Friday, April 18, 2014

The amazing aspects of mapping

In the previous post I covered the good bits about mapping - namely user needs, coping with change, effective management of complex environments and contracts, better scenario planning and strategic gameplay, improvements in communication and risk management and the ability to identify opportunities from system level to policy. It's not a bad list and I have examples of all.

However, now I want to discuss the amazing aspects of mapping.

1) Situational Awareness & Organisational learning
It turns out that mapping is incredibly useful for organisational learning particularly in aspects of gameplay because it provides a common language and a way of examining, recording and testing changes in an economic environment. This is actually a pretty big deal. However, it works because it helps increase situational awareness of an environment and this in itself turns out to be fairly massive.

Some time ago, I undertook a study of companies in the high tech industry looking at their level of strategic gameplay (i.e. understanding of their environment and those of competitors) against action which in this case was manipulation of the market through open means whether open data, open source, open hardware or even open APIs (NB all APIs are 'open' since they cannot be copyrighted).

This I plotted on a bubble chart (the bigger the bubbles the more companies involved) and then examined market cap changes over the last seven years. The results are show in figure 1. Basically the upshot is that situational awareness and strategic play are strongly correlated with market cap growth. 

Figure 1 - strategic play vs open as a means of manipulating markets.

The best of the bunch (who have high levels of strategic play and use open as a weapon) I nicknamed Players. The worst (who exhibited neither), I call Chancers

Now, often people talk to me about 'open by default' to which I'll respond that being 'open by default' or not being 'open by default' has little to no correlation with success in terms of market cap growth. What matters is the level of strategic play and those with good strategic play who tend to use open as weapon show the highest market cap growth.

The importance of this is that it demonstrates that situational awareness (i.e. knowing where to attack and why to attack one space over another) is more important than action (i.e. the how, the what and the when'). This was curtly summarised in Professor Roger L. Martin response in the Execution Trap to Jamie Dimon's doctrine - “Dimon’s doctrine - that execution is the key to a strategy’s success - is as flawed as it is popular.”

Well, the idea that 'execution is the key to a strategy's success' is fundamentally flawed and the data says the opposite. Key is situational awareness.

2) Structure
Whenever you start mapping a complex environment, because it has multiple components at different stages of evolution then you tend to start to treat components individually e.g. in the case of HS2 (high speed rail) then you tend to use multiple methods rather than single size methods.

Figure 2 - Multiple methods in HS2

This approach of breaking down complex environments into component systems has a tendency to result in teams being organised around components. Such principles of component based organisation are embedded in concepts like the USAF FIST (fast, inexpensive, simple and tiny) approach and Amazon's Two Pizza approach and both appear to be highly effective.

Now the change doesn't usually happen overnight but the act of mapping and breaking down systems into logical components appears to trigger this structural change over time. So rather than having one big team dealing with a system, we end up with many small teams dealing with components and an emphasis on the importance of interfaces. Alas, at the moment I don't have enough examples to significantly confirm this effect but I'll mention it because it's certainly an amazing effect of mapping if the trend continues. 

Figure 3 - Breaking down complex systems into logical components appears to initiate a structural change.

3) The Future isn't as unpredictable as we think
One of the most delightful aspects of mapping is in organisational learning and how it can be used to discover common re-occurring economic patterns. For example, how competition drives a cycle of peace, war and wonder which occurs at both macro and micro economic scales. Now, it turns out that some aspects of the economy (e.g. genesis of the novel and new) are highly unpredictable but industrialisation and the shift from product to utility is predictable. In some cases you can say what is going to happen but not when and in others when something will happen but not precisely what. However it's quite uncommon for things to be entirely random though it's extremely hard to predict individual players move as opposed to industry trends.

One particular aspect of this that interests me is how new organisational forms (e.g. fordism, american system, web 2.0) appear. By understanding the economic forces at work (from punctuated equilibriums to co-evolution to inertia), I was able to predict when the next generation would start to emerge though not precisely what they would look like. 

Hence by use of population genetic techniques at roughly the right time, I was able to discover a phenotype (characteristics) of the next generation. I published a summary of the work here but for those just wanting the results rather than details, then table 1.

Table 1 - Traditional vs Next Generation Companies.

So along with the Good - namely user needs, coping with change, effective management of complex environments and contracts, better scenario planning and strategic gameplay, improvements in communication and risk management and the ability to identify opportunities from system level to policy - then the Amazing aspects of mapping are better situational awareness (correlated with market cap growth) & organisational learning, initiation of potentially more effective organisational structures and heightened ability to anticipate change.

These are all 'kick ass' superpowers in business but that's nothing compared to the wow. Which is the next post.