This is the fifth in a series of excerpts from the report A Matter of Perspective: A systems approach to communication and complexity. A copy of the entire report is available here
Communication in organizations is influenced by the way organizations are designed
In business, most communication originates from within organizations, which generally exist in two forms – closed or open. To some degree every organization is closed, in that much of its information remains behind its walls. Though sometimes necessary, it can lead to what psychologist and Nobel prize winner Daniel Kahneman terms the “inside view,” wherein decisions and forecasts are based entirely on specific circumstances and supported only by a company’s own experiences.
Case in point: the decision by the Susan G. Komen Foundation to defund Planned Parenthood. Motives aside, the resolution by Komen’s board of directors was apparently derived from a narrow perspective. According to Laura Otten, Director of The Nonprofit Center at La Salle University’s School of Business, the board was filled with family and friends. “When we build a board of people who are alike in terms of background and thinking,” she told the Nonprofit Business Advisor newsletter, “[it] tends to be more about affirming what someone else wants, not about asking the serious questions or having a thorough discussion.” In fact, the board came to its decision despite recommendations to the opposite by the foundation’s professional staff.
Nearly every big – and lots of smaller – enterprises are also still hierarchical, so a good deal of their knowledge is further imprisoned within silos. Albeit, information confined to individual departments or operations is easier to coordinate – and therefore more cost-effective – real innovation seldom occurs there. Rather, it emerges at points where separate ideas intersect.
According to research at the University of California, Berkeley, exposure to unfamiliar perspectives fosters creativity. Moreover, debate and criticism do not inhibit imagination but actually stimulate it. Studies of more than 200 public firms in the United Kingdom found that those most able to radically change their entrenched ways of doing business frequently promote creative tension. That is why many resourceful companies encourage employees to expose themselves to a diversity of information, including ideas from the outside. Which makes them open organizations.
Granted, this concept of openness is hardly novel. But when businesses do venture beyond their walls for additional insights they may not go far enough. In a study of the relationship among 43,000 global corporations, systems scientists at the Swiss Federal Institute of Technology identified a network of about 1,300 blue chip companies with interlocking ownership. These include a core group of 147 tightly knit firms, all of whose ownership is held by other corporate members. Most are financial institutions, which may account for why several major American banks made the same ill-fated decision in 2011 to charge customers added debit card fees.
Conformity may be comforting, but it can also be a drawback. Three decades ago Arie de Geus, then Corporate Planning Director at Royal Dutch Shell, sought to answer the question: “What distinguishes long-lived companies?” At the time the average lifespan of Standard & Poor’s 500 firms was about 40 years, and de Geus discovered that long-lived companies (those that survived for as much as a century or more) were sensitive to their environments. Despite changes that surged and ebbed, he later wrote in his book The Living Company, “they always seemed to excel at keeping their feelers out, tuned to whatever was going on around them.” In addition, “these companies were particularly tolerant of activities on the margin: outliers, experiments, and eccentricities within the boundaries of the cohesive firm, which kept stretching their understanding of possibilities.”
For de Geus, the fundamentals of corporate longevity are as valid today as they were back when he wrote those words. Meanwhile, the average S&P 500 lifespan has since plummeted to just 15 years.
This speaks to the mounting reliance on social media as a means to access greater amounts of information; and on the capacity of data analytics to collect and process it. So far the jury is still out on whether social networks are a viable marketing medium. Yet there is a growing body of evidence to indicate that communing with consumers can play a role in enhancing innovation.
A series of related studies in the United States, United Kingdom and Japan found that consumers in these countries come up with untold numbers of ideas that can be used to improve products. This has led researchers to suggest that in lieu of viewing customers only as passive recipients of merchandise, companies should also collaborate with them as significant sources of innovation.
Capturing and capitalizing on those ideas, though, can be problematic. According to a report from the New York American Marketing Association and Columbia Business School’s Center on Global Brand Leadership, the number one obstacle to taking advantage of consumer data is the lack of sharing between departments.
Indeed, internal barriers to communication have long been a complication for most organizations. But should they overcome the problem they must still be able to recognize which ideas – whether from inside or outside – are really valuable. That starts with becoming more sensitive to their audiences.
Photo: Travis S.