Hey friends 👋,
When we experience a black swan event like the 2008 global financial crisis, we are surprised at the significant impact and yet rationalise how predictable it was.
Whether a significant event is a black swan or a more likely disruptive event, such as the recent pandemic or a new market competitor, complex systems have many interdependencies that often react unpredictably to stressors.
In response to a visible disruptive event, we often overreact, which can disproportionately negatively impact the system.
For example, an over-protective parent banning an activity when a child injures may reduce lifelong confidence and adventure.
The same applies to business; we mitigate risk by implementing rigid policies and procedures when mistakes happen. As a result, we dampen creativity, confidence and adaptability, making the entire system (business) more fragile.
What if you could build a system that strengthens more from a significant event than weakens it?
Such a system doesn’t just build resilience. It becomes anti-fragile.
Think about the black box from a plane crash. The data and insights help to adapt and strengthen the entire system, making flight increasingly safer.
The reality is that major disruptive events are going to happen. It is how we prepare ourselves to respond when they do that matters.
A resilient system resists but stays the same. On the other hand, an anti-fragile system gets stronger and thrives.
Today, we’ll unpack some ways to build an anti-fragile organisation through:
- Smarter innovation practices
- Better leadership and mindsets
🧠 Smarter Innovation Enables Anti-fragility
When organisations become successful, they usually ride the wave for as long as possible to maximise returns.
The focus shifts from searching for a scalable business model to optimising delivery. In the process, ways of working become written procedures, failure is detected and eliminated to reduce risk, and efficiency is the focus to extract the most profit.
But success comes with trade-offs.
The rigid, optimised approach that provided the gains has compromised adaptability, creativity and capability.
I don’t suggest that optimisation shouldn’t happen; exploration and optimisation should coincide.
You need to develop your organisation to become a ‘learning machine’.
Here are some practical tips to think about:
- Complete an innovation maturity assessment. Do you have a pipeline of innovation projects that range from transformative (new growth engines/models) to optimisation? How integrated with the company’s strategy are the innovation programmes, and are they producing desired results (as opposed to innovation theatre)? How advanced is the innovation culture in nurturing and enabling innovation?
- Promote experimentation. Language, actions towards and responses to experimentation (and inevitable failure) should all be intended to provide psychological safety. Complement safety with experimentation techniques like the four pillars of testing business ideas.
- Develop new ways of working. Traditional product development took months or years, risked a fortune and often failed. Instead, adopt faster, risk-reducing validation methods like pretotypes and design sprints.
Setting a course for better innovation is akin to training any muscle, requiring constant use and testing under pressure.
💪 Leadership Orientation and Mindsets are Anti-fragility Catalysts
A leader’s orientation determines an organisation’s fragility.
Firstly, to become anti-fragile, a leader must sacrifice short-term efficiency for long-term tangible results in sustainable innovation and culture.
Choosing a long-term path requires courage and personal ‘anti-fragility’ because you might be going against the board or shareholder expectations, let alone any embedded ‘we’ve always done it this way’ mindsets.
Also, it requires a leader to be more vulnerable. Complexity means that no one person can have the answers. And that different skills and attributes are needed for complex times, such as creativity, storytelling, and compassion.
Here are some valuable tips for becoming more anti-fragile:
- Align your work with values and meaning.
- With all change, the only thing that a leader can fully control is how you show up and respond.
- Develop ‘ways of working’, effective heuristics and principles to guide decision-making rather than set in concrete rules and procedures.
- Balance risk and failure through lots of small bets and experimentation. Increasing investment as evidence validates the direction.
- Build reflection into work practices to ensure constant learning cycles.
- Keep options open and practice critical thinking as described last week.
- Use data to help inform, but don’t become preoccupied with it.
- People respond to change better with a see-feel-change approach rather than think-analyse-change. Honour the past and connect with meaning.
⚡️ The Short of It
For an organisation to prosper in turbulent times, they need to become stronger under stress and anti-fragile.
One key component is building an innovation pipeline and the capability muscles to support it.
Developing personal orientation and capability is another.
That’s all for today friends!
I hope that you’ve found a new insight to developing an anti-fragile organisation.
Feel free to reply to this email if you have any question or newsletter requests.
Thanks for reading and I’ll catch you next week.