As the officers, seamen and passengers of the Titanic came to understand, it is not what you can see that gets you but what is below the visible surface.  Visualizing the unseen remains a continuing challenge.

The current president of the United States is by many accounts the most unlikely political victor.  He is not from the ‘industry’ and has limited experience in this field of endeavor.  None-the-less, he holds the office.

The results of the US presidential election of 2016 is the subject of innumerable discussions.  Most center around the performance of his opponent and missed opportunities by the opposing party.  This pundit argues that neither of these are the prime reason for his election.

Almost 30 years ago this writer was a member of the Leadership Team for a major publicly traded company.  Multiple reorganizations and the advice of numerous consulting firms did not enhance our position in a difficult market.

Something we did not understand was at work.  Why couldn’t those with decades of managerial/industry experience and all the experts fathom the forces at work?  Unless, we could no action taken would be effective.

What are Structural Dynamics?

During this period, management theories abounded.  Examples included The New Realities by Drucker, The Fifth Discipline by Senge and Economic Value Added (EVA) to name a few.  None seemed to be able to help us understand the latent forces that eluded us.

As part of the doctoral dissertation, assessing cross cultural negotiations and the relationship between human Relationships, Behaviors, and Conditions (RBC) we enhanced existing theory into an actionable methodology, Structural Dynamics.

The fundamental premise upon which the theory of Structural Dynamics is developed is the belief that structures are not static and that more often than not, these dynamics are not directly observable.

Over time, the very nature of the structure and the very nature of the component parts of the structure may be radically different from today’s composition.

In other words, Structural Dynamics is defined as “the morphology or patterns of motion towards process equilibrium of interpersonal systems.”  While this sounds academic, the implementation is straightforward.  Think of this as an iceberg.

The Iceberg Principle—90% of any system’s structure is below the surface or hidden from direct observation.  This latent component controls all the processes associated with the system.

Implementation

While there is a quantitative aspect to Structural Dynamics, analysts can use this qualitative approach.  There is plenty of information available; however, it can be challenging to shift through it and separate actionable data from noise.

For example, while it was evident for all to see most prognosticators wrote off the Trump rallies and the size of the crowds.  Similarly, Xerox had most of the technology for today’s PC, but it took Apple and others to realize the value.

Think these are remote and one-off events?  Only 60 companies that were members of the Fortune 500 in 1955 were still members in 2017.[i]  Some mergers for sure, but why did the others not see the waves that swept them away?  Sears is a recent example.

Assessment

Structural Dynamics analysts can use the following checklist as guidelines.  This list is not all-inclusive, nor is it meant to be a list that one simply puts a check mark next to and tallies up the number of checks versus not check.

It is more accurately a framework for developing a Structural Dynamics model for any given industry environment.  The following criteria provide a preliminary checklist of set of questions that should be addressed when one seeks a better understanding of the latent variables associated with an industry segment or emerging environment, such as new technologies.

  1. Not obvious or normally thought of as industry driver
  2. Usually not directly related to standard industry practices
  3. Becomes more visible over time or repeated measurement
  4. Often not specific to a single industry or economy
  5. Cannot be determined by analysis of best practices
  6. Typically, not associated with a single or few number of processes
  7. Not associated with processes in a single firm
  8. Can be cyclical or seasonal in nature
  9. Not necessarily random or chaotic events in nature
  10. Not necessarily economic variables in nature
  11. Tend to be long term variables with limited reaction to specific current events
  12. Can remain dormant for long periods of time, but when they become visible the impact can be significant and swift
  13. Demographics may provide insight into emerging or future Structural Dynamics, they should not be used exclusively
  14. Often small niche (or new) players may benefit from Structural Dynamics These niches are often outside of the industry of interest, but are subsequently imported into the industry of interest
  15. Technological developments may forecast future competitive events, i.e., the impact of cellular phones on the pay phone industry
  16. Not all technology is useful in the near term. The technology developed by Xerox, Palo Alto in the 1960s was not commercialized for almost 20 years.

Computer icon and windows technology was not commercially viable until Steve Jobs (founder of Apple Computer), and Bill Gates (Microsoft) expanded hobbyist’s niches into the personal computer revolution of the 1980s.

Knowledge of Structural Dynamics variables can defeat the brute force of large deep-pockets organization, although this is not guaranteed.  As this construct evolves, we expect to develop a more robust set of tools, so managers and other practitioners will be better able to visualize their Structural Dynamics environment.  In the meantime, it is useful to define latent variables.

Latent Variables Are impacting Your Organization.  What Will You Do About it?

For More Information

Much of this blog is taken from our monograph, Structural Dynamics: Foundation of Next Generation Management Science.  The Kindle version is available from Amazon https://www.amazon.com/gp/product/B00U0JKMT0/ref=dbs_a_def_rwt_bibl_vppi_i1

Fundamental to our Operational Excellence Platform, also see https://therrinstitute.com/structural-dynamics/

End Note

[i]  http://www.aei.org/publication/fortune-500-firms-1955-v-2017-only-12-remain-thanks-to-the-creative-destruction-that-fuels-economic-prosperity/