The Dual Operating System

Hierarchies and Networks

John P. Kotter is the Konosuke Matsushita Professor of Leadership, Emeritus at the Harvard Business School. He has written extensively on the challenges of leadership and the need to rethink organizations in a time of accelerating change. In his recent book, Accelerate: Building Strategic Agility for a Faster-Moving World (2014), he reflects on the tensions between hierarchies and networks in organizations, and concludes that we need both.

Organizations generally evolve from an early entrepreneurial network structure to a growing hierarchy. As management structures and processes are added over time, the hierarchy becomes more and more dominant, eventually suppressing the network side of the organization.

Typical life cycle of an organization: Network to hierarchy. Source: John P. Kotter,
Accelerate: Building Strategic Agility for a Faster-Moving World, 2014.

“At the end of this journey,” Kotter says, “a successful organization may have established a strong market position, powerful economies of scale, a robust brand presence, and good relations with customers. But in the drive for growth and success, something important was lost. While the firm is surviving well, and making good money, it does not have the innovative edge, or speed, or agility it once had.”

Hierarchy acts as a drag on the organization’s ability to respond to turbulence in an environment that is rapidly changing and unpredictable.

Making Strategy

Strategy making has traditionally been a linear process: creation, then implementation. For management-driven organizations, strategic planning usually happens once a year. “The key players in making strategic decisions and directing the implementation,” John Kotter says, “always sit at the top of the hierarchy.” [John P. Kotter, Accelerate: Building Strategic Agility for a Faster-Moving World, 2014]

In a world where rapid adaptation is required, there are compelling reasons to change the way strategy is developed and executed. Organizations have to quickly mobilize their creative resources.

“Strategy won’t operate only on a yearly cycle because opportunities and hazards don’t operate on a yearly cycle. Creation and implementation will start to blur as new data are discovered during implementation which immediately need to inform new creation.”

“Today,” Kotter says, “strategy is being viewed in some organizations more as a dynamic force, not one directed by a strategic planning department and put into a yearly planning cycle.  More eyes and ears and hearts need to be in the strategy game, not just a limited number of senior managers.”

Not Either/Or But Both/And

Following traditional thinking, organizations tend to formalize strategic planning, change management and project management in an attempt to impose change from the top down. This does not engage hearts and minds, and has generally proven to be ineffective. Most change management initiatives fail.

An alternative is to dismantle the hierarchy. “Organize as a spider web. Eliminate middle management and let the staff manage themselves.” This is an extreme response that is also prone to failure. We still need hierarchies, Kotter says, to make organizations work.

More appropriately, organizations can mobilize an agile network structure to complement the hierarchy. The result is a parallel system in the organization that turbocharges change.

“The solution, which I have seen work astonishingly well,” Kotter says, “is a second system that is organized as a network. It powerfully complements rather than overburdens a more mature organization’s hierarchy, thus freeing the latter to do what it’s optimized to do. It makes an enterprise easier to run while accelerating strategic change. This is not a question of ‘either/or.’ It’s ‘both/and’: two systems that operate in concert.”

Dual Operating System. Source: John P. Kotter,
Accelerate: Building Strategic Agility for a Faster-Moving World, 2014.

Kotter calls this a “Dual Operating System.” It is based on the following principles:

  • Change is driven by many people, from everywhere, not just the usual few appointees
  • People feel it’s a privilege to be involved
  • Action is driven by the desire to contribute to an important and exciting shared purpose
  • Leadership inspires people, and this does not come “from one larger-than-life executive”
  • Network and hierarchy work as one

Kotter says that harnessing the dual forces of leadership and management creates an organization that is innovative, adaptive, and energetic, and at the same time well run.

With effective management but ineffective leadership, an organization will be well run, but bureaucratic and unable to change quickly. With effective leadership and ineffective management, it will be innovative, adaptive, and energetic, but chaotic. With ineffective management and leadership, he says, an organization is doomed.

The management/leadership matrix. Source: John P. Kotter,
Accelerate: Building Strategic Agility for a Faster-Moving World, 2014.

Hierarchy relies on plans and budgets, job descriptions, compensation, metrics, and problem solving –  the traditional tools of management. The network, in contrast, draws its energy from eight accelerators:

  • A sense of urgency – focusing not just on immediate problems, but on strategic threats and possibilities
  • A guiding coalition of volunteers – people from all levels of the organization who feel this sense of urgency, want to lead and be change agents, and engage others
  • A change vision and strategic initiatives – actions people have the passion to work on, that move with the organization with speed and agility toward the vision
  • An army of volunteers – large numbers of people who buy into the vision and want to help
  • Removal of barriers – identification and elimination of obstacles that stand in the way of strategically important activities
  • Celebration of wins – recognizing successes and making wins visible to the entire organization
  • Relentless action – focusing energy forward on new opportunities and challenges to keep the entire system moving
  • Institutionalized change – integration of wins into the hierarchy’s processes, systems, procedures and behavior

Celebrating successes, Kotter says, has great psychological impact. This is crucial to build and sustain the dual system. Successes “give credibility to the new structure. This credibility in turn promotes more and more cooperation within the overall organization. These wins draw out respect, understanding, and eventually complete cooperation from the most control-oriented managers, who themselves have no desire to be network-side volunteers.”

Integrating wins into the hierarchy’s processes, systems, procedures, and behavior embeds these changes in its culture. “After a few years, such action drives the whole dual operating system approach into an organization’s very DNA.” The result is true organizational transformation.