“Why Don’t They Change?!” Because They Aren’t (Yet) Able To

• Part 1: “Why Don’t They Change?” Because They Aren’t (Yet) Able To
• Part 2: “What Needs To Change?” How Value is the Key
• Part 3: “What Does Change Look Like?” Clean Contracts and Prototypes

The gap between today’s challenges and the ability to respond to them effectively continues to widen. Why? What’s going on? What’s needed to break out of this pattern? And how can we make the necessary changes understandable, natural, and achievable?

These aren’t new questions, and we’ve already written extensively about them throughout our site. But we do have a new way of presenting the answers, and that’s what we’ll be looking at in this series.

“It’s not f**king rocket science that people need to change how they manage contracts… so WHY DON’T THEY CHANGE?!?!”

So said an exasperated partner of ours to a colleague of mine recently, when discussing how slow the commercial world has been in responding to the accelerating challenges of increasing uncertainty.

In particular, they were referring to the National Audit Office’s 2014 “Transforming government’s contract management” report, which explicitly “recognized the scale of the problem” and, in its very title, sounded the need for profound change…

…but how, nearly 12 years on, the assumptions, practices, culture, and – most of all – the failure rate remain either unchanged, or even worse (despite extensive attempts in the interim to describe the changes needed).

And far from being constrained to government and the public sector, the gap between today’s challenges and the ability to respond effectively to them continues to widen across all sectors and geographies.

The most recent Benchmark Report from our friends at WorldCC makes this point abundantly and painfully clear.

So what’s going on? “WHY DON’T THEY CHANGE?!?!“

Let’s begin by mapping the terrain here.

Mapping the terrain

The insight we’ve had recently is that we can powerfully represent what’s happening for commercial organizations with two axes:

• x: uncertainty, low to high: the nature and scale of the challenges posed to organizations

• y: structural adaptiveness, low to high: the nature of how organizations operate in response

These axes give us four quadrants that describe distinct “operating realities” or “centers of gravity”:

• Q1: Stable Efficiency (low uncertainty; low structural adaptiveness)
• Q2: Scalable Platform (low uncertainty; high structural adaptiveness)
• Q3: Disruptive Tension (high uncertainty; low structural adaptiveness)
• Q4: Agile Adaptation (high uncertainty; high structural adaptiveness)

It is critical to note that Complexity is what drives uncertainty, or the “challenge”:

• As Complexity science explains, it’s not just another word for “difficult”; it’s what happens when highly interconnected people and systems interact around rich information, causing something called “emergence” – continual, self-reinforcing change that is greater than the sum of its parts, and therefore inherently unpredictable
• So, instead of the familiar “VUCA” acronym – which just has Complexity in the mix – we refer to “C-UVA”; Complexity is the root of the others

And as you can see, the quadrants – the “centers of gravity” – that result from the degree of Complexity and how organizations respond each have a very different “headline”, and (in the four bullets) a very different modus operandi, very different goals, and very different approaches.

Each quadrant reflects not just how an organization operates internally, but also externally – with its customers; with its suppliers; with its partners; with the external environment.

And each quadrant is an example of a deeper structure we’ve identified – a structure that encompasses many other 2×2 models (e.g. the familiar Kraljic matrix), and one that we use to structure our Diagnostic tools:

• Q1 focuses on “methods”, or more broadly How (i.e. through “Stable Efficiency”)
• Q2 focuses on “results” and “outcomes”, or more broadly What (i.e. through a “Scalable Platform”)
• Q3 focuses on “people” and “relationships”, or more broadly Who (i.e. people and relationships are the source of “Disruptive Tension”)
• Q4 focuses on “purpose” and “motivation”, or more broadly Why (i.e. the locus of “Agile Adaptation”)

None of these quadrants is inherently “right” or “wrong”, or “good” or “bad”.

All of them need to be held in appropriate balance – the phrase “center of gravity” deliberately implies balance – and all of them describe valid lifecycle stages, priorities or relationships.

It is therefore absolutely possible – and desirable – to move center of gravity from one quadrant to another (a new product, for example, typically goes Q4 → Q3 → Q1 → Q2).

How this happens becomes clearer when we map on the continuum of underlying values that characterize and underpin our quadrants. You can see the “micro-shifts” along that continuum – between individual underlying values – that eventually add up to bigger shifts:

Here it is with the quadrant detail put back in:

And as well as showing how shifts can happen, these diagrams also further highlight the differences between centers of gravity.

Because where things begin to unravel is when shifts aren’t made and the current and necessary centers of gravity don’t align.

And this is especially true if those centers of gravity are diagonally opposite: stable efficiency (“methods”) vs agile adaptation (“purpose”), or scalable platform (“results”) vs disruptive tension (“people”).

So, we now know the terrain.

But where are we in this terrain?

[And note that rather than overload the diagram, I’ll remove the “Methods/How”, “Results/What”, “People/Who” and “Purpose/Why” overlays going forward, but try and keep them in mind, as they really help “anchor” all this.]

Getting our bearings

For most of us, the center of gravity now needs to be predominantly in Q4, with the aim – where possible – of scaling from there into repeatable Q2 outcomes:

The world has moved along the x-axis, with the reality of Complexity-driven uncertainty mostly all too obvious and recognized.

Some might be in denial or might assume such uncertainty is temporary, but for the most part, continuous disruption is undeniable – accelerated change, greater interdependence, geopolitical instability, and so on.

Hence the talk, especially post-Covid, of this being “the new normal”.

And Q4 is all about responding appropriately and effectively to this shift, with repeatable Q2 results the “reward” for doing so.

So Q4 is where we need to be centered, and we absolutely see calls for greater adaptability, resilience, agility, and so on: the necessary shift up the y-axis.

But – as we’ve just said, and as WorldCC’s Benchmark Report makes clear – this shift up the y-axis hasn’t happened.

And so the current operating reality remains in Q3: Complexity is biting, but in tension with familiar rigid structures and approaches, which haven’t adapted:

Where we need to be and where we are is therefore already (dangerously) misaligned – disruptive tension.

But it then gets even worse.

And that’s because most organizations haven’t even yet caught up to where they really are, with their center of gravity instead remaining stubbornly anchored in Q1:

It’s not simply that organizations continue to operate with formal fixed roles, processes, and so on. It’s that they do so – even if they don’t realize it – with the assumption that the world remains predictable and stable.

Q1 is the world of standards, benchmarks, training, and capability development – an entirely inward focus on what we do, and how we do it.

Now, these things can absolutely have value, but in Q1:

• They become ends in and of themselves, embodying the “best practice myth” that results inevitably flow from doing things “right”.
• They all assume knowability, repeatability and predictability.

Complexity means that that ship has long since sailed.

The quadrant model makes the result clear: where organizations need to be and how they’re actually operating isn’t just misaligned – it’s diametrically opposed.

The gap couldn’t be any wider.

Is it really this simple?

Now, one pushback here might be that it’s too simple to talk about just one center of gravity when it comes to an organization’s operating reality (Q3) and its operational approach (Q1).

After all, there are many different roles, and many would position themselves differently, e.g.:

• Probably only Legal and Risk / Compliance would accept a formal Q1 focus to their roles, but even then they would assume they are bridging into results and adaptivity (Legal), or controlling Complexity (Risk / Compliance).
• C-Suite would particularly edge themselves into the strategic Q4 quadrant.
• The rest would consider themselves fully delivering results (Q2) or straddling into strategic adaptation (Q2 / Q4).

But, in practice, we’d suggest this is where the roles really are, and why:

• Legal and Risk / Compliance are fully embedded in Q1, focused almost entirely on standards and control.
• As we’ve just said, capability and methods are the focus in Q1 – the domain of Consultants – with Procurement and Contract / Project Management also attempting to “tame” Complexity through formal methods.
• Roles involving cross-boundary relationships are stuck in Q3 disruption.
• C-Suite are dragged back to Q3, too.

Indeed, the most familiar challenges are clustered predominantly in Q1 and Q3:

So, whilst no model can cover every nuance, and there are always exceptions, it holds up to more granular analysis to continue to say that most organizations’ operating reality is centered in Q3, whilst actual operational approach is centered in Q1.

So why is there this catastrophic mismatch between where organizations need to be, and how they currently operate?

Explaining the mismatch

To begin with, Q1 has been the operating default for generations.

It reflects the Industrial Revolution and the scientific method (where reality can be controlled and optimised); it’s what’s familiar; it’s what people have been schooled in.

And whilst Complexity-driven change has always been the fundamental nature of reality, when that change was slower – as it typically was until the explosion of technology of the last few decades (broadband, the Internet, smartphones, AI) – Q1 often worked, and worked very well.

But in doing so, it actually worked too well.

Not only does human nature naturally resist setting aside what has previously worked, but the emphasis on knowability, control and predictability has profoundly limited and warped how we see the world.

Most profoundly, what are really verbs have become nouns – the active, dynamic processes (verbs) of valuing, collaborating, managing, etc, have become static “things” (nouns) as value, collaboration, management, etc; “contracting” as a process becomes “contract” as a document.

“Things” are knowable, predictable, definable, controllable, and quantifiable.

But they lack the sense of flow, change and unpredictability that characterize a Complex world. And so even words that apply across all quadrants end-up being “heard” and interpreted (and limited) through a Q1 filter, where “how” becomes the default “lens”:

• “Value” becomes synonymous with price and cost, rather than subjective and fluid.
• “Capability” becomes line items in a certification to obtain – or modules of a training programme – rather than servants of value (in the process, becoming “cap-ability” – a cap on ability!).
• “Negotiation” becomes a specific task and phase in a lifecycle, rather than a continuous process of trade-offs and adaptation.
• etc, etc.

Calls for “new skills” or “value creation” become subsumed into “we just need to do this… and results will follow“.

And as well as defining and limiting our language, this has even affected our brains and how we think – especially in the West – where we’re almost completely biased towards “things” and a sense of control to the left:

Put this all together, and in the bottom left of our matrix, where the axes originate – and at what we can consider as the “event horizon” of maximum certainty and maximum structure – is a “black hole”, where certainty and structure “collapse in” on themselves. This “black hole” creates a massive “gravitational pull” towards Q1:

We’re therefore not only naturally predisposed to Q1; we imprison ourselves within it.

But, again, it gets worse.

Because the “prison” of our own making is reinforced by one that isn’t – the fact that the axes are non-linear, with “fault lines” that “box in” Q1:

• With structural adaptiveness, organizations don’t develop naturally from formal, hierarchical and fixed roles to fluid, networked structures.
• With Complexity, predictability doesn’t gradually reduce through “complicated” until it becomes Complex; there is a seismic shift between “complicated” and Complex, where almost everything is inverted (e.g. top-down becomes bottom-up, etc).

Outside of the “prison” of Q1, the transitions around the quadrants we mentioned earlier are natural: they don’t involve breaking through these “fault lines”.

But when an organization is stuck inside Q1, it’s trapped by a vicious combination of impenetrable barriers and the pull to remain where it is.

In conclusion

The quadrant model perfectly and simply describes and explains the widening gap between today’s challenges and the ability to respond to them effectively.

It answers our partner’s impassioned “WHY DON’T THEY CHANGE?!?!”.

It shows how organizations are currently operating in a Q1 way that is the diametric opposite of the Q4 center of gravity they need to have.

And it shows how everything is currently conspiring to keep them in Q1.

But, as we’ll see next time, this model also shows us what’s needed to break out of this current paradigm, and what that means, both conceptually, and – crucially – practically.