This article was commissioned by ITWeb’s Brainstorm Magazine of South Africa for July 2010. Permission to re-print was granted to Afribiz.
Constant change in business is seen as a problem. But what if it wasn’t a problem, but an opportunity?
The turbulent, fast-paced business environment is causing many organisations to re-think both operation and strategy. Many struggle to keep up with the pace, but the answer may not be in keeping up with it, but flowing with it.
Firms today are urged to flatten their organisations in order to more readily handle the consistent change. A better frame is seeing organisations as living organisms, which evolve and adapt.
The crux for business is adapting successfully. There is an entire field of science called complexity, dedicated to the study of complex adaptive systems (CAS) like businesses. Complexity is often confused with complication. Complication means difficulty, but complexity means many elements are woven together.
One principle of CAS is emergence. Emergence is the process by which CAS and patterns emerge from a multiplicity of simple interactions. Something reaching a tipping point or going viral on the internet is representative of emergence.
John Holland, father of the study of CAS and author of Hidden Order: How Adaptation Builds Complexity, shares that particular attention should be focussed on boundaries, shocks, and signals. Living organisms, including businesses and markets, have boundaries. As systems adapt, they push boundaries. Businesses need to adapt, so they need to push boundaries, or innovate.
Boundaries are also the points at which information, resources, etc., flow in and out of an organisation. Boundaries can be both formal and informal. The choice of with whom we share specific information is an example of an informal boundary.
While open boundaries are characteristic of systems, there are instances where boundaries are used to control flows in and out, if they are detrimental to the system. For example, negative external shocks like the sub-prime mortgage crisis in the United States that contributed to the global economic crisis.
Signals, or patterns, are building blocks of organisms. New signals, or emerging patterns, are really re-combinations of old signals, according to Holland. Signals can help organisations anticipate both positive and negative shocks. As businesses act on emerging patterns, they are adapting.
The concepts of complexity and emergence have led to new business practices, strategies, and technology tools. Yvonne Genovese, senior VP and distinguished analyst at Gartner, explains a framework for businesses to deal with complexity. Gartner’s “Pattern-Based Strategy” framework says the process that businesses need to follow is to identify patterns, model a strategy, then adapt instead of sensing and responding. Genovese says that it involves “culture, technical capabilities, and technology”.
Ronald Schultz, an expert on complexity in business and co-author of Open Boundaries: Creating Business Innovation through Complexity, says firms need to be able to view the entire landscape. To do so, firms orchestrate an environment that allows information and resources to flow freely. In essence, it’s finding the right mix of infrastructure and innovation. Too much infrastructure is characteristic of many firms today and why they struggle to adapt successfully. This is also a factor in the health of the culture, according to Schultz.
Schultz adds firms need “cue spotters”, a term coined by Michael Lissack, to orchestrate this environment. He says these individuals have the capacity to scan the entire landscape and identify cues, or signals, of emerging patterns. Cue spotters are “mindful and aware of things in front of and around them,” indicates Shultz.
War Room
From an organisational perspective, Genovese says that there are four core competencies that firms need to develop. First, firms need the competency to seek and exploit signals that may lead to a pattern, which will have a positive or negative impact on strategy and operations. Second, firms need a performance-driven culture that incorporates these leading indicators instead of just traditional performance frameworks. Third, firms need to develop agile operations that can work rhythmically with new models developed from leading indicators. And finally, there needs to be a greater degree of transparency across the landscape to allow better information and collaboration flows.
Both Schultz’ and Genovese’s input brings to mind a war-room, or ready-room, approach. In the military, there is a platform to take in information from every angle, determine what is significant, and develop courses of action.
That first step of taking in information from every angle involves looking at both current and emerging patterns. It is also important to be able to see patterns inside and outside the organisation. Because of technology like social media, the masses now have a voice. This arena outside an organisation is called collective intelligence or the “collective”.
Genovese indicates that the next two years are a critical period for firms to learn how to seek patterns. Baynote, a firm that specialises in the field of analysing emerging consumer behaviour patterns, has a technology platform to help firms do just that.
Jack Jia, founder of Baynote, shares that his own experience with an emerging pattern started the company. Jia was looking for the next business venture and did an informal survey with about 50 CIOs and CTOs, asking them to indicate what they would pay for, if provided. Out of a scale of one to ten, all rated information discovery as ten, except for one person, who rated it 11. Jia says: “That was my emerging pattern. It was right under my nose.”
He says that Baynote’s technology simulates how people seeking information behave. Instead of wading through infinite web pages, people will ask others until someone is able to help them identify the right resource
on the web. He says that the current model of relevance engines miss the mark. “It’s not semantic relevance,
but human-defined relevance that works.”
Built on this principle, Baynote’s Collective Intelligence Platform (CIP) helps clients get better rankings on search engines and provide better recommendations to their customers.
One Baynote client noticed that red appliances were appearing as a top choice of its website users, but the company didn’t sell them at the time. The client thought it might be a mistake, but decided to offer the products. In a short time, the red appliances became best sellers.
The CIP platform simulates the eyes, mind, and touch of humans. The core engines are the observer and affinity. The observer collects the information on consumer behaviour and affinity identifies the patterns within the information.
Jia says it takes as few as seven consumers demonstrating the same behaviour for Baynote’s technology to identify an emerging pattern. “The patterns are identified based on 24 heuristics of consumer behaviour, which allows us to tap into the invisible or ‘silent’ crowd.” Jia calls these emerging consumer behaviour pattern groups “micro” niche markets.
After an emerging pattern is identified, the CIP has different modules, called touchpoints, to act on the pattern. Some touchpoints are search engine optimisation and search engine marketing. Another touchpoint can automatically create websites targeted at “micro” niche markets. This allows firms to quickly adapt to potential emerging patterns efficiently and without human intervention.
Today’s evolving business environment and its complexity can seem daunting at times. However, the opportunities in emerging patterns can serve as a catalyst for innovation in any organisation prepared to take a chance.
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A Recipe for Change: Emerging Business Patterns originally appeared on Afribiz.net on July 27, 2010.
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