Wednesday, December 07, 2011
Monday, November 21, 2011
I've also demonstrated how this process of evolution creates a cycle, with commoditisation enabling further genesis (as in innovation of new activities) and the importance of inertia barriers in regulating this cycle.
These cycles also appear at the macro-economic scale and they're known as Kondratiev waves, however even more localised cycles (i.e. specific to an industry) tend to be associated with organisational change.
Hence with the commoditisation of the means of mass communication (i.e. the internet), new forms of organisation appeared known as Web 2.0. These companies had different activities, practices, strategies and structure to the more traditional, enterprise organisations that existed before.
In general terms, this cycle of evolution and its interaction with inertia barriers creates three economic eras - peace, war and build. During the peace era, sustaining change is particularly high, companies fight to maintain their relative position and inertia barriers to change help support the status quo.
The war era occurs when an activity evolves from one state (such as products or rental services) to another (such as commodity or utility services) and during this time disruptive change dominates whilst inertia barriers become a hindrance to survival. Companies literally are fighting to survive, often against their own internal culture and inertia to change.
So during the last IT war, caused by the evolution of the means of mass communication, these new web 2.0 organisations formed and the rate of disruptive change was high. Those traditional, more enterprise like companies that were impacted but survived the war had adapted and learnt many of the lessons of web 2.0. Today, social networking, social media, rich internet applications are the norm.
However, cloud computing - which is nothing more than the evolution of a wide range of activities from products (and rental services) to commodity (and utility services) - has initiated a new era of war.
The models predicted (and this is what we found) that there are three main forms of IT organisation in the wild - the traditional enterprise who have adapted, the web 2.0 players and a new breed of Next generation companies. The practices, activities, strategies and organisational memes of these Next generation are the ones which will tend to diffuse and dominate our industry.
The underlying framework, models and principles of how this works is part of a report I'm finishing for the LEF. Including in-depth surveys of over a hundred companies, it provides a reasonable hypothesis of organisation evolution across activities, practices and strategies. I say reasonable because it's more than postulation as there is data that demonstrates the pattern but this is not peer reviewed, the sample sizes are small and hence its only a reasonable hypothesis and requires a good dose of scepticism.
I'm not going to go through the report but I thought it might be useful to just comment on how to identify the Next generation in general terms.
If your organisation :-
- embraces change and is acutely aware of inertia barriers
- has primary goals based upon disruption of existing markets and growing ecosystems rather than a focus on profitability and growth into emerging geographical markets
- views commoditisation not as a liability but an opportunity
- operates through small, highly empowered teams building and creating services
- builds and exploits ecosystems by enabling others to build upon its services
- uses data analytics rather than metrics to determine action
- continually challenges and removes processes
- understands evolution and avoids one size fits all mentality
- builds distributed systems designed for failure that use commodity IT where possible
- considers itself to be as, if not more, efficient than Amazon
- games behaviour both internally and externally
- views culture as malleable and focuses on talent density
- views open source as a tactical weapon
- is seen by others to be simultaneously highly innovative, customer focused and efficient despite what Porter said on the subject
I've provided a comparison between the traditional enterprise and the next generation in the following table.
Along with retail, media, travel firms and others who have already suffered in the last war - we should see software products & hosting, insurance and retail banking dragged firmly into this one.
Of course, along with this war era comes a build era, a golden age where the genesis of new activities flourishes and we see periods of frenzied growth.
The cycle is continuous, and the next major war after this one should be related to the commoditisation of the manufacturing process itself ... now, that'll be a big one. For me, this is personally important as it creates an opportunity to test the hypothesis.
What we should see as the means of manufacturing becomes more of a commodity (driven by 3D printing, printed electronics and hybrid printers) is a high degree of disruption in manufacturing industries as inertia barriers to change are broken by new entrants whose practices will be remarkably different from the existing players. The practices of these Next Next generation of company will diffuse and become the norm.
If this hold true, then I'll have enough to finally put the work up for peer review - having initial data (covering 4,000 data points), a hypothesis which describes a pattern from that initial data and has been preliminarily shown to exist in this current war through a survey (providing in total over 6,000 data points across 100 companies) and finally a pattern which is predictive.
If it doesn't and is falsified then it's back to the drawing board. The downside is I'll have to wait many years (possibly as much as a decade) before the next war starts ... if only companies were more like bacteria that I could grow in a lab.
Saturday, November 05, 2011
In the last fifty years wealth inequality has risen dramatically in the US, with real earnings (adjusting for inflation) increasing by 5% at the lower end of the scale and by 700% at the upper end of the wealth bracket. Not that inequality itself is a negative thing, it can spur ambition.
Unfortunately there is a strong correlation and causation between wealth inequality and intergenerational social mobility. Hence around the 1950s-60s, social mobility was around 12% in the US i.e. 1 in 8 of people in that era moved up (and down) a social class. If you were born into the working class around the 1950s-60s then you almost certainly know several people who have made it big, who have achieved the American dream, maybe you're one. Today, social mobility languishes around 3% i.e. 1 in 33.
Chances are that people born today in social working classes will see few of their contemporaries (if any) breakthrough to higher social classes.
In the US today, your future social class is not predominantly defined by your ability but by who your parents are and the opportunities they can provide you. As this spreads, the lack of role models for a change in class should become self reinforcing.
In short, if you're born today to a wealthy family, hey presto ... you're a success ... but if you're born today to a family of police officers (a noble profession in my view) chances of you becoming a CEO of a major corporation are pretty slim, certainly much less likely than it was for those born in the 50s or 60s.
I mention this because a friend made a comment that they thought that the concept of monarchy and class was over. Certainly in the UK we've suffered with poor social mobility and its impact on competition but even our social mobility is now better than the US. If anything, hereditary monarchy is alive, growing and becoming stronger in the US through hereditary financial monarchy. All Hail, the new Kings and Queens.
As for the American Dream, to be brutally honest the last vestiges of this are standing outside Wall Street in a much derided occupy movement. Certainly there will be examples of people who buck the trend (i.e. 1 in 33 or less) and there is always the X-Factor or adoption by a wealthy family.
My only advice is that if you're born into a low social class in the US, blame your parents and learn to curtsey or doth your cap. If your're born into the high social classes, thank your parents, lord it up but watch those peasants - especially when they get hold of pitchforks.
Bye, Bye American Dream ... nice idea, shame it didn't last.
[As an addition : for those who want to learn more on this subject, a good starting point is probably the Applied Economics 2009 paper from Harvard University scholar Dr Dan Andrews on "More inequality, less social mobility"]
Friday, November 04, 2011
Our economy faces unusual challenges due to the exceptionally high debt burden. In terms of Government debt this is represented through Gilts (Government backed securities of debt). The recommended solutions to our problems usually involved manipulation of the money supply in the hopes that somehow this will correct the underlying problems.
For example, in the UK the Government sells debt with Gilts then, through a wheeze known as Quantitative Easing, it prints money to buy back the Gilts it has sold. The net effect is that GBP is devalued (leading to commodity price inflation), the delta between buy and sell price is absorbed as profits by the counter party (normally a bank) and the entire distribution of wealth becomes further concentrated to the advantage of the counter party.
It would in effect be more cost effective (and honest) if Government's didn't sell and buy back Gilts but simply printed money to counter their shortfall. You'd still however be left with the issue of devaluation.
Now in an export led economy devaluation can help boost exports at the same time as increasing inflation. However, we're not an export led economy, so devaluation without direct investment leads to higher material costs, less profitability in internal markets and correspondingly cost reduction, weakening of the internal market, higher inflation and stagnation i.e. what the media call stagflation.
All of these problems are exacerbated by debt, inequality of wealth distribution etc. In the Eurozone we're seeing this shake out with Greece which faces either a decade or more of misery or default on the Government debt (i.e. gilts)
Now, a Greece default would be a disaster because it would be difficult to raise further debt and investors would be wary of trading with Greece. But wait, it's part of Europe ... the EU could always raise debt for it. I suspect this is why people are so keen for Greece to leave the Euro if it defaults. A country that defaults but then continues is not a message the market wants to hear.
Well despite media opinion, Government shouldn't operate for the benefit of investors but society as a whole and Gilts come with risk (albiet relatively small). Now if a country default and continued to operate, then the problem for the market becomes what if this idea extends? So let us extend this Greek idea a bit more. What if every country in Europe and ideally add in the US as well, simultaneously defaults on Government Debt i.e. Gilts and resets the debt to zero?
Well for investors it would cause one hell of a haircut and some banks would probably fail. However, those can be nationalised where necessary and measures taken to limit the damage. You'd certainly need some form of protective measures for those at the bottom end of society - hence tax raises would be necessary - and Government would need to co-operate to smooth out some of the fall-out.
There'd be lots of nashing of teeth, the markets would suffer turmoil whilst they reset but investment (in the case of shares, gilts etc) is always shorter term gambling and despite the losses the size of the EU & US means investment will still continue, possibly even flourish. It's worth remembering that market indices (FTSE etc) are also not a good indicator of the underlying economy despite the media's fixation on them.
I can't see there are actually any real downsides to a Europe and US default (bar the temporary turmoil etc) except for investors but such gambling inherently occurs risk and these are fairly unique circumstances. The Governments could always shore up the economy by direct Keynesian style investment as well.
Naturally, some would argue that this might collapse the USD / EURO / GBP against other currencies such as the Yuan. But the above approach wouldn't significantly increase money supply (other than investors dumping) and the Yuan isn't a free floating currency. Certainly against other countries they'd be possible devaluation but then given the size of the trading blocks the effect should be minimal over time. What about sanctions? Against Europe & the US - don't make me laugh.
Of course, some will argue it would spook investors so much that there'd be a collapse of investment. However, if the money was invested in Government debt it wasn't invested in longer term infrastructural goals which is what we actually need. Any investors sent to the wall would be quickly replaced by others - that's capitalism for you - and as for pension funds, well it's true that we'd need decent protective measures put in place to protect the poorest but beyond that not a great deal more.
I'm writing this because the UK Government is planning to give more taxpayers' money to the IMF who may contribute to the Eurozone bail-out (something which our Gov. said they wouldn't do) or in other words piling on more debt to help solve problems caused by having too much debt.
This is a cycle we need to break. Can I suggest we reset the market economy by resetting Government debt. A simultaneous default by Europe and US on all Government debt should do the trick.
Does this post mean I believe this is the right course of action? Well, unfortunately whilst the idea is interesting, the practice is virtually impossible. In order to exact such a change, the various Governments would need to agree and execute almost instantly to avoid investors dumping Government bonds on the unsuspecting public (or wrapping them up in some other complex instrument). I have doubts that our leaders are capable of such consolidated action. All it would take is one party to phone a friend and warn them to get out of Government bonds and the entire scheme would unravel quickly.
So, overall ... I agree with the concept but the practice is probably too difficult and it's much more likely that we'll settle for many years (or decades in the case of Greece) of austerity
Thursday, November 03, 2011
Consider the provision through an online API of a software system whether it’s SalesForce, Amazon’s AWS or PayPal’s x.commerce platform. These services are core utilities that the organisation is providing with the express aim of others consuming i.e. an ecosystem of consumers developing around the service.
The consumption of the service may represent general use or even novel and more creative uses e.g. the early provision of big data Hadoop systems on AWS. Since the genesis of any activity is uncertain (being chaotic) and likely to fail, then the use of utility services helps reduce the cost of failure and thereby encourages the creative pursuits of others. The larger the ecosystem, the more likely that creative models of consumption and the genesis of new activity will be occurring.
Naturally, if those activities are useful (i.e. Hadoop on AWS) they will spread through the normal process of diffusion. By monitoring the ecosystem’s use of your services this spread can be detected.
These factors enable a model known as ILC (innovate-leverage-commoditise) to be used (see figure below). Through provision of utility services and the development of an ecosystem, you enable others to create new activities at a lower cost of failure and hence encourage innovation to occur in the ecosystem and around your services. Through monitoring, you can leverage the ecosystem to identify novel activities that are spreading. An organisation then can either copy or acquire such activities and commoditise these to create further services that enable growth of the ecosystem and hence further innovation through componentisation effects.
For example, the introduction of AWS enabled others to build Hadoop on AWS. With the spread of Hadoop on AWS, Amazon introduced an equivalent utility service - Elastic Map Reduce (EMR) - which in turn has enabled novel activities to appear that consume EMR. And so the cycle repeats ...
- highly creative - by pushing such uncertain activities to a wider ecosystem
- customer focused - by leveraging the ecosystem to identify that which is becoming adopted
- highly efficient - by focusing on commoditisation
BUT they also have a strong differentiation strategy which is heavily influenced through creative pursuits of others within the ecosystem that develops around their utility service (i.e. genesis of novel activities being driven outside the organisation). This is why Next generation organisations often cite “enabling others to build upon our services” as criticial.
BUT they also have a strong customer focus strategy heavy influenced by adoption within the ecosystem (i.e. they leverage the ecosystem to identify activities that are spreading) and subsequent provision of these activities as further utility services.
In such cases, all three of Porter's strategies are being pursued simultaneously with the major nuance between these players is whether they use copying (a weak ecosystem play) or acquisition (a strong, reinforcing ecosystem play).
I mention this because "focus on customer, innovation or efficiency" is one of those truisms like "culture eats strategy for breakfast". It's a great sound bite but on closer examination, it doesn't seem to stand up to rigorous scrutiny today. The game has changed.
I'm currently collecting a selection of truisms and each one of them seems to leak like a sieve when exposed to rigorous study. The following are ones which in my view are all in need of serious re-evaluation :-
- You can't manage what you can’t measure
- You need to give customers what they want
- The best way to predict the future is to create it
- Avoid the commoditisation trap
- Business has only two functions - marketing and innovation
- Culture eats strategy for breakfast
- Focus on customer, innovation or efficiency
Saturday, October 08, 2011
In the last five years, GBP has dropped in value by between 23-47% against the USD, EUR and CNY when Gold is used as the standard. GBP has taken a pasting. Our UK inflation during that time has been around 18% (based on CPI) but that's a basket of goods approach, as we've all seen basic commodity inflation has been much higher. You can pretty much put the entire inflation down to GBP devaluation.
One might argue that devaluing GBP is good for exports, however the UK has a huge balance of trade deficit managing to clock up a record breaking £9.2 bn in Dec'10. Whilst exporters have raised some recent cheer, what has to be remembered is that the UK imports almost all its copper, ferrous metals, lead, zinc, rubber, and raw cotton and about one-third of its food, along with a whole range of finished goods. With the GBP down the toilet, the cost of these goods has risen dramatically and certain items just aren't luxuries.
So, who has made good with the collapse of the GBP and where did it come from? Well, the reason why GBP has been hit hard is basically because of monetarist policies such as quantitative easing and keeping interest rates low. Quantitative easing (QE) is the best wheeze of the two and consists basically of buying back debt we're constantly selling, at an obvious premium, and hence simply amounts to printing money and handing it over to banks. The monetarist delusion is that those banks will lend it out, increasing money supply, and hence magically all our problems will be solved. In reality it takes no consideration of capitalisation requirements, debt exposure, weakness of infrastructure, business cycle etc. The net effect is always bad for GBP.
Through financial engineering we've created a situation of increasing inflation (due to GBP devaluation through money supply manipulation) combined with a weakness in the economy as a whole since we're not bothering to directly investing in it and trying to combat the economic cycle. This combination gives us stagflation = stagnation of industry + inflation.
So who benefits? Well, a depressed GBP makes the stock market and housing more attractive to foreign investors. Hence the FTSE, though fluctuating, remains artificially high and London housing is undergoing a mini-boom. Hence some people in the city think we're doing well, when in reality they might be doing ok but the rest of country is sinking fast.
Of course, viable solutions to this problem which include increasing interest rates, direct investment in industry (rather than QE) etc will cause lots of short term pain for those with debts and exposure combined with haircuts for banks and investors. Rather than face this, we continue on a path of devaluing our future in the belief that somehow this can correct problems caused by borrowing too much from the future. It's like a drunk reasoning that the way to deal with their drinking debts and find the path to happiness is through selling a kidney and only buying methylated spirits.
So, does our current policy help us? Not a jot. The increasing focus on money supply will probably mean more QE. At the same time, the overall economy will continue to weaken, unemployment rise, tax receipts reduce creating a need for more cost cutting, cost of basic goods will continue to increase, export led business (without direct investment) will continue to flounder but at least the FTSE will look somewhat rosy until reality catches up with it and graphically demonstrates the error of its ways.
Eventually, if we keep on this route we will finally reach a tipping point and enter the world of hyper inflation combined with extensive contraction of industry. I can't think of a nifty combination of these terms, so I'll resort to, Hyper inflation + Contraction = "Zimbabwe" Economics. Of course, I use the phrase loosely here because to actually achieve the stunning results of Zimbabwe requires a very rare kind of recklessness (or more appropriately "wrecklessness") which is unlikely to be repeated.
I'm writing this so as we enter these more troubled times, can we please, please, please remember to round up all the monetarists and either lock them up in the Tower of London or ask them to provide the data which demonstrates why what they're doing makes sense.
Thursday, October 06, 2011
- Activities evolve and our industry has been shifting from a product to a utility service world. This has been clear for the last 6+ years, Salesforce knows this and they've been positioning themselves in that future space.
- Past success always acts as an inhibitor to future survival, it creates an inertia barrier to change. This is why Amazon and not some hosting company encumbered by an existing business model made the break into IaaS. This has been crystal clear for 4+ years. Salesforce knows this, it's why Oracle has been slow to react to the change.
- In this future world, competitive markets will become key to solving those outsourcing risks such as pricing competition, second sourcing options and loss of strategic control. Such markets will require multiple providers, access to code and data (i.e. standard data formats and APIs) and semantic interoperability. The latter point is only solvable with complex systems through running code and unless the market intends to be a captured markets (i.e. dependent upon one vendor) then that code will have to be open source. This has been clear for the last 5+ years. Everyone knows this just a lot of people refuse to believe it usually because of inertia barriers which have become institutionalised.
- Critical in this new world is the development of ecosystems as these enable a company to solve the innovation paradox and simultaneously appear more innovative and highly efficient. This has been blindingly obvious for 3+ years. More details on common models such as ILC can be found here. Salesforce knows this, they've been playing an acquisition game around their own ecosystem and sending market signals because of this.
- With a large enough ecosystem, you can create network effects through aggregated data e.g. market reports. This can be used as a soft form of lock-in i.e. even if you open source an entire system, your service still maintains an advantage simply because of the number of people using it. In other words, you can be entirely open but in effect create lock-in (i.e. gravity) for your service because of the benefits that being within that ecosystem brings. This has been painfully obvious for the last 3+ years.
- Salesforce has also been playing a tower and moat ploy, building a tower of core revenue surrounded by a moat of high barriers to entry and devoid of differential value. Attacking Salesforce is a tough call for anyone, hence I suspect Larry's aim to make interoperability his calling card.
Wednesday, October 05, 2011
After much ado, the European Union seems to have been badgered into emergency action in order to re-capitalise the banking system due to its over exposure to instruments based on sovereign debt and the reliance on the dollar. I'm not a fan of this, this is just another monetarists prayer to the altar of "no sodding evidence whatsoever" and as usual the taxpayer will foot the bill.
Naturally, there will be wormtongues who will claim it was a Keynesian approach when it all goes spectacular wrong ... that is par for the course for economic banter.
So given that we're going to re-capitalise the banks, let us at least try and arrange the situation in the interest of the taxpayer. First, re-capitalisation should be forced and not voluntary and the capital ratio set by Basel should be raised to 30%. Next the banks should be given two options - either raise the money yourself or borrow from us, the nice friendly EU.
Of course, being the lender of last resort, there will be a couple of strings attached to the capital we lend (oh and lend is the operative word). Hence :-
- The entire capital lent will need to be repaid annually over 5 yrs at EU base interest rates or average EU inflation (whichever is higher) + 10%.
- The EU takes precedence over all other debtors and the entire banks assets will be used to underwrite the loan
- A sum of Bank equity equal to capital lent will be paid to EU as our "setting up administration fee"
- Late payment will incur an APR of 200% plus a penalty of 50% on any remaining capital.
- No dividends will be paid until the entire loan is repaid
- Upon final repayment of the loan, another sum of Bank equity equal to the capital + interest + any late payment fees will be paid over to the EU as our "closing administration free"
- If you don't like the terms then go raise the capital yourself on the open market.
Now, I'm not actually advocating such draconian terms but I'm arguing for the EU and our Gov to stop acting like they're just pawns in this global game and start acting like pirates. The banking system is an essential vehicle for our economic system but like all things, it should be managed in the wider interest of society.
Tuesday, October 04, 2011
-- Update 13th February 2014
One of the key parts of the above scenario depended upon an aggressive share buyback in order to sustain market value / perception. I was expecting this to be around $100 billion. It turns out that buyback is much less than I anticipated (around $54 billion in the last two years) though Icahn was pushing for closer to $90 billion. This cutting back on the buyback is a fabulous move and gives AAPL a lot more breathing room. Cook is doing an excellent job.
-- Update 17th January 2015
Cook still continues to perform an outstanding job. There's the usual grumbles about the "lack of innovation" along with certain investors demanding a "larger cash buy back" but Cook has played a strong game, focusing more on the growth of the ecosystem, using supply chains effectively ... it's all good. Really impressive and adds many years to that company.
-- Update 30th April 2016
Cook has been truly remarkable. Apple is in a stable and strong position. Obviously some investors are unhappy about not getting big share buybacks or the lack of stellar growth but since they are just interested in a quick buck who cares. Well done Cook. Exceptional.
As we all know, proprietary software costs time (t) and money (m). Hence,
Proprietary Software = m.t
However, we also know that time is money. Hence,
Proprietary Software = m^2
However money is the root of all evil. Hence,
m = (Evil)^1/2
By substitution we can show that,
Proprietary Software=((Evil)^1/2)^2 = Evil
Ok, so proprietary software is evil but is this more evil than open source? Since open source only costs time, it is therefore obvious that:-
Evilness of Proprietary Software = (Evilness of open source)^2
As a function of cost, then :-
Evilness of Proprietary Software per $= (Evilness of open source)^2/0
Evilness of Proprietary Software per $= (Evilness of open source).infinity
If we hypothesise that open source isn't evil then :-
Evilness of Proprietary Software per $=0.infinity = 1
In other words, proprietary software is infinitely more evil than open source and even if open source isn't evil then proprietary software still absolutely is.
Next posts include ... Mathematical proof of why patent lawyers suck your soul dry and why clothing concepts in a cloak of mathematics doesn't make them right.
Saturday, October 01, 2011
I find irksome the management mantra that is commonly spouted of "Culture eats strategy for breakfast" because no-one ever seems to be able to justify the statement with data. I thought I'll pen a few thoughts on this.
An organisation consists of a mass of people, activities and practices combined with reserves of physical, financial, human and social capital. It's the interaction of the former three which impacts the latter either positively or negatively.
Culture results from the interaction of people with social (e.g beliefs, values, reputation) and human (e.g. skills, knowledge, myths) capital. In much the same way, the business itself can be described through the interaction of people, activities and practices with various forms of capital.
Strategy, is simply a plan of action, an intention and an aim e.g. it's the act of trying to achieve a particular goal or result. Either something has a strategy or we leave it to chance, randomness and accident.
We often talk about product strategy, marketing strategy, business strategy and organisational strategy but equally (if not in many cases more) important is cultural strategy. If you don't aim or plan to develop a particular culture, you'll end up with something by accident and that is not necessarily a good thing.
In recent years, the creation, building, "gaming" and planning of culture has become an increasingly more visible topic. Few have highlighted this trend as much as Zappos and Tony Hseih's work on delivering happiness. Be under no doubts, you can plan to build a specific culture.
Once a culture has formed it can certainly impact what business, product and marketing strategies you can effectively deploy in much the same way that past product strategies often impact future product strategies through inertia such as concerns over cannibalisation etc. In some cases, a future product strategy may require you to plan a new culture by spinning-off a group from the main corporate body.
As a rule of thumb your future strategies are impacted by today's strategies.
Whilst I can see some modicum of merit in bland arguments such as culture trumps products in certain industries, the culture eats strategy argument appears entirely misguided because you can plan to create or change a culture. Your strategy might require you to create a new group, to focus on happiness or to game the system - it doesn't have to be random or accidental.
To cut a long story short, the "Culture eats strategy" statement hypothesises that :-
unplanned, random and accidental [lacking strategy] culture eats for breakfast having a plan, intention or aim [for culture].
... I'm sorry I don't buy that, especially unless backed up by considerable amounts of data to counter examples such as Netflix and Zappos which show the opposite.
The counter hypothesis is that having a strategy for culture, organisation, business, product, marketing etc is better than not having one i.e. strategy eats all for breakfast, lunch and tea. In other words having a plan of action, aim or intention to achieve a goal is better than relying on randomness, accident and fate to do the same.
Now, the counter hypothesis would appear to be an obvious truth which is dangerous in itself. So, I'll start the process of collecting data and let's find out whether the "Culture eats Strategy" brigade have a leg to stand on. I doubt they do but then I might be pleasantly surprised.
Sunday, September 25, 2011
The O'Reilly Strata Conference NYC has now finished and I have to say it was a blast. The standard of speakers, corridor chat and the general environment was exceptionally high. If you're interested in speaking, they've already opened up the request for proposals for the Feb'12 event, so get writing.
There was something magical about the event in NYC created by a convergence of people, technology and ideas. I haven't seen a conference with this much buzz and excitement since ETech. You can guess that I was truly impressed, it was O'Reilly at its finest and that's a tall order given the very high standard of their conferences. If you missed the conference, then you can find many videos from the event on the O'Reilly channel.
I was also fortunate enough to be asked to speak, the video of my talk is below. In my session I covered commoditisation, innovation and the role of big data by examining some of my new research into the evolution of organisations. As per normal, the title of the talk is my usual Situation Normal, Everything Must Change and the talk itself is different from any other previous example i.e. the title applies to the talk itself.
By the way, if you have enjoyed my talks and you're interested in helping out with my research then please take 20 minutes to complete my online survey, as that would be really appreciated.
Sunday, September 11, 2011
On average, I find myself on a plane at least twenty times in a year. There's a lot I dislike about flying. In no particular order my pet dislikes are: flying coach, British Airways and airport queues at customs (especially NYC & SFO where it is particularly abysmal).
I don't suffer from jet lag (I use the starvation trick when needed) and I generally find airport security pretty quick and responsive. Though I'm a smoker, I've always gone outside the building to smoke, so the movement of airports to non-smoking has been no skin of my nose.
Well, that was until today.
I arrived early at Heathrow Terminal 5 (an airport I rarely use as it's mainly BA), sat down for a quick bite to eat and then decided to go out for a smoke - obviously you can't smoke in the airport.
So I went to security who said I had to be escorted through. Kidding? I have been through every one of the world's busiest airports plus a whole host of smaller airports and I've never once needed to be escorted from departures to outside the airport. I was then told by security that I had to get permission from the British Airways customer support person - damn.
Being incredibly polite I asked the lady from BA whether I could be escorted outside to have a cigarette. "No" was the reply because there was less than three hours until my flight.
So, let us be clear ... I'm currently a "captive" inside T5 departures lounge unable to leave until I get on my flight? I'm held against my will, a prisoner of BA!!! I feel a protest song coming on ...
"Free, Free, Free Simon Wardley ..."
Joking aside, my dislike of British Airways has hit an all time low.
Well, it's BA so what do you think happened. Yes, my flight has been delayed close to departure by just under two hours. Still not allowed out to have a smoke - a cruel and unusual punishment.
Saturday, September 10, 2011
Many years ago, I produced the ubiquity vs certainty curve to describe the process of how business activities evolve. It took 4,084 data points to create the curve and more details about this topic can be found here.
Currently, I'm researching into how organisations evolve. After conducting a number of general and then specific interviews (creating a thousand data points), I've been able to create models of evolution which hopefully I'll be using in future presentations.
However, I need to collect more data to test the models and either verify or falsify them and hence I've put a general survey online : [Link to Survey]
The presentations that I give at various conferences are based upon this process of hypothesis and testing, so if you have ever found my work useful (such as my various talks at OSCON on cloud computing, see below) then I would be very grateful if you could take 10-20 mins to complete it.
Depending upon the results and validity of the models, I'm aiming to give a number of talks next year on how organisations evolve combined with techniques to exploit this. Naturally, I'll be blogging about the findings as well and the survey does allow you to provide an email in case you'd like a copy of the overall results.
Friday, September 02, 2011
A couple of things to point out. Twitter is not the best tool in the world to determine the exact context of a discussion because those listening aren't generally privy to the history of the discussion. Hence in this case, it may not be clear that Sam Johnston and I are in absolute agreement on the importance of open source and efforts like OpenStack in this world.
Any difference between us is on the necessity of reverse engineering APIs and co-opting as the main short term tactical play. The long term we're both totally in agreement on - open standards, open formats and open source are critical.
Our difference in views on short term tactical plays hardly constitutes a battle but is merely debate. As for being a "giant", whilst that is very flattering it doesn't coincide with my view of the world. Nevertheless, it was an excellent post by Chris and much appreciated.
Just to clarify my view - as it currently stands any company can reverse engineer an API for reasons of interoperability. Hence when trying to make a market of providers in the IaaS space with semantic interoperability between providers, I strongly support adoption where there is clearly a dominant API.
It should be noted that such a market can have multiple open source and proprietary implementations around the API. However, running code through an open source effort is necessary to form a market place without a single (or consortium of) vendor(s) being able to force a tax on that market. In other words, providers need to have an operational means of implementing the service and compete in the market without a necessity to purchase software licenses (a tax on competition). They may choose to buy software to do so but a free market is one unencumbered by such forced taxation.
This is why I do no support MSFT Azure's effort, despite the provision of open standards because there exist no open source implementation.
This is why I did not support Google's AppEngine, despite the provision of an SDK as there existed no fully operational open source means of implementing the service.
This is why I strongly support open source efforts which reverse engineer the dominant API for reasons of interoperability e.g. open stack, eucalyptus etc.
It is also why I strongly support open source efforts which attempt to create the dominant standard in a fledgling market, such as CloudFoundry in the PaaS arena.
Once the marketplace of alternative providers is large enough and it has the dominant ecosystem then the open source effort in effect becomes the defacto standard for implementation and the API in that market. If necessary, due to abuse of position by the original provider, then the API can be differentiated away from the original provider including providing an entirely new API where applicable.
I don't find attempts to differentiate on API in a utility world where one API is clearly dominant meaningful. Of course if an open source effort (such as openstack) creates a large enough ecosystem then it is in effect the dominant and can do as it pleases.
I find re-inventing the wheel by creating an API by committee and attempting to get the market to adopt as a wasted effort when a market has in principle chosen.
I do find the way to standardise is through creating the largest ecosystem and in such cases both reverse engineering the dominant API for reasons of interoperability combined with provision of open source running code is necessary.
Co-opt rather than compete is the order of the day in this world.
Monday, August 29, 2011
When it comes to computing infrastructure, the innovation of modern computing probably started with the Z3 in 1941. This act of innovation created an entirely new class of activity - computing infrastructure - which has evolved over time through various stages with custom built examples (LEO etc), products (IBM 650 and onwards) and eventually led to commodity and utility provision. For reference, the full cycle is innovation, custom built, product (with rental services) and commodity (with utility services).
- Innovation of a genuinely new activity which is distinct from the evolution it enables.
- Evolution of an activity to custom-built, product (rental) to commodity (utility services). This process is commonly called commoditisation.
- Sustaining changes dominating within domains (i.e. product)
- Disruptive changes dominating between domains causing a discontinuity with the past (i.e. product to utility services)
- Enablement and acceleration of the innovation of higher order systems through commoditisation of lower order subsystems (i.e. creative destruction and componentisation)
- A difference between consumer and provider perspective.
- Breakthrough Innovation
- Feature, Product and Service Innovation
- Sustaining Innovation
- Disruptive Innovation
- Loads of Innovation (paradigm shift etc)
- It's my product, of course it's an Innovation ...
Or in other words Innovation.
You have no hope with spotting the pattern under such circumstances and it's no wonder that people get confused with this subject. This has severe impacts on management practices but that's a post for another day.
Thursday, August 18, 2011
I was very fortunate to be asked to give the opening keynote at Hosting Con 2011 covering commoditisation, business evolution, leadership and what the various tactical plays in the cloud computing space mean to hosting companies. The audience was fantastic, I had a great time and despite using excessive numbers of slides, no-one was hurt in the process.
Continuing on the theme from my OSCON tutorial, I've uploaded a summary set of slides which are highly condensed but give a taster to what we covered.
Alas, there's no video and as per usual I'm six years into writing my book and around 30% of the way there. The subject matter keeps on giving me more areas of interest to explore, so don't hold your breath for me to finish any time soon.
Tuesday, August 02, 2011
I gave a three hour tutorial at OSCON on innovation, commoditisation, business evolution, organisation, leadership and various tactical plays in the cloud computing space. The talk was a blast, I really enjoyed it and judging by the feedback it hit some home runs with many of the audience.
However, the presentation is 1,041 slides long and so - I'm not uploading that or creating a video. Instead I've made a summary presentation which covers the main points.
Be warned, it's highly condensed.
Tuesday, July 05, 2011
Being disrupted by cloud (something which was predicted back in 1966) and was screaming loud in terms of weak signals in the early to mid 2000s is pretty shocking. This is an issue beyond inertia (and denial) and it is better described as corporate blindness.
From my experience, corporate blindness is fairly rife. The impact can be reduced through mapping of a landscape or other mechanisms to improve situational awareness especially when combined with some understanding of economic play. Whilst I like the NYT article, in today's competitive landscape just being aware of inertia and that your own success inhibits your future survival isn't going to enable you to compete against some of the tough players out there.
Oh, and don't get me started on OpenStack.
-- Update 12th February 2015
Microsoft seems to be really turning the corner, they've increasingly adopted a more open route and seem to be overcoming inertia. This is fabulous to see. They've a top notch CEO in Satya Nadella.
Tim Cook has done a tremendous job with Apple, rebalancing it to a more ecosystem focused future. Truly exceptional CEO in my book and up there with Jeff Bezos.
Oh, and don't get me started on OpenStack. What a wasted opportunity.
Saturday, June 04, 2011
I'm traveling on a research trip in the U.S. and whilst my topic is one of organisation and the impact of change, I cannot help but notice the current "confusion of responsibility" that appears to be occurring in the mainsteam media.
All business activities evolve and all organisations are in a constant competitive struggle. One of the impacts of this change is that previously successful models are often replaced, for example the current shift from software products to software services. Unfortunately, organisations who have built around the previous model often face internal barriers which create an internal inertia to making the change necessary for future survival. Without this inertia, external disruption would not occur and today's giants of industry would generally be tomorrow's giants of industry.
Disruption is simply a consequence of management failure, it is the responsibility of management to ensure the organisation not only survives and competes today but also tomorrow. However, management doesn't operate in a vacuum and the inertia is often exacerbated by the actions of the financial markets i.e. it becomes difficult to change a successful model even though that model has a limited lifespan precisely because the financial markets are short term and see only short term value.
The pressure that the financial markets create is immense for any large organisation and ultimately those financial markets share a heavy burden of responsibility for failures caused by the pressure they exert. However, the short term view of the markets is such that this is not seen as their responsibility and long term failure is solely put down to management.
Unfortunately, the financial markets are very adept at blaming others for what is ultimately their fault. The current economic crisis caused by irresponsible lending, a merry go-round of debt re-capitalisation and excessive exposure are all the responsibility of the financial markets. Whilst you can point fingers at consumers, that's like saying a toddler shouldn't have eaten the candy you gave it and blaming the government is like blaming a parent for not providing some rule to govern your irresponsible choice.
The financial markets are entirely responsible for the economic crisis. They're equally responsible for many company failures through short-term attitude. They're also responsible for acting in a dishonorable manner when it comes to the Fed Bank - through the exploitation of quantitative easing for financial gain to the using of Fed money to recapitalize rather than increase lending.
The U.S. Gov and Public should realise that the Financial markets act on a short term basis without consideration of the long term consequences. They act with the persona of an adolescent, always blaming others, threatening to run away, demanding less rules and pointing to a lack of rules as a reason for their own reckless behaviour. They discount the long term to a frightening degree.
Short of grounding the child (the fiscal equivalent of nationalisation), the Gov should understand that the financial markets are an offspring of society and despite the threats they have to operate within its rules. Those rules should and can be gamed to encourage more longer term responsible behaviour.
The financial markets won't magically learn responsibility, that behaviour has to be taught and encouraged. Left alone, they'll just get upto the same old tricks.
Tuesday, April 12, 2011
--- Update 5th May 2014
Most is proceeding as expected. Bizarrely SAP / Oracle just seem to be waking upto the threats ... a bit too late. Unfortunately also OpenStack continued its differentiation play and the market never formed. Cloud Foundry however is storming ahead. Apple is starting to look weak vesus Android whilst OpenCompute gathers momentum.