The Integrated Digital Enterprise – The Mission Framework

February 15th

The coming of the integrated digital enterprise is going to introduce a renewed need to revisit the overarching mission.  Each of the elements of the enterprise has been given interactive dimensions by new technologies that are encouraging core constituencies to seek a voice in strategic decision making.

The democratic impulse of the critical constituencies – customers, employees, shareholders, suppliers and host communities – has been created and reinforced by a realistic recognition that major interests are in play.  New technologies, capabilities and management practices have made it possible to move jobs across the globe.  Those who fail to participate in the dialogue risk having others define their interests for them.

And so each part of traditional strategy formulation and implementation has new interactive elements.  Whether it’s crowd sourcing strategy definition or creating new measures of performance (juxtaposing top down controls with bottom up grass roots democratic impulse), the new integrated enterprise will be an interactive one.

Building new leadership styles and management practices will face the challenge of bringing new voices into the conversation about future direction.  To do this effectively, what will be critical to their essence will be the way in which the conversations are conducted.  Above all there will be a new need to align them with a larger framework of mission which is itself aligned with societal context.The Framework

 

Category
Comments

Speech to the Independent Colleges and Universities

February 10th

I was asked to speak about “Democratizing Transformation” at the National Association of Independent Colleges and Universities (NAICU) last week. I appeared in a general session and was introduced by a lifelong friend who has worked as a marketing strategy consultant for many institutions. He described himself as my Sherpa – there to help get me down from the mountain that I was about to climb.

NAICU

NAICU

Without a doubt one of the most interesting experiences of recent memory. The most interesting question from a college President “The things that you are discussing are viewed as “risky” on my campus. What do you recommend that we do?” Seeking to maintain a tone of respect – “if you find it valuable to come to a talk about transformation, haven’t you already seen risk in the status quo?”

Category
Comments

The Growth of Global eCommerce Projected to Double to $2 trillion

January 16th

FedEx recently published a study to highlight the growth of cross border shopping. The study, conducted by Forrester, interviewed 9,000 people in 17 country and small businesses with cross border operations.

Online buying now represents $1 trillion per year and it’s predicted to nearly double in the next 4 years. Clothing and apparel, books, electronics and cosmetics are the largest categories of purchases.

The growth varies around the world. But the picture is nonetheless a compelling one of a world that’s being transformed by new commercial flows.

Screen Shot 2015-02-16 at 8.11.43 PMThe study found that 82% of those interviewed made a purchase outside of their home country. This varied from 90% of Canadians to 59% of Japanese spend an average of $300 per year.  The major exporters today are the US, Great Britain and China.

With a projected doubling of global eCommerce, the dynamics of change will be interesting to watch.

As FedEx no doubt intended, the Forrester map of the world shows the possibilities for the small and medium companies who are online sellers today

Category
Comments

Strategic Inflection

October 7th

What makes this a conversation about fundamental transformation is the recognition that there is a need for change.

This may seem to be simple. But it’s deceptive. Transformation begins with the  of the need for change. Inevitably there are those with interests in the traditional way and they are likely to perceive change as loss.

When transformation has become an imperative, the trend lines that define the future of the business model demonstrate that the status quo will no longer be sufficient to ensure the future viability of the enterprise.

Andrew Grove, the former Chairman of Intel has devoted a significant amount of his career to studying this concept that he has called “strategic inflection.” “A strategic inflection point is the time in the life of a business when its fundamentals are about to change”, Grove has written. But at the same time, there are often simultaneous opportunities to invest in the future and in doing so to guarantee future viability in a competitive marketplace.

“Strategic inflection points do not always lead to disaster,” he wrote in his 1996 book “Only the Paranoid Survive” “They also create opportunities for those who are adept at operating in the new way.”

Grove wrote that he focuses on those fundamental variable that keep him up at night because he knows that if they were to change it would imperil the future. He wrote that he monitors these critical variables looking for 10x changes.

Screen Shot 2015-02-17 at 8.44.14 PM

Category
Comments

The Mountains are High, The Emperor So Far Away

August 19th

The Emerging Dynamics of the Integrated Digital Enterprise

Triumvirate

A recent report on Being Digital (versus merely Looking Digital) from Accenture’s Institute for High Performance, presents a vision of the future of decision-making and organization that will challenge many traditional expectations about leadership.

With emerging technologies, we are poised on the edge of a second digital revolution. Market leaders have moved from experimenting with one-off digital applications to creating integrated digital enterprises. But while the new style of digital enterprise is going to be vastly more efficient and more effective in identifying and serving customers, the dynamics of the new enterprise are going to change the agenda for future leaders, at least the successful ones.

We are all being spoiled by the experience of being customers of Apple and Amazon. We expect service to be omnichannel, seamless and swift. Ubiquitous data streams are becoming routine and advanced analytics and modeling combined with rich data representations, the authors from Accenture anticipate, to create a new kind of enterprise.

One of the most striking differences to be seen in the emerging Integrated Digital Enterprise will be the way that the new technology can empower individuals by augmenting their natural human capacities.   The augmented cognitive, physical and collaborative worker of the future will be supported by mobile intelligence, 3D printing and robotics among other new capabilities. The future worker will operate in organizations where such crucial questions as “who” makes decisions, “where” decisions will be made and “how” work will be structured and located are going to change.

Critically, there will be an opportunity to move decisions to the edge of the enterprise, closer to the action.  The authors argue “Information and decision-making authority formerly the exclusive domain of a centralized authority will increasingly be pushed out toward the boundaries of the firm.”

In some sectors such defense, military planners who are now concerned with fighting in anti-insurgency conflicts, have been talking about decision-making at the edge for some time. And these ideas are important. In an information rich workplace there will be a growing need to grant greater autonomy to local decision-makers. They will demand it.

Of course, such devolution of authority flies in the face of centuries of tradition. Strategic decision-making from the time of the Ancient Greeks has made strategy the work of generals. Strategy has determined the deployment of resources against long-term competitive threats in war, in government and in business. A central concern of future leaders in a world where edge centric decision-making is possible will be how to reconcile the traditional top down and the new bottom up.

Even in the best of worlds where the leaders from the provinces cooperate in aligning their actions with the Emperor’s central authority, their independent, empowered decision making is not always going reach the conclusions that are the same as the ones that would be reached in the capital. The top down vision of the central leadership may be prescient. Yet the world often looks different closer to the action and pushback is going to become a common occurrence. There are going to be a growing number of instances reminiscent of the ancient Chinese proverb. When the Emperor is far away, you can often do what you think is best.

If adopting new technology were all that mattered, there might be little news to report here.   But in fact, in organizations that have moved decision-making to the edge, the local leaders are going to demand a role in shaping policy rather than merely implementing it; and where these democratic impulses are suppressed, the dynamics of the future enterprise will create problems.

No one should miss the fundament challenge that this shift is going to pose to traditional governance structures. Once the decisions are moved to the edge, there will be a need to recognize the democratic impulse and to respect it.

One of the principle challenges that this view of the future is going to represent comes from the fact that “Boards still don’t see the value of digital” writes Walter Frick of the Harvard Business Review Press. Boards will need to see the significance of the tipping point and the emerging integrated digital enterprise. Embracing the implications of the new dynamics of the democratic enterprise will challenge future leaders ar to think top down and bottom up simultaneously.

***

Notes:

  • From Looking Digital to Being Digital: The Impact of Technology on the Future of Work Robert J. Thomas, Alex Kass and Ladan Davarzani, Accenture Institute for High Performance, April 2014
  • Strategic Principles for Competing in the Digital Age, Martin Hirt and Paul Willmott McKinsey Quarterly May 2014.
  • The Seven Habits Of Highly Effective Digital Enterprises. Tunde Olanrewaju, Kate Smaje, and Paul Willmott, McKinsey Quarterly, May 2014
  • The Digital Tipping Point, Results of the 2014 McKinsey Global Survey. McKinsey Quarterly.
  • Digital Transformation, Creating New Business Models Where Digital Meets Physical, IBM Institute for Business Value, Saul J. Berman and Ragna Bell, 2014
  • “Boards Still Don’t See the Value of Digital”, Walter Frick. HBR Blog Network citing the results of the McKinsey Global Survey, July 3, 2014.

Realignment and Echoes of the Past

May 22nd

The idea that the Internet has transformed business and created a global economy is an assertion that is   often repeated in the media today.  Yet there is little consideration given to the implications of the global supply chains for national futures.

The echoes of the cold war could be heard this week as China and Russia announced their gas deal.  Russian economic stress has been a theme that has appeared with increasing frequency in recent months .

And then the gas deal – with its apparent economic benefits for Russia and its obvious geopolitical implications for everyone – was announced.  Interestingly the announcement followed a military review, not always necessary in signing a trade deal.

China.Russia deal

What was hard to miss as the Chinese and Russian leaders reviewed the troops (picture from the Washington Post)  was the fact that the previous time this week that China had been front page news had come only a few days earlier when the US Attorney General, for the first time, threw down the gauntlet on Chinese industrial spying by indicting 5 hackers who were demonstrably focused on stealing US trade secrets. (Picture from the New York Times) The indictment went to some length to distinguish the crimes of the Chinese Army from the practices of the National Security Agency.  And perhaps the media coverage of the indictments were in fact exploring one of the most newsworthy aspects of the matter.

Screen Shot 2014-05-22 at 1.18.08 PM

Were the two connected?  Even if they went unnoticed in the minds of the Chinese leadership, its difficult to miss the point that it was the mini-war along the Chinese Russian Border in 1970 that led Ntixon and Kissinger to the sequence of events that resulted in Nixon’s “China Card”.

The world today is obviously far more complicated.  But another question raised by the indictments of the Chinese hackers was whether there might be a need for some rethinking of the global supply chains that have grown in the aftermath of the Internet.  Today its customary for retailers in the heartland of the US to receive just in time delivery of their inventory by means of FedEx, UPS and other shipments to the US.  The connections are intimate.  They come from the massive shift of US productive capacity to China and other Asian locations.

The economics of off shoring obviously did not include a calculation of the risk of disruption.  There has been a 25 year bargain based on assumptions involving peace and prosperity. The events of the week may offer some new perspectives on those underlying assumptions.

 

Amazon Changes the Game

May 20th

So what are the implications of Amazon’s moves to deliver their own products?

First, lets be clear.  This is not about delivery alone.  Second, Amazon is dead serious.

In January 2014 Amazon filed a patent application illustrated by this graphic.

 

Screen Shot 2014-04-20 at 10.08.34 PM

With this illustration Amazon describers a world of forward positioned warehouses and rapid fulfillment of eCommerce orders.

For those who don’t shop on the Amazon site, the company has long ago earned the title of The Everything Store as described in the recent book by Brad Stone.  You can buy everything there – from books and music to televisions to lawn furniture.

Some of these goods are more likely to be purchased if the consumer can get them the same day or the next day.   And for the retailer, the knowledge of who who will want which product when they can get it immediately is more valuable than the return from the sale itself.

What’s more, the market is not limited to the impulse end of the online eCommerce market that you can see today.   When you can fulfill products overnight, the scale of the marketplace expands to the Consumer Package Goods market – a multi trillion dollar marketplace.

Walmart knows this and they are experimenting with delivery themselves.  Soon every retailer in the Consumer Package Goods market is going to be confronted with the reality of the change that Amazon has anticipated.

The picture above anticipates another point as well – for those competitors who can reshape themselves as collaborators in a radically changing market, there may be new opportunities that have not been factored into the conventional forecasts.  No one should miss, for example, the fact that the U.S. Postal Service’s Sunday delivery volume from Amazon is exploding.  Where will Amazon deliver its own products and where will it rely on competitor-collaborators?

The answer to the question of where will the future of delivery be? will depend on a larger picture than one that is limited to the supply chain.  The future is going to be defined by seeing the whole board.

Category
Comments

Authentic Agility

May 8th

Major-league baseball ran into trouble in the beginning of the 2014 season with something that was called the “transfer rule.” The story offers some important lessons for philosophers and technologists at the same time.  In anticipating the future and predicting the way in which technology will shape our markets, there is one critical gut check that needs to be made. An assessment of the human interface needs to be featured prominently on the evaluation checklist.

The story really begins in the 2010 baseball season when a pitcher named Armando Gallaraga from the Detroit Tigers came within one out of a perfect game.  As the videotape would later show, he pitched a perfect game against Cleveland on that June night in Detroit.

There were no hits and no one was allowed to get to first base through the first 26 Cleveland outs. But in the top of the ninth inning, an umpire at first base named Jim Joyce, as he later admitted, blew a call and declared that the runner was safe when in fact he had been thrown out by a throw from first baseman Miguel Cabrera to the pitcher, Gallaraga, as he covered first.

In a day of technology in which key moments in football games often turn on critical replay decisions, this seemed to be the last straw. There needed to be a replay camera in American baseball as well or so the thinking went.  It took the powers who run baseball another couple of years.  But things had been set in motion.

As of this winter a replay rule was created for baseball. Until this point, the judgment of the umpire has been final and even legendary in deciding the fate of baseball games for 150 years.

Perhaps there should’ve been a warning here about what was going to happen. But the replay rule was passed nonetheless and the 2014 season began with replay cameras.

What happens now is that when the play takes place and a team feels that it has been wronged, the manager is allowed to go out and question the call. The umpires consider the protest and they may ask for a replay decision to be made by someone in a control room in New York.

In practice, the replay rule has led to some annoyingly long delays as sometimes the decision takes three or four minutes of waiting. At least in football, the camera trains it’s picture on the replay official who is looking at the replay camera and agonizing over how to make the call. Baseball’s anonymous remote judge in New York seems particularly arbitrary. But this wasn’t the end of it.

There was also a need, major-league baseball believed, to clarify a few fine points of the game so that it would be possible to make clear-cut decisions. The entry of a third-party, the anonymous replay official, seemed to force a greater need for precision, or so it was thought.

And so, the transfer rule was modified. This is when a player catches the ball and transfers it from his glove to his throwing hand in order to make a play. To make it clear, the officials believed, the transfer rule should require a player to catch the ball and to make a clean transfer. If the ball was dropped, then the initial play was ruled an error and not an out.

What this led to were some amazing plays where a player might catch a ball run three strides seem to make a transfer and then drop the ball only to be told that not only was his team to suffer the consequences of the dropped ball but the initial play was no longer an out either.

Needless to say, the precision of clarifying the transfer rule created a whole new set of problems. After two or three weeks the officials have given up on transfer rule purity and gone back to the old way.  The game reverted the old method of relying on judgment calls, at least for transfers. There is still a replay camera but it no longer dominates the way it did when the game was trying for perfect clarity.  Somehow when someone truly great is playing, the speed, precision and finesse are all combined.

I think this compromise is more in the spirit of baseball and perhaps the replays will go as well.  During this controversy, I have been reminded many times of an experience that I had in the late 90s when I was invited to go to St. Louis to make a speech to a postal audience and to join the Chief Operating Officer of the USPS who was going to dedicate a stamp at Busch Stadium where the St. Louis Cardinals played baseball. At the Postal Service it became known that I was a huge baseball fan. In fact, I had been a lapsed baseball fan until friends introduced me to the Baltimore Orioles in Cal Ripken’s day and I found something that I had lost as a kid growing up.

Baseball was a great common denominator for the USPS. There were many times that people said to me “oh yeah I remember you, you’re the Orioles guy”.

Someone thought of me and did me the favor of inviting me go to St. Louis to the dedication. We gathered in the St. Louis Cardinals locker room before the ceremony when we would go out onto the field.  I stood around with several others who were going to go onto the field and we talked baseball. One man in particular was an especially nice guy, a gentle retired Cardinal who eventually was introduced to me as Ozzie Smith. I realized that I was talking to one of the five greatest shortstops of all time[i].

Screen Shot 2014-05-06 at 4.35.05 PMWhat do you say to Ozzie Smith? I realized that we were going to get a huge big round of applause when we went out to the field and it was going to have nothing to do with any of the postal guys or even other celebrities who were with us.  Instead it was going to be for this modest man.

I asked Ozzie whether there was anything that I should’ve known about making a double play or something equally lame. He modestly demurred and didn’t embarrass me by making fun of my dumb question but instead told me something about it being in the flow.

I later read the famous statement of Honus Wagner (another great Shortstop) that’s on the wall of the baseball Hall of Fame that “it don’t take much to be a ballplayer, if you are a ballplayer”.

Ozzie Smith was such a ballplayer and the memory of his manner seemed an appropriate conclusion to considering baseball’s attempt at precision with the transfer rule. Ozzie probably wouldn’t have needed to have the transfer rule clarified or to have umpires make “proximity calls” giving him the benefit of the doubt. He was that good. But his finesse was also not something, I think, that could easily be judged by the replay official in a remote studio in New York.  There are moments when humans and events interact in a manner that cannot be made more precise with technology and it’s an important factor to consider in judging the trajectory of future events.  There will be cases where forecasts aren’t as useful as just being in the flow.

 



[i] Cal Ripken of course, Ozzie Smith, Derek Jeter, Ernie Banks and Honus Wagner would be my five nominees.

Valence

May 3rd

One of the most important elements of the new dynamic is being created by activists constituencies. There will be the need for future leaders to recognize and to anticipate this force. No surprise, many will say. There has been a need to recognize multiple stakeholder constituencies in the past. After all, there are functional specialties within the typical firm to manage customer experience, shareholder issues, labor relations, supplier management and so forth.

Valence

These functional specialties will only become more sophisticated as stakeholders become more active. But what makes this process of communications important to the stakeholders is that the stake are getting bigger. As markets change more rapidly and corporations and others are forced to adapt and to transform, it’s going to be clear to the stakeholders that they will want to have a greater voice in strategic decisions.   Likewise, the traditional business functional leaders who have historically managed stakeholder interests that the activists need to be better connected to the strategic thinking of the organization.

Unfortunately, what will make the communication process more complex will be the fact that the agenda of the individual groups will change as the organization moves through the stages of transformation. When it is clear that a change may be coming, but that it’s not likely to come soon, employees and customers can anticipate the ominous future but like residents living on a floodplain they will not necessarily act to protect themselves.

As the necessity for action comes, the stakeholders will divide between those who understand the future and want to shape it and those who have different strategies. Many don’t want to hear about negative trends they they view as self-fulfilling prophecies.  Others may recognize the direction of the future but do not want to lose the protections that the traditional enterprise has provided. Agendas change from anticipation to engagement to avoidance depending upon the way in which the activists may shape there actions to deal with the necessity of change.

An example makes the issue clearer.  Stakeholders who believe that they don’t have a choice, who will be punished by the negative consequences of decline want to protect themselves.  Those who have a choice will calculate that to eir interests and move to alternative products and services.  It’s important to understand the stakeholders and their voices.

In simple terms, the up slope and that downslope required different muscles.  Those on the rise have different priorities from those who are descending.  The curve acquires valence as it reaches the inflection point and turns downward.

 

Crafting Innovation for a Transparent, Interactive Marketplace

April 26th

While there is widespread acceptance of the idea that in times that demand transformational change innovation has become an important, even critical management capability.  And the notion that innovation needs to anticipate both investments in sustaining technologies and investment in new disruptive business models – the ideas first advanced by Professor Clayton Christensen of Harvard Business School in his book, the Innovator’s Dilemma – have received widespread support as well.  But the approaches that are often suggested for engaging the forces of disruptive change may need to be revised to anticipate the age of social media.

The problem is not a surprising one.  No one is in favor of disruptive change when it undermines them.  Long-time line managers who have developed their careers in a business model  favoring one kind of profile are naturally likely to resist investing in a new business model that will put them at a disadvantage and possibly even bring in leadership from a new generation or new group with a different skill set. S it’s not surprising that an old-line institution such as the Postal Service might have managers who would resist a new era of digital media. But what might be even more surprising is the subtleties within the disciplines inside the institution – those who have made their careers improving the delivery of letter mail, resisting new patterns that would emphasize parcel delivery and integration of the traditionally independent institution with new e-commerce providers.

But if the customers are going to act as Christianson suggests that they will in his exposition of the shift too disruptive technologies, then there’s a need to refine strategies for him bracing the disruptive future.

Christianson suggests three models in an article written in Harvard business review quote “on innovation”, a Harvard business review paperback copyright 2001, “meeting the challenge of disruptive change”, Clayton M Christiansen and Michael Overdorf first there’s the skunk works that develops the new technologies in a laboratory set apart from the traditional enterprise. Second there’s the division within the company that said apart from others and finally there’s the strategy of acquiring the technology that allows for disruptive change.

Each of these three strategies might be seen as a “sequestering strategy” where the new investments are protected from interference from the traditional line managers. The problem with relying on sequestering strategies alone is that organizations are increasingly transparent and services require integration. Both features of the network economy are likely to make it almost impossible to protect the alternative vision of the future from the traditional enterprise. This is good news for entrepreneurs but it is going to be challenging for large complex organizations. How do you invest in alternative visions of the future without being stopped?

One pathway that’ worth a new look may be to revisit the notion of open innovation. Clayton Christianson writes about open innovation in his blog (Wednesday, September 19, 2012) he relates his experience at the annual meeting of the Academy of management (AoM). He describes a session on open innovation featuring Allan Afuah from Carnegie Mellon, Karim Lakhani and Michel Tushman from HBS, and Todd Zenger from Washington University in St. Louis.

“Open innovation is a method of innovation that has arisen in recent years which allows companies to essentially source some of their innovation efforts to outside parties, often through contests where individuals compete to develop the best solution to the innovation challenge the company has set forth,” Christensen writes.

He describes the way in which such challenges work and notes the work of InnoCentive to help companies to “clearly define the innovation challenges they are facing” and develop platforms where challenges can be held.  And Christensen notes the way that the changing marketplace has played a key role in this development,

“The rise of social media in recent years has been a significant enabler of open innovation, as it allows firms to develop strong communities of external innovators eager to solve problems.”

What’s interesting about Christensen’s review of the open innovation panel is that he both acknowledges the benefits of open innovation that offer some promise to work past the obstacles to the sequestering strategies that are created in transparent interactive enterprise and at the same time he recognizes some of the limitations,

“Open innovation can be an excellent means for innovating around specific technical challenges.  In contrast, open innovation may be a less effective means for bigger architectural or business model innovations.”

Opening the innovation process but at the same time given the challenge and the intended solution precise definition offers an important potential path around difficulties that will become increasingly apparent in the future enterprise.