Category Archives: Centre for the Edge

The shift from stocks to flows

Flow

Digital technology is changing the world by enabling us to convert stocks – things we accumulate and hold – into flows – things we access on demand. This is the world where “it’s not what you know it’s what you can google”, one where you have a subscription to an on-demand car service like Flexicar rather than owning a (second) car (and working about running costs, servicing and depreciation).

The Shift Index1)Peter Evans-Greenwood, Peter Williams (2014), Australian Shift Index key findings: Setting aside the burdens of the past, Deloitte Australia that we maintain at the Centre for the Edge is based on this premise that we’re moving from a world dominated by stocks, to one dominated by flows, and it tries to measure this in action. But what is a “flow”, and what are the various types of “flow”?

The following is a short list of possible flows to consider. Shoot me a note if you think the list is incomplete or can be refined.

Information

The shift from information stored in physical locations (libraries &c.) as stocks to information stored in virtual locations (Wikipedia, shared research data sets, &c.) where the information to be consumed on-demand as a flow.

This is considered an information flow at the paradigm has changed from “individual moves to the information” to “information moves to the individual”.2)This is aligned with the definition of “information flow” in information theoretical context, where an information flow is considered the transfer of information from a variable x to a variable y in a given process.

Examples of information flows: Wikipedia, IMDB, MOOCs, etc.

Knowledge

The shift from developing stocks of knowledge (facts, information, and skills acquired through experience or education) before need, to knowledge acquired when needed, on-demand as a flow.

A key element of knowledge flow is the time invested in building your awareness of what knowledge is out there to be had (eliminating the unknown unknowns). Typically this is done by engaging in conversations and communities with which you share an interest. Eliminating the unknown unknowns means that you are aware of different areas and aspects of knowledge and know where to draw it from (via instruction, consultation &c.) when the need arrises.

Examples: Communities of interest, conferences, social media, specialist publications, &c.

Capability

The shift from needing to develop a capability yourself, to accessing one on-demand from another party.

This is related to servitisation,3)Servitisation is the strategy of creating value by adding services to products or even replacing a product with a service. Selling maintenance contracts for capital goods is an example of a service being added to a product. Contracting tyres by the kilometre to haulage companies instead of selling them outright is an example of a service replacing a product. a manufacturing trend where products are transformed into value-added services, but is a larger and more encompassing concept as it includes services that do not rely on physical products.

Examples: The classic example is Rolls Royce’s TotalCare programme which sells jet engines as “power by the hour”, and is considered a key enabler in the development low cost airlines. Contract and short run manufacturing (i.e. the flexible manufacturing ecosystem). Outsourcing. The various car-share services (Flexicar &c). Contingent workforce and the various platforms that support them.

Space

The shift from needing to maintain your own space (for work) to being able access space on demand. (This might only weakly considered a “flow”).

Examples: serviced offices, the colonisation of the “third place” by road warriors, co-working spaces, telecommuting and other remote work, creation of the virtual office, the flexible office, etc.

Capital

The shift from needing to stockpile your own capital to being able to assemble the capital required on demand.

In some senses the creation of the joint-stock corporate (and, consequently, stock markets) was the original crowd-sourced flow-based model, which we’ve been building on ever since.

Examples: Kick Starter and the crowd-funding ecosystem, credit in its various guises including micro-loans and so on, new asset classes, shared equity models.

Image: Codex41

References   [ + ]

1. Peter Evans-Greenwood, Peter Williams (2014), Australian Shift Index key findings: Setting aside the burdens of the past, Deloitte Australia
2. This is aligned with the definition of “information flow” in information theoretical context, where an information flow is considered the transfer of information from a variable x to a variable y in a given process.
3. Servitisation is the strategy of creating value by adding services to products or even replacing a product with a service. Selling maintenance contracts for capital goods is an example of a service being added to a product. Contracting tyres by the kilometre to haulage companies instead of selling them outright is an example of a service replacing a product.

Platforms are the new fool’s gold

Fools-Gold-750x300

I have a new post up on the Deloitte Strategy blog, which I wrote with Richard Millar.

Platforms are all the rage. In the modern digital economy many organisations are looking to create platforms, rather than simply building a traditional value-chain driven company (otherwise known as a ‘pipe’).

In this context, a platform is a business model designed to facilitate exchanges between interdependent groups; as opposed to a pipe, which is centred on the sourcing, production and distribution process. The successful companies of the past focused on controlling distribution (something which is increasingly difficulty in our highly-interconnected digital world), while it’s thought that successful companies in the future will focus on controlling access to customers (which they can do by creating a platform that attracts the best customers).

Platforms are where the smart money is going (particularly if your platform is seen as scalable). There’s even a Platform Strategy Summit where you can learn the tricks that will make your platform successful.

This recent obsession with platforms raises some concerns though, as it seems to confuse cause and effect.

You can find the entire text over at the Strategy blog.

Redefining education

Our latest piece at the Centre for the Edge is out: Redefining education.1)Peter Evans-Greenwood, Peter Williams, Kitty O’Leary (2015) The paradigm shift: Redefining education, Deloitte Australia.

When we did an Australian version of the Shift Index2)The Shift Index in Slides @ PEG we saw that while Australia has a pretty good digital foundation and society seems to be adapting to the shift fairly well, we’re not realising as much value as it could be. Or put another way, while we’re using digital technology to create new knowledge flows, we’re not as proficient at realising their value.

With the Shift Index complete we turned our attention to education, as it seemed logical that education would be the most effective fulcrum to use to improve our performance.

We took the major trends from the Shift Index – the move from stocks to flows, and from push to pull – and, as a bit of a thought experiment, applied them to the education sector to see what we came up with. This resulted in a slide deck The Future of the Education Sector3)The Future of the Education Sector @ PEG and now this report.

The major finding in the report is that our relationship with knowledge is changing, and consequently our relationship with education is changing. The snappy version of this is “Why remember what you can google?”. The longer story has interesting implications for the education sector as by changing what it means to be educated has all sorts of potential knock-on effects for education and educators.

The report is our attempt move the current debate beyond pedagogy and edu-tech, funding and Australia’s ranking on international league tables to consider if our changing relationship to knowledge (the shift from knowledge stocks to knowledge flows, highlighted in the report) is changing the role and purpose of education and (by extension) the education sector.

The report is on Deloitte’s web site, and I’d love to year your throughs.

References   [ + ]

1. Peter Evans-Greenwood, Peter Williams, Kitty O’Leary (2015) The paradigm shift: Redefining education, Deloitte Australia.
2. The Shift Index in Slides @ PEG
3. The Future of the Education Sector @ PEG

The Future of the Education Sector

We’ve spent the last six months or so at the Centre for the Edge looking into how the trends we saw in the Australian Shift Index (i.e. the shift from knowing something, to being able to google it) might be changing the education sector.

Our hypothesis was that digital technology has changed our relationship with knowledge, and that this has, in turn, driven changes in business and society making the existing education sector (and the model behind it) increasingly irrelevant. This means that the problems confronting educational institutions don’t arise from a lack of technology or pedagogy (and MOOCs will not save the world), but from a mismatch between the perceived purpose and role of education, and the demands of the modern worker.

To help get the creative juices flowing we put some of our thoughts onto some slides which we then used to spark conversations with a wide range of folk within traditional education institutions, and elsewhere. Given that we’re in the process of pulling together a report the details our findings we thought that it would be worthwhile to share the slides, so you can find them embedded below as well as in SlideShare.

Image: Francisco Osorio

The Shift Index in Slides

AU Shift Index External Overview (2014, C4tE)

I’ve taken the time to create a summary of the Shift Index as a handful of slides, and dropped the slides into SlideShare.

The question we asked ourselves when pulling the Shift Index together:

The world is changing faster than ever. However, we can only respond to and manage a change if we can measure and understand it. If we want to respond as a community, then we need to find a way to quantify the change. We need to ask ourselves whether the perceived change is real, and if it is, how we can capitalise on it.

is fairly straightforward, but the index is a sprawling beast.

The slides break this down into a few points:

  • Business is more intense.
  • The balance of power is changing
  • Adapt or die

and ties this back to the evidence from the Shift Index.

Setting aside the burdens of the past

The first report from the Australian Centre for the Edge on the Australian Shift Index, Setting aside the burdens of the past: The possibilities of technology-driven change in Australia, has just been published. (Press release here.)

We’ve worked hard on this over the last six months or so and I’m very happy with this report as an introduction to what we’ve done. If you’re interested in how technology is driving change both in business and in society in general, then I highly recommend that you head over and grab yourself a copy. (And if we’re in something like the same neighbourhood I’d love to catch up for a coffee to discuss. Or feel free to leave a comment below.)

The Shift Index was created as a tool to help us understand if the rapid pace and increasing uncertainty we feel in the business and social spheres is real, or if it is just an illusion created by the always-on environment we live. (This is a bit like how nationalised news brings us stories of shootings in other regions leading us to think that crime has increased, when in actual fact crime has been decreasing.)

As we say in the report:

The world is changing faster than ever. However, we can only respond to and manage a change if we can measure and understand it. If we want to respond as a community, then we need to find a way to quantify the change. We need to ask ourselves whether the perceived change is real, and if it is, how we can capitalise on it.

The short answer is that the world is definitely changing and that Australia, Australians and Australian businesses are successfully adapting to the changes. We can’t, however, rest on our laurels as the drivers of change are still present and it doesn’t look like they will dissipate for some time.

The concept behind the Shift Index is that developments in digital infrastructure (computing, storage and networks) is driving increases in information flows, and that these information flows are reconfiguring society by tipping the balance of power from the merchant to the consumer.

The framework we used as our starting point was developed by the US Center for the Edge, founded by John Hagel and John Seely Brown. The US Shift Index was developed in 2009 and has been updated each year since then.

Our goal with the Australian Shift Index was to take the US framework and build a comparable index for Australia, allowing us to take the lessons learned from the US index and translate them to our local context. At the same time, we tailored the index – tweaking or changing some of the metrics used – to create a version that is uniquely Australian and which can provide us with insight into the particular challenges we face here.

The methodology defines three groups of metrics:

  • The Foundation Index measures the price-performance of computing, storage and network technologies, the penetration of these technologies into society, and change in regulation to support the adoption of these technologies. This is the lead indicator in the Shift Index.
  • The Flow Index measures the resulting increase in information flows in terms of virtual flows (mobile phone and internet usage), physical follows (attendance at conferences, business travel, and money transfers) and flow amplifiers (social media and the like).
  • The Impact Index measures the impact of these changes across the Australian market (competitive intensity, labour productivity and stock price volatility), firms (asset profitability and the like) and people (consumer power, brand disloyally, returns to talent, and increased in executive turnover). This is the lag indicator for the Shift Index.

The result is three high-level metrics that quantify the the drivers for the change, the change itself, and it’s impact.

AU2012shiftindex

Image source: Centre for the Edge

There’s ten major findings in the report:

  • Fast adopters: Australians have a good track record for adopting new technology. Our challenge is to continue adapting, and to find opportunities to leverage these technologies within our institutions.
  • Tech-driven change: The permeation of cheap, powerful computing, communications and storage technologies is driving change and will continue to do so into the foreseeable future.
  • Knowledge flows: New technology has resulted in new flows of information at unprecedented volumes.
  • Higher competition: The Australian market has become more competitive as a result of new technology and knowledge flows.
  • Capital over labour: Australia’s focus has shifted away from labour and towards investment in new technologies for more efficient workflows.
  • Knowledge economy: Australia has shifted from an industrial and agricultural economy to a creative, service-based economy.
  • Unrealised potential: There is a big gap between our technological capabilities and the way we currently use technology to solve problems.
  • Economic strength: Australia’s economy is strong and demonstrates better asset profitability than the US.
  • Recession-proof: The global downturn in 2008 was only a pause in our progress and has not halted Australia’s transformation.
  • Future success: Our continued prosperity depends on how well our knowledge workers can find new ways of using technology to solve problems.

These ten findings are only the tip of the iceberg though. While the report answers some interesting questions, or raises even more questions, questions that we intend to delve into further.

Image source: macinate.