p.182 The business environment has changed radically since Fredrick Taylor, Henry Ford, Alfred Sloan and other giants of the early 20th century formulated the concepts and principles that became institutionalised as the industrial age 'make and sell' managerial framework.

p.182 Making meaning out of apparent noise: a core competence for adaptive organisations

Increasingly unpredictable and discontinuous change is baked into the logic of the information age. To survive in this environment, organisations must rely on people skilled at translating apparent (not real) noise into meaning faster than such apparent noise comes at them. Adaptive systems, be they people, flatworms, companies or computer viruses, are successful at making meaning out of apparent noise-signals from the periphery that do not make sense in one context, but do in another. How they do this can be explained by examining the atomic structure of our sense-making mechanism. It consists of three elements: an object or event; a framework; and an association between them. If any of these elements are lacking, sense-making is not possible. Therefore, when something unprecedented presents itself, the ability to make the associations by invoking a new and appropriate context becomes a survival trait. (Note that this is not 'thinking outside the box'. It is thinking in a different box. People who have no box to think in are clinically insane.)

p.183 Doing business in the face of constant unpredictable change requires a fundamental shift from a 'make-and-sell' to a 'sense-and-respond' institutional framework. The rest of this article is devoted to a description of the new framework, and the fundamental ways in which it differs from make-and sell... The shift to a sense-and-respond mindset means recasting strategy, structure and governance

p.183 In an information economy, where even customers are less and less able to predict (much less articulate) what they will want in the future, the basic transaction is that between a taxi driver and his potential customer: an exchange of information from the customer about value in return for a supplier response that provides that value... The strategic game becomes a game with customers... The shift to a sense and-respond mindset means recasting strategy, structure and governance. Strategy becomes a design for action, rather than a plan of action... Structure becomes a network of modular, collaborative capabilities... And governance is... context and coordination... leadership... provides the means for individuals to self-synchronize using increasingly improvisational, one-off behaviours within the common context.

p.184 systems knowledge... enables him to know the systems-level outcome that is implicit in what is currently happening on the field... he... improvises on the spot to a better solution. He doesn't predict the systems-level outcome; he knows it.

p.184 Enterprise structure... is... a network of modular capabilities that can be rapidly and profitably reconfigured in response to what individual customers need now... The organising principle moves from efficiency and predictability to adaptability and responsiveness... The source of profit shifts from economies of scale to economies of scope. Sufficient reuse of modular capabilities that can be rapidly reconfigured in response to a wide range of opportunities makes it possible to achieve both profitability and adaptability.

p.184 The make-and-sell versus sense-and-respond frameworks are based on fundamentally different premises. They represent different dominant logics and require new norms of thinking.

p.185 the focus of organisational activity shifts from activities to outcomes; from a plan of action to a design for action that specifies how organisational capabilities interact with one another

p.185-188 Giving up the premise of predictability means that sense-and-respond organisations require new core competencies:

• Knowing earlier: If the uncertain environment makes it impossible to predict better what will happen, organisations must invest in knowing earlier the meaning of what is happening now. This can be accomplished through more and better probes, superior analysis of existing data, superior pattern recognition, faster frame-switching, and the development of systems knowledge - knowing why...
• Managing by wire: Knowing earlier is only useful if the organisation can act upon that knowledge appropriately, and in time...
• Dispatching capabilities from the event back: Operations in a sense-and-respond organisation are driven from a customer request (an event) back, rather than from a company's plan forward. This means that capabilities must be modular and recombinable...
• Designing a business as a system: Adaptive organisations need to adopt, whole cloth, system design principles as managerial tenets... Systems designs, by their very nature, produce synergy and align every element of the system around a common purpose. Designing a business as a system means specifying the interactions among, rather than actions of, organisational capabilities. It means designing a business from the purpose down, never from the capabilities up.

p.188 Because of its focus on knowing earlier the meaning of what is happening in the present, a sense-and-respond organisation must spend a lot of time and energy exploring signals on the periphery of its current field of vision. It is a fuzzy area

p.189 in the Information Age, peripheral vision investments become especially important because they can:

• extend the number and types of signals we are able to sense.
• nurture an ability to transform new signals into meaning, rather than dismiss them as meaningless noise. Individuals must become adept at changing their local context appropriately, and organisational leaders must become skilled at continually adapting the global enterprise context (what are we here to achieve, what are the boundaries on acceptable behaviour, and how do we relate to one another). They cannot do this if they are not exposed to the new signals that first emerge on the periphery.
• enable role-specific managing-by-wire support, which makes possible order of magnitude decreases in sense-and-respond cycle time by key decision-makers.