Learning to Love Uncertainty
The commercial world has turned upside down. A technology revolution, uncertain inflation, volatile energy prices and interest rates, new shapes of competitors, Third World debt, changing income distribution, and shifting consumer tastes all interact to cause an unheard of level of uncertainty.
Managers face a daunting problem in trying to respond to all this. Our principles of organization structuring and business planning are based on predictability. But now, that basic premise has flip-flopped. All organizations must learn to welcome and thrive on change, ambiguity, and turmoil.
When I began working for consultants McKinsey & Co. in 1974, we didn't bother to factor inflation into our cash-flow analyses of prospective investments. Demand was hardly certain, but smooth, ten-year forecasts were considered plausible, give or take a percent or two.
Plant additions costing several hundred million dollars were undertaken with the prospect of stable demand for a small number of products in the face of a well-known and finite number of competitors. In looking at such an investment, it never occurred to us to consider a rapidly changing, large number of short production-run goods that would compete with an ever-expanding array of small and large, international and domestic competitors from developed and developing countries. Nor did we anticipate having to feed that plant with energy whose price would be $8 per barrel one year, $28 per barrel a few years later, and then back down to $10 per barrel again. And no one imagined financing that plant with flexible interest-rate dollars in a world where the supply of and demand for capital would be buffeted by daily swings in currency valuation of up to five percent—with no clear reason why the swing had taken place or when the next one was coming.
Henry Ford's model of the smoothly running production line has little validity in such a world, though it is still too often the Ford, General Motors, General Electric, and DuPont models of organization that businesses of all sizes look to when developing their own structural schemes.
The implications of the above are quite clear; moreover, they are similar for both small and large organizations.
Centralization is dead. Traditionally organized functional operations are obsolete. Centralized staffs at group, sector, and maybe even the division levels are anachronistic.
Small may not always be beautiful. But relatively independent, close-to-the-ground (i.e., to the market), fully staffed (all functions—personnel, MIS, finance) operations are most likely to be effective. Moreover, even these smaller units must be equipped with flexible production systems that permit short product changeover time; they also must have multiple, independent centers of innovation.
To be sure, we have more computers and more wired-up distribution systems to deal with suppliers and customers alike, but the ultimate purpose is to achieve mind-bending flexibility. When the mom-and-pop grocer's or giant Safeway's optical checkout scanners and computers tally daily volume and profitability of each linear foot of shelf space, they will go to their suppliers the next day to order a far different list of goods. And the suppliers had better be able to react!
The typical day's news of a new direct-mail competitor, a revaluation of a major currency or Intel's latest microprocessor announcement means that three projects might need to be sped up, two scrapped, and one new one started.
The minds boggle of the senior manager, the marketer, controller, distribution center supervisor, and reservations center team. All had better be "trained" to accept the abnormal as normal. For instance, communications across traditional, near-impermeable functional barriers must become close to instantaneous. There's no time for infighting between the bank's lenders and systems people, or the technology firm's engineers and manufacturers, or the retailers buyers and store people, let alone for mounting counter-proposals or referring to a committee. Instead, you'd better be able to form a multi-function team in a matter of hours that will likely have to include suppliers, distributors, and customers.
My friend Alan Kennedy, author of Corporate Cultures, foresaw most of this before the rest of us. He envisioned the new configuration as an "atomized organization" of mainly independent, loosely connected cells that grovel in the marketplace and adjust to change with lightning speed. Today I would go two steps further. First, the "atoms" must be able to come together to form newly configured molecules on a moment's notice, only to disperse again in short order. Moreover, that new molecule had better have the right constituent parts from outside the system—those suppliers, distributors, and key customers. Second, the players, perhaps the neutrons and electrons in the atomic molecule analog, had best be marked by a variable-charge battery. That is, we require flexible people to arm themselves with flexible systems within flexible organizations.
The change-receptive, ambiguity-loving unit describes the would-be successful car plant, local or national bank, ad agency, direct-mail house, or textile maker of tomorrow. On second thought, scratch that. Of today—or else!
(c) 1986 TPG Communications.
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