Building Renewal Capability: The Cycle of Organizational Adaptation and Growth

Building Renewal Capability
for
Sustainable Innovation & Growth

© Dean Robb, Ph.D. 2008

Building Renewal Capability: Agenda
• Opening Remarks / Background
• Key Quotes
• Key Paradigm Shifts
• The Core Problem
• Renewal Capability: The Cycle of Renewal
• Renewal Capability: Key Attributes / Characteristics
• Self-Renewing Organizations: Cultural Foundations
• Leadership for Renewal: Managing Alignment and
Differences
• How We Get There
• Institutions vs. Self-Renewing Organizations

Opening Remarks

• Brief history: How I got here
• Purpose: Co-inquiry / co-learning
• Model as transformative vision – a “new
pair of glasses”
• Practice emerges from in-sight – “seeing
into”


Key Quotes

Foundations of Individual and
Organizational Renewal


Motivating Quotes

“True creativity always involves a paradigm change,
a transformation and a new way of perceiving.”
- Nicholas Lore


Motivating Quotes

“To exist is to change, to change is to mature, to
mature is to go on creating oneself endlessly.”
-Henri Bergson


Motivating Quotes

"The intuitive mind is a sacred gift and the
rational mind is a faithful servant. We
have created a society that honors the
servant and has forgotten the gift."
- Albert Einstein


Motivating Quotes

“This, I believe, is the ultimate precept a
theory of organization can give: not a
manual for dictators of any denomination to
more efficiently to subjugate human beings
by the scientific application of Iron Laws, but
a warning that the Leviathan of organization
must not swallow the individual without
sealing its own inevitable doom.”
- L. V. Bertalanffy (1969)
General Systems Theory


Motivating Quotes

Insanity is doing the same thing over and over
again, expecting different results.
-or-
If you keep on doing what you’ve always done,
you’ll keep on getting what you’ve always gotten.

- Anonymous


Paradigm Shifts: A Sea Change

The Emergence of Renewal


Shift in Worldview:
Basic Assumptions

Dying Paradigms Emerging Paradigms
Mechanistic model Living, adaptive,
evolutionary model
Linear business growth Non-linear complex growth
(Renewal)
Business Growth =
Business Growth =
Strategy Execution +
Strategy Execution
Creative Renewal
Stability / Continuity Continuous Adaptation
Control Order; Coherence; Integrity
Prediction Prediction + Emergence

Shift in Worldview: The Social World

Parent-Child Adult-Adult
Psychological Contract Psychological Contract
Executives & Workforce Community of Shared
(split) Purpose
Authoritarian Leadership Collaborative Partnering
Masculinity Integration of
Feminine & Masculine
Patriarchy No “archy” at all
Mastery & Ego Continuous Learning &
Humility

Shift in Worldview: The Social World

Performance to Engagement &
Specifications Contribution
Compliance Commitment
Command-and-Control Freedom + Accountability
Conformity Conscious Community
Institutional (Role-based) Post-institutional
Relationships Business Intimacy
The basic human need for
Interdependence of
emotional and spiritual
Organizational and Individual
growth is ignored:
Growth
“It’s not our problem”

The Core Problem:

The Usual Organizational Life-Cycle
and
The Myth of Linear Growth


The Usual Organizational Life-Cycle

Making It
Becoming
Getting
An
Organized
Institution

Launching
The Closing
Venture In

Dreaming Dying
The Dream
(W. Bridges)

Making It
Getting Becoming
Organized a Cash
Cow
The Cycle
of
Launching Renewal Winding
The
Down
Venture

Dreaming Exit
The Dream


The Usual Progression

Organization Institution


The Myth of Continuous Linear Growth
“The rules of The Game are quite simple: Report
quarterly earnings that rise with the smooth
predictability of a bunny slope. Treat yourself as a
god for managing those smooth quarterly earnings.
And pay yourself accordingly. When anybody
suggests that you have made a strategic blunder,
fold to those instincts and bury the mistake in
divestitures and a series of restructuring charges.

Mastering the Game can make you feel like a
master of the universe. Then one day you wake up
and realize the Game has mastered you.”
- Bill George, former CEO of Medtronic, and current Director at
Goldman Sachs, Target, Novartis, and the Harvard Business School


The Real Growth Process:
The Cycle of Renewal

Task One: Task Two:
Performance: Adaptation:
Responding Effectively to a Responding Effectively to a
Context Change in Contexts

Growth: Alternating Cycles of Task One and Task Two

Sustainable Growth: A Cyclical Process
Performance Plateaus:
• Strategy & Organization
Aligned with Environment
• High Performance

Adaptive Change Periods:
Desired: • Strategy & Organization Not
Continuous Actual: Aligned with Environment
Linear Cyclical
Growth • Lower Performance
Growth

Organizational Renewal Capability:
An Integration of Complements
Performance: Adaptation:
Disciplined Execution Creative Renewal
• Value Delivery: Existing • Value Creation: New
Strategy, Products, Services Strategies, Products, Services
• Mastery of an Existing Game: • Learning/Creating New Games:
Success within an existing Success adapting to changes in
Company-Market configuration Company-Market configuration

• Focus: Short-term performance • Focus: Long-term organic growth

• Metrics: Efficiency, Productivity, • Metrics: Effectiveness, Market
Consistency, Repeatability, Alignment, Customer Satisfaction,
Quality, Cost Top-Line Growth

The
Self-Renewing
Organization

Renewal Capability Requires
Two Complementary Sub-Systems

Performance System
• Focus: Short-term Task
• Shared mission/vision, short-term strategy & goals
• “Zone of Alignment” & Disciplined Execution
• Structure:
• Organizational structure, roles, responsibilities
• Business, operational, management and support processes/
procedures
• Management systems
• Culture
• Shared norms, values, patterns of relationship, ideology
• Competencies
• Capabilities that are focused on, developed, rewarded
• (Mostly) focused on short-term, disciplined execution

Adaptation System
• Focus: Long-term Development
• Deep Purpose: Source of meaning & vitality
• Wellspring of sustainable innovation, entrepreneurship,
adaptation and renewal
• Domain of unaligned, unassimilated differences,
unprocessed organizational memory
• Structure:
• Strategic, Product, Service, Process Innovation processes
• Organizational learning & development processes
• Personal & Interpersonal development processes
• Culture
• Values that foster innovation, growth, change
• Competencies
• Focused on developmental growth, adaptation, innovation
• Untapped, latent (“invisible”) capabilities

Uses for Adaptation System

Performance
• Improve System • Gain
Performance Goal Achievement commitment
System Alignment Rationality
Closure Structure
Focus Action
Access Align • Learn
• Renew
vitality • Change
Adaptation
System • Innovate
Differences
Play Energy
• Increase Commitment
range of Learning • New
options capabilities


Renewal Capability Profile

High
10

9
Q3: Q4:
8

Performance 7
Repeatable Renewable
System: 6
Level of 5
Development 4 Q1: Q2:
3

2 Risky Responsive
1
1 2 3 4 5 6 7 8 9 10
Low High
Adaptation System:
Level of Development

Self-Renewing Organizations:

Underlying Competencies


Integration of Competencies
Performance Adaptation
Task mastery Learning

Aligning behavior Leveraging differences

Problem-solving Creativity, Imagination

Rational intelligence Emotional intelligence

Planning & control Embracing the unexpected

Detail focus Systemic focus

Integration of Competencies
Performance Adaptation

Financials Spirit and Soul

Execution Innovation

Role Authentic Self

Focus & Closure Options & Ambiguity

Action Reflection


Spectrum of Renewal Competencies
Performance
Competencies

Leaders
DIFFERENCES

Adaptation
Competencies

Self-Renewing Organizations:

Cultural Foundations


Is Culture a Bunch of
Touchy-feely BS?

Lets Look at the DATA

High-Performance Cultures

Multi-Year High-Performance Low-Performance
Harvard B-School Cultures Cultures
Study

Revenue Growth +682% +166%

Net Income
+756% +1%
Growth

Source: Corporate Culture and Performance, John Kotter


Adaptive Cultures

Measured from Adaptive Non-Adaptive
1996 – 2004 Cultures Cultures

Net Income
Growth +989% -47%

Net Income 11.5 1.7
Growth Index

Stock Price Growth +204% +70%

Crawford's Leadership & Culture Study of Fortune 500 companies


High-Performance Cultures: Foundations

• Discipline: Promotes Decisiveness, Standards of
Excellence, Direct Accountability
• Liberation: clear boundaries, combined with flexibility within
• Proactive Performance Management: blocks obstructive
behaviors; supports, reinforces, rewards constructive
behaviors
• Foundations:
• Openness and Trust
• Managed Differences
• Simplicity, Flexibility with Sharp Focus (Implementation)
• Play to People’s Strengths


High-Performance Cultures: Leadership

• Clear Articulation of a Strategic Framework
• Mission, Vision, Values, Strategic Goals, “Critical Few”
Measureable Priorities
• Design & Take Accountability for Managing Service-
Oriented, Flexible, Efficient Business Processes &
Structures
• Engage Their People, and Work Hard to Learn Their
Strengths
• Manage Talent Well and Encourage Ongoing Learning
• Communicate Rigorously and Often


Adaptive Cultures: Leadership
• Encourage confidence and risk-taking
• Mistakes proactively utilized for learning & growth
– Hidden downside of Six Sigma: can engender perfectionistic
(blaming/punishing, mistake- and risk-averse) culture
• Leadership proactively leads change
• Focus intensely on changing consumer needs
• Facilitate change to meet needs of three constituencies:
stockholders, consumers, and employees
– Non-Adaptive cultures: cautious management
that focuses on protecting its own interests
• Focus on long-term growth – growth prioritized over
short-term results

Leadership for
Innovation, Growth and Renewal:

Managing Alignment and Diversity


Adaptation Performance
The Central Dilemma

Alignment
Market

Internal Differences: Alignment:
• Innovation, adaptation, • Disciplined execution
renewal • Focus: Current performance
• Focus: Long-term growth • Source: Aligned (shared)
• Source: diversity, strategy, goals, people,
differences, individuality structure, processes,
• Typically untapped systems, culture, capabilities

The Core Problem: The “3-C’s”
Legacy Practices in Managing Alignment
• Compliance – task execution (behavior) according to specs
 Individual initiative & creativity threaten smooth-running
“production machine”
• Control – to ensure compliance, predictability, consistency
 Surprises: “errors” to be rooted out
 “Six Sigma” cultures: preoccupied with “error” elimination
• Conformity: Performance excellence via so-called “strong
cultures”
Result: Repression of Internal Diversity and Differences

The Core Problem

“The Leviathan of
organization must not
swallow the individual
without sealing its own
inevitable doom.”
- L. V. Bertalanffy, (1969)
General Systems Theory


Dynamics of Repression

Activates oppositional energy & activity in the
Adaptive System:
• Energy & talent bound up in repressed differences –
unavailable to the organization
• Internally fragmented & oppositional system
• Stagnation, demoralization, productivity loss
• Potential for disruptive or dangerous eruptions

Result: Repression & control yields loss of control;
loss of resources for innovation, adaption, growth

The Solution: “All Hands On Deck”

“The person who figures out
how to harness the
collective genius of his or
her organization is going to
blow the competition away.”
-- Walter Wriston, former
Chairman/CEO Citicorp


All Hands On Deck!

A community of adult
individuals with the talent,
spirit, ideas and
commitment to perform
together at a high level,
continually create new
forms of value, and reinvent
themselves as needed to
adapt to situational change.


High Cults Hierarchy Community:
Fascist The New Frontier
States Traditional
Societies Diversity-in-Community
Level of Group Belonging

Governments

Bureaucracies Communities of Practice

Fatalist Individualist
Societal Underworld: Large Metropolitan Centers
“Falling Through the Cracks” Breakdown of standards
Rejected Anomie
Alcoholism / Addiction / Violence Instability / Chaos
Totalitarian Militias Opportunism / Exploitation
States Revolutions

Low High
Level of Diversity & Expression

High Traditional Corporations Renewable Enterprises
Hierarchical Institutions Diversity-in-Community
Conformist Monoculture Partnering/Mutuality
Multicultural
Level of Group Belonging

Orthodoxy
Low Innovation & Learning Heterodoxy
Perpetuation of Status Quo High Innovation & Learning
Non-Renewable Evolution
Renewable Growth
Economic Underworld: Individualist
Trapped
Opportunism & Exploitation
Un/Underemployment Cultural fragmentation
“McJobs” Low Organizational Learning
Chaotic Turbulence
Non-Renewable Non-Renewable

Low High
Level of Diversity & Expression

What’s the RESULT?

• A Self-Renewing organization – that is
highly adaptable to external market shifts,
yet focused on and aligned behind a
coherent business strategy
• Because of the way it is led, a continually-
renewable connection is forged between
corporate strategy and the full capability,
commitment, and innovation capacity of
ALL your people.


Touchy-feely BS?

Lets Look at the DATA

All Hands on Deck – ROI

60-100% employee 24.2% Total Shareholder
engagement Return

49-60% employee 9.1% Total Shareholder
engagement Return

< 25% employee Negative Total Shareholder
engagement Return

Hewitt Associates Employee Engagement & Best Employer Database of 1500 Companies (2004)


“Conformity is the
Enemy of Growth” (JFK)

Higher Proportion of Women 35% Higher Return on
Senior Executives Equity
-- Catalyst 34% Higher Total Return
to Shareholders
Geographic Areas with Significantly Higher Tech-
Higher Concentrations of Driven Business Growth
Gays & “Bohemians”
Carnegie-Mellon economist To stay competitive, hire
Richard Florida more non-conformists, gays,
other minorities


How We Get There

Principles & Practices


Why Traditional Diversity Won’t Work

• Hierarchical Institutions: Traditional diversity initiatives
attempt to “graft” integration of internal diversity onto
the upper-left quadrant
• Hierarchical Institutions were DESIGNED to:
• Repress change, creativity and differences
• Maintain and protect a relatively homogeneous in-
group (senior execs) who retain all meaningful
sources of power and influence

What is required is a transformational change in the
foundational design DNA of organized human systems!

Transformational Change:
Adult-to-Adult Social Contract


Relational Foundation: Partnering


Improve Performance System:
Strategic Options & Recommended Tactics
Strategic Options: Audit Targets:
Strategy & Structure: Strategy/Structure:
• Clarify purpose & strategy • Current strategy implementation plan
• Audit & implement improvements: • Value Delivery Capabilities:
o Financial measures & controls o Key Functions, Teams
o Operations o Business & Operational Processes
o Product & service quality o Roles, Responsibilities
• Define, document & improve core o Metrics
business processes • Consumer-Centric organization
• Clarify roles, responsibilities,
boundaries, accountabilities People:
People: • Leadership/Management practices: e.g.
building commitment-based alignment,
• Build Commitment-based engagement, accountability
Alignment • High Performance Culture
• Build Performance Competencies • Baseline Performance Competencies

Improve Adaptation System:
Strategic Options & Recommended Tactics
Strategic Options: Audit Targets:
Structure: Strategy/Structure:
• Build/redesign Value-Creation • Value-Creation processes: new product
processes – R&D, new product development, business model innovation
development, new business • Key Functions: e.g. R&D, marketing
models
People: People:
• Build Adaptive Relationship skills • Leadership/Management practices: e.g.
leveraging differences, building safety &
• Build Adaptation Competencies trust, supporting creativity, dealing with
• Build Integrity-based processes to difficult problems/issues
manage differences & issues • Adaptive Culture elements: e.g.
• Build trust & safety creativity, learning, managing change,
emotional intelligence, visioning
• Develop expectations of how
individuals, groups & organizations • Baseline Adaptation Competencies
build & manage renewal • Adaptive Relationship skills

Summary Comparison:
Institution
vs.
Self-Renewing Organization


Institution (Defended) Organization
Change Process: Characteristics:
Freeze – Unfreeze - • Difficulty letting go of
Refreeze status quo
Performance • Mission: short-term
System financial performance
• Difficulty with learning,
change & development
• Rigidity – High control –
Low trust
Untapped • Security is key driver
Capabilities
• Anxiety & grief repressed
• Differences & alternatives
Adaptation repressed
System

Self-Renewing Organization
Change Process: Characteristics:
Semi-Continuous • Community sustainability
Flow overrides status quo
• Mission: Service to a larger
Performance system
System
• Focus on purpose, meaning
• Balance of performance
with learning, change
• Safety & Trust
Untapped • Emotion is acceptable
Capabilities
• Insecurity accepted as basic
to life
Adaptation • Differences prized
System

Addendum:
Going Deeper


Summary Comparison
Performance System: Adaptation System:
Primary Purpose Short-term results Long-term sustainability
Primary Orientation Status Quo New Ideas & Directions
Underlying Form Production machine Evolving life-form
Visibility Visible, Manifest Somewhat invisible, latent
Core Process(es) Consistent execution Innovation, learning, change

Basis of Effectiveness Efficiency, Productivity, Creativity, Relaxation,
Quality Redundancy
Social Foundation Alignment Diversity
Key Activity Tasks Relationships, meaning, emotion
Orientation to change Planned Emergent
Core Competencies Rational, analytical, concrete Inspirational, synthesis, visionary


Self-Renewing Human Systems
Organization

Performance System:
•Structure Performance Size of Channel:
•System •Degree of collective
•Roles & Tasks
Domain
differentiation (vs.
•Shared goals, group merger)
norms, perspectives Channel •Degree of Repression
•Developed
competencies Accessing Adaptation
•“How things get Domain:
done”
•Visible 1) Use of “Negative
•Aligned Capability”
2) Action Inquiry
3) Create a “Safe
Adaptation System: Untapped Container – safety,
•Latent capabilities Capabilities trust, interpersonal
•Alternative boundaries
perspectives 4) Access latent
•Identity contents:
•Meaning • Active Imagination
•Archetypal contents Adaptation • Symbol
•Shadow Domain • Group Self-Image
•Invisible • Story
•Unaligned • Dreams
• Drawing

Performance System: Dynamics
• Provides order, structure and discipline necessary to deliver
value, and integrate value creation
• Balances:
• Stability and the need for change
• Environmental requirements with internal needs for
growth and development
• Problematic tendencies:
• Narrowing of focus to short-term goals only
• Defending/protecting status quo
• Repressing differences, diversity, alternatives and growth
• Institutionalization

Performance System:
Functionality and Alignment
The Performance System is functional to the
extent that:
• The current Task Focus aligns with a genuine need
in the environment
• Task Structure, Competencies & Culture are
aligned with the shared task
• System members are authentically aligned with
the Performance System and their role in it


Adaptation System Dynamics

• Source of innovation, vitality & renewal
• Provides balancing corrective to the PS’ short-term
tendencies
• Seeks long-term growth of the organization (wholeness):
 Fulfillment of deepest & highest purpose
 Broadening of strategic & competence spectrum
 Development of untapped potential
 Integration of internal fragmentation, differences,
shadow
• Challenge: Mostly outside of day-to-day awareness


The Cycle of Renewal
PERFORMANCE
(Making It)

Business Model
Strategy
(Re)Build Products/Services AWARENESS
+
Supporting
Organizational
Components

(Re)Focus ACCEPTANCE

The Cycle of Renewal: Phases
Performance:
Create excellent results through tight
alignment between the Performance
Architecture and external & internal
needs

(Re)build: Awareness:
• Redesign and rebuild the Sense that the current
Performance Architecture to Performance Architecture no
realign with changed needs longer meets external or
• Work through emotional & internal needs
political consequences

(Re)focus: Acceptance:
• Create a new direction for Work through emotional &
the organization political resistance to change
• Work through emotional &
political consequences


Building Renewal Capability: The Cycle of Organizational Adaptation and Growth

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