How to overcome the system: from obsession with optimisation to strategic conviction

This article is part of a series that deals with social, economic, and technological dynamics and highlights the consequences for people, brands, and organizations.

Overview of the Article Series

1. Why yesterday's business success and today's operational hecticness put your company at risk
2. System optimization vs. system overcoming: why continuous improvement stands in the way of real innovations
3. How system overcoming succeeds: from the obsession with optimization to strategic conviction
4. The success criteria of every entrepreneurial bet: Relevance, Resonance, Acceptance

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The waves of complexity and dynamics stop for no one. Many companies struggle with the difficulty of penetrating the situation and the resulting uncertainty. There are many balls to juggle, and surprises lurk around almost every corner.

Those who do not immediately resign rely on their proven coping strategies and fall back on their intuitions. This can go well, but it doesn't have to. The decisive question is to what extent the conditions under which these strategies and intuitions were developed still correspond to today's circumstances.

Attentive and farsighted business owners and leaders concern themselves with questions like these: What is changing? What remains the same? What does this mean for my business? How can I stay up-to-date and how can I prepare?

Whoever has recognized the necessity for change and preparation will strive to let work on the system become a strategic conviction. To do this, it is crucially important to:

1. penetrate important connections in depth,
2. keep the overarching dynamics in view, and
3. separate the signal from the noise.

Perhaps this part of the series can help you with that.

Pressure from Both Sides: High Time for Change?

Society is in a state of constant flux, and the future remains unpredictable.

Structural cycles determine which way the wind blows. They provide us with clues about expected dynamics based on historical patterns. Times of (excessive) prosperity have always been followed by times of war and crisis, which in turn are followed by times of change and rebuilding before decadence takes over again and the cycle repeats.

Companies have the primary purpose of making a value-creating contribution to society by providing benefits for customers and employees. Social dynamics determine market dynamics. Your own entrepreneurial bet must always be considered in the context of social developments and designed with regard to them.

The market dynamics during the transition from the industrial age to the information and knowledge age generate palpable pressure for companies, their owners, and employees. The pressure comes from both sides:

1. Technological progress reduces entry barriers for companies and consumers. Increasing competition leads to increased innovation pressure: (new) market participants are constantly joining, shaking up the field with new ideas. The market is getting tighter and the requirements to survive before paying customers are becoming greater. Many still think their business model is not affected by these dynamics. Doing nothing can be costly.
2. The macroeconomic situation is determined by increasing inflation and the threat of recession. Decades of credit excesses are making themselves felt and can no longer be ignored. This leads to rising cost pressure on the part of companies and consumers. However, many entrepreneurs are still of the opinion that the growth course of the last decades is set in stone forever. When markets shrink, it becomes clear whose entrepreneurial bet was well-placed, who is really creating value, and who has done their business management homework.

Innovation pressure and cost pressure together create an environment in which it is a matter of business survival for many companies and their owners. If the organization of the business is not robust enough against dynamics, it prevents the company's survival.

The entrepreneurial bet is at risk of failing if it does not constantly adapt to these dynamics. To do this, it is necessary to question the proven and design the new. This requires courage, empathy, and foresight.

Many decision-makers are already aware that fundamental decisions must be questioned and remade to enable sustainable development. Mostly, it fails in implementation.

Attempts to control the organization and employees prove hopeless in almost every context. Nevertheless, they are still widespread in companies. What led to success yesterday stands in the way of many companies' development today: classic management theory and its distorted image of humanity.

Not every company recognizes its survival-critical transformations in time. Business owners often succumb to the illusion that it is enough to optimize what already exists.

Transformation? Nowhere to be seen.

But what if the existing stands in the way of change and must be fundamentally questioned so that new solutions can emerge in the first place? – Then pure system optimization will sooner or later lead to ruin.

"Yesterday's solution creates today's problems."

– Dr. Gerhard Wohland

Dynamic-Robust High Performance and Creative Agility

The value-creating handling of complexity and dynamics relies on companies that are able to recognize changes in time, learn new things, and make corresponding adjustments.

Dr. Gerhard Wohland speaks of "dynamic-robust high performers" when referring to companies that are able to survive in tight global markets through creative agility.

Fundamentally, a company can promote its development in two ways:

1. Optimization of already existing solutions (continuous improvement process, CIP)
2. Generating novel solutions (innovation and transformation)

The continuous optimization of what already makes value creation possible today is an elementary component of corporate management and business development. Reaching the goal in small, continuous steps is the right solution approach for many problems. The decisive factor here is, above all, that continuous improvement becomes a lived attitude. For a mindset like Kaizen to establish itself in the company, a framework must be created that allows and favors corresponding behavior.

Many of the successful approaches to system optimization had their origins in Japan. There, such a framework is more socially prevalent: order, structure, and cleanliness come first in many places and are thus a fixed part of the culture. This makes the successful introduction of system-optimizing approaches much more likely.

The attempt to import and smoothly introduce such ways of thinking and working has failed miserably for many companies because the overcoming of hindering structures did not take place. Other companies, however, have recognized that change is necessary first to successfully integrate new approaches for continuous improvement into the existing organization.

Nonetheless: the optimization of existing systems by reducing waste with the goal of achieving increased customer satisfaction, as particularly provided by Lean Management, has been able to bring forth large productivity gains over the last decades.

Even in a complex-dynamic environment, the degree of efficiency is decisive for the success of a company. Clouded by the successes of continuous improvement, however, an optimization mania has developed in many companies that completely ignores the following insight: innovations can only grow from ideas that question the status quo.

Besides the ideas themselves, true innovations require the right environment. Ideas must be able to be introduced, exchanged, and discussed without fear of rejection. Communication, collaboration, and conflict gain importance as competencies. Only then can things not only be optimized but also questioned. And only then can new answers or solutions arise.

The optimization mania also manifests itself in an excessive focus on costs. The lack of an investment-oriented view of change projects blocks the view of the value that can be generated and the costs of inaction.

Two questions that counteract this tendency and will positively influence your decision quality:

1. Which costs would I certainly accept as an investor?
2. What will it cost me in the future if I do not act today?

"In the global cage, creative agility—that is, dynamics—is more important than size and minimal costs."

– Dr. Gerhard Wohland

The increase in perceived complexity and dynamics makes it necessary to increase one's own connectivity. Systems must be able to develop so that they themselves generate sufficient complexity and dynamics. This requires an environment that...

• makes it possible for people to contribute ideas
• makes it possible for teams to learn with and from each other
• makes it possible for organizations to produce innovations

Only in this way are existing systems regularly irritated and encouraged to further develop.

Dynamic-robust companies rely on resilient people, capable teams, and intelligent networks that share their observations and condense them into decisive insights. When individual performance and intelligence come together in a team and are directed toward a common purpose, then available resources can be optimally used and meaningfully utilized.

In most organizations, this is not possible due to Taylorist structures, not intended due to strategic considerations, or prevented by the memory of the organization.

Companies that excessively follow the logic of Scientific Management founded by Frederick Taylor are referred to as Taylorist. Thinking and acting units are attempted to be separated here. What still worked at low dynamics goes wrong at high dynamics. Control attempts and command-and-control structures stand in the way of self-organized value creation and thus individual, team, and network intelligence. For this reason, innovation often relies on one transformation of the organization or another.

Companies that are able to recognize their now hindering success patterns through reflection can set the course for sustainable development. At its core, it's about learning from experiences and drawing corresponding conclusions.

• What additional knowledge are we missing? How can we obtain it?
• Which ideas are bothersome and stand in the way of value creation? What do we replace them with?

Successful companies ask the right questions more than they search for ever-new answers. Important questions for promoting future viability are:

• Where is system optimization sufficient and where/when is system overcoming required?
• What should be preserved and what should we change?

Future-proof companies do not shy away from the uncertainty of the future. They do not try to escape transformations. They try to shape them themselves and guide them into constructive channels instead of being unpleasantly surprised.

Forward-looking companies recognize complexity and dynamics as both an opportunity and a risk. They take on the challenge and strive to master complexity and generate dynamics.

But not every company succeeds in asserting itself in the changing times and designing a dynamic-robust organization. Usually, ignorance and activism are the result of insufficiently thought-out connections, overwhelming uncertainty, and ego-driven overconfidence.

Operational hecticness, high stress levels, and a lack of health are additional drivers that stand in the way of strategic vision and thus system overcoming. Transformation always relies on resources. If these resources are missing, it makes perfect sense for the system not to recognize the necessity of transformation. Otherwise, there would be a serious danger of it ending in chaos and no longer being able to withstand the dynamics. Thus, the transformation would miss its actual goal: helping the organization achieve new stability.

“Just do it” is an advice often given but certainly not good in complex contexts. To recognize necessary changes, it is required to engage (with) the dynamics and find meaningful answers to unpleasant and complex questions. Again and again. Despite all adversities and hardships.

To free yourself from uncertainty and escape operational hecticness, two development goals should be focused on:

1. Identity-based clarity with a view to the dynamics outside and inside
2. Strategic focus with a view to resonance and impact outside and resources and competencies inside

Only when everyone understands themselves as part of the whole can customer-centric value creation become a reality. To process complexity and dynamics outside, the ideas and knowledge of employees are needed. Only when the communication and behavior of all participants consistently express the brand identity does quality become apparent and tangible outside. Then there are good chances to win over strangers for the company's offerings and services.

"By building a specific performance identity, high-performance companies develop high creative agility (dynamics) and use it to shape the market that their competitors must follow (under performance pressure)."

– Heinrich Nottbohm

What is needed for this? – Sufficient clarity and a common focus for all participants as well as an organizational framework that makes customer-centric value creation possible.

Between Necessity and Possibility: Separating the Signal from the Noise

To receive relevant signals, the noise must first be reduced. The first step is therefore to approach the dynamics of our time from a bird's-eye view instead of losing oneself in the jungle of endless possibilities and narratives.

Instead of exclusively dealing with daily events, overarching questions like these should be processed:

• Which developments determine the general environment?
• How is the market developing and what changes are to be expected?
• Who are our competitors and what can we learn from them?
• What are the needs of the customers? Which demands can we awaken?
• Which trends are relevant for us?

An organization cannot perceive and evaluate the quality of its own development. It is dependent on its members introducing their perceptions into the communication.

Finding answers to these questions together reduces the uncertainty and overwhelm of all participants and opens up new ways for the company to adapt as a social system to external conditions. On the one hand, the necessities of the future (risks and opportunities) are better recognized. On the other hand, through the gained clarity, the courage can arise to use possibilities and proactively shape change.

Our experience with various clients has shown: most companies lack regular dialogue and discourse with a view to external dynamics. The ideas, concerns, and doubts resulting from constant change thus remain unconsidered. As a result, the organization cannot develop healthily because it does not experience enough irritations through which important changes are even considered.

Often, dialogue and discourse in the team do not take place because content is discussed based on opinions without considering the context. Also frequently observed are communication patterns in which content is discussed on the relationship level and thus leads to no usable result.

Many teams and organizations have learned to avoid dialogue and especially discourse because it is either not worth it or associated with negative feelings. The corporate culture acts like a memory that favors holding onto these patterns.

Decisive for penetrating non-linear and non-monocausal connections is a cyclical and systemic way of looking at things. It allows us to abstract from content and thus from individuals and their complex psyches and to recognize the forms and patterns behind the content. Instead of mutual accusations, status problems, and overconfidence, the work on the social system "organization" is then in focus.

Without an integrative view of the interactions between the dynamics in society, politics, and the economy and the dynamics at the level of the organization, the team, and the human psyche, most attempts to shape change remain unsuccessful. To separate the signal from the noise, it is therefore of great importance to acquire not only psychological but also sociological and system-theoretical competencies.

Never before have people had so many opportunities to obtain and generate information. While the amount of available information increases, the quality of information decreases. The flooding with (ir)relevant data leads to an oversupply of information.

Very few information sources are free from conflicts of interest. Independent reporting and independent research are increasingly rare to find. Blindly trusting central institutions and media houses is not a clever strategy for informing oneself in times of global power shifts. And yet, the BILD-Zeitung, the Tagesschau, or the Spiegel are still the one-dimensional measure of things for many people.

One-dimensional and undifferentiated views are increasingly insufficient to survive and create value in a complex-dynamic environment. Future viability means mastering complexity and generating dynamics. The conditioning of our school and education systems is diametrically opposed to this undertaking.

Many decision-makers...

• let themselves be led astray by insignificant signals,
• thus miss relevant signals,
• and fall victim to complexity and dynamics.

The selection of serious, relevant, and largely objective information sources becomes an immense challenge that has not yet been recognized as such by many.

In addition to central institutions that should make an important contribution to the information supply through sound research and scientific work, decentralized networks play an ever-larger role when it comes to gaining insights that help make more qualitative decisions.

A strategy for selecting and informing in the digital age should, based on these considerations, include two essential points:

1. Answers to the question of how to expose oneself to relevant signals and important irritations to gain clarity and focus.
2. Answers to the question of how to protect oneself from irrelevant, distorted, and invalid signals to maintain clarity and focus.

The Signal: The Transition to the Information & Knowledge Age

Economy is in constant flux. But that's not all: we are witnesses to the transition from the industrial age to the information and knowledge age. This transition presents people, organizations, and societies with ever-new surprises and great challenges that are becoming increasingly noticeable.

But what goes up once must go up further. Or not? – The belief in steady and infinite growth is still widespread in the Western world. Sometimes it reminds one of a small child who simply doesn't want to accept that it's time to go home. Yet it would take a load off many business owners' shoulders if they gained clarity about which market and competitive environment they must assert themselves in the future and what they should prepare for:

• Through technological progress and ongoing globalization, economic framework conditions are changing fundamentally. Today's winners can be tomorrow's losers, as the high connectivity density favors non-linear developments.
• The more the coping strategies and intuitions were formed in times of steady growth, the more difficult it is today to recognize and accept the global transformation process and its impact.
• The People's Republic of China is expected to replace the USA as the largest economy in 2028, according to a forecast by the London Centre for Economics and Business Research from late 2020. The future remains uncertain, but the direction is clear: it's about the question of financial, military, and economic supremacy: Who provides the next reserve currency? Who dominates the world economy?
• Dollar dominance is starting to crumble. Existing power relations are being questioned. In the struggle for power, new alliances are formed and new enmities are decided. The cards are being reshuffled. The structures of the global economic system are changing.

“We are at the beginning of a culturally subversive process that will unfold for many more decades.”

– Wolfgang Coy (1993)

Which business-relevant changes and necessities result from this?

• Customers make autonomous purchase decisions, have many alternatives, and high expectations.
• Employees place increased demands on the meaningfulness and flexibility of their professional activity.
• Teams are reliant on increasing their ability to learn and perform.
• Organizations are increasingly less able to operate value creation without dynamic network formation.
• The competitive environment is tight and highly fragmented, which ensures increasing innovation pressure.
• The economic environment is characterized by high debt and increasing cost pressure.
• Societies are determined by exploitation, polarization, and asymmetry.

What are the consequences of these developments?

Optimizing existing systems is not enough if they hinder themselves in their development. To solve the challenges of our time, to promote prosperity and productivity, a change in decision premises and coping strategies is required in many places. Only then will a healthy development for people, organizations, and societies become possible again.

The fact that such a change is urgently required is shown by...

• the overwhelm of people and organizations in dealing with complexity and dynamics.
• the increasingly frequent collapse of systems.
• the increasing crises and conflicts at all levels.

These observations can help to recognize and execute necessary changes. Those who do not move with the times, will be removed with time. Only those who question and allow themselves to be questioned arrive at new insights.

The driving force of change is primarily found in the further increasing degree of networking. With the introduction of the internet and the nationwide availability of digital technologies, networking has reached an exorbitant extent. At the same time, entry barriers have dropped drastically globally, so new markets emerged and new competitors joined the global economic party.

In combination with the non-linearity that springs from many technologies and developments, the result for people as well as organizations is increasing dynamics and complexity. For many, digitalization is primarily associated with opportunities. However, the secondary effects of changed communication ways and the resulting challenges are still being overlooked. The far-reaching impact of digitalization, the true chances, but especially the creeping risks are underestimated.

Thus, the overarching transformation necessities that emerge from technological and social developments are often not recognized. Optimizing systems with digital solutions is already a topic for most organizations. However, the overcoming of existing systems through entirely new solutions occurs only rarely.

Today we know: the communication system determines how we behave. If communication increasingly takes place on digital channels and direct contact decreases, this shapes how we deal with one another. In many cases, this results in an increasing inability to communicate constructively and to manage (hidden) conflicts in the sense of value creation.

“It is not the transmitted content, but the characteristics of a medium that determine the social impact.”

– Marshall McLuhan (1963)

Increasing dynamics become palpable for people and organizations through the fact that they must deal with more surprises,

• which cannot be successfully met with existing knowledge, but only with new ideas, and
• which must be met with a view to different and thus contradictory goals, interests, and purposes.

All the more reason to redefine the importance of communication, collaboration, and conflict in the sense of value creation, so that they find a productive place in everyday business life.

The Challenge: Encountering Complexity and Dynamics in a Value-Creating Way

To cope with complexity and dynamics, it is crucial that companies increase their own complexity and contribute to the dynamics themselves. If this does not happen, value creation is under-complex and the organization becomes increasingly less capable of connecting. Only through high market orientation and subsequent customer centricity do companies remain future-proof.

1. Increase Complexity: Through networking and exchange, people are able to generate solutions that an individual cannot produce without a “resonance partner.” It's about integrating customers, employees, and partners into value creation. This means, above all, bringing their observations and ideas as “weak but significant signals” into the dialogue and condensing them into insights.
2. Generate Dynamics: Whoever puts ideas into implementation and lets innovations grow from them creates value for customers and surprises for the competition. To come up with good ideas, you need the right people with the right ideas at the right time in the right place. For this to succeed, it's essential to integrate the different goals, interests, and purposes of the participants. This in turn increases complexity and thus both conflict and innovation potential.

The key lies in involving intelligent people in value creation and creating framework conditions that promote learning and performance. For continuous improvement, collaboration and the exchange of ideas and knowledge should be encouraged to recognize transformation potentials, open up new paths together, and successfully meet the challenges of the future.

If all participants have the opportunity for involvement and design, their connectivity increases, and with it the motivation to actively drive the development of the company forward. Because: People enjoy working when they have fun and can be proud of what the work achieves. Have you already convinced yourself of this?

Business owners who want to create a framework for learning and high-performing teams should ask themselves the following questions and strive to find honest answers:

1. Is dialogue and discourse currently even possible and desired?
2. Is it worth it (emotionally and rationally) for employees to participate in dialogue and discourse?
3. Is there a possibility to open the dialogue and discourse without fear and with the prospect of success?

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