Banking Fintech

Why organisations resist innovation

Why organisations resist innovation. Image by aarisham,
Written by Chris Skinner

Chris Skinner was introduced to Conway’s Law recently, and sees how it reflects how many organisations constrain innovation.

One of my good friends at 11FS referenced Conway’s Law the other day. I wondered what it was, as I know Moore’s Law and the Law of Diminishing Returns in economics, but Conway’s Law? What’s that? It’s a thesis created by Melvin E Conway, a computer programmer, back in 1968, which states:

Any organisation that designs a system (defined broadly) will produce a design whose structure is a copy of the organisation’s communication structure.

I love this thesis, as it really shows why it’s incredibly hard to innovate internally. The internal innovator is like some strange virus infecting the organisation. The internal innovator may be encouraged to challenge and question the way the company works, but anyone dealing with such a creature finds them objectionable. You challenging me?

It reminds me of when I was a graduate inductee way back when. After six months in the organisation, I had a whole raft of things that I thought were stupid rules and questionable procedures; things that were holding the firm back and, if adapted or changed, would release far more productive operations. I set up a meeting with my boss, submitting my paper beforehand. The meeting didn’t last long, with his opening statement going along the lines of I’ve been here for twenty years and know how this company works and what makes it work. When you’ve been here as long as I have, then you can submit a paper like this but, today, you need to understand our business before you question it. With that, he dropped the paper I had sent in the bin with a look on his face as though it were pooh, and pointed to the door indicating the meeting was over.

Resisting change

Sure enough, I never had another new idea in that company ever again. But then I left shortly after due, in large part, to that meeting.

The point is that a company has a culture and that culture reflects the people they hire, and who stays and leaves the company. The company tends to avoid reinventing itself for this reason, as it would rather replicate itself rather than reinvent itself. It’s the reason why innovators have their dilemma: You cannot innovate in an organisation that will do its utmost to resist change.

You cannot innovate in an organisation that will do its utmost to resist change Click To Tweet

This isn’t actually what Conway’s Law says, though it is the reason why the constraints of innovation are there. Melvin’s paper is all about you cannot design any new system without communicating across the organisation. This means that the more people involved, the more it reflects the existing organisation.

The basic thesis of this article is that organizations which design systems (in the broad sense used here) are constrained to produce designs which are copies of the communication structures of these organizations.

You can read Conway’s original paper here, and his conclusion is that companies need to be flexible in their communications and approach to design. I wish.

READ NEXT: The loneliness of a long distance innovation hero

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by aarisham,

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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