Social organization, from the nuclear family to the limited liability corporation, is a problem-solving strategy. Animals hunt in packs to confront larger prey; people form businesses to take on bigger opportunities. In other words, since social organizations emerge in response to their environment, they should evolve in response to their environment, too.
The survival of the fittest is the ageless law of nature, but the fittest are rarely the strong. The fittest are those endowed with the qualifications for adaptation, the ability to accept the inevitable and conform to the unavoidable, to harmonize with existing or changing conditions.– Dave E. Smalley
Instead of one singular future of work, we believe that there’s a spectrum of possible futures we characterize as either FIXED or FLUID.
Be careful not to ascribe immediate positive or negative values to either side of this spectrum. How a company or team behaves shouldn’t be dictated solely by what’s new or popular; it should be driven by the group’s context (what’s happening around it), its strategy (what needs to be done in response), and the profile of its people (who needs to do it). Neither pole is “better” than the other, but one area is likely more “appropriate” given your context.
FIXED teaming puts the consistent delivery of quality ahead of everything else. FIXED is appropriate when there are fewer unknowns in your market or area of practice and when you can win by exploiting efficiencies of scale. You know you need a FIXED approach when work is easily reproducible and yet still successful.
FLUID teaming puts speed and novelty ahead of everything else. FLUID is appropriate when you’re operating with mounting uncertainty. You know you need a FLUID approach when the world belies your best predictions and the definition of success keeps changing.
From Output-Oriented to Mission-Driven
A fixed teaming model is inherently designed to successfully repeat what it’s done in the past, such as delivering a consistent product or service. A fluid teaming model is designed to be fully responsive to the present, so it requires a consistent mission or purpose to remain coherent.
Fluid Case Study: Tesla
In November 2015, former Daimler Chairman Edzard Reuter called Tesla “a joke that can’t be taken seriously compared to the great car companies of Germany.” But just six months later, when over 350,000 people put down money for the Tesla Model 3, Germany’s auto industry got worried it was being left behind.
To achieve its mission to accelerate the world’s transition to sustainable energy, Tesla laid out this strategy 10 years ago:
- Build sports car
- Use that money to build an affordable car
- Use that money to build an even more affordable car
- While doing above, also provide zero emission electric power generation options
- Don’t tell anyone
The strategy is simple, even if the work to accomplish it is very difficult. Most importantly, it serves as a decision-making tool: if teams aren’t sure if they’re focusing on the right work, they can refer to the strategy and adjust as needed.
From Command and Control to Sense and Respond
Fixed models operate via long-term forecasting with relatively stable internal and external conditions, so their central executional challenge is having the right resources in the right place at the planned time. These teams excel at planned coordination. Fluid models trade in novelty, so their central challenge is the ability to constantly sense the world around them and quickly respond before some new change has overtaken them.
Fluid Case Study: Betabrand
The fashion industry is historically finicky and slow, but Betabrand’s avoided risk and increased their pace by going straight to the customer. The team brainstorms and prototypes clothing designs in their San Francisco headquarters, so it only takes a day to produce a sample. Prototypes are then placed in their site’s “Think Tank,” where customers can back a design by purchasing it in advance. The earlier they support it, the greater the discount—up to 30%—but if the design doesn’t get enough backers, it doesn’t go into production. If it does reach the threshold, the design can be produced and delivered to customers in about two months. This quick turnaround and instant customer feedback keep the Betabrand team on top of new trends and emerging needs.
From Rigid Structures to Loose Structures
To ensure consistent delivery, fixed models obsess over a clear chain of command and detailed roles and responsibilities. While this works efficiently in a small organization, as the company scales, it adds increasing layers of management and complexity. This creates rigidity which locks employees into set teams—whether by department or region, for instance—and slows knowledge sharing. In contrast, Fluid models must be able to create and disband teams faster as to capitalize on new trends and needs. Roles become more interchangeable as well. This can force better communication between existing team members but it may also make it harder for new employees to jump aboard changing teams.
Fluid Case Study: Valve
Valve has a truly open office, to the point where every employee’s desk is on wheels. As people form new teams or work on new projects, they can simply move their desks with them. It’s a physical manifestation of their flat structure, in which individuals decide what they want to work on and no managers exist to direct people.
From Error-Reducing Systems to Error-Embracing Systems
Again, fixed models are designed for repetition and efficiency—deviation is a costly mistake; perhaps best exemplified by “Six Sigma,” in which 99.99966% instances are free of defects. Unfortunately, this demand for “fail safe” solutions limits creativity. Fluid models are more tolerant of errors and seek to establish a “safe fail” environment, in which no mistake can do irreparable harm to the organization, and people can learn from others’ errors. Of course, this means a higher rate of failure must be acceptable.
Fluid Case Study: Etsy
The only worse feeling than realizing you made a mistake is knowing you’ll have to tell everyone else about it. But at Etsy, they’ve reframed mistakes into “Blameless Post-Mortems.” When a mistake occurs, people are encouraged to send out an email or “PSA” detailing what happened, what it affected, and any assumptions they had that may have contributed to the mistake. Most importantly, they know that they won’t be punished for their mistake. In fact, every year, the person who makes the most surprising error gets an award—a three-armed sweater. By reframing mistakes as data points, Etsy makes the entire organization smarter, and prevents larger, more serious errors from compounding.
From Suppressed Authority to Distributed Authority
In fixed models, decision-making authority is limited to the top tiers of organization, while lower tiers focus on execution. However, senior level managers may not have adequate information to make the most appropriate decisions, while the rank and file feel disempowered. Fluid models, on the other hand, push decisions down to the lower levels, where people who are “on the ground” can make the call. While more nimble, it also requires greater coordination between teams to make sure they are aligned. It’s also important to educate team members on the whole system of the organization, and how their decisions may impact other areas of the business.
Fluid Case Study: Warby Parker
If you can’t give orders, how do you get your team to do anything? At Warby Parker, they’ve developed a marketplace for engineering tasks. Managers submit work requests, which are then voted on by other managers in the company—the more Warbles the request collects, the more important it is. Led by senior engineers, the engineering teams then decide what requests they want to work on, whether it has zero or dozens of Warbles. But every six months, the engineering team that has collected the most Warbles wins a team outing and recognition—and the healthy level of competition means they’ve never had a problem fulfilling important work requests.
From Deep Knowledge to Broad Knowledge
The focus on repetition within the fixed organization enables employees to master their specific skill set, but limits their understanding of the organization’s larger goals. In contrast, fluid organizations need employees who are capable of quickly jumping into a situation and improvising, even if they are not necessarily “best in class” at their role. You may hear this referred to as “I-Shaped” and “T-Shaped” individuals and teams.
Fluid Case Study: Airbnb
Faced with a shortage of designers in the marketplace, Airbnb has pulled talent from diverse professional backgrounds, including librarians, dancers, and mechanics, to build its own design team. This team is then paired with engineering and product teams to shepherd a new feature from start to finish. Hiring people with less traditional backgrounds and developing a clear career path has proven highly successful, growing the internal talent pipeline and keeping retention high.
From Homogeneity to Diversity
Fixed organizations in stable environments need consistency and reliability, a natural fit (in the short term) for homogenous teams who are sociable and comfortable sharing information. Heterogeneous teams are more challenging to maintain—they have lower levels of trust, cohesion, and communication—but they also create more innovative solutions, making them a good match for fluid environments.
Fluid Case Study
Richard Warr, a professor of finance at North Carolina State University, and his co-authors compared an organization’s diversity and its rate of new products. Their study examined 3,000 publicly traded companies during the years 2001-2014 and included nine measures of diversity. These measures covered whether the organization had women and minority CEOs, whether they promote women and people of color to “profit and loss responsibilities,” whether they have supportive policies on gay and lesbian employees, and whether they have programs to recruit disabled employees. The study found two striking results: organizations which satisfied all nine requirements introduced, on average, two more new product launches per year than their peers AND weathered the years following the recession much better than their peers. More diverse teams increased their ability to innovate and to respond to dynamic, uncertain environments.
Selecting the Right Approach
To help our clients think about calibrating the way they work to their environment, we have leadership teams complete the two-part quiz below and discuss. It’s a simple tool meant to spark a conversation about your business and the market around it. Give it a try and share your scores and feedback with us in the comments.
PART ONE: YOUR MARKET
Consider a specific product line (e.g. men’s razors) or service segment (e.g. business credit card holders) of your business. Choose the number for each question that best represents this product/service.
Add up your score and review.
Score of less than 7
You are operating in an extremely fixed market, so fixed that it could be vulnerable to disruption. As a team, discuss:
- How might a startup eventually disrupt you? Could it be through a new technology (blockchain, voice, IoT, machine learning, etc.)? Or could it be by delivering value in a new way (subscription, freemium, bundling, etc.)? However you think you could be disrupted, start building that business within your walls today.
- Say you have incubated a new business. When will you know when to decrease or discontinue support of your existing product or service in favor of it? When the time comes, will your team have the courage to do it?
Score of 8-12
You are operating in a fixed market. Conditions may demand greater consistency, lower prices, and/or overall optimization. As a team, discuss:
- Where do inefficiencies still exist operationally? How can you improve these areas without experiencing diminishing returns or making yourself brittle to change?
- What elements of your business, if any, are dynamic and less predictable? How can you keep an eye on these areas in case the market shifts toward greater fluidity?
Score of 13-23
Your market is smack-dab in the middle of our spectrum. As a team, discuss:
- Which direction has your market moved over time (i.e., Has it become more fixed or more fluid in the last 18-36 months?) and why (i.e., What factors or players have driven the change?).
- What could happen to you if the market continues to shift? Start preparing now for the next stage of your market.
Score of 24-29
You are operating in a fluid market. Your conditions demand rapid experimentation and learning. As a team, discuss:
- Rank the aspects of your market (customers, competitors, partners, channels, resources, geographies, pricing, etc.) from least to most predictable. For the least predictable elements, how can you test and learn more effectively to reduce the uncertainty in your business?
- Are there elements of your business that could benefit from greater efficiency without harming your ability to test and learn?
Score of greater than 30
You are operating in an extremely fluid market, so fluid in fact that it might not become a viable long-term market.
Conversations worth having with your team:
- If you’re, in essence, building a new market, what about it makes it new? A new customer segment? A new customer behavior? A new form of delivery?
- How can you keep your costs low enough to survive the time it takes for your market to mature?
- What measures and milestones will tell you whether you’re making progress and when you should pivot?
PART TWO: YOUR WAYS OF WORKING
Consider the structures and systems that produce the product line or service segment you evaluated above. Choose the number for each question that best represents those structures and systems.
Add up your score and then subtract it from your score in Part One (meaning Score for Part One – Score for Part Two).
If you ended up with a difference of 6 or more:
The way you work could be too fixed for your market, especially if you feel that your market has been trending more toward fluid for the last 18-36 months. Work might feel frustratingly slow compared to the changing world around you, because inertia and/or fear is stopping you from changing.
As a team, discuss:
- Can you orient your teams toward a customer-focused mission that is broader than a single product or process? This will help you have both greater focus and flexibility.
- What processes can you implement to sense and respond to external changes faster? How can you incentivize your people to share their learnings and ritualize the act of sharing?
- How can you break down silos and encourage greater collaboration?
- How can you encourage greater risk taking, within boundaries of some kind?
- How can you delegate responsibilities and distribute authority down the hierarchy and out to the edges of the company?
- How can you hire new talent and develop existing talent to be trusted with greater authority and how can you promote a greater sense of inclusion and belonging among your teams?
If you ended up with a difference of -6 or less:
The way you work could be too fluid for your market, especially if you feel that your market has been trending more toward fixed for the last 18-36 months. Work may feel like constantly reinventing the wheel. You may still operate as you did as a smaller company or business unit, yet that way of working could be creating unnecessary waste and preventing you from realizing economies of scale and other efficiencies.
As a team, discuss:
- Is there a clear opportunity to double down on an existing product or service by increasing its quality, consistency, or affordability? How can you focus your people on this task while decreasing their explorations elsewhere?
- Can you free up valuable time and reduce uncertainty for your people by making more decisions for them?
- Should you formalize team structures to make it easier to manage your people and processes?
- Do you need to implement quality assurance processes to increase customer satisfaction?
- Should you be hiring with greater focus on expertise and/or spending more on developing the expertise of your existing employees?
If you ended up with a difference between -6 and 6:
Your work is likely well calibrated to your market. However, as your market shifts so too should the way you work. Re-take this assessment as a leadership team every six months and reflect on what might be changing.
Most organizations need both FIXED and FLUID teams. Amazon Studios follows a very FLUID model of testing and learning from new original series, yet Amazon fulfillment centers are extremely FIXED. Shipping is predictable, cultural and consumer trends not so much. Moreover, teams themselves often need to flex both muscles. Almost every team we work with has some percentage of work that demands a FIXED approach and some percentage that demands a FLUID approach. Yet, all too often, the same approach is given to all work.
Management books sell because they tell a neat, linear story complete with cherry-picked anecdotes. But businesses thrive because of constant, iterative pathfinding and self-reflection. The allure of a silver bullet all too often takes our attention away as leaders from deep investigation of our markets and our own organizations.
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What We Can Learn From Amazon’s Planning Process
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The Power of “What If?” and “Why Not?”
An Adaptive Approach to the Strategic Planning Process
Why Culture/Market Fit Is More Important than Product/Market Fit
Group Decision Making Model: How to Make Better Decisions as a Team