The industrial economy is coming to an end and a very different economy is emerging – with new technologies, new business models, new roles, and a new mindset. The next economy will be focused on solutions, that are constantly changing and reconfigured in response to end users’ changing needs. A shift that is also driven by a mixture of the necessity to become sustainable and rapid technological development. What will this mean to the Supply Chain?

 

A new underlying logic for running the business

In the 19th and 20th centuries, the machine was a metaphor for society. Industrialization was based on automated, mechanical mass production, and capitalism with its focus on money and growth was the underlying logic of the economy. Then came computers, and with digitization came an economy that was based on bits and information – increasingly virtual and detached from the limitations of the physical world. The next transformation is moving toward a technological paradigm characterized by living systems and biology, which can support our well-being in the future in a stable and sustainable way. We will mobilize biology to deliver what we currently produce with fossil energy, chemistry, and mechanics.

 

Three connected transitions

According to Peter Hesseldahl, journalist, and author of the book “When technology comes alive, and life becomes technology” we will see three connected transitions when transitioning to the future.

  • Our relationship with technology: New powerful technologies like artificial intelligence and biotechnology will change humans’ relationships with technology.

  • Our relationship with nature: Our relationship with nature and the ecosystem must change from domination to partnership.

  • Our relationship with each other: At the same time, we are leaving the industrial society and logic and moving towards a new economy based on other values than just money, and in which the distribution of power and wealth must be renegotiated.

The whole idea or basis for the above three transitions is, that they must turn out well for the entire transition to succeed in creating a thriving world.

Supply Chain to be seen as a living system

Digitization is reshaping the fundamentals of the Supply Chain. It changes the culture to one which is more adaptive, resilient, innovative, and customer-centric. The organization must be seen and function as a living system – not just a mechanical one.

Living systems are ecosystems. There must be a balanced interaction between the many different parts of the system, otherwise, it will collapse. If one wants to thrive in the long run, one must ensure that all other elements of the system thrive as well. Therefore, concepts such as circularity, resilience, and regeneration become essential. There is a wide range of characteristics and principles that recur in all living systems. Often, they are almost the opposite of the rules of the game we have created in the mechanical and digital economy. Also in the Supply Chain, as well as in the business in general, we must start acting in accordance with the principles of ecosystems.


Principles for re-imagining

How can we learn from how living systems work and use them as principles that are relevant to guiding and shaping the future approach? Here are a couple of examples that can help you re-imagine the Supply Chain in the living economy:

Example 1: Resources kept within the limitations of the ecosystem

An organization cannot function in isolation. It is supposed to be in constant interaction with the environment. The world consists of interconnected and interacting systems. Just disassembling and examining individual components will not provide an understanding of the relations and interactions. That could potentially mean that the Supply Chain must be configured within the limitations of the ecosystem. As opposed to today where resources are seen as abundant and inexhaustible.


Example 2: Ecosystems are circular

The waste from one process becomes raw material in other processes. An ecosystem consists of a multitude of creatures and organisms, each evolved to play a specific part in the vast streams that transform materials and energy into everchanging forms. It is a balanced interaction where everyone plays a part so as not to break the chain.

It would most likely mean an end to mass production and standardized solutions. Instead, it is time to invent instances- solutions for specific contexts. It will also mean an end to scaling and providing similar solutions to the whole world. We will see more diverse, decentralized, and local solutions. Manufacturing, and running of the operations in general, will be done on flexible platforms as opposed to fixed platforms, as we see it today.

Example 3: Reconnecting with each other is key

On the more social side, we will see an urge to reconnect with each other – and nature. An economic model where one simply gobbles up nature and spits out the waste is not sustainable- and likewise, an economy that consumes people to create money is not a durable strategy. The system needs to be balanced to create long-term well-being for everyone. We will hence see an urge to regain individual freedom to compete and create but in a new format expressed as responsibility and accountability. Humanity, empathy, and creativity are crucial competencies.


Welcome to the living economy

So, as mentioned in the beginning: The industrial economy is coming to an end and a very different economy is emerging – with new technologies, new business models, new roles, and a new mindset. The next economy will be focused on solutions, that are constantly changing and reconfigured in response to end users’ changing needs. It is also an economy shaped by very strong demands to reduce CO2 emissions and impact on the environment. It is a highly complex economy, which connects large numbers of players by using extreme amounts of data.

Interestingly, all of this leads to solutions that can best be described using mechanisms and concepts found in biology and living systems: Ecosystems, circularity, balance, feedback and tipping points, and adaptability. This has implications for Supply Chains, production, retail, and recycling: Atoms – physical products and materials will increasingly become local. Bits and data will be global.

Source: With inspiration from Peter Hesseldahl’s  “When technology comes alive, and life becomes technology” published in Mandag Morgen and as a book.

Peter Hesseldahl is a journalist and editor of digital transformation at Ugebrevet Mandag Morgen – a weekly Danish business magazine. As an in-house futurist, Hesseldahl has previously worked with trends, scenarios, and strategies for LEGO and Danfoss. He has also consulted extensively on future issues for ministries and large companies such as BNP Paribas and Shell. Hesseldahl is the author of 7 books, most recently “Transition to the Future. When technology comes alive, and life becomes technology”.

For many decades we have understood disruption from technology and feared the changes disruption requires of us. For only a couple of years, however, have we understood that disruptions today, happen faster and faster, and from places, we never even knew existed. The question is: what are we disrupting for?

Supply Chain volatility has increased

It is obvious to everyone. The Supply Chain is changing. Changes that have the potential to change the entire business. The technological advances that we have seen over the past several decades have finally driven us to a tipping point. We are now on the precipice of a fourth industrial revolution that will truly transform business and all stakeholder relationships. The push toward the fourth industrial revolution has accelerated over the past two years. Not only are technological advances occurring at a fast and furious rate, but the level of volatility in the Supply Chain has also increased.

Persistent challenges from increasing customer demands, disruptive competitors, and economic fluctuations make the optimization of Supply Chain designs harder. Various megatrends mean that Supply Chain complexity and risk are growing. Decision-making speed and quality need to increase to enable faster recovery from disruptions. At the same time, there is a need to handle real-time data and complex business requirements across multiple networks – and balance risks and trade-offs.

Need for new capabilities across all timeframes

In the face of these raised levels of volatility, we have no choice option but to lead transformative changes to reach a Supply Chain Future-Fit stage. Simply going through the motions of change is no longer an option. Companies that make changes simply to make them – without having the desired endpoint in mind or following a systematic process will never achieve success.

The only way forward is to change most if not all the settings in the company at both the human and technical levels. Achieving a highly resilient company that can grow and prosper in todays’ uncertain environment will require new advanced capabilities across both the strategic (two to five years), tactical (one to 24 months), and operational (one to 30 days out) timeframes.

Reimagining the Supply Chain is key

The challenge is to achieve the ideals of fully integrated, efficient, and effective Supply Chains capable of creating and sustaining competitive advantages. Downward cost pressures must be balanced as well as the need to manage effective ways to manage the demands of market-driven service requirements. At the same time, there is a need for a resilient and transparent Supply Chain.

It could potentially mean reimagining and reconfiguring the network in terms of capacity, sourcing mix and location, manufacturing capacity, and location. It could potentially also mean adding to their classical S&OP processes a tactical scenario testing capability to be used during times of serious disruption. In other words, when conventional forecasting processes become unworkable and unreliable, it will allow the company to become more agile and resilient. Supported by end-to-end visibility and the ability to make decisions fast. Fast decision-making enhances the resilience of the entire company.

Technologies such as AI are transforming how decisions are made. More people no matter what their roles are can now have real-time access to the information and perspectives that they need to do their job. As a result, individuals and teams will be better able to manage themselves, work together, and the types of decisions without the involvement of management. Companies will not need to organize themselves in the traditional way. I.e., there is no need to ensure that decisions are aligned around its goals because that happens automatically.

The Supply Chain to be seen as a living system

Digitization is re-shaping the Future-Fit Supply Chain. It changes the culture to one which is more adaptive, resilient, innovative, and customer-centric. In other words, an organization that functions as a living system – not just a mechanical one. What’s standing in the way?

According to an article written by John Gattorna and Pat Mclagan in Supply Chain Quarterly, under the title: Supply Chain, the platform for driving true business transformation, three powerful mindsets continue to sustain the norms and behaviors that drive old cultures. Command and control relationships, silo identities, and the application of engineering approach. These powerful mindsets work against creating an environment that fosters initiative-taking, creativity, cooperation, and rapid problem-solving. These mindsets belong to the early 1900’s when the goals were efficiency and control, and people were viewed as machines whose behavior had to be controlled.  

Supply Chain executives must change their mindsets

Supply Chains are in a powerful position to drive this deep transformation in both the hard (structural and technical) as well as the soft (human and cultural) dimensions of the business. This is because they are the focal point for the artificial intelligence/digital/internet of things disruption. They contain and control the main activities that add value for the customers, and account for about 80% of the business costs and associated risks.

The challenge is often that Supply Chains are marginalized, lacking representation in the c-suite. Supply Chain leaders must become active change agents for both their end-to-end value streams and the overall business that supports them. Supply Chain leaders will need to develop new decision-making capabilities, transform their Supply Chain organizational structures, and get rid of old, non-productive mindsets. Most importantly though they must make sure to understand what they are disrupting for.

With inspiration from: Supply Chains, the platform for driving true business transformation brought in Supply Chain Quarterly Q4, 2021. Page 44 and onwards.

This year Earth Overshoot Day will be (or was) July 28th. Every day after, we’re stealing from future generations. 156 days. That’s how many days, this year, we are going to be stealing from future generations, unless we have the courage to do something about it. 
 
This year’s (2022) overshoot day will fall a day earlier than last year. This is the day by which humanity has used up all of the biological resources that the Earth generates during the whole year. So every day after – 156 in 2022 – we are in planetary deficit, using up resources that won’t be regenerated.  Put in a different way, in 2022 we’re on track to use 75% more resources than the world’s eco-systems can regenerate, equivalent to “1.75 Earths”. This deficit spending is the biggest it’s been since the world entered into ecological overshoot in the early 1970s.

What can and should be done? A fundamental mindset shift is needed to build Supply Chains and businesses that are fit for the future. It does also require a different mindset in terms of leadership to get us there. In this blogpost, we will have a look at how you develop your approach to Supply Chain Sustainable Leadership.

Let’s start by having a look at what we know about the Nordic companies.

What we know about Nordic Supply Chains

Around 80% of all Nordic firms have sustainability goals that they work towards.

Danish firms are best in the Nordics on setting a target on eliminating GHG emissions from their businesses (64%), followed by Sweden (57%), Finland (47%) and Norway (42%).

Although Norway lags behind when it comes to setting a target for reducing GHG emissions, the Norwegian firms that have a target also have the most ambitious time frame. 83% aim to reach their target within the coming ten years. The corresponding number in Denmark and Sweden is 81%. Finland lags behind on 64%.

It is most common that Nordic companies measures and report Scope 1, 2, and 3 emissions. Nordic companies include GHG emissions from transport and distribution, purchase of goods and services, waste management, and fuel and energy when measuring and reporting Scope 3. Companies that do not measure and report Scope 3 state that it is too costly and time-consuming, that they lack knowledge of how to do it, that their value chains are too complex with many suppliers, and that their customers do not demand it.

The key question is: How do Nordic companies make sustainable progress?

Ambitions are key

We have come a long way since 1970 when Milton Friedman became known for saying “The business of business is business”. We have by now acknowledged that companies play a vital role in social, political, environmental, and economic aspects of society and in the development of planet earth.

The hard truth is that the CSR and net-zero initiatives simply don’t go far enough. We now know that climate change is exponential: the worse it gets, the faster it goes. And when these approaches have the unintended consequence of lowering ambitions, masking incrementalism and letting companies off the hook for the speed and scale of change truly needed, they are actually part of the problem. 

It’s time we stop satisfying ourselves with insufficient and frankly timid ambitions that don’t meet the challenges at hand. If we are to once again live within our planetary boundaries we must divert the best of human ingenuity and collaboration towards transforming the systems by which we produce, use and consume.

Top leadership commitment is key

A company can plan for sustainable development and can continue to do with and without the consent of everyone working for the company. For sustainability really to have an impact it must be fully integrated into the company. This means that it must be a core part of the company’s DNA. The employees must, at the end of the day also need to understand and want to work with the integration of sustainability, otherwise, nothing happens.

A survey completed in 2010 made by the Network for Business Sustainability showed, that the top leadership engagement is the key factor for integrating sustainability. The employees are much more reluctant to show sustainable performance or act sustainably if the top leadership is driving the change. The survey showed that it outweighed personal values or individual environmental interests.

Purpose plays a vital role

Over the past 50 years, the predominant purpose of running a business has been to generate financial returns for the benefit of shareholders. When customers, resources, and the society that companies depend on suffer from inequality and environmental impact, the only right thing to do is to create a purpose-driven business.

Purpose-driven companies create value, not only for the shareholders but also for the stakeholder groups, including customers, suppliers, local communities, and employees who are engaged in the company. Does this mean that companies do not have to make money? No. The company can only thrive in a strong society, but that also applies the other way around.

Supply Chain plays a significant role in executing the strategy both in terms of employee involvement and commitment, cooperation with the ecosystem, and processing of the product portfolio. Supply Chain has historically been measured by its ability to keep costs as low as possible while providing profitable customer service.

 

Quite impractical, being purpose-driven means that additional stakeholders must be taken into account in the decision-making processes. This also means that the Supply Chain must not only think about delivering the product but they must to a large extent also think about how the product is delivered throughout the value chain. 

Employees demand purpose. Questions like: Why is the company working with sustainability? Supply Chain sustainability? How is it or will it be integrated into the business as well as what it exactly means for the company to achieve sustainable business results? Which activities will the company initiate and how will the company honor progress?

Key questions guiding your sustainable leadership approach

  • What are the company’s visions for employee engagement in the sustainable agenda? What are the key targets internally as well as the key story externally?
  • Where is the company’s vision for sustainability born and who owns it in the company – and perhaps also in the Supply Chain organization?
  • How can the employees take on responsibility for driving the sustainability agenda? What would the company like to achieve by their engagement?
  • How do you ensure that all relevant employees get engaged in the agenda?
  • Which governance processes and structures would need to be put in place to motivate and structure employee engagement in the sustainability agenda?
  • Who is responsible for securing progress?
  • Which tools could possibly support us in supporting employee engagement?
  • How do you ensure that the effort the employees contribute with is turned into something more tangible?

With inspiration from: Forretning for fremtiden, Succes med verdensmålene, Kristoffer Nilaus Tarp and Erik Thomas Johnsen, page 204

Around two thirds of all Nordic companies are working actively (albeit to varying degrees) with sustainability, Supply Chain sustainability, world goals, climate, etc. (1). Thus, many companies are still yet to adopt the sustainability agenda fully. There can be many reasons for this. It has not yet dawned on everyone that sustainability is here to stay. 

What barriers are there in companies? Some companies are afraid of being accused of and caught out greenwashing. Some people mistakenly think they have to work with the entire sustainability agenda – e.g., all 17 UN sustainability goals at once. But they should not. They only need to work with the sustainability goals relevant to their business. Some also think it is very expensive. But sustainability is an essential investment in the future of the company. In attracting and retaining employees in a time of significant labor shortages, meeting current and future legal requirements, etc. It is timely care.

Understand the planetary boundaries 

We must learn to understand the planetary boundaries of our Supply Chains. The planetary boundaries provide us with a quantitative framework within which humanity can continue to evolve and thrive in future generations.

It may sound a bit flippant to use the term “planetary boundaries,” but it is an expression of the three environmental crises unfolding; temperature rises, pollution, and loss of biodiversity. Awareness and understanding of the planetary framework are central to ensuring the right decisions.

Understanding the effect of a company’s Supply Chain on the planetary framework requires data-driven work and analysis. One must understand the entire value chain’s CO2 emissions, water consumption, and waste volumes. In other words, one must understand sustainability in a broader sense.

Cascading sustainability down through the Supply Chain

In 2022 Optilon will publish a report based on a study about how the surveyed companies work to cascade green, sustainable initiatives down through their Supply Chains at a Nordic level.

A study on a more global level, ‘Engaging the chain: Driving speed and scale, CDP Global Supply Chain report 2021’, shows that companies often restrict their work with sustainability to their part of the Supply Chain. Given that emissions outside one’s own Supply Chain are measured to be more than 11 times as large as one’s own emissions, it’s imperative to focus on the entire value chain.

It is very difficult to reach all the way out. The figures show that 71% of the companies in the survey work with scope 1 emissions, 55% work with scope 2, and 20% work with scope 3. In other words – the companies have so far only worked with a small part of the total emissions. (2)

The goals must be science based

One of the major drivers is that financial institutions and investors are increasingly focused on how companies manage their environmental risks and opportunities. In other words, how they respect the planetary framework.

It is no longer enough to set ambitions and goals that are not science based. Increasingly companies are joining the Science Based Target Initiative (SBTI). The fact that so many companies embrace the SBTI puts increasing pressure on the companies that have chosen not to go in this direction. Basically, the initiative is about setting Science Based Targets (SBT) that are in line with a 1.5° future (keeping total global warming below 1.5° temperature rise. Of the companies surveyed, 2.5% have Science Based Targets in place (2).

The challenge is that it can often take many years to set the right goals and take the right actions. Therefore, there is also a need for more people to commit to SBT and start work now – and not tomorrow.

Need for speed and scaling of supplier collaboration

Out of 11,457 companies surveyed, 28% say that they have launched “low carbon” initiatives (2). To accelerate the companies’ focus on sustainability in Supply Chains, there is still a need to develop new procurement processes, train purchasers, and create greater collaboration with suppliers and stakeholders (the supply ecosystem). When it comes to utilizing technology, it is about finding solutions for setting better goals and being able to follow up on them. One possibility is to use simulation tools (e.g., digital twin solutions) to identify effective options for reducing emissions in a complex environment at a detailed level.

More and more companies are looking at their suppliers’ data as part of their environmental performance. It turns out that 28% of suppliers have launched plans for the green transformation, so there is enormous potential. 38% have launched initiatives with their suppliers. 62% have thus far not started work with their suppliers, which is exacerbated by the lack of suitable measurement results (2).

90% of the companies surveyed are prepared to work to a much greater extent with their suppliers, and 35% are ready to incorporate performance targets in their procurement processes or supplier Code of Conduct (2).

Life cycle analyzes are important

66% of the companies surveyed answered that life cycle analysis is one of the most essential tools for promoting the green agenda. Today, only 2% of respondents can report their emissions at the product level. Raising this level requires standards, the development of new methods, data exchange with suppliers and partners, and technologies that can help support companies (2).

In summary, it can be concluded that many companies have not yet initiated the change in their Supply Chain that is needed to lift us out of the three environmental crises. As Steen M. Andersen (1) points out in Børsen, there is a growing awareness in Denmark of the UN’s world goals, and there is communication about the companies’ focus on the various world goals, but this is not yet translated into, Science Based Targets. There is still a need to think about the entire supply ecosystem, develop new procurement processes, train purchasers and create greater collaboration with suppliers and stakeholders.

Sources:

(1) Børsen Bæredygtig, Bæredygtighed og erhvervslivet – hvad holder nogle tilbage, Af Steen M. Andersen, Direktør, FCG Global Goals, Tuesday, March 1, 2022 https://borsen.dk/nyheder/baeredygtig/baeredygtig-debat/baeredygtighed-og-erhvervslivet-hvad-holder-nogle-tilbage
(2) Engaging the chain: Driving speed and scale, CDP Global Supply Chain report 2021, (February 2022) https://cdn.cdp.net/cdp-production/cms/reports/documents/000/004/811/original/CDP_Supply_Chain_Report_Changing_the_Chain.pdf?1575882630

Facts:

Scope 1: Direct emissions due to vehicles, fuel consumption, and / or chemical leakage

Scope 2: Indirect emissions due to purchased electricity, cooling, heating, and / or steam

Scope 3: Other indirect emissions that occur in a company’s value chain and are not already included in scope 2 (such as emissions from purchased goods and services, transport, or business travel)

The Unnecessary Report 2021 once again shows and enormous and unutilized potential for Nordic companies – every fifth stock item is unnecessary. More than a fifth of the inventory is unnecessary for Nordic companies, according to a new report released by Optilon. The average company has an untapped potential of EUR 48 million – which could instead be invested in more growth-promoting purposes. The total figure for the Nordic region’s 400 largest companies amounts to EUR 19 billion.

Effective inventory management and optimization can have a major impact on a company’s profitability. Optilon’s newest publication The Unnecessary report 2021 – which has studied 400 different companies across the Nordics show, that 22 percent of the items in stock are unnecessary for the average Nordic company. This means that they have more goods in stock than they need. 

Removing an unnecessary item from the warehouse means not only less tied-up capital, but also less warehouse space, reduced distribution and administration costs and obsolescence. By addressing this and implementing effective inventory management and optimization the average company among the Nordic region’s 400 largest companies will be able to gain around EUR 48 million. Supply Chain has perhaps never been more important. The covid-19 pandemic and the prevailing macroeconomic situation have demonstrated the importance of robust and sustainable supply chains. Having fewer but the right articles in stock gives you more optimization power as a company. You free up capital at the same time as you reduce costs and increase your revenue.

Effective inventory management is an underestimated success factor. It is one of the single biggest measures you can take as a company to maximize your competitiveness. It simply ensures that the resources are used in the right way and where they generate the most value.

The mind creates our behavior. Our behavior shapes the people we lead. And the people we lead create the culture in our organization and hence determine its performance. If one wishes to increase the total performance, it is important to show care for people as a part of the business strategy. Thus, the people one has employed will feel an interconnection, a meaning and a feeling of happiness.

The initiatives of companies with regards to increasing commitment and productivity was traditionally oriented towards external ways of satisfaction, such as bonusses, trips, dinners etc. These are short-term solutions that only work for limited amounts of time. The efficacy is often decreased. It does not create motivation. If we, as Supply Chain leaders, intend to develop organizations that prosper, we need to understand what really matters for people. Employees that return home daily, with a sense of satisfaction, will want to return and perform – focus on the challenges, and work determinedly and hard.

Delve into the culture

First and foremost, you must, as a leader, be a role model and impel the correct behavior. Cultures shape organizations. Cultures are not inherently visible, but they are powerful. The culture is created, maintained and expressed through the many different mindsets, that comprise any and every organization.

The culture is embedded as feelings, values and principles, and these are all unconscious. We cannot see them, and most of the time, we have no idea that we’re affected by them. This means that we all partake in the creation of a culture, that we are a part of, but often using unconscious values and behavioral patterns.

As Supply Chain leaders, the responsibility of shaping the organization’s culture rests on our shoulders, due to human brains being programmed to see and respect hierarchies. The human brain is designed to understand where we fit in, within social structures, and to support those who seem dominant.

Focus on the health of the company

Human-oriented organizations put people first, since it is the people that make the company successful. This is why the companies, and by virtue of this, also the board of directors, should focus on the health of the company instead of the wealth of the shareholders. Only by doing this, one can recover the trust of the employees, and thereby attain a long-term, sustainable performance.

If we lead with the purpose of helping people create an immanent feeling of happiness, meaning, interconnectedness and contribution regarding their job, they will go home every day with a feeling of satisfaction. If we, as Supply Chain leaders, create an environment where the employees feel genuine care for their well-being, where we actually are present, they will become more motivated, more enthusiastic, and more cooperative team members.

The establishing of more human-oriented cultures is the most logical answer to the current organizational crisis, entailing decreasing commitment of employees and the widespread, negative occupational satisfaction.

I remember being a fresh student, 17 years old at my High school’s newly introduced cooperation with a global German company with its Nordic headquarters in my birth town just north of Stockholm. It was a unique chance to study subjects once a week that were set to plant the seed for us students to pursuit a career within the technology field, and perhaps one day, an employment at this specific company. One of the courses that made an impression was the Project Management course. The first day we learned that a Project Manager is responsible for everything in a project. He or she could never blame downwards on the team members. Essentially, he or she was not just the accountable, but also in a way responsible for the work of each team member. Now coming from this type of doctrine, which I did not reflect upon very much at the time, and given that it was a German company, it is very different from what we are used to in Nordic originated companies.

During some of my first employments after finishing university, I got to experience this difference right from the start. In comparison to what I had previously been taught at the German company, many project managers seemed to be less authoritative and often had a very consensus-based leadership style. Although intuitively it might seem like a negative feature, this leadership style is not always bad. From my own point of view, I felt that the responsibility for being creative and taking initiatives was shared with all project team members, including the Project Manager. This created one of the pros. The biggest con on the other hand, was that sometimes this shared responsibility could create a vacuum in responsibility as there was a lack of understanding of what was expected from each team member. In some projects it felt like I together with my team members were driving, planning, executing, and overseeing the project, even though none of us at the time were the Project Manager. We had become both responsible for the work that was to be executed, as well as accountable for the outcome of the project. Something that would never have been accepted in the German company.

So that brings a question: how can we fully use the power of a consensus-based leadership style with its pros, without having to deal with the cons?

A few years back, to improve Optilon’s delivery model, we nailed down the culprit of the matter. We discovered it was the lack of guidelines describing what the responsibilities of each team member (including Project Manager and Account Manager) really was. The answer to the above question became the following: Define a Responsibility map. A responsibility map clearly states who is responsible for what, regardless of project or role in the team. To aid every project team we created a template of the responsibility map to be used as a standard tool in each delivery.

To make things clearer, we also decided to introduce the word Accountability into this template as a complement to the word Responsible. Since both Accountable and Responsible translates to the same word “Ansvar” in Swedish, the importance of accountability risked being left out.

The result: we combined the best things from two worlds. We now have a hybrid by combining the way of the German company and the Nordic consensus-based way. Now each project has a clearly defined picture of the responsibilities and accountabilities of each project member. Not all team members will have accountability, but in larger projects some will. Although never directly to the client, but to the Project Manager who in turn has it to the client. This means that team members will never have to find themselves acting as an interim or substitute Project Manager, and in instances of project uncertainties it will all travel in one direction – up-streams to the Project Manager.

We can see that this approach has helped us streamline our projects to be more consistent in planning and execution. This assures a higher success rate when helping our clients with all their different Supply Chain endeavors.

Whenever organisations manage for change, we reach for the Change Management Toolbox. As experienced managers, we all know the essentials of stakeholder engagement, project management, training, and communication by heart.
Even though we strive to do the right things right, soon most of us learn – the hard way – that sustained change is hard to achieve, and it is basic knowledge from countless studies that the majority of change projects struggle to realize their full potential.
Popular explanations as ‘unrealistic ambitions’ or ‘inadequate change management’ may account for some failures. Still, an amazing number of perfectly orchestrated change initiatives sail into troubled waters.

The success of your change management efforts depends on your organization’s change capacity.

struqtures® founder Birgitte Clausen and Associate Professor Hanne Kragh, Aarhus University have studied what hinders or enhances organizational change capacity, and their research surfaces two interesting insights that go beyond general change management recommendations:

  1. that deep structures in organizations hinder change or pull things back in line
  2. that day-to-day management for change targeting deep structures can create organizations with a high capacity for change and innovation

The core message is, that you can significantly increase the success of the individual project, if your day to day management practices pays attention to factors, that increase the organizations overall change capacity.

Watch out for deep structures

Deep structures are relatively stable and reinforcing patterns that guide peoples’ behaviour, and as such, deep structures may hinder, limit, or enforce change.

Using an iceberg metaphor, change management is above the waterline while deep structures are below. Deep structures are invisible strings, ‘taken for granted’ ideas and patterns of behaviour, that guide

Deep structures are different from culture and climate. Instead, they are long-lasting consequences of organizational members’ interactions that shape culture and climate.

Deep structures are the strings that pull your organizations culture off track

It is an old refrain that culture eats strategy for breakfast. However, the mere thought of cultural change makes many management professionals take a deep breath and head for the next topic.

Culture is to abstract, too diffuse and to slow to change. And most people do not have the time, the patience, or the knowledge to really get started.

Our study offers good news. You do not need to run cultural change project to increase to increase your organizations’ change capacity.

4 areas of attention are essential to enable high change capacity

You can integrate certain practices in your daily management efforts, and thus manage for change and increase your organisation’s change capacity. In essence, you should emphasize 4 focus areas:

  1. enhance the relational structures in your organization. The better related your people feel, the faster the speed of change.
  2. beware of organizational myths and fairy tales from Once Upon A Time. Remember, that how we talk about past experiences shapes our expectations of tomorrow and determines our actions today.
  3. accept that emotions beat rationality. We normally cherish rationality as the uncontested good guy in management. However, behaviours at all levels of the organization are constantly derailed by strong underlying emotions.
  4. stop relying on your leadership autopilot. Fly manual instead. Even though they may have served you well in the past, your preferences, beliefs and organizational logics are most likely also your blindest angle and the enemy from within preventing you from achieving what you want most.

This Blog post is published in collaboration with Birgitte Clausen, Speaker, Trusted Advisor, and Managing Director at Structures, a Strategic Business consultancy focusing on Change Capacity. Learn more about the offerings of Struqtures here.

The most perfect project plan, the most perfect training plan, the most perfect communication plan will fail if it is launched in an organisation with low change capacity.

Change management is often presented as the magical silver bullet that can ease the way of any project. When a project fails, you will soon hear people blaming it on poor change management.

Bad timing. Bad communication. Bad training.

When things do not work out as planned, an automatic reaction is to blame it on the people.

We individualize the problem. We blame it on someone, on somebody: if only somebody did a better job, if only somebody were better, if only somebody knew better – then everything would be fine.

Very often, the problem is not the people. Nor the project.

The problem is very often the setting, in which the project takes place. The settings, in which people work.

Ease of change depends on organizational characteristics

Think about it like this: The project is the foreground of our focus. The organisation in which the project takes place is the blurred background, that receives limited attention.

Often, we direct our full attention to what goes on in the project. We look at the foreground, and we interpret everything related to the project within the narrow definition of the project. And we forget the background. We forget that the project takes place in an organisation with certain characteristics, and that these characteristics may determine the success of a project.

Imagine that you are the project manager of a construction project. You are tasked with building castles of sand.

You may be the ultimate builder, project manager, communicator, or trainer – but the success of your sandcastle depends just as much on the characteristics of the beach, where it is built.

It depends on the composition of the sand, the tidal waves and the weather. The context where you build your castle is just as important as the management of the sandcastle project itself.

The same applies to change projects in organisations.

Some organisations are more favourable to changes than others. Not because their people have better skills or are less change resistant, but because the organisation is configured in ways that ease the speed of change.

This is called change capacity.

Change capacity can be built

You can build your organisation in ways that increase or decrease your change capacity.

Work is organized by means of a web of structural components, that determine how people behaves. You may ask them to do A, but if the structures pull them in the direction of B, they will move towards B.

Strategic priorities, hierarchies, rules, processes, systems, dominating behaviours, logics and old stories are examples of such structural components that shape the way people act and react.

Change capacity is a function of how well the different structural pieces fit together.

All organisations organize work in some ways. They lay out all sorts of structures. You cannot not have structure in an organisation. Because deciding not to have structures in place is also a kind of structure, because it organizes how people work.

The web of structural components is not permanent. You cannot compose them in any way you like, if you aim for change capacity. But you can learn the logics or structural fitness and integrate them as mindset and an approach to daily management practices.

This Blog post is published in collaboration with Birgitte Clausen, Speaker, Trusted Advisor, and Managing Director at Structures, a Strategic Business consultancy focusing on Change Capacity. Learn more about the offerings of Struqtures here.

Are you sometimes wondering what makes Nordic Business Leaders so unique in a global context? We may come from small countries, but with great innovation capabilities, we have the know how to build great companies ready to do good in the world – focused on more than just short-term profit and the bottom line.

Times are changing and so is the need for a new leadership paradigm. The rapid discoveries, innovations and developments demands a different style of leadership. It is the leader’s role as a navigator of change, and as a guide towards the future, to make sense of what is seen by many as a period of increased complexity.

Are there aspects of our Nordic style that could be beneficial in this rapidly changing and evolving world? Can they provide answers to a new leadership paradigm? What methods and techniques long-established in the Nordics can prove to be of relevance and practicable when working on a global level?

In this blogpost we will take a closer look at how the unique Nordic competences trust, care, openness, transparency, and responsiveness could support the change in global companies.

The Nordic history
The history of the Nordic region is one characterized by adventure, curiosity, and a dependency on the outside world. The Nordic nations understand that their own survival has been reliant upon looking outwards, participating in international communities rather than on insularity and isolation.

The history of the region is one of exploration and discovery, constant adaptation to complex environments, networked communities dispersed over a large area, innovation within creative constraints, continuous learning, facilitated from childhood and on through adult education, the celebration of the collective alongside the individual and a willingness to experiment over and over again.

The outlook of the Nordic people is phlegmatic. We are accustomed to circumstances changing at short notice, requiring responding to whatever new context emerges. Nordic people are also aware of the small size of their nations and of the disproportionate but significant role they play on the world stage.

This also means that Nordic people provide a creative, simplified and unbureaucratic perspective on what is going on, and about how to take advantage of opportunities and resolve issues. Nordic people speak their mind and are raised to do so. Access to and openness of Nordic Business leadership is unique and makes people meet each other as equals. In other words, it is the low power distance, clarity and straightforwardness and the flat organizational structures in which Nordic Business Leaders can be approached easily that makes the leadership style unique.

Leadership occurs when other people respond to someone’s authenticity and choose to follow them, not through the assertion of rank and status. Authority exists to provide help, guidance, and structure. It is not to be feared but to be engaged with, questioned, and constructively challenged.

Trust plays a special role
Trust plays a special role in the Nordics as it is the foundation stone for how the Nordic society works. It informs how we interact with each other; it explains our approach to leadership, and it is an enabler for many other aspects of our leadership style. Without trust our emphasis on openness, transparency, delegation, self-direction, teamwork, and equality would be undermined. Trust enables people to move swiftly from introduction to decision to action. Trust results in efficiency and effectiveness, helping to save time and money in the long-term.

Trust is the societal glue that is there by default rather than having to be earned, as is the case in many other cultures. In the Nordic region trust is granted unconditionally and with it comes an expectation that they will do it right. It oils the decision-making process, enabling people to bypass small talk and move straight on to what is important, and it allows young kids to climb trees without supervision.

Trust stems from respectful human connections that disregard otherness and highlights what we have in common. Many Nordic Business Leaders conclude that: “In essence we are all the same. We are all humans, driven by the same need for love, belonging to a community and contributing something meaningful in our lives”.

In a global context it is often the case that the Nordic leader is responsible for overseeing change. It is imperative that the foreign leader recognizes that it is they who are the embodiment of change for their colleagues when they work with other cultures. How quickly they can move from fear of the unknown that they represent to trust of their leader is usually indicative of future success.

Care
In the Nordics, part of our leadership philosophy is reflected by the phrase “freedom with responsibility”. This captures the notion that people enjoy personal freedom but assume responsibility in a communal context.

A Nordic Business Leaders role is therefore to create a nurturing environment where people feel engaged and can flourish, where they feel safe and free to speak their mind, experiment and make mistakes and are empowered to move things forward by making their own decisions. Such a supportive environment, and the sense that an individual’s personal purpose is somehow aligned with that of the organization they work for, creates happiness at work.

Simon Sinek has suggested that the “the real job of a leader is not about being in charge, it is about taking care of the people in your charge”. Coming back to Nordic Business Leaders, they typically have a strong sense of responsibility for those who work alongside them. In other words, the Nordic way of trusting people and caring for people and putting responsibility out in the open helps build people up.

A popular metaphor is looking at the leader as a gardener. You cannot make a plant grow by commanding it to do so. You must create the right environment where it can flourish, watering it, ensuring there is enough sunlight and air. Only then will the plant grow. As opposed to seeing the leadership style as a game of chess.

Nordic Business Leaders are great at connecting with their colleagues on a personal level. This makes them establish strong trust-based relationships. People come first. A Nordic style of leadership can be mistaken for softness. Hence it is important to be clear about objectives and responsibilities.

Openness
Nordic Business Leaders are typically very open. They have a willingness to share information. They are aware of the fact that if you want people to do their best, to really question everything that they do and see how they can improve it, then it really does not fit with a very closed an authoritarian style.

The solution to complex problems is rarely found in the board room and often require seeking beyond the bounds of your own company. Looking outward and tapping into networked knowledge is necessary in order, to retain relevance in an ever-shifting, ever-adapting world. The ability to remain openminded as we immerse ourselves with other cultures enables us to challenge our own preconceptions, attitudes, and behaviors. Leading us to question what we believe in and why. If we remain closed-minded, dependent on the habitual and indifferent to other ways, we become blinded to the potential for change and the opportunities that offer.

Transparency
As also mentioned in the introduction, the notion of low power distance is a significant factor in how Nordics lead. The flat organizational structures they favor have the effect of making themselves more accessible and approachable. To maintain visibility as a leader it is important that you put yourself at the same level as your team. In doing so you make communication, explanation, contextualization, delegation, coaching and problem-solving much easier to accomplish.

It is good to speak openly about what you do, why you do it, what information you base your decisions on, why you ask for input and why you think it is important to draw on the knowledge and experience of others. In other words, help people understand how you lead and why these methods can be effective. It is about remaining open and willing to show your vulnerability.

Responsiveness
Nordic Business Leaders are good at adapting and providing the flexibility needed to move forward. It is called Nordic pragmatism. If you have plans and procedures that do not seem to work, you change them. If you have plans to go fishing and the weather deteriorates you adapt and make another plan. This is simply part of the Nordic way of life. Experimentation, supplemented by review, learning and adaptation are all part of the responsive sensibility advocated by Nordic Business Leaders.

“If you do not dare you will not win”. In the Nordics we have a more open attitude towards change and experimentation. Courage is a crucial factor behind the willingness to experiment. Continuous experimentation is needed if organizations are to innovate and find solutions for complex problems.

In other words, make plans, dream, imagine and draft multiple scenarios. The more scenarios you must hand the more you will be able to react and respond to the problems and opportunities. Be ready and willing to pivot, to abandon one plan and switch to another.

Alis Sindbjerg Hinrichsen works for Optilon and is especially passionate about everything that connects the Supply Chain strategy with the business strategy. She is also interested in what makes people and companies more change ready.

With inspiration from Pernille Hippe Bruns book: On the move, lessons for the future.

Buy the book here: https://www.saxo.com/dk/on-the-move_pernille-hippe-brun_haeftet_9788770362382

From Amazon: https://www.amazon.com/Move-Lessons-Future-Nordic-Leaders-ebook/dp/B07N2JXX4C/ref=sr_1_1?dchild=1&keywords=on+the+move+pernille+hippe+brun&qid=1605004124&sr=8-1

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