Tag Archives: Strategic management

The myth of sustainable competitive advantage

I’ve mentioned to a few people that I was unimpressed with The End of Competitive Advantage by Rita Gunther McGrath. I’ve even be so impolitic as to call it ‘crap’ a few times, after which I’m usually asked why I think this, and I then spend time shooting over references and explaining how I came to my conclusion.

Rather than doing this yet again, I thought I’d compile some notes here which I can then point people at.

The End of Competitive Advantage claims to provide key insights into how business strategy needs to change, moving on from the foundations laid down by Michael Porter all those years ago. A few even called it an ‘important’ book, as they see it as the first proof that sustainable competitive advantage is a thing of the past.

My problem with the book is in three parts:

  1. The book provides insufficient argument and data to prove its thesis.
  2. The book ignores the fact that Porter’s work was shown to be lacking at least as far back as 2006.
  3. The simple analysis and lack of research into what is driving the shift results in trite recommendations.

The usual response to these points is are along the lines of:

  • ‘But everyone is using Porter still’ – which is an observations and not an argument.
  • They point out that the book is from a professor at Columbia Business School and published by HBR – which is just appealing to credentials.
  • ‘But the book is based on lots of analysis’ – which it is, but the analysis is riddled with holes.

Let’s handle the second point first.

Do Porter’s theories still work?

Porter’s work on competitive strategy might be one of, if not the most, cited works by business academics. This doesn’t mean that it’s any good.

Academia is riddle with frameworks that either have little or no evidence behind them, or which have been proved to be irrelevant in the modern context. This hasn’t stopped them being used as the foundation for new work.

Abraham Maslow and his pyramid of needs, for example, has been shown to have no basis in fact1) William Kremer & Claudia Hammond (31 August 2013), Abraham Maslow and the pyramid that beguiled businessBBC World Service. – it’s just something Maslow made up one day – and yet it’s taught in every b-school in the world. There’s similar problems with business value, technology adoption, and a whole range of topics.

Just because everyone uses Porter’s five forces doesn’t mean it works or has any basis in fact.

As Matthew Stewart pointed out in 2009 in his book The Management Myth2)Matthew Stewart (2009), The Management Myth: Management Consulting Past, Present & Largely Bogus, W. W. Norton & Company., the idea of being able to locate and explot a sustainable competitive advantage was ‘lacking any foundation in fact or logic’. It’s rent seeking of the worst form. There’s an earlier article by the same author from 2006 that points out many of the same flaws3)Matthew Stewart (June 2006), The Management Myth, The Atlantic.. Even earlier in 2000 Pankaj Ghemawat conducted a survey of the history of business strategy which found that ‘In the case of the five forces, a survey of empirical literature in the late 1980s—more than a decade after Porter first developed his framework—revealed that only a few points were strongly supported by the empirical literature generated by the IO [industrial organisation] field.’4)Pankaj Ghemawat (April 2000), Competition and Business Strategy in Historical Perspective, HBS Comp. & Strategy Working Paper No. 798010. The report he drew this from (and which I don’t have in my hands yet) is from 19895)Richard Schmalensee, ‘Inter-Industry Studies of Structure and Performance’, in Richard Schmalensee and R. D. Willig, eds., Handbook of Industrial Organization, vol. 2 (Amsterdam: North-Holland, 1989)..

The market even rejected Porter’s theories conclusively in November 2012 when Monitor Group, the firm that Porter founded to consult around his theories, filed for bankruptcy. As Steve Denning over at Forbes commented6)Steve Denning (20 November 2012), What Killed Michael Porter’s Monitor Group? The One Force That Really Matters, Forbes.:

Monitor wasn’t killed by any of the five forces of competitive rivalry. Ultimately what killed Monitor was the fact that its customers were no longer willing to buy what Monitor was selling. Monitor was crushed by the single dominant force in today’s marketplace: the customer.

It was Drucker who pointed out that the whole point of a company is to create a customer, not to try and squat in some magical place that would allow a firm to extract rents without any effort. Porter appears to have ignored this.

So no one wanted to buy the sustainable competitive advantage snake oil from Monitor, nor was Monitor able to apply the theory to its own situation and save itself. The idea has no basis in fact, the market rejected it, and it doesn’t work. And all this happened well before The End of Competitive Advantage was written or published.

Let’s set aside the idea that Prof McGrath’s book is the first time that Porter’s theories have been shown to lack potency: clearly she’s a decade or so late to that party.

The analysis

The second problem I have with the book is the poor quality of the analysis. Generally, the approach used by The End of Competitive Advantage is of the same level as Good to Great, which is another business bible that typically can’t be questioned but is riddled with holes. A lot of data might have been used, but the process is clearly deeply flawed.

The End of Competitive Advantage is built on a set of ‘growth outlier’ companies which out-performed the market. As is stated in the book:

In 2010, my research team tracked down every publicly traded company on any global exchange with a market capitalization of over $1 billion US dollars as of the end of 2009 (4,793 firms). Then we examined how many of these firms had been able to grow revenue or net income by at least 5 percent every year for the preceding five years (in other words, from 2004 to 2009).

These firms were then compared with their top three competitors and then with each other to identify what made them different. (Comparing a firm with its top three competitors is not the same as controlling for natural industry or geography growth, but we’ll let that one slide. At least there was some attempt to normalise the results. We can also set aside the question of why a five year period was used, even though it seems completely arbitrary.) The rest of the book presents what was learned, and provides the reader with some advice and a simple framework that you too can use to copy these growth outliers’ success. (This is why some reviews think that the book is an extended ad for consulting services, as the information presented is not much more than a teaser.)

As the book states:

The major conclusion was that this group of firms was pursuing strategies with a long-term perspective on where they wanted to go, but also with the recognition that whatever they were doing today wasn’t going to drive their future growth. Interestingly, they had identified and implemented ways of combining tremendous internal stability while motivating tremendous external agility, particularly in terms of business models.

The first issue we can call out with the analysis is a lack of disconfirming research. Consider, for example, if the CEOs of all the growth outliers wore red socks on Tuesdays. We might conclude that wearing red socks on a Tuesday will give us the edge we need. Humans have a natural confirmation bias so when you reach a conclusion you need to ask yourself ‘What would it take to prove this conclusion false?’ Can you find a significant number of firms where the CEO religiously wears red socks on Tuesday and which are not growth outliers? How do we know that the correlation they you’ve found isn’t just a happy accident, and that we’re reading a lot more into it than we should?

Next we have to consider survivorship bias. Someone has to win, but coming out on top does not imply that you were more skilful. There’s a lot of dumb luck in business; it’s not enough to be good at what you do, you need to be at the right place in the right time with the right product(s) and you still need a healthy does of luck. Did the growth outliers survive because they were good at what they do? Or is their success the result of happy accidents that took down their competition, or lucky coincidences that enabled them to leap ahead? Were they in the right places at the right time, moving into Asia when their competitors moved into South America, for example? Someone must survive, but there’s no rule that says that their skill was the only determinant of their survival.

Next we have the unknown unknowns. How do we know that the practices identified by Rita and her team are the right practices? Perhaps some of the outliers were more financially savvy and managed their cash flows, something which is hard at the best of times and even more challenging in the current turbulent environment, and which is inherently boring. Or perhaps they made a couple of astute (or just plain lucky) bets on which sectors to play in, nudging them past their competition. How do we know the survey or practices was complete? What was the framework used to identify these practices, and link them to changes in the environment. Correlations don’t cut it.

Ultimately, identifying a common set of practices for a set of companies that performed well over a given time period does little more than confirm that over the last time period these companies did well. That was already obvious.

We need to build a model that allows us to feed in long term market trends (increasing competitive intensity, decrease in ROA – at least in the US – blurring of sectors, etc.) and ask questions like, ‘How would these companies have performed three or more periods back in the past, and how might they perform in the future as the market evolves?’. If we’re looking for a change in the market then there should be an earlier time period where these practices were counterproductive. It’s this sort of approach that makes Thomas Piketty’s new book so interesting7)Thomas Piketty (10 March 2014), Capital in the Twenty-First Century, Belknap Press..

If you’re going to write a book about what to do in the future than you need to do more than point out what worked in the past, even if it’s the recent past. The future, as they say, is a foreign country.

This is also the big mistake that Good to Great made: identify a group of profitable companies that have some shared characteristic, assume that what made them successful in the past will also make them successful in the future, and then call out the common elements from this set of companies. As Freakanomics, put it, a lot of the Good to Great companies went ‘From Good to Great … to Below Average’8)Steven D. Levitt (28 July 2008), From Good to Great … to Below Average, Freakonomics..

The recommendations

Given all this, the book introduces the idea of ‘areas’ as the basis for competition, rather than industries. Its a nice idea as it allows us to pull more context into our analysis of the market: industries modulated by a few different dimensions, such as geography, demographic, etc.

The concept falls down, though, as it ignores the fact that industry definitions have become fluid. (What? Apple is a PC maker, not a phone maker? And what’s this touch and apps store stuff?) This  means that areas must also be a fluid concept, but the book does not look into the dynamics of how areas change. (I expect that this is left as an exercise for the reader, or they assume that you use Porter’s model to evaluate opportunity.)

The model for managing change across areas is a simple launch, ramp-up, sustain, ramp-down, disengage process. This doesn’t account for the pace in the current market. If your competitor can launch a new product in two to six weeks from a standing start (as many companies now can) then, while your carefully thought out launch process taking six months might seem modern, it’s largely irrelevant. There is no insight in the recommendations on what the change in market pace means other than ‘the end of competitive advantage’.

The recommendations all but ignore the shift from stocks to flows9)Peter Evans-Greenwood (20 Feburary 2014), Setting Aside the Burdens of the Past, PEG., which has huge implications for how we think about, organise, govern and manage our business. There is, however, a brief mention to the idea of consuming services rather than building assets, and the book even name-checks Odesk. However, it doesn’t look into the implications that spring out of this. The coverage is only a few spare paragraphs and you’re left wondering if the author doesn’t really know what to make of the topic.

The rest of the book which follows is a fairly straightforward process of working through the stages of the model and providing a few points of sage sounding advice for each stage (‘Rotate you team through departments so that they don’t get comfortable’ type of thing). You’ll either nod and say yes to each of these (the Barnam effect10)From wikipedia: The Forer effect (also called the Barnum effect after P. T. Barnum’s observation that ‘we’ve got something for everyone’) is the observation that individuals will give high accuracy ratings to descriptions of their personality that supposedly are tailored specifically for them, but are in fact vague and general enough to apply to a wide range of people. This effect can provide a partial explanation for the widespread acceptance of some beliefs and practices, such as astrology, fortune telling, graphology, and some types of personality test. in action) or go ‘meh’. Your mileage might vary.

My review

So, as you can see, my opinion is based on the following pillars:

  • The main thesis that ‘sustainable competitive advantage is over’ is very old news.
  • The analysis is suspect, at least, and doesn’t prove the thesis.
  • The model and recommendations provided hold little value.

Calling it ‘crap‘ might be going a bit far, but for me the book was a waste of money. Use the money to buy a coffee for a friend that you haven’t spoken to in a while; you’ll learn a lot more.

While the content might come from a major b-school and has been written up in respected journals, that doesn’t change the fact that we live on the internet now and we need proof that we can see. As Jay Rosen pointed out the other day11)Jay Rosen (March 2014), “I want it to be 25 years ago!” Newsweek’s blown cover story on bitcoin, PressThink., appealing to credentials doesn’t work in this day and age.

Image: Peter Mooney

References   [ + ]

1.  William Kremer & Claudia Hammond (31 August 2013), Abraham Maslow and the pyramid that beguiled businessBBC World Service.
2. Matthew Stewart (2009), The Management Myth: Management Consulting Past, Present & Largely Bogus, W. W. Norton & Company.
3. Matthew Stewart (June 2006), The Management Myth, The Atlantic.
4. Pankaj Ghemawat (April 2000), Competition and Business Strategy in Historical Perspective, HBS Comp. & Strategy Working Paper No. 798010.
5. Richard Schmalensee, ‘Inter-Industry Studies of Structure and Performance’, in Richard Schmalensee and R. D. Willig, eds., Handbook of Industrial Organization, vol. 2 (Amsterdam: North-Holland, 1989).
6. Steve Denning (20 November 2012), What Killed Michael Porter’s Monitor Group? The One Force That Really Matters, Forbes.
7. Thomas Piketty (10 March 2014), Capital in the Twenty-First Century, Belknap Press.
8. Steven D. Levitt (28 July 2008), From Good to Great … to Below Average, Freakonomics.
9. Peter Evans-Greenwood (20 Feburary 2014), Setting Aside the Burdens of the Past, PEG.
10. From wikipedia: The Forer effect (also called the Barnum effect after P. T. Barnum’s observation that ‘we’ve got something for everyone’) is the observation that individuals will give high accuracy ratings to descriptions of their personality that supposedly are tailored specifically for them, but are in fact vague and general enough to apply to a wide range of people. This effect can provide a partial explanation for the widespread acceptance of some beliefs and practices, such as astrology, fortune telling, graphology, and some types of personality test.
11. Jay Rosen (March 2014), “I want it to be 25 years ago!” Newsweek’s blown cover story on bitcoin, PressThink.

Danger Will Robinson!

Ack! The scorecard's gone red!
Ack! The scorecard's gone red!

Andy Mulholland has a nice post over at the Capgemini CTO blog, which points out that we have a strange aversion to the colour red. Having red on your balanced scorecard is not necessarily a bad thing, as it tells you something that you didn’t know before. Insisting on managers delivering completely green scorecard is just throwing good information away.

Unfortunately something’s wrong with Capgemini’s blogging platform, and it won’t let me post a comment. Go and read the post, and then you can find my comment below.

Economists have a (rather old) saying: “if you don’t fail occasionally, then you’re not optimising (enough)”. We need to consider red squares on the board to be opportunities, just as much as they might be problems. Red just represents “something happened that we didn’t expect”. This might be bad (something broke), or it might be good (an opportunity).

Given the rapid pace of change today, and the high incidence of the unexpected, managing all the red out of your business instantly turns you into a dinosaur.

Consulting doesn’t work any more. We need to reinvent it.

What does it mean to be in consulting these days? The consulting model that’s evolved over the last 30 – 50 years seems to be breaking down. The internet and social media have shifted the way business operates, and the consulting industry has failed to move with it. The old tricks that the industry has relied on — the did it, done it stories and the assumption that I know something you don’t — no longer apply. Margins are under pressure and revenue is on the way down (though outsourcing is propping up some) as clients find smarter ways to solve problems, or decide that they can simply do without. The knowledge and resources the consulting industry has been selling are no longer scarce, and we need to sell something else. Rather than seeing this as a problem, I see it as a huge opportunity; an opportunity to establish a more collaborative and productive relationship founded on shared, long term success. Sell outcomes, not scarcity and rationing.

I’m a consultant. I have been for some time too, working in both small and large consultancies. It seems to me that the traditional relationship between consultancy and client is breaking down. This also appears to be true for both flavours of consulting: business and technology. And by consulting I mean everything from the large tier ones down to the brave individuals carving a path for themselves.

Business is down, and the magic number seems to be roughly a 17% decline year-on-year. One possible cause might be that the life blood of the industry — the large multi-year transformation project — has lost a lot of its attraction in recent years. If you dig around in the financials for the large publicly listed consultancies and vendors you’ll find that the revenue from IT estate renewal and transformation (application licenses, application configuration and installation services, change management, and even advisory) is sagging by roughly 17% everywhere around the globe.

SABER @ American Airlines

Large transformation projects have lost much of their attraction. While IBM successfully delivered SABER back in the 60s, providing a heart transplant for American Airlines ticketing processes, more recent stabs at similarly sized projects have met with less than stellar results. Many more projects are quietly swept under the carpet, declared a success so that involved can move on to something else.

The consulting model is a simple one. Consultants work on projects, and the projects translate into billable hours. Consultancies strive to minimise overheads (working on customer premises and minimising support staff), while passing incidental costs through to clients in the form of expenses. Billable hours drive revenue, with lower grades provide higher margins.

This creates a couple of interesting, and predictable, behaviours. First, productivity enhancing tooling is frowned on. It’s better to deploy a graduate with a spreadsheet than a more senior consultant with effective tooling. Second, a small number of large transactions are preferred to a large number of small transactions. A small number of large transactions requires less overhead (sales and back-office infrastructure).

All this drives consultancies to create large, transformational projects. Advisory projects end up developing multi-year (or even multi-decade) roadmaps to consolidate, align and optimise the business. Technology projects deliver large, multi-million dollar, IT assets into the IT estate. These large, business and IT transformation projects provide the growth, revenue and margin targets required to beat the market.

This desire for large projects is packaged up in what is commonly called “best practice”. The consulting industry focuses on did it, done it stories, standard and repeatable projects to minimise risk. The sales pitch is straight-forward: “Do you want this thing we did over here?” This might be the development of a global sourcing strategy, an ERP implementation, …

Spencer Tracy & Katharine Hepburn in The Desk Set
Spencer Tracy & Katharine Hepburn in The Desk Set

This approach has worked for some time, with consultancy and client more-or-less aligned. Back when IBM developed SABER you were forced to build solutions from the tin up, and even small business solutions required significant effort to deliver. In the 1957, when Spencer Tracy played a productivity expert in The Desk Set, new IT solutions required very specific skills sets to develop and deploy. These skills were in short supply, making it hard for an organisation to create and maintain a critical mass of in-house expertise.

Rather than attempt to build an internal capability — forcing the organisation on a long learning journey, a journey involving making mistakes to acquire tacit knowledge — a more pragmatic approach is to rent the capability. Using a consultancy provides access to skills and knowledge you can’t get elsewhere, usually packaged up as a formal methodology. It’s a risk management exercise: you get a consultancy to deliver a solution or develop a strategy as they just did one last week and know where all the potholes are. If we were cheeky, then we would summerize this by stating that consultancies have a simple value proposition: I know something you don’t!

It’s a model defined by scarcity.

A lot has changed in the last few years; business moves a lot faster and a new generation of technology is starting to take hold. The business and technology environment is changing so fast that we’re struggling to keep up. Technology and business have become so interwoven that we now talk of Business-Technology, and a lot of that scarce knowledge is now easily obtainable.

The Diverging Pulse Rates of Business and Technology
The Diverging Pulse Rates of Business and Technology

The scarce tacit knowledge we used to require is now bundled up in methodologies; methodologies which are trainable, learnable, and scaleable. LEAN and Six Sigma are good examples of this, starting as more black art than science, maturing into respected methodologies, to today where certification is widely available and each methodology has a vibrate community of practitioners spread across both clients and consultancies. The growth of MBA programmes also ensures that this knowledge is spread far and wide.

Technology has followed a similar path, with the detailed knowledge required to develop distributed solutions incrementally reified in methodologies and frameworks. When I started my career XDR and sockets were the networking technologies of the day, and teams often grew to close to one hundred engineers. Today the same solution developed on a modern platform (Java, Ruby, Python …) has a team in the single digits, and takes a fraction of the time. Tacit knowledge has be reified in software platforms and frameworks. SaaS (Software as a Service) takes this to a while new level by enabling you to avoid software development entirely.

The did it, done it stories that consulting has thrived on in the past are being chewed up and spat out by the business schools, open source, and the platform and SaaS vendors. A casual survey of the market usually finds that SaaS-based solutions require 10% of the installation effort of a traditional on-premsis solution. (Yes, that’s 90% less effort.) Less effort means less revenue for the consultancies. It also reduces the need for advisory services, as provisioning a SaaS solution with the corporate credit card should not require a $200,000 project to build a cost-benefit analysis. And gone are the days when you could simply read the latest magazines and articles from the business schools, spouting what you’d read back to a client. Many clients have been on the consulting side of the fence, have a similar education in the business schools, and reads all the same articles.

I know and you don’t! no longer works. The world has moved on and the consulting industry needs to adapt. The knowledge and resources the industry has been selling are no longer scarce, and we need to sell something else. I see this is a huge opportunity; an opportunity to establish a more collaborative and productive relationship founded on shared, long term success. As Jeff Jarvis has said: stop selling scarcity, sell outcomes.

Updated: A good friend has pointed out the one area of consulting — one which we might call applied business consulting — resists the trend to be commoditized. This is the old school task of sitting with clients one-on-one, working to understand their enterprise and what makes it special, and then using this understanding to find the next area or opportunity that the enterprise is uniquely qualified to exploit. There’s no junior consultants in this area, only old grey-beards who are too expensive to stay in their old jobs, but that still are highly useful to the industry. Unfortunately this model doesn’t scale, forcing most (if not all) consultancies into a more operational knowledge transfer role (think Six Sigma and LEAN) in an attempt to improve revenue and GOP.

Updated: Keith Coleman (global head of public sector at Capgemini Consulting) makes a similar case with Time to sell results, not just advice (via @rpetal27).

Updated: I’ve responded to my own post, tweaking my consulting page to capture my take on what a consultant needs to do in this day and age.

One of the only two sources of sustainable competitive advantage available to us today

I stumbled onto a somewhat interesting post over at HBR, which talks Garry Kasparov’s ideas in the business world. This is actually quite a relevant pairing, though an old one in the tradition of human-computer augmentation.

The idea a simple one, which takes far fewer words to express than the article took.

Use information technology to augment users, rather than replace them.

IT is good at lot of tasks, and less good at others. People, too, have their strengths and weaknesses. What’s interesting is that computers are weak where people are strong, and vice-versa. Computers excel as appliers of algorithms with huge memories and an attention to detail; people are powerful, creative problem solvers who have trouble thinking of four things at once and like coffee breaks. Why not pair the two, and get the best of both worlds.

Rather than replace the users, why don’t we use technology to automate the easy (for technology) 80% of what they do. (This is something I’ve written about before.) In the chess example, the easy 80% is providing the user with a chess computer for the commoditized solution space search, allowing them to focus on strategy. The performance improvement this approach provides can create an significant competitive advantage. As Garry Kasparov found, even a weak user with a chess computer can be impossible to defeat, by human or computer.

This then provides us with two options:

  1. Take the improvement as a saving by reducing head count.
  2. Reinvest the improvement by providing our users with more time to focus on the hard 20%.

(I must admit, i much prefer the later.)

If we continue to focus on automating the next easy 80%, we’ve created a platform and process for continual business optimisation. (Improvements in search efficiency would simply be harvested when appropriate to maintain parity.) Interestingly, this is one of only two sources of a sustainable competitive advantage available to us today.

The competative advantage with this approach rests with the user, in the commonplaces, the strategies, they use to solve problems. By reifying the easy 80% these strategies in software (processes and rules) we are moving some of the competitive advantage into the organisation with it can leveraged by other users. By continually attacking the easy 80% of what the users are doing, we are continually improving our competitive position. We could even sell our IT platform (but not the reified problem solving strategies) to our competitors — commoditzing the platform to realise a cost saving — without endangering our competitive position, as they would need to go through the same improvement and learning process that we did, while we continue to race ahead.

Now that’s scary: as long as we keep improving our process, our competitors will never be able to catch us.

Posted via web from PEG @ Posterous

We can be our own worst enemy

The only certainties in life are death and taxes, or so we’ve been told on numerous occasions. I’d like to add “change” to the list. Change, be it business change or change in our personal lives, has accelerated to the point that we can expect the environment we inhabit to change significantly in the immediate future, let along over the length of our careers. If we want our business to remain competitive in this ever evolving landscape, then overcoming our (and our team’s) own resistance to change is our biggest challenge.

The rules we have built our careers on, rules forged back in the industrial revolution, are starting to come apart. Most folk—from the Baby Boomers through to Gen Y—expect the skills they acquired in their formative years to support them well through to retirement. How we conduct business might change radically, driven by technological and societal change, but what we did in business could be assumed to change at a slower than generational pace. We might order over the internet rather than via a physical catalogue, or call a person via a mobile rather than call a place via a landline, but skills we learnt in our formative years would still serve us well. For example, project managers manage ever increasingly complex projects over the length of their career, even though how they manage projects has migrated from paper GANTT charts to MS Project, and now onto BaseCamp.

Which is interesting, as it is this what, the doctrine, which most people use to define themselves. A project manager manages projects, and has (most likely) built their career by managing increasingly larger projects and, eventually, programs. Enterprise architects work their way toward managing ever larger transformation programs. Consultants work to become stream leads, team leaders, finally running large teams across entire sectors or geographies. An so on. The length of someones career sees them narrowing their focus to specialise in a particular doctrine, while expanding their management responsibilities. It is this doctrine which most people define themselves by, and their career is an constant investment in doctrine to enhance their skills, increasing their value with respect to the doctrine they chose to focus on.

This is fine in a world when the doctrines a business needs to operate change slower than the duration of a typical career. But what happens if the pace of change accelerates? When the length of the average career becomes significantly longer than the useful life of the doctrines the business requires.

We’ve reached an interesting technological inflection point. Information technology to date could be characterized as the race for automation. The vast bulk of enterprise applications have been focused on automating a previously manual task. This might be data management (general ledger, CRM, et al) or transforming data (SAP APO). The applications we developed were designed as bolt-ons to existing business models. Much like adding an after-market turbo charger to your faithful steed. Most (if not all) of the doctrines in the technology profession have grown to support this model: the development and deployment of large IT assets to support an existing business.

However, the role of technology in business is changing. The market of enterprise applications has matured to the point where a range of vendors can supply you with applications to automate any area of the business you care to name, making these applications ubiquitous and commoditized.The new, emerging, model has us looking beyond business technology alignment, trying and identify new business models which can exploit synergies between the two. A trend Forrester has termed, Business-Technology.

The focus has shifted from asset to outcome, changing the rules we built our careers on. Our tendency to define ourselves by the doctrine we learnt/developed yesterday has become a liability. We focus on how we do something, not why we do it, making it hard to change our habits when the assumptions they are founded on no longer apply. With our old doctrines founded on the development and management of large IT assets, we’re ill-equipped to adapt to the new engagement models Business-Technology requires.

The shift to an outcome focus is part of the acceleration of the pace of business. The winners in this environment are constantly inventing new doctrine as they look for better ways to achieve the same outcome. How we conduct business is changing so rapidly that we can’t expect to be doing the same thing in five years time, let alone for the rest of our career. What we learnt to do in our mid 20’s is no longer (entirely) relevant, and doesn’t deliver the same outcome as it used to. Isn’t the definition of insanity continuing to do something the we know doesn’t work? So why, then, do we continue to launch major transformation programmes when we know they have a low chance of success in the current business and social environment? Doctrine has become dogma.

We need to (re)define ourselves along the lines of “I solve problems”: identifying with the outcomes we deliver, at both personal and departmental levels. This allows us to consider a range of doctrines/options/alternatives and look for the best path forward. If we adopt “I am an TOGAF enterprise architect” (or SixSigma black belt, or Prince2, or …) then they will just crank the handle as the process has become more important than the goal. If we adopt “how can I effectively evolve this IT estate the with tools I have”, then we’ll be more successful.

Rolls-Royce and Craig’s List are good examples of organisations using a focus on outcomes to driver their businesses forward. Bruce Lee might even be the poster child of this problem solving mentality. He studies a wide range of fighting doctrines, and designed some of his own, in an attempt to break his habits and find a better way.

Innovation [2009-02-09]

Another week and another collection of interesting ideas from around the Internet.

As always, thoughts and/or comments are greatly appreciated.

This issue:

  • Birdmen and the Casual Fallacy [Malstrom’s Articles]
    It’s always wise to have a clear understanding of the market you are really in. Wang was a good example of this, repositioning from mini computers to office automation with some success. Nintendo might have taken this method to an entirely new level, using an innovative blue water strategy and a superior understanding of the dynamics of their chosen market to put their competitors in a potentially impossible position.
  • Kelly’s 14 Rules [Lockheed Martin]
    Lockheed Martin’s Skunk Works is a good example of supporting a disruptive, innovative organisation within a larger, and much more conventional, business. Here are the fourteen rules the Skunk Works lives by.
  • At G.M., innovation often suffers for profits [New York Times]
    G.M. has no shortage of innovative ideas to persue. Why then, does G.M. have such a hard time getting innovative products out the door?
  • Forget how the Crow Flies [Spirit in Business]
    John Kay one one of the first to put forward the idea of Obliquity as a business strategy. Obliquity is not a new idea; the concept that sometimes the best route to success is an indirect one. Apple is a great example of this, with their proclaimed desire to simply make products that they, themselves, would love, often resulting in category defining products. Obliquity is an idea worth reminding ourselves of.