Thoughts on ‘The Big Shift’

Have you heard of the ‘Big Shift’? If not. You could do worse than cast your eye over these blogs (The Big Shift and Irving Wladawsky-Berger) for an introduction. The Big Shift is a phrase coined by John Seely Brown, John Hagel III and Lang Davison to describe a transformation of the business environment which they assert is working out around us right now. The transformation they describe is from the Industrial Age to the Information Age and is driven along by technological development. I don’t think I can improve on Irving Wladawsky-Berger’s summary of the thinking behind the Big Shift so do follow the link above and read his review. I also agree wholeheartedly with his concluding paragraph which I reproduce here: “ The Big Shift is a very innovative, difficult and important project. I strongly urge you to look at the full report to learn more about their objectives, methodologies and conclusions. You may not agree with all the measures chosen by the Center for the Edge team, but that is to be expected. Like any complex initiative, getting going is what counts. The Big Shift project will undoubtedly keep getting better and sharpening its results over time, especially, as it practices the spirit of learning and collaboration that it so strongly advocates. (from Irving Wladawsky-Berger’s blog)”.

Seely Brown, Hagel and Lang identify three waves of change which they call foundational, flow and impact. The foundational wave reflects the development of information technology and the almost contagious nature of its penetration into all the nooks and crannies of our society and, in one form or another, into the majority of social groupings on the planet. The second wave of change reflects their perception of the temporal nature of value, particularly in the context of knowledge; they believe there is more value in the flow of knowledge than in the stock of knowledge which changes in the foundational wave are rapidly making obsolete. The flow wave can be quantified in terms of the flow of knowledge and the movement of talent – it is interesting that the former seems to spread and the latter to concentrate. Seely Brown, Hagel and Lang’s third wave describes the impact of the two preceding waves on performance in the context of firms, markets, consumers and creative talent. One telling statistic they quote is that the average return on assets for US companies is now 25% of what it was in 1965. Another interesting observation is that value seems to be migrating from corporations to individuals, in terms of better deals for individual consumers and better compensation for individual ‘creative’ talents.

The study was performed at the Deloitte Center for the Edge of which Seely Brown and Hagel are co-chairmen and Lang Davison is the Executive Director. Their work represents a substantial advance in our ability to describe and therefore to discuss the economic environment of today. It raises a number of questions in my mind, which I hope will contribute to the dialogue:

1. The authors appear to imply a correspondence between the three waves of change as measured by the Foundational Index, the Flow Index and the Impact Index; as far as I can see, there is no fundamental reason for any correspondence. Am I missing something?
2. The authors appear to expect the rate of foundational change as measured by the Foundational Index to moderate; this may well be the case but given the demands of achieving a sustainable post industrial economy I don’t see it happening any time soon. Do they have a timescale in mind?
3. The concept of consumer disloyalty seems to reflect a corporate-centric perspective. This almost implies that customer disloyalty is bad; I would rather start from the position that customer loyalty is something to be earned.  Is this project corporate centric in its approach or is it more generic?
4. The authors describe a transition from scalable efficiency to scalable learning. I am concerned that learning is not enough; it has to lead to action and for want of a better word, I can only come up with the idea of scalable adaptation. Does this make any sense to you or to the authors?

The authors have pitched a significant contribution into what was a void – I had begun to wonder why John Hagel’s blog was less active than it had been. Now I know  and what they have written is well worth the wait. Stimulating stuff – so many thanks for the brain food.

Productivity and effectiveness

Productivity is elusive. Of course there are those who will argue that it can be measured, which is an undeniable fact in certain well defined circumstances. But if we assume that productivity is a measure of value created for a given amount of effort expended, the extent of the problem becomes apparent. One question is now two questions: how do you measure value and how do you measure effort? The situation can be simplified by equating value with money and effort with time, which simplification has served adequately in the industrial age, a period characterised by extensive mechanisation.

How does it fare in the post industrial era? In an era where value is created by logistics and networks such a simple measure begins to feel seriously inadequate. It seems there is a question of timing to be included in the measures of both value and effort and perhaps a more subjective assessment of quality should also be considered as more and more value is delivered in the form of a service. Already it is clear that any approach based on measuring overall performance is going to become complex and unwieldy so there may be benefit in considering an alternative measure, based on education and behaviours. Identify those behaviours in your colleagues that are likely to deliver good value to your customers and to you; educate your colleagues in those behaviours and then reward them for exhibiting the desired behaviours. You are likely to be rewarding behaviours such as honesty, understanding and commitment which does not seem a bad thing in itself and will do no harm to customer relations and loyalty.

If productivity spotlights the behaviours of individual colleagues, consideration of effectiveness returns attention to the bottom line.  The impact here will depend upon how well you have identified those behaviours that deliver value to your customers. The speed with which the right behaviours feed through to the bottom line will depend, among other considerations, upon the natural cycle of your business which might be measured in weeks or months or years. The longer the natural cycle of your business, the more forward looking you will need to be or the more adept at finding ways to accelerate the impact on your business.

As a caveat, it is important to add that there are occasions when it is expedient also to educate your customers with regard to your value proposition and I say this as a card carrying founder member of the Ryanair Frequent Flyers (though I should add that my membership expired in December 1989 and I am not sure how far the Frequent Flyers survived into the next decade).

The ‘how’ of business is important too

Businesses, even small businesses, sometimes work against themselves. This becomes a problem when the situation is not recognised or when it is recognised and ignored or when it is recognised and glossed over. The telltale signs can include a chronic inability of the business to perform to its true potential or a growing frustration amongst key colleagues which becomes a real issue if they should eventually decide to leave. However in the short term what may appear to be a marginal performance shortfall is unlikely to be the most pressing issue for a business. If a business is growing there are likely to be other priorities and other options; resource shortfalls for instance can be met by investment and recruitment. At the other extreme when things are tight and everyone is stretched, ‘the best may be the enemy of the good’ and in this case ‘good’ may be survival. In either instance, a very good case would need to be made for persuading business leaders to spend much time on what might appear to be fine tuning as all businesses are ultimately ‘needs’ driven.

Though ‘needs’ define the why of business they do not represent the only business driver and recognising other drivers can provide some interesting insights. For instance, ‘needs’ do not define the ‘how’ or the ‘who’. The ‘how’ is very much in the hands of the business leader because he (or she) it is who determines the business culture and who also ultimately determines the organisation and the technology that the business will adopt in order to operate. In the natural flow of events the culture, the organisation and the technology often evolve as the business itself develops. Not only do they evolve together but they also adapt to each other. So what happens when in the fullness of time a business is asked to embrace a significant change in culture or organisation or technology? Or what happens when the technology or the organisation or, perhaps more likely, the culture comes to be regarded as immutable and its evolutionary progress is stalled or even reversed. Some sort of imbalance is introduced to the business which leads to stresses and strains which distort the behaviour of the business and constrain its performance.

Here is a problem, however. Business leaders by and large are not comfortable with relying on any process that can be described as evolutionary. For one reason it sounds like long term deal and for another the process sounds like it is out of their control. Thankfully it is possible to find at least anecdotal evidence that might provide some encouragement for them. In the first instance, a number of the changes that have affected our culture, organisation and technology at a societal level in the past 30 years have followed an evolutionary pattern where the adoption rate is slow initially but then accelerates dramatically, following a characteristic ‘S’ curve as saturation is approached in due course. The growth in sales of mobile phones is an example of this pattern. An item that was seen primarily as a piece of business equipment and supplementary to fixed line telephony has been instrumental in changing the social opportunities and behaviour of a generation in the developed world and has been the means of bypassing the need for costly investment in fixed line infrastructure in the developing world.

So get the change right and it can be the leaders who end up being the limiting factor. One important feature of such changes that must be borne in mind is that they are often ‘pulled’ by the adopters (the ‘out of the leader’s control’ factor) but there is also possible encouragement for business leaders here, too. Multidisciplinary research by various groups under the broad heading of complexity science suggests that it is possible to build models of complex behaviour involving groups of agents that interact according to relatively simple rules. This will not provide a tool for leaders to use to control the evolutionary process but it can provide them with a better understanding of the process with which they can better position themselves to influence it. The words say it all; an evolutionary process calls for an influencing style of leadership rather than a controlling style. It is not right for every situation but if you want to align the organisation, culture and technology of your business, then ‘influencing leadership’ is the way to go. And before you go, remember an effective communication flow of knowledge and information throughout the business process is the very lifeblood of an influencing style of leadership.

There are business tools that can help; one I have used with some success in the past is AIM (Accelerated Implementation Methodology) which is available from Implementation Management Associates.

Interoperability can be fun

I am so frustrated – I recently read an article in the FT by Michael Schrage entitled “Interoperability: the great enabler” (5th Feb). In his article, Schrage introduces the concept of IQ or the Interoperability Quotient but he does not describe how to measure it.  Here I am, in France struggling with interoperability every time I venture out of the house and I could conclude from his article that, with a low IQ, I might be  destined to underachieve. Perhaps willingness makes up a large part of the IQ measure; certainly buying food in a street market was successful and ultimately satisfying as was, at a much deeper level a guided tour of a country house by one of the family who could tell a story about every one of many ‘objets d’interet’ in the house and garden. Even if I could only understand one word in five, the personal intensity of the message conveyed all the meaning necessary.

So here is my real frustration with the article.  While it recognises the technological driving force behind interoperability and an economic context in which it can develop, it does not acknowledge the importance of culture and organisation in determining potential for the wider implemention of interoperability In my opinion, the  factors that will determine success in interoperability have more to do with people, organisations and culture than a quotient relating to components and systems. Alberts talks about this in his book “Power to the edge” where he discusses interoperability in the physical, information, cognitive and social domains. It is not that all these domains are relevant to every instance of operability as this is obviously not the case but Alberts also talks about the need for ‘jointness’ which I take to mean the responsibility of the people involved at each end of any ‘interoperation’ to take responsibility for effective interoperability. People with a shared intent and awareness working ‘jointly’ can provide resilience and adaptability in the deployment of interoperability and these underpin the evolutionary capacity that is a prerequisite for survival.

Technology landscapes

Are there times when the ground rules of our businesses seem to be changing around us yet we do not seem able to anticipate the nature of the change? Anything that can help us to understand the situation is useful and here is one model for you to consider.

Most of us are born with a set of capabilities and we spend much of our lives using those capabilities to interact with our fellows, sometimes collaboratively and sometimes competitively. Almost always we are seeking to use our capabilities to the best effect and mankind has a long tradition of discovering and developing tools to give us some sort of edge. Useful tools are widely and rapidly copied so we develop the capacity to produce the tools in greater numbers.Typically we will set up some sort of system for production, supply and distribution; historically these have often been fairly informal but as the pressure of demand has increased they have become more and more formal. Experience has shown that once capacity has been established and the consumer community becomes used to products or services they begin to demand the ability to customise them – the ability to meet this demand has led to the development of customisation . But there are instances where the consumer wants to exercise greater control of his or her own destiny and this has been shown to be possible where the necessary networks can be put in place to provide direct support to the consumer. There seems to be a progression; we use tools to add capability, then we apply a system to achieve capacity, then we develop logistical skills to meet the demand for choice and finally we use networks to gain control of the resource we have developed.

Basic landscape concept

Take for a simple example our ability to walk; how do we overcome the limitations of speed and range that our physical bodies impose? In the first instance, we began to exploit an animal which was physically capable of carrying us further and faster than we could walk or even run. Even so there are limitations as riding requires skill and is physically demanding. In due course a number of us opted for travel by carriage – but here economics steps in because by this time such an option was only open to the wealthy. The introduction of cabs in cities extended access and a gradual increase in demand led to the establishment of stage coaches that operated between urban centres.

Jump now to another, more recent development track. In the late 19th century the motor car came onto the scene. This promised great mobility to anyone who could afford one, subject to the availability of fuel and the reliability of the machine. It rapidly followed the evolutionary progress of the horse enabled movement, with motorised cabs and omnibuses quickly replacing their horse-drawn predecessors. What the motor car (or more properly the internal combustion engine) offered over the horse was the potential for series production and this over the course of the 20th century has reduced the cost of ownership so that car are available to almost any person in a developed economy who wants to own one.

Mobility/transport landscape

If there is a development track for the aids to movement there is also a development track for the production of such aids and for the complementary capabilities that make the widespread use of such aids possible – in the case of cars these include production lines, dealers, service stations, repair and service shops, roads, tyre depots, loans and insurance companies, etc.

What is interesting here is that in a developed industrial and urbanised economy, the universal ownership of a horse as a means to mobility never materialised – possibly because a network for supplying, feeding, maintaining (blacksmiths, vets, etc), housing and managing waste was not economically sustainable. However there is virtually universal access to car ownership in such economies and established a new basic skill level – we learn to drive almost as automatically as we learn to walk. I will add a couple of observations, for what they are worth. From a cultural perspective walking, owner ridden horses and owner driven cars all offer mobility whereas the omnibuses and cabs (and trains, planes, etc) offer transport – so they result in a very different user experience. Secondly, another interesting element of the landscapes is that established capabilities in one area may become a key enabler of the emergence of another – so mass production has become a key enabler of, for instance mass ownership of cars that gave individuals back control over their movements at a greater level; likewise the mass production of electronics has brought computing power and communications capability to individuals – and the model does not apply only to manufacture but also to service industries.

So why is this of any interest or of anything more than passing interest?

Where is your product? Where are your products? Are they mass produced? If so, are your customers about to demand choice, customisation? Are you able to respond to such a demand? Can you anticipate it and drive it to gain a competitive edge? What might it cost to do so? Is the time right? Are you providing a service that supports a product or products? If you changed the way that the service is offered, what might happen? Where are you on the capability, capacity, choice, control continuum? Is the infrastructure in place to support a move from one corner of the square to another? If you don’t know, how can you be sure what impact any changes you make to your business model will have?

Please let me know if you find the model useful or if you think it is worth improving, extending or both and would like to discuss ideas of how to do this.

Organisation, technology, culture and their impact on the implementation of innovation.

In the 1980’s leading research into the successful introduction of new technologies identified the need for mutual adaptation of technology and organisation. There needs to be explicit recognition of the major influence culture has in determining success.

Dorothy Leonard-Barton asserts  in a paper* that “The major point in this paper is that implementation is innovation.” She is a writer whose work I regard highly even if the way that she writes and the way that I read are not well aligned and I usually make heavy weather of her texts. The important thing is that in this instance perseverance is well rewarded. If I were to change her assertion, it would be to say that innovation is the implementation of invention.

This 20 year old paper is interesting in its continued relevance to the business world of today. Leonard-Barton studied 12 instances of the introduction of new technologies into the operations of large corporations in the 1980’s, with outcomes that ranged from ‘Highly successful’ through degrees of  moderate success and partial failure to ‘Total failure’. She states that ” … a technology almost never fits perfectly into the user environment” and this situation she describes as misalignment. However there is not a single misalignment but a combination of misalignments which create complexity and which must be addressed by what she calls ‘mutual adaptation’. This involves “… reinvention of the technology and the simultaneous adaptation of the organization.” There follows a discussion assessing:

1. the significance and impact of misalignments at different strata of the organisation
2. the nature of adaptation cycles, both large and small; their impact on the business and the implications of committing to them

Some examples of adaptation options are presented and Leonard-Barton concludes that a degree of ‘mutual adaptation’ is an essential part of successful implementation. She also comments in her conclusions that “… research on survival in highly competitive industries suggests that the surviving companies are those that are open to advances in process technology – even if the price of that openness is expensive technical experimentation and costly organizational shifts.” There is no reason to think that the situation is any different now; indeed, I would argue that this broad conclusion can be applied much more widely to innovations in any aspect of  business.

One dimension in the process of implementation that is implicit in her discussion  is the influence of culture. At several places in the paper, the behaviour of individuals and groups and the effect those behaviours have on outcomes is described.  Behaviour is not a factor of technology or organisation so while it has been observed it has not been considered as a variable in this study. If you accept, for the sake of argument, that behaviour is driven by culture then the interfaces between organisation, technology and culture must all be taken into consideration and included in the process of adaptation if probability of success in the implementation of change is to be maximised. I will come back to the relationship between culture and behaviour in future posts.

* “Implementation as mutual adaptation of technology and organization”, Dorothy Leonard-Barton; Research Policy 17, 1988, pp251-267; Elsevier