Dr. Andy Grove in his book “Only the Paranoid survive” talks about a phenomenon called dynamic dialectic. He talks about strategic inflection points and how leaders in an organization should always be on the lookout for forces that can lead to such inflection points. A strategic inflection point can be defined as a period when an organization must manage a disruptive change in its business environment effectively or face a decline. He wrote that the lack of a strategy to deal with such changes is what often results in the failure of businesses.
He gives examples of companies such as Intel and HP that have been able to navigate this inflection point with ease. On the other hand, there are companies such as Wang Laboratories or Apple under the leadership of Sculley that were not able to rein in the chaos.
His essential point was that companies that successfully navigate through strategic inflection points have a good alignment between bottom-up actions and top-down strategy.
Bottom-up Actions Initiating the Change
Bottom-up actions come from the ranks of the middle managers, who, by the nature of their role and position, are often the ones that perceive the change first. They are located at the periphery of the business, where change is first perceived. However, whatever action they may take has a local impact because of the nature of the role.
Best Transformations as Results of Aligned Bottom-up and Top-down Actions
Top-down actions are those that come from the leadership, and the best transformation happens when both the bottom-up actions and top-down strategy are aligned. The bottom-up actions must meet halfway the actions generated by senior management for effective transformation.
Transformation be it Tech or Non-Tech, is always a result of a potential and/or anticipated inflection point that the organization may be looking at. Think of the Covid times when a lot of businesses had to change the way they operate so that they could deal with the new nature of interactions in society
I wanted to draw a parallel with his framework of how organizations can manage strategic inflection points – rather than strategic inflection points, apply it to the operational or action strategy that companies should ensure the success of their digital transformation initiatives.
Take a look at the grid chart below with the strength of top-down actions in an organization on the left axis and the strength of the bottom-up actions on the X-axis. Based on the strength of each of these actions, we have four grids and a category for organizations that may fall into each of these grids. Take a moment here to ponder where you are at with respect to your organization.
The best quadrant, as is evident from the graph, is to be in the top right one – Strong top-down and strong bottom-up actions roughly balancing. This is where there is perfect synergy, and the top-down strategy is seamlessly being translated to new ways of working in the bottom layers of operations.
The left top is where the bottom-up actions are not aligned with the top-down actions, and you are in a state called the Strategic Coma. This is where most organizations fall. They spend millions of dollars on strategic transformation projects, but the effect that happens on their bottom line is not as much as they had expected. This is because the strategy never flows down to the operational layers of the organization, and there is a lack of adoption of new ways of working.
The Valley of Death and the Laggards
Valley of Death is where organizations are making no investments toward strategic transformations. These are organizations whose business models will become obsolete with time. He gives the example of Wang Laboratories without Dr. Wang. How under Dr. Wang’s visionary leadership, the company made the strategic change from being a producer of desktop calculators to a pioneer in the distributed word processing system. However, in 1989 when the PC Revolution brought about a change in the market, with Dr. Wang being ill, no one was able to define the company’s new strategic direction, and Wang Laboratories ended up filing Chapter 11 bankruptcy.
The laggards in the bottom right grid are where the middle management and front line are very strong to anticipate the changing business needs, but because of a lack of direction from the top, the changes they make are very localized and do not create a company-wide impact.
Guiding an Organization Through Strategic Transformation
The responsibility of guiding a company through a strategic transformation can not be left only to the senior management. Neither can it be only on the middle management and front line because though they may have the detailed knowledge but because of their job role, their experience is specialized and outlook local and not companywide.
However, the middle management’s role is extremely important in bringing about that alignment. They are the ones who can take direction from the leadership, assess the impact on operations, and run experiments to align the operations to the new ways of working.
Rather than spending time in the complexities of execution, your middle management’s clear focus should be to ensure that the top-down actions and the bottom-up actions are constantly aligned.
DefineRight Assisting Businesses Shift Toward a Value-creation Mindset
At DefineRight, we help business functions by managing the execution details of their operations and business initiatives. Thus, as part of its X-Ops and Automation service, DR has been changing organizations’ focus and moving them from an execution mindset to a value creation mindset – It is this value creation mindset that allows organizations to bring the right alignment between the top-down and bottom-up actions ensuring the success of your transformation projects.
Only the paranoid survive is a fabulous book and a must-read for people interested in the workings of great organizations. Dr. Grove wrote the book in 1996, but many years before that (the 1970s), he spoke about and implemented at Intel what is called the Objective-Key Result (OKR) philosophy (later written into a book in 1983 by John Doerr). If the above framework is the answer to the question “What we should do to implement strategic transformation initiatives successfully?” the OKR framework answers the how behind it.