Networked and Distributive Governance
As was outlined in the last chapter, risk-taking capacity is a scarce commodity. To the extent that it is available to an organization, it is allocated from the top down to a portfolio of subsystems in the organization. Subsequently, the actual taking of risk, as measured through a disciplined approach of assessment, must be aggregated from the bottom up to be reconciled with the organization's capacity constraints or risk appetite. The process is repeated within each subsystem of the organization with an allocation to a portfolio of subsystems that receive risk-taking capacity, and so on. This cascading portfolio model of “allocation and assessment” is the framework we'll use as we build our full governance structure and to turn our complex organizations into complex adaptive systems.
However, before risk-taking capacity can be allocated down, our organizations need to get the capacity to take risk from somewhere within our network—from donors, voters, investors, entrepreneurs, or creditors. Our organizations also need to attract people and technologies to do the actual risk-taking—working or volunteering for the organization. Finally, other people or other systems must need us for the picture to become complete and value to be created—without others willing to exchange something they have for what we offer, our products have no value.
No matter how small our objectives, we are not alone when we build a complex adaptive system. ...