06.09.2015 professor tony bendell tocico conference keynote slides

2015 TOCICO International Conference

© 2015 TOCICO. All Rights Reserved.

How To Transform Your Organization To Be Anti-Fragile: Why Managing

Constraints is Not Enough

Tony Bendell, Services Limited and The An>-‐Fragility Academy

http://www.theanti-fragilityacademy.com/ http://servicesltd.co.uk/ [email protected] [email protected]



•  Organisa>onal failures are now commonplace, including those of iconic firms

•  Conven>onal management and management systems have proved inadequate to protect both private and public sector organisa>ons from catastrophic incidents, adverse publicity and failure

•  Fragility associated with: Ø  Vola>le Environment Ø  Weaknesses in Systems & Processes Ø  Weaknesses in Behaviours & Management Ø  Rush to Efficiency

Organisational Failures – The Failure of Management & Management Systems




The Problem of Risk Management •  Numerous repeated and well publicised failures of Risk Analysis and

Management –  Inherent Flaw in the Approach: Much of Risk Analysis and Management as we

know it today is part of the problem, not of the solu;on •  Reac.ve Approach – Uncertainty & Risks will occur; we need to predict &

reduce/contain it. –  We have to be able to conceive the risk.

•  Ignores aspects of the internal and external condi>ons in the system, including its complexity and loading, & assumes stability.

•  Assumes full .mely informa.on, cri.cal awareness & senior management a?en.on

•  Assumes no “Black Swans”




Enterprise Risk Management –  A New Business School Discipline

–  Great Poten>al, But… –  In its infancy –  Not Being Used, Not Being Used Well –  Educa>on & Governance Issues –  Risk silos




The Desire for Robust Systems

Ø  Whilst they exist to protect people, organisa>ons and communi>es, human systems are naturally fragile.

Ø They fail individual people & stakeholders, and some>mes they fail systema>cally & some>mes drama>cally.

Ø Weaknesses are caused by people, by processes and by environment excess.

Ø We try to make such systems robust, but how can we establish that they are robust enough since a robust system just waits for something more powerful than it to overcome it? Like the Thames Barrier the robust is always wai>ng for a wave that is bigger than it, that will destroy it.

Ø Robustness may imply Rigidity




The Problems with Robustness




There is no prac.cal level of robustness that is `Strong enough`





Robust systems don’t themselves get be?er

There is no prac.cal level of robustness that is `Strong enough`





Forensic Accounting, Fraud & Mismanagement

•  Forensic Accoun>ng is a Safeguard, But.. •  Can be a bit late.. •  The Whole Governance Issue

–  Shortcomings of Current Prac>ce –  Arguable; Different Perspec>ves on Risk & ‘Skin in the Game’ –  Board Responsibility, Understanding, Educa>on, Knowledge &

Access to Informa>on •  The Tip of the Iceberg?




Where Fragility Exists

•  At all Levels/Layers… –  Strategy & Governance –  Opera>ons, Processes & Supply Chain

–  People & Culture –  Informa>on & Technology –  Markets, Products & Services

•  Global & Local Fragility/Macro & Micro




Anti-Fragility (Nassim Taleb)

•  Fragile refers to systems and organisa>ons that can be easily damaged by changes or shocks in the external or internal environment.

•  Robust refers to systems and organisa>ons that are able to withstand such adverse condi>ons.

•  An0-‐Fragile refers to systems and organisa>ons that, like biological systems, are more than just robust and within limits actually improve their resilience through being stressed.




Nature Got There First •  Natural systems are An>-‐Fragile •  Un>l now, we have only focused

on making human systems Robust.

•  But now we know be?er!




Some Sources of Anti-Fragility •  Learning

•  Awareness of environment & internal condi>ons •  Informa>on systems •  The ability to take decisions & act •  Flexibility & Agility •  Good decision making •  Shared & spread risk •  An>-‐Fragility (or not) is defined by the Organisa.onal Strategy,

Structure and Systems, its People, Rela.onships and its Culture. We can then Build An>-‐Fragility (or not) into our products & services, use of informa>on and technology base.




•  Safeguarding Systems –  All organisa>onal and system informa>on gathering and feedback loops,

that poten>ally use current performance as the basis for control and/or change, represent An.-‐Fragility Features.

•  Strategy Review; Risk Management; Budgetary Control; Internal & External Audit; Quality Control; Quality Assurance; Developmental and Evalua>ve Performance Appraisals; HSE Assurance; Con>nuous Improvement, Kaizan, Six Sigma, Lean Improvement, Agile Deployment, & Organisa>onal Assessment against the EFQM or Baldrige Excellence Models.

An.-‐Fragility Features of Organisa.ons and Systems




•  A key part of the An>-‐Fragile mechanism in all these cases is the human role.

•  Risk Management is an An.-‐Fragility Feature of our organisa>ons and systems. But, this An>-‐Fragility Feature, is itself oKen implemented in a Fragile way. (Second Level Fragility)

•  Lack of a holis;c approach to Fragility Minimisa0on and Management in current prac;ce in organisa;onal or system design and opera;on.

Anti-Fragility Features of Organisations and Systems




But the limitations are in how these Safeguarding Systems are implemented

–  Oken designed for Robustness, not An>-‐Fragility –  Incomplete informa>on flow –  Assume some stability & no “Black Swans” –  OKen delegated to middle management, formalised and standardised, so in danger of

becoming compliance-‐driven rituals, with incomplete informa>on; with most importance being given to the integrity of the paper trail for audi>ng purposes, & inadequate senior management amen>on.




A Basic Fragility Test for Your Organisation (Score out of 100; (0-10 :10=maximum optimisation)

•  How good is our current Approach? (0-‐10) •  Do we include deliberate Diversity of Approach and Deployment? (0-‐10) •  How Aware are we of our Environment? (0-‐10) •  Do we Learn? (0-‐10) •  Do we Implement what we Learn? (0-‐10) •  Do we Learn fast? (0-‐10) •  Do we have the Infrastructure to Learn? (0-‐10) •  Do we Evolve? (0-‐10) •  Do we have the Infrastructure to Evolve? (0-‐10) •  How Op>mised are Our Processes? (0=highly op>mised)




Ten Ways An Organisation Can Become More Anti-Fragile

1.  Don’t think you are there; Realise that Never Completely get there/never completely not there.

2.  Be aware, scan the external & internal environment, risks, scenarios & possible black swans. 3.  Be joined up & nimble, keep learning, apply. 4.  Avoid rigidity, ultra efficiency & relying on robustness. 5.  Don’t automate, engage. 6.  Reduce the fragility of an>-‐fragile systems. 7.  Use diversity. 8.  Apply precau>onary principles. 9.  Fail oken & small. 10.  Stress test.




Where Can We Start?

•  How ideal is your world? •  The Board. •  Execu>ve management. •  Opera>ons management. •  Supply chain. •  Front line. •  Risk •  The Quality Department-‐ organisa>onal quality/TQM/excellence




Getting Started

•  Take stock. •  Further develop the vision & business case. •  Plan & Manage Change. •  Help develop the influencers. •  Constant review.




Anti-Fragility as an Holistic Theory of the Firm

•  No single current Business School Discipline unifies our view of the Organisa.on

•  Also tells us that a naive focus on Op.mising Efficiency, or even Effec.veness, is Wrong

•  Unifies and provides both structure around, and safeguards in applying, change, improvement & quality approaches such as Lean, Six Sigma, EFQM Excellence Model, Benchmarking, QA etc.



© 2015 TOCICO. All Rights Reserved. © The An>-‐Fragility Academy 24

Efficiency Fragility Robustness An.-‐Fragility

Process Throughput rate, OEE

No. Of breakdowns, lost >me

Up>me Rate of decline in no. of breakdowns & lost >me

People U>lisa>on, output per head

Absenteeism, turnover Amendance, reten>on

Rate of decline in absenteeism, turnover

Technology U>lisa>on, Output

Failure rate, non availability

Availability Rate of decline in Failure rate & non availability

Informa>on Timely, reliable, accurate.

Delay, inaccuracy. Timely, reliable, accurate.

Rate of decline in Delay, & inaccuracy.

Supply Chain Throughput rate, OEE.

No. of breakdowns in supply, unsa>sfied demand.

Con>nua>on of supply.

Rate of decline in number of breakdowns in supply, & unsa>sfied demand.




Stress or Time in Denominator of Rate of Decline?

•  Using >me enables us to establish easy to measure metrics, which can be used to monitor the an>-‐fragility of the organisa>on

•  Like “nega>ve velocity” •  Stress may also be useful in specific “red flag” condi>ons.





Anti-Fragility & the Theory Of Constraints

•  TOC op>mises system throughput •  Op>mised throughput… … stresses the system & may cause fragility •  Opportunity to extend the TOC Model to incorporate An>-‐Fragility



Tony Bendell, Services Limited and The An>-‐Fragility Academy England

`Every day organisa>ons fail, unnecessarily, with massive financial and human cost. We need to change. An>-‐Fragility is the most important poten>al breakthrough in business thinking in my career. It provides a language and unifica>on for all of the improvement and produc>vity methodologies I have been assis>ng companies with for over 20 years. It makes us realise that our current op>misa>on criteria are wrong and efficiency, and even effec>veness, are not such a good idea. It unifies our business model, giving a new coherence to the disjoint func>onal specialisms in our business schools. Go out and tell people, they need to know what you know .. and soon.`




Tony Bendell, Services Limited and The An>-‐Fragility Academy England

Book may be ordered at: www.gowerpublishing.com/isbn/9781472413888 35% discount code G13iCO35 Or for signed or dedicated copies go to: hmp://www.thean>-‐fragilityacademy.com/#!book/c1enr




Any Ques>ons





Any Ques>ons ………… Or Debate?

06.09.2015 professor tony bendell tocico conference keynote slides

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