Fast & Slow

Pace part 2

Friends,

Last week, we introduced the concept of pace layering in order to begin our journey down the final mile (bad pun intended – the similarly titled first summary of an e-commerce white paper that I co-wrote with James Hankins went out the other day, available HERE) to the full introduction of the ABCDE framework. Based on the overwhelming feedback, for which I am very grateful, the topic clearly hit home with a wide range of people. It is thus with a certain spring in my step that I today hope to build further on what I consider to be one of the most important keys to unlocking a broad understanding of the realities of strategy.

First, let us remind ourselves of what pace layers are.

Complex adaptive systems, such as the climate, social networks, ecosystems, the immune system, cells and – to the point of this newsletter – markets and firms, are made up out of a number of layers with different change rates and scales of size. The layers, so to say, closer to the ground are able to respond to stress quicker, allowing slower parts higher up to maintain system continuity.

For organizations, this means (among other things) that the bigger the company and the closer to the top you are, the less nimble you will inherently be due to the slower pace of your strategic level. A campaign strategy might last a couple of months, a marketing strategy might last a year, a business strategy might last half a decade and so on.

The concept of pace layering was originally created by Stewart Brand, who built on British architect Frank Duffy’s notion of “shearing layers”. Duffy had noted that while his colleagues wanted to create perfect buildings that would last forever, the buildings themselves were always changing to varying degrees, as if almost tearing themselves apart. Admittedly, companies are not buildings, nor (hopefully) destroying themselves from within. But it does not appear a massive metaphorical stretch to suggest that strategists are business architects of sorts, with similar hopes for their strategies to last forever. Of course, in reality, nothing does.

Either way, the implications of pace layers on strategic management are nothing short of profound. They can help explain, for example, why juniors get frustrated with seniors’ failure to move at their pace or, for that matter, senior annoyance with junior obsession over shiny new things. But they also explain why mutual respect is needed. If the slow parts are not occasionally frustrating the fast parts, they are not doing their job. If the fast parts are not trying a myriad of things out, they are not doing theirs.

Markets follow the same patterns. Fashion adapts over night, commerce over decades. While value can be found in that which changes, sustainable value is generally found in that which does not. Or to put it differently, Amazon is likely to be around for longer than the products it sells, as people’s desires for cheap goods delivered quickly and conveniently remains relatively constant in comparison to the goods themselves.

In turn, as Paul Saffo has noted, this can help us understand, for example, growth curves.

In much of modern business discourse, and perhaps particularly tech analysis, “hockey stick growth” has become the go-to analogy for anyone wanting to build hype.

In short, the narrative of hockey stick growth normally revolves around startups finding their market fit until, suddenly, they come to an inflection point and performances increases exponentially. Money is raised, investments are made, offices are rented, talent is hired - all under the presumption that the growth will be perpetual. And, to be fair, while extremely rare, such exponential growth does occasionally happen… …for limited periods of time. Without fail, the curve eventually evens out. It goes from a hockey stick to an s.

As we know, there are many reasons why this is the case. Yet many of them can be summed up by pace layers. Sooner or later, slower layers respond to faster layer change and dampen it. Incumbents adapt to startups just as legislative powers adapt to emerging market behavior and so on. Time and again, to reuse a couple of lines from Brand, fast and small instructs slow and big by accrued innovation and by occasional revolution. Slow and big controls small and fast by constraint and constancy. While fast gets all our attention, slow has all the power.

This has a number of important consequences.

When it comes to operations, acknowledging the existence of pace layers leads to insights about the nature of projects, systems, metrics and trends. In strategic management, pace layers explain why it is folly to expect all departments in a company to move at the same speed, and why agile methods can be invaluable in certain contexts, but largely worthless in others. The same, of course, is true for strategic planning.

We thus end up in a situation where, yet again, the only viable conclusion is that strategy ultimately must be a balance of proactivity and reactivity. It should allow for the long now, short now, slower strategic ambition and faster operational experimentation alike. Its boundaries should be open enough to allow for unforeseen consequences to be managed and opportunities to be seized, but closed enough to encourage prioritization and limit directional irrelevance. It should seek to achieve coherence, not alignment.

Eventually, even hyper growth slows down. The key to continued expanse is consequently not to make a single big bet, but to continue to make bets so that when the most successful one inevitably levels out, others can continue to push overall performance up.

Obviously, that requires innovation in many senses of the word. Next week, for paying subscribers, I will therefore look at the constructive turbulence between pace layers. As we shall see, not only is it where a lot of said innovation happens, but also where the really big money is.

Until then, have a lovely weekend.

Onwards and upwards,
JP