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How Leading Companies Are Winning with Disruptive Social Technology
By CHRISTOPHER MORACE, SARA GAVISER LESLIE
McGraw-Hill EducationCopyright © 2014 McGraw-Hill Education
All rights reserved.
DISRUPTION IN THE ENTERPRISE
WHAT, WHY, AND THE CHOICES COMPANIES MUST MAKE
NEW TECHNOLOGIES SPUR THE PACE OF CHANGE
The inventions that humankind has hatched just during the past five years are appearing exponentially faster than developments in the last 50 years or in any period since the beginning of the Industrial Age. During the Stone Age (ended between 4500 and 2000 BCE), hunter-gatherers and, later, farmers, developed tools to help them do their jobs—stone cutting tools and arrowheads among other simple inventions. Later, in the Bronze Age (ended around 1200 BCE), and then the Iron Age (ended around 200 CE), humans invented the catapult, gunpowder, the clock, and the wheel. These machines were monumental to human progress, but they are nothing compared to today's technological innovations. In mere years or even over months, humans are launching multiple inventions, many of which are more revolutionary than those the people of the Stone Age hatched over a period of 3.4 million years.
Futurist Raymond Kurzweil, in his book The Singularity Is Near, highlights the evolution of communications technologies as proof that the speed of technology adoption is rapidly accelerating:
A half millennium ago, the product of a paradigm shift such as the printing press took about a century to be widely deployed. Today, the products of major paradigm shifts, such as cell phones and the World Wide Web, are widely adopted in only a few years' time.
Technological Innovation: The Industrial Age and Rapid Development
The Industrial Revolution took machinery up several notches. Individuals who lived through this period—beginning around 1700—saw magic everywhere. Who could have imagined the ability of anesthesia to blunt pain during a medical procedure, the detail of a photograph to help you remember a scene exactly as it was, the power of a telegraph to send a message across the country, or the speed at which a spinning jenny could turn wool into yarn?
Some of the most remarkable inventions were in the area of transportation. Steam-powered trains and ships, automobiles, and electrical messaging devices replaced horse-based travel, saved hundreds of man-hours, and gave people the ability to interact with others far beyond their immediate environments.
Communications technologies offer the best evidence that the pace of change is increasing. For thousands, if not millions, of years, humans used messengers and signal fires to communicate over long distances. The only ways to convey information were face-to-face or with visual signals. Even in 1845, it took President James K. Polk six months to get a message from Washington, D.C., to California.
The telegraph quickly displaced the Pony Express in 1861 and made it possible to send and receive messages almost instantaneously. By separating information into short messages, humans could communicate more quickly. Shortly thereafter, in 1876, Alexander Graham Bell invented the telephone transmitting not just data but also voice. Initially, the phone was a very expensive tool. As it became more affordable in the 1900s—and had higher performance—large portions of the population were able to access the phone. It was no longer a tool of governments, corporations, and the wealthy alone. Then, digital communication accelerated in the late twentieth century with the facsimile machine, e-mail, mobile phones, SMS messaging (mobile texting), and video chat services like Skype in the early twenty-first century. Compared to how long it took for the telephone to replace foot messengers and U.S. mail, these digital developments occurred over an extremely compressed time frame.
Rapid innovation is becoming the norm. If Kurzweil is correct about the accelerating pace of change, we should prepare for a wild ride:
[W]e won't experience one hundred years of technological advance in the twenty-first century; we will witness on the order of twenty thousand years of progress (again, when measured by today's rate of progress), or about one thousand times greater than what was achieved in the twentieth century.
Initially, connecting to the Internet involved buying a modem and hooking that up to a computer; now the modem is inside many devices such as tablets and e-readers. Business travelers who needed to connect to their company's network from a hotel room struggled to disconnect the hotel phone, find a toll-free access number from the data carrier (lest they rack up a double or triple digit phone bill), and endured multiple dropped calls before finally reaching their company files and e-mails. Now, we expect technology to be easy to use and readily available from anywhere. When an airplane doesn't have Wi-Fi service, we see it as an injustice!
The pace of change is accelerating at a rate that the world has never before experienced, yet it's happening so quickly it almost goes unnoticed. Kurzweil notes, "Exponential growth is deceptive. It starts out almost imperceptibly and then explodes with unexpected fury—unexpected, that is, if one does not take care to follow its trajectory."
THE PACE OF CHANGE DISRUPTS THE STATUS QUO
The End of Command and Control Warfare and Management
Once, a few large players dominated all operations, attacks, and, of course, wars. They made periodic moves that required well-researched and coordinated responses. Then, real threats began to materialize from almost anywhere in the world with very little notice. Following the collapse of the Soviet Union and the rise of smaller terror organizations not directly tied to nation-states, the U.S. Military restructured to better respond to changing power structures. It shifted dramatically toward an investment in Special Forces. The military gives these small teams extensive training, broad access to information and communication technologies, and empowers them with decision making within a mission-based framework.
In the business world, too, advanced planning and coordinated responses are becoming outdated behaviors. New communications technologies enable companies to get information to customers faster, understand customer behavior, and analyze how partners behave. Instead of sending a memo through interoffice mail and waiting days for a response, workers send an e-mail and hear back in a minute. They then have no choice but to act on this new information. A mass market retailer, for instance, can no longer wait for each individual store to count inventory to know which products are selling. Instead, it must invest in sophisticated point-of-sale systems to send transaction information directly to headquarters. That generates a new challenge that must be responded to without delay. The company must reroute inventory or change promotions with almost no advance planning.
Whereas the Industrial Age was about command and control and hierarchical structures, computational global networks dominate everything and everyone in the Information Age. Distributed computational global networks set free the flow of data and information. They enable people to communicate at near zero cost. Data flows rapidly so members of the network learn about new developments quickly. As soon as they learn of them, they must act on them.
Thus the speed of business accelerates!
Businesses Run the Red Queen's Race
Alice, the main character in Lewis Carroll's Through the Looking-Glass, experienced this same relentless acceleration on her adventure. One character she encountered, the Red Queen, challenges Alice to a race across a chessboard. In the Red Queen's race, Alice finds that she must run faster and faster only to stay in the same place. Frustrated and panting, Alice turns to the Queen and says, "In our country, you'd generally get to somewhere else—if you run very fast for a long time." To this the Red Queen responds, "A slow sort of country! Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to go somewhere else, you must run at least twice as fast as that!"
Today's businesses are in a similar predicament; they're running twice as fast but making little progress. It's like an accelerating treadmill with an equally elusive finish line. When business processes hit the limits of their speed, devices like smartphones seek to make workers more productive, but only at the expense of their evenings, weekends, and vacations.
Command and control was once the dominant management style in the enterprise. But in an environment of fast-flowing information, this approach doesn't work. Instead, like militaries that replace large platoons with special forces teams, firms need adaptive organizational models that are responsive to rapid shifts in product innovations, customer tastes, or regulatory environments.
When companies can't adapt to a new environment and an accelerating pace of change, they bend or break. An enterprise is like a machine that runs a large set of processes. As change occurs more frequently, enterprises have to respond to these changes more quickly. This requires agility and adaptability. When you increase the rate of processes, exceptions to the standard process also increase. You get someone to handle exceptions and that person becomes the new bottleneck. The company cannot complete the process fast enough.
Push Out Now, Correct Later
Technology is transforming media perhaps more than any other industry; news breaks first on Twitter, and journalists and police identify suspects through Facebook photos. As Allison Kaplan, senior editor at Mpls. St. Paul Magazine explains:
Newspaper, magazine, and TV reporters feel pressure to produce more news faster. We're still doing the "traditional" work, whether that's in print or on camera, but now we have all of the other channels to constantly feed—blogs, social media (Foursquare, Instagram, Facebook, Twitter, Pinterest, and YouTube) e- newsletters, apps, and more. The rapid growth and immediacy of these channels and the constant need to feed them is eroding a basic tenet of journalism: fact checking. The new philosophy is push it out now, correct it later. We saw this in December 2012 as the horrors in the Newtown, Connecticut, shootings unfolded.
Agile software development is gaining popularity because it enables developers to continually validate their ideas through an iterative and flexible process. While the interim product might not be perfect, this "put it out, correct it later" is an overriding theme of agile. Shorter, iterative loops are replacing long planning cycles.
Sheryl Sandberg, COO of Facebook, explains how Facebook, among other technology companies, has adopted the lean approach that Eric Ries details in his book, The Lean Start-up: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses:
Traditionally, companies have depended on elaborate business plans and in-depth tests to put out a "perfect" product. Ries advocates that for tech, a better way to perfect a product is to introduce it to the market and get customers using it and giving feedback, so you can learn and then iterate. (Facebook figured out this approach long ago. We even have posters all over our buildings that remind people, "Stay Focused & Keep Shipping.")
Business processes—not just software development—must also become agile. In fact, the ability to adapt is becoming more important than any other quality, even speed. The environment is changing so quickly that even if you plan, you find that by the time you follow through on your plan, the environment has changed.
How can technology support firms' need for adaptability? In the past, technology helped enterprises manage and automate processes. Today, this software is incompatible with a constantly evolving environment. Jesper Sørensen, a professor of organizational behavior at Stanford Graduate School of Business, explains that much of the technology currently installed in the enterprise has reached its limits:
Systems like ERP, supply chain management, and Six Sigma are designed to enable companies to get better at the things they already know how to do. They reduce inefficiency in the flow of information about known processes and known procedures. The downside of these systems is that they encode a particular understanding of a strategy and operational routines. It's difficult to fit new processes, new programs, and new businesses into an existing system.
In other words, these systems worked until something in the environment changed. When a problem arises with a product, customer tastes change, or competitors emerge, a company's ability to react quickly becomes more important than consistency. In a dynamic environment, mechanization is the wrong approach; the enterprise is all engine and no steering. When you're drag racing, all you need is to go fast. But any time you want to turn, steering becomes critical. Companies have spent millions of dollars for information technology, yet they can't navigate a rapidly changing environment.
Innovation has overtaken companies' ability to react quickly.
Enterprises Need New Tools to Process New Information
In distributed organizations, a major challenge is getting all employees the right information they need to make good decisions. Enterprises are becoming larger, faster paced, organic organizations, and company information is flowing more freely both inside and outside the enterprise. Companies must monitor and react to this information.
But enterprises don't have the resources to support this kind of communication, so they optimize around constraints. They find a way to amplify their strengths and mitigate their weaknesses and punt or delay on anything that they don't know how to manage. They add resources around a problem when they can't solve the problem. They create a queue and watch customers line up for help.
Though enterprises can quickly transport information and shrink the information loop—the time and effort to get information from one person to another—we haven't seen the same acceleration and adjustments in human information processing. As marketing guru Seth Godin suggests, "We don't need people to write down the answer, information is abundant. We need help processing things, help finding surprise and insight...."
The problem is, current tools can't process information quickly enough.
When enterprises can't process information quickly and easily, they can't respond to threats like shifts in product or service needs, customer tastes, technology and socioeconomic factors; opportunities available from internal competencies; or potential opportunities with partners or mergers/acquisitions.
As Sørensen explains:
Enterprises tend to lack the systems to support communication around new ideas and information discovery. Getting ideas to take hold depends on finding the right audience. If I'm working in an organization and come up with a new idea, I want to share it; I want to tell other people about it and get them to support it. I'm going to talk to the first person I run into in the hallway and tell them about my idea. If that person isn't interested or doesn't think it is a good idea, the idea dies. The only way to keep the idea moving is to be very convincing or continually search for the right audience.
Systems like CRM and ERP don't capture the conversations that don't fit anywhere; the conversations that take place on the phone, over e-mail, or even in person. Companies don't have an easy way to make these conversations available to a wider audience or even have a record of them for the future. Andy Sernovitz, author of Word of Mouth Marketing: How Smart Companies Get People Talking, explains it this way:
Customer relationship management systems took customer data formally stored in silos and made that data accessible across an organization. But what about the conversations that keep people in organizations aware of what's happening? That describe what do to in exceptional cases? That clarify procedures when automation isn't enough?
What we lack, Sernovitz suggests is a "database of conversations."
The Goliaths of the world experience this happening. They hear about up-and-coming players, they know customers are choosing competitors' products over theirs, but they can't efficiently process the information they are gathering both internally and externally. When they finally do process this information, they are unable react and refocus their business on the threat quickly enough to strike back at new competitors.
Excerpted from Transform by CHRISTOPHER MORACE, SARA GAVISER LESLIE. Copyright © 2014 McGraw-Hill Education. Excerpted by permission of McGraw-Hill Education.
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