Organisations evolve and, with so many people spending less and less time in any one job, managing that evolution is more important than ever. At the same time the huge changes being wrought by technology combined with new global dynamics are making understanding what has evolved, and what is in place simply because it has always been so, a priority. For me, the importance of finding out why things are as they are hit home when I was helping a client who was collecting data which seemed to have no purpose. It turned out their predecessors had started collecting the data during the Second World War when it was needed in case of invasion!
To understand why organisations hold onto the past so readily, it’s tempting to repeat the famous “five monkeys” experiment. To paraphrase the telling of the story, a group of monkeys is in a cage with a ladder supporting a banana. The first monkey that climbs the ladder to get the banana triggers all the monkeys to be hosed down. This is repeated until the lesson is learnt: “don’t climb the ladder”. More monkeys are added to the enclosure and they try the ladder, before the hose can be used the other monkeys pull them off. Over time, all the “old” monkeys are removed until only monkeys who joined after the last hosing are present. These “new” monkeys still stop each other and any additional newcomers from climbing the ladder, they do so only as a cultural norm rather than any direct knowledge of why the ladder is bad.
I wanted to use the monkey story in a speech about transformation and began researching its origins. What I found was that the experiment is a myth and the story allegorical. It seems to originate from a management book in the 1990s and gained further credibility through retelling in magazines and social media.
Rather than fake experiments, behavioural economics gives us the best insight into why people hold onto the past and resist change. I recommend Dan Ariely’s excellent Predictably Irrational. Ariely uses a series of (academically sound) experiments to show that as humans we have a loss aversion. In particular, he shows we prefer “free” products and services even when we know they really have a hidden cost. We are so afraid of wasting money, in even trivial amounts, we will often make inferior choices.
This is never more so than when executives make “no regrets” investments. This is a nice way of saying that they are giving in to their loss aversion over rational risk taking. Usually these decisions involve minimal upfront cost and attempt to avoid risking a loss through a wrong decision. There are four categories of investment that are most often candidates for these “no regrets” decisions: technology, workforce skills, supplier selection and acquisitions.
The organisation that fears loss over opportunity puts off major technology investments in favour of tactical fixes in case vendor products change, uses contractors to avoid investing in skills in case future growth doesn’t come, buys only from major suppliers in case the more innovative alternatives don’t survive and shies away from business acquisitions for fear that they dilute shareholder value. By comparison, the most valuable and successful businesses have taken bold positions in all four categories. Interestingly, these same successful companies have made expensive errors and learnt from then, they aren’t afraid of risk.
A good way to overcome a fear of making mistakes is to be deliberate in designing the future in the full knowledge that every decision, or avoidance of a decision, carries risk. This is “deliberate design”. So often we just accept that a new approach isn’t possible in our own organisations. The deliberate design of technology plans for the long-term future even if it means making existing investments redundant. The deliberate design of workforce actively trains staff, often using a “train the trainer” approach, and hires for the workforce five years hence. The deliberate design of the supplier and alliance ecosystem seeks out innovative startups and makes informed bets knowing that they will learn more than they will lose in the long-term. The deliberate design of additions through acquisition looks to make bets based on the best knowledge of today, knowing that shareholder value may be destroyed in the short-term but growth without the injection of new capability is almost impossible to sustain.
A great metaphor which helps maintain the positive momentum of deliberate design and counter our negative fears is “dancing”. Mike Lipkin has done this best in his book Dancing with Disruption which focuses on maintaining momentum in the face of disruption: knowing the context, dreaming big, being analytical, being prolific, communicating, collaborating and, above all, remaining unconditionally enthusiastic.
Understanding our tendency to hold onto the past and fear change, I’ve concluded that we should stop worrying about digital disruption and pivot to a more positive frame of understanding uncertainty. With the knowledge that this uncertainty means we will sometimes make wasteful investments, but almost always gain more than we lose, we can have the confidence to embrace deliberate design for the future.