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The value of the dual operating system

We need organisational structures that combine hierarchies and networks

Virtually all successful organisations on earth go through a very similar life cycle. They begin with a network-like structure, sort of like a solar system with a sun, planets, moons and even satellites.

Founders are at the centre. Others are at various nodes working on different initiatives. Action is opportunity-seeking and risk-taking, all guided by a vision that people buy into. Energised individuals move quickly and with agility.

Over time, a successful organisation evolves through a series of stages (more on that later) into an enterprise that is structured as a hierarchy and is driven by well-known managerial processes: planning, budgeting, job defining, staffing, measuring, problem solving. With a well-structured hierarchy and with managerial processes that are driven with skill, this more mature organisation can produce incredibly reliable and efficient results on a weekly, quarterly and annual basis.

A well-designed hierarchy allows us to sort work into departments, product divisions and regions, where strong expertise is developed and nurtured, time-tested procedures are invented and used, and there are clear reporting relationships and accountability. Coupled with managerial processes that can guide and co-ordinate the actions of employees – even thousands of employees located around the globe – and you have an operating system that lets people do what they know how to do exceptionally well.

There are those who deride all of this as a bureaucratic leftover from the past, not fit to handle 21st century needs. Get rid of it. Smash it. Start over. Organise as a spider web. Eliminate middle management and let the staff manage themselves. But the truth is the management-driven hierarchies which good organisations use and we take for granted are one of the most amazing innovations of the 20th century. And they are still absolutely necessary to make organisations work.

The future organisation, today

What we need today is a powerful new element to address the challenges posed by mounting complexity and rapid change. The solution is a second system that is organised as a network – more like a start-up’s solar system than a mature organisation’s Giza pyramid – that can create agility and speed.

It powerfully complements rather than overburdens a more mature organisation’s hierarchy, thus freeing the latter to do what it’s optimised 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 in concert – a dual operating system.

It seems like new management tools are proposed every week for finding a competitive advantage or dealing with 21st century demands. How is a dual operating system any different? The answer is twofold. First, a dual system is more about leading strategic initiatives to capitalise on big opportunities or dodge big threats than it is about management. Second, although the dual system is a new idea, it is a manner of operating that has been hiding in plain sight for years.

All successful organisations operate more or less as I describe during the most dynamic growth period in their life cycle. They just don’t understand this while it is happening or sustain it as they mature.

The basic structure is self-explanatory: hierarchy on one side and network on the other. The network side mimics successful enterprises in their entrepreneurial phase, before there were organisation charts showing reporting relationships, and formal job descriptions and status levels. That structure looks roughly like a constantly evolving solar system, with a guiding mechanism as the sun, strategic initiatives as planets, and sub-initiatives as moons or satellites.

This structure is dynamic: initiatives and sub-initiatives coalesce and disband as needed. Although a typical hierarchy tends not to change much from year to year, this type of network typically morphs all the time and with ease. Since it contains no bureaucratic layers, command-and-control prohibitions or Six Sigma processes, the network permits a level of individualism, creativity and innovation that even the least bureaucratic hierarchy, run by the most talented executives, simply cannot provide.

Populated with a diagonal slice of employees from all across the organisation and up and down its ranks, the network liberates information from silos and hierarchical layers and enables it to flow with far greater freedom and at accelerated speed.

The hierarchy part of the dual operating system differs from almost every other hierarchy today in one very important way. Much of the work assigned to it that demands innovation, agility, difficult change and big strategic initiatives executed quickly – challenges dumped on work streams, tiger teams, or strategy departments – has been shifted over to the network part.

That leaves the hierarchy less encumbered and better able to perform what it is designed for: doing today’s job well, making incremental changes to further improve efficiency, and handling those strategic initiatives that help a company deal with predictable adjustments, such as routine IT upgrades.

In a truly reliable, efficient, agile and fast enterprise, the network meshes with the more traditional structure; it is not some sort of ‘super task force’ that reports to some level in the hierarchy. It is seamlessly connected to and co-ordinated with the hierarchy in a number of ways, chiefly through the people who populate both systems.

Still, the organisation’s top management plays a crucial role in starting and maintaining the network. The C-suite or executive committee must launch it, explicitly bless it, support it, and ensure that it and the hierarchy stay aligned. The hierarchy’s leadership team must serve as role models for their subordinates in interacting with the network.

None of this requires much C-suite time. But these actions by senior executives clearly signal that the network is not in any way a rogue operation. It is not an informal organisation. It is not just a small engagement exercise which makes those who participate feel good. It is part of a system designed for competing and winning.

Characteristics of the dual system

On close observation, it’s clear that a well-functioning dual operating system is guided by a few basic principles:

Many people driving important change, and from everywhere, not just the usual few appointees. It all starts here. For speed and agility, you need a fundamentally different way to gather information, make decisions, and implement decisions that have some strategic significance.

You need more eyes to see, more brains to think and more legs to act in order to accelerate. You need additional people with their own particular windows on the world and with their additional good working relationships with others, in order to truly innovate. More people need to be able to have the latitude to initiate – not just carry out someone else’s directives.

But this must be done with proven processes that do not risk chaos, create destructive conflict, duplicate efforts, or waste money. And it must be done with insiders. Two hundred consultants, no matter how smart or dynamic, cannot do the job.

A ‘get-to’ mindset, not a ‘have-to’ one.

Every great leader throughout history has demonstrated that it is possible to find many change agents, from every corner of society – but only if people are given a choice and feel they truly have permission to step forward and act. The desire to work with others for an important and exciting shared purpose, and the realistic possibility of doing so, are key.

They always have been. And people who feel they have the privilege of being involved in an important activity have also shown, throughout history, that they will volunteer to do so in addition to their normal activities. You don’t have to hire a new crew at great expense. Existing people provide the energy.

Action that is head- and heart-driven, not just head-driven.

Most people won’t want to help if you appeal only to logic, with numbers and business cases. You must also appeal to how people feel. As have all the great leaders, you must speak to the genuine and fundamental human desire to contribute to some bigger cause, to take a community or an organisation into a better future. If you can provide a vehicle that can give greater meaning and purpose to their efforts, amazing things are possible.

More leadership, not just more management.

To achieve any significant though routine task – as well as the uncountable number of repetitive tasks in an organisation of even modest size – competent management from significant numbers of people is essential. Yes, you need leadership too, but the guts of the engine are managerial processes. Yet in order to capitalise on unpredictable windows of opportunity that might open and close quickly, and to spot and avoid unpredictable threats, the name of the game is leadership, and not from one larger-than-life executive.

It’s about vision, opportunity, agility, inspired action, passion, innovation and celebration – not just project management, budget reviews, reporting relationships, compensation and accountability to a plan. Both sets of actions are crucial, but the latter alone will not guarantee success in a turbulent world.

An inseparable partnership between the hierarchy and the network, not just an enhanced hierarchy.

The two systems, network and hierarchy, work as one, with a constant flow of information and activity between them – an approach that succeeds in part because the people essentially volunteering to work in the network already have jobs within the hierarchy.

The dual operating system cannot be two super-silos, staffed by different groups of full-time people, like the old Xerox PARC (an amazing strategic innovation machine) and Xerox corporate itself (which could never execute on the fantastic commercial opportunities PARC uncovered). Ultimately, the meshing of the two parts succeeds in the same way as anything new, that at first seems awkward, wrong, or threatening: through education, role-modelling from the top of the hierarchy, demonstrated success, and finally sinking into the very DNA of the organisation, so it comes to feel just like, well, ‘the way we do things here’.


The inevitable failures of single operating systems hurt us now, and will kill us in the future. The 21st century will force us all to evolve toward a new form of organisation.

The good news is this can allow us to do much more than simply hang onto what we have achieved in the 20th century. If we successfully implement a new way of running organisations, we can take advantage of the strategic challenges in a rapidly changing world.

We can actually make better products and services, enlarge wealth, and create more and better jobs, all more quickly than we have done in the past. That is, while the consequences of an increasingly changing world do have a downside, they also have a potentially huge upside.

We still have much to learn. Nevertheless, the companies that get there first, because they are willing to pioneer action, will see immediate and long-term success – for shareholders, customers and employees. Those who lag will suffer greatly, if they survive at all.