Strategic alliances and open systems can teach us much concerning the new ways of working. As a strategic alliance professional and a business consultant, opening up closed systems for clients and assisting organizations to embrace ecosystem development is a core competency.
What is an open system and why does it matter?
An open system, in natural sciences, has traditionally been defined as one which interacts with its environment. An open system is permeable to information, energy and mass which transfers into and out of the system boundary endlessly. People – and all living organisms – are open systems. Renewable energy such as solar power is predicated upon a radiant energy system which is open and inexhaustible for all practical purposes. Closed systems, on the other hand, are mechanical, limited and do not require a feedback loop with its environment.
Open-systems theory originated in the natural sciences and subsequently spread to fields as diverse as computer science, ecology, engineering, management, political science and psychology. In contrast to closed-systems, the open-system perspective views an organization as an entity that takes inputs from the environment, transforms them, and releases them as outputs.
Strategic alliance and ecosystem development, which moves companies and organizations from a closed, internal focused organization to an open, interactive and dynamic entity are breaking new ground as organizations become part and parcel of the environment in which they are situated. The classical change management methodology brought process flow and value chain optimization to siloed organizations. The new transformation projects are multidimensional: networks outside the firm, profit and sustainability and social contribution, maximum efficiencies and “best place to work” goals.
Scientific management (Taylorism), administrative management (central planning), and bureaucratic management (hierarchical command & control) enabled vast improvements in productivity as the industrial age reached its apogee. These management systems and organizations were largely closed systems. More modern management (the last fifty years) tend to be open systems; examples include total quality management, integrated supply chain management, business process re-engineering lean solutions.
Closed, vertical management systems are organized by function in which activities are grouped together by common work (function). Within each function, the chain of command flows from top to bottom and decision-making is consolidated at the highest level. The move towards open systems is not simply a more process-oriented organizational design, but also more like an network matrix than a linear structure.
Open vs. Closed. In many ways, it’s a battle that has been at the heart of the technology industry for most of its modern history. Open systems vs. closed systems. Open web vs. walled garden. Open source vs. proprietary standards. The “cloud wars” are presented as a battle between those that want to sell a monolithic vertically integrated hardware and software stack, and those that want to specialize on a specific layer in the cloud stack and, through API’s, remain open and integrate with players in the layers above and below them.
On the closed side – the argument is that owning the stack provides time to market value to the customer, while on the open side, it boils down to ensuring flexibility and pricing power for the end client. The technology debate is fascinating but outside the scope of this blog post.
One of the greatest but least known of the intellectual giants of the 20th century was Ludwig von Bertalanffy. He is credited as the principal architect of the interdisciplinary school of thought known as general systems theory or GST where holism is emphasized over reductionism, organism over mechanism and generally speaking open systems are the wave of the future vs closed systems as the way of the past.
Strategic alliances and the ecosystems are ground-breaking practices in the development of open systems. outside one’s own structure, interacting constantly with one’s extended environment. As a general rule, we are seeing this trend accelerate and proliferate well beyond our day-to-day perception. The advent of open system partnerships is the way all organizations will function in the 21st century.