Modular Enterprise Design

Johan Strümpfer

EXERCISE 1EXERCISE 1

DRAW A PICTURE OF YOUR OGANISATIONAL STRUCTURE

BUSINESS SYSTEMS

• ORGANISATION

• COMPANY

• FIRM

• ENTERPRISE

ENTERPRISE

• PARTS INTERACTING AROUND AN OVERARCHING BUSINESS PURPOSE

• NOT A CONGLOMERATE

• NOT NECESSARILY A GROUP WITH PARTS MORE OR LESS IN THE SAME BUSINESS

• NOT A FINANCIAL HOLDING

• A SYSTEM

ENTERPRISE DESIGN

• THE DELIBERATE ARRANGEMENT OF FACTORS INTO A SYSTEM

• THE INTEGRATION OF INTERACTIONS INTO A REGULATED WHOLE

SYSTEM

• A regulated set of relationships

• Interacting and interrelated parts

• Parts organised for a purpose

• A whole with novel features

Structure Re-interpretedStructure Re-interpreted

J ill John N ew Guy

Jo

John J ill

N ew G uy

Meaning of OrganiseMeaning of Organise

– Way the enterprise works– Pattern of interaction between parts– How enterprise is set up to deliver what is

required– How the parts fit together, statically and

dynamically

?

Reflection on organisation:-1Reflection on organisation:-1

• Work in groups of 2-4 people. Time allowed is 45 minutes.

• Your group must choose an enterprise (organisation) you want to reflect on. It is not necessary that you choose your own enterprise, but do select one that you are familiar with.

• This reflection is on the way the enterprise is organised, and how this way of organisation is affecting performance. Refer to the preceding slide for a definition of “organise”.

• “What is going on?” Develop a list of about 10-15 points of striking issues, problems, features, trends and patterns that relate to the manner of organisation. Consider how appropriately the enterprise is organised, issues of transforming the enterprise to be organised differently, and the impact of such interventions. Relate these points to the performance (success, failure, profitability, etc.) of the enterprise.

Reflection on organisation:-2Reflection on organisation:-2

• “What are the future implications or possible consequences?” Develop a list of 3-5 points of future implications if the current situation and trends continue. Where is pattern of organisation and changes to the manner of organisation, coupled to performance, leading to?

• “What are your concerns?” When considering the future implications, what are your concerns regarding the way the enterprise is organised? List 2-3 major concerns.

• “What question would capture your concerns?” What is the essential knowledge that you feel is needed to resolve your concerns?

Case Study 1Case Study 1 What is going on?

ABC Division is important and stressed close to the limits.

DEF Division is lucrative, but has barriers to foreign competition, [yet] is not (well) linked into [distribution] structure.

[Distribution] system is very important but that’s where the greatest structural stresses are.

Present systems and structure inhibits appropriate customer management and focus.

Structural divisionalisation inhibits cross-selling and marketing; loss of [significant] potential income; lack of appropriate cross functional incentives.

Lack of overall responsibility and accountability for the (integrated) whole/customer as a whole.

Case 1: Possible Future ImplicationsCase 1: Possible Future Implications

Loss of market share and profitable customers. Client defection rates increase.

Continued and worsening problems to differentiate [from major competitors].

Work place becoming more corrosive on people in [organisation]. Possible loss of key people.

Loss of energy and flexibility to embark on new ventures, partnerships.

Continued see-saw between [sales] and [service levels].

Case 1: SynthesisCase 1: Synthesis

It is very complex. Structuring is an issue of [gaining/maintaining] appropriate

customer focus. Incentive systems, support systems, management style

and organisational structuring cannot be “fixed” or dealt with in isolation.

High levels of [current] success re-enforces current thinking and organisation (design).

Key question: What is the (appropriate) logic for the design of

the whole, and how do we inquire into this?

Case 2: What is going on?“The question of Structure”Case 2: What is going on?“The question of Structure” We have had a strongly centralised structure now for a

decade or longer ... During this time we have seen this structure consolidate into specific strategic business units - with the rationale behind it primarily for cost control/profit focus and associated accountability. It had little to do with improving our marketing/sales. ....

During the past decade numerous changes have occurred in the market place, as well as in other aspects of business life. ...

Our business is increasingly technology dependent. .... Our performance: ...over the past nine years, in the two

areas we can influence directly, ..., we have not performed nearly as well as our competitors.

[Has] our structure developed power blocks inhibiting innovation, development, accountability and performance and created introspection, intrigue and arrogance?

Case 2The Issue of Structure, cont.Case 2The Issue of Structure, cont.

...our centralised structure, while of administrative attraction, may have become more of a hindrance than a help to our new business efforts.

[The paper reviews trends in organisational forms world-wide, and in particular those used in the industry of this organisation.]

The successful [enterprises] are good at managing the relationships between the components (something we have failed at - perhaps because we did not recognise the need?)

A very fluid and borderless environment allows [specialist independent organisations] to ‘bond’ and interact for business reasons as long as it is mutually beneficial to do so.

Case 2: Research conclusionsCase 2: Research conclusions

Business in future will have to be far more fluid to be able to cope with changes and turbulence in the environment.

This fluidity will require businesses to group/disgroup/regroup according to mutual benefit over time.

Success will come to those who, foreseeing the need, group excellence together to achieve common objective(s) before competition.

Success though will also be dependent upon how well the group members manage the relationships between themselves. this in turn implies more integrity, honesty, trust, openness and mutual co-operation than in the past.

The customer is the key common component and a group’s collective efforts should deliver [in the customer’ needs] - thus the common good of the group becomes primary.

Case 2: Key questionCase 2: Key question

.... ....[Questions related to strategic intent] Do we retain an administration-orientated SBU structure or

invoke a ‘closer-to-the-customer’ marketing-orientated change?

Organisational change: Current dilemmasOrganisational change: Current dilemmas

– Change very disruptive (human, $)– Instability: Inappropriately

organised cf. environment/context demands

– Time lag to organise: Rapidness of (re-) organisation required

– Wrong paradigm: Changing to get organised vs. organising to get change

Means to overcome dilemmasMeans to overcome dilemmas

– Isolate change to where it is required– Have more frequent smaller adaptations– Shorten lag for perceiving and acting on

change signals– Build learning and evolutionary adaptation

into the organisation structure rather than having it as extraneous interventions on structure

“I don’t know what organisational structure you need, but I do know you won’t need it for long”

“I don’t know what organisational structure you need, but I do know you won’t need it for long”

Johan Strümpfer

Continuum of: Externally Co-ordinated vs. unco-ordinated individual behaviourIndependent vs. interlinked behaviour

Continuum of: Externally Co-ordinated vs. unco-ordinated individual behaviourIndependent vs. interlinked behaviour

(INTEGRATED)

MODEL

SYSTEM

WHERE DO WE WANT TO BE?

WHERE ARE WE?

IMAGE: LOOSE CANNON BALLS VS AIMED SHOTGUN PELLETS

CONGLOMERATE

AGGREGATEGRAVEL

MED Process in context of systems thinkingMED Process in context of systems thinking

– MED is a systems view of organisation– MEDP is a systems method

Systems WorldSystems World

MEDP

– Problem Solving– Planning– Organisation Structure Design– Organisational Change Management– General Management

Business Management Operations Management Total Quality Management

– Disciplines Psychology Geology

Ecological Management

SYSTEMS PRACTICE AREAS INCLUDE....SYSTEMS PRACTICE AREAS INCLUDE....

SYSTEMS APPROACHES

INCLUDE....

SYSTEMS APPROACHES

INCLUDE....– Soft Systems Methodology– Systems Dynamics Modelling

Organisational Dynamics Global Dynamics

– Critical Systems Heuristics– Modular Enterprise Design– Viable Systems Model– Interactive Planning/Interactive

Management– Total Systems Intervention

Problems and solutions

Problems and solutions

– There is nothing as problematic as solutions(Argyris & Schön,1967)

– The Berkeley experiments(C West Churchman)

Solutions

Problems with mental models(From John T Martin)

Problems with mental models(From John T Martin)

Problem Solving is/should be...Problem Solving is/should be...

– Process of inquiry– Group based learning process– Group inquiry

Learning Processes:Handy’s Learning

Wheel

Learning Processes:Handy’s Learning

Wheel

Question

Reflection Theory/Answer

Test

Problem solving should deal with the way people think:Problem solving should deal with the way people think:

– DEVELOP: An appropriately rich and relevant mental

model of reality Decision criteria (value system) Knowledge (insight, understanding, wisdom)

Single and Double loop

learning

Single and Double loop

learningBeliefs

World ViewParadigm

Theory in PracticeAction Problematic

Situation

ActualOutcome

DesiredOutcome

GapSingle Loop Learning

Double Loop Learning

Soft Problem solvingSoft Problem solving

Hard Problem solvingHard Problem solving

Problem solving should build:Problem solving should build:

1. Shared understanding of problematique (mess)

2. Alignment w.r.t. ends

3. Agreement on action

4. Continuous action

What is planning?What is planning?

– Process of group learning– Problem solving with larger scope

MEDP in context of systems methods...MEDP in context of systems methods...

– MEDP Purposes– MEDP Philosophy– MEDP Principles

PURPOSES OF MED PROCESSPURPOSES OF MED PROCESS

– Make change in organisations less disruptive in human terms

– Make organisation change more continuous and pervasive

– Build shared and appropriate model of enterprise

– Integrate intervention processes

Philosophy of MED ProcessPhilosophy of MED Process

Participative inquiry Who should participate?

Group learning Whose mental model of the organisation requires

development? Who needs to share an understanding of how the

enterprise is organised?

Systems thinking structures what gets inquired into What systems model is used as basis? MED (What

is MED?)

PRINCIPLES OF MEDPPRINCIPLES OF MEDP

– Participative process of inquiry– Process of group learning (problem

solving, planning)– Build a (shared) model of of how

the enterprise is or should be, constituted and work

– Systems models and methodologies guides the process of inquiry

Dependencies of MethodologiesDependencies of Methodologies

What & How of Enterprise Why of the Enterprise

MEDP Planning

MEANS PURPOSE

PlanningMEDP

You cannot hope for success with MEDP without context/purposesetting adjunct process

PURPOSE

ORGANISE

Planning

MED Process

Modular Enterprise Design:Process Reference Framework

Modular Enterprise Design:Process Reference Framework MODES OF INQUIRY FRAMEWORK

System viewpoints Generic methodologies Inquiry patterns

GROUP INQUIRY PROCESSES Problem solving and planning

Shared understanding of problematique Alignment on Future Implications &

Desired System Agreement on Action Continuous action

What are these methodologies?What are these methodologies?– Multi-dimensional organisation design

Garajedaghi, Ackoff, Self

– Viable systems model Beer, (self)

– Systems Dynamics Modelling Forrester, Senge

– Modified Soft Systems Methodology Checkland, Wilson, Churchman, self

– Biomatrix Jaros & Cloete

– Stakeholder analysis Mitroff, self

– Modes of Inquiry Self

MED

BPD

Process

WHAT IS THIS?WHAT IS THIS?

WHAT IS THIS?WHAT IS THIS?

WHAT IS THIS?WHAT IS THIS?

WHAT IS THIS?WHAT IS THIS?

WHAT ARE THESE?WHAT ARE THESE?

IMAGESMODELS

SYSTEM VIEWPOINTS

FUNCTION

STRUCTURE

PROCESS

REGULATION

SYSTEM

STRUCTURE

ANALYSIS

PROCESS

FLOW

TRACING

FUNCTION

SYNTHESIS

REGULATION

SYSTEM

DYNAMICS

DYNAMIC

DIMENSION

STATIC

DIMENSION

INFORMATION

INSIGHTUNDERSTANDING

'WISDOM'

HOLISTIC ANALYTIC

INFORMATION

INSIGHT

UNDERSTANDING

'WISDOM'

KNOWLEDGE HIERARCHY

Difficulty of Inquiry

Difficulty in communication

Power of Intervention

E

S

PF

R

Register a

customer need

Sarisfy need

Asses customer

financial well-

being

Trigger appropriate

service providors

Information acquisition

1.

2.

3.

4.

5.ENVIRONMENT A

ENVIRONMENT B

ENVIRONMENT C

DIVISION A

DIVISION B

DIVISION C

MANAGEMENT A

MANAGEMENT B

MANAGEMENT C

CONTROL

DIECTIVES RESOURCE BARGAINING

CO-ORDINATION

MONITORING/

AUDITING

POLICY

INTELLEGENCE

EXTERNAL

ENVIRONMENT

• PURPOSE–How the enterprise intends serving its stakeholders

–Vision

–Mission statement

• IT’S A PROCESS!–What needs to be delivered?

• BUSINESS PROCESS DESIGN–What needs to be done to deliver?

STATEMENT OF ENTERPRISE PURPOSE

P={F,F,...,F}1 2 n

• What is the input, output and transformation?

• Who is the client/customer?

• Who are the actors in the transformation?

• Who are the owners of the transformation?

• Who are the decision makers of the process?

• Why is this transformation assumed to be meaningful?

• What is the purpose of this transformation?

• What are its measures of performance?

• What environmental factors impact directly on this transformation?

PROCESS DEFINITION

CLASSICAL ORGANISATIONAL

STRUCTURE

ENTERPRISE DESIGN PROCESSENTERPRISE DESIGN PROCESS

STRUCTURE

PROCESSFUNCTION

SYSTEM

REGULATION

MED Process and MED ToolsMED Process and MED Tools

STRUCTURE [1]

PROCESS

FUNCTION

REGULATION

CONCEPTOF

ENTERPRISE

DESIGN AS

INQUIRY PROCESS

1

2

3

4

MED Process FrameworkMED Process FrameworkIntro & Overview

Org. struct.Deconstruct

Immersion

Stakeholder Analysis

VSM BPD

Analysis of MED

Intervention Design

MED

MED Process FrameworkMED Process Framework

– Orientation Introduction and Overview Organisation structure re-interpretation (SDM) Immersion (MOI questions)

– Design Stakeholder Analysis Viable Systems Model Business Process Design (Modified SSM) Modular Enterprise Design

– Reflection Analysis of MED (SDM) Intervention Design

Systems view underlying MED...Systems view underlying MED...

– Review– Implications for MED Process

• Human Systems are Different

• Manage people as people and not as systems

• Don’t control actions, manage the rules of the game

• “We do not believe the organisation can be controlled from the top”

• Most (people) systems suffer from over management (autopoesis)

• Loosely organised systems are more robust

• Assume change: Learning, adaptation and evolution underlie viability

• Causality in complex systems is complex

PHILOSOPHY OF MED

Human Systems Are DifferentHuman Systems Are Different

Freedom and Ability to ChooseENDS of Parts and Whole

Mental Model Parts (Groups,Individuals)

WholeOrganisation

MECHANISTIC

ORGANISMIC

SOCIALSYSTEM

How is system controlled?How is system controlled?

Low

High

HighLow

CONTROL

AUTONOMY

Fear, Inaction

Chaos

Authoritarian Empowerment

Alignment

• Differentiate and Integrate simultaneously

• Centralise and De-centralise simultaneously

• Organise for change: – Enable evolutionary rather than revolutionary change

• Organise for viability:– Implement Viable Systems Model functions

• Internal Market mechanisms guide interaction

• Manage the interactions, not parts:– Tweak measures of performance

• Management style: Hi delegation, hi control

• Support structures must support

PRINCIPLES OF MED

IMPLEMENTATION OF MED• Differentiate and Integrate simultaneously:

– Use multiple bases of differentiation

– Co-ordinate w.r.t. each basis of differentiation

– Develop and integrate compatible measures of performance

• Centralise and De-centralise simultaneously: – Centrally develop shared decision criteria; alignment w.r.t

» Culture

» Values

» Strategy

» Policy

» Principles

» Standards

– Maximum devolution of line (executive) authority and responsibility

– Selective collective decision making & empowered individual decision making

Implications of MEDP interventionImplications of MEDP intervention

– Different way of interrelating Information and financial systems Need for integration

– Different approach to “control” People skills Facilitation (“coach” metaphor)

– Role of Purpose Planning & vision building, alignment

– Performance measures, incentive systems, reward systems re-design

– Need to redesign business processes– Culture: Entrepreneurial, empowered, development,

accepting responsibility– Learning organisation

In short, holistic change management is required, of which MEDP is one strand.

In short, holistic change management is required, of which MEDP is one strand.

– What are other strands in holistic change management?

– What are typical delivery vehicles?– Who manages the integration of the

interventions?

– MED is NOT a strict structural intervention – Shift Management style, worldview, culture– Adjunct interventions:

Strategic planning process Management style: social, systems paradigm Culture and value system development People skills:

Facilitation skills, Behavioural insight Group dynamics

Training: Financial concepts Entrepreneurship Marketing skills

IMPLEMENTATION OF MED

Change very disruptive (human, $) Instability: Inappropriately

organised cf. environment/context demands

Time lag to organise: Rapidness of (re-) organisation required

Wrong paradigm: Changing to get organised vs. organising to get change

Organisational change: Current dilemmasOrganisational change: Current dilemmas

END END

– End overview of MED Process– Process view of MED follows