When we wake up in the morning to read a business newspaper, the headline that grabs our attention is that a high-profile company has gone bankrupt. Companies with reputation of infallibility, just sink like titanic. Flawless legacies tarnish overnight. Being in fortune 500 list does not guarantee continuity in the next decade. Against this backdrop, the burning question is how do organizations mitigate the risk of failure, avert crippling blows and become impregnable fortresses of resilience and growth?
To complicate matters further, classic business models are losing relevance. The business environment and global dynamics are changing fast. It is obvious that resilient companies will sustain and grow, while others will die a sudden or slow death. Learning from the changing environment is the key for success. As Charles Darwin said – “It is not the biggest, the brightest or the best that will survive, but those that adapt the quickest.”
Companies that learn to adapt quickly to the changing environment will succeed. Organizations with thousands of employees can’t wait for the CEO to lead, direct and react. The empowered frontline leaders make the difference in an organization’s success and failure. In learning companies, they become catalysts for change. Hence, the question is how an organization can achieve excellence by becoming a learning company. Below are some of the advantages of becoming a learning organization. Read on and discuss with me your viewpoints.
1. Build the corporate DNA
The Egyptian revolution taught one major business lesson – anyone can lead and be a change agent. For leading one doesn’t require a hierarchical structure supporting a leader, any formal authority or support of an organization. A person needs a good idea and strong influencing skills. That’s it.
Moreover, in the present organization structures the organizational boundaries are collapsing. There is no way to focus on an aspect in isolation, as everything is interlinked. For example, risk appetite calculation is not just a mathematical analysis, as it is highly dependent on the organization values and culture. Organization behavioral psychology influences risk culture.
It is apparent that organizations with hierarchical autocratic culture will lose the game to the socially networked organization. Social networks have made it easier for organizations to communicate vision, values and focus on culture. It allows multifunctional teams to work together and each employee can actively participate in the discussion.
Establishing the processes, systems and thinking pattern of learning organizations will facilitate organizations into building cultures that are more transparent. It helps companies break silo mentality, challenge groupthink and create an environment for employees to cope with change. The time has come for collective leadership.
2. Prepare plans in detail with failure scenarios
As Anon said – “Destiny is not a matter of chance; it is a matter of choice.” The age-old practice of senior management rolling out the strategic plan will soon become passé. Though presently, as I had earlier mentioned from the McKinsey report, just 6.5% of the organizations have a proper strategic planning process. Around 20% are just consolidating different business units’ numbers for the strategic plan. This doesn’t work in the long run.
To succeed one has to plan in detail with all possible failure scenarios. For instance, Bill Gates wrote “nightmare memos” describing various failure scenarios even when Microsoft was doing well. Paranoia is good. When a company prepares for each of the assumptions of strategic planning going wrong, it devises alternative strategies in advance to quickly change track in emergency situations.
Learning organizations gather information on business opportunities and failure scenarios from all possible sources at local and central level. They have a better understanding of the local and global issues and this puts them in an advantageous position. Second aspect is with double loop reporting, the senior management promptly gets information about assumptions going wrong, failures and successes. This allows them to leverage opportunities, mitigate risks timely and change tracks where required.
3. Change at strategic inflection points
With the rapidly changing environment, one of the bigger challenges is to differentiate between the noise and strategic inflection point. Nonconforming for the sake of being different doesn’t amount to leveraging strategic inflection points. As Andy Grove said in the book ‘Only the Paranoid Survive’ –
“A strategic inflection point is when the balance of forces shifts from the old structure, from the old ways of doing business and from the old ways of competing, to the new. Before the strategic inflection point, the industry simply was more like the old. After it, it is more like the new. It is a point where the curve has subtly but profoundly changed, never to change back again.”
The computer industry faced a strategic inflection point in 1980’s when from vertical industry it became a horizontal industry. However, quite a few big names failed to understand the changing face of the industry.
Thousands of individual events contribute to the transformation of an industry. The organizations that capture information of these individual events and get the bigger picture from putting the various pieces of jigsaw puzzle together have the upper hand. In learning organizations, employees are used to challenging the status quo and are wired to learn new stuff. They identify trends, changes and transforming events faster than the hierarchical organizations. Hence, organizations benefit by not reacting to the noise, but changing at strategic inflection points.
4. Innovate to implement & gain competitive advantage
Intellectual capital consists of organization, human and social capital. It gives organizations a competitive edge by encouraging a culture of innovation. Organizations hit a home run, as innovation gives companies the first mover advantage and puts them ahead of the pack. As shown by Apple, intellectual capital and innovations add to the market value of the organization. Failure to innovate slowly erases the company from customers’ minds. An organization not only needs ideas, it needs a culture that transforms those ideas into products.
This underscores the importance of being a learning company. The rate at which an organization learns may become the only differentiating factor for giving an organization competitive advantage. Hence, knowledge management has become critical for success. Organizations need to capture explicit and tacit knowledge. Companies that have effective knowledge management systems and an environment for innovation are more flexible, adaptable and creative.
Learning companies have processes, systems and structures in place that allows them to leverage collective intelligence. As individual employees’ knowledge on customers, suppliers and other relevant stakeholders is systematically captured, therefore value creation improves. As human and social capital is hard to imitate it becomes a valuable source of competitive advantage. Innovation in products and services adds to the bottom line.
5. Avoid psychic traps, rely on data
Success often results in C-suite wearing rose-tinted glasses and from their comfort zone tell happy stories for the future. These organizations might be operating real-time but may not be living in the real world. Psychic traps make it difficult for organizations to confront brutal facts, be straightforward and decipher the data.
Additionally, hierarchical structures with command and control environment reinforce the thinking – the boss is always right. If someone challenges the status quo, they get hushed up and told – this is the way things are done out here. Moreover, when C-suite does mandate change, it results in failure since no one wishes to discuss the real problems and most nod their head in obedience. These change programs don’t get commitment, they get compliance, hence are mostly unsuccessful.
In learning organizations, business intelligence plays a vital role in decision-making. Management and employees rely on data, not individual hunches and intuitions. Secondly, companies adopt a two-pronged approach for information exchange and decision-making. Employees don’t expect C-suite to have all the answers. They take ownership for leading at local levels, gather requisite business intelligence and commit to change, as they are personally involved in organization success. Hence, the advantage is that no one can have distorted reality for a long enough duration to cause extensive damage.
6. Deliver consistent performance
Some organizations market value graph depicts a sea wave – goes high and low for some time then flatten out. These organizations work on the mental model of quarterly earnings and making quick bucks. They try to capture the short-term gains at the expense of long-term benefits. As Sun Pin in ‘Art of War’ stated –
“If you abandon your armor and heavy equipment to race forward day and night without encamping, covering two days the normal distance at a time, marching forward a hundred kilometers to contend for the gain, the Three Army generals will be captured. The strong will be the first to arrive, while the exhausted will follow. With such tactics only one in ten will reach the battle site.”
Apple exemplifies the case of a long distance runner. After Steve Jobs return as CEO in 1997, Apple didn’t grow rapidly immediately. The company invested in research and development of new products. The market value started showing an upward trend after five years, and reached its pinnacle before Jobs death. The company worked on long-term plans and improved step-by-step.
Learning organizations as part of systems thinking focus on long-term goals versus short-term goals. They aim is on the whole not individual parts. These companies survive in turbulent conditions as they show different behaviors though the circumstances maybe the same. Consistency is the name of the game. They neither blindly rush to adapt to each change in business environment nor fail to make changes where required. They focus on showing consistent performance in earnings report and not spectacular successes and unimagined failures.
7. Make learning fun
In the present business environment, John F. Kennedy’s statement holds true –“Learning and leadership are indispensable to each other”. Leaders must become master learners and create an environment of continuous learning within the organization.
In autocratic and bureaucratic organizations the two statements that predict death knell of an employee’s career is saying – “I don’t know” and “I made a mistake”. The blame game is so intense on failure that employees are petrified to try out new things and follow procedures even if they don’t make any logical sense. Organizations cannot survive in culture of fear and defensiveness. More disasters occur when no one spoke up in time to question the plans and/or delivers the bad news.
On the other hand, learning organizations give people a platform to learn, unleash their passion and creativity. The shared values and visions allow them to discuss a number of bad ideas to arrive at a few good ones. Individuals feel responsible for fixing their own areas and don’t wait for top management to address problems. Learning becomes fun and inspiring. As Peter Senge said – “People talk about being part of something larger than themselves, of being connected, of being generative.”
Becoming a learning organization is not an option any more; it is a mandatory requirement for success. At this business juncture, seeing the exponential change due to globalization, advanced technology and economic downturn, acting out from an old script isn’t going to help organizations. The organizations that are aiming for the biggest honey pot need to incorporate the core concepts of learning organizations within their culture. Else, they might tank anytime.