Transformations require second-order solutions

Due to rapidly changing economic and social conditions, many companies are currently facing the need for a profound transformation. Consequently, many change projects are underway within these companies, but their success often falls short of expectations:

• New systems are being introduced, but they aren't being used.
• Strategies are adopted, but not put into practice.
• Structures are being adjusted without any noticeable improvement in collaboration or results.

The reasons for this rarely lie in technical errors in project planning. Rather, they are rooted in the nature of organizations, because these are not mechanical systems that can be controlled linearly, but rather social structures. They consist of people with individual experiences, interests, fears, routines, beliefs, and so on. That is why even a rationally convincing strategy may not be feasible.

Why People Resist What Makes Sense

From the perspective of top decision-makers in companies, resistance to planned changes from parts of the workforce is often difficult to understand. They ask themselves:

• Why do employees stick to inefficient routines?
• Why are they blocking measures that are clearly intended to bring about improvements?

The answer lies in how those affected perceive the situation. For them, change means uncertainty. It challenges what is familiar to them and raises existential questions, such as:

• Will I still be needed in the future??
• Am I losing influence?
• Can I meet the new requirements?
• Will my past achievements be devalued?

What is a necessary change from the company’s perspective is often perceived by those affected—in a top-down context—as a threat to their professional identity. Their resistance, therefore, is not a sign of irrationality, but rather an expression of concern and a means of self-protection.

Darn it, the same problems keep cropping up

Similar obstacles or barriers to success arise in nearly all change projects:

• Silo mentality,
• lack of cooperation,
• rigid routines and
• Fear of the unknown.

Project managers often address these problems directly—for example, by introducing new tools, processes, and structures. However, the results are usually limited. The problems do not disappear; rather, they continue to arise in a slightly different form, because the aforementioned obstacles are not the actual causes of the problems. They are merely symptoms of them.

A classic example of this is departmental silo mentality. An obvious solution to this problem is cross-departmental projects and changes to communication structures. However, even after these measures are implemented, silo mentality often persists. Why? Sometimes, for example, because employee compensation is largely based on the department’s financial performance. If this is the case, cross-departmental cooperation is neither attractive nor lucrative from the employees’ perspective. So it is only practiced in name. The visible problem of silo mentality thus has deeper underlying causes.

Find second-order solutions rather than first-order solutions

Many project managers are pragmatic doers. They want to solve identified problems as quickly as possible; that is also what is expected of them. In transformation projects, however, this often leads to only the symptoms being addressed, while the root causes of the problems remain unaddressed.

In organizational development, a distinction is made between first-order and second-order solutions. First-order solutions aim to resolve problems within existing systems. These include, for example, introducing new tools, optimizing (sub)processes, or holding additional coordination meetings. While these measures can be useful, they often fall short.

Second-order solutions, on the other hand, question the system itself and seek the underlying causes of problems, asking questions such as:

• What assumptions shape our actions?
• Which rules and incentive structures exacerbate undesirable effects?
• What cultural patterns perpetuate problems?

Only once these questions have been answered can sustainable changes take place (see table).

A Comparison of First- and Second-Order Solutions

In the context of change and transformation projects, first-order solutions can be understood as measures that optimize existing structures, processes, or behaviors without fundamentally changing the system. Second-order solutions, on the other hand, change the logic, paradigms, control mechanisms, or the business model itself.

 

Dimension	First-Order Solution	Second-Order Solution	Advantages of the second-order solution	Example
Objective	Improving What Already Exists	Redesign the system	A more lasting impact	Introduction of New Reporting Formats vs. Full Transition to Data-Driven Management
Understanding the Problem	Addressing Symptoms	Addressing Causes and System Dynamics	Prevents the problems from recurring	Additional approval steps vs. eliminating unnecessary hierarchical levels
Organizational Structure	Optimize Existing Roles	Redefining Roles and Responsibilities	Greater adaptability	Efficiency Training for Departments vs. Introducing Agile, Cross-Functional Teams
Leadership	Train Managers	Changing the Understanding of Leadership	Cultural Change Rather Than Behavioral Correction	Seminar on Feedback Techniques vs. The Shift to Servant Leadership
Corporate culture	Encouraging Desired Behavior	Changing Values and Beliefs	More Deep-Seated Change	Communication Campaign vs. Redefining Corporate Values
Processes	Streamline processes	Rethinking End-to-End Processes	Avoiding Local Optima	Form Digitization vs. Full Process Automation
Technology	Expand Existing Systems	Rebuilding Digital Architecture	Sustainability	ERP Upgrade vs. Cloud-Native Platform Strategy
Business Model	Improve Products	Changing the Logic of Value Creation	New Areas of Growth	Product Optimization vs. Switching from Product Sales to a Subscription Model
Cooperation	More meetings or votes	New Principles of Collaboration	Greater capacity for innovation	Introducing Regular Meetings vs. Establishing a Network Organization
Customer orientation	Increase Customer Satisfaction	Redefining Customer Relationships	Market Differentiation	Improved Hotline vs. Building a Customer Ecosystem
Innovation	More Innovation Projects	Establish an innovation system	Sustained Capacity for Innovation	Idea Contest vs. Innovation Portfolio with a Venture Approach
Learning	Offer training courses	Developing a Learning Organization	Continuous Adaptability	One-on-One Training vs. Systematic Retrospectives and Knowledge Networks
Change Management	Building Acceptance for Change	Increase the organization's ability to adapt to change	Future transformations will be easier	Communication Campaign vs. Building Change Competence Within the Company
Control	Adjust Key Metrics	Change the control logic	Behavioral Change Through New Incentives	New KPIs vs. the Shift from Individual to Team-Based Performance Measurement
Strategy	Optimize the Existing Strategy	Redefining Our Strategic Direction	Greater Resilience During Market Turbulence	Increasing Market Share vs. Expanding into New Business Areas

 

A First-Order Solution answers the question: „How can we improve what we already have?“

A Second-Order Solution answers the question: „How do we need to change our system so that the problem no longer arises and we can be more efficient in the future?“

Source: Kraus & Partner, Bruchsal

Looking Beneath the Surface and Diving

Here’s another example: A company suffering from a lack of innovation can set up an innovation lab. This is a typical first-order solution. A second-order solution, on the other hand, would first examine the causes of the lack of innovation—for example, whether it is due to the fact that

• «out-of-the-box» thinking is hardly encouraged in the company, and
• Mistakes or failed attempts are even penalized in it.

After all, if employees are afraid to openly question the status quo and make mistakes, innovation will always be difficult—regardless of how many innovation labs there are.

Changes in companies usually only become sustainable once one also addresses the (individual and collective) beliefs, fears, and (informal) rules that exist within the organization and shape its culture. This is often a sensitive matter, as it also involves questioning existing power structures and routines. That is why conflicts are almost inevitable. Nevertheless, this is precisely where the key to sustainable change lies.

Patience is key; mistakes are part of the process

Transformation projects and processes rarely proceed in a straightforward manner or exactly as planned. Rather, they are characterized by setbacks, uncertainties, and necessary adjustments. Projects start with clear goals, encounter resistance, lose momentum, and must be realigned. This course of events is normal; it reflects the complexity of such processes and initiatives.

A key factor for success in such projects is patience, because cultural changes take time since they involve learning processes. The organization itself and its employees—from the top down—must develop and test new ways of thinking and behaving. Mistakes are inevitable in this process. What matters most is how they are handled. If they are used as learning opportunities, they foster development. If, on the other hand, they are punished and (consequently) covered up, they hinder it.

Telling stories that inspire confidence

Transformation projects often fail because of the way they are communicated. In most cases, this communication is based on

• Strategy papers,
• Roadmaps,
• Key Figures and
• PowerPoint presentations.

These tools are important, but they aren't enough. After all, it's not numbers and concepts that usually inspire and motivate people—it's stories; stories about,

• what the organization—or its collaboration—might look like in practice after the change,
• what difficulties might arise along the way,
• how other people or organizations have overcome them,
• why it's worth it for them/the organization.

Stories that don’t make unrealistic promises but instill confidence, and whose core message isn’t «Everything will be easy,» but rather, «It will be difficult—but we’ll make it if …»; in other words, stories that combine realism with hope and therefore generate trust and energy.

«Deep-sea diving» is worth it

Experience shows that transformations rarely fail due to a lack of expertise or missing strategies. They fail because organizations underestimate their own patterns. Anyone who wants to achieve lasting change must look beneath the surface and be willing to ask uncomfortable questions and tolerate uncertainty.

Transformations are not a linear process with guaranteed success. They are processes of learning and development that require patience and a strong capacity for reflection. Yet it is precisely in this deeper examination and exploration that the opportunity lies to bring about sustainable changes that lead to the desired development and the success we strive for.

To the author:

Prof. Dr. Georg Kraus is the founder of the change and transformation consulting firm Kraus & Partner, Bruchsal. He holds a degree in industrial engineering, is a professor at Clausthal University of Technology, and serves as a lecturer at the University of Karlsruhe and the IAE in Aix-en-Provence. Among other works, he is the author of the book *Beneath the Surface: Stories About What Really Changes Companies*, published in February 2026.

This article originally appeared on m-q.ch - https://www.m-q.ch/de/transformationen-erfordern-loesungen-zweiter-ordnung/