leadership and complexity
DESCRIPTION
Countries, Industries and Organisations are operating in an increasingly complex word where interdependencies abound. Under these conditions Leadership faces enormous challenges and strategising has to be done on the edgfe of chaos.TRANSCRIPT
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Towards making sense
Complexity science implications for Leadership, Business and Industry
Leaders make the impossible happen
Dr. Llewellyn B. Lewis
BMI CENTRE FOR STRATEGY, LEADERSHIP-AND ORGANISATIONAL- REINVENTION
www.strategicforum.co.za
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www.leadershipreinvention.co.za
THE LANGUAGE OF COMPLEXITY
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� The pace of change has accelerated way beyond the comfort zone of most people
� The rules that guided decisions in the past, are no longer reliable
� The elements of change that are driving these momentous shifts, are based on the
fundamental dimensions of the universe itself.
� Time, space and mass (Stan Davis : 2001)
www.strategicforum.co.za
THE LANGUAGE OF COMPLEXITY
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THE LANGUAGE OF COMPLEXITYwww.strategicforum.co.za
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� Connectivity is putting everyone and everything on-line in one way or another and has led to the
death of distance, a shrinking of space.
� Intangible value of all kinds like service and information, is growing explosively, reducing the
importance of tangible mass.
� Connectivity, Speed and Intangibles – the derivatives of time, space and mass – are blurring the rules and redefining our businesses and our
lives.
� What we see is a melt-down of all traditional boundaries.
(Stan Davis : 2001)
THE LANGUAGE OF COMPLEXITYwww.strategicforum.co.za
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� Since the economy and business are part of the universe, time, space and mass are the fundamental
dimensions of them as well.
� Until recently, this notion was too abstract to be very useful.
� Now we are realising the extraordinary power this insight has to the business world.
� Almost instantaneous communication and computation are shrinking time and
focusing us on speed.(Stan Davis : 2001)
THE LANGUAGE OF COMPLEXITY
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THE LANGUAGE OF COMPLEXITY
Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics. The challenge of Complexity: 2000)
�Chaos�Complexity� Diversity�Strange Attractors�Emergence�Self Organisation�Critical Mess�Order for Free� The Butterfly effect
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� Since the time of Newton, Bacon and Descartes, scientists have tended to understand the natural world in terms of machine-like regularity in which
given inputs are translated through absolutely fixed laws into given outputs
� Cause and effect are related in straightforward linear ways
� According to this Newtonian view of the world, humans will ultimately be able to dominate nature� This whole view of reasoning and understanding was imported into economics, social sciences and
psychology (Source: Based on Stacey, Ralph D. Strategic Management & Organisational Dynamics. The
challenge of Complexity: 2000: 259)
THE LANGUAGE OF COMPLEXITY
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� This importation is the source of the stable equilibrium paradigm that still dominates
thinking on managing and organising� That thinking is based on the belief that
managers can in principle control the long-term
future of the system
� Such belief is realistic if cause-and-effectlinks are of the Newtonian type, for then the
future of the system can be predicted over the
long-term and its future can be controlled by
someone. (Source: Based on Stacey, Ralph D. Strategic Management &
Organisational Dynamics. The challenge of Complexity: 2000: 259)
THE LANGUAGE OF COMPLEXITY
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�Chaos exists outside abstract mathematical
equations, for example the world’s weather system
� The weather is patterns in interdependent forces such as pressure, temperature, humidity
and wind speed that are related to each other by
non linear relationships� To model its behaviour, the forces have to be
measured at a particular point in time, at regular vertical intervals through the atmosphere from each
of a grid of points on the earth’s surface (Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics. The challenge of
Complexity: 2000: 259)
THE LANGUAGE OF COMPLEXITY
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�Rules are then necessary to explain how each of the sets of interrelated measurements, at each
measurement point in the atmosphere, move over time� This requires massive numbers of computations� When these computations are carried out they reveal that the weather follows what is called a
strange attractor, another name for a chaotic pattern. What this shape means is that the weather
follows recognisably similar patterns, but those
patterns are never ever exactly the same as at
any previous point in time (Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics. The challenge of Complexity: 2000: 259)
THE LANGUAGE OF COMPLEXITY
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�Chaotic dynamics means that humans will
never be able to forecast the weather at a
detailed level for more than a few days ahead. The theoretical maximum for accurate forecasts is two
weeks, which meteorologists are nowhere near reaching yet
� The reason for no two snowflakes ever being the same can be explained using chaotic dynamics� One of the most intriguing discoveries is that
healthy hearts and healthy brains display
mathematical chaos (Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics.
The challenge of Complexity: 2000: 261)
THE LANGUAGE OF COMPLEXITY
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� The heart moves into regular rhythm just
before a heart attack and brain patterns during epileptic fits are also perfectly regular
� It seems that chaos is the signature of health
� The properties of low dimensional deterministic chaos have been applied to non
linear feedback systems in meteorology, physics, chemistry and biology
� Economists and other social scientists have been exploring whether these discoveries are relevant to
their disciplines (Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics.
The challenge of Complexity: 2000: 259)
THE LANGUAGE OF COMPLEXITY
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THE LANGUAGE OF COMPLEXITY
THE NOBEL PRIZE: 2005
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THE LANGUAGE OF COMPLEXITY
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� There are indications that chaos explanations give insight into the
operation of foreign exchange markets, stock markets and oil
markets (Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics.
The challenge of Complexity: 2000: 259)
THE LANGUAGE OF COMPLEXITY
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SELF-DIRECTED TRANSFORMATION
CRITICAL MESS
ENVIRONMENTAL CHANGE
RISKRUDE AWAKENING
CHAOSUNCERTAINTY
FIRST CURVE
SECOND CURVECREATING THE FUTUREIMPOSSIBLE RESULTS
EMERGENCESTRANGE ATTRACTORS
(Based on Handy : 1994)
THE BUTTERFLY EFFECT
THEEDGE OF CHAOS
COMPLEXITYFIELD THEORY
ZONE OF CREATIVITY AND ADAPTABILITY
LEADERSHIP AND COMPLEXITY
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YOUNG(Development, Growth)
PRIME(Shakeout)
MATURE(Maturity)
DEMISE(Decline)
High
Low
Low High
INTEGRATION – Have capabilities, can do things
DIFFERENTIATIONCan recognise new things
(Source: Based onWind and Crook: 2005)
(Source: Johnson and Scholes: 2002)
LEADERSHIP AND COMPLEXITY
YOUNG PRIME MATURE DEMISE
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� The danger for mature individuals is that they will miss changes in the environment because all new information will
be force-fitted into the old model.� With maturity comes considerable experience and a vast mental model
repertoire, which are both a blessing and a curse.� Demise follows when the ability to get things done
diminishes and new things are increasingly difficult to handle.� Individuals have little choice but to follow this path from youth to demise in their
physical development, although many consistently reinvent themselves to stay young in their thinking.
(Source: Based on Wind and Crook: 2005)
LEADERSHIP AND COMPLEXITY
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TWO PARADIGMS OF BUSINESS
UNIVERSAL BUSINESS PARADIGM
RE-INVENTION BUSINESS PARADIGM
� Quantum Physics
� Non Linear, organic and complex adaptive system
� Systems theory, Chaos theory, Complexity Science
� Influence, rather than control
� Emergent teams, self selected and self organised
� Uncertainty, limited ability to predict
� A WORLD MADE UP OF RELATIONSHIPS WITH INFINITE POSSIBILITIES
� Newtonian Mechanics
� Linear thinking
� Mechanistic
� Cause and effect
� Action and reaction
� Centralised Control
� Hierarchical structure
� Job titles and job descriptions
� Predictability
� A WORLD MADE UP OF THINGS WITH FINITE POSSIBILITIES
(Based on Lewin and Regine : 1999)
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THE WORLDS OF HORUS* AND SETH*
INDUSTRIAL AGE CULTURE IN THE AGE OF HORUS*
INFORMATION AGE “SPIRIT” IN THE AGE OF SETH*
� Learn a skill
� Security
� Job preservation
� Capital equipment
� Status quo
� Hierarchical and regulated
� Zero sum
� Measure inputs
(Grulke : 2000)
Seth, the god of chaos and disorder.
* Horus, the god of structure and predictability.
Even thousands of years ago, the conflict between order and chaos, and the dilemmas created for those in authority, were well recognised.
� Lifelong learning
� Risk-taking
� Job creation
� Intellectual capital
� Speed and change
� Distributed and networked
� Win-win
� Measure outputs
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THE WORLDS OF HORUS* AND SETH*
(Grulke : 2000)
“ In a very real sense, today’s business executive is in the same position as
that stone pharaoh.
Everything we have been taught about business was crafted in the Industrial Age -
in an economy where central authority, predictability and control
were the touchstones.”
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THE WORLDS OF HORUS* AND SETH*
“ The unwieldy corporate cultures of the Industrial Economy are rapidly being replaced by a kind of team spirit especially suitable to the new eCommerce organisations of today -
swift, nimble and driven by almost religious visions of the future - “Don’t look for profits
here, we want to change the world!””
(Grulke : 2000)
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ECONOMY IN TRANSITION
INDUSTRIAL ECONOMY RESOURCES
INFORMATION ECONOMY RESOURCES
� Information
� Knowledge
� Skills and Ideas
� Raw Materials
� Real Estate
� Cheap Labour
(Grulke : 2000)
THE INDUSTRIAL ECONOMY HAS BEEN WITH US FOR HUNDREDS OF YEARS.OUR FOREFATHERS COULD BE BORN INTO THIS ECONOMY, THRIVE IN IT AND
RETIRE IN IT WITHOUT EXPERIENCING SUBSTANTIAL CHANGE.
THE NEW INFORMATION ECONOMY, DRIVEN BY COMMUNICATIONS AND COMPUTER TECHNOLOGIES, HAS BROUGHT MORE ECONOMIC TRANSFORMATIONIN THE PAST DECADES THAN THE INDUSTRIAL ECONOMY BROUGHT IN THE PAST
CENTURIES. THE INFORMATION ECONOMY WAS BUILT ON THE SUCCESSES OF THE INDUSTRIAL ECONOMY, AND THEN LEAP-FROGGED THE ECONOMIC IMPACT.
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LEADERSHIP IN TRANSITION
INDUSTRIAL AGE INFORMATION AGE
� Skills
� Attitude
� Leadership
� Knowledge
� Experience
� Management
(Grulke : 2000)
THE NEW JOBS DEMAND THE ABILITY TO APPLY KNOWLEDGE IN THE FORM OF SKILLS.
EXPERIENCE HAS CONTINUALLY LESS VALUE AS THE PACE OF CHANGE INCREASES - ONLY THE RIGHT ATTITUDE TO UN-LEARN AT EVERY STEP
OF THE WAY WILL WIN THE DAY.IN A FRACTAL BUSINESS NETWORK THERE ARE FEWER MANAGEMENT
JOBS AND GREATER DEMAND FOR LEADERSHIP AT ALL LEVELS.
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The move from the “control” model, that comes
down almost unchanged from Moses, in the
hierarchic principle, toward the “servant”model, begins with cultivating the attitudes that will
permit the shift from coercion and manipulation to persuasion as the the predominant modus
operandi in institutions generally.“I believe that caring for persons, the more able and the less able serving
each other, is what makes a good society.”(Robert K. Greenleaf : The leader as servant : 1998)
“Whoever would be great among you must be your servant, and whoever would be first among you must be your slave”
(Matthew 20 : 26,27)
LEADERSHIP REINVENTION
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ROMANTICDREAMERSDreamsDisturbing the status quo Paradigm shift
Not possible results
SUPERMAN(AGER)S(SHAKERS) Developing Vision, Setting goalsFocus on Doing (more, better, faster)Paradigm pioneeringStretch results
DOINGProcesses, Policies and Business Detail
BE
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Pa
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, C
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CH
AN
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FO
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AL
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TRANSFORMATIONALLEADERS (MOVERS)Creating contextFocus on Being (Transformation)Paradigm reinventionImpossible results
PRACTICALDOERSRoutine tasksFollowing ordersParadigm enhancement
Possible results
DOERS AND DREAMERS SHAKERS AND MOVERS
LEADERSHIP REINVENTION
©BMI-CSLORLC28LC28 ©BMI-CSLOR(Based on Treat : 1999)
The Great Exchange
LEADERSHIP REINVENTION
UNIVERSAL HUMAN PARADIGM
FOCUS ON DOING
REINVENTION MASTER PARADIGM
FOCUS ON BEING
©BMI-CSLORLC29LC29 ©BMI-CSLOR(Based on Treat : 1999)
FUTURE UNKNOWN WORLD
(“The Promised Land”)
CURRENT KNOWN WORLD
(“The Wilderness”)
The Great Exchange
� Pull of the Past
� Slavery
� Day to Day issues
� Satisfied with Mediocrity
� Surviving
� Conformity
� Grasshopper Paradigm
� Paradigm Paralysis
� Challenge of the Future
� Freedom
� Dreams and Visions
� Striving for Excellence
� Thriving
� Transformation
� Eagle Paradigm
� Paradigm Reinvention
LEADERSHIP REINVENTION
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FUTURE UNKNOWN WORLD
(“The Promised Land”)
CURRENT KNOWN WORLD
(“The Wilderness”)
The Great Exchange
� Pull of the Past
� Slavery
� Day to Day issues
� Satisfied with Mediocrity
� Surviving
� Conformity
� Grasshopper Paradigm
� Paradigm Paralysis
� Challenge of the Future
� Freedom
� Dreams and Visions
� Striving for Excellence
� Thriving
� Transformation
� Eagle Paradigm
� Paradigm Reinvention
UNIVERSAL HUMAN PARADIGM
FOCUS ON DOING
REINVENTION MASTER PARADIGM
FOCUS ON BEING
LEADERSHIP REINVENTION
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FUTURE UNKNOWN WORLD
(“The Promised Land”)
CURRENT KNOWN WORLD
(“The Desert”)
The Great Exchange
Thomas Kuhn found in his study of scientific revolutions
that you can’t convince the protectors of the old paradigm with better arguments.
The reality is that you have to wait until the establishment scholars finally retire from their positions and are
replaced by a younger and more open generation of scientists.
(Senge, Scharmer, Jaworski and Flowers: 2005)
LEADERSHIP REINVENTION
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FUTURE UNKNOWN WORLD
(“The Promised Land”)
CURRENT KNOWN WORLD
(“The Wilderness”)
The Great Exchange
No one wants to die. Even people who want to go to heaven don’t want to die to No one wants to die. Even people who want to go to heaven don’t want to die to No one wants to die. Even people who want to go to heaven don’t want to die to No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. get there. And yet death is the destination we all share. No one has ever escaped it. get there. And yet death is the destination we all share. No one has ever escaped it. get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, becauseAnd that is as it should be, becauseAnd that is as it should be, becauseAnd that is as it should be, because death is very likely the single best death is very likely the single best death is very likely the single best death is very likely the single best invention of life. It is life’s change agent. It clears out the old to invention of life. It is life’s change agent. It clears out the old to invention of life. It is life’s change agent. It clears out the old to invention of life. It is life’s change agent. It clears out the old to make way for the new.make way for the new.make way for the new.make way for the new. Right now the new is you, but someday not too long Right now the new is you, but someday not too long Right now the new is you, but someday not too long Right now the new is you, but someday not too long
from now, you will gradually become the old and be cleared away. from now, you will gradually become the old and be cleared away. from now, you will gradually become the old and be cleared away. from now, you will gradually become the old and be cleared away. Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by
dogma dogma dogma dogma ———— which is living with the results of other people’s thinking.which is living with the results of other people’s thinking.which is living with the results of other people’s thinking.which is living with the results of other people’s thinking. Don’t let the Don’t let the Don’t let the Don’t let the noise of other’s opinions drown out your own inner voice. And most important,noise of other’s opinions drown out your own inner voice. And most important,noise of other’s opinions drown out your own inner voice. And most important,noise of other’s opinions drown out your own inner voice. And most important, have have have have
the courage to follow your heart and intuition.the courage to follow your heart and intuition.the courage to follow your heart and intuition.the courage to follow your heart and intuition. They somehow already know what They somehow already know what They somehow already know what They somehow already know what you truly want to become. Everything else is secondary.you truly want to become. Everything else is secondary.you truly want to become. Everything else is secondary.you truly want to become. Everything else is secondary.(Steve Jobs, graduation address at Stanford University : 2005)
LEADERSHIP REINVENTION
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Behind the Change Curve
Ahead of the Change Curve
Strategic Drift
Demise
Transformation orREINVENTION
(Source: Based on Johnson and Scholes: 2002)
BUSINESS AND COMPLEXITY
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WATCH A FLOCK OF GEESE TURNINGand swooping in flight, undeterred by wind, obstacles and distance.
There is no grand vizier goose, no chairman of the gaggle.They can’t call ahead for a weather report.
They can’t predict what obstacles they will meet. They don’t know which of their number will expire in flight.
Yet their course is true.
And they are a flock.
Complexity theorists describe this, and the many other examples of spontaneous harmony in the world around us, as
order without careful crafting or order for free.(Gary Hamel : 2000)
BUSINESS AND COMPLEXITY
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The intricate play of the many markets that make up the global economy, the vibrant diversity of the Internet, the behaviour of a colony of ants, that
winged arrow of geese - these are just a few instances in which
order seems to have emerged in the absence of any central authority.
All of them have something to teach us about how revolutionary strategies should emerge in a chaotic and ever- changing world.
Complexity theorists have demonstrated that by creating the right set of preconditions, one can provoke the emergence of highly ordered things
maybe even things such as revolutionary business concepts.
(Gary Hamel : 2000)
BUSINESS AND COMPLEXITY
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� In one of the earliest models developed by complexity theorists, Craig Reynolds discovered that the complex behaviour of such a flock of geese emerges from a few
simple rules of individual behaviour.
� Wryly, he called his computer simulation BOIDS.
� In the model each BOID obeys three rules :
�Fly in the direction of other boids;
�Try to match the velocity of adjacent boids;
�Avoid bumping into things.
(Lewin and Regine : 1999)
BUSINESS AND COMPLEXITY
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� The simulation begins with the boids placed randomly in space, but very quickly the individuals form themselves into a flock that behaves just like real birds, wheeling and
turning together and avoiding obstacles in their path.
� The point is that the complex behaviour of the system as a whole - the coordinated motion of the flock - emerges from a few simple rules of interaction among individuals,
not from a single leader.
� This has been called “distributed control”, in contrast with central control, which is what many CEO’s usually try
to achieve when they follow a mechanistic model of management.
BUSINESS AND COMPLEXITY
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� This process is known as “emergence”.
� In nature an ant colony is a complex adaptive system.
� Individual ants interact in a few simple ways, following simple rules of signals and behaviour : “danger, come quickly”,
“food, follow me”, or “I am a nest mate, not an alien”.
� FROM THESE SIMPLE RULES EMERGES A COMPLEX NEST ARCHITECTURE, A COMPLEX SOCIAL DYNAMIC, AND EVEN
PROPERTIES SUCH AS TEMPERATURE AND HUMIDITY CONTROL WITHIN THE COLONY.
� YET NONE OF THE EMERGENT FEATURES CAN BE PREDICTED BY KNOWING HOW INDIVIDUAL ANTS INTERACT.
(Lewin and Regine : 1999)
BUSINESS AND COMPLEXITY
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(Source: Johnson and Scholes: 2002)
BUSINESS AND COMPLEXITY
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(Source: Johnson and Scholes: 2002)
BUSINESS AND COMPLEXITY
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A shift from viewing the world as simple, predictable and settling to
equilibriumTO
acknowledging that it is complex, unpredictable and far from
equilibrium
PARADIGM SHIFT IN THE WORLD OF BUSINESS :
(Lewin and Regine : 1999)
BUSINESS AND COMPLEXITY
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� The danger for mature Organisations is that they will miss changes in the environment because all new information will
be force-fitted into the old model.� With maturity comes considerable experience and a vast mental model
repertoire, which are both a blessing and a curse.� Demise follows when the ability to get things done
diminishes and new things are increasingly difficult to handle.
� Organisations generally react to a perception that they are
headed into decline by attempting to reinvent themselves and bring in new leadership.
(Source: Based on Wind and Crook: 2005)
BUSINESS REINVENTION
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BUSINESS REINVENTION
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TOKYO — Sony named the British-born head of its US operations, Howard Stringer, as its new chairman and CE, handing the reins of the struggling Japanese electronics
maker to a foreigner for the first time.
“The world is simply not the same place it was a few years ago. The needs and expectations of our customers have
changed,” Stringer said at a briefing.
“So, Sony too, must reinvent itself.”
BUSINESS REINVENTION
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UNIVERSAL BUSINESS PARADIGM
RE-INVENTION BUSINESS PARADIGM
� Quantum Physics
� Non Linear, organic and complex adaptive system
� Systems theory, Chaos theory, Complexity Science
� Influence, rather than control
� Emergent teams, self selected and self organised
� Uncertainty, limited ability to predict
� A WORLD MADE UP OF RELATIONSHIPS WITH INFINITE POSSIBILITIES
� Newtonian Mechanics
� Linear thinking
� Mechanistic
� Cause and effect
� Action and reaction
� Centralised Control
� Hierarchical structure
� Job titles and job descriptions
� Predictability
� A WORLD MADE UP OF THINGS WITH FINITE POSSIBILITIES
(Lewin and Regine : 1999)
BUSINESS REINVENTION
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� Decreasing dependence on command-and-control type of leadership
� A breakdown of hierarchies� An increasing commitment to virtual technologies
� The embracing of teamwork� Greater flexibility
� Knowledge centres interacting largely through mutual interest and electronic - rather than authority systems� Emergence of new organisational forms, including
virtual enterprises - defined as small, core organisations that outsource major business functions - imaginary
corporations, dynamic networks and flexible work teams.
(Raghuram, Garud and Wiesenfeld : 1998)
BUSINESS REINVENTION
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� Boundaryless organisations in a borderless global marketplace
� Chain of command eliminated� Limitless spans of control
� Departments replaced with empowered teams� Vertical boundaries removed to flatten the hierarchy
� Horizontal boundaries removed to both replace functional departments with cross-functional teams, and organise
activities around processes� Boundaryless organisations break down barriers to both
external constituencies and geographic distance
(Based on Noble : 1996, Robbins : 1996, Raghuram, Garud and Wiesenfeld : 1996)
BUSINESS REINVENTION
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ORGANISATIONAL RESPONSE (BA)
As the information revolution begins to affect the nature and organisation of work as fundamentally as the industrial revolution did,
there will be more pressures to redesign the actual physical surroundings. Robert Ayling, Chief Executive, British Airways.
There are no lifts from the underground car-parks so that everyone has to pass through the street on the way to their work place; meeting people on the way. First names are the norm and no one stands on ceremony - you can’t in a village street.
The street is a real street with a café, a bank and a branch of Waitrose where you can place your order via computer and pick it up in the car park on the way home. There are trees, a piazza and a small stream, all under a high glass canopy.
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Organisations work best if they are designed as villages.
In a village you don’t learn what is going on by reading memos, you go down the street and pick up the news by bumping
into people.Randomness and accidental meeting, encourages serendipity, removes the impression of hierarchy, and fosters a sense of comradeship and belonging.
ORGANISATIONAL RESPONSE (BA)
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Paradigm Re-invention
Sc
op
e o
f c
ha
ng
e a
nd
tr
an
sfo
rma
tio
n
Different
All processes
(Whole company)
Single process (Part of company)
Standing still
ContinuousImprovement
Paradigm shift
BestPractice
Benchmarking
Smaller
Impact of Change and transformation
Better
Business processre-engineering
The current and known world The future, unknown
Transformed
Businessrestructuring
Processsimplificationand redesign
Leadership-
Corporate-
Industry-
Transformation
Reinventing the Leadership The Organisation
Reinventing
The Industry
All organisations
(Whole industry)
Single
organisations
(Part of industry)
STRATEGYREGENERATION
FIRST CURVEEVOLUTIONARY CHANGE
SECOND CURVETRANSFORMATION AND RENEWAL
Faster
INDUSTRY AND COMPLEXITY
THEEDGE OF CHAOSCHAOS THEORYFIELD THEORY
COMPLEXITY SCIENCE
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INDUSTRY AND COMPLEXITYTHE EDGE OF CHAOS
(Source: Based on Johnson and Scholes: 2002)
First curve
Second curve CreativityEmergence
Intuitive capacity Permeable boundaries
PARADIGMS
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INDUSTRY AND COMPLEXITY
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Hot Spots = (Cooperative Mindset x Boundary Spanning x Igniting Purpose) x Productive Capacity
INDUSTRY AND COMPLEXITY
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Hot Spots = (Cooperative Mindset x Boundary Spanning x Igniting Purpose) x Productive Capacity
Emergence of a Cooperative Mindset depends on the attitude of Leaders towards
cooperation and competition and their capacity and willingness to craft within the
organisation a sense of mutuality and congeniality.
The energy of the cooperative mindset has to be channeled across boundaries for the
innovative capacity of a Hot Spot to emerge.
For this well of latent energy to be released there has to be a point of ignition. This igniting purpose, can be an igniting vision, question, or
task.
These three elements have a multiplier effect on each other. Together they are capable of creating
energy and excitement. For this energy to be channeled into productive outcomes requires the
fourth element, productive capacity. This capacity is the extent to which members within the Hot Spot are
capable of working together in a productive manner.
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC55
Emergence of a Cooperative Mindset: It starts with assumptions(Source: Gratton: 2007)
Assumptions of
cooperation
Designing for cooperative
Practices and processes
Cooperative
Social norms
Cooperative
Language
And stories
Legitimisation of
Cooperative behaviour
and habits
Delegitimisation of
competitive behaviour
and habits
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC56
Dep
th o
f R
ela
tio
nsh
ips
Extent of Boundary Spanning
Within the Group Outside the Group
Close friends andStrong relationships
(strong ties)
AcquaintancesAnd associates
(weak ties)
Exploitation Exploration
InnovationConfirmation
IPDeProp
SAPOASAARF
BMRNHBRC
CIDB
ABSAFNB
Standard BankNedbank
UNISAGreenwich University
BERRodeIndustry InsightCement and Concrete InstituteSAFCECBIFSASA Steel Institute
BMI-BRSCUMFAEconometrixPolitical Dynamics
Reconfiguration
Information
arbitrage
Information
arbitrage
Information
arbitrage
Information arbitrage
(Source: After Gratton: 2007)
Another version of Stakeholder analysis
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC57
Forms an igniting purpose can take(Based on Gratton: 2007:102)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC58
Forms an igniting purpose can take(Based on Gratton: 2007:102)
Can we develop deep strategic understanding of the Current
Reality of the Building Industry Environment ?
Developing Competitive Industry Foresight and Strategic
Leadership as a way of Business Life.
Turning Data into Wisdom,Exposing Paradigm Blindspots, and challenging the Industry to
REINVENT continuously.
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC59
Points of inflection in organisations: shifting from old rules to new(Gratton: 2007: 145)
The point of inflection occurs when what has served well in the past will not serve well in the future.
The challenge for executives is that many are leading companies which are themselves at a point of inflection
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC60
The context in which we work has changed fundamentally as technology joins up the world and globalisation opens up new markets for capital, talent, products and services.
Many companies are beginning to approach the
apex of the first curve, when simply doing more of the same is not increasing the value of their companay.
To do so they will have to abandon some of the old rules, and begin to build competence and energy
around the new rules of the second curve.
Those that fail to do so will see a gradual but consistent decline in the capacity to
create value.
At the heart of the second curve are the rules of Hot Spots – the
idea that energy can be ignited, that relationships and
networks are crucial, that commitments and
conversations can replace rules and directives.
This is no easy challenge. As leaders and members of
organisations, we often find ourselves at points of inflection.
What worked in the past is not working so well anymore.
Points of inflection in organisations: shifting from old rules to new(Gratton: 2007: 145)
The context in which we work has changed fundamentally as technology joins up the world and globalisation opens up new markets for capital, talent, products and services.
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC61
The context in which we work has changed fundamentally as technology joins up the world and globalisation opens up new markets for capital, talent, products and services.
Many companies are beginning to approach the
apex of the first curve, when simply doing more of the same is not increasing the value of their companay.
To do so they will have to abandon some of the old rules, and begin to build competence and energy
around the new rules of the second curve.
Those that fail to do so will see a gradual but consistent decline in the capacity to
create value.
At the heart of the second curve are the rules of Hot Spots – the
idea that energy can be ignited, that relationships and
networks are crucial, that commitments and
conversations can replace rules and directives.
This is no easy challenge. As leaders and members of
organisations, we often find ourselves at points of inflection.
What worked in the past is not working so well anymore.
Points of inflection in organisations: shifting from old rules to new(Gratton: 2007: 145)
The context in which we work has changed fundamentally as technology joins up the world and globalisation opens up new markets for capital, talent, products and services.
INDUSTRY AND COMPLEXITYReal progress demands a revolution. You can’t shuffle your way onto the next S Curve. You have to leap. You have to
vault over your preconceived notions, over everyone’s best practices, over the advice of all the experts, and over your own doubts.
(Gary Hamel, The Future of Management: 2008)
©BMI-CSLORLC62The Hot Spot Scenario: mapping emergence
(Gratton: 2007: 145)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC63
Productive capacity
Data analysis,developing WISDOM
Cross functional
Networking
Website, sharing of ALL
INFORMATION,empowering
Information ARBITRAGE
Socratic dialogue,
asking the BIG questions
Exchanging and TRANSFORMING
facts
BMI
AssociatesSubscribers
Modeling cooperative behaviour
REINVENTION
The Hot Spot Scenario: mapping emergence(Based on Gratton: 2007: 145)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC64LC64 ©BMI-CSLOR
Towards
Making sense of the future of the Building Industry System
Dr. Llewellyn B. LewisNovember 2007
THE STRATEGIC FORUMA place of assembly
for strategic conversations
BMI
Studium Ad Prosperandum
Voluntas in Conveniendum
BUILDING RESEARCHSTRATEGY CONSULTINGUNIT cc
Reg. No. 2002/105109/23
•BMI
Studium Ad Prosperandum
Voluntas in Conveniendum
BUILDING RESEARCH
STRATEGY CONSULTING
UNIT cc
•
THE STRATEGIC FORUMwww.strategicforum.co.za
BMI•
BMI•
BMI•
©BMI-CSLORLC65
INDUSTRY AND COMPLEXITYTHE EDGE OF CHAOS
(Source: Based on Johnson and Scholes: 2002)
Many Organisations
Lots of Ideas
Variety
Potential volatility
Intuitive capacity
Permeable boundaries
Creativity emergence
Potential Innovation
©BMI-CSLORLC66
INDUSTRY AND COMPLEXITY
(Source: Fortune, 11 September 2006)
THE EDGE OF CHAOS
©BMI-CSLORLC67
INDUSTRY AND COMPLEXITY
THE EDGE OF CHAOS
(Source: Fortune, 11 September 2006)
Larry PageSergey Brin
Eric Schmidt
“We’re willing to tolerate ambiguity and chaos because that’s where
the room is for innovation.”
©BMI-CSLORLC68
INDUSTRY AND COMPLEXITY
THE EDGE OF CHAOS
(Source: Fortune, 11 September 2006)
©BMI-CSLORLC69
INDUSTRY AND COMPLEXITY
THE EDGE OF CHAOS
(Source: Fortune, 11 September 2006)
©BMI-CSLORLC70
INDUSTRY AND COMPLEXITY
THE EDGE OF CHAOS
(Source: Fortune, 11 September 2006)
©BMI-CSLORLC71LC71 ©BMI-CSLOR
PresentPast Future
The Edge of Time
Chaos Edge of Chaos Structure
The Edge of Chaos
(Source: Brown and Eisenhardt: 1998)
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC72LC72 ©BMI-CSLOR
PresentPast Future
The Edge of Time
Chaos Edge of Chaos Structure
The Edge of Chaos
(Source: Brown and Eisenhardt: 1998)
COMPETING ON THE EDGE OF CHAOS
New order can emerge from chaos. Complexity theory argues that nothing innovative can emerge from systems with a high degree of order and stability (egregulated industries);similarly, completely chaotic systems (eg riots) are incapable of functioning or creating anything.Somewhere on the boundary between order and disorder, control and chaos, sits creativity, innovation, self-renewal and growth. Pascale (1999) calls this point “the edge of chaos”. (OUBS, Strategy: Unit 8: 28)
©BMI-CSLORLC73LC73 ©BMI-CSLOR
� Competing on the edge rests on the assumption that the marketplace is in constant flux. � The assumption of static equilibrium no longer applies. � Rather the view is that competitors come and go. Markets emerge, close, shrink, split, collide and grow. � Today’s collaborators are tomorrow’s competitors . . . or both. � Technology is constantly shifting. Getting to the market early matters. � In complexity parlance, the marketplace is a continuously deforming landscape. � The image of this kind of landscape is of a terrain richly contoured by peaks and valleys. � And it is continuously reshaped by warp-speed change.
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC74LC74 ©BMI-CSLOR
� The second assumption is that firms are composed of numerous parts or agents, or businesses. � When these parts are linked together at the edge of chaos and time, they form complex adaptive systems. � These systems are complex not because they are complicated. They are actually fairly simple. � Rather, “complex” describes the complicated, innovative and self-organised behaviour that emerges from them. � They are adaptive because they can change effectively.
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC75LC75 ©BMI-CSLOR
� The key assertion is that successful firms in fiercely competitive and unpredictably shifting industries pursue a competing on the edge strategy.� The goal of this strategy is not efficiency or optimality in the usual sense. � Rather, the goal is flexibility – that is adaptation to current change and evolution over time, resilience in the face of setbacks, and the ability to locate the constantly changing sources of advantage.
� Ultimately it means engaging in continual reinvention.
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC76LC76 ©BMI-CSLOR(Source: Brown and Eisenhardt: 1998)
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC77LC77 ©BMI-CSLOR
Roll out new branches, source and develop new
products, develop new markets,
discover new customers,diversify.
LEADING CHANGE.
(Source: Brown and Eisenhardt: 1998: 23)
Building Blocks
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC78LC78 ©BMI-CSLOR
Navigating the Edge of Chaos: Improvisation
Entrepreneurial and creative, visionary
thinking, possibility and abundance, continuous
learning,
Emergent teams, self selected and self-
organised,emergent strategy
Simple rules,Influence rather than control,
Flat structure,Strategic Conversations,
COMMUNICATION
(Source: After Brown and Eisenhardt: 1998: 47)
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC79LC79 ©BMI-CSLOR
Co-adaptation
Networking, teamwork, alliances, joint
ventures, partnerships
Industry Knowledge,Local autonomy,
decentralised, distributed power.
Rapid response,Flexibility,
Leveraging strategic capability,
Unique resources, core competencies
(Source: After Brown and Eisenhardt: 1998: 80)
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC80LC80 ©BMI-CSLOR
Regeneration
Simultaneous first and second curve thinking;Leveraging core
competencies across Business Units.
Protect and build;Product enhancement;
market penetration;Create services that exploit
change.
Respect experience;Win-win relationships;
Redefine the boundaries, change the game rules, reconfigure the value chain.
(Source: After Brown and Eisenhardt: 1998: 114)
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC81LC81 ©BMI-CSLOR
Experimentation
Creativity and innovation;explore opportunities within
context of strategic intent
Strategise to intercept the future,Market development, product development, diversification.
Exploring the future, emerging strategy,Reinvention and transformation
(Source: After Brown and Eisenhardt: 1998: 149)
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC82LC82 ©BMI-CSLOR
The ever renewing organisation (or
society) is not one which is convinced that it enjoys eternal youth.
It knows that it is forever growing old and must do something about it.
It knows that it is forever producing deadwood and must, for that reason, attend to its seedbeds.
The seedlings are new ideas, new ways of doing things, new approaches. (Gardner: 1981: 68)
COMPETING ON THE EDGE OF CHAOS
©BMI-CSLORLC83LC83 ©BMI-CSLOR
(Source: Based on Roger Lewin. Complexity. Life at the edge of chaos: 1999)
THE GLOBAL PROPERTY INDUSTRY
Local Interaction, local knowledge
Emergent Global Property
market
©BMI-CSLORLC84LC84 ©BMI-CSLORBMI-BRSCU
(Source: Based on Roger Lewin. Complexity. Life at the edge of chaos: 1999)
Local Interaction, local knowledge
Emergent Global Property
market
THE PROPERTY MARKET AND COMPLEXITY
©BMI-CSLORLC85LC85 ©BMI-CSLORBMI-BRSCU
(Source: Based on Roger Lewin. Complexity. Life at the edge of chaos: 1999)
Local Interaction, local knowledge
Emergent Global Property
market
Characteristics of WISE CROWDS:1. Diversity of opinion (each person has some private information, even if it is just an eccentric interpretation of
the known facts);2. Independence (people’s opinions are not determined by
the opinions of those around them);3. Decentralisation (people are able to specialise and draw
on local knowledge);4. Aggregation (some mechanism exists for turning private
judgements into a collective decision). (James Surowiecki:
2004)
THE PROPERTY MARKET AND COMPLEXITY
Not imposed by any one guru or institution
or government.The result of the
individual choices of millions of people
world-wide.
©BMI-CSLORLC86LC86 ©BMI-CSLOR
� There are indications that chaos explanations give insight into the
operation of foreign exchange-, stock-and oil-markets
(Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics. The challenge of Complexity: 2000: 259)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC87LC87 ©BMI-CSLOR
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC88LC88 ©BMI-CSLOR
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC89LC89 ©BMI-CSLOR
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC90LC90 ©BMI-CSLOR
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC91LC91 ©BMI-CSLOR
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC92LC92 ©BMI-CSLOR
� There are indications that chaos explanationsgive insight into the operation of foreign exchange-,
stock- and oil-markets (Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics. The challenge of Complexity: 2000: 259)
� We deduce that it can be used to explain the dynamics of the Property Market
� Inter alia, that it is a deterministic non linear system in a stage of bounded instability displaying
highly complex behaviour� It is in a border area between stable equilibrium and explosive instability; i.e. a state of paradox in
which two contradictory forces, stability and instability are operating simultaneously
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC93
Demand and Supply Equilibrium
RHRH
SA RES PROPERTY MARKET
AHAH
MIH
Legend:
AH - Affordable Housing
MIH - Middle Income Housing
LH - Luxury Housing
RH - Retirement Housing
BTL – Buy to Let Market
Loosening Market
Tightening Market
Source : Based on Viruly
BTL
LH
1999
2007
2012?
UNDERSUPPLYDemand exceeds supplyPrices increaseBuyer resistance developsMarket tightens
OVERSUPPLYSupply exceeds demandCompetition increasesPrices moderateMarket loosens
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC94LC94 ©BMI-CSLOR
� When the system operates in the border between
stability and instability, its behaviour unfolds
in so complex a manner, so dependent on the
detail of what happens, that the links between
cause and effect are lost.
� One can no longer count on a certain given input leading to a certain given output
� The longterm future of such a system is not simply difficult to see:
� it is for all practical purposes unknowable
(Source: Based on Stacey, Ralph D. Strategic Management & Organisational Dynamics.
The challenge of Complexity: 2000: 259)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC95LC95 ©BMI-CSLOR
� The consequence is that any decision-making process that
involves forecasting, envisioning future states, or even making any assumptions
about future states, would be ineffective
� One would have to rely instead on using qualitative
patterns to reason by analogy and intuition� Those who succeed in the borders between stability and
instability would be those who see patterns where others
search for specific links between causes and events.
(Source: Based on Stacey, Ralph D. Strategic Management & Organisational Dynamics.
The challenge of Complexity: 2000: 259)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC96LC96 ©BMI-CSLOR
Sc
op
e o
f c
ha
ng
e a
nd
tr
an
sfo
rma
tio
n
Critical mass of Investors
(Whole community)
Single Investor (Part of community)
Paradigm Pioneer
Early adopter
LateAdopter
Bandwagon Flocking
Herd behaviour
Impact of Change and transformation
All Countries
(Whole World)
Single
Country
(Part of World)
�THE LOCAL PROPERTY MARKET
LIMITS TO GROWTH
PARADIGMS CHALLENGED
ALTERNATIVE INVESTMENTS
�DEMISE
� THE PROPERTY BUBBLE?
The current and known world The future, unknown
INDUSTRY AND COMPLEXITY
THE GLOBAL PROPERTY ENVIRONMENT
©BMI-CSLORLC97LC97 ©BMI-CSLOR
Sc
op
e o
f c
ha
ng
e a
nd
tr
an
sfo
rma
tio
n
Critical mass of Investors
(Whole community)
Single Investor (Part of community)
Paradigm Pioneer
Early adopter
LateAdopter
Bandwagon Flocking
Herd behaviour
Impact of Change and transformation
All Countries
(Whole World)
Single
Country
(Part of World)
�THE LOCAL PROPERTY MARKET
LIMITS TO GROWTH
PARADIGMS CHALLENGED
ALTERNATIVE INVESTMENTS
The current and known world The future, unknown
INDUSTRY AND COMPLEXITY
Individual
BanksPublic
opinion
MinistryTreasury
IMFWorld Bank
�DEMISE
� THE PROPERTY BUBBLE?
Paradigm shift
©BMI-CSLORLC98LC98 ©BMI-CSLOR
Paradigm Re-invention
Sc
op
e o
f c
ha
ng
e a
nd
tr
an
sfo
rma
tio
n
Critical mass of Investors
(Whole community)
Single Investor (Part of community)
Paradigm Pioneer
Early adopter
Paradigm shift
LateAdopter
Bandwagon Flocking
Herd behaviour
Impact of Change and transformation
All Countries
(Whole World)
Single
Country
(Part of World)
�THE LOCAL PROPERTY MARKET
LIMITS TO GROWTH
PARADIGMS CHALLENGED
ALTERNATIVE INVESTMENTS
The current and known world The future, unknown
INDUSTRY AND COMPLEXITY
THEEDGE OF CHAOS
CREATIVITYINNOVATION
REINVENTION
• Structural Change?
• Self Organisation
• Order for Free!
• Property a preferred Investment!
©BMI-CSLORLC99LC99 ©BMI-CSLOR
Is the Reserve Bank in Control of the System?
It was an old Federal Reserve chairman who said that it is a central bank’s task to take away the punchbowl
just as the party starts to get lively.
(Cees Bruggemans, Chief Economist, FNB, 6 December 2004)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC100LC100 ©BMI-CSLOR
Is the Reserve Bank in Control of the System?
In both the UK and Australia, the reserve bank raised
interest rates specifically to target house prices,
because of bubble conditions that have developed there.
(Chris Hart, Chief Economist, ABSA, 17 September 2004)
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC101LC101 ©BMI-CSLOR
The International Monetary Fund (IMF) urged the
Bank of England to raise interest rates to avert the possibility of a crash in house prices.
It also warned about the risks posed by high levels of
household debt, saying, 'the main risk to the outlook is the possibility of an abrupt
correction in the housing market'.(The Telegraph, London, 25 April 2004)
Is the IMF in Control of the System?
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC102LC102 ©BMI-CSLOR
No one
Is in control of the system!
Truth be told
INDUSTRY AND COMPLEXITY
©BMI-CSLORLC103LC103 ©BMI-CSLOR
No one
Is in control of the system!
Truth be told
INDUSTRY AND COMPLEXITY
But . . . There are Important
Influencers and
Influences
©BMI-CSLORLC104LC104 ©BMI-CSLOR
PROGNOSIS ON THE PROPERTY MARKET: ALAN GREENSPAN
“The housing market will
inevitably cool down and prices
may even decline.”(28 August 2005)
INDUSTRY AND COMPLEXITYIMPORTANT INFLUENCER
©BMI-CSLORLC105LC105 ©BMI-CSLOR
PROGNOSIS ON THE PROPERTY MARKET:
ALAN GREENSPAN
• “By far the majority of homeowners have built up a considerable value cushion which can absorb a
reduction in house prices.”
• “The increase in the buying and selling of second homes indicates that speculation has played a larger role in the recent house price increases than before.”
• “Some 80% of the increase in mortgage advances are people that have borrowed on the value of their
homes.” (28 September 2005)
INDUSTRY AND COMPLEXITYIMPORTANT INFLUENCER
©BMI-CSLORLC106LC106 ©BMI-CSLOR
INDUSTRY AND COMPLEXITYIMPORTANT INFLUENCERS
Borrow for that dream house at your own risk.
That’s the message from economists who are alarmed at runaway
mortgage lending and worry that Reserve Bank governor Tito Mboweni might apply
gentle brakes soon in the form of an interest rate hike.
Optimists point out that CPIX inflation has languished for two years
within the 3%-6% target range, South Africans’ debt burden remains low by
historical and international standards and low interest rates mean
there is little problem with financing this debt.
But the pessimists say: “Tell Tito that”. He may have been a
tad alarmed by the money supply and credit growth figures for August that the Bank released on Friday morning.
(Moneyeb, 30 September 2005)
©BMI-CSLORLC107
The IMF finds that, even though housing is not traded internationally, house prices are highly
synchronized across industrial countries.
An important implication of these findings is that, just as the current upswing in
house prices has been a global phenomenon, any downturn is also likely to be highly synchronized across countries, with corresponding implications for the world economy.
One possible factor triggering a house price downturn is the tightening of monetary policy across industrial
countries as inflationary pressures emerge.
(World Economic Outlook, Washington DC, 15 September 2004)
INDUSTRY AND COMPLEXITYIMPORTANT INFLUENCES
©BMI-CSLORLC108LC108 ©BMI-CSLOR
Paradigm Re-invention
Sc
op
e o
f c
ha
ng
e a
nd
tr
an
sfo
rma
tio
n
Different
All processes
(Whole company)
Single process (Part of company)
Standing still
ContinuousImprovement
Paradigm shift
BestPractice
Benchmarking
Smaller
Impact of Change and transformation
Better
Business processre-engineering
The current and known world The future, unknown
Transformed
Businessrestructuring
Processsimplificationand redesign
Leadership-
Corporate-
Industry-
Transformation
Reinventing the Leadership The Organisation
Reinventing
The Industry
All organisations
(Whole industry)
Single
organisations
(Part of industry)
STRATEGYREGENERATION
FIRST CURVEEVOLUTIONARY CHANGE
SECOND CURVETRANSFORMATION AND RENEWAL
THEEDGE OF CHAOSCHAOS THEORYFIELD THEORY
COMPLEXITY SCIENCE
Faster
The challenge is TO REINVENT THE INDUSTRY
FROM :A closed system,
that reacts, copes, improves incrementally,
benchmarks, shaped by the past and designed for survival;
TO :An open system,
that creates, generates, encourages risk,
shaped by the future and designed to
transform and reinvent itself continuously.
Leaders make the impossible happen
INDUSTRY REINVENTION
©BMI-CSLORLC109
Culture fulfils several important functions (Open
University, 2006):
• It reflects and reinforces a common sense of identity internally and externally
• It aligns employees values and norms to those of the
organisation• It enables the organisationto work as a social system
• It provides a frame of reference for employees to
draw upon when undertaking productive activities and
serves as a guide for appropriate behaviour
PARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEB
©BMI-CSLORLC110
PARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEB
©BMI-CSLORLC111
PARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEB
Together The “soft” and “hard” Together The “soft” and “hard” Together The “soft” and “hard” Together The “soft” and “hard” elements of the cultural web elements of the cultural web elements of the cultural web elements of the cultural web
capture life in any organisation.capture life in any organisation.capture life in any organisation.capture life in any organisation.
The three ‘soft’ (i.e. intangible) The three ‘soft’ (i.e. intangible) The three ‘soft’ (i.e. intangible) The three ‘soft’ (i.e. intangible) elements of the cultural web are elements of the cultural web are elements of the cultural web are elements of the cultural web are ––––
symbols, stories, rituals and symbols, stories, rituals and symbols, stories, rituals and symbols, stories, rituals and routinesroutinesroutinesroutines
The three ‘hard’ (i.e. tangible) elements The three ‘hard’ (i.e. tangible) elements The three ‘hard’ (i.e. tangible) elements The three ‘hard’ (i.e. tangible) elements of the cultural web are power of the cultural web are power of the cultural web are power of the cultural web are power
structure, organisation structure and structure, organisation structure and structure, organisation structure and structure, organisation structure and control systems. control systems. control systems. control systems.
©BMI-CSLORLC112
PARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBThe organisation’s paradigm refers to
the “deeper level of basic assumptions and beliefs that are
commonly shared by members of an organisation and defines the
member’s view of the organisation and its environment.” (Boojihawon,
2006: 67)
“The cultural web can be used to enable managers to surface
and explore the core assumptions underpinning their
paradigms, and therefore, facilitate the implementation of change.” (Boojihawon, 2006:
81. 82)
©BMI-CSLORLC113
PARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEBPARADIGMS AND THE CULTURAL WEB
©BMI-CSLORLC114
Added ValueWealth CreationHome ownershipNation building
Family Life
DecentralisedDistributed power
Mutual respectProfessional
Expert knowledgeInformality
Emergent teams, self selected and self organised;
Non hierarchical;Flat Structure;
Networking, Teamwork; Alliances, Joint Ventures
Partnerships
Planning meetingsNetworking
Site meetings
ProjectsRelationshipsInstalled base
Problem solvingUnique Solutions
FUTURE ORGANISATION CULTURAL WEB
Commercial principlesSimple rules
Influence rather than controlRelationships emphasised
Budgeting and strict Financial Discipline
Project management
An entrepreneurial and creative company with high confidence and passion. Oriented towards visionary thinking, possibility and abundance,
risk taking and reward sharing. Emphasis on continuous learning, teamwork, networking and long-term, win-win relationships.
©BMI-CSLORLC115
The NETWORK STRUCTURE is a flexible, non hierarchical organisational form
that groups together a series of independent organisations to
design, produce and market a given product or service. (Grant: 2002)
FUTURE STRUCTUREFUTURE STRUCTUREFUTURE STRUCTUREFUTURE STRUCTURE
The essential feature of networks is that the boundaries of the organisation are less distinct and permeable, so that the
organisation becomes “boundaryless”.
The network structure is common in dynamic and complex environments where creativity, innovation, and speed of
response are key sources of advantage and fundamental to the effectiveness of the organisation. (Grant 2002)
©BMI-CSLORLC116
NETWORK STRUCTURE REQUIRED FOR BUILDING AN EVERLASTING COMPANY
MarketingSupply Chain
Logistics
FactoriesRegional Distribution Centres
CORPORATE SUPPORT OFFICE
CORPORATE SUPPORT OFFICE TOGETHER WITH FACTORIES AND REGIONAL DISTRIBUTION CENTRES PROVIDES THE POLICY DIRECTION, STRATEGY AND COORDINATION
Policy Direction,Strategy and Coordination
Manufacturing
FUTURE STRUCTUREFUTURE STRUCTUREFUTURE STRUCTUREFUTURE STRUCTURE
Human Resources Finance
©BMI-CSLORLC117
Trends in the Property Market are inextricably responsive to, and influenced by INVESTMENT CLIMATE,
INVESTOR CONFIDENCE and PROPERTY DELIVERY.
Investo
r C
on
fid
en
ce
Investment Climate
Closed System Open SystemParadigm Regression Paradigm Paralysis Paradigm Shift Paradigm ReinventionProperty a Poor Investment Average Good Property a Preferred Investment
MIAMI SCENARIOHIGH ROAD
Planned development
Property the preferred investment
High affordability
High confidence
Profitable industry
IPANEMA SCENARIOUPPER MIDDLE ROAD
Mixed development
Property a good investment
Average affordability
Average confidence
Average performing industry
ALGARVE SCENARIOLOWER MIDDLE ROADHaphazard development
Property an average investment
Low affordability
Low confidence
Surviving industry
MOMBASA SCENARIOLOW ROAD
Sporadic development
Property a poor investment
Poor affordability
Struggling industry
INDUSTRY REINVENTION
MOST LIKELY OUTCOME
©BMI-CSLORLC118
Trends in the Property Market are inextricably responsive to, and influenced by INVESTMENT CLIMATE,
INVESTOR CONFIDENCE and PROPERTY DELIVERY.
Investo
r C
on
fid
en
ce
Investment Climate
Closed System Open SystemParadigm Regression Paradigm Paralysis Paradigm Shift Paradigm ReinventionProperty a Poor Investment Average Good Property a Preferred Investment
MIAMI SCENARIOHIGH ROAD
Planned development
Property the preferred investment
High affordability
High confidence
Profitable industry
IPANEMA SCENARIOUPPER MIDDLE ROAD
Mixed development
Property a good investment
Average affordability
Average confidence
Average performing industry
ALGARVE SCENARIOLOWER MIDDLE ROADHaphazard development
Property an average investment
Low affordability
Low confidence
Surviving industry
MOMBASA SCENARIOLOW ROAD
Sporadic development
Property a poor investment
Poor affordability
Struggling industry
INDUSTRY REINVENTION
MOST LIKELY OUTCOME
THREE DRIVING FORCESStrange Attractors?
� Investment Climate� Investor Confidence�Property Delivery
©BMI-CSLORLC119
INDUSTRY REINVENTION
1.00
1.86
2.71
3.57
4.43
5.29
6.14
7.00
INVESTOR CONFIDENCEGovernmental influences
Primary Stakeholder influences (Players)
Secondary Stakeholder influences (Subjects)
Tertiary Stakeholder influences (Referees)
Neighbourhood influences
Environmental influences
Promotional influences
Market influences
INVESTMENT CLIMATE
Cost related
Policy related
Promotion and marketing relatedMarket relatedFinance related
Resource related
Lifestyle related
Confidence related
PROPERTY DELIVERY
Role of the Estate Agent
Role of the New Housing Market
Role of Secondary Housing Market
Role of the Product
Role of Influencers
Role of Financial Institutions
Role of IntermediariesRole of Consumer
MAKING SENSE OF THE FUTURE OF THE RESIDENTIAL PROPERTY MARKETCURRENT REALITY vs Strategic Forum SCENARIOS
(Source: BMI-BRSCU)
CURRENT REALITY (3,92) Higher Middle Road Algarve Scenario (4,86) Lower Middle Road Ipanema Scenario (4,00)
High Road Miami Scenario (5,72) Low Road Mombasa Scenario (3,14)
©BMI-CSLORLC120
INDUSTRY REINVENTION
1.00
1.86
2.71
3.57
4.43
5.29
6.14
7.00
INVESTOR CONFIDENCEGovernmental influences
Primary Stakeholder influences (Players)
Secondary Stakeholder influences (Subjects)
Tertiary Stakeholder influences (Referees)
Neighbourhood influences
Environmental influences
Promotional influences
Market influences
INVESTMENT CLIMATE
Cost related
Policy related
Promotion and marketing relatedMarket relatedFinance related
Resource related
Lifestyle related
Confidence related
PROPERTY DELIVERY
Role of the Estate Agent
Role of the New Housing Market
Role of Secondary Housing Market
Role of the Product
Role of Influencers
Role of Financial Institutions
Role of IntermediariesRole of Consumer
MAKING SENSE OF THE FUTURE OF THE RESIDENTIAL PROPERTY MARKETCURRENT REALITY vs Strategic Forum SCENARIOS
(Source: BMI-BRSCU)
CURRENT REALITY (3,92) Higher Middle Road Algarve Scenario (4,86) Lower Middle Road Ipanema Scenario (4,00)
High Road Miami Scenario (5,72) Low Road Mombasa Scenario (3,14)
Assigning values to the QUALITATIVE generic variables influencing change allows for quantifcation and positioning of the CURRENT REALITIY relative to the IDEALISED SCENARIOS. It also shows where performance is good and where intervention is required.
©BMI-CSLORLC121
INDUSTRY REINVENTION
1.00
1.86
2.71
3.57
4.43
5.29
6.14
7.00
INVESTOR CONFIDENCEGovernmental influences
Primary Stakeholder influences (Players)
Secondary Stakeholder influences (Subjects)
Tertiary Stakeholder influences (Referees)
Neighbourhood influences
Environmental influences
Promotional influences
Market influences
INVESTMENT CLIMATE
Cost related
Policy related
Promotion and marketing relatedMarket relatedFinance related
Resource related
Lifestyle related
Confidence related
PROPERTY DELIVERY
Role of the Estate Agent
Role of the New Housing Market
Role of Secondary Housing Market
Role of the Product
Role of Influencers
Role of Financial Institutions
Role of IntermediariesRole of Consumer
MAKING SENSE OF THE FUTURE OF THE RESIDENTIAL PROPERTY MARKETCURRENT REALITY vs Strategic Forum SCENARIOS
(Source: BMI-BRSCU)
CURRENT REALITY (3,92) Higher Middle Road Algarve Scenario (4,86) Lower Middle Road Ipanema Scenario (4,00)
High Road Miami Scenario (5,72) Low Road Mombasa Scenario (3,14)
Current Reality (3,92) indicates that Residential Property is between the Low Road (3,14) (Mombasa) and the Lower Middle Road (4,00) (Ipanema) scenarios.
©BMI-CSLORLC122
INDUSTRY REINVENTION
35 000
85 000
135 000
185 000
235 000
285 000
335 000
385 000
435 0001
98
0
198
2
198
4
198
6
198
8
199
0
199
2
199
4
199
6
199
8
200
0
200
2
200
4
200
6
200
8
201
0
201
2
201
4
201
6
201
8
202
0
RA
ND
MIL
LIO
N A
T C
ON
ST
AN
T 2
010 P
RIC
ES
ASSETS MORTGAGED : RESIDENTIAL PROPERTY : 1980-2008STRATEGIC FORUM SCENARIOS: 2009-2020
(Source : SARB, MFA DATABASE, BMI-BRSCU)
Residential Property: 1980-2009
High Road Miami Scenario
Higher Middle Road Algarve
Lower Middle Road Ipanema Scenario
Low Road Mombasa Scenario
Current most likely outcome is between the Low Road Mombasa and the Lower
Middle Road Ipanema Scenario
©BMI-CSLORLC123
After 9/11, the terrorist attack in New York, and after the crash of the stock market in 2000, 2001,
individuals have said “the only place that my money is safe is in my own
home”.And as a consequence of that, “There’s firmly embedded in the global culture this
idea that you can’t go wrong investing in property.”
(Simon Marais, Alan Gray as quoted on Moneyweb, 12 July 2004)
INDUSTRY REINVENTIONINVESTMENT CLIMATE
©BMI-CSLORLC124
After 9/11, the terrorist attack in New York, and after the crash of the stock market in 2000, 2001,
individuals have said “the only place that my money is safe is in my own
home”.And as a consequence of that, “There’s firmly embedded in the global culture this
idea that you can’t go wrong investing in property.”
(Simon Marais, Alan Gray as quoted on Moneyweb, 12 July 2004)
INDUSTRY REINVENTIONINVESTMENT CLIMATE
The world’s second wealthiest man, investment guru Warren Buffett, said
this year he had found “very few
attractive shares to buy” “ Joe Public’ is still seeing bricks
and mortar as more attractive than securities
and bonds”.(Researchworldwide.com, 18 March 2005)
The world’s second wealthiest man, investment guru Warren Buffett, said
this year he had found “very few
attractive shares to buy” “ Joe Public’ is still seeing bricks
and mortar as more attractive than securities
and bonds”.(Researchworldwide.com, 18 March 2005)
©BMI-CSLORLC125LC125 ©BMI-CSLOR
PROGNOSIS ON THE PROPERTY MARKET
• Affordability of Housing DECLINING.
• Real House prices are some 5% below 2007 (But . . . A massive 87% higher than 2000)
• Price difference between new and existing houses widening (new housing now 32% more than existing)
• Interest rates at historically low levels
• Debt levels of households increasing
• The GLOBAL PROPERTY BUBBLE is now history. The market in SA has adjusted downward quite dramatically in a
hard landing. Residential building on the way to gradual recovery. Non Residential building declining. Many other
factors unique to the South African market mitigated against a bubble type collapse of the market.
INDUSTRY REINVENTION
©BMI-CSLORLC126LC126 ©BMI-CSLOR
PROGNOSIS ON THE PROPERTY MARKET
• Affordability of Housing DECLINING.
• Real House prices are some 5% below 2007 (But . . . A massive 87% higher than 2000)
• Price difference between new and existing houses widening (new housing now 32% more than existing)
• Interest rates at historically low levels
• Debt levels of households increasing
• The GLOBAL PROPERTY BUBBLE is now history. The market in SA has adjusted downward quite dramatically in a
hard landing. Residential building on the way to gradual recovery. Non Residential building declining. Many other
factors unique to the South African market mitigated against a bubble type collapse of the market.
INDUSTRY REINVENTION
When the system operates in the border between stability and instability, forecasting, envisioning future states, or even making any assumptions
about future states, are ineffective
One would have to rely instead on using qualitative patterns to reason by analogy and
intuitionThose who succeed in the borders between
stability and instability would be those who see patterns where others search for specific links
between causes and events. (Source: Based on Stacey, Ralph D. Strategic Management & Organisational
Dynamics. The challenge of Complexity: 2000: 259)
When the system operates in the border between stability and instability, forecasting, envisioning future states, or even making any assumptions
about future states, are ineffective
One would have to rely instead on using qualitative patterns to reason by analogy and
intuitionThose who succeed in the borders between
stability and instability would be those who see patterns where others search for specific links
between causes and events. (Source: Based on Stacey, Ralph D. Strategic Management & Organisational
Dynamics. The challenge of Complexity: 2000: 259)
©BMI-CSLORLC127LC127 ©BMI-CSLOR
INVESTMENT CLIMATE
0
50 000
100 000
150 000
200 000
250 000
300 000
01
-Ma
r-1
98
0
01
-Ma
y-1
98
1
01
-Ju
l-1
98
2
01
-Se
p-1
98
3
01
-No
v-1
98
4
01
-Ja
n-1
98
6
01
-Ma
r-1
98
7
01
-Ma
y-1
98
8
01
-Ju
l-1
98
9
01
-Se
p-1
99
0
01
-No
v-1
99
1
01
-Ja
n-1
99
3
01
-Ma
r-1
99
4
01
-Ma
y-1
99
5
01
-Ju
l-1
99
6
01
-Se
p-1
99
7
01
-No
v-1
99
8
01
-Ja
n-2
00
0
01
-Ma
r-2
00
1
01
-Ma
y-2
00
2
01
-Ju
l-2
00
3
01
-Se
p-2
00
4
01
-No
v-2
00
5
01
-Ja
n-2
00
7
01
-Ma
r-2
00
8
01
-Ma
y-2
00
9
01
-Ju
l-2
01
0
Aff
ord
ab
le R
ea
l H
ou
se P
rice
s (R
an
d)
Affordable Housing: Real prices: 1980 - YTD 2011(Source: ABSA HPI; BMI-BRSCU Workings)
©BMI-CSLORLC128LC128 ©BMI-CSLOR
MFA COMPOSITE LEADING INDICATOR (CLIBI)
FOR THE SOUTH AFRICAN BUILDING INDUSTRY
0
10
20
30
40
50
60
70
80
90
100
| 71 | 74 | 77 | 80 | 83 | 86 | 89 | 92 | 95 | 98 | 01 | 04 | 07 | 10 | 13
Source: FNB / BER; SARB; MFA DATABASE
PE
SS
IMIS
M <
50 >
OP
TIM
ISM
OPTIMISM
PESSIMISM
Shaded areas represent the upswing phase
of the business cycle
OP
TIM
ISM
PE
SS
IMIS
MINVESTOR CONFIDENCE
?
©BMI-CSLORLC129LC129 ©BMI-CSLOR
MFA COMPOSITE LEADING INDICATOR (CLIBI)
FOR THE SOUTH AFRICAN BUILDING INDUSTRY
0
10
20
30
40
50
60
70
80
90
100
| 71 | 74 | 77 | 80 | 83 | 86 | 89 | 92 | 95 | 98 | 01 | 04 | 07 | 10 | 13
Source: FNB / BER; SARB; MFA DATABASE
PE
SS
IMIS
M <
50 >
OP
TIM
ISM
OPTIMISM
PESSIMISM
Shaded areas represent the upswing phase
of the business cycle
OP
TIM
ISM
PE
SS
IMIS
M
CONFIDENCE TURNING?Now is NOT the best time for buy-to-let
investments.(Unless the Lets are BLUE-CHIP
Corporate Tennants) For some investors in residential
property it is, in fact, TIME TO CASH IN.
INVESTOR CONFIDENCE
?
©BMI-CSLORLC130LC130 ©BMI-CSLOR
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
19
93/0
1
19
93/0
8
19
94/0
3
19
94/1
0
19
95/0
5
19
95/1
2
19
96/0
7
19
97/0
2
19
97/0
9
19
98/0
4
19
98/1
1
19
99/0
6
20
00/0
1
20
00/0
8
20
01/0
3
20
01/1
0
20
02/0
5
20
02/1
2
20
03/0
7
20
04/0
2
20
04/0
9
20
05/0
4
20
05/1
1
20
06/0
6
20
07/0
1
20
07/0
8
20
08/0
3
20
08/1
0
20
09/0
5
20
09/1
2
20
10/'0
7
20
11/'0
2
R M
illio
ns (
Cu
rren
t V
alu
es)
New mortgage loans and readvances by month and application: Jan 1993- June 2011(Source: SARB, BMI-BRSCU Workings)
New mortgage loans and re-advances applied on existing buildings
Gross new mortgage loans and re-advances for construction of buildings
Net new mortgage loans and re-advances applied on vacant land
12 per. Mov. Avg. (New mortgage loans and re-advances applied on existing buildings)
New Building Loans
ExistingBuilding Loans
PROPERTY DELIVERY
©BMI-CSLORLC131LC131 ©BMI-CSLOR
TO REINVENT
THE LEADERSHIP FIRSTTHEN THE ORGANISATION
THEN THE INDUSTRY
Leaders make the impossible happen
The challenge is