The fallacy of (digital) Transformation

As Carrie Bradshaw says
“the more words we invent, the harder it becomes to define things”.
She talked about relationships, I’m talking about strategy.

In this short post ( I needed to get it out of my system), I’d like to point you to 4 common mistakes and misconception that lead to poor thinking in organisations.

1. DIGITAL DOESN’T MEAN ANYTHING

Digital doesn’t mean anything, because it means too many things to too many people. Latest executive research performed by INSEAD & this fluid world provides valuable insights.

“Digital” does not have a universal meaning: the research identifies 20 key categories of engagement in digital with multiple subcategories of varied levels of complexity”

I invite you to read the research here.

arnie-levin-can-of-soup-with-label-that-reads-digital-soup-zeros-and-ones-cartoon

2. DIGITAL IS CONFUSED WITH TECHNOLOGY OR DEVICES

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Common mistake being made between the artefact and the underlying process.

The term “digital transformation” is essentially preempted by IT firms in order
to sell their services (check for yourselves). Again, see recent INSEAD & this fluid world research or insights from 2014 Altimeter research (mentioned here)

Success is perceived as being rooted in leadership and management, yet a significant proportion of respondents feel this gets insufficient attention

 

3. DIGITAL IS CONFUSED WITH INNOVATION

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Digital is not just another app, or a connected device…
Just like electricity is not just a fridge or a TV set…

Although digital enables some components of innovation
(see 10 types of Innovation graphic below) – it must not be confused with innovation – innovation being “the creation of a new, viable business offering.”

The most important word in that phrase is viable: innovation must result in the creation of new economic value – for customers but also for companies.

10-types-of-innovation

 

4. INNOVATION IS CONFUSED WITH STRATEGY

Strategy is getting the job done –  that means winning competitively in a given situation.

There can’t be one strategy, but there needs to be a portfolio of strategies depending on:

  • the breadth and depth of a companies products and services and markets served
  • the predictability of the business environment
  • the shape-ability of the business environment
  • the favorability or unfavorability of conditions

 Innovation is the component of your strategy that allows a company to adapt
its capabilities, assets and processes to continue to create value for its customer.

Because strategy is about making choices, innovation is also about making choices.

Evidence-based research led by Larry Keeley for his book demonstrates the superiority of
strategy combining multiple innovation tactics across more business components than product performance alone.

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Finally, this means Strategy guarantees survival – and poor choices lead to death.

As Martin Reeves explains in his TEDTalk : “transformation is about survival”.
Not competitive advantage …but survival. If you need to transform… you probably made some poor choices, and you’re paying the price.

In a world that is more complex, strategy has changed and how you think about strategy
needs to change. strategy is not a luxury: it’s a requirement.
As french poet Nicolas Boileau explains:

Whatever we well understand we express clearly, and words flow with ease.
(Ce qui se conçoit bien s’énonce clairement – Et les mots pour le dire arrivent aisémement.)

I thought it was worth a post. So next time we talk about digital or transformation, let’s be specific.

sources & links:

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Courage is the new competitive advantage

A lot is currently written about challenges mature corporation face to innovate : various mavens and gurus exemplify Uber, Airbnb (add yours here) as models to follow, urging businesses to disrupt themselves and behave like startups.

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There a is indeed a wide broadcasting of this polarised view of old world vs new world, without much thought being given to the underlying laws of strategy and business at play nor long-term impact on wealth, labour, society, etc…

We are hammered with the transformation imperative, with an obsessive focus on technology and a total ignorance of the challenges of adoption inherent to human behaviour.

Big players create research lab, corporate accelerators, hackathons to look like startups:
it seems it is more important to appear innovative, then to actually do the hard work of rethinking the way you do business.
They spin off digital academies, digital or disruption days, visits to Silicon Valley, or dedicate a section of their executive training programmes to this thing called “digital”.
It’s like going to visit the gym – only once – to get an idea of what it could look like to be fit.

fake-muscle-shirt
Less than ten years ago, I remember a client of mine at Nokia stating that Nokia was now an ”internet company” (today, the equivalent is “everlasting startup”).
Makes me smile: You can mimic the looks of an internet company or a perpetual startup, but you ain’t one: you copy the artefact, not the underlying “reason why”.

As I’ve stated this previously:

  • mature organisations are good at executing a business model, but not good at innovation (mostly because they tend to only focus on one type of innovation: product)
  • Startups are good at creating products, but not good at operating at scale.

Both mature companies and startups both face a common challenge:
how to design an organisation for scale in a highly unpredictable environment,
when obviously organisations models inherited from previous ages do not work anymore.

Our current model of how a company works is inherited by previous industrial revolutions, and a “machine view”: a business is a well-oiled machine, with multiple parts, each assigned to a specific task. Inputs/Outputs.

“The mechanistic view of the world that evolved in France after the Renaissance maintains that the universe is a machine that works with a regularity dictated by its internal structure and the causal laws of nature. This worldview provided the basis not only for the Industrial Revolution but also for the development of the machine mode of organization (Gharajedaghi and Ackoff, 1984).”

Therefore you “just” need to optimise the parts to run at maximum efficiency.

But as the company grows, so does complexity, and the common solution is to increase processes and procedure to control chaos, by limiting the autonomy of each part.

And we roughly end-up with two types of control:
– monolithic and central: senior management reviews all tactics, lots of buy-in meetings, slowness increases with size.
– independent silos: everyone does their own thing, alienation and suspicion between departments.

Efficiency trumps flexibility. In a fast-paced and unpredictable environment: the company become irrelevant.

“The most stubborn habits, which resist change with the greatest tenacity, are those that worked well for a space of time and led to the practitioner being rewarded for those behaviors. If you suddenly tell such persons that their recipe for success is no longer viable, their personal experience belies your diagnosis. The road to convincing them is hard. It is the stuff of classic tragedy.” (Charles Hampden-Turner and Linda Arc)

Contemporary research in various fields indicates that this machine view is flawed: the interaction of the parts (ie. the dynamics of the system) matters more that the intrinsic performance of individual parts:
Proof is recent news about Google’s Aristotle Project, IMD’s or MIT’s research on collective intelligence cognitive diversity team performance

I also find Netflix’s culture deck very insightful in this matter:
“context, not control”: clear and articulated context allows autonomy and relevant, decentralised decision-making
“highly aligned, loosely coupled”: all parts are aligned to deliver on clear strategy and specific, broadly understood goals. Teams interact around strategy and goals, not tactics.

 

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To thrive in complexity, companies need to be purposeful systems and have a purposeful strategy: be able to produce the same outcome in different ways in the same environment and different outcomes in the same or a different environment.

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To achieve that leaders and managers need to become designers : learn how to use what they already know, learn how to realize what they do not know, and learn how to learn what they need to know.
Producing a design requires an awareness of how activities of one part of a system affect and are affected by other parts.
Unfortunately, the task is not just an academic discourse; it demands enormous emotional struggles and a huge cultural challenge. Engagement in this process, in addition to competence, requires courage.
I guess courage is the new competitive advantage.

(to be continued)

Recommended links:

What happens to startups when they grow up?

You’re not going to like the answer.
Truth is, most startups die.
– 9 out of 10 fail (according to Genome Project)
– 1 out of 200 (according to THNK & Deloitte Fast Ventures)
It’s the elephant in the room.

Everybody talks about startups, and celebrates entrepreneurship, and so we should.

But “getting our ecosystem to produce a greater number of scale-ups is more ambitious and challenging than producing a greater number of start-ups or celebrating entrepreneurs.”

“UK boasts a host of successful businesses and starts more companies per capita than the US. Yet, the main stumbling block to growing a global tech empire is the country’s current inability to “scale-up” these startups into larger companies”
(Sherry Coutu, ScaleUp Report)

I find most advice given to entrepreneurs useless:
– they are obvious (e.g. don’t hire bad developers. Thank you, I was planning to do that on purpose)
– they are contradictory and subjective (qualifiers as good/bad, slow/fast are only determined as such in retrospect)
– they form aspirational quotes that everybody repeats without truly understanding what they means (move fast and break things anyone?)

More importantly, they failed to address what successful scaling looks like,
and what it takes to grow in size and complexity in a sustainable way.

 

Scaling comes with predictable challenges:
Yes: predictable.
As companies from various sizes and industries grow, the face similar crisis at each stage of their evolution.
Scaling successfully requires to recognise the early signs of each phase and proactively design the following one.

a. the leadership crisis: “We need a bigger boat”
Designing a product or a service and building a business require different skills.
– the creative, organic and informal ways of working are not effective anymore.
– the attention moves from people to processes, from product to customers.
– Founders are forced to pass the hat, create new functions to divide the tasks for greater efficiency.
– Culture is diluted as new people join the company. Early joiners find it difficult to articulate and institutionalise the “tribal knowledge”

b. autonomy crisis: “Why so serious?”
As a functional organisation is put in place with clear and separate roles and responsibilities, hierarchy of titles and position builds, work standards and incentives are adopted. Founders and managers are disconnected from the coal-face. Teams feel torn between following procedures and taking initiatives on their own.

c.control crisis: “Ground control to major Tom”
As greater autonomy is given through a decentralised structure proves useful to gain expansion (e.g. market territories), a serious problem appears. The top executives are losing control over a highly diversified field operation. It becomes difficult to coordinate plans, money, technology.

d.Red tape crisis: “Brazil”
As formal systems are put in place to achieve greater coordination (planning, reporting, procedures for allocation investments across groups), the proliferation of systems begins to exceed its utility.
Coordination is useful to achieve growth through a more efficient allocation of the company’s limited resources, but procedures take precedent over problem solving and innovation is dampened.

In order to scale successfully:
– know where you are in the development cycle:
you need to be aware of these stages, and recognise when the time for change has come
– be prepared to dismantle your current organisation
– plan your next stage, and consciously design your new structure, it will not form automatically.
– realise that each solution breeds new problems. predict future problems and coping strategies

My recommendation to scale up founders and executives, as they dismantle and design a better version of their business:
– favour social control and self-discipline through cross-functional task groups and teams.
– align individual and collective efforts around simple, unified and multi-purpose metrics and systems
– invest in real-time information platforms and integrate them into daily decision-making
– reward team performance rather than individual achievement
– experiment and reward new practices
– invest in education and training to develop the appropriate behavioural skills in your company

The only way to do that is to articulate and solidify the core components of your company: your purpose, your culture, your decision-making process and communications flow,
– and to define the appropriate people skills and processes to deliver the capabilities you need to win…. with built-in flexibility.

It’s hard to do it alone. Ask for
help.

[LOL] Hi, All: The Absurdity of Companywide Emails, Visualized

The Reply All button has long been derided in companies as a harbinger of spam. Nobody likes being included in a chain that keeps going and going but doesn’t directly affect him or her. But then there are those emails that should never have been sent.

All Staff. All Day. Is a tumblr that celebrates the vague menace of the companywide email. It’s basically Shit My Company Says, but backed by visualizations that amplify each message’s context.

via Co.Create: Creativity \ Culture \ Commerce.

[Video] Listen to Freddie Mercury and David Bowie on the Isolated Vocal Track for the Queen Hit ‘Under Pressure,’ 1981

In the summer of 1981, the British band Queen was recording tracks for their tenth studio album, Hot Space, at Mountain Studios in Montreux, Switzerland. As it happened, David Bowie had scheduled time at the same studio to record the title song for the movie Cat People. Before long, Bowie stopped by the Queen sessions and joined in.

via Open Culture

[Music] Brass-ft Punk: masterful New Orleans brass band cover

If you’re still thinking about Daft Punk after yesterday’s excitement around Random Access Memories, you might appreciate this masterful New Orleans brass band cover EP of a few of their classics. Their Kickstarter to cover Get Lucky is also fully funded with four hours left!

The link to Soundcloud is here

via BoingBoing