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You can teach old dogs new tricks - An Agile Organisation is a Living Company -

Hans-Jürgen Kugler, Bhaskar Vanamali

Kugler Maag Cie

VDA Automotive SYS Conference

2016-07-08 Version C

Abstract In the "Software Drives" study conducted by

Kugler Maag Cie last year the participants

identified becoming an agile organisation as

one of the preconditions to successfully

meeting the challenges facing the automotive

industry between now and 2030. Yet is quite

difficult to even make simple changes to a

common work process, such that this is

actually adopted smoothly and the use, learn,

revise cycle runs sustainably. Gallup research,

among others, suggests that 87% of staff are

only physically present at work. (Gallup 2016b)

This is the level of engagement at steady state.

An attempt at changing work practices on the

other hand, may produce an 80% resistance,

even if the change appeared a logical

simplification.

It is the authors’ view that the traditional

reductionist understanding of organisations in

an industry as traditional as automotive is at

the heart of the problem. Instead the authors

recommend using organic models to

understand organisations as living entities.

This is not a new approach. Ariel De Geuss,

then at Shell, was able to answer the question

of why certain companies live so much longer

than others using such an approach. His book

is aptly entitled "The Living Company." (Geus

2002) We advocate a similar starting point.

What insights can evolutionary and systems

biology together with our knowledge about

ecosystems give us about the formation and

evolution of a corporate culture and how to

“nudge” this evolution on the right track.

Treating companies as highly complex

organisms, higher lifeforms, means that they

are organized from cooperating and co-

creating other, less complex organisms. This

model has great advantages. Living things are

not subject to entropy, and they are never

static. "Change is the capacity for life",

Margaret (Wheatley 2010) Adaptability and

embracing change are capabilities that are at

the core of agile organisations. Living

organizations are agile. Living organizations

are more than the sum of their parts – the

wave is the sea. (Jäger and Quarch 2000)

Suddenly the issue of motivation and

engagement disappears.

You can teach old dogs new tricks Change comes natural for living

systems "You can't teach old dogs new tricks,"

according to popular wisdom. Humans suffer a

similar fate. The brain looses capabilities as the

body ages. This is inevitable, we were taught.

Modern neurology has debunked these myths.

Dogs can continue to learn, and so can our

brain, provided the capability to learn is

continuously exercised. We know that any

muscle in the body, which is not exercised, will

loose strength. We also know that regular

exercise can increase the muscle strength. The

effect is known as hormesis: regular low doses

of stress exerted on the muscular - or any other

living system - balanced with periods of rest

(this is important) strengthens the

system(Taleb 2012) The foundations of a wall

exposed to stress, for instance, would crack

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over time. Quite clearly the wall is not a living

system. The hormesis effect applies to the

brain as well. This means that contrary to

popular opinion we can even increase our

brainpower as we get older. Living systems can

get stronger and living systems adapt to the

eco-system in which they exist. They actually

interact with other living systems to cause

potential changes which makes it UtheirU eco-

system.

The Challenge What has this discussion about living systems

got to do with the current and future

challenges of developing software intensive

products and services in the automotive

industry? Well, we think a lot. The study

"Software Drives - Automotive E/E

Development 2030" (Hientz et al. 2015) clearly

indicates that complexity will continue to

increase rapidly - systems of systems - and that

rate of change will accelerate. Development

organizations are already struggling to just

keep pace, never mind any increase in

performance. Transforming the development

organizations into "agile organizations" is

generally seen as a main plank of a strategy for

the future. Few - if any - agile organisations

exist in the automotive industry. Even at the

development team level we suspect agile

behaviour to be in the minority. We do not

want to downplay the importance of the role

model of the agile organization, just the

contrary. We want to use concepts from

systems and evolutionary biology - living

systems, organisms - to get a better

understanding of the properties agile

organisations need to have.

Even if we knew a lot more about agile

organizations, we would still be at the start. A

major transformation is required. However, we

know for a fact that most attempts at changing

the behavior of companies are doomed. Gallup

suggests 70%. (Gallup 2016a) Many change

1 They are actually bio-socio-psycho systems.

initiatives in companies are not seen to return

value for money, or cannot be sustained,

because too much resource is consumed to

keep the new behaviour alive. So the

organization drops back to its previous level, or

even worse.

Organization are organized Companies behave in the way they are

organized. Improvement programs, in

automotive or any other industry, aim to

change the performance by changing the

organizations behaviour by tweaking the

underlying processes - seen as the behaviour

templates. So far so good. But why is additional

energy (resource) needed to safeguard the

sustainability of the changes? The answer

often given refers to the second law of

thermodynamics, which means that entropy

will degrade your organizational structure over

time, unless you counteract, which needs

additional resource. If the organization is

viewed as a living system this line of reasoning

is not acceptable - the second law of

thermodynamics does not hold for living

systems. Living systems create order.

Who organizes organizations? Changing the behavior means changing the

processes. But how do you change the

processes - sustainably? If the company were

an automaton, a controllable machine

"executing processes", then we could "just re-

program." This way of thinking is an

unfortunate legacy of the industrial revolution

and inherent reductionism. In this view

companies need to have their organization

imprinted from the outside, generally top

down, leading to "command & control"

companies.

The promise of predictability of "command &

control" companies is, however,

hollow. Organizations of any size are1P systems.

And as such they are inherently non-

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deterministic. Any attempt to increase control

through explicit mechanisms reduces the

capability of the system to perform. We

obviously had successfully organized

companies in the past, you will argue. This is

correct, but the underlying design goal for

organizations was "stability", or "resilience" in

advanced cases. We are now at a stage where

change is the only stable thing. This means we

need to run a continuous change program

besides running the business. The conflicts are

pre-programmed. We need to achieve an

understanding of “change” being the “default

state.” What we are looking for is an

organizational model (the company) with

“organization built-in,” i.e. the capability to

“adapt automatically.” Does this exist? We

need to lay a few more foundations before we

can address this question.

Living systems The living systems we want to learn from are

higher level organisms, like ourselves. The

human body is made up of trillions of cells,

organized in many different structures, some

interwoven, complementary, even in tension.

A vast collaborative network that actually

changes every second as cellsP1F

2P are replaced,

modified etc. Who organizes that? Who or

what tells a cell to become a part of the heart,

or the brain? No, the cell nucleus is not a

command and control center that uses the

DNA as a rulebook.

Self-organization is a key principle of life. Self-

organizationP2F

3P is decentralised and fractal. Self-

organization is a process where some form of

overall order or coordination arises out of the

local interactions between smaller component

parts of an initially disordered system. (“Self-

Organization” 2013) The purpose of the self-

organization is to “build” and “maintain” an

organism that can fulfil its purpose as an

instance of a species. It is this centering on

2 The structure of our cells, with its sub-components, is the result of simpler lifeforms starting to collaborate many millions of years ago.

purpose, that leads to the alignment of the co-

creation of so many (living) parts. Evolutionary

biology and epigenetics give us some

understanding of the feedback mechanisms

between the organism and its “home” eco-

system. This feedback is similar in nature to

organizational and societal learning. Learning

allows the organism to adapt to changes in the

environment. The principle of hormesis states

that these changes may make the organism

stronger. Evolutionary biology emphasizes co-

creation as the main force of evolution.

Competition happens at the same level, but co-

creation establishes a higher level of

organisation, which allows more complex

challenges to be addressed.

If we treat companies as organisms, will this

mean that change makes them stronger,

better performant? We shall see that this is not

wishful thinking.

Companies as organisms The idea of treating companies as organisms is

not new. When at Shell, Arian De Geuss

researched lifespans of companies. (Geus

2002) What he found was that if companies

were treated as living entities, as organisms,

with their own life’s purpose, then these

companies had a life expectancy that was a

multiple of that of businesses that were run as

automata to merely create profit. Adizes

method of managing corporate life cycles

(Adizes 2004) is based on the same holistic

systems view and has been successfully used

for many decades.

The principle of life is self-organization. Here

we understand self-organization to include

self-governance. Hold on, we hear you say, this

can't work for companies, for businesses.

Someone must be in charge. Yes, this is correct

for companies organized by the command and

control principles forged in the industrial

3 Chaos theory discusses self-organization in terms of islands of predictability in a sea of chaotic unpredictability.

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revolution and extended to people

management based on Taylor's (Taylor 2015)

ideas.

Yes, organizations (organisms consisting of

humans) group people in certain structures,

governed by rules, and this is done for a

common purpose. People are the constituent

building blocks. They have a life as individuals,

but as “cells” of an organization (organism)

they need to ensure that they can align their

purpose with that of the organization that they

have joined, or are contemplating to join. Just

like in biological systems, the quality (ethics)

and clarity of the purpose determines whether

a social system consisting of individuals can

“gel” into an organization. Identification with

the purpose is required for members of the

organization to become part of the organism.

They “share some of the same DNA.”

Inside a company organism The work that is necessary for the organism to

“live”, to perform its purpose, is divided into

areas of concern, e.g. dealing with tangible or

intangible assets that need to be utilised.

Within these areas the tasks are grouped into

roles, which have responsibility performing

tasks within authorised limits. Policies regulate

interrelationships. All of this is set up by those

who later fill these roles. Unless it is a complete

green field, there would be an existing model

to learn from, e.g. a template for the

constitution of a start-up company. The

wording might be slightly “suspect” for

biologists, but they would recognize this as a

living system.

Each area of concern communicates (this could

be meetings) internally on “tactical” issues.

These are the actions that make up the

purpose of the organism/organisation. They

also confer locally on governance issues.

Governance is that part of self-organization,

which does the organizing in the local area. All

communication is open. There is a standard

role in each local area to establish connectivity

with other areas. The collaboration model

scales fractally.

“Working in the system” and “working on the

system” are now both inherent parts of the

organizations, without a separate

organizing/management sub- or super-system.

What holds this together is the focus on a

purpose. This common purpose drives the

activities of the organization. It is the answer

to the “why are we doing, what we are doing.”

The chosen “how” to achieve the purpose

must be in line with underlying values

embedded in the culture of the organization.

Ensuring this transparently is also an important

element of governance.

The living systems route has led us

“organically” to an organizational pattern, that

is equivalent to one that came from sociology

and is known as sociocracy. Sociocracy “is a

collaboration framework for evolving effective,

resilient and agile organizations.” (Swenson

2015) (Buck and Villines 2007) U33TIn spite of these

current buzzwords the story of sociocracy

starts in the mid-19P

thP century. Dynamic

governance (Buck and Villines 2007) (Neo and

Chen 2007) and holacracy (Robertson 2015a)

(Robertson 2015b) can be seen as variants. The

success of these approaches is clearly

documented by Semler (Semler 1995) and

Laloux (Laloux 2014). Exactly how these work,

and how they could be deployed using the

organism model will be discussed elsewhere.

When researching what “drives” people who

really engage in their work, Dan Pink found

that remuneration could actually have a

detrimental effect. The positive drivers besides

purpose are self-determination and mastery.

(Pink 2010) The latter two are related to self-

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organization and specialisation in connection

with diversity. The organizational systems that

can be derived from these ideas have been

shown to “deliver happiness.” (Hsieh 2010)

Hsieh states that “happy” employees, those

that have the “drive”, are known to be 400%

more productive than average.

We have explored self-organization using the

organism model. What about hormesis, the

welcoming of change?

Living organisms are agile “Everything that stands still either is dead or

will soon be,” is the way a good friend used to

describe the traffic in Rome. Systems and

evolutionary biology and the concepts of eco-

systems say the same thing about organisms in

eco-systems. Organisms interact with their

eco-system and adapt accordingly by

continuously organizing themselves.

In the (socio- or holacratic-) company this

would be inherent in governance activity. It is

important, however, that the working of

governance does align with the purpose, but

not the way of thinking about it. An

organization or an organism may eliminate

tension and only focus on the common

denominator. Decisions will become easier, life

will become more repetitive. However, the loss

of diversity may make adaptability very hard,

because potentially competing have been

“optimized out.”

Agility needs healthy eco-

systems Diversity is important. Diversity provides

options for the future. They provide creative

tension, both at tactical and governance level.

Actually we want to change the model

perspective somewhat in order to explore

what the properties of an agile organization

4 The human body contains more bacteria than own cells. Looking at the human organism we have to state the human DNA is in the minority. The bacteria are from very diverse species and the

are. We shall still use systems and evolutionary

biology as guidance, but will move perspective

from the organism to the eco-system inside. In

complex organisms, like humans, the

behaviour of the constituent elements and

their relations form an eco-system.P3F

4P Normally

the ecosystem is healthy and growing, less in

size, more in sophistication (experience) in

dealing with situations, e.g. illnesses. Here we

have the homesis effect again.

This needs to be developed further. Here we

list a few relevant concepts with a preliminary

mapping to an organizational situation.

Foodchain/Energy flow “Predators” are at the top of a food chain, they

consume the most energy. Energy here stands

for any resource, such as human, previously

created asset etc. They should produce the

most value, i.e. represent “hot-spots” of

development. Task forces can be such internal

predators. If there are issues with the numbers

of predators or if they are not where they are

supposed to be, then something is wrong with

the energy flow. For further research is the

observation in natural eco-systems that

predators may help restore the health of the

eco-system. (Sustainable Human 2016) 33T

Indicator species Indicator species are very sensitive species

which react first if there are problems in the

ecosystem. Early warning systems could be

built. Some groups of staff may be, based on

their disposition or on their role, particularly

susceptible for burn-out. Or they might have a

particular intuitive connection to the

customer. Preventing internal strain or

predicting change from the market will be

simpler. Another example is the meeting

discipline of certain groups. Decrease of

populations are different in different humans. Yet they all work together and symbiotically with our own cells. We all know what happens to us when we take anti-biotics.

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attendance could indicate difficulties with the

meeting culture or the motivation.

Island population Island populations do not follow regular

population dynamics. The most famous

example is the dodo (Raphus cucullatus) of

Mauritius. The dodo shows that island

populations may be very vulnerable. Island

populations may also indicate niches to

expand, e.g. the island could turn into a

continent. An organization may find a niche

which is unique and specialise and work that

niche. For example, face recognition was

developed in the mobile market (and before)

some time ago. More and more comfort

functions in automotive are now also seeking

this feature. The mobile companies have to

compete with automotive suppliers and either

find their niche or will not be able to sustain a

footprint in the automotive market or vice

versa.

Swarms Swarms and herds are essentially social

constructs in an eco-system. People also need

to socialize. We live as individuals, but a big

part of that is also the dynamics of social

behavior. Social behaviour depends on the

culture, but is influenced by the social network

and media. As a conclusion we need to deal

with social dynamics if we want to change the

direction of an organization. Here we may be

able can “use” these concepts for swarms of

teams, say, or roll-out actions as “follow the

herd”.

Survival in difficult environment Some eco-systems thrive in places where we

do not expect life, like e.g. the thermal vents of

the mid-atlantic ridge. In theory it is too hot

and toxic there. However, certain species

adapted to that environment and wildlife

thrives around those vents. Another good

example is man himself. We survive in all

different climates even though our bodies are

fairly fragile, not well insulated and we can not

take long periods of hunger or thirst.

Organizations do not have to give up if

conditions are difficult. They have to find a way

how to deal with the conditions they are

working under. That means you have to utilize

the knowledge within your organization and

deal with problems. A lot of organizations

actually would be able to survive massive

changes in their “friendly” eco-system, if they

employed less of a hierarchical approach and

listened to the voices within. We are back to

diversity and agility.

Conclusion Everybody is looking for the Holy Grail of the

agile organization. Like Wolfram von

Eschenbach’s “Parzival” most are looking for

an externally manifested template / utility /

tool. We wanted to direct the view to the

inside, to what makes organizations tick.

Treating organizations as living systems with

their own rights, will show that the Holy Grail

is already there, we just don’t see it. This

approach will make organizations full

members of society – companies are already

legal persons – with all its duties and

responsibilities to all other members of society

and life on earth.

This is clearly work in progress. One can use the

eco-system/organism model pair also for the

higher and more complex value creation

networks that will replace consortia as we

know them. We leave this as an exercise for

the interested reader.

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