Is your organization more operational or more entrepreneurial? Think carefully, the answer may foretell your company’s future!

First, know that virtually all organizations have two primary systems within which they operate:

Operational (formal) systems are found in the formal, bureaucratic organizational structures that push for order, e.g., standardization, alignment, and control. They are responsible for productivity, efficiency, and results. These practices and processes are an organization’s go-to source for stability and often a favored arena for traditional leaders.

Entrepreneurial (informal) systems occur in the informal structures that push for change, e.g., new opportunities, different operating procedures, new products and services, or expansion into different business areas. They are responsible for innovation, learning, and growth. They are an organization’s source for an adaptive response to complex challenges.

Most businesses are formed using opportunity and innovation to create value. In other words, they are entrepreneurial, but as organizations become established and grow they can quickly lose their adaptive capacity. Innovation and creativity become muted when faced with the need for operational systems and repeatable results. Sound familiar? Herein lies the danger: the order and control that most organizations seek (equilibrium) are significant barriers to adaptability and innovation.

Don’t be discouraged, most organizations and industries are managed according to bureaucratic organizing principles emanating from the mechanistic or Industrial Age; the inclination to impose and increase order in the system is common. It is important to note here that no matter how flat or circular the organization, virtually all companies have structures and bureaucracies that come with hierarchical leaders who rely on systems that block or diminish adaptive capacity. Ironically, most companies are unaware that they are inadvertently inhibiting the very qualities they need to survive in the Information Era.

This leaves us in a conundrum: how do we create adaptive organizations that boast bureaucracy and layers of structure? With such barriers firmly in place, how do we build and maintain flexible organizations that are responsive to change? The answer lies in leadership’s ability to understand, support, and balance an organization’s operational and entrepreneurial systems. By working with the entrepreneurial system and not privileging the operational system, the organization can achieve a critical balance between formal and informal tensions through the development of Adaptive Space.

Adaptive Space and the Entrepreneurial System

Companies poised for success in today’s new frontiers have fluid, self-organizing structures (adaptive space) that allow them to change in the face of pressures from within their environments. Organizations that enable an adaptive response do not revert to traditional, top-down approaches. Instead they engage networks to cope with complex challenges. These responses are built from richly connected interactions that allow diverse people, ideas, and pressures to collide – I’m invoking tension here for good reason – and combine in ways that generate emergence of novelty.

Adaptive Space?

Adaptive Space is a temporary structure assembled by the organization to address challenges as they emerge. Imagine your company is faced with a new and flashy competitor that offers a similar product or service but more efficiently and for lower cost (think Uber). Instead of relying on your individual brilliance or that of the organization’s executive team, as a humble leader of this firm you might set up a survey process to query all of the company’s stakeholders for their ideas to meet this new threat. You might then bring together representatives from all levels (stakeholders from inside and outside the organization) to review the survey data, generate ideas, and create action plans. You give this group a few simple rules, as in: hear all voices; ask hard questions; be creative. This is an example of a temporary network structure that allows the people, technology, and resources at hand to interact in new ways that generate emergence and novel approaches. These responses resist the pull to order that traditional organizations seek and capitalize on the collective intelligence of groups and networks. Moreover, by calling on the collective expertise of the firm, enthusiasm and motivation – created by genuinely valuing and respecting all contributions – is infused throughout the company. Herein, you are unleashing a powerful force for organizational success!

Four Conditions Necessary for Adaptive Space

Adaptive responses are not managed, but rather they are enabled. Leaders employ adaptive responses by engaging in and creating conditions for innovation. Following are five organizational must-haves to develop Adaptive Space and enable a change-ready organization:

  1. Trust & Fail-Safe Cultures: Organizational leadership that builds trust between individuals, teams, and divisions. Trust is the key component to building Fail-Safe Cultures in which people are willing to take risks and step in and out of leadership roles as the context warrants.
  2. Information Flows: Information Flows allow agents to find each other and link common needs, purposes, or perspectives around which they can unite to identify an adaptive response.
  3. Pressures: Pressures act to loosen a system for change. When a system is loosened it seeks novelty, creating windows of opportunity not present during times of stability.
  4. Emergence: Emergence is the creation of new order that happens when people, technology, information, and resources in a networked system coalesce (self-organize) to generate the emergence of something that did not exist previously.

Based on my research and experience as an organizational development consultant and practitioner, as well as the decade-long research program of Uhl-Bien and Arena and the work of numerous other experts in the field, I am convinced that the key to adaptability in organizations is Adaptive Space. Moreover, the role of leaders in these systems is to enable adaptive space in ways that nurture and protect flexibility in the organization. More on the leadership role in our next blog!

The content of this blog is based on my 2017 research on leadership and change, and on a terrific article published the same year by Mary Uhl-Bien and Michael Arena: Complexity leadership: Enabling people and organizations for adaptability.

Following are three additional resources related to this topic (considered to be classics in the field) that you might find interesting:

1. Large Group Interventions: Engaging the whole system for rapid change by Bunker & Alban. This book, first published in 1997, presents large group interventions (LGI) that provide a framework for change and distributed leadership in organizations. The work provides a comprehensive overview of 12 methods of LGI in practice.

2. Understanding Large Group Intervention processes: A complexity theory approach, by Arena. This 2009 article evaluates large group interventions as organizational change methods that address the complexity, unpredictability, and turbulence associated with today’s organizations.

3. Changing the way organizations change: A revolution of Common Sense, by Dannemiller & Jacobs. This 1992 article describes history, practical applications, and possible future for technology of whole systems changing themselves in real time.

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