Illustration from the 1855 edition of La Fontaine's Fables
Ideas for Leaders #731

Fast-Slow Strategy-Making in Adaptive Organizations

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Key Concept

An adaptive company uses a dynamic collaborative learning system to merge the ‘fast’ experience and insights from front-line operational managers with the ‘slow’ analytical reasoning of corporate strategists to chart the company’s best path to future success.

Idea Summary

As described by Copenhagen Business School professors Torben Juul Andersen and Carina Antonia Hallin, companies in today’s turbulent environment must react quickly to continuous changes and events in their marketplace to maintain their competitive edge. Managers and employees on the front lines are in the best position to experience and respond in real time to these ongoing marketplace developments. Through their day-to-day interactions — supported by decentralized decision-making that allows them to take action without seeking approval — they learn what works and what doesn’t work in this shifting environment.

The challenge for companies is that their strategic planning and implementation processes, intended to prepare and position companies to respond to changes in their environment, are located in corporate headquarters, physically and mentally far from the operational front lines. Corporate strategists acquire their information from peers and industry reports, focusing on trends in demand, competition, regulations and technology, but often knowing little of the experiential learning happening at the lower-level, customer-facing units of the company. 

In addition, unlike the necessarily fast processes at operational levels, centralised strategic planning is traditionally a slow endeavour, sometimes occurring just once a year when the company’s strategic plan is revisited with new information. 

Such analytical reasoning is necessary; however, if the experiential learning from the front lines is not part of the process, corporate strategists are making decisions with incomplete information. Another complication: strategic planning process can be so insular that even if information from the operational functions of the company filters to the planners, confirmation bias will kick in: that is, corporate strategists will consider any new information based on what they already believe is happening, and will discount the information that does not correspond to their already established conclusions. 

How can companies reconcile the ‘fast’ operational processes with the ‘slow’ strategic processes to ensure that the company is adapting to changes in the most effective manner possible?

The answer is an intermediary set of processes that communicates the experiential insights of low-level managers to the corporate executives setting the course of the company for the future. In some companies, this occurs informally as engaged middle managers communicate with high-level executives. This informal process is not consistent and robust enough to ensure that all of the information is being transmitted. Formal collaborative learning processes are required to systematically collect and forward the experience and insights of operational managers to the company’s strategic decision-makers. 

The adaptive company would thus ideally have three levels of processes — operational-level responsive actions that yield fast experiential insights: slow forward-thinking reasoning at the top level; and intermediate collaborative learning processes that connects the fast and slow processes in a dynamic system that is operating interchangeably and continuously. 

Business Application

According to Andersen and Hallin, leaders have to recognize that ‘individual cognition matters’ — that is, that individuals at all levels of the organization will have experiences and insights pertinent to the overall strategic direction and future of the company. 

As described above, companies should systematically collect experiential insights from front-line managers on an ongoing basis and make this information available to top management. They should also encourage and enable individuals from different functions and management levels to exchange their insights; the result will be more creative solutions to the challenges of the turbulent environment.

Companies should also decentralize decision-making to allow front-line managers and employees to take immediate action in response to changes in their environment. To make decentralization more effective, communication and information systems should be in place to enable front-line managers to communicate horizontally with other operational managers and with specialists, who can add their knowledge and experiences to the discussion. Communication with top managers is also important, as centrally coordinated responses have their role to play in dealing with the uncertainty and complexity of today’s business environment; decentralization alone is not a solution.

A fast-slow dynamic system works if managers and employees — especially those at the lower level — are empowered and engaged. In addition putting in place decentralized decision-making and horizontal and vertical communication systems, the company’s leaders must ensure a culture that encourages entrepreneurialism, experimentation and discourse. The right structures, systems and culture will encourage local experimentation, collaborative learning and submission of potential solutions to high-level strategists for careful scrutiny: the hallmarks of the fast-slow adaptive organization. 

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Authors

Institutions

Source

Idea conceived

  • March 2017

Idea posted

  • February 2019

DOI number

10.13007/731

Subject

Real Time Analytics