Harnessing the analogies between human behaviour and organisational behaviour
Successful organisations often struggle to adopt or invest adequately in technologies that end up being the very reason for their demise. This observation from Clay Christensen’s Innovator’s Dilemma, which I was discussing with a senior executive at a workshop in Oxford last year, was not only central to the workshop but also to the role of the executive at one of the biggest tech companies on Earth and to the changing fundamentals of that business because of AI.
That conversation continued over dinner and like many deeper discussions, the lines between the business and personal began to merge. That blending of worlds started an exploration of a different way to think about how organisations evolve over time in response to the inevitable changes that happen to them and sometimes because of them.
The usual suspects given to demonstrate the innovator’s dilemma are Blockbuster and Netflix, or Kodak and the new era of digital photography because both Blockbuster and Kodak not only knew about the new technologies that significantly contributed to their problems, but in Kodak’s case, they had already invested significantly in them (it produced the first consumer-grade digital camera), and Blockbuster had earlier been given the opportunity to buy the company that ultimately was the biggest factor in its destruction (Netflix’s pitch was for them to be the online service provider for Blockbuster).
What makes this particularly perplexing is that these companies are almost always the dominant players in any given market; they are riding high, have all the resources and attract the best talent.
There are exceptions. Some companies, such as Fujifilm, are able to reinvent themselves. It faced similar challenges to Kodak yet managed to evolve into adjacent domains:
- By using its imaging expertise to create digital x-ray systems and other medical equipment, it became a leader in medical imaging.
- By discovering that the same antioxidants that prevented colours from fading in film could be used in skincare products, it created a successful line of cosmetics.
But most companies struggle to evolve like that. There are many theories about why this is the case but as Professor Marc Ventresca elegantly explains, it boils down to how to balance prioritising what makes you money today, whilst also prioritising what will make you money tomorrow.
This is both very common and very difficult to do. Why?
Two fundamentally different worlds
With 'Exploit', you have something that requires efficiency, optimisation and smaller, more incremental innovations in markets that are known, that are defined. Exploit has a way of being that is about consistency, predictability and the routine.
With 'Explore', you have something that requires a very different set of skills, mindset and view of what success looks like. It’s about experimentation and radical innovation, in markets that are yet to be defined, where there is a great deal of ambiguity. Explore has a way of being defined by variance, playfulness and experimentation.
These are not easy bedfellows. In fact they are often the antithesis of each other. Put another way, it’s like trying to surf two waves at once, knowing at some point you’ll probably have to jump off one and on to another, but you aren’t sure how or when to do it.
The central problem seems to be that organisations have what O’Reilly & Tushman call the 'Success Syndrome'. A syndrome that is grounded in them being naturally built to exploit, with all their systems designed to do what they currently need to do to be successful: from the technologies used, the KPI’s designed to ensure they deliver, to the kinds of people employed, what motivates them and the systems developed to keep all those things in an optimal place. It wants innovation, but not too much, it doesn’t really want to rock the boat. The more successful they are, the stronger the bonds that keep those parts in place are as well. It’s a system designed to support what worked before, not embrace what might work tomorrow.
The psychological challenges of change
Alongside this more functional explanation, there is also arguably a deeper challenge at hand: humans really don’t like the uncertainty and ambiguity change requires.
To give you an idea of quite how much, in a landmark 2016 study de Berker et al presented people with a number of different stressful situations, including getting a nasty electric shock. They found that people would rather know they were going to get a nasty electric shock, than that they would have a 50/50 chance of getting one. It’s an extraordinary finding.
Dr Maya Shankar argues this is because we all crave ‘Cognitive Closure’, the compelling desire to feel control over a situation, to feel like things are known. This is compounded by people struggling to imagine themselves changing ('The end of history illusion') and the cognitive biases such as 'Consistency and Functional Fixedness' that we all share.
If the people who create and run organisations are like this, it feels safe to assume the companies themselves exhibit these traits as well. The success syndrome is as deep as is it pervasive.
So how do you solve it?
Behind every business problem and opportunity lies a human one
There are many theories with lots of different points of origin, but arguably the most compelling is that presented by O’Reilly and Tushman’s ‘Dynamic capabilities' and the powerful idea that the explore vs exploit balance requires an organisation to be ‘ambidextrous’. A solution where different parts of an organisation have a different focus, and that with careful management, the explore parts can build to and from existing capabilities without derailing their successful exploit parts.
If we lean in even more to the human that sits behind every business opportunity and challenge, and interrogate how we as individuals are able to adapt in the long term, what kind of answers do you get?
But as powerful as this idea is, challenges remain: despite the best intentions, institutional wisdom and the systems built from them often curtail the ability to evolve those systems, even when much of the organisation knows it should change. And even more problematic, is the root cause of that reticence to change: there is no defined mechanism for deeper, productive reflection. There is no effective mechanism that would allow different parts of an organisation to step in and outside of themselves and see what they are doing in an objective light, free, at least for a time, from the shackles of the success syndrome.
This is where the Oxford conversation got me thinking. If we lean in even more to the human that sits behind every business opportunity and challenge, and interrogate how we as individuals are able to adapt in the long term, what kind of answers do you get?
Internal Family Systems Therapy - where part of you isn’t all of you
I have tried many different kinds of therapy over the years, but the one I found most powerful is ‘Internal Family Systems Therapy’ (FST) created by Richard Schwartz. The core idea is this: where more traditional forms of therapy consider an individual’s psyche to be like an onion, where we slowly peel away the layers to get to the essence of us, FST sees each person as a bulb of garlic, comprising of many cloves, and you must therefore understand each clove as well as the overall system, the family of parts (hence the slightly confusing name) in order to make progress. Schwartz calls each clove a ‘part’ and each part plays a significant role in our lives.
He argues that each part has its origins in our earlier development, each has a personality that was born to help us cope with situations we found ourselves in. These parts have a role to play and they do it to the best of their ability. They don’t question that role, because they have never really had to. There is a core assumption at the centre of their existence - it worked before - and they assume that’s the way it should always be, because it’s what they are designed to do. The attitudes and behaviours that flow from these parts, as individual elements and as an overall system, naturally reinforce each other.
And because of this, these parts can stay stubbornly in place, even though the world around them has moved on. Without careful guidance, they can derail any attempt to change, even if that approach is what is probably needed for them to survive and thrive.
If you look at the organisational success syndrome through this lens alone, I imagine you will begin to see the parallels.
Growing into something else
But where it get’s really interesting is in how FST helps those parts evolve. There is a part of you that is different from others, Schwartz calls it the ‘Self’. It feels timeless and it is the part of you that allows you to get to know the other parts.
It’s a system that allows you to step in and outside of yourself, letting you get to know the parts but also they get to know themselves and each other. They are then able over time to understand that they have gifts, but they may not be relevant to the world that they now live in. They are encouraged to challenge their assumptions and explore their deeply held beliefs.
As they begin to evolve they are able to release themselves from their current roles, finally able to evolve, taking all that energy, all those capabilities and focus on something that is more relevant to this life, to this time. They grow into something else.
This feels like an intriguing way to think about organisations and how they succeed in the longer term.
Working with organisational parts
There are parts that are timeless, stable: those things, like its culture, or its organising idea and convictions about the future, that makes that organisation unique. An organisational ‘Self’ that is also able to look at itself calmly with an open mind and a solution centric mindset.
Then there are the parts that are designed to do specific things, in specific ways, surrounded by systems designed to keep those parts in place and working well. Most of those parts are exploit dominant, but others will lean more towards explore.
As the world shifts around them, as technology, culture, markets and the needs of the planet evolve, the parts and the system that holds it together are potentially given a way to successfully evolve because it, and they, are able to do three deeply intertwined things.
A potential prescription: Reflect. Reveal. Realise.
Each part is given the permission, the space and tools to reflect, then reveal what might need to change and then finally realise the changes those revelations suggest.
This process begins with the ability to ask important, intriguing and often difficult questions of themselves and the work they do: Are our assumptions still right? What new beliefs flow from exploring ‘Workarounds’ (Paulo Savaget) that people find when conditions are far from ideal? What do we see if we go back to first principles? What new, unconventional thinking and beliefs emerge? (Betmead, Maverick Model 2024)
It leads to questions that are more functional in nature: Do we need to make the same things in different ways? Do we need to make different things? These questions force a reflection that is both outward facing, sensing what is going on in the world, but also introspective, looking at what that means for them.
It’s a system, like that of FST, that is built to ask, then try and answer those questions through open, honest and vulnerable conversations that are transparent, psychologically empowering (Han et al 2022) in their content and deeply practical, progressive in their approach.
The challenge here is that you create a system that is designed to help but becomes stifling, where everyone, everywhere is constantly checking themselves and the work they do.
A potential model of engagement
This is where another FST principle is useful. Whilst the relationship you have with the parts, including the Self, is a continuous affair, it is structured around regular check ins, especially during the early stages. Outside those, you are mindful of them and of yourself, but you get on with your life.
You are also encouraged to notice when a specific part takes central stage, because that can often be an ideal time to engage with it outside these structured settings. It’s when you recognise the symptoms that an attitude or behaviour may be maladapted, and you can check in and begin to course correct in a productive way, right there in the moment of truth.
If you overlay these engagement principles into an organisation, it gives you two types of intervention that creates a time and place for both regular reviews as well as more fluid, situation specific interventions.
Depending on the size and shape of a company, the management systems can be built around these reviews, in the moment - to help with ‘exploit’ dominant optimisations which will involve smaller, more incremental changes; as well as less frequent entire business reviews where the balance of ‘exploit’ and ‘explore’ can be intentionally discussed. Because of this, wherever parts sit on the explore-exploit spectrum, they are more likely to recognise themselves both in the problem and the solution, they are more likely to work towards answers that work for all of them, not just one of them.
Lastly, if you give all parts a success metric that includes their ability to reflect, reveal and realise, that measures the ability to build on the past to create a different future, it makes a more successful future even more likely.
In an increasingly changing business world, this is a system that is able to see the bigger picture but also remain in the present, to build bridges between different parts and then let those parts evolve into something more, something better.
Associate Fellow and alumnus Saul Betmead de Chasteigner, with guidance and input from Professors Paulo Savaget, Daniel Armanios and Marc Ventresca, wrote this class note for executive students and alumni at Oxford University’s Saïd Business School. It explores key concepts in leading and managing innovation and systems change in complex, distributed contexts, using cases and discussions to challenge readers to navigate complexity, ambiguity and identify novel leadership levers.
