Cloud Citizen

What if you had a socially constructed operating manual that reliably delivered sustained strategic superiority?

Of all the thinking exercises a company goes through, the most important concerns that which sustains the competitive advantage that keeps its customers loyal and prevents them defecting to rivals.

So, if a company’s strategy is its life-support system, the most important question any business must answer every day is, is our strategy working?

It is said that a strategy must become an organisation’s way of life, but of course this is so only if the answer is yes.

If your own life depended on it, you probably wouldn’t buy a life-support system that didn’t come with an operating manual. So, why wouldn’t you aim to develop one that provided a better way of building more robust, responsive strategy for your business?

Likely as not, in any business, to achieve any of the array of possible favourable outcomes, effective strategy formulation will no longer be a one, two or three-man job, because the world is changing and the tools are here to enable a better job to be done collectively.

A company must develop a way of giving shape to its strategy that makes sense from the sum of the intelligence and experience available to it, not just a sub-set.

By engaging social technologies in this pursuit, many minds may make lighter work of developing new opportunities, because each has a perspective and critical sensitivities no other shares. But, collectively, they will only transform the scope for better strategy formulation if their understanding of the context in which they are making their contribution is common and shared.

As that is not the case in an overwhelming majority of companies, this is likely only to happen best when organisational learning, focused and directed for this purpose lies at the core of effective strategy formulation.

Community learning is a powerful force. There is energy to be tapped here, and common purpose and interest, because it protects livelihoods and provides opportunities for personal growth.

More importantly, when everyone is learning together, the most compelling purpose for applying that growing intelligence is to focus on strategy, because the articulation of strategic need paints a shared destiny and reveals the competencies on which the future organisation must itself be built.

As it is the stone on which the attainment of factors critical to success will be built, the explicit recognition of required competencies will come to shape the organisation itself. It will focus the learning of the learners.

Given a new, shared sense of where it is heading, the organisation has many new choices.

What delivers operational excellence to the business but does not deliver explicit strategic advantage may no longer need to form a core part of its operation. That which is not strategic may be achieved and managed in other ways, perhaps even outsourced.

Better knowledge and awareness improves focus on what matters most.

Much less a document than frame of self-constructed understanding, the operating manual for developing better strategy is built through the active engagement of precisely those sensitivities and insights that enable the organisation to learn from itself, that keep it in business and grant it the strongest possibility for sustained strategic superiority.

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What is organisational capital?

I wrote this a year ago for a client in human resources consulting but I think it still holds up, so I’m posting it here.

There's a new management mandate taking shape, at whose core flexibility and expectation of a new return on investment in people processes lies front and centre. It is manifesting under an emerging and compelling theme: organisational capital.

Human input into workplace productivity has been notoriously hard to measure. It's not hard to see the effects of well-executed management in a balance sheet, but much more difficult to evaluate it with quantitative rigour. Yet, clearly productivity growth at any level is the outcome of improved management practices and operational processes. Its ingredients are enabled clearly enough by investments in information technology, but the quantum of IT expenditure alone is insufficient to explain economic advances.

Leading United States researchers [such as Professor Erik Brynjolfsson, Director of the MIT Center for Digital Business] describe organisational capital as an intangible asset that, just like other assets, creates a stream of value over time. As such, investments made in organisational capital - which can be described as the enabling layer of raw human capacity and its flows of applied intelligence and creativity laid atop the information tools of the workplace - can be considered in similar terms to that in any other corporate asset.

Businesses spend a lot of time and effort to optimise the ways in which they work and can correlate improved practices with better goods, services and growing revenue. In this equation, investment in technology is the driver of complementary returns – in process redesign, training and strategic advances – and of new products of improved quality, timeliness, variety and convenience.

But in standout companies, success is all due to differentiating human input and the skills with which people are engaged and their knowledge transformed.

A company may be equal to the sum of the values of all the assets it owns or controls, but in such companies organisational capital’s effective people engagement comprises the hidden equation driving the outstanding growth in their ledger.

Signs both anecdotal and borne out by academic enquiry suggest a philosophy abroad in the ranks of human resources consistent with a concerted, if as yet unlabelled as such, push for the development of organisational capital.

Among its themes:

• Organisational agility in the face of fast-changing business cycles cannot be achieved without a view of integrated organisation design and people as structure. This requires seamless and integrated functioning of talent management beyond divisions, silos and champions within a developing architectural view of the organisation. With adaptability at its core, skills development of those who can work across structural, technical and functional business divisions makes talent increasingly a board-level issue.
• Responsive, rapid strategic and tactical business model change demands a comprehensive portfolio approach be taken to human capital planning. This balances the HR system and adapts certain philosophies of supply chain risk reduction to the just-in-time human resources challenges of increasingly project-driven organisations. It implies a need for organisation-wide talent pooling, improved forecasting of the demand for talent and the development of more effective enterprise talent scorecards.
• In workplace practices themselves, leading organisations must focus their learning and development activities increasingly on "execution as learning". Instantaneous feedback loops using efficient collaborative "2.0" technologies will revolutionise knowledge transfer in increasingly mentoring-intensive organisations, as fast learning on the job becomes the norm and workplace innovations are enabled through worker freedom, stimulation and engagement.
• HR management will itself be transformed by a wave of improved enterprise technology for managing human capacity. Its software will be ubiquitous, available on demand, and multi-language, and its automated functions will facilitate the emergence of performance-based cultures based on clear engagement metrics. Adopting a single model, simplifying and maximising workplace potential, this revolution presages the need within organisations for clear articulation of HR technology road maps that facilitate the development of the human architectures that deliver leaps in organisational capital.
• The demands of such flexible, adaptive workplaces will require HR increasingly to see itself as a marketing function to attract and retain connections with workers of value. The likely demographic constraints of an ageing workforce will encourage the development of strong networks both within and without the organisation to attract and retain workers but the development of strong brand and employee value propositions will increasingly position HR itself as a core strategic marketing discipline.

Increasing organisational and business-process change, broader sharing of information, decentralised decision-making and increasing connections of pay and promotion to performance will likely lead to greater investments in training and education.

But with an improving understanding of the metrics of human performance finding its way into boardroom discussions and on to corporate balance sheets, the ever greater leverage of human capacity will find its clear and unambiguous enveloping market rationale in the push for increased corporate organisational capital.

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