Flow by Design - a new business paradigm (1/2)

There is a revolution going on across all our major industries, albeit one that has been hiding in plain view until now. A small number of pioneer organizations have reinvented the way they manage their resources, encouraging the flow of ideas and information, raw materials and finished goods, employees and customers, even byproducts and waste. In doing so, they have demonstrated the viability of a new, more sustainable business paradigm for the future. In this first of two posts I explore the current status quo, the Silo paradigm and in the second one I will describe the emerging model of Flows.

Silos - the dominant paradigm

Everyone agrees that silos in the business world are a bad thing. Every few months another well meaning article urges us to bust, smash, destroy or crash them for the continued wellbeing of our firms. And you’d be hard pushed to find anyone actually admitting to owning or running one. So how is it that they keep cropping up like weeds despite our best intentions? What is it about them that causes them to appear not just in the business world but also in science, where their presence is just as criticized and just as ubiquitous, and in education, and in health care, and just about anywhere else we care to look?

The reason is surprisingly simple. It’s because they work, at least for the silo owner. They’ve been working for a very long time, ever since we built the first physical silos for storing grain some 11,500 years ago. From that time on we have found that the more control we have over resources the more valuable we can make them. Silos give us that control. We use silos to accumulate valuable resources and to release them only when they’re most needed and we can exploit their value most fully. And it doesn’t just apply to grain, missiles, or information. It’s how we manage and increase the value of nearly all kinds of resource, and if we look closely enough we will find silos of one kind or another just about everywhere. We accumulate gold and seeds and other strategic reserves in vaults, water behind dams, money in banks, patients in waiting rooms, students in classrooms, employees in cube farms, pigs and chicken in factory farms, and so on almost endlessly. As John Hagel III, John Seely Brown and Lang Davison have noted of knowledge resources, “our firms are organized and operate to accumulate and defend stocks of knowledge and to extract as much value from them as possible.” HBR Blog “Abandon Stocks, Embrace Flow”, January 27, 2009.

In short, nearly all of our organizations, across all industries, are silos or are made up of them.  The problem with many of our silos is that we tend to forget that they are only parts of systems, not systems themselves, and that optimizing for the success of the silo can compromise the overall success and wellbeing of the system, whether that system is a company, an industry, a community or an ecosystem. Silos can create inequalities between those that own and control resources and those that need them. They can deplete and even exhaust resources that turn out to be finite, and they are often slow, reluctant and even incapable of adapting to changing system conditions and needs.

So, if we really truly want to smash the silos, we’re going to need something much deeper than an impassioned plea. We’re going to need an alternative, a whole new business paradigm in fact, and not just for information silos but for all resource types. It turns out that the paradigm Hagel, Seely Brown and Davidson recommended for knowledge holds true for all other resources as well; one based on Flows. A small number of pioneer organizations have already proven the effectiveness of this paradigm, demonstrating that flow based designs can be better for the customer, better for the company and better for the environment than their silo equivalents and, as a result, represent a new, more sustainable business model for the future.

For more information on Flow by Design, a new business paradigm which promotes flows of resources including people, information, materials, products, energy and waste, please feel free to comment on this post. I will be sure to reply.

Comments

[EwanRDuncan]

Agree with the general idea of customer flows (=journeys or lean value streams). One answer may be the matrix.

Functions serve a purpose to build expertise. Cross-functional flows/journeys/streams drive customer value.

You need both, which ends up meaning some form of matrix or councils or committees etc. Or is there something else?

[Henry]

Hi Ewan, great to hear from you. Good question. I agree that functions are the dominant design for building expertise. Historically this is where we have always generated value, from the building, accumulating and protecting of resources of all types, including expertise. Too often, however, the protection of resources by a function (or silo) can reduce the fitness or effectiveness of other parts of the system outside the silo. Hence organizations are not as effective in toto as they could be if expertise, knowledge and other resources flowed more freely through and beyond them.

I don't know if a matrix is the answer organizationally as it creates yet more cells which inevitably start to accumulate their own resources to rationalize and defend their existence. I have been thinking about circulatory systems instead and, conceptually at least, about pumping stations and water towers and pumps more generally and will post a piece on pumping stations if that would be interesting. In brief, we tend to think that ideas will, by nature, flow freely through organizations. The reality is that they don't, and that the structures and processes we put in place to manage them,like functions and stage gates, serve only to stop them, not propel them forward. Pumps by contrast have the purpose and property of pulling product towards them and pushing them out the other side, and pumping stations have the purpose of maintaining pressure on the line to ensure the continued flow of product through it.What might it mean to envisage the organization as a circulatory system where expertise can be increased not just in a function but in the flow itself? Or maybe to envisage customer flows as pipelines, and functions as pumping stations which enrich and propel the flow through themselves? This would certainly require resetting incentives as well as traditional modes of thinking and behaving, but I believe it would ultimately improve overall organizational effectiveness. I'd be happy to discuss this in more detail if that would be helpful to you.

Thanks again and I hope you enjoy part 2, coming in a couple of days. Best, Henry

[David McGaw]

Henry, love the notions of flows as a paradigm.

As you point out, the structures intended to extend flow (e.g., when the organization is too big to fit into a common workspace) instead impose a burden. So how can we work around that? Some systems that seem to work well benefit from widespread belief/alignment on their value to the organization as well as the individual (e.g., contributing my idea to the internal IP platform = greater chance for recognition and therefore promotion). Your notion of pumps that push ideas is a great one; adding on to that, in the context of a flow containing myriad elements instead of just the same common liquid, it would be important to route ideas where they would be particularly useful. Ewan's point about matrices is relevant: we don't want the IT team only to hear the IT-related ideas, but anything that could inform how they create value.

What really needs to change in an organization to make flow work well? There's some technological platforms that come to mind, of course, and rules/standards for exchanging information within them. But I also think there's a critical cultural component: alignment on *why* we invest in flow, and new behaviors that are informed by reframed priorities: it's better to share than to hoard; possibly better to augment/build on than to originate; better to facilitate value in the system than to optimize only locally, etc.

Looking forward to reading Part 2!

[Henry]

David, great to hear from you. Thanks for your comments. You're right, it will take a huge cultural and mental shift for Flows to be adopted widely. The idea that in order to extract value from something - or conversely to reduce its harmfulness - we first have to stop it in its tracks is deeply engrained in us. We grasp ideas, attract and retain talent and customers, arrest suspects and imprison criminals, quarantine viruses, dam water, bank money, hoard diamonds, store data, etc. etc. almost endlessly. And so asking how we might extract value from something on the go or in flow is somewhat counter-intuitive. Yet there are a small but increasing number of examples, and all the examples demonstrate greater overall effectiveness over the default solutions. So you're right, there is a huge relearning that needs to be done. I'm ready to get to it!

Interestingly on mixtures, some physical pipelines do allow product to mix during transportation and then separate elements out later. And there's a kind of battery which may be suited to storing energy from renewable sources (wind, solar etc which, are by the way, all flows) known as Flow Batteries, and the most promising type are called membraneless flow batteries, allowing liquids laminar flow across one another. So you have to look hard but the principles of Flow- based solutions are around and that's how I got to the emerging flow paradigm in the first place.

Thanks again. Let me know what you think of Part 2,which I think will help clarify a little.

Best, Henry

[RogerMader]

Henry
This post, two years past but which we discussed at the time, can serve as a proxy for our email conversation of similar theme. I offer my response to that item here:
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Well another one of those perfect instances appears, where the retort is more valuable than the original provocation. Thank you so much for your powerful erudition - as usual.

I must read Kuhn. You have referenced him and this book to me at least thrice. Time to read. And to adopt your "ratchetyness". That is another book title I want to read, right after Dave's suggestion: "When Raccoons Rule". Thank you both.

Success Matrix is interesting. My initial interrogation was distracted by Theranos, which may merit its own quadrant next to Bernie Madoff and the Volkswagen emissions device design team.

I really only empathize with Jobs to the degree that he was commenting on technology companies in the same space as himself. BSC has the opposite problem as do many companies that leave the product engineers to run the show. They obsess over their craft until they lose all sight of relevance, producing next gen releases that no one actually wants - and worse - that compromise the original. Like the classic Ford case study of over-engineered car seats.

Rather than generalize the way he does, i would submit that failure arises whenever you have any functional imbalance in corporate focus and organizational power. Hand the helm to marketing or sales or product or legal or cost management and you get a skewed business. Getting it right repeatedly in the market means getting it right in the diverse application of many talents. So I think we largely agree on this one?

Getting my head around process replacing org structure. Again my observations can be boringly summarized, like a country sermon, as "balance in all things". You need them all, and all aligned.

[insert propeller model]

But if I had to bias for one it would be an infinitely adaptive process.

Your observation may be right, and definitely snappy, that - like outdated government departments that refuse to die - "companies exist to make a product but then make the product to exist." I would like to see a world where all entities and individuals exist to pursue an ideal, to fulfill a purpose, to right a wrong, and organize accordingly to deliver the solutions that march ever onward in that pursuit.