So, what is the 1 core capability that needs to be developed in 2014? What do the organisational tea leaves tell us?
Change is in the air. Not the falsely claimed change of the past (you know the ones, the change programmes that promise a beginning and an end – short-term pain for long-term gain), but an organisation that exists with change as a state-of-mind, and a new core capability.
Complexity has been the ‘belle of the organisational ball’ for the last four to five years, but 2013 saw the concept mature. A lot of time has been invested by thought leaders over the past years into establishing a language and setting the scene for change and it would seem that their hard work is paying off.
Organisations generally sense complexity in four ways: hyper-ambiguity, hyper-connectedness, hyper-interdependence and hyper-flux. This year has seen the emergence of mechanisms that respond directly to the characteristics of complexity:
- Integrated Reporting (a new framework for financial reporting) has moved out of the exploration phase and now has a formalised framework that nudges organisations to report on key capitals from environment (strategy alignment, signal detection and risk assessment) through to knowledge (Intellectual Capital, Social Capital and Human Capital) – there is even a mention of tacit knowledge systems!
- The change to the way in which US GDP is calculated has changed; where R&D has moved from being a Capital Expense to a Capital Investment.
- The emergence of ecology-based risk assessment, where risk is being assessed from the perspective of interactions within a whole ecosystem – as opposed to a more traditional, reductionist approach that looks at relationships in isolation.
These are example of system/process nudges that prompt the unaware, moving them toward action that aligns with the nature of the environment they transact in.
This is not enough though. Increasing complexity, and at is increasing, means that you have to operate in a constant state of heightened awareness. Complexity characteristics will naturally throw up problems. The level of awareness or the ability to sense and respond to these problems will determine the future of organisations.
Sensing a problem early will bring competitive advantage, but sensory capability is only one piece of the puzzle. An ability to solve known and emerging problems (outputs of unintended consequences) is a core capability. A mindset that embraces change, not for change sake, but as a natural way of doing business, will separate the wheat from the chaff. Change capability is the limiting capability that will define the future landscape of today’s organisations.
This means that today’s organisational communities have to be educated, their awareness heightened, if they are to be prepared for what is to come. This need for change capability can be seen in the pages of the top management journals. Organisations are being asked to rethink their modus operandi. An organisation’s purpose is not about creating shareholder value, but about creating communities that can consistently adapt to a changing environment to design, develop and deliver products and/or services that customers will find desirable.
Leadership development is responding, with thinking shifting towards a ‘Values-Based’ approach, where communities are formed around core values that define the organisation and its purpose – an approach that Harvard Business Review sees as being key to today’s most successful firms.
Organisational development teams are having to rethink organisational design to focus on a more integrated form - A lack of integration is a good example of how concepts like Knowledge Management have failed in the past; their functional design being isolated and misaligned to the point of failure.
This will not be for everyone. There will be those that resist. Those that cling to the past and its fading familiarity. They will deflect, deter and disrupt, but their mindset is the problem that impacts change capability, what I argue to be the organisation’s core capability for the future.
The time will come when staff either change their minds or face the fact that change will make them irrelevant. Organisational communities need to understand the duty of care to support and nurture change capability within their staff. There is a need for patience; a need to invest in energy and resources to align the organisational community with the external environment (take a look at the Integrated Reporting framework and you’ll understand what I mean). But, ultimately, there has to be a willingness to change from leadership and staff alike. Without it there can be no future and I predict that the next 3-5 years will see an acceleration in the number of “established” organisations that fail (remember Kodak?)
Quite simply, change is a state of mind that has to be acquired as quickly as possible. Change capability is the 1 core capability that needs to be developed in 2014. The future of organisations depends on it!