Archive for February 29, 2012

Managing Chaos, or Predicting the Unpredictable

If you want to observe the role of chaos in management theory, help run a sports program! A hockey player, I have helped run a few over the years. Yes, there’s lots about these programs that’s very orderly and top-down, with one exception.

Messy Humans

Typically, hockey programs run on predictable schedules that are the same year-in, year-out. Decision-making is usually fact-based and easy to implement, with clear delegation to a hierarchy of coaches, managers, and staff. But there is always one factor that adds a dose of chaos—the human factor.

A committee might not have proper authority to make decisions; individuals have personal agendas; parents intervene; “referees suck;” and there’s always inappropriate personal relationships, feuds, and ill discipline.

Humans are messy—but in a sports program, authority tends to rest on the shoulders of a director. As long as everyone respects authority, he or she is able to decisively move forward on any issue, either by reference to policy, or experience, or industry standards.

However, according to management philosopher Meg Wheatley, “If you’re interested in creating sustainable growth, sustainable productivity, sustainable morale, you can’t do that through autocracy.”

Document Everything

Simply dictating behavior and outcomes doesn’t work in most cases these days. Well, maybe it does in a hockey program—but Wheatley says you’ll be surprised how self-correcting and complexly adaptable the Army is!

In this interview, Wheatley discusses chaos management theory. Of course, she doesn’t mean that sustainable organizations are anarchic; rather, they have the ability to turn seemingly random events (i.e. the human factor) into patterns that can help them learn and predict outcomes. The Army, notes Wheately, “studies history carefully” and “documents everything.”

But is this approach good for all businesses? Once a hockey coach introduced a new training regimen to my program—small group games—bringing to bear his experience and learning. Other coaches were easy to win over. But parents are results-oriented. They wanted full scrimmages, goals, wins. They resisted, until a collaborative approach was taken and the “whys” and “wherefores” were shared—opening up the learning experience to the parents, who self-corrected and adapted.

Disruptive Change

However, most organizations have more moving parts than a hockey program. And many have much less tolerance for risk and much greater need for process stability—think hospitals or nuclear power plants. Creating a chaotic state might guarantee change; however, its direction cannot be guaranteed.

On the other hand, organizations that thrive on creativity may be better suited for chaos management. Technology firms, for instance, may benefit from disruptive change because they require constant innovation to stay competitive.

And traditional companies may at times benefit from disruptive change for the sake of survival. The print industry is shrinking due to the adoption of dynamic media such as websites, and Kodak’s recent bankruptcy is an example of a print industry firm that failed because its change management was perhaps not disruptive enough.

Pattern Finding

If your change management job is to deliver an expected outcome, perhaps chaos is not the first arrow to reach for. Or it could be if its lessons in pattern-finding are brought to bear. Recall that one discovery of this science is the fractal, the idea that simple, repeatable, mathematical patterns are at the heart of some of nature’s most efficient designs, such as snail shells and leaves.

If chaos management can be used to observe what is occurring as events unfold, and if it can help us react rationally to those unfolding events, then we’re onto something.

Chaos theory also teaches us that events are interconnected, affected by minute external changes—the so-called “butterfly effect.” Perhaps chaos management can help us recognize this interconnectedness and let go of the search for control and certainty, embracing probability, prediction, and forecasting as key management tools.

Leaders, I think, make decisions most successfully when they fully understand the context of the organization—its complexity, risk climate, human behavior, external factors such as politics—and they are even more successful when they monitor responses and act appropriately based on what they learn.

Vistaprint’s New View of Globalization

As globalization continues to affect everyday lives, we are seeing a corresponding repositioning of business resources and factors that promote growth and success, particularly in sectors hitherto untouched by globalization’s reach.

The small, local, family-owned enterprise is no exception. Nor is the “old fashioned” printing sector.

In order to remain competitive, “traditional” companies can no longer rely on rigid structures, and thanks to the commoditization of technology, they must now look for ways to reinvigorate their business models.

Vistaprint is one company that has leveraged new technologies and the means of globalization not only to excel in the global marketplace but also to dominate of all things the business card/postcard/T-shirt segment! An aggressive web advertiser, Vista now has 2,700 employees across 13 countries.

One time, Vistaprint—born in Europe—was a small business, but by leveraging the Internet, multi-channel marketing, and global supply chains, it has grown exponentially, reporting $817 million in revenue in 2011.

Vistaprint is now the poster child of how companies—especially those in “traditional” sectors—must adapt to globalization’s new paradigms: aggregated mass production, global supply chains, offshoring, innovative use of the web, etc.

Farther, Faster, Cheaper

Prior to the Internet, operating across geographies was a challenge, but manufacturing today can occur anywhere there is physical infrastructure, shipping access, and/or digital communications. A production facility can now encompass many locations and serve a global demographic—Vistaprint’s facilities, for instance, are in Australia, Canada, and the Netherlands.

As Thomas Friedman says, “[T]echnologies are making it easier … for traditional nation-states and corporations to reach farther, faster, cheaper, and deeper around the world than ever before.”

Putting it another way, Vistaprint CEO Thomas Keane explains, “[T]he Internet and the ability to pull orders instantaneously … is the death of distance between these different areas. That’s why we can put manufacturing where it is most competitive. Technology has accelerated globalization to a really exciting place.”

An Element of Salvation?

In the now-globalized world, those who rely on out-moded, rigid systems will never grow beyond a certain level, or they may die on the vine.

The localized, small business printer, for example, realizing that its market share is shrinking, might react—systematically—by buying another distressed business for reasons of purchasing technology he or she covets. But this tactic alone cannot provide long-term growth.

Online ordering with supply chains located all over the world is challenging an industry that once relied on craftsmanship and local business ties. New services and new ideas—ones that leverage globalization’s tactics and that are spread over wider geographic areas—are needed to maintain the same level of success, let alone to grow.

Although online marketing has diminished the printing industry significantly, moving processes and products online might provide an element of salvation. It may be that globalization and new technology benefit the industry and make it suffer simultaneously.

From Production to Service

That is, small printers have the ability—if they have the wherewithal—to move beyond the print shop floor to produce expansive cross-media marketing campaigns for clients that include an element of printing but that also include the management of assets, supply chains, and fulfillment requests.

Online tools allow the printing industry to become less like a manufacturer and more like a service provider. In other words, the print shop can now become an advisor to its clients and sell holistic business and workflow solutions such as fulfillment, warehousing, and cross-media marketing.

And small printers can use online systems to gain efficiencies for clients (such as online prepress, proofing, or print-on-demand), thereby counteracting the fact that digital marketing is competing for client printing budgets.

The changes in the printing industry are reflected in its staffing model, which has seen a significant shift from the manufacturing floor to the front office. Because technology has created machines that need fewer people to produce more goods, printing companies are replacing blue-collar staff with service staff—sales, account management, production, creative, and marketing.

All this is a perfect illustration of the shift in the labor force that Daniel Bell predicted would happen to industry as technology and communication improved. The growth of the knowledge economy requires businesses to include technology and knowledge along with labor and capital as key factors of success.