Complexity:: Strategy and the ‘threatened’ business model

It would be wrong to say that I am in total agreement with the content of this article but that is simply because, courtesy of Ontonix, I hold an ‘informational advantage’! That is because, of course, it is a great deal easier to identify which products, services or aspects of the operation are dragging the model down when you can, objectively, identify sources of internal [endogenous] risk and measure their impact upon the stability [or resilience] of a complex system.

But there is a lot of good stuff that I would highly recommend. Particularly for those readers who have already determined (subjectively) that any downward trend is temporary, a result of ‘bad’ luck/timing, financial volatility or unforeseeable uncertainty. Of course, you may be right but you COULD be wrong and your inaction might only be exacerbating the problem…or accelerating the rate of decline.

I dread to think how much valuable resource is wasted by organisations treating symptoms that are self-generated. John Seddon, a leading ‘Systems Thinker’, talks (with some humour) about the need to address the right problem instead of, inadvertently, creating more "failure demand". It would be fair to say that with an understanding of the complexity of business systems – aided of course by a means to identify and address sources of risk and uncertainty – even the business owners, without whom the organisation may not have come into being, can learn a great deal about a business they feel they know intimately.

But this ‘mistress’ has secrets that will remain hidden unless they are coaxed out…

Business ecosystem

The Gravity of Risk Can Slowly Crush Business Models

Executives must proactively assess their business model, and do so on a regular basis. What was once a great business engine can grow less viable years later because it has become outdated or ineffective due to market shifts or new developments in industry’s business environmental conditions. It is the course all businesses must run, facing the need to change along the way in order to survive.

Risks are about events that, when triggered, cause problems. Hence, risk identification can start with the source of problems, or with the problem itself. It is important to remember that risks emanate from threats, but the manifestations are much broader and may be internal or external to the organization.

Strategy and the Threatened Business Model | Corporate Strategic Planning | Strategic Planning Articles and Resources | Management Consulting Services Firm | Business Strategy Consulting.

Insurance, risk & underwriting:: out of the coffee shop and into the light

Underwriting next level Wow! This is a great report from a US firm called Strategy Meets Action and I think that Deb Smallwood has spelled-out a way forward for insurers, MGA’s and brokers who are dithering on what they need to do be “win” in the immediate future and in the longer term, no matter how the landscape changes in coming years.

Don’t get me wrong, whilst the report makes sense of so much that can (does) cloud the mind of insurance executives – who have so many strategic issues to address and an abiding fear of making the wrong call – it doesn’t enlighten them as to “how” they tackle some fundamental failings, such as:

  • how to differentiate between risks that “look good”, according to correlations in data gathered over many years and those that ARE good, based upon a reliable measurement of their current resilience [ability to absorb unforeseen events]
  • how to rate risks for which there is little or no historic data [the truly “new” venture]
  • how to develop and maintain a sensory awareness of, rapidly changing, internal/external factors – threats and opportunities

Real-time visibility is, undoubtedly, a huge advantage in the Digital Age but, that does pre-suppose that the capability to analyse large scale data [Big Data is THE hot topic] exists. But an even more important question is…

…how do you recognise something you haven’t seen before?

That is to say if it is a familiar pattern i.e. risk, something “known”. But hold on a minute, if this is the full extent of what the smart, enabled and aligned, insurer is looking for then that is to fail to recognise that there are “unknowns”. Do we assume that something unfamiliar is irrelevant, an outlier, or investigate to ensure it is not a new, emergent, pattern or risk?

Organize for Complexity:: business change [presentation]

Dance of silosPlease, please, PLEASE take the time to view this excellent presentation. Even if you only view it at “surface level” it may explain nagging doubts you may have had about the effectiveness of hierarchical business structures. It may help you to visualise your own organisation in a radically different (silo free) manner.

More importantly it may be the “spark” that is required to re-ignite a passion amongst co-workers who have had similar thoughts about the operational structure, misaligned or ill-conceived strategies and all the other "issues" that affect motivation and performance!

There are more levels (or layers) to be considered and that aren’t really covered by the presentation. But I suggest you view the presentation first…

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Shaping the topology of the financial network

The analytic model outlined earlier demonstrates that the topology of the financial sector’s balance sheet has fundamental implications for the state and dynamics of systemic risk. From a public policy perspective, two topological features are key.

First, diversity across the financial system. In the run-up to the crisis, and in the pursuit of diversification, banks’ balance sheets and risk management systems became increasingly homogenous. For example, banks became increasingly reliant on wholesale funding on the liabilities side of the balance sheet; in structured credit on the assets side of their balance sheet; and managed the resulting risks using the same value-at-risk models. This desire for diversification was individually rational from a risk perspective. But it came at the expense of lower diversity across the system as whole, thereby increasing systemic risk. Homogeneity bred fragility…

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Get "fit for randomness" [with Ontonix UK]

socio complexityNot news, unless you have been living in a cave…in which case I could probably recommend some more appropriate reading!

Assuming (dear reader) that you have some interest in the topic(s) this is a very interesting piece. It can be found/downloaded here.

Andy Haldane (Director at Bank of England), Mervyn King and Lord May have been on this “tack” for at least 2 years – I have come speeches, papers or presentations on the subject if anyone is interested – and I have referred to their views in various blog articles over that period.

However, I did want to share this section from the conclusion. Because, these gents have recognised that there is a great deal that we can learn, about, both, cause and solution, from Nature. However, as they point out, due to the Political processes that will, inevitably, affect Bank of England, it is unlikely that solutions…

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Transparency:: “the only lasting competitive advantage is extreme trust”

If TRANSPARENCY is viewed as a "threat" it presents itself as an OPPORTUNITY for competitors and new entrants.

Customers are Ignoring You

Image by ronploof via Flickr

This message should really be ALL the incentive that the “managers” of tired old Institutions need to remind them that, before they determined that the function of their role was to secure individual wealth and power, it was to oversee fulfilment of the purpose(s) for which the organisation was first created.

Discharging that responsibility would be such a departure for some that it could amount to a “disruptive strategy”!

Extreme trust.  This may be the strongest strategy of all, because it makes it likely your customers themselves will want you to succeed. Being proactively trustworthy (we call it “trustable”) requires you to watch out for your customer’s interest even when your customer isn’t paying attention. For instance, if you try to buy something from iTunes that you already bought, they’ll remind you that you already own it. Ditto Amazon. Extreme trust like this engages people’s natural impulse to show empathy, transcending the commercial domain of monetary incentives and tapping into the social domain of friendship, sharing, and reciprocity. And extreme trust should be even easier for a physical store to earn, because most people find it easier to trust other people they come face to face with.

via The Only Lasting Competitive Advantage Is Extreme Trust | Fast Company.