The organisational design problem
How do we grow when our existing business model is under threat?
What all leaders care about?
We have invested in AI but do not see any commensurate increase in business value.
What do we do with our people in respect of AI?
Our competition is hot on our heels.
Our clients are getting more impatient.
Plenty to stew over. Today, AI features heavily:
What some leaders care about?
More reflective leaders ask, why:
Does decision making take so long (best done in front of a mirror)?
Are our people unwilling to take risks?
Does innovation feel so difficult?
Do our managers focus on what is best for their department / team, rather than the organisation as a whole?
What very few leaders care about?
Functional silos.
Centralised leadership.
Excessive hierarchy.
A fragmented technology landscape.
Caring is not enough
These three categories of caring can be summed up as follows:
Symptomatic.
Systematic.
Structural.
Focusing on AI without addressing the underlying organisational issues is like putting a sticking plaster on a broken leg. The systemic issues stem from the organisational design, so addressing the structural issues is necessary.
Organisations of any pedigree were built for a world that no longer exists. Uncertainty trumps certainty. The factory model, with or without humans, has had its day. Trying to sprinkle AI on a decaying business model will not work. You do not paint the house until the repairs are complete.
What is done well
It is not all bad. Organisations birthed in the industrial era typically:
Are structurally sound.
Efficiently turn resources into value.
Eliminate toxic elements – people, clients, suppliers, projects going nowhere.
Grow in some capacity, think learning organisation (Peter Senge, 1990).
Regenerate – Create new processes and fix broken ones.
Self-regulate – Governance and demand management.
What is done less well
Unfortunately, traditional organisations typically are not:
Responsive – or at least cannot keep pace with a rapidly evolving world.
Adaptive – Are unable to fundamentally change over time – Tadpole to frog, not factory with people to a fully digital factory.
And unfortunately, these behaviours are critical to survival. That is why it is rare to see a poorly sighted gazelle or a clumsy leopard. These behaviours cannot be bolted on like an organisational Lego brick, ie in the manner business schools append an AI module to their industrial era MBA.
These eight behaviours define a living system. I believe if we are to navigate an increasingly unknowable world then embracing a model that is less mechanical and more akin to a living system is required. Six out of eight is not a pass.
Next steps
If your organisation happens to already be very responsive to the market and adaptive to boot, eg. finance and tech, then you may consider eliminating what is an existential single point of failure, ie having only one business model, ie. a set of products and services in one market with one go-to-market model and one financial model.
Such organisations need to diversify into adjacent and non-adjacent markets, either through acquisition or home grown. Think Anthropic also having a swimwear range and a nickel mine.
For less responsive and adaptive organisations, do the same. It is very unlikely that you will be able to affect some sort of structural transformation without threatening existing cashflows and/or startling the horses. The high failure rates of business and digital transformation give me enough evidence to reach this conclusion.
Conclusion
I am a strong advocate of developing intelligent organisations, ie organisations that operate as living systems. This thinking is at odds with current management thinking, which is deterministic in nature. In fairness, that works well in predictable conditions.
Today, conditions are far from predictable, and so a more probabilistic approach is required. AI is extremely well suited for the task. But smearing brain tissue over a sausage machine is unlikely to make it intelligent. But that is not a popular message for those that have invested heavily in a bygone era.