“Adapt or perish, now as ever, is nature’s inexorable imperative.” - H. G. Wells
I don’t believe companies are ‘always in control’. There is too much going on in the world that affects their markets, customers, products, and services. External events impacting society, the environment, and relationships are affecting companies and their people. Whether there are regulatory changes, climate change, or war, they all have consequences which can quickly become threats to businesses.
However, understanding that this is not new, that it has always been (and still is) common practice in human and natural systems, can help an organization to get ahead of the curve. Literally!
Panarchy
In the book Panarchy, understanding transformations in human and natural systems, Gunderson & Holling (2002), write about how transformative ecosystem principles apply as well to human systems. They describe a hierarchy of adaptive cycles that move at different speeds and scales and influence each other.
I see many parallels in this when I consider each Adaptive Cycle an (business) "entity". The larger, slower cycles can represent governmental entities at local, national or even international level. For example the European Union. Somewhat faster and smaller are companies of all types. Yours, your competitors, suppliers, customers (in a B2B setting) etc. The shortest and fastest moving cycles are individuals. Their need for speed is one driver to disrupt other cycles. On the other hand the governmental layers may hold you back through regulations and procedures.
Think back to the Uber introductions: People wanted better service, in cleaner cars, at reasonable prices, with ease of payment. The business opportunity got generated by fast moving cycles. Uber responded and found a valid business model for it.
Governments, responsible for facilitating taxi licenses, and obtaining a good income from them, did what they could to slow down that introduction.
Taxi drivers themselves that had heavily invested in obtaining a license, so much it provided for their full pension plan, suddenly had competition. They pushed governments to push back. They protested verbally and sometimes violently. They were stuck in their Status Quo.
Observing what happens in and between adaptive cycles may be the basis for guiding organizations’ strategic issues of growth and development. Observing why and how change happens, at what moments in the adaptive cycle, may provide insights into the learning that takes place between the people that form the system.
The adaptive cycle
The theory of complex dynamic systems describes the periodic, rhythmic dance between order and chaos, between stability and transformation as a fundamental pattern of self-organization in complex (living) systems. The adaptive cycle therefore is a great model to understand an organizations’ Lifecycle.
Adapted from source: Gunderson, L. H. and Holling, C. S. (eds). 2001.
The Adaptive Cycle is a model of natural patterns of change in ecosystems and eco-social systems. The cycle never ends. It can be decomposed in two main parts:
A front loop with a growth phase, conservation phase, and a rigidity trap
A back loop with a release phase, reorganization phase, and a poverty trap
Let’s look at each component.
The ‘Front Loop’
Describes a journey of exploitation. It is a ‘slow’ and often long phase of growth and building connections and interaction. Optimization, structure, clarity and growing certainty are the keys. Eventually, too much of all this means the organization loses its adaptive capacity: it becomes very difficult to effectively respond to change. Taken too far, the company gets stuck in a rigidity trap. Getting out of the trap is painful and will be paired with a non-healthy dose of chaos.
Growth
In this phase a selection of options from the re-designed opportunities for change are tested against the market and each other. One or a few innovations begin to define the characteristics of the transformed system. Patterns of interactions between people and (financial) resource flows are loose, though start to shape towards the end of this phase.
Once the shaping of the reformed, redesigned, transformed (take your pick) organization starts we can see a number of things happening in the organization.
From the perspective of change, this phase characterizes itself by a redefinition of the ‘type of change’. The release and reorganization phases are all about transformational change. The growth stage is the bridge from transformational change to optimization (call it ‘normal’ change). This doesn’t make the change easier, though it might be perceived as such. There’s still a lot of moving parts that only slowly form clear patterns and interactions.
The danger in this phase is what I like to call ‘false certainty’. Because we’re out of the chaos, people feel ‘relieved’. They re-found energy, they’re on the way to the longed for stability. However, integrating the new solutions with what once were the solutions, discovering the right place, time, structure, and way to introduce the solution into the company’s fabric, is a journey of its own.
It may require people to adopt different behaviors. Though, it may seem unclear why they must change the way they behaved in the past. It may push the organization back towards some more experimentation again when it realizes that what worked in reorganization (with early adopters) is not responding the same at scale (with the early masses). Grit, the ability to hold on and push forward, is an important intangible quality the organization and its change leaders need now.
Signs that an organization is moving out of growth and into a new conservation phase are relatively obvious. Profits increase, processes are clearer, investment and financial flows stabilize further, people are less absent, turnover of employees goes down. All these aspects will from there on only be further optimized in the newly reached conservation phase.
Conservation
From a change, or transformation (I’ll use these two words at will going forward), perspective we consider an established organization in conservation as in a (late) Status Quo stage.
Efforts are mainly in internal optimizations and product enhancements. Process and procedures are clear to everyone. Roles, career paths and development are stable and financial flows well established. The longer a company stays in this stage the more it’ll notice that opportunities begin to mature, accompanied by an increase in fixed and ordered patterns of interactions and resource flows. The system becomes over connected, or better, rigid.
The rigidity inhibits the quick formation of new products, teams, processes, innovation needed for adaptation to outside changes and its own, internal, continued evolution. Eventually this leads to such rigidity in the system, that it becomes brittle, less resilient, and more susceptible to disturbances from the outside. It is a decisive moment of taking or losing control.
Rigidity Trap
At the exit of the conservation phase, there’s a critical moment. When a system is not able to take the leap from conservation into break down. When there is too much rigidity, the system locks in a ‘Rigidity Trap’. Staying too long in this overconnected, trapped state may cause irreversible damage to the organization.
The taxi drivers were at that point when Uber entered their markets...
Signs of this can be as broad as lack of innovation, inability to find new markets (for a specific product), the need for heavy discounts on existing products and services to reach ‘skeptics’, heavy resistance to change, etc.….
The decision to leave the conservation phase is often not an easy one. Apart from the emotions that surface when people need to leave their comfort zone, it is a costly decision. The growth (described later) and conservation phase are the phases in the cycle that are financially attractive to companies.
Financial stability, optimization (read ‘cost savings’), bigger margins, incoming positive cash flow are all logical reasons for not leaving the conservation phase behind and leaping into the unknown. Especially when the outlook is organizational and financial pain.
As with individual change, as long as the reasons to remain in the current state outweigh the pain of changing, nothing moves. The danger the rigidity trap in the adaptive cycle describes is that if an organization waits until the pain of changing feels less than the pain of not changing, irreversible damage may already be done.
From a change perspective, this is the point where ‘change resistance’ will be strongest. It is the point where the organization is forced to mess with people’s beliefs -what you did over the past X years was great, but going forward won’t work anymore-. Trying to cross the trap causes strong, emotional, reactions.
The ‘Back Loop’
Describes a journey of exploration. This is often fast moving and relatively short. In this phase the opportunity for creative destruction and renewal, radical innovation, redesign, reorganization, and restructuring is high.
The release from the tight structures at the end of the front loop’s conservation phase makes the back loop possible. The beginning will be chaotic, because many things seem different ‘overnight’. However, it is here where people and the organization are the most creative. The challenge of the back loop is to keep it short. We determine new directions to follow, this costs money. If we don’t find a suitable way forward in time, we will be out of money: the poverty trap.
Release
In this phase the rigidity of the conservation phase is brought to collapse (sometimes called ‘creative destruction’). Old structures break down, (financial) resources are freed up, available skill sets do not align with the needed ones anymore, deeply embedded behaviors may need to be set overboard, people are derailed from their perceived stable career paths.
The often resulting gradual or sudden breakdown of the old order and structures moves the organization (or a part of it) closer to chaos. At the edge of chaos, a complex dynamic system is most creative. It opens up opportunities for innovation.
At the ‘peak’ of the release phase companies have formed innovative (new) teams. There’s a considerable move in the flow of investments. From knowing where the money was going and an ability to calculate its ROI, to uncertainty, probing, experimenting with, at best, a direction, but no clear sight on the potential of the creative ideas that emerge.
This time of radical innovation is exciting for some and troublesome for others. It is a time of high uncertainty. A phase of learning through experimentation and fast iterations of ideas.
This phase happens fast. Or at least, it should, because it is a phase of pure investment with no significant income. How fast is fast? That can depend on the industry, the market, overall economic developments, etc. The rule of thumb is: get through it as fast as you can.
We can recognize the move out of this stage by the formation of a reduced number of somewhat better developed ideas. These ideas are the first to be considered towards the reorganization phase.
In terms of change, this phase starts with learning. What do we know, what do we need to know, what do we not know yet. These insights help us define options to experiment with. Feedback from the experiments helps us to reduce little bits of uncertainty and move towards a more select number of creative opportunities.
Reorganization
The creative opportunities resulting from the release phase get remodeled. The organization’s adaptive capacity and transformability, its resilience, are tested.
In this stage the remaining connections and patterns from the conservation phase are changed or eliminated. Connections and patterns that can be adapted to support the new solutions undergo changes. Those that may hold back the introduction of those solutions get eliminated.
The organization redefines its strategy and structure to support these solutions. New skills, (leadership) styles, number of staff, ways of working, etc. are being worked on to effectively move the opportunity into a new growth phase.
Though investments are better targeted, and first ideas about the financial potential of these opportunities investigated, it is important to keep an eye on Moore’s adoption curve here. Though we test-run our opportunities with visionaries, the early adopters (a very small market), this phase is still one where cost is much higher than income.
The selected few opportunities are being tested against their potential. We keep progressing through feedback cycles. We are, from a change perspective, still in a learning phase. We pivot, we park, we pursue, we move from high levels of experimentation and testing to more targeted activities.
Poverty Trap
At the end of the reorganization journey the way to move forward must be clear. Some resources must be replenished, first ideas to reach mass markets tested and put in motion.
Some organizations will fail to renew, to redesign structures, processes, and ways of working. They may fail to define the new or adapted skill sets needed, re-train people or find new staff externally. These kinds of failures can cause the organization to stay in a chaotic state where eventually it ends up in a ‘Poverty Trap’. Simply said it loses all its money.
To cross the poverty trap is to cross the ‘chasm’ of the technology adoption curve. If an organization is unable to find a ‘transforming ideas’ it can concentrate efforts and investments on it stays in a state of higher cost than income. The potential timing for bankruptcy will be directly related to the depth of the (financial) pockets the company had when it entered the release stage.
For people impacted by this change it can be a moment of break it or make it as well. The longer the organization remains in the reorganization phase, the more people will feel helpless. Most people, mentally, need to arrive at a new ‘comfort zone’ to ‘recharge’. When we hear voices of despair, increase in sick leave, higher rotations than normal, we see signs that the ‘poverty trap’ is closing in.
In our idea about change, crossing the poverty trap is the point where we experiment less and plan activities to be executed. We pursue more than we pivot or pause. We must. As soon as we see signs that we do not move away from high levels of experimentation, we must question the viability of the found solution in the release stage. Though often not much appreciated, the organization must be told the solution is likely the wrong change. Change leaders must be courageous enough to pivot the whole solution, a fast step back to the release stage.
Change is always on the move
Changes occur within a complex context of an organizational lifecycle and culture; technical and human systems; relationships and components; and individual perceptions of, and reactions to, change. This never was, is or will be linear and stable.
The adaptive cycle, and panarchy, is one model we can use to describe Lifecycle Models for Change. There are 4 other types of models: Diagnostic, Cultural, Individual Reaction, and Process. Each of these models influences all of the others. Meaning, for example, when we try to implement a new strategy as part of a diagnostic model, while our lifecycle model indicates were just passed a poverty trap, it may not be the smartest of all decisions.
Don't fall in the trap of believing the next trend will not impact your company. Change is always on the move. Continuously read the signs and be prepared to adapt to movement in the lifecycle.
If you want to have a conversation on this Lifecycle Model, how to use it, and/or any of the other types of change models, drop me a note at patrick@adaptivechange.org
“The longest relationship in my life has been with ‘Change’.” - Steven Magee