CEPA eprint 2531

From building environmental representations to structural coupling: An autopoietic theory perspective on the theory and practice of strategic management

Brocklesby J. (2011) From building environmental representations to structural coupling: An autopoietic theory perspective on the theory and practice of strategic management. Systems Research and Behavioral Science. 28(6): 618–630. Available at http://cepa.info/2531
Table of Contents
Introduction
‘Cognitivism’ – the conventional account of human cognition
Autopoietic theory and cognition
Embodied cognition – a basic form of human knowing
Charting a course between formal and self-organizing processes
A structural coupling perspective on strategic management
Knowing the organization as a system
Knowing the Terrain
On ‘chance encounters’
Conclusion
References
This paper seeks to extend the usefulness of autopoietic theory within organization studies by tying it to a renewal of interest in that field in real-world activities, micro-level practices and process thinking more generally. Focusing specifically on strategic management, the paper attempts to demonstrate how autopoietic theory’s distinctive perspective on cognition and structural coupling can provide more convincing accounts of this area of practice than is possible using conventional understandings. Using the dominant ‘cognitivist’ approach as a starting point and using illustrative material taken from a major research project that has examined the strategic management process in exemplar firms, the paper questions the idea that strategic activities and outcomes reflect the intent, decisions and interventions of managers to accommodate, respond to and/or exploit external circumstances. The paper has argued that more convincing accounts are possible using the autopoietic theory’s more process-based, co-evolutionary and self-organizing perspective.
Key words: Autopoietic theory, cognition, strategic management.
Introduction
… with the exception of a few largely academic discussions cognitive science has had virtually nothing to say about what it means to be human in everyday, lived situations (Varela et al., 1991).
… the field of strategy has traditionally concentrated on the macro-level of organizations, it needs now to attend to much more micro-level phenomena. . . that focuses on detailed processes and practices which constitute the day-to-day activities of organizational life. . . (Johnson et al., 2003).
In the call for contributions to this Special Issue that ‘might demonstrate the appeal of autopoietic thought to a wider range of disciplines’, reference was made to papers that might further ‘examine its impact on how we run organisations’. To those who have grappled with Maturana and Varela’s work and who might readily appreciate its value in an organizational context, this has always been an interesting question. The disappointing truth of the matter, however, is that its overall impact in organization studies has been somewhat muted. Admittedly, from time to time, there have been spirited debates, most notably on the question of whether organizations can and/or should be considered autopoietic (see Luhmann, 1986; Robb, 1989; Mingers, 1992; Zeleny and Hufford, 1992; Kay, 2001). Beyond this, various attempts have been made to consider Maturana and Varela’s work in relation to various aspects of organization life such as change, decision-making, innovation, information management and organizational knowledge (see, e.g., Morgan, 1986; Winograd and Flores, 1987; Mingers, 1996; Kay, 1997; von Krogh and Roos, 1995, 1998; Magalhaes and Sanchez, 2009). In general though, although debate and theorizing within organization studies continue to be very heavily suffused with biological imagery, autopoietic theory has never entered the mainstream of thinking in this area, and the overall take-up of Maturana and Varela’s work has been rather disappointing. Despite this negativism, I shall argue here that there is a relatively recent development in organization studies that opens up space for autopoietic theory to make a stronger contribution, particularly for those aspects of it that extend beyond biology and have relevance for complex systems more generally.
The development in question is organization theory’s so-called ‘turn to process’ (see, e.g., Gergen, 1992; Townley, 1993; Knights and Morgan, 1995; Shotter, 1995; McKinlay and Starkey, 1998; Hosking and McNamee, 2002; Wood and Bakken, 2006; Hernes, 2008). Traditionally, it is often assumed that the main ‘objects’ of interest to organization scholars (‘firms’, ‘organization structures/systems’, ‘strategy’, ‘management’, ‘leader’, ‘culture’, to name but a few) exist independently of and are primary to the processes that constitute them in particular settings. The basic term ‘organisational system’ provides a good example of this. In some circumstances, this might turn out to be a relative unproblematic distinction; elsewhere, it is not. Witness, for example, a research agenda that seeks to explain success in a company that has been leveraged out of complex networks and connections involving large numbers of independent actors, or where it is tied to a strategic alliance where each company’s success is linked, in part, to that of others. In a situation such as this, defining what the competitive unit is is much more ambiguous. If, to take another example, the spotlight of attention is on ‘leadership’, focusing only on those who are formally designated as such is not that helpful if of leadership is vested in others and/or is widely dispersed through the organization. In examples such as these, processes are primary, and the ‘object’ is whatever emerges out of them; it is not the other way around.
Another very common approach in organization studies is to generate simple cause–effect propositions, often described along the lines of the impact of: ‘leadership style on productivity’, ‘technology on organisational structure’, ‘environmental complexity on internal operations’, and so on. Propositions such as these might have some generic utility, but their explanatory power is seriously limited when applied to real situations that are characterized by complex inter-relationships between phenomena and where an adequate explanation needs to move beyond static formulations by incorporating dynamic processes that can account for changes over time.
Although the interest in process thinking is evident across the full range of organization studies, the field of strategic management has become particularly enamoured with it. Here, an energetic group of ‘strategy-as-practice’ scholars have been conducting research, publishing papers, regularly convening tracks at leading conferences, and editing special issues of key journals. An online community (which purportedly now has several thousands of members, see: http://www.strategy-as-practice.org) is at the centrepiece of all this activity.
One thing that is immediately striking about this practice/process approach to organizations is how much it seems to tilt in the direction of systems thinking. The notion that ‘objects’, including system structures and components, emerge through their own internal processes, rather than as an outcome of management control, or of one-way causalities, is characteristic, not only of the systems approach in general, but also of Maturana and Varela’s conception of autopoiesis and the derivative body of work commonly referred to as ‘autopoietic theory’ (Whitaker, 1996).
The argument then is that the ‘turn to process’ in organization studies creates space for autopoietic theory to demonstrate that it can play a more significant role in this field than it has in the past. Potentially, as previous research has shown, autopoietic theory can shed interesting light on many aspects of human behavior in and around organizations. However, the aim here is not to re-evaluate these earlier contributions. Instead, building upon what has just been said about the recent impact of process thinking in strategic management, the discussion here will restrict itself to that particular subdiscipline.
Because the concept of cognition is central to understanding the relationship between strategic management and autopoietic theory, the paper begins by contrasting conventional accounts of cognition with that of autopoietic theory. Following that, the paper outlines some of the key insights that emerge for strategic management, and tease out what an approach to this area of practice that is informed by the logic of autopoietic theory might involve. An important caveat is that because the paper seeks to provide only a general overview of how strategic management and autopoietic theory might intersect, it concentrates mainly on some of the key foundation ideas developed collaboratively by Maturana and Varela. Significantly, the paper touches upon, but does not delve into the distinctive treatment of autopoiesis of Luhmann (1986, 2000; see also Seidl and Becker, 2006; Nassehi, 2005), which clearly has potential relevance for strategic management. Varela’s landmark collaboration with Thompson and Rosch is given significant attention, however, and in the conclusion, I comment on the possible significance of both Maturana and Varela’s later work.
From time to time, and in order to illustrate and flesh out key points, the paper draws upon materials extracted from a multidisciplinary research enterprise conducted by the author in association with colleagues from various disciplines within organization studies. The main aim of this research (colloquially known as ‘The Exemplar Firms Study’) has been to investigate strategic management and the origins of competitive capability in globally successful exporting companies (for a full listing of project publications, see project website http://www.victoria.ac.nz/canz/research).
‘Cognitivism’ – the conventional account of human cognition
Conventionally, the human nervous system is taken to be an instrument through which human beings obtain information from the environment. From this, the nervous system constructs an image of the ‘outside world’, which in turn is used to compute behavior adequate for survival or to achieve some predefined goal. Thus, for ‘cognitivism’, as it is known, human adaptation depends upon there being an accurate symbolic imprinting of the environment within the nervous system, and the individual behaving in accordance with these representations by initiating appropriate actions.
This process is mirrored in the organizational context, where, in general terms, strategy is conceived to be a process through which key actors first scan the environment and then, depending upon what is found, act with intention in support of a particular set of purposes. Many strategic management writers have sought to explain strategic outcomes such as organizational performance, competitive capability and corporate evolution in these terms, and it underpins all of the main ‘design’, ‘planning’, ‘positional’ and ‘environmental’ schools of strategic management (see, e.g., Mintzberg and Ahlstrand, 1998). With this approach, strategists construct models and other representations of the environment often using various techniques and tools such as industry, competitor and environmental analysis, ‘the Porter diamond’, ‘SWOT analysis’, ‘PEST analysis’, ‘the BCG Matrix’ and so on. Analysis of this data then precipitates deliberate interventions around the traditional topics of strategic management, for example, promoting acquisitions and mergers, forming alliances and joint ventures, diversifying product portfolios, reformulating company mission statements, developing new company policies and optimizing and fine-tuning company structures and processes. The overall aim is to do whatever is required organizationally to achieve competitive advantage through the creation of a product or service output of value in a specified market having first figured out what is happening in the ‘outside world’ (see, e.g., Grant, 1991; Amit and Schoemaker, 1993; Winter, 2000). The literature does not imply that any of this is easy; nonetheless, it does retain an optimistic view that doing these things will improve the chances of engineering an appropriate alignment between the organization and its environment.
With this basic idea in mind, I initially began investigating the exemplar firms using various ideas drawn from cybernetics, most notably, Stafford Beer’s Theory of Viable Systems (1972, 1979, 1985), an approach that, at least partly, is based on cognitivist thinking. In this early research, we heard or were told about many actions that – in true cognitivist fashion – were deliberately designed to move the companies closer to desired targets in relation to specific environmental circumstances. The first consolidated publication (Campbell-Hunt et al., 2001) provides many examples of this in areas such as technology strategy, manufacturing and product innovations, and human resource management. Consistent with this, we also noted that, from time to time, all of the companies had experienced periods of often very intense externally focused planning and activity in support of particular goals. Despite this, it soon became clear that neither cognitivist thinking nor formal planning processes could account for some highly significant product and international developments and what in some cases, could only be described as rather haphazard and indeterminate developmental paths.
Autopoietic theory and cognition
Because the twin concepts of ‘structure determinism’ and ‘structural coupling’ are central to autopoietic theory’s conception of cognition (as well as to both its biological and social aspects more generally, see Brocklesby, 2004), this next section begins with a description of these. Beginning with ‘structure determinism’, put simply it seeks to emphasize that whatever happens to a complex system always depends on its own structures and processes. Provided external perturbations are ‘admitted’ by the system, they can trigger activity and change within it. Any such structural change then becomes the basis for future interactions. However, the nature of the outcome depends upon the system itself. It is worth noting that this idea is consistent with the proposition put forward by other systems thinkers, (von Bertalannfy, most notably), that system structures (or, in von Bertalanfy’s language, ‘organized complexity’) emerge out of the interaction of components, and are a result of ‘adaptive effects’, not ‘cause effects’ in response to environmental change, (for a discussion of this, see Nassehi, 2005).
Beyond the idea of structure determinism, the early experimental work of Maturana et al. (1960, 1968), had also led him to seriously question the idea that the human nervous system is open to the direct flow of information from the environment; hence, to be sceptical of the claim that human beings work with direct representations of the ‘outside world’. Naturally this raises the obvious question as to how human beings are manifestly so well adapted to their environments. If it is not through building accurate representations of the outside world, and then acting on these, then what is the process?
The key concept of ‘structural coupling’ provides an answer to this question. In simple terms, this depicts a ‘co-evolutionary’ process through which recurrently interacting systems change, each one according to its own structure determinism. In the biological domain, this process accounts for an amoeba’s movement as it ‘engulfs’ particles of ‘food’ in its medium. Here, the presence of the particle generates changes in the chemical composition of the medium, which in turn triggers changes in the boundary membrane of an amoeba that subsequently becomes the basis for future interactions. For an observer, this represents ‘intelligent action’, and, on that basis, structural coupling – so the argument goes – can be taken to be a form of cognition (Maturana and Varela, 1987: 147). Clearly, this is not cognition as the term is commonly understood; the absence of a nervous system and an inability to operate in language prevents the amoeba from generating external representations. All that is happening is a system acting effectively in a relationship of structural coupling with its medium.
In autopoietic theory, the logic of structural coupling is not confined to biological phenomena, and the same adaptive process can be observed in the material and social worlds. Witness, for example, how both the shape of someone’s foot and a favourite shoe can alter over time, how individuals in a close relationship change ‘congruently’ through their interactions, and how companies in a strategic alliance ‘co-evolve’. Although such changes are triggered by the interactions, their nature, in all cases, is structure determined.
Applying a structural coupling perspective to organizations does not automatically lead to the conclusion that environmental scanning and traditional planning is a pointless exercise. It does however remind us that the ‘knowledge’ or ‘intelligence’ that emerges out of this process is highly dependent upon the organization’s policies, its processes, its management tools, its rewards systems and how all of these are manifest in practice. Moreover, whereas the key challenge in strategic management tends to be framed as knowing what organizational arrangements need to be put in place to sustain a set of articulated purposes, the idea of structural coupling paints a much more complex picture. This is one in which there is an infinitely large number of couplings (hence mechanisms of adaptation) that extend way beyond anything that might be ‘brought forth’ through language, conversations and formal strategic analysis. Often these are self-organizing processes where patterns emerge spontaneously out of people’s daily interactions and where ‘knowledge’ and ‘corporate intelligence’ are embodied in unarticulated behaviors and daily practices. The next section examines this point in more detail.
Embodied cognition – a basic form of human knowing
Whereas the conventional view is to identify cognition (thinking), affect (feeling) and action (behavior) as separate human subsystems, autopoietic theory sees these as largely indistinguishable aspects of the whole process of day-to-day structurally coupled human engagement in the world. On this account, and in its most basic form, human cognition is not a mentalistic process; it is the attribution by one observer to another of ‘effective action’ in a particular domain (Maturana and Varela, 1987: 29). As such, cognition involves the whole human being; it is not simply about the thoughts that someone might be having as a prelude to action; it is about action more generally. The abstract mentalistic processes that occur in human beings and in organizations, through formal processes of strategic management are important, but only as a special case of something that is much more fundamental.
This question of how human beings develop and sustain ‘intelligent’ alignment with their environments is perhaps the best known of the various strands of Varela’s work pursued in the years following his collaboration with Maturana. Arguably, this recognition can be put down to the success of his collaboration with Thompson and Rosch, published in the form of ‘The Embodied Mind: Cognitive Science and Human Experience’. In this work, the authors use the everyday example of learning how to drive a car to illustrate how, in the first instance, the learner driver needs to acquire significant ‘propositional knowledge’. Typically this includes learning how to start the car, change gears, use the handbrake and indicators and so on. The learner driver also has to know about and abide by the various rules and regulations that are designed to prevent accidents. However, because the driving world is a domain that ‘has the structure of ever-receding levels of detail that blend into a nonspecific background’ (Varela et al. 1991: 147), whereas acquiring such knowledge is necessary, it is not sufficient. This background includes a complex array of variables such as weather conditions, road surface, local driving customs, pedestrians, the mood of the driver and passengers and so on. Hence, knowing how to drive a car properly – effective action in this cognitive domain – ‘depends upon acquired motor skills and the continuous use of commonsense or background know-how’ (Varela et al. 1991: 147, emphasis added).
This latter point, I submit, gets to the heart of the complaint voiced by the strategy-as-practice community, namely, that there is a distressingly wide gap between what is written about strategic management in the literature and what the process involves in practice. Certainly, the literature can lay out ways of decomposing competitive environments, differentiating commonly occurring situational features and producing rules for using reasoned behavior in dealing with these (see, e.g., Huy, 2001; Stace and Dunphy, 2001). However, even sophisticated contingency approaches capitulate in the face of the potentially vast number of situational factors that must be faced, especially when these differ in subtle, nuanced ways. As someone once said, ‘no plan survives first contact with the enemy’. In a real concrete setting, although propositional knowledge can help in informing people how to prioritize things, to decide what is important and what is not, it cannot possibly provide all of the answers. Competency or proficiency, especially in complex and volatile circumstances, requires active involvement, practice and experience of a large number of cases. Becoming expert, where reasoning gives way to intuition, is even more demanding. This requires a gradual accumulation of a vast number of situational discriminations, associated responses and acquired feedback on the success or failure of these. Experts, with this sort of experience, do not necessarily need a detailed analysis of the environment in order to make decisions; they can self-organize and they know intuitively what needs to be done in a situation and how to do it.
Our experiences with the exemplar companies were consistent with these kinds of propositions. Across the whole group, the general approach has been to recruit people with talent, nurture them, provide a supportive context and then, as one of the company owners said, ‘we let them have their head’. Thereafter, strategic decision-making relies at least as much on accumulated experience and intuition as it does on rational ‘scan–analyse–plan–act’ processes. As one manager put it, ‘it doesn’t matter what the data says, if we do not have direct experience that something works, or if doesn’t feel right, we do not do it’. This is tantamount to saying that managers gain as much, if not more, knowledge of the environment by operationally interacting with it, as they do through formal inquiry processes.
Developing this line of thought, one might argue that because highly complex actions can be executed without us needing to appreciate and evaluate them, ‘discovering’ and ‘giving voice’ to all aspects of expert practice is unattainable. Of course, we can ask experienced practitioners what worked for them, and this can become the basis for developing propositional knowledge. Yet, as Varela (1981: 66) cleverly put it, ‘in finding the world as we do, we forget all of what we did to find it as such, entangled in the strange loop of our actions through our body’. In other words, thinking and describing is only possible against a background of taken for granted and largely inaccessible skills and practices that are embodied in both our individual and collective structures.
It is here that Varela and colleagues’ idea of ‘enactive/embodied cognition’ becomes important. As we confront new situations, various experiences are gained not only through sensing, thinking and analysing but also through action. On this view, survival and successful alignment with ‘the outside world’ depends upon having various orienting capacities that allow agents individually and/or collectively to act, perceive and sense in distinctive ways. If people do not learn to orient themselves in such a way that the relevant cues are picked up, then the risks are manifold. The statement by an exemplar company chief executive that ‘some people seize opportunities. . . other people do not even notice them’ is tantamount to saying that the opportunities and threats (that cognitivist logic would take to exist ‘out there’) are only real if there are frameworks, narratives and, most importantly, behaviors and practices within the company that bring them to people’s attention.
Charting a course between formal and self-organizing processes
Organisations do not achieve success because of their ability to predict and create planned strategies. They achieve success because of their ability to constantly realign with the environment (Burnes 1996).
If one were to take Varela and his co-authors’ line of argument to an extreme, one might argue that if organizational intelligence and strategic activity are largely the result of self-organizing processes, often intuitive and widely dispersed, then managers should dispense with formal planning processes that result in propositional knowledge; moreover, they should relinquish any thoughts of being ‘in control of the ship’. Although this kind of approach might have some merits, especially in already successful organizations, there are attendant risks and, as a general philosophy of management, it is unlikely to curry favour in most organizations.
A variation on this theme that we identified in the exemplar organizations involved allowing self-organizing developments to occur but acting, where necessary, to remove elements perceived to be nonadaptive. There are examples of this in new product development and the organization of work where grassroots product and working practices innovations, sometimes emerging spontaneously, have been given time to ‘prove themselves’ before either being rejected or more widely adopted. A similar process has occurred through what we have labelled a ‘sow and reap’ approach to internationalization. Lacking the resources of international competitors, the companies in this study cannot always adopt a highly analytical/strategic approach when it comes to deciding which international markets to target. Instead, they have very successfully adopted a strategy in which the ‘seeds’ of development are sown in many markets, and then subsequently entered those markets where the seed has ‘taken root’.
For the most part, it was impossible to explain the success and distinctive trajectories of the exemplar companies wholly through reference to either formal planning or other processes. In other words, in most cases, it was a combination of traditional scanning and planning activities occurring at the apex of the organization and of more widely dispersed self-organizing processes occurring elsewhere. We have experienced this in many organizations, although the balance between what, on the one hand, reflects more of a ‘control’ model of management and the other more of a ‘stewardship’ model of management obviously varies. Given this observation, the next section uses a simple analogy to translate the previous theoretical discussion into an image of how this combination of forces might work, what it involves and how its challenges might best be met.
A structural coupling perspective on strategic management
One of the more interesting aspects of the structural coupling concept is that it provides an explanation of how systems of common origin become differentiated as a result of the interplay between the historical conditions under which they live and their intrinsic structural characteristics. In the case of species differentiation and evolution, Maturana and Varela (1987: 108–110) use the analogy of someone flicking down drops of water on the sharp peak of a hill. Repeating this experiment many times reveals that some drops – the larger and heavier ones, for example – form a straight line channel down the hill. Others meet obstacles that they elude by moving off to the left or right in different ways as a result of their small structural differences in weight, size, speed of travel and so forth. Slight changes in the wind will also move some of the droplets away from the initial direction.
Eventually, it will be possible to observe many channels of drift down the hill. These channels result from the interaction between the structural characteristics of the droplets and the irregularities of the terrain and the wind. Looking from above, that is in a two dimensional (i.e. flat) perspective, it should be possible to observe the starting point in the centre and a number of crooked lines extending away from the centre in all directions. Some of these lines are curtailed because the emergent structural form of the water droplet cannot overcome the environmental feature that it encounters. In this case, adaptation ceases. Other lines continue moving on, branch-like, away from the original starting point to all points of the compass. The location and positioning of these lines, relative to each other and at a particular moment in time, represent a complex pattern of system differentiation.
Some aspects of this analogy seem to work quite well in the organizational context. Just as water droplets cannot avoid the effects of gravity, in organizations, it is difficult, if not entirely impossible, to reverse the effects of history. Also, structure determinism applies irrespective of whether we are speaking of water droplets or companies; whether and how a company responds to an external perturbation will depend on its own capabilities, predispositions, rigidities and inertias. Moreover, the evolutionary positioning of a company is, in principle, no different to the point where one of Maturana and Varela’s streams of water reaches sea level having tumbled down the sides of the mountain. The differentiated position of the company depends on its accumulated set of historical interactions between it and its wider environment.
Admittedly, other aspects of the analogy are less easily transferable to the organizational context. In general, mountains are much more stable than corporate environments; this makes planning in the latter a much more tricky business. On the other hand, whereas droplets of water act according to their structure at any moment in time, in organizations, human beings are part of that structure and, to some extent at least, are able to exert an element of control over direction. Whereas evolution in biological systems is not a directed process, that is, it has no goal in mind, organizational interventions are clearly different. For this reason, the analogy needs to be modified slightly.
Imagine being able to grasp in two hands a plastic model of the hill used in the aforementioned analogy. The goal is to guide a droplet of water towards a particular target by moving the model to the left or the right and by tipping it forward or backward. The only way that this can be done with any degree of success is through an acute understanding, tacit or otherwise, of how its continuously evolving structure is interacting with a continually evolving terrain. In this thought experiment, the water droplet can be taken to represent the company, the target of a position of competitive strength in a particular market, the model of the hill, its contours and varying textures, and the business environment. The person holding the model and attempting to control the movement of the droplet represents whoever is responsible for guiding the formal process of company/environment alignment. Again, drawing upon the exemplar firms study, I will explore the two major aspects of this process individually.
Knowing the organization as a system
Recall that the logic of structure determinism means that external events ought not to be seen as determining the substance or direction of change. It means that attempting to ‘work against’ the system can, and almost certainly will, be counterproductive. For company strategists, it implies a need to work within existing structures and routines rather than being swayed through an analysis of some external situational ‘logic’ that might appear to demand a particular response, or when the action in question appears to have worked well elsewhere.
The exemplar companies’ owner/managers’ proclivity to speak about ‘not forcing things’ and the need for changes to gradually ‘drop into place’ suggest that they have these understandings. Although there has often been awareness that change is necessary, these people have generally not allowed external circumstances to dictate its substance. Where change is triggered by external events, it is more a case of the latter acting upon pre-existing capabilities than it is a simple cause–effect response, or because the external event has generated some new capability. A good example of this is when these companies began to internationalize, typically in the 1970s and 1980s. This happened because the motivation and capability to internationalize were already there; it was not ‘caused by’ events of the day such as the 1970s Governments introducing new export incentives or (later) by deregulation of the domestic economy.
In addition to the matter of the substance and direction of change, there is also the question of its timing. On Maturana and Varela’s view, at any point in time, the structure of a system contains a record of previous interactions. This implies a need for change agents to be highly sensitive to historical/temporal processes. In the case of the water–mountain analogy, imagine that a company has evolved to a position that is roughly equivalent to the six o’clock position when looking at the mountain from a position directly above it. Let us further imagine that the optimum in terms of maintaining or enhancing viability is ten o’clock. How easy is it to get from six to ten? Obviously, this will depend on the particular competitive action or behavior that the company is attempting to mimic. However, what we can say is that the current position of the company is not arbitrary. It is where it is because of the interplay between its historical interactions and its structural characteristics. Moreover, it means that nullifying the effect of these may be difficult if not impossible.
In the case of the exemplar companies, we were able to trace their strong competitive positions back to key events in their histories: tax breaks, export incentives and tariff protection, involvement with particular collaborative partners, the involvement of key individuals during critical developmental periods, as well as various chance events.
Having identified such critical moments in these companies’ histories, it is important to point out that all interactions that are ‘admitted’ by the system’s structure will count. Hence, there is no way of explaining that the evolution of an organization occurs in all its aspects. Just as droplets of water flowing down a mountain might encounter a sudden gust of wind or a hidden obstacle that drastically alters its course, relatively insignificant events in the course of a company history in the fullness of time can have momentous consequences.
So far, in introducing a dimension to the debate that would not necessarily emerge out of a cognitivist-inspired perspective, it has been a case of ensuring that the people concerned look at the existing configuration of the organization, and backwards, to history, in order to know what is and what is not desirable moving forward. It is equally important, however, to acknowledge the future ramifications of the co-evolutionary aspects of structural coupling.
Because structurally coupled systems co-evolve through their interactions, each one triggering changes in the other, it is not simply a case of scanning the future environment and understanding internal company structures and dynamics in order to chart a way forward. The relationship between the exemplar companies and their collaborative partners provides a good illustration of this. Where there are such interactions, there are wider evolutionary ramifications for both parties. This might explain why, in the exemplar firms, strategists went to great lengths in making sure that they establish the ‘right’ connections. The various cases show that collaborative partners are important because they assist in developing knowledge of a particular market and in delivering a valuable product to that market. In that sense, they are a key component of the emergent competitive unit. At the same time, partner choices, for better or worse, alter the firm’s structure and hence its evolutionary trajectory. The cases provide a number of examples of companies going on to bigger and better things through leveraging off a collaborative arrangement or, conversely, where relationships have been terminated because of slow progress or because of other difficulties.
Knowing the Terrain
In addition to having some appreciation what the organization is, where it has come from and what interventions are likely to be possible and deliver positive outcomes, obtaining even a modicum of control over an organization’s evolutionary trajectory requires an acute understanding of its environment. At first sight, this brings the argument full circle back to the cognitivist logic that is ingrained in much mainstream strategic management thinking. The difference lies in the caveats that autopoietic theory issues about this process.
As has already been said, conventionally, the outcome of environmental scanning activities and information ‘processing’ is a model or a representation of whatever is perceived to be happening (or likely to happen in the future) ‘outside’ in relation to some purpose. The problem with this logic, as we have already said, is that the mechanisms that are used to determine the outcome of such activity are part of the structure of the organizational system, and the resultant knowledge cannot therefore be taken to be a direct proxy for anything that might be taken to exist independently. What is seen to ‘exist out there’ in the business environment depends on what those involved do, as they go about making distinctions and enacting various ‘ways of seeing’. In some cases, these are ingrained and highly self-referential. This point, of course, represents perhaps the main characteristic of Niklas Luhmann’s (1986, 2000; Seidl and Becker, 2006) distinctive perspective on autopoiesis. Given its distinctiveness of origins and content, it is impossible to consider Luhmann’s work here. Suffice to say that in arguing that social systems can only experience their environment through the mechanism of their own operations and in specifying ‘acts of communication’ as the key autopoietic unit that generates experiences, Luhmann too is strongly reinforcing the view that whatever is revealed through the process of environmental scanning is, at least in part, a projection of the system itself.
In planning, the critical challenge then is not to make increasingly detailed analytical distinctions using preferred tools, frameworks and institutionalized ways of thinking; rather, it is to think more creatively. For the exemplar firms, being relatively small (compared with their global competitors) has necessitated that they incorporate externally generated knowledge into their planning process. For example, lacking skills in key areas, they have come to rely very heavily on external collaborators as a source of industry and customer-relevant knowledge. The active involvement of these people creates a better balance between ‘diving in’, that is, developing internally generated knowledge capabilities, and ‘stepping out’ by challenging institutionalized frames and traditional ways of thinking. In that sense, they go some way towards mitigating the worst excesses of self-referentiality in intelligence gathering and knowledge production. In part, it might also account for the observation that over time, most of these companies have avoided becoming stuck in a single identity and evaluating environmental opportunities and threats purely in such terms.
In very simple terms, it is a case of finding ways in which, in formulating ‘new knowledge’, existing distinctions can be challenged and called into question. There is a need to understand the extent to which company structures, favoured distinctions, dominant narratives and institutionalized patterns of conversation might be restricting people’s ability to identify opportunities and threats. In a very real sense, it is a case of appreciating the ‘inside’ in order to better appreciate the ‘outside’.
Notwithstanding this, using the relevant distinctions provides only part solution to the problem of self-referentiality. Because cognition is integral to our normal everyday activity, the problem has to do with practices. When practices are repeated day after day, people become more adept at them and more likely to continue using them. But procedures that were once selected for a particular context can become irrelevant or dysfunctional under changed circumstances; people carry on doing what they do best rather than looking for more effective options. In this sense, the relative lack of scale in the operations of the exemplar firms might be advantageous. Because lack of scale prevents the establishment of an elaborate internal division of labour, instead of employees occupying narrow slots in the division of labour with limited intra-organizations interactions, by necessity, they have to broaden their capabilities, interact more widely and do different things differently.
On ‘chance encounters’
Finally, I wish to touch upon a point that was raised earlier. No matter how much those who are interested in improving the fit between organization and environment engage in conversations that are designed to better understand the structure of the system and to appreciate the environment in which it operates, there will always be surprises. In the language of structural coupling, there will always be ‘chance encounters’.
In terms of the analogy that has been used through the paper, the person controlling the droplet of water may have an acute understanding of its structure and that of the terrain, but his/her control will always be precarious. It may not always be possible to avoid all the obstacles on the way down the hill. Neither will it always be possible to steer the droplet into channels that can direct or increase its momentum towards a desired end point. Best efforts aside, it is clear that there will be a good deal of unpredictability in terms of how the droplet interfaces with and responds to the terrain. There may be a sudden gust of wind, the flow may come face to face with a previously hidden obstacle or, suddenly. the flow may be swept into a channel. Whatever the situation, the direction of movement of the water down the hill is altered, often dramatically and irreversibly.
In the exemplar companies, we observed many examples of this. One company, for example, has developed a highly successful manufacturing presence in Asia, another in North America, neither of which were deliberate strategic initiatives. The first was a by-product of the company acquiring an Australian competitor, which, by coincidence, happened to have a production facility in Vietnam. The second occurred as a result of the company’s involvement with a professional association, a member of which had established effective pathways into the North American market. Our company was able to exploit this to great effect. Undoubtedly, these developments, and others like them, were compatible with the broad strategic direction of the companies. However, it would be entirely wrong to say that they were the realization of prior intent on the part of managers.
Conclusion
The main argument of this paper is that the relatively recent ‘turn to process’ in organization studies provides an opportunity for Maturana and Varela’s autopoietic theory to have much greater impact in this field than it has in the past. This is particularly so for those aspects that extend beyond biology and which seek to explain human interactions within and across complex social systems, as well as human behavior more generally. This body of theory provides a language and a set of concepts that provide a better understanding of how the day-to-day realities of strategic management in particular contexts unfold through time, and, as a result, provide a more convincing account of strategic outcomes.
The paper has also sought to tease out what an approach to strategic management, informed by the logic of autopoietic theory, might look like. The approach is based upon a very different conception of human cognition and the nature and sources of individual and organizational knowledge. However, when translated into a strategic management context, these ideas suggest that a more circumspect approach be taken in relation to traditional planning processes; it does not advocate dispensing with them.
Because this topic has been to provide a general overview of how autopoietic theory might contribute to strategic management, the paper has concentrated on autopoietic theory’s core and better known aspects. In doing so, this has inevitably placed more emphasis on the earlier work of Maturana and Varela rather than their later work that is much more nuanced and less tightly defined. In response to critics who might claim that this gives the impression that nothing much has happened since these basic propositions were first formulated, I should acknowledge here that this is not the intention. Maturana’s later writing focus mainly on the nonbiological phenomenological aspects of autopoietic theory, and the breadth of this work provides fertile ground for further application. In his ‘Theory of the Observer’ (1998), the distinctive perspective on emotion and ethics in decision-making stands out as being particularly relevant in the current academic, corporate, and political context.
Varela’s work, of course, did not end after his collaboration with Maturana. The paper has already discussed his seminal collaboration with Thompson and Rosch, but it is important to acknowledge that this work has continued since his untimely death (see, most notably, Thompson 2007). Like Maturana, Varela also had much to say about ethics (Varela, 1992); he spoke about the role of temporality (Varela, 1999) and ‘purposiveness’ (Varela, 2002) in human experience; he also made significant practice-oriented contributions to social phenomena (Varela, 1989). All of this work is relevant to the discussion that has been pursued here. However, the current reality is that autopoietic theory does not yet have a strong enough foot in organization studies’ door. Once it has, these more recent contributions can be examined in more detail.
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