The Failure of Efficiency
As the world stumbles into yet another Covid wave, this time driven largely by the Delta variant, policy makers and business leaders continue to struggle with systems, of their own making, that are simply too efficient. Surely that is a mistake, right? No. The modern world has been built upon models of robustness, that maximise economic efficiency, such as lean, just-in-time, etc and punish inefficiencies. Yet, such models are based upon underlying assumptions of a predictable level of order that can be largely controlled. However, when faced with systemic waves of unpredictable complexity robust systems turn out to be pretty poor and are overwhelmed. We see the start of this in the UK, with the so-called pingdemic, where so many people are being pinged by the health service app to self-isolate, due to close contact with someone who has tested positive for Covid, that supply chains are unable to cope. As the wave widens and deepens in countries with lower levels of vaccination we can only expect more of the same.
Instead of robustness the world needs more resilience. As Roger Martin wrote in 2019 (Martin R., ‘The High Price of Efficiency.’ Harvard Business Review, January 2019) the high price of efficiency is seen in rising inequality and reliance upon a small number of dominant business models, based upon robust systems that maximise internal gains. However, the loss of slack in the system reduces space to experiment for innovation, leads to concentration of wealth and power and, just as in nature, the reduction of diversity leads to a loss of systemic resilience. It is that lack of resilience at a systemic level that Diamond described as leading to societal collapse. In his book Collapse (Diamond J. (2006), Collapse: How Societies Choose to Fail or Survive. London: Penguin) Diamond outlines how history is littered with examples of societies failing to learn this fundamental lesson. From Easter Island to to the Mayans to the destruction of fish stocks he shows how the hubris of human invincibility comes crashing down as we knowingly undermine our own resilience.
Unless we start to question the idea that we are the conquerors of nature, that has prevailed since the enlightenment and driven the industrial revolution, we will always be at risk of collapse. For whilst we can design social and business systems to be more resilient, the temptations of greed and power will always win out and in the end nature will always kick back and put us in our place, unless we start thinking beyond pure financial value. The time has come to develop models which recognise human activities as positioned within nature and not as controllers of nature. Developing more local, diverse supply chains may be less economically efficient, but is always more ecologically resilient and the simplest insurance against hard times.
Lets take the examples of apples or pigs. In both cases farming has focused upon a few breeds of both, which deliver maximum gains in shortest possible times, reliant upon heavy use of chemicals and treating both as mere units of production, whose existence has no inherent value beyond its economic utility to human corporations. In times gone by the range of breeds of both was considerably greater. This meant that if disease hit one breed others may be unaffected. Equally farmers deliberately farmed a variety of crops and animals to hedge against disease or weather affecting one or other. Today, of course, we monoculture almost everywhere to maximise efficiency.
Capitalism has fooled us into believing that short term financial figures are everything. Whilst they measure levels of efficiency well, in doing so they encourage a search for robustness which continues to undermine more sustainable systems of resilience. The pandemic has simply revealed how hard leaders are finding it to get out of their efficiency driven mindsets. However, the way out of the pandemic and the ecological crisis we face is more resilience and not more robustness.
As Roger Martin noted (referenced above) rising complexity was already, prior to the pandemic, significantly challenging existing models of business. The convergence of digital disruption and globalisation was undermining old certainties in developed markets and transforming the nature of work in emerging economies. If your markets are being disrupted by technology, new patterns of working or the pandemic you need to think beyond robustness. In times of ordered gradual change robust models of organisation can be powerful. They tend to be very poor for periods of complex, turbulent or rapid change, when the inevitably inefficient process of innovation is critical. Even worse, the constant search for more efficiencies reduces systemic resilience and psychological preparedness.
Our research, over the last twenty tears, indicates that most managers believe their markets and ways of working are increasingly complex, more dynamic and less predictable than previously. The pandemic has, by forcing us all to question how we work, created an opportunity to rethink how we organise our businesses and what we ask of those that lead them. Learning to think beyond optimisation and rewarding managers for their adaptability over their efficiency is not easy, but is critical if you are serious about long term resilience and innovation. Our research, practice, writing and teaching is available to help you make the most of this moment. As someone once said in every crisis is an opportunity. Will you seize it, or not?
If you would like to know more about how to adapt for resilience please ask about our programmes for complexity and disruption.