On the future ...

The Chinese philosopher Lao Tzu once stated, “Those who have knowledge don’t predict. Those who predict don’t have knowledge”. However, let us assume that there is future change that is known to everyone and change that is unknown to all (i.e. we’re forced to speculate and predict). Advantage can be created by a business through change that is known only to a few and “unevenly distributed”. 

This raises a question; can we determine a means of identifying future change that is knowable but not known to all? When examining literature, we can often cite examples of past science fiction novels that appear prophetic. However, the sheer volume of publications (in excess of 70K novels & short stories per annum) means that this can be attributable to pure coincidence and often such predictions suffer from interpretation effects (i.e. we read into them prophecy where there is none, the prognosticators’ equivalent of the P.T Barnum effect). 

The challenge is whether we could develop a means of more accurately predicting change beyond random coincidence. Could we predict the predictable because the knowledge was already there even if we were only vaguely aware of it? Could we create a more ‘prophetic’ story? To exploit the future, we need to somehow create a framework that allows us to uncover knowable change. Such a framework must be inherently holistic, interdisciplinary, relative, repeatable and useful: - 

• Holistic because of the potential for combinations to be greater than the individual change (e.g. standard electricity plus material science leading to computing. 

• Interdisciplinary because it impacts not just technological, economic and physical systems but also social systems. 

• Relative because the changes may be different depending upon the observers’ viewpoint i.e. the impacts in one industry may not be the same in all. 

• Repeatable because the validity of single, one off predictions provides no method of testing beyond the scope of the single prediction. 

• Useful because vague generalisations and known effects provides no means of exploitation. 

Is this possible? The answer turns out to be ... sort of, maybe ... but I'll leave that to another day ... well, to be precise ... another 7,200 days approximately in order to gather the data to validate it.

On disruption and executive failure

When examining the issue of predictability, it becomes fairly obvious that there are two important axes to consider - the predictability of what and the predictability of when. By examining change on these axes (see figure 1) then one pattern becomes clear - there is more than one form of disruption.

Figure  1 - Predictability of What vs When

The two main forms are disruption by Product to Product substitution (which is unknowable i.e. unpredictable) and disruption by Product to Utility substitution (which is knowable) :-

The Unknowable (e.g. product to product substitution). In this form, a change in the value chain (caused by some new component added to the product e.g. size) is unpredictable. The entrant has no idea whether it will be successful nor does the incumbent. However, the incumbent has inertia caused by past business success and if the change is successful then the speed of adoption tends to be non-linear. This means the incumbent has little time to react, lots of inertia to overcome and is unsure whether the change will dominate. Once they realise the change is inevitable them then it's usually too late to do anything about it. This type of disruption can only be accurately seen post event and in this case, Jill Lapore is correct that disruption is a post event classification and unpredictable.

The Knowable (e.g. product to utility substitution). In this from, the change is highly predictable and can be prepared for many years (or decades) in advance. Cloud computing fits into this category. This predictable disruption can be determined pre-event but for the same reasons this can defended against and shouldn't disrupt. The incumbent will have inertia but they also have plenty of time to prepare - from years to decades. The reason why incumbents become disrupted is due to one of two variations.

The first variation is that the change is usually unseen due to poor situational awareness & scenario planning on behalf of the executive. Less than 30% of companies have any form of scenario planning and less than 4% have any means of visibly seeing the landscape, hence such blindness is rife. In this scenario the incumbent fails to prepare for a predictable change and suffers the same consequences as though the change was unknowable. For an attacker, this is highly attractive as the change is highly predictable and therefore a new entrant can target a space with a good degree of certainty of success. If you can find a product to utility substitution for which all the weak signals indicate it is ready to happen and which incumbent executives show low levels of situational awareness ... well, it's like stealing candy from a child. For extra icing on the cake, you can often use incumbents inertia against them. This is how Canonical managed to walk in and help itself to the entire future cloud market against the vastly better resourced and funded competitor of Red Hat.

The second variation is that the change is seen but the incumbent still fails to act. In some cases (quite rare) this failure to act is due to extremely strong and entrenched inertia to change. This is what happened with Blockbuster vs Netflix - Blockbuster saw the change, was first with video online and on demand but completely failed to deal with the inertia cause by shops. The same happened with Kodak - first in with DSC and online photos but failed to deal with inertia caused by its analog fulfilment systems. Not seeing a predictable change (due to poor situational awareness) is a failure on behalf of the executive however seeing the change and failing to act is shockingly poor.

The points to take home are 1) disruption occurs (as described by Christensen) and 2) there are also two forms of disruption - unknowable and knowable. The unknowable type is difficult to defend against due to its unpredictability. So, in the case of APPL vs RIM then you can't really point the finger at the executives. It's just down to chance, a gamble and it's not surprising that companies get hit by this. Lapore is spot on regarding lack of predictability and post event classification with this form.

However, the knowable form is highly defendable against - it is easy to adapt to this. That companies get disrupted by this is either failure of executives in terms of situational awareness or even worse a failure to act upon what is known. There isn't much of an excuse for this. 

I mention this because 'disruptive innovation' appears to have become a common excuse for company failure. In many cases, the reason why the companies were disrupted was because of executive failure to either see or act upon a visible change i.e. the storm was visible, they either failed to look or failed to move the company out of the way. This shouldn't happen but unfortunately it does.

On Prognositication

The Internet did not catastrophically collapse in 1996 as Robert Metcalfe (co-inventor of the Ethernet) predicted. Apple was not ‘dead’ by 1997 as Fortune, Business Week and the New York Times told us. Neither wireless nor airplanes made war impossible – Marconi and the Wright brothers got this wrong.

I don’t use a nuclear powered vacuum cleaner nor do I live in Arthur C. Clarkes’ vision of the autonomous home that flies into the air to head south for the winter. Apparently I was supposed to in 2001 when not travelling around in my Fred Freeman 1999 Rocket Belt or taking saucer shaped flying ships to NASA’s permanent moon base which still hasn’t appeared after 50 years of prediction. Edison’s prognostication that Gold would become worthless never came true. My automated vehicle of the 1980s that David Rorvik assured us that we would get, never turned up. Without a getaway vehicle, it’s fortunate that Donald Michael’s warning that by the 1980s we would be replaced by intelligent machines never actually happened. Of course, I could have escaped to my 2014 underwater city of Isaac Asimov … except it’s not there. Nor am I taught by electrocution, Fireman do not have flying wings and I’m still waiting for my personal helicopter in my garage (I was supposed to get that in 1968).

Prognostication is a very sorry business.

When to use a curve, when to use a map

The mapping technique is based upon two axes - one which describes a chain of needs (the value chain) from the user needs (visible to the user) to the underlying components (whether activities, practices or data) that meet those needs (invisible to the user) versus evolution. A description of how the evolution axis was developed including its relationship to publication types can be found in this post.

Now generally, when examining change in any complex system then you'd use a map because the system contains many evolving components and the interaction between them is also important (see figure 1).

Figure 1 - A map

The history of each component is simply a movement from left to right on the map and this can also be viewed on the evolution curve - for example, you can examine the change of computing infrastructure from its genesis with the Z3 to commodity forms today (see figure 2)

Figure 2 - Evolution of a single component (computing infrastructure)

However, sometimes it is useful to simply focus on the current state of change and view the position of all the components of a current map on the evolution curve  - see figure 3. This is part of a process known as profiling.

Figure 3 - The components on the Figure 1 map on the evolution curve

Now, the components shown on figure 3 are all independent and they are all evolving along the same pathway. Creating profiles is an extremely useful technique for competition and one I've mentioned beforehand, however for the time being I simply want to mention it.

Paradoxes of Organisation

I've just seen Dave Gray's post on the paradoxes of organisation. Oh, this is a wonderfully rich area and something I'm looking forward to reading.

Over the years (based upon evolution), I've noticed several patterns from conflicts (innovation vs efficiency, agile vs six sigma) to misunderstandings to paradoxes. From Ashby's to Jevons' paradox to the impacts of componentisation then there is lots of interesting material.

Four of my favourite paradoxes in business (with each argument described by a scale from 0 to 1) are :-

Predictability (of what) + Predictability (of when) ≈ 1 (i.e. we can often say what will happen but not when or when stuff will happen but not what)

Potential for future value + Certainty of value  ≈ 1 (i.e. the more something has potential, the less certain we are about it. If we're certain about it then so is everyone else and the value is correspondingly smaller)

Simplification of management + Effectiveness of management ≈ 1 (impact from Ashby's law of requisite variety i.e. the more we pretend management is simple, the less effective it becomes.)

Organisational focus on survival today + Probability of survival tomorrow ≈ 1 (impact from Salaman & Storey i.e. survival today requires coherence, co-ordination and stability whilst survival tomorrow requires 'innovation' and hence a replacement of those values)

A necessary capability but an unnecessary role - CDO.

Any widespread examination of corporate strategy will quickly demonstrate the prevalence of backward causality and the copying of others. 67% of companies have an "enterprise mobility strategy" ... do you? If this wasn't the case, my strategy template wouldn't have touched so many nerves.

Depressingly less than 30% of large companies have any form of scenario planning and of those less than 4% have any formal means of situational awareness. The majority are playing chess without looking at the board which is why techniques like SWOT or Business Model Canvas or single size debates like Agile vs Six Sigma become rampant. This is why it's so easy for someone like me to walk into an industry and help myself - I'm no genius, I just understand that looking at the board (even an imperfect representation) in a game of chess is actually a sensible thing to do.

By understanding the basics of competition, we know that organisations evolve and a new phenotype appears. We know how (competition), we know the causes (co-evolution plus punctuated equilibrium plus inertia), we understand the cycle and it is even predictable, testable and this has happened. I can even give you a list of the modern phenotype (from 2011) - see figure 1. We can trace the process back through hundreds of years of history from the Web 2.0 to Fordism to the American System.

Figure 1 - Next Generation vs Traditional

We know that strategic play is not uniform between companies, even in the high tech sector. We know the economic impact of poor situational awareness - see figure 2.

Figure 2 - Strategic Play vs Action

We know our organisations have difficult coping with change, we normally bolt on new roles and new departments to cope with the change. But this is not a sensible course of action but instead a symptom of a non adaptive structure - we bolt on because we cannot simply absorb the change. Given however that few can see the landscape and predictable changes heading towards them, this is probably no surprise.

However, be under no illusions that improving situational awareness and creating adaptive structures is complex, it's not simple, it doesn't fit into a neat 2 x 2. Inherently a map is more complex than a SWOT.

So, yes we are undergoing changes, many of which are predictable and we need to adapt. Since our organisations are not designed to do this, we've often bundled those phenotypic changes into roles - we hear the clarion call for Chief Insight Officers, Chief Data Officers, Chief Ecosystem Officers, Chief Digital Officers, Chief Open Source Officers, Chief Disruption Officers and on and on and on. 

It should be no surprise that the justification given is usually because "others are doing this" - backward causality and the search for simple answers remains as strong as ever. The words of wisdom I will leave you with belong to Phil Rosenzweig. 

When examining the marriage of convenience between business and the academic / consultancy groups that surround it, Phil concluded - "Managers are busy people, under enormous pressure to deliver higher revenues, greater profits and ever larger returns for shareholders. They naturally search for ready-made answers, for tidy plug-and-play solutions that might give them a leg up on their rivals. And the people who write business books – consultants and business school professors and strategy gurus – are happy to oblige. Demand stimulates supply, and supply finds ready demand. Around and around we go” 

Ah, the merry go round continues. All hail the new priesthood. Today's version appears to be the Chief Digital Officer. Tomorrow's will be something else. One day business will learn the lessons of the military from two thousand years ago and start to understand the landscape we compete in. Until such time, expect tomorrow endless calls for "Chief Ecosystem Officers, well HBR's got an article and 67% of other companies are hiring one" etc etc etc.

Learn the capabilities, they should be absorbed. Try to avoid building structures you're going to simply dismantle later on. The capabilities of a Chief Digital Officer are needed, as for the role itself - well, maybe as a transitional structure to force change in an organisation that is unwilling or maybe there's a specific need (assuming you know what you're doing). In all likeihood most will be hired because 'other companies are hiring one'.

Just remember it is the capability not the role that is important.

My viewing habits ... 100 hours

Out of curiosity, some time ago I started to record my viewing habits. Out of the last 100 hours of "recreational video" that I've watched then approximately :-

2% on Terrestrial TV
2% on 4OD
2% on Amazon Prime
4% at the Cinema.
9% on BBC iPlayer
34% on YouTube [highest volume]
47% on Netflix

If Wardley mapping is so powerful ...

... why isn't it more commonly used?

For over a decade I've used mapping to startling effect having outwitted much greater foes and reduced waste in existing environments. From many hundreds of millions in new opportunities, cost savings and raised funds. For those few who use mapping in earnest, the smorgasbord of management doctrine feels outdated and current popular tools simple artefacts of a deeper process. Lessons such as the use of multiple management methods become ingrained, tactical gameplay around ecosystems becomes second nature and strategy takes on a new meaning. There is no turning back when you start mapping.

To contrast today's thinking with mapping then I'll return to the battle of Thermopylae (the tale of the three hundred) and the clash between the Greeks and the mighty army of Xerxes.  The great general Themistocles devised a strategy where the narrow pass of Thermopylae would be used to hold back the Persians whilst the Athenian navy would block the straits of Artemisium (see figure 1).

Figure 1 -  Battle of Thermopylae

Now, imagine a universe where Themistocles had no situational awareness e.g. no map and no understanding of the landscape. Imagine on the eve of battle, if the troops had been called together and Themistocles had tried to rally them with a strategy not based upon the environment and context of battle but instead based upon the presentation of a SWOT diagram (see figure 2).

Figure 2 - Themistocles' SWOT

Now compare the two figures. What is more useful in battle - a map or a SWOT diagram? Now ask yourself, what do you more commonly see in business?

Had it been the normal practice to base a strategy upon a SWOT as opposed to situational awareness then I doubt we would have ever got the legend of the three hundred, the Greeks would have lost to the Persians and things would be very different today. On the bright side we might have avoided a very dodgy Hollywood film. Fortunately, Themistocles was well versed in situational awareness.

To be honest, I find teaching situational awareness hard in business because few CxOs have a military background and understand its importance. The best text on business is still a 2,200+ year old manuscript (the Art of Warfare) which very few understand. However, 'Wardley mapping' - as it has been nicknamed - continues to show its usefulness and is slowly gaining traction. 

For those wanting to know how to map - the key is to start (imperfect maps are better than none) and a simple step guide is provided. I occasionally hear strategy consultants tell me that they do something similar, well let us be clear - that appears to be prattle. In a decade I've seen no evidence of any kind whatsoever of a similar technique. Fortunately the technique is all creative commons, so have a go yourself. You don't need strategy consultants, they are generally a waste of time and money giving you little more than copying others.

Which leads me to the question of why don't more companies use it? Well, the technique might be ineffective and the observed benefits just simply coincidence. There are many examples of positive use and whilst it seems unlikely that this is just fortuitous chance it cannot be discounted. However, more likely is that change in management practice is extremely slow. Given this assumption then it'll take 15 to 20 years before mapping makes any kind of dent (assuming it continues to demonstrate positive effects and isn't superseded by something else). That's just the way things are.

However, there's another problem. Take a look a figure 1 and figure 2 again. When using a map Themistocles could have decided to defend around Athens or Thebes or any number of 'wheres'. The why was a question of why here over there. In the end, a strategy was devised to take advantage of the landscape and to funnel the overwhelming forces of Xerses into the hot gates. This process of strategy is inherently more complex than a 2 x 2 matrix. It's more reactive, requires greater understanding and flexibility. The 'Keep it Simple Stupid' mantra would argue for the use of a SWOT and abandoning any form of mapping.

I suspect that this complexity will be the real problem with maps and why adoption will take a very long time (more like 30 years) regardless of benefits. It's the same issue behind our love affair of single size approaches - outsource vs insource, push vs pull, agile vs six sigma, or hierarchical vs network. We like simple.

Maps, like life, are by nature more complex than our desire for simple answers.

Historically, approaches which change our way of thinking and shift us from a simple view of life - whether Boyd's OODA loops (1973), Business Relationship Management (Ernst & Young, mid 1990s), Cynefin (Snowden, 1999) or Scrum (Takeuchi et al, 1986) - take a long time to spread. Mapping has a long and slow road ahead of it in which (despite its apparent usefulness) it will have to stand the test and rigours of time. I am under no illusions regarding this.

However, on a positive note then this also has a considerable upside. Uncommon use will mean that mapping will retain for many years any ability it might have to create a significant competitive advantage over others. I still expect in a decade's time to be able to understand and map an industry, then play the game and take over an entire market with a fraction of resources of competitors. I still expect to be playing chess against competitors who can't see the board well into old age. I expect by then, I'll be an even better chess player.

I'm ten years into this journey but as Lao Tzu would say "a journey of a thousand miles begins with a single step". There's a long long road ahead but it looks like a pleasant journey.

Three of my favourite taunts of business - adoption, egosystem and SWOT.

Every now and then, I find something in business so ridiculous that it tweaks my sarcasm gene into overload. I normally respond with a graphic on the subject. I have many of these little gems scattered in my blog but my three favourite are ...

1) The Enterprise Adoption Cycle

A comment on the state of inertia within organisations.

2) Ecosystem vs Egosystem

A comment on strategic play exhibited by some companies in the cloud space

3) Thermistocles' SWOT

A comment on the artefacts we often call strategy in business.

Themistocles' SWOT

The battle of Thermopylae (the tale of the three hundred) and the clash between the Greeks and the mighty army of Xerxes has echoed throughout history as a lesson in the force multiplier effect of landscape. Themistocles devised a strategy where the narrow pass of Thermopylae would be used to hold back the Persians whilst the Athenian navy would block the straits of Artemisium.

The tale is a lesson on why understanding the environment (situational awareness) and exploiting it is critical in combat and why maps of the environment are powerful military tools.

Alas, it turns out that this tale is wrong. Recently discovered archaeological evidence has shown that rather than using awareness of the environment, Themistocles had no situational awareness at all. Instead, the troops were roused not through cunning strategy but the use of a SWOT (strengths, weakness, opportunity and threat) diagram which was presented to the troops in 28 pt Arial on parchment. The original Greek document has now been translated and is provided below.

Themistocles' SWOT

Please note, the next time someone turns up with a strategy document which has no map of the landscape but instead either a business model canvas or SWOT diagram masquerading as strategy - I will laugh mercilessly at you until you go away.

Both Business Model Canvas and SWOT diagrams are perfectly useful communication artefacts of the process of scenario planning but they are post event. Without a map, even an imperfect map then you have no strategy. Well, certainly not anything I'm going to take seriously.

Oh, and btw ... I ran strategy for Canonical in cloud between 2008 and 2010. I mapped the environment and with others we learned where to attack, knew where to not get in the way of others, used what was there to our advantage and exploited the inertia of competitors. With a small team and paltry resources (tiny fractions of our competitors) then in two years we took Ubuntu from a bit part of the operating system market to around 70% of all public cloud. Mapping helped me enormously to explain to others and to determine where to attack. Fighting Red Hat was like stealing candy from a child ... I felt guilty over how ridiculously easy it was to walk in and help myself.

Now, maps are imperfect and I'm no Thermistocles or miracle worker but if someone like me can waltz into a market and take it over through the use of a map then I have to say the strategic play in the world of business is pretty poor. In fact, I already know it is.

On Co-Creation ...

Co-creation is an extremely useful technique but it should be remembered that it's not suitable across the board. When I examine a map of the landscape then I tend to advocate its use in particular circumstances.

However when creating the novel and new (i.e. the genesis of an activity), it's actually better to get everyone else to create it for you and to exploit their creations to identify success. This is more You CREATE and I EXPLOIT and there is little collaboration to it.

An example of this is the ILC (innovate-leverage-commoditise) model which I've talked about extensively in the past. The model starts with a company first creating the industrialised services that you build upon (what is often called a platform) and then growing an ecosystem of companies consuming those services. 

The technique is incredibly powerful (it's a force multiplier in competition). If correctly used then my apparent :-

1) rate of innovation i.e. how much YOU are creating for me to EXPLOIT

2) rate of customer focus i.e. how much I'm EXPLOITING creations YOU made to give to others

3) rate of efficiency i.e. how much I take advantage of economies of scale by all YOUR use.

4) stability of revenue i.e. volume of predictable industrialised services I'm providing to all of YOU.

5) ability to maximise opportunity i.e. how much I am able to spot future success from YOUR experiments.

... all increase, simultaneously with the size of the ecosystem.

Spotting a company using an ILC like model is fairly easy. Whilst the company might grow in terms of physical numbers of employees, it's apparent rate of innovation, customer focus and efficiency all seem to accelerate at a faster rate (because it's growing with the size of the ecosystem). Worse, this seems to happen all at the same time (counter to the old ideas of you can focus on one).

A telltale signal is when people & other companies start grumbling that this company has just trampled all over their business models. Words like 'eaten the ecosystem', 'bully' tend to get mentioned a lot. At the same time, customers (i.e. those not being trampled on which can include other companies) benefit from the net effect of an increasing number of useful services. This tends to act as a magnet and the model is therefore reinforcing with plenty of network effects.

Anyway, more information on ILC can be found from reading the above post (linked here also).

So, why do I mention this? Well, first of all the ILC technique has been in operation for almost a decade. Hence, to anyone who is recently discovering the force multiplier effects of ecosystems - can I suggest that something is going terribly wrong with your horizon scanning. 

The second reason is someone just asked me whether I thought Amazon was a good example of co-creation. Oh, you're kidding right? Seriously?

Data points for mapping ...

The mapping technique I describe (known as Wardley Mapping) is not widely used, in fact usage is quite rare. However, seeing that I made the technique creative commons many many years ago - I don't actually know how many people are using it.

Of those that I do know then I have numerous examples on impact e.g. :-

1) Estimated reduction in cost of an entire project by 30%

2) Reduction in cost of individual project transactions between 99.3% and 99.6%.

3) Identification of new opportunities and successful funding of new business to exploit this (around $70M raised in total).

4) Increase in market share in an emerging field from 5% to 70% with minimal (sub $1M) investment.

5) Identification and removal of project risks for large scale projects (in excess of $100M).

The problem of course is that "numerous" isn't the vast number of examples I need. Even the examination of high tech companies on strategic play (see figure 1) only covers 160 high tech companies.

Figure 1 - High Tech companies, Strategic Play vs Action

Now mapping has a reasonably solid base in terms of the research on evolution. But unlike the evolution work, it lacks the many thousands of data points that I require to confidently say (to my satisfaction) what the impact of mapping is to most organisations. The signs all look encouraging but that's not enough. I like my work to be backed by large volumes of supporting evidence as opposed to handfuls or a few hundred. I'm not into the "this company did A and is successful, so you should do A too" world of backward causality.

I don't obviously expect to get this data anytime soon - it'll be a very slow road (i.e. 10 -15 years). However, if you are using mapping then please take a short amount of time to jot down the impacts (positive, negative and no impact) and ping me.