Interview: Foresighted self-renewal

All of S&P Consulting’s consulting services are based on the findings of the Newer Systems Theory. According to this theory, we see organizations as highly complex social systems with the existing hierarchical and communication structures, the characteristic observation and decision-making routines as well as specific cultural characteristics. Following this understanding, we do not primarily see the people in an organization as the key levers for observations and interventions, but rather the way in which an organization supplies itself with information and impulses, evaluates these and then comes to decisions. In our consulting work, we are guided by the 3rd mode of consulting according to Prof. Wimmer. The 3rd mode differs fundamentally from the traditional form of expert and pure process consulting in that, in addition to the processing of the content-related dimension, the social and time dimensions are equally considered, synchronized and integrated into the architecture right from the start.

“We see organizations as highly complex social systems with the existing hierarchy and communication structures.”

The subject dimension refers to the processing of a task-related problem of the organization with the aim of securing or further developing the organizational performance. The social dimension deals with the indirect processing and further development of the cooperation quality and decision-making ability of the teams involved. And the third dimension, i.e. the time dimension, refers to the observation and design of corporate development over time. In this context, it is particularly important to counteract any tendency to over- or under-regulate the workflow and decision-making processes and to ensure a careful balance between acceleration and deceleration. We are convinced that these three dimensions are inextricably linked and influence each other in the communication and decision-making processes in an organization. As consultants and according to this understanding, we, therefore, have to be able to constantly observe and process these dimensions in an integrated manner.

Well, I would like to go deeper on that: The central thesis of the Newer Systems Theory is the distinction between system and environment. In our understanding, this is the differentiation between organization and environment. As already mentioned, we understand organizations as a very specific type of social system, which has been created by social development over the past centuries. Organizations generate solutions to problems for their relevant environments and, based on this, derive the reason for their existence.

We now assume that the diversity and complexity of developments taking place outside the organization, i.e. in the environment of the organization, is always greater than what an organization can process internally. This means that organizations have to select their relevant environments in order to reduce complexity and remain capable of acting. For this purpose, organizations develop their own observation and evaluation patterns over time. If an organization were to respond to every environmental event, it would no longer be able to provide a stable output for the relevant stakeholders in the environment. It would endanger its existence. In this process of complexity reduction, however, lies the greatest danger for an organization. Namely, to set the wrong observation and evaluation criteria or failing to review them over a longer period of time. The danger of blind spots arises with the consequence that developments that are actually highly relevant for the organization are simply not “on the radar”. Whether it be threats from competitors, other industries or general developments in the relevant environments. Therefore, an organization has to master a balance – yes, virtually a paradox – between the opening and closing.

A constant balance between inner and outer orientation is necessary in order not to be completely cut off from the outside world. And for this purpose, organizations develop their own approaches. These are underpinned by the way in which they identify and observe relevant environments and evaluate the observations, in order to then selectively link up with other environments in a structured manner. Often this process occurs only implicitly and without the actors in an organization being explicitly aware of how they select and evaluate and according to which criteria they choose relevant and potentially important partners with whom they then establish and develop a business relationship, partnership, or cooperation.

If these observation and evaluation criteria have led to successful actions and results in the past, it is very likely that the organization will continue to apply them without further reflection. And this is where a major risk lies if these criteria don’t undergo a regular critical evaluation and, if necessary, are renewed. Just imagine, we would still assess a submitted application according to the evaluation framework from the 1980s, which we were taught by HR experts back then! We’d be making completely wrong decisions. And unfortunately, this happens every day in organizations when it comes to issues that are critical to success. We use this phenomenon to explain why, time and again, we encounter dangerous crises that threaten the very existence.

As already mentioned, there is a great danger in the way an organization observes and evaluates, especially if it remains unreflected. Indeed, these patterns and the highly selective sensitivity to relevant environmental developments can lead to an organization failing to recognize or implement vital changes in its relevant environments in a timely manner, and thus running into significant difficulties. In this context, we like to refer to the fact that an organization overlooks the “Black Swan” or that it is being seen as white. That which has not happened yet and which is unknown then cannot exist either. It is then oscillated back and forth until it fits into the existing pattern. In this respect we speak of the organizational blindness: An organization sees what it sees. But it does not see what it does not see at the moment. This can have fatal consequences, as very prominent examples have shown.

“An organization sees what it sees. But it does not see what it does not see at the moment. This can have fatal consequences…”

Ja, nachdem die Europäer im 18. Jahrhundert in Australien entgegen ihrer bisherigen Annahme davon überzeugt wurden, dass nicht alle Schwäne weiß sind, hat sich der Begriff als Metapher für unvorhersehbare bzw. unwahrscheinliche Ereignisse durchgesetzt. Was die Europäer für unmöglich hielten, hat sich auf einmal doch bewahrheitet. Und so ist es oft auch mit Organisationen. Erlebtes wird auf noch nicht Erlebtes projiziert. Es wird also nach den Fällen gesucht, die die eigene Theorie bestätigen oder, noch gravierender, wichtige Impulse werden gleich ganz ignoriert. Bestes Beispiel hierfür ist Nokia. Der Konzern konnte sich beim besten Willen nicht vorstellen, dass Apple ein ernstzunehmender Konkurrent ist. Da wurde dann gesagt ‚Die wissen doch gar nicht, wie man Handys baut‘, und das Thema war damit abgehakt. Nokia hatte dabei übersehen, dass es Apple nicht nur um das Bauen von Handys ging. Durch diese Selbstbezüglichkeit ist das Unternehmen letztendlich in eine Schiefl age geraten.

A corporate crisis can be explained by the fact that relevant impulses from the environment have not received the necessary response within the organization over a long period of time due to organizational self-reference. Thus, the necessary change processes have not been initiated early enough. In many cases, radical restructuring measures are then the only way to prevent the demise of the organization.

The future is and remains uncertain. The paradigm of calculability and predictability is increasingly eroding. For this reason, an organization should supply itself sufficiently with impulses from outside, evaluate them and use them to generate the energy for foresighted self-renewal. Unfortunately, only a few organizations have recognized this fact and adjusted their planning and management processes accordingly. It is indeed a tragedy to observe how even large business units of DAX-listed corporations come to wrong market assessments over the years as they continue to use observation and evaluation patterns without any reflection. Therefore, the management maneuvers the organization from one emergency operation to another. For us, these are indicators that the radar systems are inappropriate and that an organization runs the risk of not detecting the iceberg early enough and damaging itself with full force.

We are convinced that it is possible to prevent an imbalance if we succeed to monitor the organizational patterns to observe relevant environments as well as the established evaluation and decision-making processes in a reflective manner, and to critically examine to what extent these are still adequate. If it becomes apparent that the way in which developments outside the organization are observed and evaluated has led to false hypotheses, assessments, and decisions, it is absolutely time to start a reflection and change process to replace the established radar systems.

This is an excellent and exciting question. I am deeply convinced that the time of heroic leadership is over. Growing complexity, the intransparency of reality, and increasing globalization call for interdisciplinary approaches and diversity. A single person at the top will not be able to successfully master the current challenges. It requires well-functioning management teams that have an idea of how organizations as highly complex social systems function and can be influenced. The time to see organizations as trivial machines that can be optimally managed like an asparagus field – to use the origin of the term “business management” – is truly over. An essential task of management is to carefully observe the interface between inside and outside and to make sure that the organization is supplied with sufficient external impulses, evaluates them internally and, in doing so, keeps the system in motion. The key function of leadership is, therefore, to let the organization work on issues that are relevant for its further development and to create pressure to stimulate the development of the organization in a targeted manner – as a basis for maintaining and increasing competitiveness.

The management then has the task of mobilizing the available resources and skills to make exceptional performance possible. In doing so, it is necessary to ensure that so-called paradoxical resources are made available in a targeted manner, i.e. on the one hand to optimize the status quo and on the other hand to provide resources to promote creativity and innovation. Finding an oil well and exploiting an oil well are different tasks that require different processes and different people.

“An essential task of management is to carefully observe the interface between inside and outside and to make sure that the organization is supplied with sufficient external impulses, evaluates them internally and, in doing so, keeps the system in motion.”

That’s correct. Through years of cooperation with renowned scientists in the field of Newer Systems Theory and through our experience in accompanying strategy and change processes, the concept of Foresighted Self-Renewal in its current form was born.

Foresighted self-renewal enables an organization to pick up weak signals and impulses from its relevant environments at an early stage and to assess their significance so that necessary changes can be proactively addressed. It is, therefore, a matter of expanding its own points of connection with the environment and creating internal structures that pick up and process impulses and opportunities from the environment. This means increasing the ability to specifically register weak signals from the markets, the competition, suppliers and other cooperation partners, to make their significance assessable and to initiate the necessary innovations. To achieve this, the organization needs a pronounced sensitivity for the unusual, for surprisingly emerging opportunities and a management system capable of making decisions that takes up these impulses promptly, reviews them for relevance and initiates the necessary innovations and drives their implementation. The concept thus aims to systematically increase the learning ability of organizations. By learning ability, we mean the ability of an organization to skilfully balance between change and preservation. Organizations need routines for changing routines. It is about changing the change – this is the core of self-renewal. The learning of the organization itself becomes the object of learning. With this understanding of learning ability, based on the findings of the Newer Systems Theory, the concept of self-renewal differs significantly from the more familiar concepts of the Learning Organization.

An organization develops a clearer awareness of its own “blind spots” and sharpens its view of the relevant environments. Previously unrecognized opportunities, threats, and possibilities for action become clear. By consciously feeding external impulses into the communication and decision-making process, the organization becomes aware of changes at an early stage and therefore increases the chance of preparing for the new in a timely manner. The ability and potential of an organization to develop independently and proactively and to deal adequately with growing challenges is what makes foresighted self-renewal so special. With this management concept, an organization provides itself with completely new competencies to sustainably secure its own competitiveness.

“Foresighted self-renewal enables an organization to pick up weak signals and impulses from its relevant environments at an early stage and assess their significance, so that necessary changes can be proactively addressed.”

In recent years, we have developed a precise understanding of the levers of influence – we call these levers “reflex points” – which can be used to increase the variation diversity in organizations, i.e. opportunities for development impulses. This also includes which reflex points can be used to increase the processing possibilities of recognized variations within the organization and what is required to implement recognized and selected innovations in a sustainable manner. We have described about 40 reflex points, which enable us to measure the self-renewal capacity of an organization, to identify the reflex points that are relevant for development and to stimulate them in a targeted manner. We attach great importance to the close interlocking of changes in structures, processes or strategic decisions with the development of relevant groups of people in the organization.