Shaping Network Society

Co-authored by Sofia Elizondo and Philipp Mueller

This year in our leadership course students came up with new questions that we had not heard before: why do you teach us leadership, if value is created through the collaborative efforts of open source communities? And how does your class help us to foster such collaboration?

While meandering through the Alte Pinakotek in Munich, one of the world’s greatest collections of old masters, where societal transformations of the 15^th Century are painted onto canvas (stark reminders of the power of ideas on our worlds), Sofia Elizondo from the BCG strategy institute and I mulled over this question.

Here’s our raw thinking that will form the basis of an article on anti-leadership. Do join us in this effort!

Moving from Strategy to Second Order Strategy

The world has seriously changed.  Not just the financial crisis, but a systemic profound shift.  We can see this broadly across many different “categories” from politics to our lifeworlds. For example, interconnectedness has changed our societal behaviors and expectations; Technology has changed the way organizations relate to each other and generate value.

In the business world, we used to want to be industry leaders because industry leadership granted security in the # 1 spot.  NOT ANYMORE!   While industry leadership used to last 10 years, it is now common to find industries where the #1 spot is held by a handful of companies during any given year. We also assume that industry leadership is desirable, that market share increases profitability.  That relationship has also disappeared and in some industries even inversed.  So why do many companies’ mission statements still say: “we want to be the number 1 provider of toothpaste?”

To explain this marketplace turbulence, some academics push the “hypercompetition” theory.  We see all of this turbulence in industries because the world is approaching a more perfect marketplace, competition in fiercer so more value is transferred to the consumer..  However, the data show the contrary.  The difference between the top performers and bottom performers within industries is actually increasing, not decreasing.  So SOMETHING must be driving that change.

Now, if we look at classical strategy – the strategy derived from 19^th Century Prussian military thinking, we realize that Clausewitz’ian strategists basically do the following: analyze their market, forecast the future, and optimize the company accordingly through a first order strategy plan.

This might have worked very well for the stable business world of the 60s, but it assumes we can KNOW all of the relevant variables, and that we can FORECAST them.  These assumptions unfortunately do not work very well today.

Now, is classical strategic planning irrelevant in all industries?  Not really.  If we plot all industry groups across a “turbulence chart” measuring rank volatility across the x axis, unpredictability on the y and the difference between bottom and top performers on a 3rd axis, we see that there are particular places where it is much more relevant, and other industries that are hopeless. Unfortunately, it is hopeless in the fields that we care about, such as telecoms, software, internet retail, media (which is not surprising).

So now what?

Let’s replace the Prussian military battle analogy with a metaphor of organizations successfully thriving in unpredictable environments: genetic systems in biology (populations of species, for example) The trick of biological systems is their second order “planning” capability: they adapt flexibly to changing environments without asking their CEO for permission. Naturally, populations randomly generate enough genetic variation to survive environmental changes, such as food shortages, climate changes or new predatory patterns. In that sense, the population is not optimized for lean six-sigma performance, but carries some “genetic slack” that can be very useful for the survival of the species if an Ice Age comes along (or if their food source dies out, a meteor strikes or any other unpredictable event occurs).

Adaptive Strategy’s aim is to set the context for strategies to emerge, NOT to specify The Strategic Plan for the organization. Now as with any metaphor, let us not take the biological approach to an extreme. We can still assume some type of coordinating function, or what we could refer to consciousness or an organization that defines the second order strategies, designs the organization fit to carry these out and intervenes in extreme situations, where adaptation would fail. And this is where anti-leadership comes in.

The Leader of the past

In the past the leader was an authority figure.The term “leader” begs the question: Of what? The immediate answer is: of followers. Notice that it is content agnostic. (Leading towards good or evil is still leading). The leader would focus on the crowds it leads: big, small, fully committed, yet-to-be-convinced, etc. The leader “knows more,” therefore had more authority, therefore, was legitimized.

Anti-leadership / second-order leadership / “designers” begs a different question: not “who and how do I lead?” but “what should be achieved?” which is where the focus should be: the target, aim, direction in front. Not the crowd behind. The anti-leader knows that she does not know, that the emperor has no clothes. In that sense, she relies on the organization’s tentacles to gather, interpret, and act on information.

Implementing Adaptive Strategies through Anti-Leadership

With the advent of constructivist thinking in academia, professors have been slowly moving from taking the role of “the sage on the stage, to the guide by the side.” With adaptive strategizing, CEOs will have to learn this lesson. And it will not be easy to move away from the idea of leading, where essentially all others are blind followers, willing to internalize the messages of the leader.

The core principle of anti-leadership is fairly easy. When you cannot analyze, forecast, and plan anymore, you need to empower your organization to be able to modulate it to turbulent contexts, by allowing for variation (think Google’s 20% rule), define meta-principles of selection through mechanisms such as simulation, scorecards, or actual performance in the market place (think Google’s testing of any interface changes), and amplify what works, through scaling-up mechanisms.

The PILS Framework of Anti-Leadership

This type of modulation can be done by designing your organizations around processes in the following way:

Process: Design a beta-process, deliberately, expose it to the real world before it is finished, so that feedback and selection mechanisms can help it adapt.

Interface: Design as many interfaces to the process as possible, these can be internal or external, they can be to experts or to the unwashed masses. Interface design is a second order strategy guided by the question, who should be allowed to contribute to the process and it is a third order strategy, when you ask who should be allowed to make changes to the process.

Legitimacy: Do not stop in defining interfaces, which can be seen as a technical issue (what APIs to use, what standards, etc.), but imagine communities around them (and again these can be contractually bound to you or not. They might be experts, carriers of local knowledge, or crowds).

Scale: The issue of scaling processes is not trivial. Just as different forces of nature work differently at different scales, think about how gravity does not really affect an an ant – it will survive a fall from a 10 story house, however, wind does. An elephant on the other hand will not be swayed by wind, but could not survive the drop. So the challenge for the anti-leader is to think about processes at different levels of scale and how to get from one to the other.

Skills of the Anti-Leader

Anti-leaders are not loud, they listen. The do not command, but empower. They do not choose, but design decision mechanisms. They do not aim to be smarter than the crowd, or the outsiders, or the locals. But they guide and shape and LEARN. Is this what we teach in leadership class? Is this how you see yourself as a leader? It might be time to rethink our higher education curricula….

Distributed leadership is still a new concept, even though it sometimes seems that most of what we do is

building robust and resilient communities of like-minded individuals that are willing to be engaged in the value creation process, even though we do not control them through contract or the muzzle of a gun.

Think new corporate governance strategies, the millenial workplace, enterprise 2.0, collaborative strategizing, municipal participatory budgeting, user-centric design processes, open source software development, UN multi-stakeholder processes, etc.

The first challenge for successful distributed leadership is to see the loss of control over open processes as an opportunity not a threat. “There’s this interesting tension between the value of having contributed information versus a clear loss of control over the process,” says Eric Kansa, executive director of the information and service design program at the University of California, Berkeley. Open processes allow us to leverage not only the wisdom of the crowds, increase our legitimacy by outsourcing accountability to the interested public, but also increase capacity massively. The only comparable historical management reform that comes to mind is Napoleon’s idea of the levee en masse, moving from expensive hired guns (mercenaries) to a citizen army of Frenchmen proud to fight and die for their country.

The second is to ignore the political realities of the hierarchy, specifically, middle management. Middle managers fear whatever flattens the organizational structure and makes them superfluous. A response to one of the top evangelists of the Intellipedia project in the intelligence community by a staff member: “ ‘I don’t need top cover, I need middle cover. I need someone to convince my manager this is something we need to do.’ “

The third challenge is to change organizational culture. There is no way around it: open processes are different and counter-intuitive: Sharing information increases your power, giving up control increases your capacity, giving up the ability to control your image (transparency) increases legitimacy. As the head evangelist of intellipedia says, “There’s a reason this is called disruptive technology. These are counter-cultural concepts, which can be very daunting.”

It is not easy, but it can be done. And the payoffs will be huge – think of the impact Napoleon had on today’s Europe.

The blog-post was inspired by Jill R. Aitoro‘s article in nextgov The Gospel of Government 2.0. All quotes (except the first) are taken from his article (the hyperlinks point to it).