Building OrganizationalIntelligence

Richard Veryard

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This version was published on 2018-11-10

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© 2012 - 2018 Richard Veryard

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Contents

About this book . . . . . . . . . . . . . . . . . . . . 1

Extracts . . . . . . . . . . . . . . . . . . . . . . . . . 8

About this bookWhat is organizational intelligence?

An intelligent organization is characterized by the follow-ing collective abilities:

• an ability to make sense of complex situations andact effectively

• an ability to interpret and act upon relevant eventsand signals in the environment

• an ability to develop, share and use knowledge rele-vant to its business purpose

• an ability to reflect and learn from experience

To make an intelligent organization, it isn’t enough torecruit the brightest people, locate them in state-of-the-art office buildings, and provide them with the smartestcomputer tools and networks. Brainy individuals are oftenpoor at talking to one another and sharing knowledge,let alone coordinating their work effectively. So manyorganizations fall short of their potential intelligence.

Organizations need a mix of people with different “intelli-gences” and each of these has its value. But organizationcan be packed with talented people, and if they do not

About this book 2

communicate and collaborate effectively, the intelligenceof the organization as a whole will be impaired.

A lack of organizational intelligence may show itself inmany ways, including

• a lack of awareness or understanding of environmen-tal change

• slow to respond to problems• inconsistent or ineffective policies and decisions• failure to learn from experience• limited capacity for innovation• lack of focus in communication and action

Any of these signs of organizational stupiditymay threatenthe long-term survival of the enterprise, especially in acomplex and changing world. Improvements in organiza-tional intelligence should help to build more cost-effectivecoordination, improved decision-making and innovation,and improved business performance; and these shouldenhance the long-term prospects for the organization.

What is it like working in an intelligent organization? Ifyou have ever worked in a successful start-up, you willrecognize that there is a real desire to understand whatthe customers want, and strong commitment to collabo-rative problem-solving. Meetings are focused on solvingreal issues, and there is little tolerance for the kind ofunproductive games that people play in larger and moreestablished companies. In principle, it should be possible to

About this book 3

have this kind of positive experience in any organization:in practice, these aspects of intelligence get harder to findas an organization gets larger and older.

It is a popular idea that large organizations should behavelike small organizations: one way to achieve this is to lookat the way successful small organizations practise organi-zational intelligence. At the same time, we can understanda lot about organizational intelligence by looking at thearray of frustrations experienced by people in many largeorganizations.

Improving organizational intelligence

People and technology have complementary forms of in-telligence, and an intelligent organization brings thesetogether. There are lots of interesting ideas for improvingorganizational intelligence, mostly calling for changes toorganizational structure and culture, but there may also bea useful technological contribution, if and only if this canbe aligned with the necessary organizational change.

Themanagement literature is full of strange andwonderfulideas for transforming organizational structure and cul-ture. These radical changes may help to improve organiza-tional intelligence over the longer term. They usually can-not be achieved by quick fix solutions – whether technicalor top-down management. However, an organizationalintelligence perspective can support a broader organiza-tional change initiative, as well as enabling incrementalimprovements within an existing organization.

About this book 4

Meanwhile, a wide variety of software products and plat-forms are being promoted for their contribution to variousaspects of organizational intelligence, and there is alreadya proliferation of jargon, including ‘agile enterprise’, ‘col-laboration networks’ ‘enterprise 2.0’, ‘smart work’ and soon.

Many organizations already have a range of fancy tech-nology, but it is only worth spending money on advancedinformation systems or faster analytics or fancy Enterprise2.0 platforms if your organization is capable of using thesesystems effectively. Organizations often fail to use thetools that are available, or (worse) waste effort and re-sources on a random collection of expensive tools withoutappreciating how they will work together in the specificorganization. And sometimes technology merely amplifieswhat’s wrong with an organization.

However, many organizations have expended large amountsof time and money on fancy solutions, often with muddledobjectives and poor planning, and therefore no prospect ofany genuine return on investment. In fact, poor deploy-ment of technology may just make things worse.

What you will find in this book

Firstly, a broad range of real-life examples, showing thepresence and absence of organizational intelligence fromvarious perspectives.

Secondly, an overall roadmap for understanding and im-proving organizational intelligence in your organization.

About this book 5

• How to distribute intelligence throughout your orga-nization for maximum benefit.

• How to justify your investment in organizationalintelligence.

Thirdly, guidance for specialist functions (including HRand IT) for contributing to the organizational intelligenceagenda, as well as guidance for vendors wishing to supportthe organizational intelligence of their customers.

• Developing an agile knowledge-based learning orga-nization.

• How to identify the human and technological blocksthat reduce the effective intelligence of your organi-zation.

• Understanding how to get the value out of a broadrange of other investments, including IT. Many tech-nologies can help if implemented wisely, properlyintegrated with each other as well as with workingpractices and organizational culture.

• How to design, implement and integrate human andtechnical systems to enhance organizational intelli-gence

And finally, a general framework for understanding andimproving organizational intelligence.

About this book 6

OI Schema

The framework identifies six connected capabilities. Theschematic diagram shows some of the main connections.

Information GatheringHow well does the organization collect and processinformation about itself and its environment?

Sense-makingHow well does the organization interpret and under-stand itself and its environment?

Decision, policy, actionHow effective are the (collective) processes of think-ing, decisions, policy and action?

Knowledge and MemoryHow does the organization retain experience in auseful and accessible form?

About this book 7

Learning and DevelopmentHow does the organization develop and improve itsknowledge, capabilities and processes?

Communication and CollaborationHow do people and groups work together? How dothey exchange information and knowledge? How dothey share ideas and meanings?

When an organization lacks intelligence, this may be be-cause one of these capabilities is weak or marginalizedwithin the organization, or because the loops connectingthese capabilities are not working. But when these capa-bilities are connected and in balance, the organization willmake better decisions, respond more promptly and appro-priately to key events and trends, and learn efficiently fromexperience.

This framework for organizational intelligence thereforeprovides us with a way of looking at business improvementand survival, combining the latest management thinkingwith advanced software technologies to produce highlyeffective organizations.

ExtractsWilensky on OrganizationalIntelligence

The first person to venture into the subject of Organiza-tional Intelligence was the American sociologist HaroldWilensky, who published a book on the subject in 1967.Some of Wilensky’s assumptions look a little dated now,but there’s a wealth of great ideas and examples in his book¹.

Wilensky’s book contains many examples of organizationsthat have been led astray by false certainties, narrowthinking, and insufficiently rigorous and critical debate.His final paragraph is as follows.

“To read the history of modern intelligence fail-ures is to get the nagging feeling thatmen at thetop are often out of touch, that good intelligenceis difficult to come by and enormously difficultto listen to; that big decisions are very delicatebut not necessarily deliberative; that sustainedgood judgement is rare. Bemoaning the decline

¹The New Yorker journalist Malcolm Gladwell has drawn upon Wilensky’sbook in his analyses of several topical examples, including Enron.

Extracts 9

of meaningful action, T.S. Eliot once spoke of aworld that ends ‘not with a bang but a whim-per’. What we have to fear is that the bang willcome, preceded by the contemporary equivalentof the whimper - a faint rustle of paper assome self-convinced chief of state, reviewinga secret memo full of comfortable rationaliza-tions just repeated at the final conference, failsto muster the necessary intelligence and witand miscalculates the power and intent of hisadversaries.”

It is not hard to project this onto more recent events.

Do you recognize any of thesesymptoms in your organization?

ChokeInability to access capability when it is needed.

Denial“The problem doesn’t exist, and anyway it isn’t aproblem for us, and anyway we’re already dealingwith it.”

GuessworkActing in the dark

MeddleTinkering andmanagement interferencewithout realunderstanding

Extracts 10

MuddleConfused and bewildered by many overlapping andconflicting narratives

PanicTaken by surprise, responding in haste

Policy-based evidenceFinding data to support or justify an existing decisionor state, while ignoring any data that might contra-dict.

Repetition / OscillationRepeating the same mistakes without learning.

Short-Sighted / Tunnel VisionNarrow focus on short-term goals, inability to con-sider broader or longer-term vision.

Tidal Wave

Here’s a story we can learn from even if we don’t take itat face value. It’s a well-known episode from the historyof Microsoft and the internet – the Bill Gates ‘Tidal Wave’memo from May 1995.

There are alternative accounts of this episode, and thememo clearly doesn’t tell the whole story, but it still givesus some fascinating clues about the presence or absence ofintelligence loops within Microsoft and elsewhere in theindustry at the time.

So let’s have a look at the Bill Gates memo.

Extracts 11

Tidal Wave 1995

“Exponential improvements in computer capabilities - greatsoftware quite valuable”

An account of Microsoft’s previous strategy.Appeals to a shared memory of past events toexplain Microsoft’s success to date.

“Exponential improvements in communications networks -the Internet is at the forefront of this.”

Prediction of future trend - creating a plausiblenarrative based on observation and analysis.Weak signals gradually getting stronger.

“Perhaps you have already seen memos from me or othershere about the importance of the Internet. I have gone

Extracts 12

through several stages of increasing my view of its impor-tance.”

Emphasizing a gradual shift of opinion. Thereis no criticism of Microsoft implied if we askwhy several stages were necessary and whatthese stages were. With hindsight, it may al-ways seem that radical conclusions might havebeen reached more quickly, but we should alsorecognize that many organizations take a lotlonger to reach such critical shifts in opinion.

“Now I assign the Internet the highest level of importance.”

This is a key decision, from which a large num-ber of other decisions and policies will follow.Note how a series of observations and specula-tions slowly built up towards this decision.

“… memos from me or others here … In highlighting theimportance of the Internet to our future I don’t want tosuggest that I am alone in seeing this. There is excellentwork going on in many of the product groups.”

Emphasizing the collective nature of the pro-cess. It is always tempting to see all decisions asmade personally by the CEO, especially in thecase of a high-profile company founder like BillGates. Although much of the memo is in the

Extracts 13

first person singular (‘I have, I assign’) Gatesalso wishes to share the credit and responsibil-ity to some extent.

“There will be a lot of uncertainty as we first embrace theInternet and then extend it. Since the Internet is changingso rapidly we will have to revise our strategies from timeto time and have better inter-group coordination than everbefore.”

Emphasizing the need for Microsoft strategiesto rapidly evolve, presumably based on emerg-ing trends and feedback.

“I am looking forward to your input on how we can improveour strategy.

Emphasizing the need for collective strategy-making.

There may be things that Microsoft itself can learn (or hasalready learned) by looking back on this episode. Could theimportance of the Internet have been recognized sooner?How quickly did Microsoft align itself to this new agenda?How effectively did Microsoft monitor the evolution ofthe Internet and adjust its strategies? How did Microsoftuse the tools and platforms that were available at thetime (such as email), and how might today’s technologies

Extracts 14

(such as blogging and social networking) have affected theprocess?

More generally, there are things that any organizationcan learn by looking through similar episodes in its ownhistory. How quickly were important signals picked up?How effectively were strategies and policies formulatedand decided, and follow-up actions communicated andcoordinated?

As with any other firm, the survival and success of Mi-crosoft depends on how it deals with a small number ofmajor episodes and turning points like this, as well as withcountless minor episodes. No amount of intelligence canguarantee that every episode will be handled correctly, butwe should expect an intelligent organization to get more ofthese episodes right, to take appropriate action promptlywhen things start going wrong, and perhaps even to getbetter at handling these episodes over time.