In the early days of my last start-up, CANDDi, I remember my co-founder, Tim, telling me about a technology he wanted to use. Graph databases. We were building a platform to help people understand the relationship between lots of different sales and marketing data points: interactions with sales prospects on the web, email, social media, phone. The value was in the relationships between these data points. By understanding the relationships, we could map someone’s journey through the sales cycle. We could understand which of those touchpoints were effective. And maybe predict when they were ready to buy.Graph databases, Tim explained, were focused on the relationships rather than the data points. Because that’s where the value was.

Building networks

This nugget stuck with me for a few years until I was asked by the chief executive of a London borough council to help him design a council for the future. The model I came up with was in some ways like a graph database. A network of nodes rather than a monolithic whole.The reasons for creating this network model were many. Local authorities, like most large organisations, have many disparate functions. Like most organisations that have grown organically, they can be quite chaotic in form. Skills and capabilities are unevenly distributed. As is control: too much at the centre, not enough at the edges. Faced with falling funds and rising responsibilities, the organisation needed to be more efficient but also more agile. Able to adapt quickly to rapidly changing circumstances.I don’t believe you can ever try to squeeze such an organisation into a totally rigid model. Nor do I believe there is much value in trying to do so. But I thought there was a better organic form that might offer the required agility. Restructure the organisation around nodes of capability. Distribute more power to each of those nodes to give it a level of autonomy. Arrange those nodes around the citizen (a term I prefer to ‘customer’ in public service) in concentric rings, from those that face them on the inside, to those that face the rest of the world on the outside. In the middle, the nodes that do the data and processing that drives it all.I called this model ‘Stratification’ because of those layers.

What’s the right structure for a large organisation?

So, what’s the right structure for a large organisation? I tackled this question again when a £250m turnover logistics business asked me to help them to be future-ready. Neither they nor the council were Apple-scale. But I think the answer holds as you scale up.My answer in both cases was similar. It starts with perspective. Every org chart is created from the leader’s perspective, and so has the leader at the top or in the middle. But we know that the most important person in any organisation is not its leader. It’s the customer.Reorganising the businesses around the customer gave us a model of concentric circles: a common interface layer, a common network layer for data, and a common external interface for partners.This, in turn, led to a clear need to define the interfaces at each of these layers very carefully to minimise friction — another way of maximising the accessibility that Steve Yegge talks about in his famous platforms rant.Where things get really interesting is when you diminish the friction not just between layers in this model, but between different services and functions.

Functional vs Divisional

In the classic org models, you would divide the business up by functions (HR, finance, sales, marketing) or by business line (product A, product B, product C). Most companies do a bit of both. The attempts to rationalise this hybrid often end up with a matrix: people have a functional reporting line (more senior people of their discipline) and a divisional reporting line (more senior people responsible for the delivery of products or services).In our model, we proposed more of a service model. Part of this fits with the description of Amazon’s data-driven approach as Yegge describes: there are lots of interfaces that are currently based on high-friction, human-to-human interaction where little would be lost and lots gained by changing them to low-friction digital interactions. But there are also interactions where the human-to-human component is absolutely vital: creative, decision-making, or complex communication. Here we often suggested more of an agency/client approach.

Low friction communications

Such relationships in the past may have been very high friction, hence the perceived need to co-locate people or set out the org chart to define hard connections. But technology has enabled very low friction interactions — e.g. shared documents, instant messaging — that supplement the richer face-to-face interactions that these relationships require.The availability of high-speed digital communication has also reshaped our networks, at home and at work – though those two are increasingly superimposed on one another. When information flows so freely, there is less need to be close to the other nodes in the network, either physically, or legally. Face time with your colleagues remains hugely important. But 90% of your tasks can be conducted by the exchange of digital data.Once that is true, does it matter whether your colleague is in the same office, or even the same country? Does it matter that they are part of the same company?Increasingly, it does not. With the right interconnections, we reshape the nature of organisations, commerce and economies.

The interconnected enterprise

My fascination with the connections that enable this structural shift, from monoliths to networks, was renewed when I was contacted about working with a new client, Console Connect. The company’s raison d’etre is to ease the creation and management of these connections in their most tangible form. The telecommunications links that connect us to our organisations’ disparate nodes around the world and across the cloud. They knew how important the relationships were in any network, and they were working to take some of the friction out of those relationships.The result of our collaboration is a report on what we termed ‘the interconnected enterprise’. It is an evolution of the model initially created for that local authority, that then evolved through my work helping large corporates to structure for agility. A model that was most recently refined in my book, Future-proof your business. You can download the report here.

The future of business leadership

So, what kind of leader is needed in a future interconnected enterprise? I learned a new term while working with BMW and Strategic Leadership: Ambidextrous Leadership. Ambidextrous Leadership is about how you balance the challenges of today and the opportunities of tomorrow. It is about how you deliver operational excellence, while at the same time exploring the horizon for future growth. In the language I use most often, it is about how you balance optimisation, with adaptation.Ambidextrous Leadership is a term that I had not come across before, though it is not new. It appears to have originated in the 1970s, according to this valuable summary, and been popularised in the early part of this century. Since I started researching it, I have found endless articles on the topic. This one from Deloitte is particularly worth a read, and I shall refer back to it below.

Optimisation and Adaptation

I have spent the last few years preaching that organisations must shift their focus from optimisation to adaptation. We are so focused on the performance of today’s business that it feels like a massive effort is required to create more time to focus on the future. But of course, we can’t stop thinking about the business as it is today. It has to keep ticking over and even improving. Ambidextrous leadership is an attempt to create some balance.The Deloitte article linked above suggests two modes of Ambidextrous Leadership. First is a structural ambiguity. This means hiving off the ‘skunkworks‘ division doing the high-risk exploratory activity looking at tomorrow’s business models from the day-to-day work of delivering profit today. The second is contextual ambiguity, where every functional unit and even every individual must have an entrepreneurial, innovative approach alongside their focus on strategic goals.What I realised reading this, is that my idea of Stratification really combines both of these approaches.

Stratification and ambidextrous leadership

Typically, the organisation has four layers: a customer-facing layer, a data layer, an operational layer, and a supply-chain-facing layer. Some functions cross those boundaries, but the division is useful because it allows leaders to see where functions ought to be unified and where they perhaps ought to be divided. For example, all customer-facing functions need to be using common language, design and service principles.The leadership of functional units try to optimise for that unit’s narrow purpose. But critically, that purpose can be abstracted away from its role in the wider business. For example, if you have a unit that is fantastic at milling aluminium, it doesn’t have to consider itself as only the aluminium milling unit of the company. Its leadership can be entrepreneurial. They can look for opportunities to make aluminium parts for other customers. Some of these new customers might be inside the business but may will be external.This is a low level of ambidextrous leadership.

How does this affect the future of strategic planning?

The high-level ambidexterity comes from the leadership who have oversight of all the layers and functions. Once the organisation is divided like this, they have a box of building blocks to play with. Leaders can reassemble the blocks to meet new challenges. They can create new blocks without affecting the other functions. They can use blocks from other people’s organisations easily. Or in the worst cases, they can shut blocks down.This approach allows the lower-level functions to keep the priority of delivering operational excellence, something they are well drilled in and something that is often critical to the continued success of the wider organisation. Where they are stretched to think about future opportunities, it is within a narrow context of their known abilities.Meanwhile the senior leadership can take a more long-term, holistic view in the future of the strategic planning process. They should be freed, both in time and responsibility, from the day-to-day operations of the lower-level units, each of which should have its own effective and entrepreneurial leader.

Define interfaces, not connections

If you focus on defining the interfaces between units in an organisation and then optimise those interfaces, you can map it much more easily and more importantly, maintain that mapping. You can see through the organisation and understand value flows and interactions. You can keep goals coherent.