Friday, April 24, 2020

Applying Different Kind of Rationality to Manage Business Complexity

Companies that are skilled at managing complexity can gain advantages by rejuvenating a high-performance business culture, developing “digital fit” leaders and professionals with differentiated capabilities, and building a unique set of business competency.

One significant effect of today’s digital economy is increased velocity, complexity, unpredictability, and a need for a faster response to changes in businesses. Digital management is multidimensional. There are different kinds of rationality that apply to different dimensions of corporate management. There is physical or technical rationality. There is emotional or psychological rationality, and there is mental or spiritual rationality, just to name a few. Each arena has its own rules and norms. Organizational leaders today should take a holistic view and structural approach to manage business complexity and improve organizational maturity.


Multi-dimensional business values: Not all business value is directly related to ROI, at least not in the near term. Corporate value is a multi-dimensional concept, there’re utility value, efficiency value, financial value, customer value, employee value or social value, etc. For example, some products/services features may deliver little to no ROI directly but are wonderful marketing tools to increase customer value.

Business management should dentify stories on the basis of their "strategic" or "tactical" value. Organizational value has a broader concept such as seamless customer experience, an optimal business service, a commercial value proposition, a social value system that deals with and provides context for varying interest and need, etc. When evaluating strategic business value and success, the whole system needs to be considered in order to help the organization become sustainable and "future proof."

Decision process effectiveness and decision maker’s mindfulness: A selection among multiple available choices is a decision. The knowledge constraint and perception bias are paramount issues during the decision process. With the exponential growth of information and rapid changes, decision-making is often a difficult task because it is contextual and situational. Thus, it’s important to define a systematic process and access the updated information for capturing crucial insight, weighing multiple factors for getting the best outcome.

Decision-makers today need to be multi-dimensional thinkers, leverage both critical thinking and creative thinking to ask tough questions for framing the real issues behind tough decisions. It is also important to embrace the contrarian viewpoints and leverage collective insight that balances out the biases. Collective decision making helps to generate more of everything (viable alternatives, criteria, etc.) all of which are shown to improve the quality of decisions.

Senior management influences "invisible culture":
Culture is a collective mindset, attitude, and behavior. Culture is an amalgamation of people, their core values, their socioeconomic realities, lifestyles, and education. Culture is not something that can be dictated and followed such as a new policy or rule from management. The spirit of the organization comes from the top. Senior leadership makes a high influence on corporate culture. When the business gets over-complicated or stagnated, trace down the poor behaviors or lower-than-expected performance, understand the causes behind it. Perhaps it is the management culture that is out of date and harming the organization's prospects.

Company strategy flowing from company culture is intentional leadership at its best. Senior Management starts the wave coming into the shore, but it then has to reach the beach (bottom) before it can go back out. Senior leaders should walk the talk; believing in the effects and high value of company culture, and follow their roadmap continuously to improve the success rate of business strategy.

The right people are in the right place: Putting the right people with the right capability to solve the right problem is simply one of the biggest challenges facing businesses and our society today. The point is how to make intelligent judgments to ensure the right people with the right mindsets and capabilities to solve the right problems and overcome complexity. And it’s much easier to say than doing because it involves multiple intelligence judgment and assessment processes to evaluate people and problems, especially at the cognitive level in an objective way.

Different organizations perhaps set varying criteria to evaluate people’s “digital fit.” Generally speaking, a “digital fit” person is self-motivated, self-directed, self-inspired, purposeful, learning agile, and creative, etc. Find the right people through what they think and how they act, digital professionals have to learn the new skills and develop unique competency for adapting to the digital new normal and exploring the new possibilities and discovering the better way to solve problems.

From risk management to risk intelligence: Risk management is very useful for handling complexity and achieving the business results. Organizations are not always the ones paying for the risk. Stakeholders ranging from investors to customers to ordinary citizens to business partners might all benefit or suffer from the risk attitude of a company. As long as risks have been identified and agreed with stakeholders as per business needs, then you develop risk models that can effectively predict, optimize, and consider a continual and sustainable approach and the specific threshold for justifying opportunities and business outcomes.

The value of high mature risk management could be in better management decisions, optimized operations, greater resilience, improved reputation, increased confidence in management, etc. Risk Management mechanism needs to be well embedded into both soft business factors such as corporate culture and hard organizational elements such as processes and technologies, and it is not only about risk mitigation or control, but also about high mature risk intelligence.

There is no magic formula to improve organizational maturity. Companies that are skilled at managing complexity can gain advantages by rejuvenating a high-performance business culture, developing “digital fit” leaders and professionals with differentiated capabilities, and building a unique set of business competency for pushing the boundaries of a more sophisticated business mix that provides opportunities to create inter-business multidimensional value.

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