Organizational Adaptability

Product development as an adaptive walk is a new way to organizational adaptability. Predictions far into the future are highly uncertain. Parmatur Pulse supports short lead times and thereby establishes an agile business model.

Nonlinear Systems

Nonlinear systems contain three actors or more that interact in a nontrivial way. The actors exchange energy, information, decisions and resources. A nonlinear system is not equal to the sum of its parts , it will always be less or more. A nonlinear system can have sudden changes and threshold transitions, but it can also be very resistant over a long period of time. People that interact in a company will form nonlinear systems internally and with the surrounding market.

The more actors there are and the more they interact, the more nonlinear the system becomes. The result is that the system becomes more unpredictable. A non linear system emerge from the interaction between the parts (not from the parts themselves), which creates adaptation that changes the behaviour of the actors. Nonlinear systems are also called learning systems or complex systems.

Adaptation will require feedback (what is happening?), variability (several options to choose from), and decisions (choose what to do). With more frequent interaction, the amount of relevant feedback will increase and joint corrections can be done faster and in smaller steps. Frequent pulse meetings will enable a team to adapt quickly to new information gathered during their work with product development.

Linear systems (e.g. mechanical machines): Require a stable and predefined environment that doesn’t change. Closed systems where the parts can’t interact and learn. Stable, predictable and controllable parts.

Can be divided into components, each of which can be designed, optimized and then put together again to form a system that is the sum of its parts.

The conclusion is that increased interaction between individuals working with product development will speed up learning and adaptation. That will in turn increase the likelihood for value added work to be done and thus shorten the development time.

Nonlinear systems (e.g. economy, learning, and development): Are successful in unstable and changing environments. Are open systems that receives information and energy from the outside world. The systems’ behaviour emerge from the interaction between the actors. The wholeness is something entirely different than the sum of their parts. Autonomous interconnected parts that change and adapt over time (“learning”).

Planning Into the Future

Agility is the ability to successfully create, cope with and exploit changes in circumstances. Within product development, changes in circumstances are typically changes in the market or new techniques that will have impact on individual projects and potentially also on the whole strategy. The amount of agility that is needed depend on the complexity of the system (how fast new knowledge is created and the environment is changing) and the cost of error (such as launching a product that doesn’t sell).

When you work in a nonlinear complex system such as product development and want to plan further and further into the future, then the uncertainty will increase. To be able to plan, you also need to collect historic data as input. The longer time span you want to predict, the more information from the past you need to compile and analyse.

That will cost a lot of money and time, and still the uncertainty in the prediction will be very high.

In Parmatur Pulse (as in lean, agility, and scrum) planning is done in short iterations, in small steps, which creates low uncertainty. Detailed long term planning has been replaced with a system for real-time (daily) control at the pulse meetings.

Managers in Parmatur Pulse will also work in a system for real-time (daily) control through the pulse meetings. They operate through priority and focus that will control the release of energy in the company. Work on strategies is constantly in progress to keep up with the rapid shifts in the projects and in the rest of the world.

Seeking Out Opportunities

Product development will be successful when a new product meets strong customer needs. Some customer demands doesn’t change, for example solutions that will increase customers’ productivity, but the ability to offer solutions will change as new technologies are developed. The race is on to be there first with a cost effective attractive solution as soon as a opportunity emerge.

To be able to find opportunities, you need to place yourself where the flow of change is strong. That spot is called “on the edge of chaos”. The success rate is lower on either side of the edge. Either the environment is too stable or too chaotic.

To be able to realize the opportunities you find, you have to balance the amount of structure that will give you advantages in efficiency (that will control the release of energy). Too much structure will be costly, prevent adaptation and slow down the work. Too little structure will create hesitation, anxiety and decision overload that will slow down the work.

Balancing on the edge of chaos will require constant attention. It is not enough to find one point that will balance. The ground is constantly moving as from a earth quake. Over time managers will have to adjust the amount of structure to fit individual opportunities and projects. The business needs to do what is called “an adaptive walk in a fitness environment”.

Too much structure and bureaucracy will not only cost money to build, but even more to maintain. If the cost to change the structure is high, then that will either slow down adaptation (resulting in missed opportunities and lower revenue) or encourage people to find ways around the system (not updating information that over time will erode the structure). Organizational adaptability need a agile business model.

Ronnie Leten, CEO at Atlas Copco: ”Our business model is an agile, resilient business model. When volume drops, we´re able to adapt, and when volume comes up, we are able to deliver. Agility in an organization is to be restructuring without restructuring costs. If you can adapt to a new norm without really having restructuring costs, then you are really at operational excellence.”

Working with Product Development on a Strategic Level

There is a lot of details in a project. The amount of information to be processed is therefore enormous. Increasing complexity will increase both the need for information and the uncertainty in the projects. That will induce waste and increase loss of energy.

A strategic product team acts on a higher level with less details. The uncertainties will be handled with less information and less waste. To move up on a higher level, using overall patterns, simplifies decision making by not having to consider so many details. Work done on a strategic level to prepare business cases and technical architecture before a project is started will reduce the uncertainty in the project and will thus shorten the development lead time.

And short lead time is necessary to make the business agile and thus fundamental to organizational adaptability.

Product development done by the strategic product team will include a lot of uncertainty when launch of a potential product lies far into the future. The point is not to avoid uncertainty as that will also reduce the opportunities and therefore the revenue, but rather manage uncertainty in a clever way. A strategic product team will create a strategic design with business goals within prioritised segments and compile “long lists” and “top lists” with potential product and project candidates.

They will screen through those lists and pick the best ideas to prepare projects to be started. The items on those lists will change quite often. Not all candidates will develop gradually and eventually become projects. Some will die prematurely, some will be combined with other ideas, and some will be split into several parts. From time to time there will also be unforeseen opportunities coming from customers, universities or partners that will fast track directly to a project start.

Example: To understand the difference between the project level and a strategic product team. Consider to the difference between quantum mechanics and thermodynamics. At a quantum level there is a lot of information to be collected and understood about atoms and their spin, rotation, velocity and so on. In thermodynamics you measure only pressure and temperature.

The Law of Large Numbers

It is well known from data networks that whereas each individual traffic stream may behave in an unpredictable fashion, the merged behaviour of a large population behaves in a predictable fashion. Basically this is a smoothing effect of a large population. The consequence is that it is possible to study and understand a complex system on an overall level and ignore the parts. Actually, if you want to learn something about a product development system as a whole, you have to ignore the parts (such as individual projects) since they are unpredictable and will contain disinformation.

In product development an overall level will contain for example a compiled project portfolio with a total revenue over 5 years, overall business goals for a business unit indicating additional growth in focus segments, and a product road map that point out new products to be launched.

Organizational Adaptability

Predictions far into the future are highly uncertain. Project ideas in early stages of development will be changed quite often. As projects work closer to launch the uncertainty is reduced.

To be able to realize opportunities, the company have to balance the amount of structure that will give advantages in efficiency versus adaptability. Too much structure will be costly, prevent adaptation and slow down the work. Too little structure will create hesitation, anxiety and decision overload that will slow down the work.

If you can adapt to a new norm without really having restructuring costs, then you are really at operational excellence.

If you want to learn something about a complex system (such as product development), you have to ignore the parts (such as individual projects) since they are unpredictable and will contain disinformation. Instead focus on an overall level with project portfolio, business goals, and product road map. The result – organizational adaptability.