A digitalization strategy is dangerous and mainly wrong approach.

Why?

Because it draws the attention to today’s models, structures and systems and how they can change and become digital.

And why is that wrong?

Just ask yourself these questions:

  • Would the bookstores have survived if they pursued a digitalization strategy?
  • Would the newspaper industry thrive if they succeeded with a digitalization strategy?
  • Would the film developing industry have boomed if they just pursued a digitalization strategy?
  • Would the video rental business kept up with a digitalization strategy?

...continue reading "The folly of digitalization strategy"

Skärmklipp 2015-10-08 10.47.30

I agree in principle with the analysis that BCG have done and which they conclude in what they call the Digital Imperative. They have also developed a nice animated presentation that explain it visually.

It is when I reach the end of their animation I suddenly see all five fundamental changes that a company needs to address I start to laugh and shake my head. I suddenly visualize something like a Larson cartoon where a bunch of dinosaurs are sitting in a conference listening to a presenter that shows PPT-slides which tells them to evolve into mammals.

...continue reading "Is following BCG – Digital Imperative possible for anyone???"

How does the digital transformation of your organization go? According to the global study DIGITAL TRANSFORMATION: A ROADMAP FOR BILLION-DOLLAR ORGANIZATIONS from CapGemini just 50 of 157 executives say that they have an effective approach. Not an easy task it seems...

But why is this so hard? The report states that

Successful digital transformation comes not from implementing new technologies but from transforming your organization to take advantage of the possibilities that new technologies provide. Major digital transformation initiatives are centered on re-envisioning customer experience, operational processes and business models. Companies are changing how functions work, redefining how functions interact, and even evolving the boundaries of the firm.

I couldn't agree more. But isn't this difficult? Yes, really! What makes it even more difficult is further described in another conclusion:

Successful DT comes not from creating a new organization, but from reshaping the organization to take advantage of valuable existing strategic assets in new ways.

This means that in order to succeed you have to understand what your valuable existing strategic assets really are and transform your business to leverage them in a digital approach.

I think these statements are correct, are really important and points in the right direction. But judging from my 10+ year experience in working with intelligence, strategy and change in a global company, I see is that this is incredibly difficult to do in practice. Is it really so that as much as 1 in 3 are successful in this process? And to what extent are they successful?

From a historical perspective from other technology driven transformations, there are extremely few companies that have been successful in transforming themselves across societal and technological shifts. How many companies are e g older than 100 years? 100 years ago there was another, albeit a magnitude smaller, technological and societal shift that also required transformation and how many organizations survived that?

We must correlate these insight with other findings e g John Hagel's analysis of the performance of today's companies:

Firms in the Standard & Poor's 500 in 1937 had an average life expectancy of 75 years; a more recent analysis of the S&P 500 showed that the number had dropped to just 15 years.

I think it is time that people reread the former Shell executive Arie de Geus' book The Living Company, Clayton Christensen's The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business and Alan Deutchman's Change or Die: The Three Keys to Change at Work and in Life.

In the end of the executive summary the CapGemini reports correctly states that:

Despite the hype around innovative digital technologies, most companies still have a long way to go in their digital transformation journeys. Leadership is essential. Whether using new or traditional technologies, the key to digital transformation is re-envisioning and driving change in how the company operates. That’s a management and people challenge, not just a technology one.

From my view from the outside I still wonder if change really is happening to the extent that people think it does. Because if it does it is against all historical odds. Or are we creating an illusion of change, when in fact organizations are failing more dramatically than ever?

The good thing with this report is that they are starting to formulating the difficulties in a much more realistic way than I have seen before from IT-consultants. And that is a good thing... If they show the correct picture of the reality, I am not at all sure.

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confused-compass 2

Scenario planning is rapidly on the rise as one of the most important strategic tools. This awakening have slowly been going on for a while but the global uncertainties caused by the financial crisis and global economic recession have been speeding up the process.

Since the 1960:s the value of scenario planning have been that of a tool for the long term strategic thinking process. A value that most managers have been able to ignore since operations have had a very strong focus in the vast majority of organizations. Because of this I usually argue for scenario planning along the lines that

  1. many of the important decisions organizations actually have to take have more far reaching ramifications and consequently is taking place in a more uncertain future than usually is understood - scenario planning can help in mapping and understanding this longer term perspective
  2. peoples perceptions of a situation are almost always flawed due to a range of biases that comes from how we as humans are hardwired - scenario planning is here used to assist organizations to see through and beyond their own unconscious blinds

Since October of 2008 a lot of people have suddenly become painfully aware that we live in a time of fundamental uncertainty. In such a situation planning is not just a process of organizing long lists of actions that leads towards a goal. When uncertainty blurs the horizon and an uncertain environment calls for real action, people abruptly come to understand that they have forgotten the process of assessing and interpreting what is happening in the environment in order to evaluate their own capabilities of adapting and identify realistic and relevant goals.

Hugh Courtney, who is quoted below, is known for a simple but powerful model of explaining different levels of uncertainty we perceive that we can see for the future:

200812171447.jpg

The change we have seen since October of 2008 is that many more of us now perceive our situation to be on uncertainty levels 3 and 4 rather than on levels 1 and 2 which was the common view before.

One of the few structured ways to understand the situation of an organization in the longer and more uncertain perspective is to use scenario planning. And today when uncertainty even permeates the shorter perspective scenario planning is basically the only strategic management tool that is left.

This awakening can be followed by the increasing in referrals to scenario planning in management magazines articles. Here are some examples from the last couple of months.

  • Hugh Courtney, author of 20/20 foresight is interviewed in McKinsey Quarterly and advices strategy officers to start with scenario planning because it is more important than ever that we think forward even if we don't get any exact answers, because any clues to what might unfold is valuable in these levels of uncertainty - A fresh look at strategy under uncertainty: An interview
  • In the same issue of McKinsey Quarterly there is another article basically following the same line of thought - Leading through uncertainty

Even in other places scenario planning is suggested as a tool for managing uncertainty:

If you want to read more about scenario planning visit my page: scenario planning resources

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One major challenge with the failing global financial markets is that the amygdala is directly connected to the economic system. This means that individual feelings of billions of people around the globe is directly linked to the global economy. To some extent this have of course been true for a long time, but the increasing speed due to more online transactions i e removal of buffering mechanisms, makes the connection even tighter for every day.

And gradually economics becomes social psychology (or complexity theory).

Once upon a time I played volleyball, a sport which I sadly retired from after I had a bit of surgery in my shoulder. I really liked volleyball because of the magic that occured when playing. Volleyball is an explosive and intense sport where all team members have to connect to each other - have flow - to play really good. To achieve this volleyball players repeatedly talk to each other and touch each other in order to create bonds that connect the bodies and minds of each other. When you feel you are connected you don't think consciously about where the other players are positioned, you simply know where they are and where you should be. It is an almost magic sensation and the team seems to behave like one organism.

After some time of flow, the opponents might be catching up and play better and you lose a couple of points. Suddenly you feel like if you've lost all the flow and your team seems to have a problem performing as a team. You start losing even more points and it feels like nothing is working anymore.

The key question here is what you do to recreate your flow again?

The wisdom from tight team sports like volleyball is that you cannot recreate it with less than forcing the whole system to completely disconnect, wait for a while, and then restart the whole process of connecting again - not creating exactly the same connections - but starting to connect again in order to find the flow of the team. In volleyball it is called a timeout.

I would argue that since the economic system more and more behaves like a volleyball game - i e a tightly connected system of brains and bodies - and what it would need right now is a timeout.

Why would timeouts be better than bailouts? If we look at the economic system from a social psychology perspective, or even a complexity system perspective, changing a destructive spiral into a constructive one is extremely difficult. The reason is that all the small reinforcing drivers are working in concert in order to maintain the direction of the system. And it will continue until the energy runs out or something at a very basic level is turning some of the fundamental drivers in another direction e g a positive spiral. This is basically the reason why many billion of dollars of aid to the third world didn't change anything. It is first when a number of internal key forces, albeit very tiny-looking, are starting to positively reinforce each other the economic development turns into an upward spiral. To be able to reinforce these small, but important drivers within our economy, we have to be extremely clever to reinforce the right ones, without also fueling the destructive ones.

So why not try the timeout idea? If we don't, the system will crash anyway in order to create it's own natural timeout, and we will take the full hit. If we on the other hand create an artificial timeout and forces ourselves to rewiring the system in a new way, the we maybe have found a heuristic to stop these kinds of globally reinforces crises?

My home town Göteborg is currently host for the 61st World Newspaper Congress & 15th World Editors Forum with the main theme: Newspapers: A Multi-Media, Growth Business. To me, who is working with strategy, technology related forecasting and scenario planning, it feels really weird. When I look at how technology development and diffusion mix with new emerging values and behavior I see a world where a large part of the population globally is constantly involved in a peer-to-peer information sharing process. Of course there are hubs of information gathering and spreading here and there, but they are not stable enough to build a static and hierarchic business model around.

We will of course see a myriad of floating dynamic businesses who is born and then dies, shrinks and grow. All with a pace of the changing interests and new possibilities. But not anything like today's media factories... That model basically died in 1995, when the new web technology boosted the new business models of either

  1. giving first to a lot of people, and then charging later and be rich if it hits the cord or
  2. selling exactly what people are willing to pay for to a price with a reasonable margin

When reading in today's local paper about the congress I was reminded of something Peter Schwartz and Paul Saffo were saying in a discussion in Davos in January 2008. I searched my hard drive to find it and then I found a link to an article describing it - "A Futurist Panel At The World Economic Forum Suggests Print Newspapers Will Cease By 2014 So Should We Start Packing Our Bags?". But didn't get the article, because I was stopped by a page looking like this:

newspapers-2014.jpg

I had apparently been choosing a link which went through a commercial site in the media industry who behaves exactly the way that makes the media industry business logic irrelevant to the new emerging business models. I was suddenly required to pay 2€ to see the article... The problem here is that I that I am not willing to pay (or go through the hazzle of paying) for a short article which I don't even know have any interesting content.

Since this example points the finger in the direction towards the death of the news based mass media factory in its current form it is not necessary to talk about the other levels of driving forces like: technology and the new emerging modern man changes the foundation of communications logic and make the broadcasting model irrelevant and soon extinct - at least the broadcasting business model - because in the new emerging world the value equation for anything with a distribution cost of close to zero is fundamentally changed.

When I think about these kinds of congresses I can't help thinking about how it might have looked at a congress in the ice distribution industry when the electricity and refrigerators were spreading in the homes in the beginning of the last century. I wonder if those venues had themes like: "Ice distribution - a High Tech, Growth Business"?

2

When I was at Volvo IT (my former employer until 2000) for a meeting today, it became sadly clear that Volvo IT have entered further down the path of radical ignorance. I've heard about their strange firewall filters before stopping people from visiting web pages containing the phrases "IP telephony", "sex" and ""games". Apparently the filters have broadened and now they seems to have added phrases like "social software" as well.

I couldn't resist asking if I could do a quick test for a number of web-sites I read or write. Here are 4 examples of sites that was blocked.

When trying to reach these sites you are met with:

BLOCKED / STOPPAD
Ã…tkomst stoppad
(English text below)
Ã…tkomst har stoppats till webbplatsen http://brintam.blogspot.com/. Den ör klassad som kategori Social Networking and Personal Sites.

Volvokoncernen ger åtkomst till ett urval av webbplatser genom sin internettjönst. Andra kategorier av webbplatser ör stoppade.

Behöver du åtkomst till den angivna webbplatsen för ditt arbete måste du begöra åtkomstmöjlighet till den genom att sönda ett e-brev till internetfilterse@volvo.com. Ange varför du behöver komma åt den.

Ytterligare information finns i:

Regler för internetanvöndning

Access blocked
(Svensk text ovan)
Access to web site http://brintam.blogspot.com/ is blocked. It is categorised as Social Networking and Personal Sites.
Volvo Group provides access to a subset of web sites through its Internet services. Other web site categories are blocked.

If you need access to the requested web site in this blocked category for a work related purpose, you must request it to be accessible by sending an e-mail to internetfilterse@volvo.com. Be sure to state why you need access to the web site.

You can find further information in:

Rules for internet use

So of course you might request access to a specific site when you believe you need to... I don't know how often they say yes or no, but to have to request access site by site in the information age is really strange!

Here you can read what Richard Gatarski wrote about restriction of web access in May 2007:

Here is my main point: Various measures to control access to IT is an alarming issue for the organizations who have not yet understood the consequences of their current security measures. These might stop outsiders getting access to internal systems, and keep insiders away from what might look as non-work-related stuff. But in the long run the result is an organization full of members who neither know what is going on, nor get the chance to develop knowledge and skills concerning media development and new social patterns

Isn't it ironic that Volvo IT employees can't read Richard's post containing these lines since they can't reach his site at all?

Maybe I should be happy that this blog (http://www.futuramb.se/blog) and it's sister blog (http://www.futuramb.se/scenariotankar - in Swedish) could be reached so that Volvo employees can read this post... Ooops! Now they probably can't since this page contains the phrase "social software".

Update 2008-02-15:

The filter seems to filter everything which is published on the sites blogspot.com and typepad.com. Another large blog that is blocked is http://sethgodin.typepad.com, one of the top 10 Technorati blogs.

I have now and then been involved in discussions about changing consumer behavior during the years. When at Volvo we recognized that Internet provided a price transparency which threatened the margins. The story were that people first went to shopping for a car, but when they had decided which car they wanted they asked their 16 year old kid to find it for the cheapest price on the Internet creating a new price transparency. After thinking about it for a while it also became clear to us that what technology did was change the prerequisites differently for the stages in the process

  • Shopping - an emotional and information heavy process where your identity and the brand identity would match in order to end up in a decision
  • Purchasing - the rational process of finding the goods for the best price - boosting self asteem
  • Owning - an identity building step where the earlier steps isn't that much important any more (nobody else actually know where and how you bought)

This complex mix of identity building and boosting your self esteem through owning expensive looking products and feeling smart was probably why outlets was such a success. There you could buy the right Prada bag very cheap and nobody actually knew that you bought it for less than half the price. The result was that these steps actually became disconnected from each other at least for some products.

This was at least true for emotionally loaded products like cars, jewels and expensive designer products. At this stage (late 1990:s) the Internet was still a information gathering tool. Today with the emergence of social software this is being taken even further. A very good story about this was provided in a post by researcher Danah Boyd on the Marketing & Strategy Innovation blog (found through Richard Gatarski's blog weconverse). In a lecture Danah heard this story from a mother describing her daughters shopping behavior:

Using Google and a variety of online shopping sites, Mary researched dresses online, getting a sense for what styles she liked and reading information about what was considered stylish that year. Next, Mary and her friends went to the local department store as a small group, toting along their digital cameras (even though they're banned). They tried on the dresses, taking pictures of each other in the ones that fit. Upon returning home, Mary uploaded the photos to her Facebook and asked her broader group of friends to comment on which they liked the best. Based on this feedback, she decided which dress to purchase, but didn't tell anyone because she wanted her choice to be a surprise. Rather than returning to the store, Mary purchased the same dress online at a cheaper price based on the information on the tag that she had written down when she initially saw the dress. She went for the cheaper option because her mother had given her a set budget for homecoming shopping; this allowed her to spend the rest on accessories.

It becomes clear that the young and connected generation sees consumption and shopping quite differently than the previous not-yet connected generations (NYCoG).

When technology now matures and everything becomes mobile and online: shops, friends and all other information sources you can think it becomes clear that customer behavior is taking another step. But where is it going?

A couple of months ago HBR Working Knowledge announced a paper called Digital Interactivity: Unanticipated Consequences for Markets, Marketing, and Consumers by John Deighton where he argues that traditional marketing research have missed the real changes in a digital interactive world. Maybe this can be a clue to where it is currently heading?

The conclusion of his article is that marketing research have too much focused on how producers are interact with the customers (in the lower left corner), not understanding that the biggest change is occurring within the ranks of the customers (the move towards the top right). He draws this picture (the red arrow is mine) to explain what is happening when the communication flow increases between individuals.
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Step by step the game isn't anymore about accessibility and information, it is about identity and meaning. The game is on its way to change towards a game of fitting in to a web of cultural communities where the community, and not the producer, accepts or rejects its participants.

This is why the increasing communication in general and social software in particular is so interesting for how business and marketing is going to change from a vertical producer-customer game towards a horizontal game where the customer-to-customer relations are much more interesting.

Maybe this is something to think about before you are designing your next marketing strategy or sending your next batch of direct mail offering.

  • Read Danah Boyds post here
  • HBR Working Knowledge working papers: Digital Interactivity: Unanticipated Consequences for Markets, Marketing, and Consumers by John Deighton - download here

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For the last year or so most of my involvements in foresight activities in organizations seems to have different results than before. More often than not they are putting the focus back to fundamental issues about internal organizational issues. In some sense the results tell me:

"Don't fiddle around asking questions about the future! Focus on fixing the basic organizational issues first, because otherwise the issues about the future are irrelevant."

These kinds of result wasn't unheard of some years ago, but is much more common now. Almost a standard result from both commercial and public sector scenario planning exercises.

Based on my view of the future it isn't strange and also seems to resonate pretty well with the conclusions in e g the book "Navigating the Badlands: Thriving in the Decade of Radical Transformation" (Mary OHaraDevereaux) (Amazon US) where the message is:

  • We are in a decades long transition period
  • Hunt down your obsolete (and sometimes even dangerous) ideas and methods
  • Start from scratch from where you are and innovate and build new structures from the new prerequisites that slowly and unpredictably emerge

If this is true, what does it say about the role of scenario planning and foresight? Does this render long range foresight useless?

One interpretation of this could be yes, looking into the future isn't helpful at all when it comes to survival. Being pragmatic, down to earth and focus on the result is. This is without question a valid interpretation but I believe it is flawed and too quick conclusion. Ignoring the big picture is always dangerous and even more so in volatile times. The reason is simply that everything that can help you interpret and make some order in all the small seemingly contradictory signs will in the long term help you take the right decision.

But what seems to have changed is that foresight is not directly helping companies to take any mid- to long term decisions any more - i e strategic decisions. At least if we by strategic decisions mean long term decisions about investments and choice of options which reaches 5-10 years into the future. The reason is that in turbulent times nothing can help us taking what we used to call long term decision.

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But that doesn't mean that we shall ignore the big picture. Understanding the big picture of current change is mandatory, but it is not anymore a tool for identifying the next big decisions. Long range foresight is rather a meta-strategic activity which creates a higher level of understanding of the situation which is invaluable for taking the small and important steps towards the future.

This means also that the role of strategic and top level management have changed. They cannot anymore think about the big picture and then take the big and important decisions at the same level. Their role is more and more to provide the big picture and then let the required decisions being taken at the right level. Or maybe more correctly their role is to provide the structures and resources so the organization can achieve really good big pictures to help them take all those small decisions that takes the organizations forward. This means that the major long term decisions top management must take is to open up the structures so that tomorrows new structures can emerge.

I heard Gary Hamel used a interesting phrase that connects to this: The CEO and the board should increasingly be editors of strategy, not creators of strategy.

So, yes! Focus on fixing the basic organizational issues because the way the world works is changing dramatically from the ground up. But remember that understanding the big picture is essential to take the right decisions even if you don't recognize it in the line of fire.

4

Update: This post is adjusted since I attributed some of the answers to Guy Kawasaki and not Michel Raynor who actually answered the questions.

Today Art Hutchinson pointed me to Guy Kawasakis blog and the post on Michael Raynor's book The Strategy Paradox called How to Change the World: Ten Questions With Michael Raynor. It struck me as Kawasakis post set the light on a very good example on how to talk about strategy within it's own realm. E g taking little, if any, notice of the fundamental changes at lower levels which is what both changing the game radically, but also underpins the fundamental uncertainty today.

I started to get real interested when Raynor started to talk about the different levels:

The rest of the solution lies in calibrating the focus of each level of the hierarchy to the uncertainties it faces.

Yes, this sounds terrific! But then he ends at the middle manager level saying:

Managers should ask: How can we best execute on the commitments that have been made in order to achieve our performance targets? To put it on a bumper sticker, they have to “show us the money.” There are no strategic choices to make at this level, because the time horizons are too short—six to twenty-four months. Strategies simply can’t change that fast.

By the last sentence he is defining the whole game from a strategic level where the uncertainties are believed to come come from the outside the organisation which makes the lower levels strategically irrelevant. The point I was trying to make in my (to long) post Mind the gap a couple of days ago was that this exclusive view from top of "Mount Strategy" is a fundamental part of the problem. And even more so in the future. When Raynor refers to Stephen Wolfram saying:

First, any system must have boundaries that define it, since any system without boundaries would be the universe itself. Second, no system is entirely closed. Therefore, every system is subject to exogenous, and necessarily unpredictable, shocks that introduce randomness into the system.

he is right! But Raynor misinterpret what this means. The shocks that introduce randomness into the system can also come from what is thought to be the conceptual foundation for the strategic level of thinking. Strategic thinking is actually constituted by and dependent on the work at the lowest level. In this sense the strategic world could be a separate system not just from the outside world, but also from the lower levels on which depends and claims to include.

Yes, I agree with Art's post, that

A need for divergent scenarios that empower management teams to think systemically across and around boundaries--recognizing but not being hemmed in by them [my emphasis]. The goal: strategic resilience whatever may come.

But to do that you have to cross the gap and embrace both levels to do a good job.