Everyone’s talking Digital and it’s Dangerous

INSEEC London| 18 January 2016

David Terrar | Founder & CXO – Agile Elephant | @DT on Twitter

innovation | digital transformation | value creation | (r)evolution

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. ”

Alvin Toffler

Agenda

• The digital backdrop - 20 years of a world gone digital

• Why the current business landscape is so disruptive and what we call the Digital Enterprise Wave

• Mobile is eating the World – extract from Benedict Evans

• Why organisational change is relevant, a look at different models, examples and case studies

• Digital transformation defined

• The management shift that is emerging (and required)

• We’re not in Kansas any more

Hang on - can you explain this new digital landscape?

"Move bits, not atoms."

January 1995

Forums – Usenet in the 70s, web based forums & bulletin board services start ‘94 – online journals ‘94

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Being Digital – Nicholas Negroponte – moving atoms to bits – published Jan ‘95

Wikis – Ward Cunningham installs first wiki Mar ‘95

Blogging – term “weblog” John Barger Dec ’97, “blog” used as noun and verb Peter Merholz Apr ‘99

Wikipedia – opens Jan ‘01

WordPress – first released May ‘03

LinkedIn – launches May ‘03

Flickr – launches Feb ‘04, acquired by Yahoo Mar ‘05

Facebook – launches Feb ‘04

iPhone – announced Jan ‘07, available Jun ‘07

iPad – launches Apr ‘10

Twitter – 1st tweet Mar ‘06, SXSW Mar ’07, Apr ‘07

Instagram – Oct ‘10

Snapchat – Jul ‘11

Tumblr – Feb ’07

WhatsApp – Feb ‘09

Pinterest – Mar ‘10

20 years of a World Gone DigitalThe development of social media, social networks and mobile computing

YouTube – launches Feb ’05, acquired by Google Oct ‘06

Skype – launches Aug ’03, acquired by eBay ‘05, Microsoft May ‘11

Your business model is under threat!

Necessity is the mother of invention

Reinvention is the mother of necessity

The Digital Enterprise Wave

ride it

or go under!

Infrastructure

Connectivity

Internet

WiFi

3G & 4G

Human Factors

Entrepreneurship

Crowdsourcing

Millennials

Economic

Outsourcing

Offshoring

Low cost

The Digital Enterprise Wave

The Big Shift

Cloud Social Mobile

The Digital Enterprise Wave

Emerging Technologies

Internet of Things

Big Data & Analytics

3D Printing

Artificial Intelligence

Everything will have an IP address

Gartner predicts 25 billion connected devices by 2020

The Digital Enterprise Wave

“Business as Usual” Thinking

Point Social Media Solutions

Siloed Communities

Lack of Integration

Legacy Systems of Record

Business as Usual

The Digital Enterprise Wave

We need “Digital” Thinking

Digital and Social inside and out

Business Model Innovation

Systems of Engagement

Design Thinking

Strategy

Skills

Staff

“Shared Values”

Structure

Systems

Style

Hard Systems

Soft Systems

Integrates “hard” and “soft” business systems in a structured way

“technology neutral”

Includes employee engagement

Proven approach

Especially useful for lessons in managing major change

McKinsey 7 “S” Model

The Digital Enterprise Wave

The shift to Digital (Business) - what are we calling it today?

• Enterprise 2.0 → Social Business → Digital Transformation

• You need an ESN or social collaboration approach at the heart

• Cloud technology drives scale, reduces cost

• Mobile technology increases reach, penetration

• Analytics increases focus, impact

• It’s about much more than technology

Nexus of forces3rd PlatformBig wheel of Disruption

it’s not digital, it’s business

The Value Chain is being disrupted end to end

Probability of outcomes

“The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.”

Peter Drucker

Why organisational change?

• The evidence is mounting – to make digital truly work change is necessary

• The key is change of Mind-set and Culture

• I worry about some current thinking on organisational structure….

• We need “Evolution not Revolution!”

Core Building Blocks for Responsive Organisations

• Lessons from Human evolution

• Dunbar’s Numbers

• The rise of Heirarchies

• Pressure on today’s Organisation Structures

• Responsive Organisation models • Military• Civil• A bit of Organisation theory

• Organisational Ossification

Organisational Structures

Chimpanzees and Bonobos

Chimpanzees and bonobos are two separate species within the same genus. They are 99.6 percent genetically similar to each other, but have different appearances and vastly unique social behaviours.

The biggest differences between the two are in how they govern their societies:

• Chimps are led by an alpha male and tend to maintain order through aggression

• Bonobos are dominated by females and keep the peace through sex.

Both strategies have been equally effective at core Responsive abilities:• Act collaboratively• Information diffusion• Tool use

Same Primates, Different Cultures & Organisations

Machiavellian Intelligence Hypothesis - primates have large brains because they live in socially complex societies: the larger the group, the larger the brain. Dunbar extrapolated this work to humans to predict limits to various relationship types

Close Support Group

Close Friend-shipGroup

ExtendedFriend-ship Group

Casual Friend-ship Group

Acquaint-anceGroup

Can put a name to a face

Dunbar’s Numbers

Transaction Costs make companies redundant?

Organisations under pressure - Economics

Hierarchies• Flexibility• Lowest Cost• Automate

Heterarchies• Holacracy• Wirearchy• Podularity• etc

Augmented Humans• AI• “The Singularity”

Responses today

Co-ordination, Communication, Flexibility, Fungibility, Modularity and other aspects of Responsiveness are hardly –key issues have always been:

• Volume of communication required• Complexity of communication• Time taken• Requirement for knowledge transfer or storage• Setup/teardown cost of each communication• One way or two way, acknowledged or not• Asynchronous or Synchronous?

Theory of Organisation Design – what really works?

Tradeoffs in network design

Hierarchy Fishnet Mesh Full Mesh

Nodes = 6Links = (N-1) = 5Max Distance = 4Mean Distance = 1.6Ave connections = 1.5

Nodes = 6Links = 9Max Distance = 3Mean Distance = 1.25Ave connections = 3

Nodes = 6Links = N(N-1)/2 = 15Max Distance = 1Mean Distance = 1Ave connections = 5

Underlying Mathematics of Organisations

There are tradeoffs in network design….

Hierarchy Fishnet Mesh Full Mesh

• Simple, Scalable• Efficient & Economic to operate• Rigid• Fragile• Data can be trapped, errors

amplified

• Most efficient fully resilient configuration

• Increases complexity at far lower rate than highly connected mesh

• Complex scaling issues• Fully Resilient• Fully Redundant• Easy to reach anybody• Easy to swamp everybody

Plusses and Minuses

taking responsibility individually and collectively rather than relying on traditional hierarchical status

Hierarchy - Wirearchy

http://wirearchy.com/what-is-wirearchy/

Increase in links as number of people increases is geometric (n=2) in full mesh, linear for hierarchy

0

1000

2000

3000

4000

5000

6000

7000

10 30 50 70 90 110

Hierarchy

Fishnet

Full Mesh

Links

People

Heterarchical structures have major scaling problems

For example Sociacracy (Holacracy is a type of this model) architecture is a hierarchy of meshed cells, an attempt to derive benefit of mesh where it is most useful (small task focussed groups) without the scale problems of full meshing

This is a type of “small world” architecture where most of any person’s links are very local, with a few long distance (socially speaking) links into other groupsNodes = 36

Links: • Full mesh = N(N-1)/2 = 630• Hybrid = 6 cells + mesh = 99Mean Distance = 1.25, up from 1Ave connections = 5.33 (would be 35 in full mesh)

A hybrid hierarchy of heterarchies

Can military tactics be responsive?

"No plan survives contact with the enemy." - Field Marshal Helmuth von Moltke(1800–1891)

Today's military thinking has to react to asymmetric warfare and very fast moving events, and has moved a long way from traditional command & control:

network-centric warfare designed to flatten the hierarchy, reduce the operational pause, enhance precision, and increase speed of command

Increasingly the senior people can only describe the desired direction, not the how

The commander’s intent describes the desired end state. - 1993 US Army Field Manual (FM) 100-5

Lessons from today’s Military

McRaven’s Theory of Special Operations:

8 historical special operations cases analysed (including the Raid on Entebbe) derived 6 principles:

o Simplicity

o Security

o Repetition

o Surprise

o Speed

o Purpose

"a simple plan, carefully concealed, repeatedly and realistically rehearsed, and executed with surprise, speed, and purpose" - in three phases:

• Planning (simple)• Preparation (security and repetition)• Execution (surprise, speed, and purpose)

Asymmetric Warfare & Special Forces

OODA Loop - USAF Colonel John Boyd

OODA Loop – design for a Responsive Organisation

Peter Principle

In any organisational structure, an employee will rise until they get to their level of incompetence.

• Promotion is driven by ability to do current role not next role

• Over time, all organisations fill up with incompetent people

• Some form of forced culling required e.g. “up or out”

Parkinson’s Law

Work expands so as to fill the time available for its completion.

• An official wants to multiply subordinates, not rivals

• Officials make work for each other.

E.g: increase in the number of employees at the Colonial Office while Great Britain's overseas empire declined – it was at its largest when the UK had no colonies left

Pournelle’s Law

In any organisation, the people devoted to the benefit of the organisation itself always get in control

Those dedicated to the goals the organisation is supposed to accomplish have less and less influence, and sometimes are eliminated entirely.

3 P’s of Organisational Ossification

• Fairness to each other and everyone with whom we come in

contact

• Freedom to encourage, help, and allow other associates to grow

in knowledge, skill, and scope of responsibility

• The ability to make one's own commitments and keep them

• Consultation with other associates before undertaking actions that

could impact the reputation of the company

A Team-Based, Flat Lattice Organization

checks and balances to ensure accountability, transparency and honesty

Organisational Change

• It’s not about changing the org chart – many structures will work

• It is about mind-set and values:

– accountability, transparency and honesty

– checks and balances

– fairness

– freedom to encourage, help, collaborate

– taking responsibility individually and collectively

– empowering employees

Total Value Created

IncreaseRevenue

Average Sale £

Sales Volume

Reduce Costs

Churn

Operating Cost

• Deeper understanding of customer needs• Conversation with customers increases

attachment to business

• Increased marketing penetration at lower cost

• Faster lead generation & customer onboarding

• Faster understanding of product and customer problems

• Pro-active customer retention

• Fast information movement and higher levels of collaboration drives efficiency

• Higher employee engagement drives effectiveness

Close link

Digital Business Value CreationDepending on the business, the impact of digital transformation will vary – but will drive significant value

Bottom line = value creation

“At the height of its power, the photography company Kodak employed more than 140,000 people and was worth $28 billion. They even invented the first digital camera. But today Kodak is bankrupt, and the new face of digital photography has become Instagram. When Instagram was sold to Facebook for $1 billion, it employed only 13 people. Where did all those jobs disappear? And what happened to the wealth that all those middle-class jobs created?”

Jaron Lanier

Digital Transformation – a definition

Digital transformation is the process of shifting your organisation from a legacy approach to new ways of working and thinkingusing digital, social, mobile and emerging technologies. It involves a change in leadership, different thinking, the encouragement of innovation and new business models, incorporating digitisation of assets and an increased use of technology to improve the experience of your organisation's employees, customers, suppliers, partners and stakeholders.

Leading Digital

What is your level of Digital Mastery?

- generate 9% more revenue- create 26% more profit- 12% higher market valuation

“Digital Darwinism is unkind to those who wait”

Lesson 1 – Transform Business Models And Engagement

Lesson 2 – Keep The Brand Promise

Lesson 3 – Sell The Smallest Unit You Can

Lesson 4 – Know That Data Is The Foundation Of Digital Business

Lesson 5 – Build For Insight Streams

Lesson 6 – Win With Network Economies

Lesson 7 – Humanize Digital With Digital Artisans

Lesson 8 – Democratize Distribution With P2P Networks

Lesson 9 – Deliver Intention Driven, Mass Personalization At Scale

Lesson 10 – Segment by Digital Proficiency Not Age

http://www.slideshare.net/rwang0/201504-disrupting-digital-business-short

• One of the largest bookmakers in the UK

• 80 year old company undergoing a major culture shift

• Adopting a lean start up model

• Product teams include people who used to be in marketing, IT, product management

• 4-6 week new product cycles

• Touch the customer within weeks – used to be 2 years

with

• 76,000 employees now collaborating• Sharing knowledge and expertise through 7,500 purpose built

communities• 30% active users posting 10 collaborative notes per week/per

user• Better knowledge sharing leads to faster response times and

more wins• Reducing response time in some cases from 2 days to 45

minutes• Operational efficiency gains by reducing internal e-mail overload

by an average of 60%• Saving an average of 2 hours a day per employee

Atos "Journey to Collaboration" / Zero emailTM program

Winners Of The 2014 Groundswell Awards (Business-To-Employee Division)

We’re not in Kansas any more

References

Not for reading – just for reference

http://en.wikipedia.org/wiki/Nicholas_Negropontehttp://en.wikipedia.org/wiki/Being_Digitalhttp://adjuvi.com/what-is-digital-business-is-it-e-commerce-the-collaborative-economy-or-apis-yes/http://www.industrytap.com/everything-internet-will-be-14-4-trillion-market-by-2020/3054http://www.zdnet.com/article/25-billion-connected-devices-by-2020-to-build-the-internet-of-things/http://www.zdnet.com/article/the-new-cio-mandate/ http://www.jaronlanier.com/futurewebresources.htmlhttp://www.gore.com/en_xx/aboutus/culture/http://www.johnlewispartnership.co.uk/about/our-constitution.htmlhttp://wirearchy.com/what-is-wirearchy/http://blog.medallia.com/customer-experience/ceo-top-pyramid/http://www.ibm.com/smarterplanet/us/en/centerforappliedinsights/article/social_insights.htmlhttp://socialbusinessjourney.com/2014/02/25/social-business-cookbook-soft-version-for-all-culture-hackershttp://www.themanagementshift.com/ http://www.amazon.co.uk/Leading-Digital-Technology-Business-Transformation-ebook/dp/B00NE6MG0Y/ref=sr_1_1?s=books&ie=UTF8&qid=1416926793&sr=1-1&keywords=leading+digitalhttps://vimeo.com/130722577http://www.slideshare.net/a16z/mew-a16z/2-Mobile_is_makingtechnology_universal

David TerrarAgile Elephant | techUK | EuroCloud UK

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innovation | digital transformation | value creation | (r)evolution