Wednesday, April 16, 2014

'The best summary post that you've done' ... on mapping.

Things appear and diffuse in society through diffusion curves of ever maturing versions of the act. Product A1 leads to a better Product A2 and so on, until it finally becomes more of a commodity (or utility if suitable). These diffusion curves follow a s-curve shape and have an exponential component.

However, many of the curves (A1 to A5) tend to be related to products leading us to a misperception that since the time for products is long then the time to convert to utility will be equally long. This creates a period of overlapping conflict between the product view of the world and the more commodity / utility view of the world.

Figure 1 - Diffusion curves of A1 to A6
*example A1 to Aabove is not real data but a hypothetical.

Whilst diffusion curves are not identical over applicable market and the same time frame, you can graph evolution by measuring over ubiquity and certainty. What drives the process is competition both demand side (which drives ubiquity) and supply side (which drives certainty).

Figure 2 - Evolution of A1 to A6
*example A1 to Aabove is not real data but a hypothetical.

You can then draw a map of the environment and overlay common economic factors e.g. the evolution from the uncharted space (the rare, uncertain and changing) to the industrialised (the common, the defined, the static) and the change of properties this involves. Included in this is how evolution not only drives efficiency but also through the provision of ever more standardised interfaces enables the development of higher order systems which enables future but uncertain sources of wealth (e.g. electricity enabling TV, radio, computing etc).

 Figure 3 - Map of A1 to A6

*example A1 to A6 above is not real data but a hypothetical.

Of course, competition doesn't happen in isolation and the improvements to efficiency (+e), agility in building higher order systems (+a) and hence ability to create new sources of wealth (+w) create competitive pressures for others to adapt. This pressure only increases as more adapt. This mounting pressure creates a punctuated equilibrium between the past and future. Hence the early exponential aspect of diffusion curves.

 Figure 4 - Pressure to adapt mounts as others adapt.

Alas we have inertia to change due to past success. There are over 16 different forms of inertia to be considered.

 Figure 5 - Inertia to Change

We can now take into consideration inertia, the competitive consequences of evolution (+e, +a, +w), the increasing pressure to adapt, the exponential nature of change, the properties of each stage of evolution (uncharted vs industrialised) and the impact of diffusion curves (time for product vs time to utility) to determine an overall pattern of economic change. This has three components - peace, war and wonder and it has a corollary in Hollings adaptive renewal cycle which is unsurprising given the work on evolution is driven by competition effects (as with nature).

 Figure 6 - Peace, War and Wonder from A1 to A6

*example A1 to Aabove is not real data but a hypothetical.

This pattern of peace, war and wonder occurs both at a micro and macro-economic scale. The larger waves (known as Kondratiev waves) are determined by whether the component that is evolving impacts many value chains (i.e. common components such as mechanical components, power, money and computing create large macro waves). The pattern of peace, war and wonder and its characteristics is reflected in the work of Carlota Perez with Wonder covering eruption & frenzy, Peace covering synergy & maturity and War being the phase between one wave and the next.

 Figure 7 - Peace, War and Wonder at a Macro-economic scale.

Understanding the basic patterns, mapping environments and exploiting how to alter the position of pieces on the map is an essential part of strategy. The effects of which are dramatic, as demonstrated by an examination of 100+ companies I undertook back in 2011/2012.

 Figure 8 - Strategic Play and effect on Market Cap over a 7 yr period.

* Examination of high tech leading companies, bubble size refers to number of companies in this group.

Unfortunately most companies have poor situational awareness (understanding of where and why) compared to action (the how, what and when) as exhibited by strategic documents. The main culprit for many of the problems faced is the box and wire diagrams we tend to use to try and understand the jumbled mess of activities, practices and data that represent organisations.

Figure 9 - The box and wire

All of these problems can be improved through the use of maps. However, mapping is only the start of the journey. Then you need to learn how to play chess between companies (and how to organise around evolution) and alas this is not something I can cover in a single blog post.

However, I'll be talking on this subject at OSCON.

PS. The title change was courtesy of @cpswan

For more reading on 
1) How to create a value chain - see here
2) Evolution - see here
3) Some of the basics - see here
4) The overall process - a long and somewhat rambling set of posts which never was completed and which I've since tidied up terms - see here
5) The finer details - hmmm, sorry ... somewhat scattered throughout this blog over the last seven years.