One of the most profound management theories of recent years is nexxworks Partner Peter Hinssen ’s Thermodynamics of Organisations. He believes that when start-ups grow, they shift from being SUPERFLUID (as in fast, furious and agile) to FLUID (slowing down, but still remaining pretty flexible). The bigger they get, the more FROZEN and efficiency-driven they become. They cement the operational model that led them to success. They protect their core business with strategies, processes and fixed structures. The most successful large organisations, however, are able to balance themselves between being fluid and being frozen. It’s essential to realize that when the frozen stage - the hierarchies, the fixed procedures, the addiction to margins, … - starts to take over, companies are in danger of becoming RIGID. They could become so sluggish that they focus more on themselves than on the outside world. And that’s lethal. Rigid is a state of atrophy from which you cannot escape.
How Hinssen’s Thermodynamics Behaves In A Pull Market
Before I zero in on Peter’s Thermodynamics, I want to talk about today’s market. About how it has completely flipped. How companies used to be the ones to push their products and services. Now they have no choice but to pull those from the customer. The impact of this customer empowerment goes FAR beyond a migration from push marketing to pull marketing. Digital and social have created a PULL MARKET, where basically everything is dictated by the consumer. PUSH ORGANISATIONS – which is how most of us still operate, if we’re completely honest – have bought themselves a one-way ticket to Bankruptville. The only way they can survive this paradigm shift, is to reverse their thinking and the way they organize themselves, as I explained in “Stop lying about customer-centricity – it is poisoning you”. Instead of focusing every strategy, structure, process and KPI on their own offering; their first, last and only starting-point should be the customer. (S)he should reside at the very heart of the company. In a Pull Market, there is no other way.
Now, what happens if we merge the concept of a Pull Market with `The Thermodynamics of Organisations’? When customers are the trigger that determines how a company functions, everything directly related to them ought to be characterized by speed and agility. In thermodynamic terms: companies need to be completely fluid around the consumer; in customer experience, staff behaviour and company culture. So, no long-term planning, no static structures and no locked processes in that area. However, we’ve learned that large companies can only function in a dual mode (switching between fluid and frozen). So if the customers dictate extreme fluidity, this means that the more the organizational action is removed from them (e.g. in logistics), the more it becomes acceptable – inevitable even – to be frozen.
How To Fluidify – KPI Killing & Algorithms
I’m certain that some of you are thinking “That’s insane. Customers want us to be efficient and you cannot accomplish that without fixed processes and procedures”. Yes, in a physical human world, that statement is true. On the scale that organizations are operating these days, human efforts do have to be proceduralized. But this is a digital world. It is ruled by algorithms, which do have the ability to read, assess and automate responses to your customers faster, better and more personalized than ever before. They allow us to move and change as fast as the customer so we can give them what they want, how and when they want it. Customer Analytics, in all its forms, is the way to liquefy your organisation’s response to the customer.
“If the market quickens and you don’t, your relative speed slows down and you are in danger of becoming RIGID.”
“Ok, but how will I be able to measure success, then, if I can’t assess the efficiency of our processes in the places where fluidity matters most?”, is what you’re probably thinking next. You will need to change your KPIs obviously. In a Pull Market, your customer is your biggest metric. Not your operational efficiency. Not your EBITDA. Not your Gross Profit Margin. Not your Cost per Lead. Not your Training Return on Investment. Not “please fill in anything you usually measure here”. Your Customers. They drive the market. They determine your products. They are the ones who make or break a company. `Soft’ KPIs – anchored upon values – are what should determine your success: how wonderful the experience of your customers was, how they were treated by your employees and how inclined they are to recommend you to their peers.
Ironically, for most companies, wanting to be faster and more efficient is precisely what slows them down. Because they still believe that smooth processes equal efficiency which equals speed. But human velocity – even if it is efficient – can never measure up to the acceleration of this market. If the market quickens and you don’t, your relative speed is slowing down. Today, the only right way to accelerate an organisation, is to create an almost untamed area of urgency and resilience around your customer, tailoring every action to his fickle moves. THAT is how your customers can speed you up. If you let them.