Adaptability and resilience are more than just industry jargon in today’s hypercompetitive business environment; they are the backbone of sustainable success. However, traditional governance systems often fail to cultivate these critical attributes, which highlights the need for more dynamic and resilient frameworks.
Antifragile governance is a new approach to corporate governance. This forward-looking model is designed to help companies navigate the complex and ever-evolving business terrain, enabling them not only to withstand, but to thrive in the face of uncertainty and disruption. A shining example of this approach in action is the Chinese multinational Haier.
Traditional approaches magnify risk
Navigating a complex business environment is akin to traversing uncharted terrain, each brimming with unique market opportunities and threats. Traditional, centralized approaches fail to uncover and capitalize on many of those opportunities, much like a single exploration team struggling to map an entire unknown landscape. The risk is significant if the organization’s success depends on this lone effort. Failure of this single team leaves the organization without an immediate backup plan, leading to potential setbacks. Investment-heavy, complex and long-running innovation projects are especially prone to and accumulate such risks.
Spread the risk
Now, consider an alternative approach. Imagine dispatching a swarm of multiple autonomous teams, each eager to explore a certain area of the terrain or, in business terms, a unique market segment. Operating like start-ups, these teams innovate and adapt to specific challenges, learning fast and adjusting their business proposals based on real-time customer feedback. As the teams cooperate and support each other, their shared approach fosters a broader, more comprehensive understanding of the terrain as a whole.
However, the expectation is not for all teams to succeed. Indeed, some will encounter insurmountable obstacles, errors, or outright failure. Yet, in this multi-team model, the overall progress isn’t halted by the failure of one or several teams. While not all teams succeed, overall progress isn’t hindered by a few missteps. The organization can pivot based on the insights gained from unsuccessful attempts, while successful teams continue their work unimpeded. The whole organization continuously learns from failures and successes alike and adjusts future efforts accordingly.
This model finds a practical application in the Smart Home industry, where traditional home appliance manufacturers have struggled to adapt to the rapid pace of software-driven products and services. Haier, on the other hand, used multiple teams to explore different segments of the smart home market, resulting in a more comprehensive understanding of different customer needs and the creation of a variety of customizable solutions with a world-class customer experience. Haier customers enjoy similar user benefits despite having different and highly individual needs, domestic solutions and setups. This user experience is the result of a carefully orchestrated multi-team effort. It is being cultivated through dedicated teams in an organizational setup that is unique in its flexibility and speed of adaptation. Haier supports several hundred of these user experiences, each implemented through specific business ecosystems providing associated products and services. This turned Haier into the world’s leading home appliance manufacturer for the 14th consecutive year in a row in 2022.
Haier’s ability to learn, innovate, and adapt very fast resulted in a more comprehensive understanding of customer needs, and allowed for the development of diverse solutions catering to a broad spectrum of preferences. The multi-team swarming ability is central to Haier’s strategic advantage. It enables the company to explore and seize multiple market opportunities simultaneously, much faster and more comprehensively than its competitors. Their rapid development cycles allow Haier to also capitalize on short-term opportunities and local niches. This is a big strategic advantage compared to traditional strategy, which takes longer to develop solutions, and is therefore limited to pursue only longer-lasting opportunities with less-customizable, but highly scalable solutions. In highly dynamic markets like the smart home industry, Haier’s strategy has proven its superiority.
A Guide for Today’s Leaders
Haier’s success story offers valuable insights for leaders embarking on an iterative learning journey of transformation. By integrating the principles of antifragile governance and emphasizing psychological safety, leaders can cultivate robustness, adaptability, and a sense of ownership within their organizations. A powerful starting point is to initiate this journey with a few pilot teams.
Starting with pilot teams allows companies to test and refine their approach in a controlled setting. By granting these teams decentralized decision-making authority, leaders empower employees and foster a culture of autonomy and innovation. This distribution of decision-making authority builds psychological safety, as individuals feel trusted to make decisions related to their work.
The organization can capture valuable insights from the pilot teams’ experiences. Successful approaches and lessons learned can be scaled and applied to the broader organization, while failures can be analyzed to inform adjustments and refinements. This repeated process becomes a continuous cycle of experimentation, learning, and adaptation – an iterative learning journey.
With decision-making authority gradually pushed to more teams throughout the organization, more and more parts of the organization can actively contribute to the transformation journey. This broadened scope promotes a culture of engagement, as individuals feel empowered to contribute their unique perspectives and take ownership of their work and embrace change as an opportunity for growth. Overall, this mindset makes an organization increasingly adaptable and resilient. In combination with entrepreneurial incentives, the organization turns into a fluid system of competition and cooperation at scale – a perfect foundation to implement antifragile business strategies.
Haier’s innovative approach to antifragile governance, combined with their culture of autonomy and entrepreneurship, provides a robust blueprint for navigating the ever-changing business terrain. By fostering a strategy and governance framework that supports innovation, autonomy, and learning from failure, organizations can thrive amidst uncertainty and disruption. The journey to antifragile governance may be challenging, but as Haier’s example shows, the rewards make the journey not only possible, but worthwhile.
About the author:
Janka Krings-Klebe and Jörg Schreiner are founders of co-shift GmbH, educating companies in digital transformation topics. They co-authored several books, the latest being “The Digital Transformation Playbook: What You Need to Know and Do” (Project Management Institute & Thinkers50, 2023). Their upcoming book „Thriving Amidst Disruption“ explains how to turn enterprises into antifragile ecosystems.