Man of String

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

In this second of two posts I describe a new business paradigm that is quietly emerging across all our major industries. 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. As well as introducing the flow by design paradigm, I have attempted to synthesize its underlying design principles and have given examples from various industries to illustrate its broad applicability, its impact and its power of meaningful differentiation.

The Flow Paradigm

Open Road Tolling (ORT) has transformed toll road driving and provides a vastly superior motorist experience compared to a toll booth, especially for commuters. No stopping, no wasting time in rush hour lines, no searching for the exact change, no getting stuck behind “that” driver. Instead, ORT is designed specifically to allow you to continue your journey without interruption, to maintain your flow. And if that’s all it did, it would still be reason enough to love ORT. But not only does it save you time, it’s also cheaper and safer for you. It’s a better solution for the toll operator, being cheaper to manage and to maintain than the toll booths. And because it eliminates stopping and waiting it also increases fuel efficiency and reduces carbon monoxide and other emissions, providing an environmental benefit as well.

A flow, then, is something free to move and set in motion, like a motorist on an ORT toll road, as opposed to something held in a silo, like a motorist at a toll booth. Flow can apply to just about anything, including people, ideas, natural resources, money, products, even waste. It carries with it the idea of being able to maintain steady progress, even across boundaries or borders between domains, modes or territories of any sort. Flow-based solutions, like ORT, make it possible to use, improve or process a resource without having to stop it first, and instead allow it, or even make it easier for it, to maintain its flow. In this way flow-based solutions represent a total upending of traditional silo solutions which, like the toll booth, operate by stopping, immobilizing and batching up resources prior to working on and/or extracting value from them.

The remarkable thing about flow-based solutions is that, regardless of industry or resource application, they nearly always have the same triple whammy effect as ORT, improving the customer experience, reducing operational costs, and improving environmental or community impact, all at the same time. They commonly disrupt industry norms and orthodoxies and share, even if implicitly, a set of design principles that generate and guide this revolutionary business model. These principles can be used by other organizations who wish to design their own flow-based solutions and achieve a similar impact. These principle include

Create flows of information, materials, people and other resources, thereby removing waste and building a capability of immediacy and responsiveness;

 In retail, the Spanish fashion retail chain Zara is built on a continuous flow and feedback model. They produce and distribute in small batches, reducing the design-to-shelf cycle time from an industry average of 6-9 months to 2-4 weeks. They maintain low inventory levels in their stores. Information flows daily from consumers to designers - what they say they’d like to see, what they try on but discard in the dressing room, and what they actually buy – and responsive product flows back to them. And it works. They took over from The Gap as the largest retail fashion store in the world in 2008.

Build connectedness with the communities, markets, industries or ecosystems of which the organization is a part, not independence from them;

In energy and industry, the Danish industrial park of Kalundborg stands alone in its commitment to Industrial Symbiosis, the sharing between organizations of byproducts as resources, including both energy and material, to reduce waste, costs and environmental pollution. Since its initial experiments in 1972 membership has grown to include over 30 byproduct exchange agreements between some of Denmark’s largest organizations. Between them they have reduced yearly CO₂ emission by 240,000 tons, saved 3 million m³ of water through recycling and reuse, and recycled 150,000 tons of gypsum. The park as a whole operates as a flow system, providing inspiration, example and analogy for innovative multi-organizational collaborations of all types.

Remove organizational and ideological “silos”, and favor integration and sharing over isolation and protection;

In public education, High Tech High School rejects most educational norms. It removes the distinctions between school and community, adult and student, academic and technical, privileged and under-privileged, and draws connections between them all through field studies, community service, internships, consultation with industry partners and other outside experts, and exhibitions in professional venues. Some 98% of HTH graduates go on to post-secondary education compared to a national average of approximately 66%. As a result, it ranks as USA’s #1 STEM school (Science, Technology, Engineering and Mathematics) by U.S.News,

Design for customer experience and relationships over touch-points and transactions;

In healthcare, Memorial Sloan-Kettering has re-imagined chemotherapy treatment from the bottom up and from the patient’s perspective, starting with the insight that time, especially time spent with family, is their patients’ most precious commodity. At the Brooklyn Infusion Center, waiting times have been eliminated. Patients are free to move around, bring family members with them, and create a soothing or healing environment for themselves. The workflow is so different from the norm that nurses are cross-trained as Reiki massage therapists and can provide guided imagery and other integrative therapies as their patients receive their infusions. All at high safety and quality levels and at a lower cost than the traditional model.

Design, measure, and optimize for the effectiveness and wellbeing of the system as a whole

 In agriculture, a Spanish fish farm has turned the traditional agricultural model on its head. Veta La Palma is a farm that does not isolate its animals from other parts of the ecosystem but allows them to integrate fully. It does not feed its animals but allows them to feed from their ecosystem, as they would in the wild. It doesn’t kill its predators but measures the success of the farm by their wellbeing. It does not pollute or impoverish the environment but actually purifies and enriches it. It has become a bird and wildlife sanctuary, and it provides direct income to about 100 people from the neighboring villages. And, according to Dan Barber, the chef whose story about Veta La Palma has to go down as one of the best TED talks of all time, the fish tastes absolutely delicious!

Summary

Organizations that have implemented flow-based solutions are typically among the most differentiated and the most successful players in their industry or market. And yet they represent a very small part of the whole. As a result there is a massive opportunity for transformation, including everything from how we eliminate waiting in various lines, rooms and phone calls to how we get rid of the silos that stop the flow of ideas, information and knowledge across and beyond the organization, from how we utilize flow based energy sources like the sun, wind and water, to how we support soccer Moms, business people and high-school students alike in their respective flows. Any organization that is looking for transformative and differentiated success should consider designing and implementing flow-based solutions and watch their silos crumble.

If you think that designing for flows can make a positive difference  please help me get the word out and share with your networks via Twitter etc.  And please feel free to leave a comment here or contact me by email and I will be sure to reply. Thanks for reading.

 

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.