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Pravir Malik

To the degree that an organisation centred at the physical level can call on attitudes and strategies from higher levels in the fractal journey, it will function more successfully than an organisation that perceives and acts solely from a brick-and-mortar perspective.

IN the article "Fractals and the Future of Organisations" (Business Line, September 10) the question had been raised that "if nature employs a fractal structure in building much of the physical universe, is a similar fractal structure being unconsciously employed in the development of organisations?"

The same article suggested an answer by concluding that "the case will be made that the same fractal journey is, in fact, inevitable at the level of organisation and, further, that often times when an organisation has been successful, it has been so because it has unconsciously applied something of the pervasive fractal dynamics.

Conversely, whenever and wherever an organisation has failed, it is because it has deviated from the need to maintain the imperative fractal journey."

In this article we will examine the fractal journey as it applies in the business world, laying the foundation on which to examine business success and failure, and other business-world fractal implications in subsequent articles.

To begin with, let us recall that the different levels of the fractal journey can be equated to different ways of seeing and dealing with the practical world.

Thus, if an organisation operates at a `physical' level, where all is perceived as fixed and stable, then it can be said that the organisation is tied to the past and to what may have once made it successful. Its world consists of known customers, known products, known markets, known processes and structure, and known strategies.

Thus, customer service, as practiced by numerous Indian banks, can be said to lie at the physical level. Even though customers increasingly use the Internet and a growing segment expect to have services such as ATMs easily available, the banks in question are used to a certain yester-year model of the world and, hence, continue to not supply such services.

Innovation at this level is about `tweaking' and about moving within the boundaries that have been established. Thus, a single point of contact in a bank, rather than meeting with several different people to withdraw a sum of money, would perhaps be considered `innovative'.

An organisation centred at this level has a limited number of options to choose from when confronted with change. Change itself is engineered as though the world is fixed, and, therefore, any efforts are only incremental, within the confines of the described world.

To the degree that an organisation centred at this level can call on attitudes and strategies from higher levels in the fractal journey, it will, in all likelihood, be able to function more successfully than an organisation that perceives and acts in the world solely from a physical perspective.

An organisation operating at the `vital' or resource-oriented/financial level in effect has more `degrees of freedom'. Being centred in financial results, whether return on investment, sales, or market share, it is not necessarily bound to the world that has made it successful.

It is not necessarily bound by past markets, customers, products, processes, structures or strategies. It has the added flexibility of changing any of these to ensure that it meets its specified financial goals.

Thus, one witnesses the phenomenon as practised by a large number of Indian business houses, of entering into industries that they may not necessarily have expertise in. This has been the case with numerous groups, such as Tatas, Reliance, Modis, RPG, Birlas, to name a few.

This dynamic is often successful in growing markets. In more mature markets, however, where rationalisation of competition is the norm, companies are often required to go through a quantum change in order to remain afloat.

Under such conditions, a vital-centred organisation runs the risk of failure, especially when it remains focussed on meeting its imposed financial goals. Remaining so centred on imposed financial goals, it often does not have the freedom to think out of the box.

An example of a company that successfully made the shift by stepping to another level of operation was that of General Electric. Like the Indian business-houses, it had proliferated across industry. However, at the critical juncture, it went through a process of self-rationalisation, whereby it divested many of its companies that were not leaders in their respective industries.

It is to be noted that organisations operating at the vital level usually embody all the positive capacities of the previous, physical level. At the same time, to the degree that an organisation centred at this level can call on attitudes and strategies from the mental level, it will be able to function far more successfully than an organisation that perceives and acts in the world solely from a vital or a vital-physical perspective.

An organisation operating at the `mental' level is not bound by its past. It has more degrees of freedom and is, in essence, more fluid and adaptive than any form that precedes it. It seizes on ideas and will change its customers, products, markets, processes, structures and/or strategies to ensure that these ideas can be fulfilled. It usually has the know-how and capability of the previous physical and vital levels, either embedded into or easily available it.

An example of a company that initiated a concept-led (mental-level) strategy from a strong physical and vital base is that of Dell Computers. In an environment where standard IBM computers and its clones were the offering to customers, Dell began to offer customised computers that would be ready to ship in just a few days.

It is to be noted that in Dell's case, it could position itself in such a manner because it had already built itself around a robust customer-ordering/delivery process. That is, it had embedded in the necessary vital-level flows and the physical-level stability to make a more upwardly flexible offering.

By contrast, Amazon.com, another conceptual-led or mental-level company, came in with a pure idea and then, over the course of five years, had to integrate in the physical and vital characteristics to ensure its success.

At its inception it sought to create the world's largest virtual bookstore. It sought to allow users to browse titles in the comfort of their home, while allowing users to view online reviews by other readers.

It shipped books to buyers at prices compatible with or less than those available at its competitors. Its concept for selling books was so different from existing sellers of books that investors allowed it to continue in operation for five years before it had even begun to show a profit.

Further, it drew investors to its unique concepts, and through the funds that became available to them was able to quickly mobilise capabilities at the previous levels — physical and vital. Being mentally-centred, it was also easily able to successfully diversify into providing electronics and toys, among an array of other consumer goods.

It is to be noted that in the cases of both Dell and Amazon, a fractal journey was completed, though from different starting points. In Dell's case, it began at the physical and vital levels and moved on to the mental level to reinvent itself. In Amazon's case, it started at the mental level, but then went on to integrate the physical and vital levels into it.

If Dell had not moved to the mental level, it would have been one among many IBM computer clone suppliers. If Amazon had not integrated in the physical and vital aspects, it would have been an interesting play, like so many others of the dotcom-era of the late 1990s, and would have faded away just as they did.

In both cases, it was the ability of the company to step through each of the levels in the fractal journey that ensured its success.

To drive the point home, when one considers the strategy followed by Amazon.com's competitor, Barnes and Noble, one sees that the latter was unable to achieve the success of Amazon, because it had not risen to the mental level in its fractal journey.

Thus, when Amazon actually began following through on its vision of becoming the largest bookstore on the planet, Barnes and Noble, threatened by its diminishing market share, spun off barnesandnoble.com. Its motivation was simply to gain back lost market share which, it is to be noted, is a pure vital play or strategy.

If, instead, it had moved to the concept-based or mental level, it may have been able to reinvent the retailing industry by being the first truly click-and-mortar company, since it already had a vast brick-and-mortar chain in place.

Thus, the levels of the fractal journey are not just a way of seeing and perceiving the world but, as in the case of the numerous other fractal journeys already introduced — ranging from that of the global economy, to that of the politics of global power, to that of physics — is a means by which to begin to understand and make sense of seemingly discontinuous and supposedly unrelated events across time.

In so doing, a higher level of shaping power is made available to the astute corporation, and the necessity of development along certain more visible lines, made more abundantly apparent. In today's rapidly changing world, such foresight could spell the difference between business success and failure.

(The author is founder of Aurosoorya, a firm specialising in creativity and innovation, and has consulted with several organisations worldwide. He can be reached at: thefuture@aurosoorya.com)

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