ix Adaptive Enterprise deserves to be read carefully from beginning to end.
x the sense-and-respond firm defines its scope in terms of first, the repertoire of personalized
customer value attributes it will address, and second, the repertoire of capabilities that can be marshaled
by the firm into responses. Even more significantly, the firm has the ability to systematically and dynamically change
its scope in response to signals from the environment.
xi GEers [JLJ - employees of General Electric] are fond of saying, "We're not smart enough to predict the
future, so we have to get better at reacting to it more quickly." You couldn't ask for a better articulation of the sense-and-respond
imperative.
xv the transformation to sense-and-respond - particularly for large organizations - requires a fundamentally
different way of thinking about how companies create value.
xvii The only kind of strategy that makes sense in the face of unpredictable change is a strategy
to become adaptive... the real objective: successful and systemic adaptation. Adaptation implies more than agility.
It requires appropriate organizational response to change. And when change becomes unpredictable, it follows that
the appropriate response will be equally so.
In this environment, therefore, planned responses do not work.
xviii Why not reconceptualize businesses as complex adaptive systems? Companies will no
longer have to develop appropriate strategies - they will simply emerge. Strategy collapses
into a universal imperative: Become a complex adaptive system. Next case... An enterprise's ability to adapt depends on how
it processes information.
xix The sense-and-respond model... manages the interactions - rather than the actions -
of modular capabilities through a universal and general commitment management protocol
p.2 Widespread and discontinuous change makes unpredictability a given. Uncertainty is not a passing symptom,
but a fact of economic life in the information era.
Peter Drucker was one of the first business thinkers to call attention to the growing certainty
of uncertainty. He made very clear its implications for planning and strategy when he wrote "uncertainty - in the
economy, society, politics - has become so great as to render futile, if not counterproductive, the kind of planning most
companies still practice: forecasting based on probabilities."
To survive, organizations must prepare themselves to deal with such a future.
p.3 A sense-and-respond organization does not attempt to predict future demand for its
offerings. Instead, it identifies changing customer needs and new business challenges as they happen, responding to
them quickly and appropriately, before these new opportunities disappear or metamorphose into something else.
p.4 organizations cannot just add adaptiveness to their current set of capabilities. They must become
adaptive organizations.
p.14 an organization... must settle what to sense, what response capabilities it will invest in,
and what will be its defining organizational purpose and the boundaries of organizational behavior... those issues follow from the basic decision to address the puzzle of formulating strategy in the face of uncertainty
by building the capacity to adapt.
p.14 A four-phase adaptive loop defines the crucial behavior of sense-and-respond organizations.
Both adaptive individuals and adaptive organizations first sense changes in their environment and
internal states. They next interpret these changes in the context of their experience, aims, and capabilities,
separating threats from opportunities and discarding irrelevant information. Next, they decide how to respond
and, finally, they act on their decisions. The progression from sensing to interpretations to decision to
action becomes an iterative loop as the adaptive system monitors the results of its previous actions and picks up environmental
changes that have occurred since the previous cycle.
Organizations of all kinds... follow these basic steps to adapt their behavior.
p.33 Where speed, flexibility, and variety are possible, they will become necessary. If you don't offer
them, your competitors will, and your customers will disappear.
p.40 radical uncertainty about the future washed away the foundation on which traditional strategic planning
rested.
p.40 Some companies have found scenario thinking useful in recent years, because it does not depend on predictions
about the future. Scenario development helps identify the most relevant areas of uncertainty and the future
events that might signal an unfolding reality of a given scenario or combination of scenarios. Such exercises help
organizations prepare themselves for a wider range of possibilities
p.49 Strategy-as-plan has ceased to be a viable option for most large organizations because creating
an overall plan of organizational behavior requires the ability to predict or control the future, an ability that, according
to our premise, no longer exists.
p.49 for large firms operating in highly unpredictable environments: Strategy is a design for an adaptive
structure. I argue that this is the only strategy that makes sense under such conditions.
p.51 We have learned that... the past will be a poor guide to the future and that we shall forever be dealing
with unanticipated events. Given that scenario, organizations... will need individuals who delight in the unknown. -Charles
Handy
p.68 Good project managers are nothing if not adaptive. They expect the unexpected to happen.
p.69 modular organizations must be managed as systems. Systems produce synergy. How much synergy
they produce depends on how effectively the interactions among capabilities are managed. Modules function
as interacting pieces that snap together easily to make something new. Coordinating these elements is an important challenge
for sense-and-respond organizations.
p.75 Every adaptive system, whether an individual living creature, a computer virus, or
a large organization, survives by making sense out of its environment and responding with an appropriate action. It
then repeats the cycle, factoring in the results of the previous one. In this circular and continuous process, the
adaptive system senses its environment even as it acts.
p.76-77 Complexity scientist Seth Lloyd has derived an important principle about the sensemaking requirements
of adaptive systems. His insight can be paraphrased as: Successfully adapting systems have the property of translating apparent
noise into meaning at a faster rate than the arrival rate of apparent noise.
p.77 the challenge is to make better sense out of the situation than the next guy.... The strategic challenge
here is a cognitive one.... [W]hat frameworks do they wheel up to understand the situation? ....A system that is to [adapt]
successfully.... must adapt by constructing models that allow it to decide what information to get, and how to act on it.
[J. Kurtzman, "An Interview with Brian Arthur," Strategy and Business, Booz-Allen & Hamilton, Second Quarter
(1998).]
p.77 The adaptive loop begins with and is fueled by data. The system must transform this data into
information and knowledge before it can take action. Adaptive organizations possess the survival trait of making
rapid and continuous iterations around this loop.
p.89 to quote Kusnic, "There are no data about the future." [JLJ - this quote does not
appear in Kusnic's section, or anywhere else, it seems. Maybe it is from the future... there are no data about the future.]
p.91 organizations operating in environments of great uncertainty might choose scenario development
to structure leadership's adaptive loop.
p.92 How can large, complex organizations cope systematically and successfully in a changing, unpredictable
world? Increasingly, companies today can't know what they will be called upon to do next and must therefore express
their business strategies as designs for adaptiveness, rather than as plans for efficient operation.
p.105 Ambiguity about purpose or principles undermines coherent action.
p.231 [the adaptive decision process] uses scenarios to identify the environmental uncertainties most likely
to yield information about relevant emerging discontinuities.
p.234 An essential requirement for an adaptive enterprise, however, is an ability to deal with increasingly
frequent, discontinuous change.
p.235 we use connection to identify and deploy information probes designed to give advance warning of impending
new worlds that matter. Decision-makers must ask and answer the following questions: "What must we sense about the
environment to anticipate the emergence of relevant new worlds?"
p.241 Decision pull means that the decision context establishes the pull signal for information
relevant to the decision at hand.
p.241 An adaptive organization must sense what information can contribute to the development of
value-creating strategies. The value of information can be calculated based on the relative value of alternative
response strategies and the likelihood that acquiring the information would result in a change in response. Only information
that leads to a change in response strategy has any value, and its value is a function of the difference in the values
of the alternative strategies. Once an organization knows how to determine what information is valuable, its investments
in information gathering become more focused and productive.
p.254 The irreducible "units of meaning," according to Weick, are a cue (for example, some triggering
signal, stimulus, or input), a frame (for example, an ideology, a set of decision premises, or a paradigm), and a
relationship between them. The meaning of any one of these units "is determined by your momentary awareness of the
other two"
p.255 Briefly, data is transformed into information by context; information is transformed into
intelligence by reference; intelligence becomes knowledge when sufficient certitude is established; and
wisdom arises from knowledge through synthesis.
p.265 Over breakfast one day in the summer of 1985, I heard Alan Hohne describe Westpac's strategic intent
in these terms: "We aim to develop a system that will enable us to sense change earlier and respond to it more rapidly
than other banks." The phrase struck me as a very different way of thinking about strategy.
p.268 the conclusion of Gell-Mann and Seth Lloyd about the information processing requirement of successfully
adapting systems is pivotal: Apparent noise must be continuously translated into meaning.
