Monday 23 September 2019

Dave Ulrich: Reinventing the Organization

I continue to be impressed by Dave Ulrich's ability to articulate the future of HR, leadership and organisation. Since my current focus is on organisational management, that applies in particular to Dave's recent focus on organisations, with the suggestion that organisation has four times the value of talent (in Victory through Organization). So I really appreciate Dave writing the Foreword to The Social Organization (TSO) too.

And now, writing with Arthur Yeung, Dave has once again moved his thinking on a significant notch. Reinventing the Organization deals with the formation of the Market Oriented Ecosystem (MOE) which I referred to when posting on Dave's and other sessions at the Drucker Forum in Vienna last year.

In many ways I see the book as a follow-on from mine. TSO dealt with the opportunity for melding networks, including the use of platforms, internally. MOE is a build on that, extending the ideas internally and developing them externally too. But I still believe that in the majority of cases, the first useful step to create a MOE might be to develop something more like the melded network from TSO. That then provides a great basis to develop this approach outside of the firm too (see more on this later).

Regardless of where you start, Dave’s book is by far the best book you can read to understand the development of platform based ecosystems, particularly over the last five or so years. It's a deep book, and quite hard going (for me, that's not a negative) so although I've been through the book twice, I need to spend quite a bit longer on it too. Therefore, my notes here summarise my early, rather than fully formed, thoughts.

However, I think I have now got my head around why Dave suggests the book provides an evolution in organisational thinking - a reinvention of the organisation rather than just incremental experimentation. Dave explains this as “reinvention means more than just changing people’s reporting relationships, building teams or announcing a new strategy. You must build a fundamentally new organisation, redefining how your organisation works. Besides understanding and shaping your work setting, you need to change how you coordinate the work, the principles that govern it, and your own and others’ leadership actions.”

If I'm correct, then Dave’s organisational reinvention isn’t about the MOE itself, but the way we see organisations which Dave suggests has progressed from a focus on structure (leading to a focus on hierarchy / bureaucracy) to one on more holistic organisations (the systems view of McKinsey’s 7S or Jay Galbraith’s Star model), and mainly through Dave’s own insights, onto the outcomes or capabilities which an organisation provides. I think TSO develops these ideas further too, describing how organisational forms and other options can be selected to provide the capabilities and organisation principles which are required. That logic applies to the selection of a MOE just as it does a functional, team based or other organisational form. So despite the following diagramme, I don’t think the MOE itself is the radically new idea.

The new idea - and I suppose it’s not that new, but as a result of this book, it’s now more strongly articulated, is that we should always think about an organisation’s ecosystem and not just an individual organisation. Eg I liked the suggestion that MOEs focus on stakeholders more than processes.

So actually, the new logic, I think, is to be clear about the external environment and the required capabilities, and then to develop the ecosystem, systems and structures to support them. I think that this is at least a partial reinvention of organisation design. So I’d adapt the diagramme like this:

By the way, the mini-slide I’ve chosen to illustrate capability on the top left in the above diagramme is the one from TSO showing how the different elements of an organisation from the systems perspective can link with the different aspects of capability, ie human, organisation and social capital. I still think that works for an ecosystem too, although the social capital needs to be extended to what I normally call relationships capital, which is the value of the connections and relationships outside of the single organisation.
You could argue, and maybe this is what Dave is doing, that the traditional ways of seeing systems and structures needs to be replaced by the key features of the MOE, which I explain in a later post. However, I don’t think that’s so. MOEs still have the 7S’s structures, systems, shared values, style, staff and skills, or the Star model’s people, rewards, processes and structure (see the ecosystem model from IRC4HR below), or whatever other set of elements you pick (eg in TSO I present the Organisation Prioritisation Model which focuses on work, infrastructure, people and connections as well as a largish number of organisation and HR enablers, which might not be a reinvention but is, I think, a bit more suited to today’s organisations, and ecosystems too).

Assuming that a reinvented organisation has got to have a particular feature takes us back to the first step in Dave’s evolution diagramme when we assumed all organisations had to have a hierarchical, functional structure, just with a more modern equivalent replacing this. I don’t see that as helpful and certainly don’t believe it would contribute to more evolved thinking. Much better to start with a set of core elements and then build up from there.

It’s still helpful to have an archetype. Dave’s three legged stool for HR is a good example of this, but that’s different to saying all HR organisations need to have three legs. Or that all organisations need to have a platform.

Dave actually suggests there are three archetypal MOEs but I’m just going to review their basic features - see my next MOE related post over the next few days for more on this.

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