In 2011, Babson College predicted that by 2021, 40% of existing Fortune 500 companies would no longer exist.
They were not the only one to make such alarming predictions.
The global strategy and innovation company Innosight noted that the average lifespan of an S&P 500 company has decreased from 67 years in the 1920s to 15 years today. They estimated that at the current churn rate, 75% of companies on the S&P 500 would be replaced by 2027.
And it’s not just big American companies facing such dire predictions. On a 2014 business trip to Silicon Valley, then-CEO of Telstra David Thodey spoke of industry insiders telling him that his business model was, to put it bluntly, ‘dead’.
The job of a CEO is already hard. But it’s about to become even harder.
En masse, business leaders around the world are experiencing a collective dissonance as the world around us fails to meet our earlier expectations of it.
Dissonance is where our own internal beliefs and expectations of how the world should function are not matched by what is actually happening in the external world.
Until now, most successful businesses have evolved in a linear function, operating in a business landscape which was changing linearly and in which our expectations were met. But not any more. As we now know, technology is changing the world exponentially.
A linear response to a linear world makes sense. But a linear response to an exponentially-changing world? Not so much.
The root of the problem
The root of the problem is that most of our organisations use an outdated linear structure, designed to operate in the old world, where status quo was the norm.
Structured in a hierarchical fashion and fit for a linear world, organisations have been designed to be robust and resilient to change.
Leader-centric and reliant upon top-down strategy, control and decision-making, the traditional organisational structure was very effective during times of gradual and predictable change.
It enabled the most successful organisations to rapidly expand, dominate and control their markets, often via excusive ownership of assets and infrastructure. In short, might was right.
However, the traditional organisational structure is now providing diminishing returns in this new world of uncertainty, complexity and unpredictability.
Top-down strategy and decision-making takes too long and burden the organisation in this rapidly changing environment. Ownership of the latest infrastructure can overnight become an outdated burden rather than a commercial advantage.
Simply relying on robustness and resilience to outlast the change will no longer be enough. Your organisation might survive the storm, but the world will have moved on.
Not only are most of today’s organisations structured linearly, but the way in which we think and strategise is linear, too.
This tendency to operate linearly means most of us work towards fixed targets, goals and outcomes—and whilst it’s understandable, because it’s what we were taught at business school and in our MBAs, it’s actually a problem.
It’s a problem because a reliance upon prescriptive and linear strategies and plans makes leadership teams prone to ‘goalodicy’, where goals and objectives become such an obsession that they can lead to poor decisions and outcomes (and ironically, the goals and objectives not being achieved).
In his very clever book The Antidote
, journalist Oliver Burkeman illustrates how goalodicy can occur by describing a study of New York taxi drivers who were so focused on their goals they were effectively blinded by them.
In NYC, it was a widely held belief that cabs were more difficult to catch on rainy days than when the weather is fine. The cause of this was commonly attributed to all the cabs being busy because on rainy days more people catch cabs to avoid getting wet.
What the study found, however, was something different. The actual cause was due to taxi drivers having a daily income target; due to the increased number of fares from the increase in patronage on rainy days, the cab drivers reached their daily target sooner than usual and went home early. They were ignoring the opportunity to make considerably more than their daily target.
Fixed strategies and plans have a tendency to do that: working towards fixed expectations makes us blind (to both the opportunities and dangers of the rapidly changing world around us).
Linear thinking and strategy also leads us to an organisational emphasis on clarity, measurement and accountability as key metrics and drivers of performance. Whilst this worked in the old world, in today’s new world of ever-increasing business complexity, these metrics only serve to encourage and compound business failure.
The default response for many of us to problems associated with increased uncertainty and complexity is to focus even further on clarity, measurement, and accountability, and to create further, and more complicated, structures, systems and processes.
In other words, we do more of what has been done in the past, and when that doesn’t work, we do even more of the same thing.
Since 1955, business complexity (as measured by the number of requirements companies are required by legislation to fulfil) has increased at a steady rate by a factor of six, whereas organisational complexity, in response to this, has increased by a factor of 35.
In other words, we are overreacting and in an increasingly complex environment fooling ourselves into thinking that our organisations should become more complicated and layered too. But we all know what happens to overly layered and bureaucratic organisations—they become mired in their own complexity, getting bogged down and waylaid.
They become heavy and slow, and are the opposite of what they need to be in this new world of increased business complexity and uncertainty.
Light and Fast
The solution to this problem of increased uncertainty and complexity is to reconfigure our traditional linear approach to how we operate our businesses: it’s called ‘Light and Fast’.
Light and Fast is a colloquialism from the world of mountaineering, and it means to climb a mountain with the absolute bare essentials of equipment, enabling the climbers to move quickly in their team. It’s about reliance upon the self and the climbing partner, rather than reliance upon equipment and fixed infrastructure.
Unlike most traditional businesses, light and fast organisations are not reliant upon infrastructure ownership as a means to dominate their market. Light and fast organisations lease rather than own (e.g. cloud-based solutions), and are not reliant upon linear strategy, central leadership and hierarchy; rather they operate in an autonomous and networked structure, with decentralised leadership.
With a decentralised network of teams operating with varying degrees of autonomy, the bottlenecking associated with most top-down decision-making resulting from centralised leadership is removed. Response times—a key metric for measuring agility—are massively reduced.
We must all learn to get comfortable with uncertainty, and to embrace the doubt and paradox that accompany it. Embracing uncertainty, expecting the unexpected, and giving up the desire to always be in control is the Light and Fast way—and it’s the answer to this new world order.
Don’t believe me? Just try it, and you might be very surprised.
Patrick Hollingworth is the author of the recently released book The Light and Fast Organisation: A New Way of Dealing with Uncertainty. He consults organisations globally and is an accomplished mountaineer.