Designing Resilience: The Strategy, Structure and Spirit of Enterprise Agility

William Haas Evans
Dec 1, 2020
19 min read

Updated: Jan 30, 2024

Note: This is the introduction to my book, "Designing Resilience: The Strategy, Structure, and Spirit of Enterprise Agility." I'm in the process of editing and posting chapters as I find time between travel and engagements with clients undergoing large-scale transformation efforts. There are a total of 10 chapters, and I hope you enjoy reading my thoughts formed over the past two decades working inside of human, though not always humane, organizations. - Will

Introduction

“The groves were God’s first temples.”~ William Cullen Bryant, A Forest Hymn

Pando, known as the Trembling Giant, is a massive, interconnected grove of quaking aspens in Utah. It looks like a vast forest covering 106 acres and weighing almost 6,600 tons. Scientists estimate that Pando has survived for more than 80,000 years. Against the odds, Pando has managed to survive this long by developing the capability to reproduce asexually, which means the entire forest is actually a single clonal colony sharing one root system. Pando has also survived by adapting to an ever-changing environment to deal with everything from drought to natural predators. But now, the world’s largest organism is dying due to the accelerating rate of change to it’s environment and other adverse factors which threaten it’s very survival.

Pando grows by producing new stems, and those stems are tasty to local elk and deer populations. Because of a decline in predators like coyote and wolves, there are more elk and deer than ever before, which means increased predation on Pando's new stems. What’s the cause of the decline in the wolf and coyote population? While causality is problematic in cases such as these, the rise of ranching out west and other environmental factors certainly contribute. Ranchers have been harvesting local wolves and coyotes to protect their own flocks and herds. Even if the ranchers do not have any intention of harming Pando and are entirely unaware of the chain of consequences, the interconnections remain.

While Pando is a resilient organism, it cannot match the rate of change in it’s environment and adapt fast enough.

According to Paul Rogers, an ecologist at Utah State University and the director of the Western Aspen Alliance, the challenge Pando faces is that, “the system is not replacing itself; it's highly out of balance."

Pando reveals a salient metaphor for the challenges and threats that large organizations face in the quickly accelerating, uncertain competitive global environment today.

Like Pando, many large enterprises face existential threats – in fact, less than 12% of the companies listed on the Fortune 500 just 50 years ago have survived. Both Pando and large enterprises are complex adaptive systems that face emergent threats which they are ill-equipped to handle.
In complex systems, an exogenous shock can produce a wide range of potential changes to the entire ecosystem, many of which are unpredictable and difficult to recover from.

Over the past few decades in the business world, leaders of organizational design efforts have assumed that enterprises are predictable, linear, and closed (to their external environment) – vestiges of Newtonian physics and the scientific revolution – that social organizations are like mechanical watches.

We can no longer lead organizations rooted in the machine metaphors of 20th century scientific management. This mindset leads to strategic, project planning, and business continuity planning based on tacit assumptions which no longer hold true (if they ever did). Usually, strategic initiatives are announced, a playbook is designed (and handed to the leadership team), roadmaps with milestones established, and then the organization marches happily toward the predetermined end.

Unfortunately, this way of planning and executing organizational design, and business continuity is incongruent with the complex reality of today’s competitive environment.

According to a study by IDC, 70% percent of organizational transformations will fail to achieve the stated business outcomes. A more effective mental model for understanding the challenges and threats organizations face is a complexity thinking approach. If we view organizations as complex adaptive systems, like Pando, we can adopt new mindsets, frames, and practices necessary for growth and competitive advantage given our ever-changing environment.

It goes without saying that today, organizations need to become more resilient and agile. In today’s hyper-competitive environment, leveraging insights and principles from complexity science, design thinking, and other disciplines will offer leaders the tools to remove waste, and transform the structure, systems, and processes necessary for enterprise resilience.

The Need for Resilience (Asymmetries and Nonlinearities)

So, how can you design resilience into your organization? In other words, how can your organization absorb the shocks to the system caused by the acceleration of change in our world? And how can you make quicker decisions and pivot faster than your competitors? How can you respond to the myriad of threats that organizations face, from Russian hackers to global warming and other asymmetric threats. Few organizations anticipated the 2008 financial crisis. It was what Taleb Nassim calls, a ‘black swan’ event. Those organizations that quickly adapted and learned from the experience now have a competitive advantage. They have embraced principles of resilience by increasing optionality and the strategic and initiative level, de-coupling systems, encapsulation, response diversity, reduced batch size and cycle time while enhancing system coherence and team cohesion. They’ve become resilient and adaptive to change.

Resilience isn’t an end unto itself. Rather, resilience is about organizations, business units, and teams learning and adapting to changing market forces. It’s also a property of a well-designed system, which is coherently aligned to the mission and strategy of the organization. Once an organization becomes resilient, it has the capacity to use market uncertainty to its advantage by solving real problems and delivering value to customers and stakeholders.

Organizations can be designed to become more resilient. The process requires that we change our underlying assumptions which form the business architecture of how we deal with challenges of external adaptation and internal integration. In short, organizational transformation requires a structural evolution which then informs and shapes the behaviors, narratives, beliefs and practices required to achieve a culture of enterprise agility.

The first step on this journey is to understand that old mindsets and frames are ill-suited to our current environment.

Adapting and adopting new frames and principles may uncover new options and opportunities. In this book, I use design as a frame through which to address the obstacles and constraints that stand in the way of successful organizational transformations.

Design as a Frame

"Everyone designs who devises courses of action aimed at changing existing situations into preferred ones." ~ Herbert Simon

Charles Eames said “design is a plan for arranging elements in such a way as best to accomplish a particular purpose”. I like that definition, and I would add that the organization’s purpose must include a desire to face adversity, overcome obstacles, and create more value for your customers. This is a functional notion of design. There are many others. To think that design is only about problem solving is to think that dinner is only about caloric intake, and the Michelin Guide is proof that simply isn’t so.

“The mind loves the unknown. It loves images whose meaning is unknown, since the meaning of the mind itself is unknown.” ~ Rene Magritte

Design can also be reframed as a process of discovery. It’s about revealing, uncovering, digging, connecting, and reintegrating. In my experience, designers generate multiple pathways where problem and futures can be explored, constraints removed, policies evolved, and behaviors changed. Design is about moving intentionally towards better futures and may be the best tool we have for creating the kinds of systems and interactions for a responsive, flexible organization.

As a process, human-centered design involves exploring the context in which human needs are experienced so it necessarily involves contextual inquiry. The process involves using analytical and lateral thinking to create options, rigorous prototyping of potential solutions to generate learning, and testing those hypotheses within complex, coherently aligned systems.

A designer’s thinking approach, which includes play, talk, sketching, reasoning, collaborative sense-making, iterative problem framing and reflection—is focused on solving problems by conceiving of things and their patterns of interaction into the future. It follows then that design requires an optimistic mindset: a future will exist, things can be better, and all things should be made to serve human needs without negative externalities.

Designers explore all aspects of a current system so they can move it towards some kind of preferred state – there is intentionality to the interventions in the system. To do that, they must be able to imagine what “better” looks like. Once the picture begins to coalesce, they constantly iterate to move the organization in that direction.

But a designer’s mindset, approach, and process is not enough. You also need a framework for thinking about organizational change from a whole systems perspective. Four prompting questions derived from Eliyahu Goldratt’s Theory of Constraints allow us to take a systems thinking approach to organizational transformation. Those four questions are: Why Change? What to Change? What to Change to? And How to Cause the Change?

Why change?

"The more a thing tends to be permanent, the more it tends to be lifeless.” – Alan Watts.

For almost two decades now, I have worked with organizational leaders around the world. Consistently, they express similar strategic objectives. They want to increase their market share and marketability while decreasing their overall operating expenses. They want to become more sustainable and increase their long-term viability. They want to find new ways to survive a wide range of adversities, particularly the disruptive competition they face from the outside – but also from geo-political, financial, and ecological threats. Finally, most of them want to have a positive impact on their communities.

Unfortunately, leaders are finding their goals more difficult to achieve – again, the mindset of 20th century scientific management has failed to provide the answers for managing this complexity perhaps because best practices are always past practices. Many organizations are experiencing large scale challenges, which are symptoms of deeper, underling systemic and cultural factors – all of which are interconnected. These symptoms include: lack of clear alignment, dissatisfied customers, disengaged employees, long product release cycles, no capacity to innovate, and no ability to capture economic rents and exploit competitive advantage from their research and development investments.

Lack of Clear Alignment

Most organizations lack a clear alignment among their various programs, projects, and strategic initiatives. People are working on too many projects with no clear sense of true north and no idea if their individual projects are moving the organization in a positive direction. This lack of alignment leads to further dissatisfaction and disengagement from employees.

In almost every organization I've consulted, employees are overworked, forced to “do more, with less”. While they take pride in their work and derive meaning from it, they endure long hours do things that seem useless – in service to processes that don’t make any sense. Many of those hours are wasted in useless meetings where decisions are never made. Getting anything done seems to require massive effort and an enormous commitment.

It has also become more of a problem in the last few years because millennial workers do not accept the status quo. More research is indicating that not just millennials, but many knowledge workers want to know they are making an impact and that their work is meaningful. They are driven by a desire for mastery, autonomy, and purpose, according to Daniel Pink, not just a paycheck. Organizations are finding it difficult to create alignment to a purpose, which makes it harder to recruit, train, and develop the next generation of leaders. Employee churn is a massive drain on the capital of any enterprise.

At the same time, organizations are competing against highly aligned, agile startups, which appeal to highly skilled people. Increasingly, many workers are gravitating towards “cool” startups with vibrant cultures, or else they do their own thing, working freelance and selling their skills in the open marketplace sometimes called the “gig economy”. Organizations that are highly-aligned and attuned to a purpose offer employees a work environment where they can grow and find coherence, social cohesion, meaning, and identity.

Dissatisfied Customers

Customers today have higher expectations than ever. Thanks to social media, they are more connected to everything, but they also tend to be dissatisfied and critical. When everything is going well, customers are quiet, but if something goes wrong, they are both vocal and viral. As Ryan Grenoble aptly stated, “social media giveth, and social media taketh away,” discussing the United Airline PR nightmare (which was actually a governance, systems, and management fiasco).

People expect a rapid response from customer support, quick solutions, and a fast flow of information, but more deeply, they wish to be valued as human beings. Exacerbating this are long product release cycles, and organizations encumbered by legacy systems, policies and handbooks – sometimes referred to as organizational debt.

Long Product Release Cycles

Among the growing challenges leaders face, it now takes far too long to bring products to market – and when they do come to market, they fail to meet customer needs. I first came face-to-face with this problem twenty years ago when I worked in the marketing department of a tech startup. We had brilliant new web-based technology that was poised to completely disrupt the market. The concept was to create a browser plug-in that lets users create 3-D visualizations of complex financial data. It was quite an achievement back in the 90s, when most people had, at best, 56K dial-up modems.

The idea was spun out of MIT’s computer science lab and backed by $175 million of venture capital funding. Though the company was based in Cambridge, Massachusetts, some of that investment capital was used to hire top leaders out of Silicon Valley. Our new team also included a hundred of the smartest computer engineers from top-tier universities, including MIT.

We had a beautiful office with a great work environment, and we had a clear understanding of our goals. By the end of two years, we’d blown through the $175 million, and we finally released a gold candidate of our product to a resounding thud. The market hardly noticed. As it turned out, nobody wanted another browser plug-in. The value proposition was weak at best. We all thought it was a phenomenal piece of tech, but the public didn’t care.

It took us two whole years to release a product to market just so we could determine if we had created something of value, and in the end, after all that time and money, we learned we hadn’t.

That experience informed much of what I did after leaving the company. Since then, I have investigated lean systems thinking and agile product development. Pride comes from designing something that solves people’s problems and achieves real impact, not just building an elegant solution for its own sake. As Ash Maurya says in Running Lean, “Life's too short to build something nobody wants.”

No Capacity to Innovate

In many organizations, the capacity to deliver disruptive innovation is greatly diminished by teams that are already at 100% utilization on existing projects, products, and services. There is no slack in the system to allow for creativity, so leaders can only hope for incremental innovation. How, then, can we decrease unnecessary obstacles within organizations so people have time to innovate?

Leaders and employees spend an inordinate amount of time dealing with existing problems.

As Carl von Clausewitz, an eighteenth-century military theorist, said, “easy things are hard and hard things are impossible.” While that was applied to war in 18th century Europe, it also reflects the reality of many organizations today. Employees and leaders struggle to make progress against this friction, and yet feel they are too busy to improve.

In many organizations, I have observed cultures of constant firefighting. They’re so busy trying to put out fires that they can’t focus on anything else. I sometimes tell leaders (only half-jokingly), “If you have so many fires in your organization, you should consider the possibility that you have an arsonist in your midst.”

All of these existing problems that are visible on the surface are ultimately symptoms of deeper organizational dysfunctions.

What to change?

Many of the symptoms discussed above stem from a root organizational problem, which is the mindset that organizations are machines (and people are replaceable cogs) derived from the traditions of Frederick Taylor’s scientific management. Leaders and their hired consultants assume organizations are predictable, ordered, closed systems like a mechanical watch. In reality, organizations are complex, interdependent, and emergent. When you change one part, many other parts shift as well, usually in unpredictable ways.

Compounding the frustration, most companies are experiencing a constant increase in the rate of change. Leaders feel like they can never get a handle on any situation. By the time they finish a project, everything around them has changed. This volatility makes people jump to solutions without adequately understanding the problems they’re attempting to solve. They assume their plans will lead to a predetermined outcome, and then wonder why things don’t pan out the way they expected. As Mike Tyson famously said, “Everyone has a plan until they get punched in the face.” But, no matter how detailed the plan, it cannot make the uncertain certain. Leaders struggle to predict the amount of time and effort any given project will take, but no matter how they plan, projects always take longer than predicted, cost more than planned, and rarely meet the objectives of the business case. This desire for predictability, lack of predictability predicament is the source of a lot of management anxiety.

I saw the problem firsthand when I consulted with a large holding company. They had a number of acquisitions in their pipeline, but they learned the hard way that buying and selling other companies only worked if they could complete an acquisition within a short period of time to realize the return on capital. Unfortunately, the time between deciding to make a purchase and fully integrating that acquisition lasted three to four years. By the time they finished, so much time had passed that they didn’t know if it had actually delivered any value to shareholders or met the objectives of the business case.

In large organizations like this one, value (to the customer, business, and shareholders) usually gets lost along the way and is never recovered. A recent report reveals that 90 percent of the acquisitions of smaller companies delivers none of the value to shareholders that the leadership team expected. In fact, shareholder value decreased. 90% of the time acquisitions decrease shareholder value to the acquiring company. Of course, by the time this is realized, the decision-makers have moved on to their next posting. A friend once quipped “the shelf life of the c-suite in 3 years.”

Why does everything take so long? One obvious reason is because organizations are rigid.

They’ve developed numerous processes, procedures, and policies and layered them on top of old cultural norms.
These become bottlenecks preventing the flow of information through the system and the flow of value to customers.
The other obvious reason is the number and density of the dependencies across teams, and information systems. These constraints prevent adaptation, and even small tasks become incredibly difficult to complete.

What to change is different for every organization, but we can start by viewing the organization as a complex system, identify the constraints that impede decision-making and value creation, then focus on improving the capacity of the system using experiments to reduce lead time.

What to Change to?

Eli Goldratt famously said that “every improvement is a change, but not every change is an improvement.” Change is difficult. Leaders often overlook the investment in time, energy, and focus required to transform an organization because it goes far beyond moving boxes and arrows around in an org chart. They also fail to realize the power of narrative in shaping the organization’s response to the change, and the power of underlying beliefs anchoring organizations in the past.

As I have alluded to above, designing resilience starts with an intentional process of identifying and addressing the constraints in the system. It then requires a collaborative effort to reimagine the structures, processes, policies, reward systems, and people practices – essentially refactoring the underlying code and interfaces of the people systems. Developing the capacity to evolve the organization from its current state to one capable of designing an emergent strategy, turning uncertainty and change into competitive advantages, is ultimately an enterprise capability requiring significant investment – it’s not a part time job or a side project.

While the future state for every organization will be unique, there are some common characteristics based on key principles that are worth considering. Some of these characteristics include: the value of diversity and redundancy; intentionally designed networks and connections; loosely coupled, highly cohesive teams; a portfolio strategy of real options and asymmetric bets; and a culture that privileges experimentation, continuous improvement, and requisite response diversity aligned to the organizations purpose.

Organizations with many different components (people, partners, sources of knowledge, technical systems) are generally more resilient than systems with fewer and homogenous components.
Diverse teams at all levels in the hierarchy increase the frames, perspectives, and options available for exploration.
Redundancy provides insurance within the system by allowing some people or components to compensate for the loss or failure of others.

Effective design systematically transforms the networks of connections and communications within an organization. This includes all the interfaces, interactions, and interdependencies. It’s important to consider that well-connected systems can overcome and recover from disturbances, disruptions, and market changes more quickly, while overly connected networks may lead to homogenization and reduction of diversity.

The key then is the intentional design, management, and orchestration of connections, networks, and interfaces across the enterprise, coherently aligned with the overall purpose.

Loosely coupled teams are able to adapt and pivot faster than tightly coupled units, which tend to be slower and more brittle. When a team has a highly-defined service level agreement with other parts of an organization, with clearly defined deliverables up-front, the whole system tends to move slower. But this does not mean that loose coupling should always be applied across all teams. It is preferable to make sure that teams are optimally designed for the context and class of work they are performing, but still coherently aligned across boundaries, and optimized for the whole system.

Leaders should also focus on what I call directed opportunism and asymmetric bets across a balanced portfolio of investments. Leveraging frameworks like the Three Horizons model, combined with portfolio prioritization framework like Cost-of-Delay, they should seek to move beyond incremental innovations to constantly seeking opportunities that create significant impact throughout an organization.

Effective organizational design focuses on exploring challenges and generating real options, instead of prematurely reaching for ready-to-hand solutions. Consider this common example: a senior leader traveling on a plane picks up a copy of Harvard Business Review or Fast Company, reads about scaling the agile enterprise. “Hey, this might work for us,” he thinks. He may not have a complete understanding of the obstacles and constraints the organization faces, and there may not be a shared understanding of the risks involved in transforming the enterprise. Nevertheless, he decides to bring in expensive consultants or a tech firm and spend a massive amount of money “installing Agile.” Inevitably, the company will look back and say, “Well, we spent a lot of money and our situation didn’t get much better.” It’s often better to create a shared understanding of the constraints and problems that exist before generating countermeasures which may improve the situation, than falling passionately for the latest buzzword or quick fix. Too often as leaders, we fall in love with the solution, instead of deeply understanding the problems and constraints we face.

One consideration worth mentioning here is Conway’s Law, named after Melvin Conway, who stated, “organizations which design systems (...) are constrained to produce designs which are copies of the communication structures of these organizations.” I believe it is important to understand how existing structures may constrain the range of potential options available. What to change to depends on where you are and the direction you need to go. Every journey will be different, and every strategic direction will be unique based on the territory to be traversed. Two elements that are essential, then, are a map and a compass on the road to a more resilient organization.

How to Cause the Change?

You can’t Gantt Chart your way to enterprise agility – and yet, when something looks like a project, our first thought is to enlist the enterprise project management office (EPMO). When it comes to exploring and addressing the challenges organizations face, there are few silver bullets or best practices, but there are some options which will point a humble leader on the path.

First, I recommend whole systems thinking approach. One reason organizational transformations fail is that they tend to break an enterprise or firm down into its component parts in order to optimize each function or team individually. When they achieve some measure of success in a component part, they attempt to “scale it” out to the rest of the organization, while applying arbitrary constraints such as spans-and-layers, and never refactoring the governance, policies, or measures which all work to return an organization to it’s previous equilibrium. This notion of the “model line” seems completely reasonable, and usually fails.

Instead of focusing resources maximizing the individual components of your organization, adopting a whole systems viewpoint based on complexity thinking will allow you to make sense of your situation and address the bottlenecks holistically instead of playing a fruitless game of ‘wack-a-mole’.

Complexity thinking understands that an organization can be greater than the sum of its individual parts (though most organizations are very much less than the sum of their parts!). With this mindset, consider how the whole system interacts and works together, deriving value chiefly from those interactions. This often means that more value can be found by applying and scaling principles across the organization, and then allowing teams to create and run experiments to identify practices that improve the system. Additionally, this means looking intentionally at the interactions across boundaries, as well as the queues between teams in a value stream.

A Note on Culture

Perhaps the single most important aspect of the journey towards becoming a resilient organization is the culture. Culture includes the underlying values, tacit assumptions, and norms that govern behavior, practices, authority, and decision-making. Admittedly, addressing and challenging the underlying assumptions of the organization’s culture is really hard, but it may be the most effective in creating a culture of experimentation and learning necessary for sustainable transformation.

Organizations who embrace experimentation and learning will be more willing to face problems and address the deeper challenges of culture change head-on. This means understanding and redesigning the tacit structuring of social order within the organization including norms, values, symbols, rituals, ceremonies, and language. No small task! I have come across four key culture dysfunctions which prevent learning and experimentation. They include cultures of fear, denial, blame, and heroic individualism.

When a culture of fear or denial exists, people simply pretend that problems don’t exist, or they actively work to hide them. The first step to addressing these cultural dysfunctions is to create safe places where people can engage in safe-to-fail experiments to improve the situation.

Addressing the next challenges focuses on replacing fear and blame with trust and collaboration. This requires that leadership communicate the new values and then model them throughout the transformation process, with a bias towards action. People pay more attention to what leaders do, how they act, and how they respond to bad news than anything said at a town hall or posted on the company intranet.

The final challenge is overcoming the culture of heroic individualism which is endemic in many large enterprises (especially in America where it is a foundational value) and reinforced through the annual ritual of performance evaluations. Stories of heroic acts are a key component of culture formation and heavily influence the decisions and behaviors from the shop floor to the board room. But today’s challenges are complex. They require broad participation and collaboration across all parts of the enterprise. They also require new assumptions about how the organization makes sense of reality and deals with uncertainty. Organizational cultures that can develop practices, norms, and stories to face uncertainty with alacrity will become more adaptive and resilient.

Resilient Leadership

While designers create the systems, structures, and processes that move organizations toward a better future, leaders must define and articulate the vision. First, leaders must ask and then answer the question, “Why do we exist?” The vision provides the organization with its purpose, and that purpose needs to be communicated at every level, from the top to the line employees. Then a strategy can be designed based on the capabilities required to gain, maintain, and exploit a position of temporary advantage in the marketplace. This requires understanding the context, terrain, and climate in which the organization operates. Without situational awareness, a strategy is simply an attractive power point of wishful thinking adorned with buzzwords and set in Helvetica.

After establishing purpose, strategy, and situational awareness, leaders must then develop (**or empower?) their managers to begin changing the systems, removing obstacles, and rewarding the new behaviors and practices required to create a better system. Managers must be taught to see challenges from a variety of perspectives so as to create options, before running experiments to turn uncertainty into knowledge.

Finally, leaders must develop their own capabilities by intentionally practicing observation, self-reflection, humble inquiry, and servant leadership while shaping the environment through constraints to encourage new patterns and cultural norms to emerge.

When leaders develop these capabilities, organizations move towards becoming more flexible and resilient. They can adapt faster to changes in their environment. At the same time, employees become more committed and engaged in their work because they have the tools to solve problems within a system that provides safety.

Ultimately, the organization will begin to create products and services that customers actually want and pay for which makes the organization more profitable and sustainable.