This is the second post in a series on Flow by Design, a new, more sustainable paradigm for business success. In the first article, Henry King and I argued that organizational silos are not what they seem. They are not anomalies or aberrations or management gone bad. They are not a recent malaise or byproduct of the digital era.They are in fact just everyday examples of an approach to resource management that has been successful for millennia and that pervades all industries and all regions.
So even though they do cause all the problems that we attribute to them -- including wasted time and increased friction, ineffective communications, untimely decision making, unresponsiveness, loss of business -- they're simply not going to go away just because we complain about them. We also recognized that trailblazer organizations have successfully created radically differentiated business models to their industry norms by removing process friction and establishing continuity of flow of resources.
The only way we can effectively get rid of them is if we can replace the entire paradigm on which they're built, not engage in a futile and endless game of whack-a-silo. We need a new model, one that still offers success but that extends success out to a much broader set of stakeholders, one that minimizes waste and maximizes responsiveness, one that allows our companies to thrive in an era of constant change.
It turns out that living systems offer up an alternative model to silos, one that is based not on accumulating and defending stocks of essential resources but instead on the continuous movement, or flow, of those resources across and throughout those systems.
We like to talk about key resources as our companies' lifeblood, the most important thing we need to survive or to be successful, and yet we pay no attention to their movement. Blood by itself does not ensure life. It's the movement, the flow of the blood that counts. Our lives are absolutely dependent on flows of nutrients both inside our bodies, enabled by the circulatory system, and between our bodies and the outside world, achieved through the continuous act of breathing. Embolisms and other blockages that stop those flows cause death to tissue, limbs, organs or even to the whole organism.
If our bodies decided to try out our corporate model of resource management, and our hearts started to store blood instead of pumping it to where it is needed, and our lungs started to hold their breath instead of continually bringing in fresh resources from the outside and sharing them with the blood, we would die immediately. To exist, living organisms use pumps (lines of business or departments), a circulatory system (CRM platform) -- pulmonary, cardiovascular and systemic, filters (AI applications and analytics) and enriching environments (ecosystem and stakeholders).
This doesn't just apply to humans or animals. Trees also move resources throughout their bodies, from leaves to roots and back via their own circulatory systems. They even exchange information with each other via the recently discovered "wood wide web" also known as a mycorrhizal fungal network. And they exchange resources with us, most notably carbon dioxide and oxygen by way of photosynthesis, arguably the most important process in nature. And while individual trees may not move, forests can. Peter Wohlleben in his marvelous book "The Hidden Life of Trees" estimates that the beech trees of Central Europe are migrating northwards a quarter mile per year.
When we're overly controlling and protective of our resources we may be endangering the life of our companies. Changing our management paradigm from accumulation and control to movement and sharing, i.e. flow, may reverse that trend.
Armed with the twin insights that most organizations apply silo-based approaches to managing their resources, and that living systems apply flow-based approaches to theirs, we decided to look to see where we could find examples of flow in the business world. And here's what we found:
First, as you would expect after reading in our first article that silo based resource management governs at least 90% of all our industries and institutions, flow is relatively rare. Some industries, however, are much further along in applying flow than others. Manufacturing, in particular, has long advocated for flow, and approaches like Just In Time manufacturing have existed for decades. But even in that industry those approaches are by no means universal. Only in the last decade have pharmaceutical companies begun to explore in-flow production, and have seen all the benefits that we outline below. Meanwhile, problems of excess inventory, batched production, waste, inflexible infrastructure and processes as well as organizational silos leading to unresponsiveness are commonplace and continue to be problematic.
Similarly, flow has been an important principle in computing ever since the advent of multi-user systems in the 1960s. Over the last 50 years we have seen shifts from a few centralized mainframes to billions of distributed devices, from nightly batch windows to 24/7 online availability, from hierarchical to relational to networked data, from proprietary to open systems, from waterfall methodologies to agile, from "monolithic" applications to microservices and APIs, and, potentially, from corporate ownership of customer data to individual ownership by means of the distributed web (a current initiative led by Sir Tim Berners Lee, the "father" of the world wide web).
Second, flow designs tend to produce win win win situations, where they are better for the customer, better for the business, and better for the ecosystem, community or environment within which they operate. They accomplish this as a direct result of their focus on the flow of resources. The benefits that are routinely achieved by flow designs include:
All of which add up to differentiation in the marketplace and industry leadership for the companies applying flow.
Third, through our synthesis of all the examples we have researched, we have found that all types of flow designs follow, consciously or otherwise, a common set of principles. We will introduce these seven principles in the next article in the series.
Fourth, flow enables pioneering companies to innovate and even disrupt across all areas of their business. We have mapped the flow designs that we have uncovered so far against the Ten Types of Innovation framework developed by Doblin Inc, and have found that innovative organizations can use flow across all ten types. More broadly we can say that flow based designs are equally applicable across the three larger innovation categories of Experiences, Offerings, and Configuration (also known as business model or organizational innovations).
To further illustrate what we mean by flow, here are a few examples from across all three of those categories.
We are all familiar in our daily lives with experiences that force us to stop in our tracks and take us out of our flow. One of these, especially irksome for many of us who commute by car into work, has traditionally been the toll plaza experience. Toll roads have a surprisingly long history, stretching back at least 2,700 years to the reign of the Assyrian king, Ashurbanipal. And for at least 2,680 of those years, toll road users have had to stop and pay at toll gates, stations, booths or plazas before continuing on their way. Over the last decade or so, however, things have changed significantly.
Open Road Tolling (ORT) has transformed toll road driving and provides a vastly superior motorist experience compared to a toll booth, especially for those commuters. No stopping, no wasting time in rush hour lines, no searching for the exact change, no getting stuck behind "that" driver. Instead, ORT is designed specifically to allow you to continue your journey without interruption or frustration, to maintain your flow. And if that's all it did, it would still be reason enough to love ORT. But not only does it save you time and annoyance, it's also cheaper and much safer for you. It's also cheaper for the freight industry where it is estimated that for every 15 minute reduction in trip time the typical truck saves $25. And It's a better solution for the toll operator, not only because it is cheaper to manage and to maintain than the cash based toll booths, but also because it collects data continuously that may be useful in a variety of ways. And because it eliminates stopping and waiting it also increases fuel efficiency and reduces carbon monoxide and other emissions, providing an environmental benefit as well.
Another example of flow based experience that is still in its early days but that will inevitably evolve to take share from its current silo counterpart is checkout-free retail, currently being led by Amazon Go and already followed by several others. In many respects, checkout-free retail is nearly identical to ORT in its benefits, saving the customer time and irritation, improving the retailer's data capture while saving employment costs, and improving the use of space (an environmental benefit). And it is also enabled by a similar, distributed technology model, with mobile technology at the customer end (smart phone for retail, transponder for ORT) and sensing technology at the retailer end. Distributing intelligence to the customer and provider is a profound facilitator of the flow model in general, already enabling experiential innovations in other industries like the hospitality industry as we will see later
In only a dozen years since its introduction to the world, Apple's iPhone and the entire sub-species of mobile smartphones that it has birthed has achieved quite extraordinary reach and impact. It has reached half of all humanity in that short time. We will come back to it later when we discuss the principles of flow in more detail, but here it should suffice it to say that smartphones give us our flow as individuals to a degree unprecedented by any other technology. Not only does it untether us from the landline, but it brings the world to us while we are on the move. A significant and growing percentage of all ecommerce is now performed from mobile devices and in the near future companies will need to have fully embraced the mobile first mindset that has been percolating for the last decade or so.
The autonomous car is an obvious candidate for flow because it moves, but there is far more to this evolving story. Autonomy actually requires that the car is far more connected to its world than it has ever been, it needs to be sensing information continuously, it needs to decide what it needs to do and then it needs to respond to those external conditions. And it delivers benefits to the human, who is free to do what they want as a traveler rather than as a machine operator, it can be mobile continuously serving multiple human needs rather than being parked in a garage or on the side of the street for most of the time, and it will be much safer given that over 90% of all car crashes are the result of human behaviors and emotions. We will explore the autonomous car in more detail as we discuss the individual principles of flow later.
Companies that are designed for flow from first principles and that already work according to them consistently are difficult to find except in small companies for whom silos generate excessive overhead rather than economies of scale. Later on in this series we will introduce a number of practical recommendations for implementing flow within organizations of all size, but in the meantime we can point to some exemplars across different industries and regions who illustrate the outcomes of being flow based.
In enterprise software, Salesforce delivers three major releases annually to its CRM product, predictably and reliably. It has achieved this by adopting Agile practices and philosophy, enabling the flow of information between customers, salespeople, partners, developers and others. It also designed and implemented a process for developing annual goals and gaining organizational alignment around them from the earliest days of the company. Known as the V2MOM for Vision, Values, Methods, Obstacles and Measures, the entire company is engaged in its development in one way or another and everyone can see everyone else's individual version, enabling a flow of information from top to bottom and across the entire organization that is second to none.
In retail, the Spanish fashion retail chain Zara is built on a continuous flow and feedback model. It produces and distributes in small batches, reducing the design-to-shelf cycle time from an industry average of 6-9 months to 2-4 weeks. Zara maintains low inventory levels in its stores. Information flows daily from consumers to designers -- what they say they'd like to see, what they try on but discard in the dressing room, and what they actually buy -- and responsive product flows back to them. And it works. Its parent company, Inditex, took over from The Gap as the largest retail fashion company in the world in 2008, and is currently competing with H&M, the other pioneer of "fast fashion", for the top spot.
In energy and industry, the Danish industrial park of Kalundborg stands alone in its commitment to Industrial Symbiosis, the sharing between organizations of byproducts as resources, including both energy and material, to reduce waste, costs and environmental pollution. Since its initial experiments in 1972 membership has grown to include over 30 byproduct exchange agreements between some of Denmark's largest organizations. Between them they have reduced yearly CO2 emission by 240,000 tons, saved 3 million m^3 of water through recycling and reuse, and recycled 150,000 tons of gypsum. The park as a whole operates as a flow system, providing inspiration, example and analogy for innovative multi-organizational collaborations of all types. With the recent increased interest in business ecosystems and in sustainability, Kalundbord continues to serve as an important inspiration.
Flow, then, is about setting resources in motion, like a motorist on an ORT toll road, as opposed to something held in a silo, like a motorist at a toll plaza. Flow can apply to just about anything, including people, ideas, natural resources, money, products, even waste. It carries with it the idea of being able to maintain steady progress, even across boundaries or borders between domains, departments or territories of any sort. Flow-based experiences, offerings and configurations make it possible to use, improve or process a resource without having to stop it first.
The remarkable thing about flow-based designs is that, regardless of industry or resource application, they nearly always produce the same triple whammy effect, improving the customer experience, reducing operational costs, and improving environmental or community impact, all at the same time. They commonly disrupt industry norms and orthodoxies and our research has found that they share, even if implicitly, a set of design principles that generate and guide this revolutionary business model.
Organizations that have implemented flow-based solutions are typically among the most differentiated and the most successful players in their industry or market. And yet they represent a very small part of the whole. As a result there is a massive opportunity for transformation, including everything from how we eliminate waiting in various lines, rooms and phone calls to how we get rid of the silos that stop the flow of ideas, information and knowledge across and beyond the organization, from how we utilize flow based energy sources like the sun, wind and water, to how we support customers, employees, students, individuals and communities of all types alike in their respective flows. Any organization that is looking for transformative and differentiated success should consider designing and implementing flow-based solutions and watch their silos crumble.
Next up, the seven principles of flow that designers, managers and entrepreneurs alike can use to gain the benefits described above.
This article was co-authored by Henry King, a business innovation and transformation strategy leader at Salesforce.