The following two questions from Grove and Burgelman’s paper (see prior discussions – Part 1 and Part 2) sound like they are exploring how to balance investments between the complicated and complex domains of the Cynefin framework:
1. What is the right balance of exploration and exploitation activities?
2. How to balance induced strategy-making processes that optimize for strategic fitness with autonomous strategy-making processes that optimize the firm’s ability to evolve, evolvability?
In the case of limited industry change, which resembles the complicated domain, the authors advocate for exploiting the opportunities identified from tops-down, induced strategy-making processes. This makes it hard to pay attention to new, autonomous business opportunities from middle management or the front line that are critical for the company’s long-term future. To ensure longer term success, the authors advocate that “top management should continue to allocate a minimum amount of resources to keep the autonomous process viable and maintain at least a limited portfolio of autonomous initiatives.”
During independent industry change, which resembles the complex domain, autonomous strategy-making processes become key. The authors advocate for shifting investment toward autonomous strategies that fit with the company’s core competencies.
As other players are able to engage in rule-changing strategic action, [the firm’s] induced process does not readily respond to these changes because of strategic inertia. … Ultimately, [the firm] is better off pursing new opportunities created by the autonomous strategy process that continue to capitalize on the company’s distinctive competencies. Hence, top management should significantly increase resource allocation to the autonomous strategy process to generate a higher rate of new initiatives…
Grove and Burgelman’s paper is a great read if you are interested in how complex adaptive systems theory can be applied to corporate strategy. While the paper stops short of recommending any prescriptive recommendations, it’s key message is that leaders need to adopt a dynamic investment strategy for balancing investments between autonomous, bottoms-up processes and induced, tops-down processes. Allowing for slack and knowing when to rein it in to exploit the emergent innovation is an important skill for leaders.
Alert strategic leadership is cognizant of the important role of both induced and autonomous processes in strategy-making, tolerates a sufficient level of uncommitted resources and looseness in control to continue to maintain a portfolio of autonomous initiatives, and is able to select at the right time those that need to be converted to the discipline of the induced process in order to cope with nonlinear strategic dynamics.
If you have a chance to read the paper, let me know what you think. Stay tuned for a future post on portfolio management decision frameworks across the domains of the Cynefin framework.
- “Let Chaos Reign, then Rein in Chaos – Repeatedly: Managing Strategic Dynamics for Corporate Longevity” by Robert A. Burgelman and Andrew S. Grove, Strategic Management Journal, 28: 965-979, 2007. Available for download here