Last weeks blog on predicting resistance was about how power structures within organisations are likely to respond to change. But one could equally look for patterns to predict innovation within an organisation.

Resistance to change is a common and significant barrier in organizational transformation efforts. The challenge lies not only in implementing new processes or technologies but also in addressing the underlying power dynamics that create resistance, particularly in organizations with rigid, hierarchical structures. Drawing from Kane’s Law, we can predict where and why resistance is likely to emerge based on an organization’s structure and power distribution (Kane, 2015).

Uniqlo’s flat structure and vertically integrated supply chain demonstrate how different types of organizational structures—hierarchical versus flat—impact decision-making, innovation, and overall business success. As a global leader in the fast-fashion industry, Uniqlo has differentiated itself through its unique approach to organizational design, which emphasizes efficiency, agility, and customer-centricity.

Organizational structure is the framework that defines how an organization operates, how roles and responsibilities are distributed, and how decisions are made. It shapes the flow of information, the distribution of power, and the relationships between individuals and teams.

Part 2 of Structure and Power is now available for review. If you haven't already read Part 1 I'd strongly encourage you to do so because it lays the foundation for the rest of the book.

Because the design which occurs first is almost never the best possible, the prevailing system concept may need to change. Therefore, flexibility of organization is important to effective design. 

Organizations frequently launch cultural change initiatives aimed at improving collaboration, fostering innovation, or aligning behaviors with strategic goals. However, these efforts often fall short when structural barriers are not addressed. Here’s why:

The structure of an organization significantly impacts both the speed and quality of decisions. The contrast between hierarchical and flat structures reveals how power dynamics can either hinder or enhance organizational performance (Galbraith, 2014). 

In 2015, Dutch multinational bank ING initiated a comprehensive Agile transformation to enhance adaptability, customer-centricity, and innovation. Facing increasing competition from fintech startups and evolving customer expectations, ING recognized that its traditional hierarchical structures and siloed operations were inadequate in a rapidly changing environment (Harvard Business Review, 2019).

In 2006 Ken Schwaber, co-creator of Scrum, publish a shot 15 point paper about the likely impact of Scrum on that organisations. He titled that paper “Scrum is Hard and Disruptive”. It discusses many of the same issues as Kane’s Law, Larman’s Law and Conway’s Law. Ken clearly understood the relationship between structure and power even if the article wasn't presented that way. 

To fully grasp  the implications of Conway’s Law, it is essential to understand the connection between communication pathways and organizational structure. Kane’s Law provides an important foundation here: an organization’s structure dictates the distribution of power, which in turn shapes how communication flows. These communication patterns are not passive reflections but active reinforcers of the underlying power dynamics.

Kodak was once synonymous with photography. The company dominated the market for decades, pioneering film technology and capturing the memories of millions. At its peak, Kodak was an industry giant, a trusted brand known worldwide. Yet, despite its success—and in many ways because of it—Kodak failed to adapt to the digital revolution, ultimately filing for bankruptcy in 2012.

88% of government payments flow through this system every year and it is what I've described as the beating pulsating heart of the federal government's payments. Before you get to the banking system, before you get to the Federal Reserve this is the heart, this is the artery that is making it all function. It is the most important aspect of the federal government even though no one's ever heard of it.

A recent post on Naked Capitalism had me thinking about how tightly interconnected the global banking system is, and the problem that can arise. The article discusses a recent IT outage at Barclays Bank, one of the UK's largest and most systemically important banks, which left customers unable to access banking services for nearly 48 hours. Banking failures are so common place at this point in time that I hadn't even heard about this particular failure.

In 1997, a fledgling DVD-by-mail company named Netflix sent its first red envelope to a customer in California. At the time, Blockbuster Video -a $6 billion behemoth with over 9,000 stores - dismissed it as a niche novelty. Blockbuster’s CEO, John Antioco, famously laughed off Netflix’s offer to partner, confident in his company’s scaled empire of brick−and−mortar stores. By 2010, Blockbuster was bankrupt. Netflix, meanwhile, had abandoned its own dvd model to bet every thing

In the early 2000s, Microsoft stood at the pinnacle of its dominance in the tech world. Windows XP had just been released to widespread acclaim, and the company was riding high on its success. But beneath the surface, a storm was brewing—a storm that would expose the cracks in Microsoft’s organizational structure and serve as a cautionary tale for companies everywhere.

Structure is the underlying framework that defines how an organization functions. It is more than just reporting lines or organizational charts; it determines how decisions are made, how information flows, and how power is distributed. Every organization, regardless of size or industry, operates within a structure that shapes its ability to adapt, innovate, and execute strategy effectively.

Kane’s Law ultimately suggests that structural changes are the most critical drivers of an organization's ability to innovate and adapt. Without addressing how power is distributed and decisions are made, no amount of vision, talent, or culture-building will lead to sustained transformation.

I'll confess that I have a difficult relationship with the words leader and leadership. They're very important concepts because why else would the be so many different leadership courses? But what exactly does it mean, and what do "leaders" do differently from everyone else? What explicit behaviors, responsibilities or actions define leadership?

This understanding about the relationship between structure and power, and the how a company innovates is only useful if we can make some reasonable predictions and observations.