and bottom… but that’s another thought), or on the partners, supply chain, & community ecosystem (I’ll save that for the next post). Though translating this picture to my thinking it seems turned inside-out. To me it is the enterprise core (and its supporting ecosystem) that will go through repetitive “growth-refinement-disruption-renewal” cycles: Simply because those 4 terms are the definitions of the panarchy stages. The ‘Protective layer’ to me represents the level of resilience of the company. The external and internal forces (self disruption) are natural events, unavoidable in any ecosystem. Those forces will play upon a company, any company, sooner or later. Thinking they won’t is no option.
As in the opening, Chris Houston identifies ‘purpose’ as the common denominator to be and remain resilient. In The Operating Model That Is Eating The World, Aaron Dignan, CEO of Undercurrent, shows how they use purpose in a similar way. Not directly referencing resilience, though the out most layer of nested domain to take into account when building a company.
In my imagination overlaying this approach to the Enterprise Core in the picture of Dion creates a company where Purpose interplays with the Protective layer. And I wouldn’t know how to build a more resilient company than one where Purpose reigns and is protected while riding the roller coaster tracks. If then such company manages to exploit and explore within the needed boundaries, to me it has the greatest opportunities to learn from, grow in and contribute to it’s ecosystem. Resilience rules!
Two exits statements for this post, not in the last place to keep me going on a next post:
- A resilient company must keep in mind that (a wise lesson from the book Thinking in Systems mentioned before):
- A valuable purpose serves supporting (one of) the weakest link(s) in the ecosystem
- By supporting that link, the link may evolve and over time not be the weakest link anymore
- Hence purpose needs to be adaptive as well
- For the enterprise core and internal forces like self disruption it is important to keep in mind that in any ecosystem multiple layers of panarchies are active:
- Hierarchy between and amongst them is evident and will always exist in some form
- Lower levels move faster than higher levels in the hierarchy
In other words: a company’s purpose must evolve with the development of the ecosystem its purpose is set out to support to begin with. And that is the 3rd dimension of the adaptive cycle to me.
Resilience is always needed (even simply because there are external forces that come unexpected and hard, impacting heavily on our businesses), and is dynamic in nature. Like any other component or function of an organization it should be strategically designed correctly to cope with the different characteristics of the different stages of Panarchy.