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The Emergence of the Antifragile Organization

September 21, 2013

Taleb’s (@nntaleb) (Homepage) work is revolutionary! Taleb’s The Black Swan focuses on the impact of the highly improbable — reality is unpredictable (Black Swans). Taleb’s Antifragile focuses on things that gain from disorder — how we thrive in uncertainty. “Antifragile is a blueprint for living in a Black Swan world. . . . The antifragile, and only the antifragile, will make it.”

Appreciating Taleb’s work involves initially recognizing it (Antifragile, Flexibility, Robust, Resilience, Agility, and Fragile) and then translating it into practice.

— — — The Triad: Fragile, Robust, and Antifragile
(a more recent blog) may be of interest — — —

The Agile Organization

Nearly 90% of executives surveyed by the Economist Intelligence Unit believe that organisational agility is critical for business success. One-half of all chief executive officers (CEOs) and chief information officers (CIOs) polled agree that rapid decision-making and execution are not only important, but essential to a company’s competitive standing. Agility may also be linked to profitable growth: research conducted at the Massachusetts Institute of Technology (MIT) suggests that agile firms grow revenue 37% faster and generate 30% higher profits than non-agile companies.

What are the critical traits of an agile business? 60% of CEOs suggest rapid decision-making and execution (60%) and 45% suggest a high-performance culture!

[Source: The Economist]

For CEOs, Agility and being an Agile Organization is vital — with an emphasis on rapid decision-making, execution, and culture — and demonstrably grows revenue faster and generates higher profits.

Beyond the Agile Organization

During the past decade, we’ve seen economic volatility and disruption escalate to arguably unprecedented levels. . . . For business leaders across the world, “expect the unexpected” has become the mantra.

To navigate through this environment, companies need to develop resilience. This combines an ability to ride out the immediate impact of shocks with a long-term capacity to adapt to constantly changing conditions . . . achieve this blend of qualities not only to survive through new and emerging challenges, but to thrive in this environment.

The only way forward is to build organisations that can survive and thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption and emerge stronger than before.

Trust isn’t just an essential part of the customer relationship, it’s the glue that binds an organisation and all its stakeholders together — and there are now many more stakeholders to consider. Thanks to the social media revolution, many of these stakeholders also have an unprecedented amount of clout.

[Source: PwC Global CEO Survey]

Business leaders are embracing disorder and oriented towards “expect the unexpected” while recognizing that survival requires being agile and adaptive to ride out the immediate impact of shocks (volatility and disruption) and thriving requires coping with disruption and emerging stronger than before (that is, Antifragility) for the long-term. Furthermore, business leaders are embracing that trust may be that “glue” or “elusive elixir” that binds stakeholders together so we can navigate our new reality.

Opportunities, Customers, Effectiveness, and Trust

In conclusion, trust is the prerequisite for everything CEOs hope to achieve as they move from risk management to resilience. Businesses’ efforts to target the right opportunities, increase customer demand and loyalty and improve operational effectiveness are only as effective as their ability to build trustworthy relationships with all their stakeholders.

CEOs are recognising the need to align their strategies around a stronger social mandate — starting from the top — and through it create organisations that are more agile, adaptable and resilient.

This means developing a deep understanding of the changing needs of a growing range of stakeholders across existing and new markets, and investing to engage and empower them. Networks of trusted relationships, with shared vision, values and objectives, are helping to build strong yet flexible ecosystems that can not only survive, but flourish amid disruption.

[Source: PwC Global CEO Survey]

CEOs are recognizing that trust is the “prerequisite for everything, including seizing the right opportunities, increasing customer demand and loyalty, improving operational effectiveness,” and creating organizations that are more agile, adaptable, and resilient (that is, more Antifragile). Furthermore, only a “deep understanding of the changing needs of a growing range of stakeholders” while “investing to engage and empower them” will “build strong yet flexible ecosystems that can not only survive, but flourish amid disruption.”

Antifragility is realized through trust.

People and Trust

Low-trust fosters redundancy, bureaucracy, politics, disengagement, turnover, churn, and fraud within organizations.

High-trust fosters increased value, accelerated growth, enhanced innovation, improved collaboration, stronger partnering, better execution, and heightened loyalty.

Watson Wyatt’s research suggests that high trust organizations outperformed low trust organizations by 286% . . . value in high-trust organizations.

Gallop’s research suggests that 70% of people are not engaged in their jobs, with a $450 to $550 billion lost each year in productivity . . . disengagement in low-trust organizations.

[Source: Chief Executive .net]

Trust is at the root of engagement and performance.

People and Happiness

Gallup research shows that while keeping employees happy or satisfied is a worthy goal that can help build a more positive workplace, simply measuring workers’ satisfaction or happiness levels is insufficient to create sustainable change, retain top performers, and positively affect the bottom line. Satisfied or happy employees are not necessarily engaged employees. Engaged employees have well-defined roles in the organization, make strong contributions, are actively connected to their larger team and organization, and are continuously progressing.

By shifting the focus to employee engagement, organizations are more likely to motivate their workers to expend discretionary effort and reach their performance objectives. Gallup research has linked employee engagement to nine specific business outcomes such as higher productivity, profitability, and customer ratings that directly affect or reflect the bottom line.

[Source: Gallup]

While happiness and satisfaction foster a more positive workplace, they are “insufficient to create sustainable change, retain top performers, and positively affect the bottom line.” Engagement, however, does “directly affect or reflect the bottom line.” Happiness does not imply engagement, and happiness is insufficient to impact the bottom line while engagement directly impacts the bottom line!

The dimensions of customer engagement include a Rational Foundation, Confidence, Integrity, Pride, and Passion [Gallop]. Confidence and Integrity essentially constitute Trust and Pride and Passion essentially constitute Love [Leading the Starbucks Way] — “Love and Trust” [Leading the Starbucks Way]. There is significant interplay among these dimension, including passion and engagement [Bloomberg].

The dimensions of Employee Engagement include Basic Needs, Individual Contribution, Teamwork, and Growth [Gallop].

Antifragility

The idea that businesses might be experiencing an unprecedented amount of “stress and disorder” should come as no surprise. CEOs and other senior executives consistently describe uncertain future business conditions as a key concern.

The term “antifragility,” coined by Nassim Nicholas Taleb in his book Antifragile: Things That Gain from Disorder, is defined by the source of its strength. Like the human body, whose immune system gets stronger from exposure to germs and diseases, the antifragile system improves or responds positively when shocked.

While fragile systems are easily injured and suffer from volatility, antifragile systems grow stronger in response to volatility. So-called robust systems remain unchanged.

  • The fragile are susceptible to large lethal shocks.
  • The robust can handle adversity but stay the same.
  • The agile move and adapt rapidly.
  • The antifragile grow and improve (evolve) from external shocks.

Antifragile is beyond stable, beyond robust; stable and robust systems resist shocks but stay the same . . . antifragile systems as those capable of absorbing shocks and being changed by them in positive ways . . stable systems, because they don’t change, eventually experience shocks large enough to cause catastrophic failure. Antifragile systems break a little all the time but evolve as a result, becoming less prone to catastrophic failure. . . . Antifragile systems adapt and evolve in response to stress and changes to their environment.

When the magnitude of change stays within a normal range, robustness can be a state that seems resilient. During periods of unusual change, only the antifragile organizations prove to be resilient.

Life, Taleb says, is not as predictable or explainable as the rationalists would have us believe; instead, simple sets of rules help us to navigate through a complex and constantly changing landscape. He argues, “We have been fragilizing our economy, our health, education, almost everything—by suppressing randomness and volatility…If about everything top down fragilizes and blocks antifragility and growth, everything bottom up thrives under the right amount of stress and disorder.”

[Source: PwC Technology Forecast]

AntifragileOrg2013092101

Volatility shocks organizations! Some organizations resist shock and suffer (negative impact of volatility) or sustain (are unchanged due to the impact of volatility) while other organizations absorb shock and adapt (are changed due to the impact of volatility) or evolve (positive impact of volatility)!

Robust organizations are resilient within a normal range of change, but fragile organizations are not! Antifragile organizations are resilient within periods of unusual change, but agile organizations are not! And their is fragilizing and antifragilizing!

Given the unprecedented levels of volatility, disorder, disruption, and stress, Antifragility is quintessential (and Agility is no longer enough) and ultimately founded on trust and engagement!

The Anatomy of the Antifragile Organization (versus the Agile Organization)

Agility and Antifragility are driven by “thinking” in the Technology world and Business world.

AntifragileOrg2013092102

Agility has been founded on expressions such as “embrace change” (Kent Beck) and “inspect and adapt” (Ken Schwaber and Jeff Sutherland) with the overall intent of fostering continuous responsiveness (John Boyd) in a world where “sustainable competitive advantage” (Michael Porter) empower us to confront “future shock” (Alvin Toffler), and Agility is ultimately reified in various business practices.

Antifragility must now be founded on expressions such as “embrace disorder” or “embrace chaos” (Taleb’s Antifragile) and “adapt & evolve” (Taleb’s Antifragile) with the overall intent of fostering continuous transformation (John Boyd’s OODA) (and renewal) in a world where “transient competitive advantage” (Rita Gunther McGrath) empower us to confront “present shock” (Douglas Rushkoff), and Antifragility is ultimately reified through a unique transformative journey that catalyzes antifragility — This is Conscious Agility!

The tenets of Antifragility versus Agility:

  • “Embrace Disorder” or “Embrace Chaos” versus “Embrace Change” — Change alone is not enough, only disorder fosters antifragility!
  • “Adapt & Evolve” versus “Inspect and Adapt” — Inspecting and adapting is not enough, only adapting and evolving foster antifragility!
  • Continuous Transformation versus Continuous Responsiveness — Being responsive is not enough, only transforming (continuously) fosters antifragility!
  • Transient Competitive Advantage versus Sustainable Competitive Advantage — Nothing is sustainable in a Black Swan world, but everything is transient!
  • Confront Present Schock versus Confront Future Shock — Shock is no longer in the “future” but always in the present!
  • Reified through a Journey versus Practices — In a Black Swan world, its always a journey of emerging practices!

Conscious Agility is a means to Antifragility!

2 Comments leave one →
  1. October 2, 2013 4:24 am

    great ! ( because it is what I think, of course :-) . you may want to look at theory of process, if you haven’t already : http://www.arthuryoung.com/sibbet2.html

    and obviously , trust / defenselessness / oneness is opposed by fear, the reptilian brain and so on, so we have to “unlearn” ( see “sound of silence” / cognitive psychology )

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