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You are here: Home > Rethinking Organizations > The tipping point of #change and #sustainability

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Published on 2018-10-14 | Updated on 2019-04-03 19:17:32 | words: 1723

This short post is a companion to an article in Italian that is focused on the "political" element of sustainable change (#innovazione e #conservazione #sostenibile).

Or: if you change, you have to ensure anyway stability (or sustainable instability) during the transition.

In previous posts, once in a while wrote about the concept that, in any complex system (e.g. a private or public organization scattered across different locations or covering different businesses, i.e. different "mindsets"), there is a point where cutting down costs or "streamlining" undermine the long-term sustainability of the organization.

Yesterday I was talking with a new Spanish friend, and, while going around Turin, I decided to talk with him with my painfully weak Spanish- I can read and listen C1/C2 if I focus, when I am not part of a conversation, but talking is a different beast.

And my 2013 Headstart2 course in Spanish is useful for limited, functional conversations (the intent of those courses), not to talk about politics and social transformation.

I could have stayed on English, but when talking about the conditions in other countries, I prefer to make the effort and use whatever language is the mother tongue there- or at least listen.

Why? Because this lets those I am listening to talk at full speed, with minimal restructuring of what they would say in their own country to their own fellow citizens.

If I had had not even passive Spanish skills at an appropriate level, and enough active skills to at least try to interact or underline points in the same language, communication would have been affected.

Yes, it would have been better to have a fully bilateral C2 in Spanish, as sometimes my understanding required re-running, but... you can get an acceptable result also with an imperfect tool.

Now, why this digression? To explain a simple concept.

Multicultural and multilanguage communication is a complex system, made of different "social values frameworks", before and above just mere language differences.

If you remove bits of what allows the communication work, there is a point up to which you can "make it simpler".

Beyond that, the system ceases to work properly.

Let's move to a physical system, your mobile phone.

In and by itself, unless it is a satellite phone, your phone is useless.

To become useful, you need at least two elements: somebody to talk with, and an infrastructure connecting you both- wherever you go.

You do not really care how many "links" are needed for you to talk with somebody 2,000 kilometers away.

What matters, is that you can use the phone to talk.

While discussing with my friend, we exchanged examples of areas where in our countries former industrial towns lost their manufacturing base, and what that implied.

If you read my previous posts or some of the books, you know that I do not see a factory as cathedral desert.

Logistics has a cost.

A supply chain has a sequence of costs that make you choose one location versus another.

I remember the first decision support model I had to develop for a gas distribution customer outside accounting: its purpose was to optimize the costs while making choices on where to locate a warehouse.

So, knowing the cost per kilometer per kilogram for each location was a pivotal element within the model.

It wasn't just distance: it was the distance weighted by cost.

Now, look at e.g. a general store within a Western movie.

Did you ever consider what could have made "sustainable" that shop? Did you notice as, within the most credible stories, it seemed as if the variety of products available was limited?

Fast forward to our times.

I live in Turin, a town that used to have hundreds of thousands of people working within the automotive industry- but, from what I discussed with my friend and others in the past, talking about other locations (both in Europe and elsewhere), the same "pattern" is quite common.

Our manufacturing after WWII is based on complex logistics, and interconnections between various locations and various suppliers scattered, in recent years, across continents.

But the end point usually needs a "critical mass" to justify attracting new factories or services associated with a larger population.

Shrink down the number of inhabitants of any location to 1/10th, and see how many of those towns will still be sustainable.

At first, services will be still provided, but maybe at a higher price.

Eventually, that could not be enough- and you would have to use other sources to fund just the ordinary running of services whose capacity is now exceeding demand.

Yes, the locals might see that as an improvement: but would they be willing to keep public finances in order by covering for e.g. the tax revenue that used to be provided by the now disappeared 9/10th of the citizenship?

Doubtful- at best, you could dig into resources (or public debt) for a while, but, after squandering the resources set aside in the past, you, if you were a mayor, would need to cope with reality, and start cutting down services.

Companies too, seeing a smaller demand for e.g. their services in logistics or banking, might cut down the number of branches or the staff on their payroll, further reducing the tax revenue of local authorities.

Authorities that, after a while trying to finance running costs instead of investments through debt, have to gradually surrender.

Citizens now scattered across the town are anyway used to have a transportation network designed for the past, and any attempt to rationalize or reduce turns into a protest against cutting down services.

So, what you can cut is what cannot be seen: first stretching maintenance resources, then clustering services so that eventually one or more lines can be merged, etc.

You can transition to more efficient ways of delivering "citizens' transit services", but that too comes at a cost.

As, for a while, you will still have the old and the new.

I remember years ago an elected officer (I think a mayor) in Tuscany who said that his citizens complained that he could not remove snow fast enough.

He replied that, having hundreds of kilometers of road with people scattered around all the territory, but overall less people, he simply could not afford to keep all the roads clean.

In any transition there is a point when an existing socio-economic status quo is not anymore sustainable, and infrastructure is just the most visible element.

Few European countries recently announced that they were to stop the installation of new telephone landlines: it wasn't sustainable anymore, to keep in place all the staff, infrastructure, and maintenance resources, considered the limited demand (and traffic).

A choice that makes sense, but... have you considered how many jobs will therefore soon be made redundant?

And, also, it is worth considering for how long the remaining support staff and services will still be economically viable

.Italy is a country whose industry has lost most of the national champions, and currently has mainly small and smaller companies, with few "pocket multinationals" here and there: not enough to sustain the old infrastructure and old educational system.

Moreover, at a time of transition, where the existing "operational mindset" has to be converted to a new approach.

As another example, just consider the shift from combustion engines to electrical or fuel cell vehicles.

Luckily, there is an hybrid transition- and this will keep "alive" the existing automotive infrastructure for a while.

Telephones, automotive: just two of the industries- imagine what could happen when also banking expands e.g. the use of electronic money, reducing the volume of paper money moved around.

The point isn't to avoid reaching a "tipping point" where the existing incumbent ceases to be economically viable.

To paraphrase Star Trek: resistance is futile, a tipping point will happen in each and every industry, as our post-WWII industrial society is built upon complex structures that are or are about to become obsolete.

It is not anymore just a matter of "improvement", or "marginal innovation", something that e.g. smaller companies in my country are quite used to.

Just think again to electronic money: why should I pay SWIFT fees, when I can use an app and device to transfer money instantaneously from one customer to another?

There is an ancillary issue that, from what I read in few languages on newspapers around the world, still eludes most politicians: you cannot just simply tax the phase-in/phase-out transition to fund the reallocation of people and resources, as the existing infrastructure will still be around much longer after a "tipping point" is reached.

We already saw some of that happen both by design and by accident (e.g. the introduction of PCs), but on a much slower path.

Removing carts and horses to introduce cars took time- but back then there was limited infrastructure to replace, while now we live in world made of physical and virtual networks, ranging from electric lines to their software-based distribution systems.

What is needed is building up preparedness for disruptive changes, changes able to make not viable anymore entire supply chains, physical and virtual.

It is a mix of regulatory and market initiatives, but that should be probably designed with something similar to a "Manhattan Project" approach.

Managing tipping points means thinking ahead: regulatory governance, as it was done by the introduction of Euro1 2 3 4 5 6 for cars; and orchestration of phase-out (the old) and phase-in (the new)- no magic wand, and a lot of orchestration, overt and covert.