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The principles of a dual operating system

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This post is an excerpt from “John Kotter’s ACCELERATE: Building Strategic Agility for a Faster-Moving World” (Harvard Business Review Press, 2014), by John Kotter.

It seems like new management tools are proposed every week for finding a competitive advantage or dealing with twenty-first-century demands. How is a dual operating system any different?

The answer is twofold. First, a dual system is more about leading strategic initiatives to capitalize on big opportunities or dodge big threats than it is about management. Second, although the dual system is a new idea, it is a manner of operating that has been hiding in plain sight for years.

A duel system’s structure

The basic structure is self-explanatory: hierarchy on one side and network on the other. The network side mimics successful enterprises in their entrepreneurial phase, before there were organization charts showing reporting relationships, before there were formal job descriptions and status levels. That structure looks roughly like a constantly evolving solar system, with a guiding mechanism as the sun, strategic initiatives as planets, and sub-initiatives as moons or satellites.

The hierarchy part of the dual operating system differs from almost every other hierarchy today in one very important way. Much of the work ordinarily assigned to it that demands innovation, agility, difficult change, and big strategic initiatives executed quickly—challenges dumped on work streams, tiger teams, or strategy departments—has been shifted over to the network part. That leaves the hierarchy less encumbered and better able to perform what it is designed for: doing today’s job well, making incremental changes to further improve efficiency, and handling those strategic initiatives that help a company deal with predictable adjustments, such as routine IT upgrades.

In a truly reliable, efficient, agile, and fast enterprise, the network meshes with the more traditional structure; it is not some sort of “super task force” that reports to some level in the hierarchy. It is seamlessly connected to and coordinated with the hierarchy in a number of ways, chiefly through the people who populate both systems.

I am not describing a purely theoretical idea. Every successful organization goes through a phase, usually very early in its history, in which it actually operates with this dual structure. This is true whether you are Panasonic in Osaka, Morgan Stanley in New York, or a nonprofit in London. The problem is that the network side of a dual system in the normal life cycle of organizations is informal and invisible to most people, so it rarely sustains itself. As they mature, organizations evolve naturally toward a single system—a hierarchical organization—at the expense of the entrepreneurial network. The lack of insight and effort to formalize and sustain an organization that was both highly reliable and efficient on the one hand and fast and agile on the other did not cost us much in a slower moving past. That situation has changed forever—for Panasonic, Morgan Stanley, and thousands of others—or it will soon.

On close observation, it’s clear that a well-functioning dual operating system is guided by a few basic principles:

• Many people driving important change, and from everywhere, not just the usual few appointees.

It all starts here. For speed and agility, you need a fundamentally different way to gather information, make decisions, and implement decisions that have some strategic significance. You need more eyes to see, more brains to think, and more legs to act in order to accelerate. You need additional people, with their own particular windows on the world and with their additional good working relationships with others, in order to truly innovate. More people need to be able to have the latitude to initiate— not just carry out someone else’s directives. But this must be done with proven processes that do not risk chaos, create destructive conflict, duplicate efforts, or waste money. And it must be done with insiders. Two hundred consultants, no matter how smart or dynamic, cannot do the job.

A “get-to” mindset, not a “have-to” one.

Every great leader throughout history has demonstrated that it is possible to find many change agents, and from every corner of society—but only if people are given a choice and feel they truly have permission to step forward and act. The desire to work with others for

an important and exciting shared purpose, and the realistic possibility of doing so, are key. They always have been. And people who feel they have the privilege of being involved in an important activity have also shown, throughout history, that they will volunteer to do so in addition to their normal activities. You don’t have to hire a new crew at great expense. Existing people provide the energy.

• Action that is head and heart driven, not just head driven.

Most people won’t want to help if you appeal only to logic, with numbers and business cases. You must also appeal to how people feel. As have all the great leaders throughout history, you must speak to the genuine and fundamental human desire to contribute to some bigger cause, to take a community or an organization into a better future. If you can provide a vehicle that can give greater meaning and purpose to their efforts, amazing things are possible.

• Much more leadership, not just more management.

To achieve any significant though routine task — as well as the uncountable number of repetitive tasks in an organization of even modest size — competent management from significant numbers of people is essential. Yes, you need leadership too, but the guts of the engine are managerial processes. Yet in order to capitalize on unpredictable windows of opportunity which might open and close quickly, and to somehow spot and avoid unpredictable threats, the name of the game is leadership, and not from one larger than life executive. The game is about vision, opportunity, agility, inspired action, passion, innovation, and celebration—not just project management, budget reviews, reporting relationships, compensation, and accountability to a plan. Both sets of actions are crucial, but the latter alone will not guarantee success in a turbulent world.

• An inseparable partnership between the hierarchy and the network, not just an enhanced hierarchy.

The two systems, network and hierarchy, work as one, with a constant flow of information and activity between them — an approach that succeeds in part because the people essentially volunteering to work in the network already have jobs within the hierarchy. The dual operating system cannot be, and does not have to be, two super-silos, staffed by two different groups of full-time people, like the old Xerox PARC (an amazing strategic innovation machine) and Xerox corporate itself (which pretty much ignored PARC, or at least could never execute on the fantastic commercial opportunities it uncovered). And, ultimately, the meshing of the two parts succeeds as does anything new that at first seems awkward, wrong, or threatening: through education, role modeling from the top of the hierarchy, demonstrated success, and finally sinking into the very DNA of the organization, so it comes to feel just like, well, “the way we do things here.”

These principles point to something very different than the default way of operating within a hierarchy: to drive change through a limited number of appointed people who are given a business case for a particular set of goals and who project-manage the process of achieving the goals in the case. That default process can work just fine when the pace needed is not bullet-like, the potential pushback from people is not ferocious, and the clarity of what is needed is high (and innovation requirements are therefore low). But, increasingly, that is not the world in which we are living.

Based on these principles, the action on the network side of a dual system is different from that on the hierarchy side. Both are systematic. They are just very different. It’s not a matter of one side being hard and metrically driven while the other is fluffy or soft. We know less today about network processes like “creating short-term wins” than we do about hierarchical processes like operational planning or creating relevant metrics. But, just as action within a well-run hierarchy is far from control-oriented people doing whatever comes into their heads, action within a well-run network is very different from enthusiastic volunteers doing whatever they want.