Means and ends

Mckinsey's circular economy

It would be fantastic if we all delivered work, lived our lives, bought stuff etc etc for the right reasons. But sometimes, the right reasons aren’t enough. Climate change and the environmental consequences have been discussed for many years, and many people understand that in an ideal world, we should all use less energy, less water, eat less food and so on. At the conceptual level, there are few who would not subscribe to the view that we should always, indeed must, consider future generations. And yet, it is clear from the limited changes to date that environmental concerns, and debates about impact are insufficient to change behaviours substantially.

At the organisational level, financial and commercial drivers sit more comfortably with day to day strategies and tactics. And increasingly environmental issues have a direct earnings or profitability impact. Interestingly these are by no means all negative. So on the risk side, the Thai floods of 2011 are illustrative of the issues:

  • A single extreme climatic event flooded three quarters of the world’s hard disc drive production.
  • We began to wake up to the fact that HDDs were not just in computers, but cars, entertainment etc – the immediate production implications were huge and for the organisations themselves the loss of profitability substantial
  • But it created an awareness of the systemic nature of risks – and put external risks firmly at the centre of the attention of analysts and market commentators, impacting share prices and market valuations as well as the immediate P&L
  • Finally it engendered more innovation and investment in storage since solid state drives have increasingly become cheaper and more accessible since 2011

But what about opportunity? The McKinsey report in Sept 2015 on Europe’s circular economy opportunity illustrates that addressing environmental concerns through recycling, repurposing and making supply chains more efficient can provide huge returns. This is therefore a real opportunity as well as an essential move. And beyond the direct economic benefits, the rise of the collaborative consumption economy fuelled in part by a desire by some consumers to use less, have less of an environmental impact and make more of what we already have is a further indication of the commercial opportunity here.

Faster and broader

userbase

It was this evidence of the broadening impact of each successive wave of technology that I talked about in my last ‘card’ on the CIAO website. And it links strongly with BreakingSmart which I am still digesting but which seems to me to develop and refine these simple statistics further. Venkat Rao discusses in his first essay how software (and more specifically Marc Andreessen’s view that ‘software is eating the world’) relates to previous innovations – only two of which, written language and money were ‘soft’ technologies. I will make no attempt to paraphrase the great story told in BreakingSmart, but the point that software (in the form of the internet and the applications which leverage it) is enabling faster and broader impact across the globe.

And I think it is interesting to compare this to previous such revolutions – take electricity for example.The focus is inevitably on the pure technology in the beginning. Punch in 1848 has this to say:

LIGHTS! LIGHTS! I SAY!

INSTEAD of there being the slightest chance that wonders will ever cease, we have strong reasons for thinking that wonders have only just begun. The last new marvel is a Company for lighting our streets, our shops, our houses, and even our bed-candlesticks with electric fluid, so that we may sit, and read or write by flashes of lightning, and go to sleep with a column of electric fluid doing duty for a rushlight in our room. The new lights that have sprung up within the last few years have been extinguishing and snuffing each other out in rapid succession. The first breath of science blew out the dips, which fell prostrate under the wand of discovery, and then came the metallic wicks, offering “metal more attractive” than the cotton, of whose existence ingenuity has at last cut the thread. Chemistry then took the candles in hand and superseded with the composite fashion the once popular “mould of form,” until the public, having noted the presence of arsenic, stopped its nostrils and its patronage. The electric light now threatens to supersede all, and considering the universal use now made of electricity, we should not be surprised at the formation of a Company to fix a lightning conductor instead of the ordinary conductor to every omnibus.

Punch, Jul.-Dec. 1848

What is blindingly clear from this is just how difficult it was in 1848 to predict what and how electricity would do to promote growth and change. Instead the focus is on how it changes the ‘how’ of every day activities. There is no reference to the ability of the technology to create entirely new industries (both in power generation and in the application of electricity) nor of the dependence that electricity would increasingly provoke as it became a ubiquitous utility. Thinking about the digital universe we seem to be not much further than our own 1848 position now – in KPCB Mary Meeker’s Internet Trends 2015 she says “Whilst consumer internet entrepreneurs often pursue personal passion, ‘Enterprise’ internet entrepreneurs often pursue prior company pain points’ and we in the corporate world still seem to be seeking in many ways to deal with the issues of today or even the past, rather than the opportunities of the future. As a result there sometimes seems to be an increasing divide between the new opportunistic talent and a corporate rear-guard.

But as electricity shows us the two either marry up, or the former outstrips the other – giving rise to the next step change in growth.

Bought by many

boughtbymany

My latest card on CIAO is on ‘bought by many’ insurance as an example of how global connectivity is driving commercial shifts in conventional business models. And of course in this instance it is very reminiscent of the old mutual funds of the industrial revolution, with people (in this case in close geographic rather than virtual) in close proximity grouping together to create a protective mutual fund.

And that triggered a thought as to what else was a new invention of an old model. After all, Guest Houses and Bed & Breakfast offers have been around for decades without anyone suggesting that the hotel industry is under threat globally. And the auction model behind eBay is centuries old. So what is it that is truly different if it isn’t the product underlying the transaction?

It is to my mind another example of experience overtaking service which has overtaken product as the key attribute of any transaction. That experience can be made up of many things, some of which are not really related to the transaction at all – the experience of browsing AirBnB for example feeds dreams of holidays as much as it does provide a solution.

Choice too is part of the experience – the choice of global offerings (Etsy being a prime example) rather than local or national. And of course convenience – all done with a few clicks rather than needing to visit or phone.

So I started to think about what else that experience offers – how far in the value chain does it extend? In the case of AirBnB you may not actually be wanting or needing to travel at all – browsing through where you might go can happen in the absence of any specific trip (although it may then become a trigger for that trip). So that extends the journey in advance of a specific transaction, And similarly, getting to know the owners of where you stay may result in new friends – extending the chain well beyond the specific visit.

Experience is becoming key for customers but increasingly I think it offers huge value to providers and suppliers too, in creating extended and different value chains for old models. Numerous new points of contact with customers, and opportunities to build the relationship. So perhaps these are new models rather than just reinventions of old . . . .

More or less helpful

looking through

I’ve been feeling that weather forecasts have become less helpful recently (that’s a purely personal and subjective view, albeit influenced I suspect by the fact that the great British summer has not exactly materialised this year!). But what does appear to be real is that forecasters are talking more about probabilities – eg ‘this is the most likely scenario but it is possible that. . . . ‘

And that’s set me thinking about Daniel Kahenman’s Thinking Fast and Slow and how one of the things that our System 1 thinking struggles with is probabilities. So, does offering people information that says it will probably be X but could be Y actually help in making better decisions or not? I am not qualified to comment from any specific scientific angle, but my experience of getting people to make decisions, particularly difficult ones in an environment of change is that alternatives, particularly those that involve probabilities are less than helpful. So, in weather terms, it may be that more information is really less, in terms of value offered, even if at the end of the day the actual view offered is technically more accurate. Knowing that X is materially more probable than Y is not at all the same thing from a decision making perspective as X is right and Y is wrong. And yet, to a great extent that is how many are using the data when they hear it.

I think there are lessons here for using data wisely. The ability to draw conclusions from data and analytics often will throw up the probability of a trend, or an event – but for whom is that information helpful? One of the reasons sites like Trip Advisor work for people is that the element of probability is removed – we trust people like me to make the same decisions as us – indeed in many cases to make the decisions for us in practice. Am I advocating this? No I’m not, but I think as we use data more and more, and we throw up trends and probabilities we need to get a good deal better at dealing with those as probabilities, rather than the black and white world of yes and no. I am for example an advocate of scenario planning as much because of its ability to help people understand that there are many possible variations of the future – some more probable than others but none absolutely and categorically right.

And speaking as someone who for varied and unplanned reasons has studied statistics at multiple points in my life, I have to say that certainly the way I was educated about them was of no help in thinking about probabilities and certainties in very different ways.  If there are ‘Lies, damned lies and statistics’ (popularised by Mark Twain but attributed to many originally) then what can we say about data? Where does that sit on the spectrum?

Parallel tracks

Alternative finance

Picking up on a recent post by Future Options, the rapid adoption of so called alternative finance to the point where it now represents nearly 50% of funding to SMEs is typical of the disruptive nature of these parallel businesses. It is tempting to see the democratisation of finance as simply a beneficiary of technology enabled start ups in crowd funding and the like but in reality the situation is much more complex.

The shift, particularly for SME funding, has much to do with the aftermath of the financial crisis and the regulatory response to that as well as new opportunities and is itself illustrative of the dilemma faced by traditional businesses, not just in financing. Significant funds are needed to maintain legacy businesses (especially as this post suggests, those built through M&A) and the entire structures, processes and culture of conventional business has been built with scale rather than agility in mind. And, with known business models, regulators are in a position to respond with policy and rules which reflect and build on what’s gone before rather than the new.

So is this really a question of old vs new? Simply a cyclical change which sees the replacement of the old guard? In practice it seems unlikely when the wider picture is considered. When I was doing a post graduate diploma in printing studies in 1980 electronic typesetting was coming in and the death of the newspaper was predicted within 5 years. Publishing has indeed changed significantly – but not within 5 years and not with the complete death of newspapers. Any more than radio or TV has died completely. Instead niches develop – mainstream moves on, but there are environments, activities and tribes for whom conventional models make sense. None of the traditional media is unscathed, or in the identical format, but they still exist and indeed in some cases are thriving.

There is also the case, going back to financing, as to what it is that is being financed. Many new businesses require significantly lower levels of capital than in previous start ups (limited hardware for example). M&A has not returned to being the mainstay of growth in the way of the 90s and hence the type of financing appropriate for that is unlikely to be as predominant. And the big acquisitions in the tech space at least are frequently made by corporates with cash filled balance sheets.

Alternative may indeed be the wrong name, but the broadening of funding opportunities to support SMEs in particular is a welcome one and has its parallels in many other sectors where new approaches are growing alongside old models. I have classified this trend under agile responses – as the increase in options can only benefit more companies.

The Promethean Teal – rara avis

bird

If my posts this week seem a little vague it is probably because my brain is full. I’ve just finished both Frederic Laloux’s Reinventing Organisations and Breaking Smart Session 1 by Venkatesh Rao. Both have so much food for thought in them and on the face of it, little in common per se. And yet, put together with much of what John Hagel talks about I think there is much serendipity in reading them in close proximity. So this is a brief post to bring these to your attention – more to come I suspect when my brain has done digesting . . . .

Predictive in action

My latest addition to the trend illustrations on Change is an Opportunity is predictive in action and I used Bluenose (below) and Digit to illustrate my point that predictive analytics doesn’t depend on the widespread internet of things or BIG data or sensors necessarily – it’s here today, using very much traditional buckets of data available to many organisations and individuals.Bluenose

And that set me thinking about innovation. A bit like the myth that it is all to do with the lone innovator or maverick genius, the notion that all disruption is massive and immediate is one of those illusions that many suffer from. It’s not that it is ever really stated, just that people believe that the telephone, electricity, the internet suddenly burst on us. You can see it with the debate over driverless cars – the issue is will we or won’t we, or by when. That completely disregards the fact that most people who have cars aren’t all able to change them overnight, or whether we all want or need driverless cars. And, more pertinently to this argument, many, at least those with newer cars, have a large number of the elements of driverless cars already – automated parking, emergency braking, cruise control, lane changing. So with hindsight it might look like a big shift that happened at once but in reality as we look forward it is more likely to be a steady evolution.

And that is just as well because we don’t on the whole adapt well in terms of behaviours to sudden massive disruption. We need to get used to things gradually in most cases. (Gradually here is a relative term when considered against human evolution!). Most of the big potential disruptors that haven’t happened (yet) – wearables being a case in point – are certainly not limited by technology but by behavioural acceptance.  And whilst there is evidence of the use of technology changing how we think I am interested to know whether there is evidence that we are becoming more adaptable – essentially evolving faster in how we approach novel or innovative activities.

Kevin Kelly makes the point when he says that the utility of electricity exploded when we invented many more gadgets, but not the quality (as I am reminded every day when I am searching for a different charger or in a strange room looking for a power socket that isn’t miles from any usable surface). Which feels like a lack of progress somehow – a missed potential or opportunity. And in the great and age old debate as to whether radical or incremental innovation adds more value, suggests that the answer is almost inevitably both . .

Instant feedback

like

I’ve mentioned my website previously – here’s another of my posts related to material on there. This one’s about instant feedback – and from there to instant gratification, the removal of annual appraisals, the contrast in speed of decisions and activity between start ups and established business – all big shifts stemming from a fairly simple behavioural trend – the instant feedback provided by Likes, Shares,Comments on posts, tweets, Facebook, etc.

We’ve always loved feedback – nothing new there! But the scale, spontaneity and range of feedback from social channels has changed this massively – feeding an increasing need for instant gratification – am I being followed or read? is my selfie liked . . .? The interesting issue for me is how well or otherwise this translates into the business world.

The annual appraisal is the obvious candidate and Deloitte are only one of many removing this and replacing it with more frequent and different systems. But what about the distinction between reward, easily (at least on paper) linked to appraisal ratings (of whatever frequency) and recognition. I’ve long been convinced that companies do not understand the difference, and certainly in my experience ways of demonstrating recognition have generally been exhortations to say thank you just in various ways. And more often than not those ways have been confused with reward – the monetary ‘present’ to say thank you for an above average job for example.

But social feedback is primarily about recognition (or it has been to date – I must admit to speculate whether at some future point a shifting balance of privacy and value in data will make likes a genuine currency) and much less about reward. And hence I think businesses have some real issues to contend with in opening up their performance systems to social feedback and similar tools, or in simply assuming that instant feedback can be introduced. Just think how long Dan Pink and others have been talking about the drivers of motivation without much impact on the standard tools of salaries, bonuses, remuneration.  I think therefore we are talking about a much more radical shift than simply changing the performance management process – something more akin to what companies like Netflix are doing in recognising their employees abilities and judgement, and creating an environment in which that deep level of trust underpins performance. Recognition (indeed mutual recognition) then becomes as important if not more than reward. And as the HBR article points out the process starts with who you employ, much further back than performance management.

I would love to see more about recognition – ‘Drive’ talks about mastery, autonomy and purpose – which are very much the individual drivers but to work collectively, to make the business greater than the sum of those individuals, I suspect that the desire, indeed the increasing expectation, of instant feedback will make recognition a key element too – even though I am not sure that we know what it looks like yet.

Have I missed something?

working

I was running a foresight session a few years ago and we were talking about work-life interaction – specifically the use of social media during formal work hours. Perhaps unsurprisingly given the age of the audience there was scepticism (another post perhaps) about the efficiency of this. One of my colleagues said “But things do change – did you think when you started work that you would spend at least 50% of your time each day on email?” Apart from the comment “50%? And the rest!” everyone agreed that email was a nightmare. But . . . email was one channel (although we had face to face, phones as well – having seen off telexes and faxes by then).

Now, let’s see – I’ve got a blog on wordpress, a linkedin page, posts and company page, multiple email accounts, IM, twitter, texts, phone, the odd face to face meeting (!) and now Slack. Along the way I’ve played with Yik Yak, Pinterest and am about to open an Instagram account. And of course various financial sites too. Plus not just powerpoint, but Prezi, Videoscribe and Adobe Voice to help me communicate. And I am well aware that I am not particularly up to date or active in the digital space.

So I am intrigued as to when we stopped moaning about email and embraced so many alternatives. Because on the face of it, it’s more bewildering and difficult to manage these multiple channels than the single email route. (I should perhaps confess that because I had a really long daily commute I never got overwhelmed by email but simple swopped the one evil for the other). Is it really because, as many would have it, we are now in control of all these channels? We can choose whether or not to post, or tweet or to reply? Or have we simply become addicted to digital communication in a way that email never inspired and that control is a delusion? And what are the inevitable consequences of that?

I’m interested because of a parallel track of thinking. When I’m running a foresight session I commonly ask what people think will have disappeared in say 5 years time. There are 2 very common responses – cash and pens. And when we discuss the latter, people begin to think that handwriting might disappear as well. Because in none of the above does snail mail, letter writing appear. And whilst I will confess I do write letters, it is becoming rarer and rarer (and I freely admit my handwriting is getting worse). All of which stems from the ability of almost everyone (but importantly not all) to exchange digital notes. So if we continue down this route what happens to our abilities to communicate? And how do we talk to the ‘have nots’ and ‘choose nots’ of technology?

And what physical consequences are there? Texting thumb is an identified issue as is the hunched neck and shoulder of a mobile addict. It is less these individual consequences that interest me so much as how fast this is all happening. We think of evolution in generations – centuries or millennia, not years or decades. I’m also interested in an updated version of the infinite monkey theorem. If we gave smart phones to monkeys would they develop texting thumb and how fast?

I’m certainly not the first to raise the issue – but I am fascinated by our ability to detest (but become ruled by) one form of digital communication (email) whilst embracing so many others – and interested in the evolutionary experiment we are running!

Always on

clock watching

More for less – it’s been the holy grail of business for years. And yet – sometimes we don’t know it when we see it. Or rather when it’s there – it is the seeing that is the fundamental problem. Trust in management circles has generally relied on seeing what’s going on and reviewing what gets produced. The issue with a knowledge or virtual based economy is that the effective way to work is likely to be remotely, probably mobile and digital in nature, and hence invisible to the watching manager. And increasingly what matters, in a consumer world at least, is experience – it trumps product or service and hence quite often outcome is more important than measureable output.

Why does all of this matter? Work – life balance – how to help people be more productive in work, and yet enjoy life. Mobile devices and enterprise apps are making this increasingly possible but the behavioural and cultural aspects are as ever the most intractable. Or at least they have been to date. For generations comfortable with texting their immediate neighbour rather than conversing, it shouldn’t really be a problem. Like so many things affected by digital we need to reappraise trust, metrics and accountability – after all the research has shown for years that except for mechanical tasks productivity increases with autonomy (Check out Dan Pink on the subject).

So fixing the old issue may be about technology and trust – but what about the new? Do we really understand what working remotely, when it suits you, without an office, really looks and feels like? I’m intrigued by Hoffice, a Swedish start up which is encouraging people to get groups of individuals at their homes – with a structured approach to working with timed breaks, coffee and encouragement to achieve rolled into the package.

As with so many things digital, the technology is only part of the issue – our own instincts and needs, the support and issues of working relationships, the trust and clarity of what good looks like in terms of outputs or outcomes are all key to long term success. And as the Internet of Things takes off I suspect that life is going to change again . . . .