A deep dive into the future of company-building
What will tomorrow bring?
I am a fan of Peter Hinssen. His “The network always wins” is brilliant. The key message from that book is clock speed. In his latest book “The day after tomorrow”, he is asking four pertinent questions to help you with that a bit more:
Why is it almost impossible for large organisations to spot new and radical technologies quickly, and develop their potential?
Why are large corporations so eager to acquire new startups, and why are they capable of messing them up so profoundly in such a record time?
How is it possible that large corporations – even when they understand their challenges and the directions they need to take – are incapable of moving on their own, without external help and guidance?
How can corporates accelerate their ‘Day After Tomorrow’ thinking? Why do large organisations – that understand the fundamental challenges coming at them, because of disruptive technologies, business models or concepts – seem to be too paralysed to move fast enough to respond? How can companies become agile in their ‘Day After Tomorrow’ thinking, and be successful in developing an approach that works?
My opinion
BIG questions. Personally, I think it is pain avoidance and organisational design and not understanding exponential change . Moore’s law is everywhere as lego blocks that can be combined. Creating some interesting industries for the future.
Exponential
Even if you know, you don’t know. We think we have lots of time. The book explains this false sense of security in a brilliantly simple manner, with a little guy standing on a platform, just before the line becomes exponential.
One-third will not survive
That’s where we are all standing now, thinking that everything is pretty much same old, same old and linear, perhaps just a bit faster and steeper, but not by much. Well wise up, it’s not. You are standing on a gentle slope that is about to become an exponential mountain and we are absolutely unprepared for what’s coming. One-third of businesses today will not survive the next ten years.
VUCA leadership
Leaders who make the future will transform
Volatility into Vision
Uncertainty into Understanding
Complexity into Clarity
Ambiguity into Agility
Leaders who make the future will jump quickly from denial, anger, bargaining and depression to acceptance. They will embrace the four manifestations of (digital) disruption: detectable, clear, inevitable and new normal.
Strategic reinvention
These leaders will start strategic reinvention when things are going really, really well. When they are still growing like crazy. Because, that is the ideal moment when strategic transformation can take root, and be carried out successfully. How will you be able to survive and even create your own ‘Day After Tomorrow’?
Day after tomorrow
They apply their time to three simple buckets: Today, Tomorrow and the Day After Tomorrow. The ideal proportion would be ‘70 per cent, 20 per cent, 10 per cent’.
Also Read: Why an SME needs to understand their business worth
They create a climate open and frank atmosphere of constructive dialogue and ruthless intelligence. They know that the battle between every startup and incumbent comes down to whether the incumbent innovates before the startup gets distribution. They realise that a corporation is a living organism that has to continue to shed its skin. They know that success breeds complacency. That complacency breeds failure. They know only the paranoid survive. They understand that business success contains the seeds of its own destruction
You are not going to make it
If you do not make sure that the ‘Day After Tomorrow’ becomes a part of how you organise yourself as an individual, if you don’t embed it into the DNA of your organisation, then the odds are that you won’t even make it to the ‘Day After Tomorrow’.
Magic
“Any sufficiently advanced technology is indistinguishable to magic.” It is from Arthur C. Clarke. And yes, that is where things are going. In the world of the ‘Day After Tomorrow’, in the world where things will wake up, we will see a surge in invisible technologies at work. Their impact will be huge. As in “Industries of the Future”, Hinssen has identified a number technology trends, which are becoming so advanced that it is near magical.
Artificial Intelligence
The Internet of Things
Networked logic
Blockchain & Smart contracts
Augmented and Virtual Reality
Quantum Computing
3D printing
Platforms (read “Machine, Platform, Crowd”)
AI
AI is hot. It is the new electricity. AI first’ will replace ‘mobile first’ as the preferred consumer-facing interaction. AI will ride and drive all the other technology trends.
IoT
The Internet of Things is the fourth industrial revolution. When things wake up. Imagine trillions of connected things. Devices to have ‘embedded cognition driven by brain-inspired computing’ which means that IoT devices will all have tiny little brains connected to one another into a big brain.
Digital manufacturing
If you can think it, you can make it. From your local garage. The maker movement on steroids. Maybe as a counterweight to urbanisation?
Quantum
Digital will become quantum. The development of a quantum computer will mark a leap forward in computing capability far greater than that from the abacus to a modern-day supercomputer, with performance gains in the billion-fold realm and beyond. If quantum mechanics has not profoundly shocked you, you haven’t understood it yet. It is coming. Intel reported that they can now layer the ultra-pure silicon needed for a quantum computer onto the standard wafers used in chip factories.
The winners take all
Hinssen also identifies the winners-take-all threat. Take GAFA, the four exponents of this network explosion: Google, Apple, Facebook and Amazon. Google and Facebook are expected to command 73 per cent of each additional digital ad-dollar over the next three years. In the US alone, by 2016, Google and Facebook commanded more than 50 billion minutes of digital attention every week. Alphabet, for example, the parent company of Google, controls 12 per cent of all money spent on media advertising. There is a new term for that “GAFAnomics.”
BAT-men
Or take BAT-men’: Baidu, Alibaba and Tencent. Tencent dominates communication in Asia. It is the owner of WeChat. GAFAs are getting kicked around by the BAT-men. Which shows how economies are shifting towards the East.
Culture is too slow
So what are we doing about it? At the macro and micro level. The first thing we do is all trying to become Silicon Valley. That is culture and history (flower power and settlers). It is too slow.
We wrote about it a while ago. Organisational design will eat strategy and culture.
Organisations of the future
Organisations of the future need creativity, innovation, agility and flexibility. Which suggests that these organisations are online, networked, open, transparent and fast. “It takes a network to defeat a network”, which is now known as McChrystal’s Law. Forget command and control. Like us Hinssen is a fan of “Reinventing organisations”, and he uses Zappos as the example. If it is good enough for Tony Hsieh…….
Holacracy
The system of Holacracy works completely differently. Everything is organised around ‘circles’, and employees are free to ‘join’ the circles they would like. Teal companies are characterised by self-management, creative potential, bringing one’s ‘whole’ self to work, and having a purpose beyond making money. They operate effectively, even at a large scale, with a system based on peer relationships, without hierarchy or the need for consensus.
Teal
Organisations that are ‘Teal’ – like Patagonia, FAVI, Sun Hydraulics, Morning Star, Heiligenfeld and Buurtzorg – become a living organism, instead of just a structure. Organisational biomimicry.
Cell division
Atos is a giant in the technology services industry which originated as the largest Dutch IT services provider of the time, called ‘BSO/Origin’1 They use ‘cell division’. Every-time one ‘cell’ would grow beyond 100 people, he would split it and make them separate entities within a corporate ‘network’.
The results were spectacular: overheads stayed low, the ‘organisational cost’ remained minimal, but the entrepreneurial instincts thrived. The very best new people handled virtually any challenge knowing that they could rise through the ranks quickly and perhaps, one day, head up their own cells.
Platform of guiding principles
Visa took a leaf out of “The connected company” and “The starfish and the spider”. Using guiding principles to grow the network.
Rainforest
If you want an agricultural metaphor (read “Drawdown” if you are interested in agriculture ). The plantation is a metaphor for the business and management model that emerged from the Industrial Revolution. Organised growing.
Contrast this to the wild and seemingly disorganised messiness of the rainforest. There are no ‘crops’ in the rainforest. The rainforest has ‘weeds’. It’s messy and chaotic. Silicon Valley is a ‘rainforest ecosystem’, an inherently dangerous place to start with. You can get killed by a snake in the rainforest and die instantly. The mortality rate of a startup is nearly 95 per cent, even in Silicon Valley. But the startups don’t mind.
You can get killed by the venom of a snake, and perish instantly, but that same venom could be the cure for cancer, that’s the lure of the rainforest. You need the hustle and bustle, the ‘thickness’ of the jungle to foster interactions. Innovation is a contact sport. You need the interactions that are natural in such a fertile and connected environment. It is about building a community where ideas can have sex, and bear amazing results.
How to get the rainforest
The natural reaction of many corporates is a very understandable one: “We have to get some of the ‘rainforest’ magic into our banana plantation right away”. Yes! Brilliant! “So, let’s buy one of those rainforest startups!” No! Horrible! Because plantations have no idea how to foster rainforest magic. The real trick is getting more ‘rainforest magic’ in your plantation is to focus on culture.
It will be very hard because there is a fundamental difference in culture between the plantation and rainforests.
Bi-modal
Wouldn’t it be great if your company would be ‘bi-modal’? Think ‘Business Thermodynamics’. Thermodynamics is probably one of my favourite areas of physics, a wonderful field that explains why – depending on pressure and temperature – water can be ice that you skate on, a liquid that you drink or vapour that you can inhale. It’s the exact same molecule: H20 but, depending on the temperature and pressure, it can behave in a different manner.
You need to become solid, fluid and superfluid
As an organisation, you need ice, water and vapour. That means a six-month plan and 30-year vision every six months. That means a high internal clock speed. That means experimentation. Trying to find a triple point where multiple culture and organisational forms can co-exist. There is this magical composition where all three states can perfectly complement one another: superfluid, fluid and solid. Unfortunately, there is no “how-to”. There is no ‘silver bullet’, or some ‘magical Harvard Business Review case’ that you can take, and make it all better. However, there are a few models you can consider:
The remote silo
They create a removed ‘division’ where they can – in splendid isolation – invent the future. It’s an incredibly alluring idea. But it proves incredibly difficult to pull off. There is an ‘optimal distance’ where the remote silo can indeed invent the ‘Day After Tomorrow’, and still infect the mothership to act on those insights.
The separate entity
The test of a first-rate intelligence is the ability to hold two opposed ideas in their mind at the same time, and still retain the ability to function. It sums up the biggest challenges of large corporates: balance an existing business model with another one that operates on the flip side and might cannibalise the core business. If a company has a severe integration problem with a radical ‘Day After Tomorrow’ silo, there is only one solution: cut the umbilical cord.
The catapult
The concept of the disruptive catapult. During these catapults, eight senior executives, each from different business divisions. They participate in an intense eight-week program. During that time, they are put in an innovation pressure cooker scenario.
Also Read: How to totally screw up Corporate Venture
They are bombarded with all kinds of eye-opening experiences and fed with all sorts of disruptive ideas, concepts, technologies and startups. The aim is that, using agile mechanisms, by the end of the experiment, they figure out one or more possible ‘Day After Tomorrow’ initiatives The best part of the catapult exercise has to do with ownership because, at the end of this exercise, one of the executives is going to have to lead the initiative.
Customer co-creation
One of the most efficient ways to keep in touch with increasingly complex markets is to use co-creation with customers. For example, MasterCard then brings a multidisciplinary team of designers, developers and product experts from their Labs – augmented by subject-matter experts from the relevant part of MasterCard – to come up with a radical idea to solve the challenge in just one week. That’s right: one week.
At the end of the week, they have a working prototype, a video advertorial of the solution and a full-blown go-to-market plan. MasterCard runs these pressure cookers around the world on a weekly basis. Co-creation stimulates the focus on emerging business. On ‘Day After Tomorrow’ thinking, instead of obsessing about the status quo and company politics. The only drawback with this kind of co-creation labs is that they are sometimes not radical enough to survive the ‘Day After Tomorrow’ of an organisation.
The portfolio organisation
One of the largest experiments in such a portfolio innovation strategy is how Google re-organised its entire corporate structure under the umbrella company Alphabet Inc. while keeping the engine revving.
Solid
The move from Google to Alphabet is anything but a simple cosmetic name change. It’s a very clever portfolio exercise for the ‘Day After Tomorrow’, creating a new holding company that is composed of independent operating units, each with a separate and strong management.
Root businesses – search, advertising, Google Maps, YouTube, Chrome and Android – under Google Inc.
Superfluid
But the radically innovative and superfluid ventures are separated from Google Inc. and fall under the larger Alphabet umbrella: like X (the research and development facility) and DeepMind (the AI division).
Fluid
The same goes for the fluid parts, like Verily, or Google Ventures which is looking at the next new technologies on the horizon. Each part is managed quite similarly to how a venture capitalist would cope with a portfolio of investments.
Google is one of the first companies to leverage this kind of portfolio structure in such an extensive manner. Many companies who want to secure their ‘Day After Tomorrow’ ventures while, at the same time, leveraging their ‘today’ and ‘tomorrow’ revenue are going to follow their model.
The accelerator
Many companies that are trying to tap into the fountain of eternal youth are setting up corporate accelerators. Selected startups get access to the top executives who open up their network to accelerate the growth of these fledgeling companies.
The corporate garage
The problem with accelerators is their limited impact as the time during which they actively engage with the startups is very limited. In the Silicon Valley startup myth, the ‘real’ magic happens in a garage. So, shouldn’t a corporate organisation need a garage as well? Many corporates are building ‘corporate garages’ where startups can be hatched. And these often have more impact, greater influence and a longer effect than the standard ‘short-lived’ accelerators.
The network organisation
Haier’s is an extreme networked model. Haier has 73,000 employees and generates US$30 billion in revenue (2015). It is considered to be one of the most innovative, leading quality players in the field of appliances ranging from washing machines, microwave ovens and refrigerators.
They eliminated middle management and chopped their 73,000-employee workforce into hundreds of internal micro-companies with their own profit and loss account.
Ideas
They are free to propose new ideas, which are then put to the vote. The winner would become the project leader and could ‘recruit’ employees for his venture (who were free to join or leave at any time). In other words, these micro-companies functioned just like in actual startups.
Catfish
They also introduced ‘catfish’ to keep everybody on their toes: shadow managers who follow the micro-entrepreneurs and ruthlessly report on missed targets and lost opportunities. The catfish is the person who had a rival idea that came second in the voting, after the intrapreneur. He/she is supposed to help and carefully watch. The ‘catfish management’ technique counterbalances the natural chaos created by his micro-enterprise network philosophy.
End-user focus
In Haier, everything begins and ends with the end-user. In fact, Haier employees do not receive a fixed salary: it’s the customers who ‘decide’ upon their remuneration. The beauty of Haier’s competitive and networked innovation approach is that only a certain type of ‘gutsy’ and entrepreneurial type of employee will be drawn to the company, which will reinforce its innovation culture.
The integral disruption
100 per cent pure, undiluted ‘Day After Tomorrow’. SpaceX is a perfect example of such an enterprise. How’s that for a radical ‘moonshot’ (what Google X calls its radical solution projects)? Better yet: a Mars shot. When you walk around SpaceX and talk about the NASA contract, you will hear: “Ah, that’s just to pay the bills. What we want to do is colonise Mars.” Pure ‘Day After Tomorrow’ companies are rare, but they exist.
The pollutants strategy
Follow the outliers, or the ‘pollutants’. Those users who are trying to do things radically different. For example, Autodesk played a pivotal role in helping Cameron pioneer new methods of virtual moviemaking for Avatar. Helping them to shine a light on an area of the ‘Day After Tomorrow’.
Also Read: The millennial force: changing the workplace and its culture
It is not R&D
Just as life is an emergent property of all the atoms in our body, so is radical innovation an emergent quality of all the ingredients in your company. Today, when companies innovate with a ‘today’ lens, internally they will tend to focus on a ‘research & development’ activity. When we start to move up to the ‘tomorrow’ lens, in a more fluid setup, companies will set up intrapreneurial activities and platforms to stimulate radical innovation. We will see the development of truly disruptive labs inside companies. Setups like Google X, or JLabs in Johnson & Johnson. We will have to.
Politics
His last chapter is the best. About our political system. It is like reading “The end of Western Civilisation” but then from a technology perspective. The current political leadership of our planet does not address the ‘Day After Tomorrow’ in any significant way. They are jeopardising the future of our children and grandchildren in the most grotesque way possible.
Blind
We are being guided by a political ruling class that is almost completely blind to the world beyond the horizon of the next elections. For instance, in most Western countries, politicians are still calculating ‘pensions’, government debts and budgets with economic models that stem from more than twenty years ago, from an analogue time when laws of change operated under very different circumstances.
Abyss
Our ‘inclusive’ political leaders are not doing us a favour by only tackling those concerns that can be solved in periods that are no longer than their election term. Quite the opposite, in fact, they are slowly plunging us into the abyss of an economic dystopia where the ignorance of technology and the election cycle-induced myopia are the true reason why many nations will fail.
Disruption
What will happen when mass disruption by automation and AI starts impacting jobs in the service industry as well in a significant manner? That could give rise to several simultaneous transformations that could cause incredible disruptions of the economic, social and political order.
Out of sync
Our economy and our politics are completely out of sync. We need to plan for a future without jobs. It is time to optimise our economy for human beings it’s supposed to be serving. How will we manage countries when capital is fundamentally and irrevocably substituting labour? We are truly entering the post-capitalist era.
Too slow
Our political systems have become the slowest moving part of society. Or governments are not running twice as fast. Worse, they are not even running fast enough just to keep up. Imagine all curves going exponential upwards (technology, climate change, population, knowledge, connectivity) and one line keeps going vertical. That means that the political system is losing touch with reality at an also exponential speed. Something will have to give.
An Xlab for civil servants anyone?
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