Business Strategy – Andrew Essa

Trends and issues of AI-enabled legal and compliance services

As AI continues to transform many industries[1], including the legal service industry, many experts are unanimous in predicting exponential growth in AI as a paramount technology to bring new tools and features to improve legal services and access to justice. Already, many aspects of the estimated $786B[2] market for legal services are being digitised, automated and AI-enabled whether discovery in litigation (e.g. RelativityAI), divorce (e.g. HelloDivorce), dispute resolution (e.g. DoNotPay) or contract management (e.g. IronClad).

As with many disruptive technologies, there are many experts who believe that AI will significantly disrupt (rather than extend) the legal market:

“AI will impact the availability of legal sector jobs, the business models of many law firms, and how in-house counsel leverage technology. According to Deloitte, about 100,000 legal sector jobs are likely to be automated in the next twenty years. Deloitte claims 39% of legal jobs can be automated; McKinsey estimates that 23% of a lawyer’s job could be automated. Some estimates suggest that adopting all legal technology (including AI) already available now would reduce lawyers’ hours by 13%”[3]

The real impact will be more nuanced over the long-term as whilst AI will eliminate certain tasks and some legal jobs, it will also augment and extend the way legal services are provided and consumed. In doing so, it will drive new ways of working and operating for both established and new entrant firms who will need to invest in new capabilities and skills to support the opening up new markets, new business models and new service innovations. In the past few decades, we have seen the impact of emerging and disruptive technologies on established players across many sectors, including banking (e.g. FinTechs), media and entertainment (e.g. music, movies, gambling), publishing (e.g. news), travel (e.g. Airbnb) and transportation (e.g. Uber). It is very likely traditional legal providers will be faced with the same disruptive challenges from AI and AI-enabled innovations bundling automation, analytics, and cloud with new business models including subscription, transaction or freemium.

Although AI and AI-enabled solutions present tremendous opportunities to support, disrupt or extend traditional legal services, they also present extremely difficult ethical questions for society, policy-makers and legal bodies (e.g. Law Society) to decide.

This is the focus of this article which sets out a summary of these issues, and is structured into two parts:

Current and future use cases and trends of AI in legal and compliance services;
Key issues for stakeholders including legal practitioners, society, organisations, AI vendors, and policy-makers.

A few notes:

This article is not designed to be exhaustive, comprehensive or academically detailed review and analysis of the existing AI and legal services literature. It is a blog post first and foremost (albeit a detailed one) on a topic of personal and professional interest to me, and should be read within this context;
Sources are referenced within the footnotes and acknowledged where possible, with any errors or omissions are my own.
Practical solutions and future research areas of focus is lightly touched on in the conclusion, however is not a focus for this article.

Part 1 – Current and future use cases of AI in legal and compliance services

Historically, AI in legal services has focused on automating tasks via software to achieve the same outcome as if a law practitioner had done the work. However, increasing innovation in AI and experimentation within the legal and broader ecosystem have allowed solutions to accelerate beyond this historical perspective.

The graphic below provides a helpful segmentation of four main use cases of how AI tools are being used in legal services[4]:

A wider view of use cases, which links to existing legal and business processes, is provided below:

e-discovery;
document and contract management
expertise automation;
legal research and insight
contract management
predictive analytics
dispute resolution
practice automation
transactions and deals
access to justice

Further context on a selection of these uses is summarised below (note, there is overlap between many of these areas):

E-Discovery – Over the past few years, the market for e-discovery services has accelerated beyond the historical litigation use case and into other enterprise processes and requirements (e.g. AML remediation, compliance, cybersecurity, document management). This has allowed for the development of more powerful and integrated business solutions enabled by the convergence of technologies including cloud, AI, automation, data and analytics. Players in the legal e-discovery space include Relativity, DISCO, and Everlaw.

Document and contract management – The rapid adoption of cloud technologies have accelerated the ability of organisations across all sectors to invest in solutions to better solve, integrate and automate business processes challenges, such as document and contract lifecycle management. For contracts, they need to be initiated (e.g. templates, precedents), shared, stored, monitored (e.g. renewals) or searched and tracked for legal, regulatory or dispute reasons (e.g. AI legaltech start-ups like Kira, LawGeex, and eBrevia). In terms of drafting and collaboration, the power of Microsoft Word, Power Automate and G-Suite solutions has expanded along with a significant number of AI-powered tools or sites (e.g. LegalZoom) that help lawyers (and businesses or consumers) to find, draft and share the right documents whether for commercial needs, transactions or litigation. New ‘alternative legal service’ entrants have combined these sorts of powerful solutions (and others in this list) with lower-cost labour models (with non-legal talent and/or lower-cost legal talent) to provide a more integrated offering for Fortune500 legal, risk and compliance teams (e.g. Ontra, Axiom, UnitedLex, Elevate, Integreon);

Expertise Automation –In the access to justice context, there are AI-powered services that automate contentious or bureaucratic situations for individuals such as utility bill disputes, small claims, immigration filing, or fighting traffic tickets (e.g. DoNotPay). Other examples include workflow automation software to enable consumers to draft a will (for a fixed fee or subscription) or chatbots in businesses to give employees access to answers to common questions in a specific area, such as employment law. It is forseeable that extending this at scale in a B2C context (using AI-voice assistants Siri or Alexa) with a trusted brand (e.g. Amazon Legal perhaps?) – and bundled into your Prime subscription alongside music, videos and same-day delivery – will be as easy as checking the weather or ordering an Uber.

Legal Research – New technologies (e.g. AI, automation, analytics, e-commerce) and business models (e.g. SaaS) have enabled the democratisation of legal knowledge beyond the historic use cases (e.g. find me an IT contract precedent or Canadian case law on limitation of liability). New solutions make it easy for clients and consumers (as well as lawyers) to find answers or solutions to legal or business challenges without interacting with a lawyer. In more recent times, legal publishing companies (e.g. LexisNexis, PLC, Westlaw) have leveraged legal sector relationships and huge databases of information including laws and regulations in multiple jurisdictions to build different AI-enabled solutions and business models for clients (or lawyers). These offerings promise fast, accurate (and therefore cost-effective) research with a variety of analytical and predictive capabilities. In the IP context, intellectual property lawyers can use AI-based software from companies like TrademarkNow and Anaqua to perform IP research, brand protection and risk assessment;

Legal and predictive analytics – This area aims to generate insights from unstructured, fragmented and other types of data sets to improve future decision-making. A key use case are the tools that will analyse all the decisions in a domain (e.g. software patent litigation cases), input the specific issues in a case including factors (e.g. region, judge, parties etc) and provide a prediction of likely outcomes. This may significantly impact how the insurance and medical industry operate in terms of risk, pricing, and business models. For example, Intraspexion leverages deep learning to predict and warn users of their litigation risks, and predictive analytical company CourtQuant has partnered with two litigation financing companies to help evaluate litigation funding opportunities using AI. Another kind of analytics will review a given piece of legal research or legal submission to a court and help judges (or barristers) identify missing precedents In addition, there is a growing group of AI providers that provide what are essentially do-it-yourself tool kits to law firms and corporations to create their own analytics programs customized to their specific needs;

Transactions and deals – Although no two deals are the same, similar deals do require similar processes of pricing, project management, document due diligence and contract management. However, for various reasons, many firms will start each transaction with a blank sheet of paper (or sale and purchase agreement) or a sparsely populated one. However, AI-enabled document and contract automation solutions – and other M&A/transaction tools – are providing efficiencies during each stage of the process. In more advanced cases, data room vendors in partnership with law firms or end clients are using AI to analyse large amounts of data created by lawyers from previous deals. This data set is capable of acting as an enormous data bank for future deals where the AI has the ability to learn from these data sets in order to then:
- Make clause recommendations to lawyers based on previous drafting and best practice.
- Identify “market” standards for contentious clauses.
- Spot patterns and make deal predictions.
- Benchmark clauses and documents against given criteria.
- Support pricing decisions based on key variables

Access to justice – Despite more lawyers in the market than ever before, the law has arguably never been more inaccessible. From a small consumer perspective, there are thousands of easy-to-use and free or low cost apps or online services which solve many simple or challenging aspects of life, whether buying properties, consulting with a doctor, making payments, finding on-demand transport, or booking household services. However, escalating costs and increasing complexity (both in terms of the law itself and the institutions that apply and enforce it) mean that justice is often out of reach for many, especially the most vulnerable members of society. With the accelerating convergence of various technologies and business models, it is starting to play a role in opening up the (i) provision of legal services to a greater segment of the population and (ii) replacing or augmenting the role of legal experts. From providing quick on-demand access to a lawyer via VC, accelerating time to key evidence, to bringing the courtroom to even the most remote corners of the world and digitizing many court processes, AI, augmented intelligence, and automation is dramatically improving the accessibility and affordability of legal representation. Examples include:
- VC tools e.g. Zoom, FaceTime
- Process apps e.g. Your Lawyers Online, CourtNav, Hello Divorce
- Robolawyers e.g. Do Not Pay
- Lawyer marketplaces e.g. Probono.net, Paladin, AsylumConnect
- Document and knowledge automation e.g. LegalZoom
- ADR to ODR (online dispute resolution) e.g. eBay, Alibaba
- Speed to evidence – Cloud-based, AI-powered technology e.g. DISCO
- Risk detection e.g. Legal Risk Detector, rAInbow app

2. Key issues for the future of AI-power legal and compliance services

There are many significant issues and challenges for the legal sector when adopting AI and AI-powered solutions. Whilst every use case of AI-deployment is unique, there are some overarching issues to be explored by key stakeholders including the legal profession, regulators, society, programmers, vendors and government.

A sample of key questions include the following:

Will AI in the future make lawyers obsolete?
How does AI impact the duty of competence and related professional responsibilities?
How do lawyers, users and clients and stakeholders navigate the ‘black box’ challenge?
Do the users (e.g. lawyers, legal operations, individuals) and clients trust the data and the insights the systems generate?
How will liability be managed and apportioned in a balanced, fair and equitable way?
How do organisations identify, procure, implement and govern the ‘right’ AI-solution for their organisation?
Are individuals, lawyers or clients prepared to let data drive decision outcomes?
What is the role of ethics in developing AI systems?

8 Areas of Leadership Focus In Times Of Ongoing Disruption

In July last year I published a research and later and an eBook called REIGNITE! From Crisis To Opportunity In A COVID World. In light of a recent lockdown where I live (Guernsey) I thought it worth reflecting on what I wrote back then. To help I’ve pasted an infographic containing 8 areas where leaders should focus to rebuild their organisations.

Six months on and most (if not all) recommendations still remain, from prioritising digital investments, pushing ahead with smarter working policies, and leading with empathy. Whether or not organisations have implemented some or all of these is likely to be another story.

Understanding Value Proposition

Last week I posted here about my experience mentoring a start-up team from LSE’s Innovation Accelerator programme.

This week I have asked the team to get more ‘granular’ to better define, understand and analyse the problem they are focused on solving i.e. identify user pain-points, challenges, jobs to be done.

In the original Uber pitch deck the co-founders demonstrated a good understanding of the problem for the different stakeholders. Once this is done to a satisfactory level, you can then start to ‘test’ with customer research, experiments and MVPs.

To assist the team, below I provided some great videos from Strategyzer

The Value Proposition Canvas Explained
Value Proposition Canvas: Best Practices
The Basics Of Testing Business Ideas

Corporate Governance And Innovation: 10 Questions for Boards

To be successful, companies must be led by leaders – the CEO, top executives and board of directors – who are deeply and irrevocably committed to innovation as their path to success. Just making innovation one of many priorities or passive support for innovation are the best ways to ensure that their company will never become a great innovator – Bill George, former CEO and Chairman of Medtronic and Professor at Harvard Business School

A few weeks back I gave a talk focused strategic response, adaptability and innovation in a COVID world to an audience of NEDs mainly focused on off-shore financial services (FS) sector firms.

Given how highly regulated and risk-adverse many off-shore FS firms are, unsurprisingly questions were focused on the challenges of balancing risk vs innovation, how to make change happen at board level, and how to navigate director duties.

It got me thinking….

What are the ways for boards to show their real, concrete commitment to innovation and technology, and its governance?

As I discussed in my talk, all global business and technology trends point in the same direction: there is a need for more proactive and far-sighted management of innovation. Innovation for business reinforcement and growth – and for transformation in particular – are, of course, the prime responsibility of top management. Innovation governance – a holistic approach to steering, promoting and sustaining innovation activities within a firm – is thus becoming a critical management imperative.

Boards of directors also need to be more than just observers of this renewed management interest in innovation, because so much is at stake in an increasingly pervasive digital and COVID world. In a growing number of industries and companies, innovation will determine future success or failure.

Of course, boards do not need to interfere with company leaders in the day-to-day management of innovation, but they should include a strong innovation element in their traditional corporate governance missions. For example:

Strategy review;
Auditing;
Performance review;
Risk prevention and, last but not least;
CEO nomination.

It is therefore a healthy practice for boards to regularly reflect on the following questions:

To what extent is innovation, broadly defined, an agenda item in our board meetings?
What role, if any, should our board play vis-à-vis management regarding innovation?

To facilitate their self-assessment, boards should answer a number of practical questions that represent good practice in the governance of innovation. According to various innovation governance experts, including Professor Jean-Phillipe Deschamps at IMD Business School and author of Innovation Governance: How Top Management Organises and Mobilises for Innovation (2014), below are ten good-practice questions and perspectives to incorporate into any board evaluation:

1) Have we set an innovation agenda in many, if not most, of our meetings?

Board meetings are always crowded with all kinds of statutory corporate governance questions, without talking about the need to handle unexpected events and crises. So, unless innovation issues are inserted into the board agenda, they won’t be covered. It is a good practice to include innovation as a regular and open agenda item in at least a couple of board meetings per year. It should also be a key item in the annual strategy retreat that many boards set up with the top management team. Many of the following questions will provide a focus for this open innovation agenda item.

2) Do we regularly review “make-or-break” innovation projects?

In some industries, like pharmaceuticals, automotive, energy and aerospace, company boards regularly review the big, often risky innovation projects that are expected to provide future growth. They also do so because of funding issues – some of these projects may require extraordinary and long-term investments that need board approval. But in other industries, boards may be only superficially aware of the new products or services under preparation. Arguably, there may be several projects that are still small in terms of investments but could become “game-changers,” and it would be wise for the board to review them regularly in the presence of R&D leaders and innovators.

3) Do we regularly review and discuss the company’s innovation strategy?

Boards are generally aware of – and discuss – the company’s business strategy, particularly when it involves important investments, mergers and acquisitions and critical geopolitical moves. But what about the company’s innovation strategy (if it exists and is explicit, which is not always the case)? There are indeed important decisions that might concern the board in a company’s innovation choices because of their risk level and impact. Think of the adoption of innovative new business models, the creation of totally new product categories, or the conclusion of important strategic alliances and partnerships for the development, introduction and distribution of new products. Management’s adoption of a clear ‘typology’ of innovation in its board communication would definitely facilitate such reviews and discussions.

4) Do we regularly review and discuss the company’s innovation risk?

Boards usually devote a significant amount of time to risk assessment and reduction. But their focus tends to be on financial, environmental, regulatory and geopolitical risk. Innovation risk may be underestimated, except in the case of large projects involving huge investments and new technologies. But internal innovation risk is not limited to new project and technology uncertainties. It can be linked to the loss of critical staff, for example. Innovation risk can also be purely external. Will competitors introduce a new disruptive technology that will make our products and processes obsolete? Will new entrants invade our market space through different, more effective business models? Will our customers expect new solutions that we have not thought about? Assessing innovation risk is critical to avoid what Ravi Arora calls “pre-science errors” – underestimating the speed and extent of market or technology changes – and, even worse, “obstinacy errors” – sticking to one’s solution too long after markets or technologies have changed. It is the duty of the board to prevent such errors.

5) Do we set specific innovation goals for management?

Boards often exert strong pressure on management by setting performance goals. But most of these goals tend to focus on financial performance: top and bottom line growth, earnings per share, capital utilization ratios, etc. Some companies add other goals to focus management’s attention on worthwhile new objectives, such as globalization or sustainability. But what about innovation if it increasingly becomes a growth driver? A number of highly innovative companies have indeed included innovation goals in the CEO’s balanced scorecard. One of the most commonly found is the percentage of sales achieved through new products, typically products introduced in the past few years. But there are many other innovation goals to incite conservative management teams to take more risk – for example, the percentage of R&D spent on high risk/high impact projects. Innovation goals are interesting because they actually determine much of the company’s long-term financial performance. It is therefore good practice to discuss these goals with the management team and retain the most meaningful ones.

6) Do we review innovation management issues with the CEO?

Most sustained innovation programs raise many issues. Some of them are managerial – how to keep innovators motivated and reward them? Others are organizational – how to decentralize R&D to tap the brains of our international staff? Many deal with intellectual property – how do we practice open innovation while maintaining our IP position? Others deal with strategic alliances and partnerships – how do we share the efforts and risks of new ventures with our partners? And there are many more issues. The question boards should ask is: Are we aware of the most acute issues that management faces as it steers the company’s innovation program? The board’s mission is of course not to interfere and become too deeply involved in these innovation issues. However, its mission is to keep informed and help the CEO and top management team reflect on their options. This is why it is essential to keep a short open agenda item – “innovation issues” – in board meetings with a specific innovation agenda.

7) Do we expect management to conduct innovation audits?

Many companies embarking on a major innovation boosting program rightfully start with an internal audit and, sometimes, a benchmarking exercise against best-in-class competitors. Where are we deficient in terms of strategy, process, resources and tools? Do we have the right type of people in R&D and marketing, and do we tap their creativity effectively? Do we cover all types of innovation, i.e. not just new technologies, products and processes? Are our projects well resourced and adequately managed? Are they under control? How good is our innovation climate? These audits are extremely effective for highlighting priority improvement areas, and it is therefore good practice for the board to suggest that management undertake such audits and keep them updated. These audits will provide the board with a rich perspective on the company’s innovation performance issues.

8) Do we expect management to report on innovation performance?

This question is directly related to the questions on innovation goals (5) and innovation audits (7). Once innovation goals have been set and an audit conducted, it will be natural for the board to follow up and assess innovation performance. To avoid having to delve into too many details, innovation performance reviews should be carried out once or twice a year on the basis of a reasonably limited number of innovation performance indicators. Good practice calls for these indicators to cover several categories. A couple of them should be lagging indicators, i.e. measuring the current result of past efforts – the percentage of sales achieved through new products being one of them. A couple of others should be leading indicators, measuring the level of efforts done today to ensure future innovation performance – for example, the percentage of the R&D budget devoted to high risk/high impact projects mentioned above. One or two others should be in the category of in-process indicators – the most usual measure being the percentage of projects managed on schedule and on budget. Finally, it is always interesting to include a learning indicator to measure the reactivity of management and its ability to progress on key issues.

9) Do we know and occasionally meet our main corporate innovators?

Nothing conveys a company’s strong innovation orientation better than a visit by the entire board to the labs and offices where innovation takes place, both locally and abroad. Such visits, which are often carried out by innovative companies, have a dual advantage. They enable board directors to be aware of the real-world issues that the company’s innovators face, and they provide them with a good understanding of the risks and rewards of innovation. They also motivate the frontline innovators, who often lack exposure to top management.

10) Do we take innovation into account when appointing new leaders?

This last question is probably the most important. The nomination of a new CEO is undoubtedly one of the board’s most visible and powerful contributions to the company. It can herald a new and positive era for the company if the capabilities of the CEO match the company’s strategic imperatives. But it can sometimes lead to damaging regressive moves if the values of the new CEO are innovation-unfriendly. Management author Robert Tomasko notes that CEOs often fall into one of two broad categories: fixers and growers. The former are particularly appreciated by boards when the company needs to be restructured and better controlled. But fixers often place other values and priorities ahead of innovation. Growers are more interested in innovation because of its transformational and growth characteristics. This does not mean that boards should always prefer growers over fixers. There are times when companies require drastic performance improvement programs and an iron-handed CEO is needed. The board should, however, reflect on the impact the new CEO will have on the company’s innovation culture and performance. This is why it is so important to look at the composition of the entire management team. How many growers does it include and in what position? Will these senior leaders be able to counteract excessive innovation-unfriendly moves by the new fixer CEO?

If you are interested in this topic, I suggest starting with Professor Jean-Phillipe Deschamps book Innovation Governance: How Top Management Organises and Mobilises for Innovation (2014)

Pandemic Pivots by Small Businesses

The COVID-19 crisis caused many businesses to make crunch decisions such as rapidly pivot offerings or building out new products/services. Often we hear stories of how big companies (e.g. Uber pivoting away from ride-sharing to food delivery) have done this (or not as the case may be), but rarely do we hear of pivots by small or local businesses.

In the course of research for my REIGNITE! 2020 Report which analysed strategic responses of 439 international organisations (large and small) around the world between March-June 2020, I came across many inspirational stories of incredible small business pivots.

In a recent speech to the NED Forum (slides here), I described the story of one particular business who had managed to turn crisis into opportunity.

To tell the story of a brilliant pandemic pivot by a small business, I’ve pasted the excerpt from the talk below:

Let me tell you a quick story about ABC Learning Company, based here in Gsy. Obviously that is not their real name but I came across them in some research I did during Q2 and lockdown.

In the research which later became the REIGNITE 2020 Report – which I’ll introduce shortly – there was so much devastation across sectors including travel, hospitality, retail, construction, manufacturing, and so on.

In fact 50% of the 439 leaders surveyed were in total despair, in terms of closures, restructuring, uncertainty and so on.

However…there was a glimmer of hope!

About 10% of businesses were doing extraordinary things. They were using the crisis as an opportunity to reset, rethink, and reinvent. They were pivoting, quickly using technology to launch new offerings, testing new business models, and at the same time becoming more efficient, productive and reducing costs.

In terms of ABC Learning, it was a typical lifestyle business providing high school tutors, owned by one person with 5 tutors on the payroll. No online presence, web-site or anything. Business stopped overnight with lockdown, but by rethinking things quickly and using simple online and digital tools – google spreadsheets for CRM and bookings, zoom for delivery of live sessions, stripe for online or over the phone payments, the owner was not only able to quickly survive but doubled revenue during lockdown, hired 10 more tutors on contracts, and created a scalable solution which allowed for recorded training on-demand on popular topics. So better CX, more revenue and profits.

So what is interesting here is the combination of human psychology and business strategy during a crisis: so how did the leader reinvent whilst everyone was retreating, what can we learn, and how can we emulate this for our own contexts

This is what underpins today’s talk and certainly the REIGNITE 2020 Report which I’ll introduce shortly.

How To Create Winning Strategies That Reignite Human Potential, Adaptability and Creativity

Yesterday I gave a presentation to a NED Forum event sponsored by Investec. It covers a topic that I think is one of the most important issues for CEOs and Boards today who continue to grapple with the challenges of COVID.

The 3 key objectives for the presentation were to:

Better understand what are some of the key and complex forces at play in organisations due to COVID
How organisations can be more adaptable and resilient to future disruptive change
And how to do this with more humanity using some best practices of a growing new breed of organisations out there

You can view the presentation here or below including the REIGNITE! 2020 Report:

andrew-essa-ned-forum-talk-sept-8-2020-5 Download

The REIGNITE! 2020 Report

For those interested on more detail, below I have pasted in snippets of the talk including the Introduction.

Enjoy!

——

Hello and welcome everyone. Thank you to The NED Forum and Investec for the opportunity to speak here today. My name is Andrew Essa, and today I’m going to cover a topic that I think is one of the most important, if not THE most important, issues for CEOs and Boards today.

And that is:

Not just about turning this COVID crisis into an opportunity

Not just about where CEOs should focus, or where to invest

And not just about what winning strategies to implement to outmanouevure the competition

But more about HOW to do all of this in a way that is also more humane, more trusting and less bureaucratic, and in a way that can unleash the potential and creativity of people to have more impact and more fulfilling work lives

So we will aim to do 3 things here today:

Better understand what are some of the key and complex forces at play in organisations
How organisations can be more adaptable and resilient to future disruptive change
And how to do this with more humanity using some best practices of a growing new breed of organisations out there

Slide 2 – Gary Hamel quote

So to bring this quote which I love and also my ‘fascination’ with this topic – I’ll tell you a quick story about ABC Learning Company, based here in Gsy.
Obviously that is not their real name but I came across them in some research I did during Q2 and lockdown.
In the research which later became the REIGNITE 2020 Report – which I’ll introduce shortly – there was so much devastation across sectors including travel, hospitality, retail, construction, manufacturing, and so on.
In fact 50% of the 439 leaders surveyed were in total despair, in terms of closures, restructuring, uncertainty and so on.
However…there was a glimmer of hope!
About 10% of businesses were doing extraordinary things. They were using the crisis as an opportunity to reset, rethink, and reinvent. They were pivoting, quickly using technology to launch new offerings, testing new business models, and at the same time becoming more efficient, productive and reducing costs.
In terms of ABC Learning, it was a typical lifestyle business providing high school tutors, owned by one person with 5 tutors on the payroll. No online presence, web-site or anything. Business stopped overnight with lockdown, but by rethinking things quickly and using simple online and digital tools – google spreadsheets for CRM and bookings, zoom for delivery of live sessions, stripe for online or over the phone payments, the owner was not only able to quickly survive but doubled revenue during lockdown, hired 10 more tutors on contracts, and created a scalable solution which allowed for recorded training on-demand on popular topics. So better CX, more revenue and profits.
So what is interesting here is the combination of human psychology and business strategy during a crisis: so how did the leader reinvent whilst everyone was retreating, what can we learn, and how can we emulate this for our own contexts
This is what underpins today’s talk and certainly the REIGNITE 2020 Report which I’ll introduce shortly.

Slide 5 – The Modern Org is Under Attack

So the modern organisation is clearly under attack from so many angles.
The pace of change now is exponential and only will increase as further technological convergence happens through digital, AI, automation, analytics and so on
Today’s orgs look and feel very similar to how they have always been – command-control, top-down consistency, coordination and standardisation- which is the classic bureaucracy
In US 1983-2019 the bureaucratic workforce – managers and overhead – has doubled in that time-frame VS growth of 50% in all other job categories
At same time productivity per OECD has gone down since them
Mental health, burnout, anxiety, stress, bullying, politics, discrimiation, harassment etc has skyrocketed
Do we know anyone who is a leader, manager or worker and genuinely feels inspired, trusted, valued and engaged by their organisation every day??
We can’t afford it anymore!
So the question becomes, is it possible to build organisations that are big and fast, disciplined and empowering, responsive to market shifts yet resilient, efficient and entrepreneurial, and bold and prudent?
Many examples of new breeds of organisations successfully operating with 1/2 of bureaucratic load of traditional org
Case study – Buurtzorg (page xi)
- Dutch firm Birdszaard home-health employers 16,000 nurses and home-carers with 2 line managers with a span of control of 1-8000!
- They do this with dividing into small teams, give them the data they need to be self-managing, connect with a social platform to collaborate to solve problems and collaborate and share best practices, hold deeply accountable with P&Ls
- Gives all the advantages of bureaucracy with control, consistency and coordination with no drag or overhead

On Digital Business:

Speed and scale: Digital and cloud has enabled adaptability at speed and scale;
- The crisis has shown that rapid change at speed and scale is possible using digital and cloud in the short-term.
Increased adoption: Increased adoption of back-end cloud and front-end productivity tools, from e-signature to VC to MS365 to Dropbox etc
Effectiveness and benefits: Focus now on what is working, what isn’t, benefits realisation, productivity, efficiency, training,
Complexity: So much going on…..managing capacity, cybersec, managing the complexity of the new IT estate, ensuring greater resource allocation with 2021 budgets, investments and leadership commitment to that
Scaling and Transformation: The best firms – probably not many – are:
- firmly putting digital at the centre of corporate strategy
- looking whether to build vs buy
- aligning leaders on digital acumen so every CXO is a Chief Digital Officer for their function
- looking at wider opportunities for upskilling and digital adoption across the firm – so beyond infrastructure into more advanced worker productivity tools – automation, AI, analytics, superior Customer Experiences, New Business Models and Products/Services, Ecosystem Collaborations/Ventures
- As well as more strategically, how to better organise and transform to become a digital business
Caution! Digital laggards will get left behind due to external forces and competitive intensity

On Trust + Safety:

So this is such a critical, complex and often overlooked dimension, mainly as it requires leaders to be empathetic and emotionally intelligent, and unfortunately many aren’t
The BIG opportunity is that for the firms who get these complex dynamics right, will differentiate themselves from a talent retention and hiring perspective and become the new employers/brands of choice 2021+
But first we need to look at the state of play before COVID
In a nut-shell, there is very little trust, just need to look at amount of oversight, rules, policies, rule-choked processes and employees get this and know they aren’t trusted and even that their managers don’t think they are very capable
UK amount of discretion people have in jobs has been going down in last 20years
Only 1 out of 5 believe their opinions matter at work
Only 1 in 10 have the freedom to experiment with new solutions and methods
Most people can buy a car or house but same people in organisations can’t order a better £150 work chair without going through crazy internal hoops and hurdles
The way organisations are organised it is a caste system of managers and employees of thinkers/doers which causes disengagement of people from their work
Gallup surveys show only 20% of those highly engaged in their work – this is ALARMING so something needs to change
So against that backdrop you introduce a health and economic crisis of proportions never seen before, which impacts the human psyche in many different ways, and for most orgs you have a widening trust gap
Key impacts:
- The “psychological contract” between employer/employee has also shifted for many
- Traditional work assumptions have been challenged, firms must now not assume ‘old’ practices were the right ones
- Acceleration of complex issues around safety, mental health, inclusivity, belonging, empathy, EQ, culture and behaviour, power dynamics, and expectations on leadership styles

The Power of Language To Communicate Strategy & Change

I used this slide at a presentation yesterday.

For me its purpose was to contrast current/future states and link to best practices.

However one of the participants (Banking senior executive) said he loved how it simply showed how powerful ‘language’ can be to communicate a new strategy, initiative or change.

He said they have been stuck for years using the same old terminology from the ‘old’ column.

This was brilliant.

An unexpected but simple example showing the power of fresh #perspectives #diversityofthought #customerdevelopment #userfeedback

An Interview With Gary Hamel

I recently listened to the Eat.Sleep.Work. Repeat podcast where Bruce Daisley interviewed Gary Hamel about his new book Humanocarcy. I posted about my excitement to recieve the pre-order of it here, and am really enjoying working my way through it.

If you are a leader, manager or worker in ANY job, this book (or notes below) is a must-read.

Whilst I rarely (well, never) take notes of the podcasts I listen to, after the first 5min it was clear I needed to capture the content. There was just so much unbelievable value Gary Hamel was providing.

And so the below represents my rough notes of that interview (which includes the below quote – so simple, yet so powerful):

Cannot assume that low-skill jobs means low-skill capabilities! – Gary Hamel

Enjoy!

What is the impact of COVID on the world of work?

Remote work and flexibility is possible, that will continue
Power moves to the periphery. Front-line people have had to use their ingenuity along with more freedom and autonomy so these people will not want to go back to traditional roles
Institutional and political resilience has come up short. Organisations are poorly suited to fast-moving, demanding problems and challenges beyond COVID such as racial injustice, income inequality, environmental change, automation impacts will need everyone to turn on everyone’s creativity

What is going on with the state of trust?

Yes very little trust, just need to look at amount of oversight, rules, policies, rule-choked processes and employees get this and know they aren’t trusted and even that their managers don’t think they are very capable
UK amount of discretion people have in jobs has been going down in last 20years
Only 1 out of 5 believe their opinions matter at work
Only 1 in 10 have the freedom to experiment with new solutions and methods
Most people can offered to buy a car or house but same people in organisations can’t order a better £150 work chair without going through crazy internal hoops and hurdles
The way organisations are organised it is a caste system of managers and employees of thinkers/doers which causes disengagement of people from their work
Gallup surveys show only 20% of those highly engaged in their work – this is ALARMING so something needs to change

What is the impact of bureaucracy?

A 1/3 of wage bill goes to managers, supervisors and administrators
A 1/3 of all hours/activities in organisations goes to bureaucratic tasks
In US 1983-2019 the bureaucratic class has grown by 200% (doubled) in that time-frame VS growth of 50% in all other job categories
It’s not about more regulation but the proliferation of new functions
At same time productivity per OECD has gone down since them
We can’t afford it anymore!
Many examples of post-bureaucratic vanguard of firms operating with 1/2 of bureaucratic load of traditional org
Dutch firm Birdszaard home-health employers 16,000 nurses and home-carers with 2 line managers with a span of control of 1-8000!
They do this with dividing into small teams, give them the data they need to be self-managing, connect with a social platform to collaborate to solve problems and collaborate and share best practices, hold deeply accountable with P&Ls
Gives all the advantages of bureaucracy with control, consistency and coordination with no drag or overhead
Can cut the bureaucratic drag by 50% would produce 10T gain in economic output across OECD (in UK £900B) and would double productivity growth rate over next 10 years
No other proposals on the table eg improving education, more incentives for capital investment
Economic reason, competitive reasons, social reasons as ethically the reason to do this

How do we get there?

Foundation for building a post-bureaucratic organisation is everyone thinking and acting like an entrepreneur, owner
Pre-Industrial era most owners/employees 4-5 people, all customer-focused and knew each other
As organisations scaled in line with Industrial revolution that was lost and no longer have the information to be self-organisation
Firms that do it e.g. Haier, Nucor ensure the front-line people have the information, skills, incentives, and freedom to think/act like owners
Still have to have coordination and tie the org together, instead of top-down it can be via collaboration
Some organisations have ESSP but that’s not what an owner – autonomy, right to make key decisions, right of participation in the financial upside of the business

Have we over-valued consistency and scale?

Bureaucracy invented to enable control and efficiency at scale with a top-down model
Replicability required to do things properly at scale
But that makes it very hard to change
Control is important in most industries!
But what else is important and what other ways to achieve it?
Orgs at heart are built to maximise control
Today we need orgs to maximise contribution with free to experiment, free to respond quickly to customer needs, free to solve local problems, not waiting for permission
In bureaucratic model everything comes top-down which makes it hard to change fast
By the time an issue is big enough to attract CEO’s attention, often too late by then
E.g. Intel CXOs only would go after $1B Opportunities – but how do you know what is this at this scale? Only way is if someone else is already doing it i.e. not original, innovative. Nothing starts out as a $1B opportunity VS Amazon which experiments with all sorts of opportunities at different levels VS waiting for someone at the top to say ‘this is a strategic priority’ which will rarely happen

Experimentation is part of the new Org DNA

Pace which anything evolves is limited by the amount of experimentation that takes place e.g. humans today
Worrying that vast majority of employees say it’s virtually impossible for front-line employee to get a small amount of time and budget to try something new
More than ⅔ of employees say new ideas are greeted by hostility or skepticism
E.g. central collaboration platform at a global tech retailer to share ideas and issues and real-time and treat the stores/orgs as a laboratory
Bezos says his goal is to build the world’s biggest lab, best place to create break-out success or fail with ideas vs if know it will succeed as have data it will likely be incremental innovation
Intel hires goes through ‘Design To Delight’ programme teaching ‘design thinking, rapid prototyping, agile, experimentation’

Is the moment now a great opportunity to experiment?

We’ve had the tools/tech to enable remote working for over a decade
Whilst tech becomes more available, also enables orgs to exert more control! Due to analytics.
But data is not context and is historical
We can assign every worker a detailed rulebook on what they need to do and somehow it aggregates into extraordinary performance. But does not reflect reality
Battle of forces pushing decentralisation and autonomy and remotely, enabling lateral communications VS vertical challenging managers top-down
Same complexity to drive decentralisation is also pushing to exert control especially with the old guard
One of the ways to ‘soothe’ a leader is to go to bed at night is that there is a policy to guide everything! I.e. squeeze the complexity of the chaos and world by creating appearance of uniformity and control but reality is far from it

The paradox of forces at play:

Consistency does matter – when I got to Apple store we expect certain things
But we do need this and creativity on the front-line with ability to tweak and change to make the real-time trade-offs
E.g. Nucor – unleashed the everyday genius of workers
Tension between adaptability vs consistency
Even if irreconcilable the eco value from scale is not what it used to be VS demand now for customised, personal experiences
It will be a long slog
Over 70% say the prime way to get ahead is to be a good bureaucrat! i.e. horde resources, politics, climb ladder, attain positional power
But requires political challenge to redistribute power which no-one will like to do that
System is working for anyone – workers, managers, leaders
It all grows to accumulate power! We have to change that game
Power needs to be fluid in orgs
If adding value people or a mentor or inspiring people will follow

What;’s happening in politics?

There’s a belief that the system is not working for them – income inequality, low wage jobs, equity
Workers treated like commodities, resources VS opportunity to use all competencies, skills, grow etc
Cannot assume that low-skill jobs means low-skill capabilities!
Stop talking about low-skilled jobs!
US Bureau of Stats – 70% low-skilled jobs are designed so people cannot use their originality
Economically indefensible that we haven’t done more to given front-line people the opportunity to grow and use ingenuity

Can all orgs make this change away from bureaucracy?

If you are a smaller business, what are the principles to hold scared as you grow the org
Founding principle – humanity vs bureaucracy
From the start highly alert to the signs of bureaucracy to stay vibrant

US Airlines example

Needed to kick-off some people to allow crew on
Staff did not have authority to offer correct incentives
Passenger carried off and became worst PR disasters ever
The CEO said workers did not have the procedures, guidelines, rules to use their own judgement! But it was the existence of too many rules that did not allow the local staff to use their own judgement
Manual at UA is 60 pages VS manual at Southwest Air 5 pages

Haier Case Study

Hair Chinese domestic appliances
They wanted to build a network company
They divided 80k organisation into 4k micro-enterprises
All businesses had rights and flexibility akin to start-ups with significant incentives
Tied together with internal contracts for services e.g. HR or can go outside
Everyone’s performance – including internal contracts – is tied together on the success of the product in the market so everyone is aligned
Make it easy to start new businesses, if new idea post it online internally and others can join, Haeir can give you access to their VC network and they will co-invest and you can leverage the Haier network
Haier to make the journey redeployed 12k middle-managers to the micro-enterprises (or left), today three is 1 level between front-line and CEO, most firms have 8 levels

Digital Ecosystems, Tzars, Puzzle Pieces, & The Halo Effect

This week I have had numerous informal discussions with different business leaders about the digital potential of Guernsey in the context of a COVID world. It got me thinking.

What are the key ingredients of an efficient digital and innovation ecosystem? What are the key pillars? If I was Digital Tzar for a day, what would I focus on?

I immediately thought back to my own entrepreneurial journey starting in 2011 in Shoreditch (London) when I left Accenture Consulting & co-founded The Social Experiences Club, one of the first European experiences and activities marketplaces. Along the way and following an exit I have advised, mentored, coached and consulted to many other entrepreneurs, VCs and corporates on everything from new venture development to business models to fundraising to hiring and firing.

Below I have provided a list of some key ‘ingredients’ to an efficient innovation and digital ecosystem. They are like pieces of a puzzle. There can’t be one without the other. Whilst there are wider factors required for success (e.g. smart, collaborative and decisive government), these are not the focus here.

Key Ingredients Of An Efficient Digital and Innovation Ecosystem:

Innovation-I think the focus on ‘digital’ is too narrow. Perhaps the better conversation is around how to foster new ways of thinking, working and investing (in technologies, skills, institutions etc), and how to provide the right infrastructure for anyone or any organisation to be able to build new solutions and deliver benefit, value and prosperity for consumers/citizens.
Commitment + Vision – As with anything in business or life, a strong vision and commitment to that vision is required to create impact and make change happen. For the public-sector, having a strong technology and innovation policy is critical, and was the foundation of Estonia’s e-Government transformation Even with such intent and will execution will be hard enough, but without this and appropriate support, resources and political capital, nothing will change.
IT Infrastructure – The pandemic has shown how strategic this asset class is to the future prosperity of nations – and will continue to be – which may require regulators to rethink approaches to regulation and competition. Without reliable and quality connectivity and access for all people at a fair price today or in the near future (e.g. 5G, fibre etc), economic and social growth could suffer and could lead to catastrophic long-term consequences. On regulation, balancing the strategic interests of nations and the telecom providers (who all have very different corporate strategies, business models and operating structures) is no doubt a difficult but critical balancing act, especially in light of COVID’s acceleration of digital services, access and inequality issues, and continued and future investments in next generation infrastructure (e.g. 5G).
Centralised Governance – A centralised market-focused unit as the knowledge and resource ‘hub’ responsible for digital activity can provide benefits for an emerging innovation ecosystem, especially where aspects of the infrastructure might be lacking. London had TechCity, although it was arguably overshadowed by the power of the entrenched historic networks of the wider ecosystem in terms of universities, commerce, government, and investment community.
Incentives – Smart technology and innovation tax policies is critical to facilitate a more efficient and attractive market to build the wider entrepreneurship and corporate innovation ecosystem.

Support for business R&D can help to foster innovation and boost productivity. Investment in new technologies can also be supported through more generous depreciation deductions or immediate expensing – OECD Report (2018) – Tax Policies for Inclusive Growth in a Changing World

Incentives (whether EIS, SEIS, tax-breaks or otherwise) can encourage and unlock local (and overseas) private and corporate capital flows into start-ups/scale-ups. In 2011 when I was raising funds for a start-up in London in 2011, everywhere we went investors, accountants and lawyers would immediately ask the same question: are you EIS compliant? Clearly the years following the 2009/09 Financial Crisis was a massive boon for innovation with a huge supply of entrepreneurs choosing new paths and supported by an abundance of capital.

Since its inception in 1993 the Enterprise Investment Scheme (EIS) has enabled UK companies to raise over £16 billion in investments. Of the 3,470 companies benefitting from the EIS Scheme in 2015/16 alone, 1,645 companies were raising funds for the first time, between them generating £997 million of investment – Thomas Jenner LLP

On the supply-side, facilitating a more efficient is needed to generate an increasing supply of entrepreneurs able to access capital (plus ‘smart’ capital) especially at early stages. For companies, encouraging the development of in-house IP via R&D tax credits (or similar) (UK HMRC policy is here) could also have downstream benefits such as up skilling (depending on the policy), and can be aligned with any national Digital Vision.

e-Government – For smaller nations, it is especially critical to invest in citizen-facing automation (e.g. paper-less) and improved customer experience opportunities across social security, ID, e-voting, e-health, data, e-signatures, and EdTech. Often government is the largest employer in smaller communities hence these investments can have outsized impacts and benefits. It also ‘opens’ the government up to being more accessible, transparent, and helpful in working with and facilitating the wider ecosystem.
Ecosystem – One of the key reasons why London has been able to become a global leader in innovation (especially FinTech) has been due to the infrastructure and network effects facilitated by a number of key factors. In particular, within a 1hour train ride you have leading universities (e.g. Oxbridge, LSE, UCL, Imperial etc), commerce, and government. It creates enormous opportunities for creativity and collaboration to flourish, share knowledge, and build relationships with every piece of the start-up puzzle, from enterprise clients, to talent, to regulators and so on. As a start-up co-founder in Shoreditch in 2011, you could easily do nothing but network and attend amazing events, meet ups, hackathons, talks, pitch competitions etc every night. Whilst not every city or small community can replicate that, the principles and practices are there to be examined and implemented within whatever your specific context is.

“We are witnessing a rapid changing of the guard for global investment in innovation centers. The US and Europe have traditionally been viewed as dominant forces in innovation and technology but Asia could soon surpass the US for number of innovation centers built and operated. Moreover it is clear that funding alone is not enough — the success or failure of any innovation center hinges on how effectively it taps into the surrounding ecosystem, and the role it plays in driving a broader corporate innovation strategy – Eric Turkington, Director at Fahrenheit 212, part of the Capgemini Group

Talent/Skills – Education is critical for the future of innovation in a society. At K-12, schools need to be offering introductory (and advanced) knowledge-based and/or practical courses on digital topics whether entrepreneurship, digital marketing, Excel/Google Spreadsheets, coding, design thinking, or analytics. This creates opportunities for ‘start-up clubs’ and business idea/pitch competitions aligned with industry, which can provide pathways for hiring and investors. Businesses should also prioritise up skilling which includes investing in softer skills (e.g. communication, creativity, collaboration, empathy).

“Twenty years from now, if you are a coder, you might be out of a job,” Cuban predicted. “Because it’s just math and so, whatever we’re defining the A.I. to do, someone’s got to know the topic. If you’re doing an A.I. to emulate Shakespeare, somebody better know Shakespeare”. – Mark Cuban

In addition, it is critical to learn new ways of working and thinking (e.g. agile, lean, design), and how to significantly improve inclusivity and diversity initiatives for existing talent (and future hires). At the higher education level, it is no surprise that some of the best known ecosystems (from Hollywood to Silicon Valley) have top-tier universities in close proximity. A centralised knowledge, teaching and research centre for technology and related skills and excellence must be a high-priority for any region without this. Also, making it easier or more flexible to hire overseas talent and plug skill-gaps in high-priority areas – whether software, analytics, UX or engineering – should also be considered, especially as this removes the friction for individuals or companies to pursue innovation.

Specialism – It certainly helps to be known and famous for a certain speciality. London has done well to intentionally (or accidentally) carve out a ‘brand’ around FinTech which leverages the reputation, expertise and talent in that sector, although it is still active in many other sectors. This helps with the halo effect to build an ecosystem around that which then flows out into other areas.
Examples – The halo effect above also extends to when there has been one or more successful start-ups and entrepreneurs who have moved though the start-up stages i.e. idea to exit. In a similar way that we celebrate sports stars and use them as aspirational icons for children and others, this can be used to inspire the next generation of entrepreneurs. If the right examples exist, we need to profile them and start holding them up examples of what can be possible (and using them as mentors).
Intellectual Property – Historically patents have been used a measure of R&D and innovation – and hence subject to tax breaks – but since 2000s software development has become a critical focus. Incentivising corporate investment into building out in-house IP vs using an overseas agency/service provider may provide local benefits and stimulate the local digital skills ecosystem.
Pathways – Programmes for potential entrepreneurs whether at school or higher-education or post-university to educate prospective entrepreneurs. To be effective it requires all of these initiatives to be in place or in-flight
Collaboration – A critical digital ‘soft-skill’, without a collaborative approach and mindset amongst key participants – coupled with the strongest of commitments from smart government – attempts to develop and execute on a digital vision will struggle. This needs to be baked into any refreshed governance supported by strong top-down commitment.
Experimentation – Modern start-up development relies on many small experiments: start with a small hypothesis, test, learn, iterate, build, repeat. Government therefore needs to be more comfortable with this way of working to ensure progress is made versus spending years analysing and/or smothering creativity with bureaucratic processes which ultimately delivers nothing or very little. In the midst of an ongoing pandemic, unprecedented government spending, and a reduction in tax revenues, the Government must work differently and smarter in order to be more accountable to taxpayers and deliver benefit, value and sustainable progress for citizens.

BigTech Power, Regulation, And The Early Days Of The Internet

I recently came across a Guardian article looking at the winners and losers from last month’s US Congressional hearings into the power, practices and conduct of various ‘Big Tech’ companies. It got me thinking.

BigTech’s power and urgent need for regulation reminds me of a hot topic back in the early days of the Internet being….the urgent need for regulation.

In Australia during the early 2000s, the approach of business and government to the emerging Internet and associated applications tended to be driven by fear and uncertainty (“let’s sue them, shut them down, and take control of the IP” – major records labels in the music industry) as traditional legal and regulatory frameworks struggled to adapt to the new paradigm and business models began to creak.

Between 2000-2004, I was entrenched in these issues as I wrote and delivered a brand new undergraduate and post-graduate course at Queensland University of Technology called ‘e-Commerce law’.

At the same time, I was in private practice advising Australia’s biggest casino, media and other operators on how to navigate the emerging world of online gaming and meet the increasing demand of Australian consumers (who love to gamble).

Most topics in the course and in practice grappled with the issue of how do the traditional legal frameworks apply to this new technology and applications, from payments and money, copyright (e.g. music file-sharing), privacy (e.g. data protection), and reputation (e.g. defamation).

In 2004, I analysed the Governments prohibition of online casinos in my first academic article published in QUT’s law journal, titled ‘The Prohibition of Online Casinos in Australia: Is It Working?’.

I’ve pasted the introduction here as in the context of the BigTech Congressional Hearings, a few points are still interesting:

Preliminary online research of consumer gaming activity was utilised to develop an assumption that [after 2 years of prohibition] prohibition is not working. A key reason for this is the futility of prohibition given the unique nature of Internet technology. This article will also critique Government motives for prohibition, as arguably, the best approach to deal with interactive gaming was not implemented. The relevant question for public policy appears to be not whether online gambling can be controlled, but the extent to which it can be controlled.

Obviously, 16 years on you can apply this principle to the other areas which BigTech have completely dominated including social media, search, video, browsing, advertising, e-commerce, web services, app stores, personal data, and so on. In the early 2000s, it was a nascent and emerging industry and overall regulation policy needed to be ‘light-touch’ (although exceptions existed especially where consumer harm risk was high, such as gambling, payments).

As converging technologies penetrated (Internet, broadband, OS software, mobile, apps, cloud etc), limited regulation has allowed a handful of companies control the majority of our online data, purchases, browsing habits etc. This will only accelerate given the impact of COVID on our behaviour, and soon that will extend in the last frontier of growth for such firms including health, education, government services, and so on.

Whilst regulation (and disposals or break-up) is clearly required for many different reasons (competition, national security, business and consumer harm etc), it is unclear what will play out given the power of these firms, how politicised the issues have become, and the nature of US anti-trust enforcement and law which historically focused on pricing practices and consumer harm.

In Chairman Cicilline’s wrap-up:

This hearing has made one fact clear to me. These companies as they exist today have monopoly power. Some need to be broken up. All need to be properly regulated and held accountable … their control of the marketplace allows them to do whatever it takes to crush independent business and expand their own power. This must end.

Something needs to be done. But we will have to see what happens after the Nov elections.

Building Resilient Growth

The creators of Blue Ocean Strategy recently a wrote Harvard Business Review article called “How to Achieve Resilient Growth Throughout the Business Cycle”

In it they address this fundamental question: How do you build growth and resilience, irrespective of the stage of the business cycle?

Below I summarise some of the key insight from the article:

Strategize like a market-creator

The authors Chan Kim and Renee Mauborgne argue that based on their 30 years of research, they have identified two types of strategy:

1. Market-competing strategy, which focuses on beating rivals in existing markets, and

2. Market-creating strategy, which focuses on generating new markets.

While both types of strategy have their role to play, companies pursuing market-creating strategies are not only better positioned to unlock a growth edge when economic conditions are favorable. They are also able to generate resilient growth during unfavorable economic conditions.

Red ocean and blue ocean strategies are not a binary choice. You need both. But while you’re already focusing on market-competing strategies, ask yourself how much of your focus is going to market-creating moves that generate the resilient growth.

How to build resilient growth

There are four actions companies take to best manage growth through market cycles:

1. Focus on building a healthy, balanced portfolio of market-competing and market-creating strategic moves.

Both are important. While market-competing moves generate today’s cash, market-creating moves ensure tomorrow’s growth.

2. Don’t wait for growth to slow to make market-creation a strategic priority.

Prepare in advance. You’ll be buffered by your market-creating move in a downturn cycle only when your market-creating move is already launched or set to launch. Don’t wait. Act now.

3. Ensure your market-creating efforts are a core component of your strategy.

It shouldn’t be siloed into a function, effectively a side show. If you want to achieve market-creation you need to make it a priority.

4. Remember, technology itself doesn’t create markets.

What creates new markets is the use of technology and whether it provides a leap in value to the buyer. Ask yourself: Is it linked to value innovation or not?

In a nutshell, the principles focus on both (i) leaders being aware and fully committing to exploring opportunities beyond the short-term and (ii) organisations being organised – or ‘building the muscles’ – through culture, systems, processes and talent to embed the focus on exploring and exploiting market-creating growth opportunities.

The late Professor Clayton Christensen and co-authors applied these theories to the prosperity and income inequality challenges the world faces and continues to face today with the book The Prosperity Paradox

This book and Blue Ocean Strategy is a must-read for anyone wanting to learn more about market-creating innovations.

Digital Playbook: How And Where to Focus to Maximise Opportunities In a COVID World

In summary, this article provides:

An 8-point playbook of strategies which leaders can use to focus time and resources to build digital capabilities and navigate business change
A useful framework to compare or evaluate existing digital investment and innovation initiatives to improve quality and impact
A useful article to share or use for internal discussions with non-digitally native executives, Board members and cross-functional teams
A set of practical strategies to guide implementation following on from the key insight and findings in the REIGNITE 2020 Report authored by Andrew Essa
A playbook to evaluate your digital progress and help plan for the future. Get in touch with any questions, comments or help to implement these perspectives here andrew@rocketandcommerce.com or at ROCKET + COMMERCE

The 8 strategies include:

Understand current digital usage, productivity, value and benefits
Diagnose and benchmark digital performance and opportunities
Scale digital capacity for increasing demand but manage complexity
Review and upgrade cybersecurity measures
Move from ‘good’ to ‘great’ across 4 key areas
Prioritise resource reallocation to digital initiatives (with a crisis mindset)
Improve the digital acumen of the Board (and workforce)
Organise to build digital capabilities

8 Strategies For Leaders to Navigate Digital Acceleration

Although some organisations are thriving on the back of tailwinds in this environment, many more are struggling. In many cases, the difference between the former and the latter is an organisation’s ability to rapidly adapt and chart a sustainable and differentiated path forward, especially through maximising Digital opportunities across areas including Customer Experience, Growth Strategy, Workforce Productivity, and Organisational Adaptability (I posted recently here about the 3 Big Digital Opportunities for Organisations)

Below are 8 playbook strategies for leaders to now consider:

#1 Understand productivity, value and benefits

For most organisations, the critical first step has been to safeguard employees by enabling them to work remotely using the full suit of available tools (see below).

As this continues alongside partial or even full reintegrations, firms should continuously engage or ‘pulse check’ with workers, customers and key stakeholders. It is critical to evaluate what is working well (e.g. feedback, analytics, usage), what is missing (e.g. cybersecurity, training, IT hardware), lessons learned, and where low-hanging fruit is for further digitisation opportunities and benefits (e.g. customer service and experience).

A challenge to overcome is that most firms typically fail to realise the full value from their technology investments for a variety of reasons (e.g. budgets, skills, governance, change, training etc). What tends to happen is some efficiency and cost reduction, but limited revenue generation, improved customer experiences and new products/services. The firms who out-perform their peers are the ones who prioritise and maximise the full potential of digital and are laser-focused on benefits realisation across the organisation.

“The crisis has sped up the utilisation of tools such as Microsoft Teams for meetings, e-signature software and other tech which will assist both with internal and external customers moving forward. Typically face to face meetings or travel has been a big part of how we’ve conducted business particularly in my role in the past – Client Director, Private Investment Bank (interviewed in the REIGNITE! 2020 Report)

#2 Diagnose digital performance and opportunities

For some SMEs, the current state of digital maturity involves a combination of accelerated back-end cloud, front-end software tools (e.g. MS 365), and new ways of working. Other larger, established firms however continue to have core (or hybrid) infrastructure set-ups based on outdated tools, processes, and assumptions combined poor digital acumen at leadership level and limited workforce training or up skilling.

This makes it increasingly difficult to adapt to new challenges (e.g. remote work, new services, cybersecurity), manage complexity, and properly reap the benefits of digital technologies. In some cases, the lack of agility will drag down the business which might be fighting to to rescue declining margins, compete, or even survive.

The challenge for leaders is to build on the momentum of change (‘it can be done!’) and increased adoption by leveraging the potential of digital across the entire organisation (not merely in pockets) for improved efficiency, productivity, customer experiences and new products/services.

To get started, leaders need to know what they are dealing with today. If strategic planning around digital opportunities are to be robust and there is leadership intent to focus time and resources on the digital agenda, data and insight about the current digital state of the organisation will be needed.

Diagnostic surveys tools and assessments can help to evaluate an organisation’s digital and analytics maturity to discover digital growth, operational improvement and worker productivity opportunities now, with recommendations on where to focus efforts for longer-term growth, change or productivity.

At ROCKET + COMMERCE our Digital Performance Index (DPI) focuses on areas including Strategy, Customers, Analytics, Technology, Operations, Marketing, Offerings, People, Culture, and Automation. This data-driven, diagnostic approach helps CxOs and functional leadership teams to shape, refresh and align around a common vision and strategy across key digital and innovation dimensions.

We also critically incorporate human-centric approaches (see below) to our diagnostic tools which also provides people-focused data of digital change on users, customers, experiences, productivity, collaboration, skills, behaviours, trust, safety, belonging, health and well-being.

Read these brief case studies on how at ROCKET + COMMERCE we have helped organisations do this and find new ways to go-to-market, become more customer-centric, launch new ventures, or pilot new up skilling programmes.

This exercise also allows leaders to identify gaps between current capabilities and those of digital leaders (or the desired future state of the organisation), and plan a prioritised road map of tactical improvements or new strategic initiatives. This data-driven, diagnostic approach can also help CxOs and functional leadership teams align around a common vision and strategy across key digital dimensions.

#3 Scale digital capacity for increasing demand but manage complexity

Many IT teams are now grappling with providing sufficient capacity to serve the increased (and varying) volumes of traffic flowing through digital channels. One respondent to the survey (a provider of web-based collaboration tools), experienced a surge in demand from all of the newly remote workers and had to rapidly build out new infrastructure capacity to ensure availability.

This transition to digital channels will likely continue beyond the current health crisis as customers and organisations adopt fundamentally different ways of working. Recent research from Gartner indicates that about 41% of employees are likely to work remotely for some of the time post-pandemic.

Source: Blackfog

The accelerated capacity build-out in H1 2020 has taken many forms beyond physical infrastructure deployment. In many cases, it has pushed organisations to adopt different architectural solutions for expansion, such as cloud bursting and augmenting on-premises deployments with virtual appliances and software-based deployments in the public cloud.

According to Mike Pelliccia, head of worldwide financial services technology solutions at Amazon Web Services (AWS), on-premises infrastructure no longer meets the business needs of today:

On-premises data infrastructures do not scale to meet variable and increasing volumes of data. Multiple disconnected data silos with inconsistent formats obscure data lineage and prevent a consolidated view of activity. Rigid data schemas prevent access to source data and limit the use of advanced analytics and machine learning. The high costs of legacy data warehouses also limit access to historical data.

The cloud helps organisations to harness the value of their data and aggregate it at speed and scale so that they can achieve their business goals. Traditional data solutions cannot keep up with the volumes and variety of data that is being collected today by financial players.

Pelliccia adds that a cloud-based data lake allows organisations – from banks to SMEs – to store all data in one central repository where it can be more readily available for the application of other technologies such as machine learning, “to support security and compliance priorities, realise cost efficiencies, perform forecasts, execute risk assessments, improve understanding of customer behaviour, and drive innovation.”

This enables organisations to maintain a holistic view of their business, while identifying risks and opportunities. For instance, analyses can help to detect fraud, surface market trends and mine for deeper customer insights to deliver tailored products and personalised experiences.

#4 Review and upgrade cybersecurity measures

Whilst many organisations will have robust cybersecurity processes and culture, for many others this will represent a new capability and massive learning curve. What was good just a few months or weeks ago may not be adequate today.

The urgency and impact of the shift away from office working will mean most organisations may have introduced new levels and types of cybersecurity risk not previously seen before at this scale (see below for leading causes of cyber risks).

Source: PropertyCasualty360

While allowing the workforce to be flexible is only a small part of digital transformation, it carries with it the need to ensure that new hardware (laptops, home printers, smartphones) and services have been, and continue to be, implemented securely (e.g. full disk encryption, enabling strong multi-factor authentication, and using VPN technology).

#5 Move from ‘good’ to ‘great’ across 4 key areas

Once solutions to immediate workforce and business priorities are in-flight, organisations should accelerate the exploring of different ways to use digital to work and operate, deliver innovative customer experiences, and create value in the new normal. For example, restaurants enabling entirely new in-home dining experiences, telemedicine becoming more of a norm, and different ways to shop with ubiquitous curb-side pick-up.

According to McKinsey, whilst many B2B companies have a general sense of what they need to do to become more digitally-enabled, it is the best B2B leaders who move beyond “accepted wisdom” to focus on being ‘great’ at 3 main differentiators of digital success:

Customer Insights
Process Improvement
Capability Building

To this list, I add a critical 4th dimension: Business Models

The below provides further explanation:

Customer insights

Good: Focus on understanding their customer preferences and demographics.
Great: Ability to quickly translate into the most relevant value-creation strategies. Pick one or two high-value customer segments, then map decision journeys front-to-back to understand how customers buy, what channels they use, what turns them on—and off. More than 90 percent of B2B buyers use a mobile device at least once during the decision process, yet fewer than 10 percent of the B2B companies in the survey indicated that they have a compelling mobile strategy.

Process improvement

Good: Relentlessly improve existing processes.
Great: Use agile development techniques, automation, and design thinking to reengineer or reinvent supporting processes. Effective pre-sales activities—the steps that lead to qualifying, bidding on, winning, and renewing a deal—can help B2B companies achieve consistent win rates of 40 to 50 percent in new business and 80 to 90 percent in renewals. Incorporating agile techniques forces product development, marketing, sales, and IT to come together and use digital design practices, such as launching minimally viable products (MVP). That can ramp up the cultural changes needed as well.

Capability building

Good: Build important capabilities for digital initiatives
Great: Identify and augment the capabilities critical to achieving scale. B2B leaders create an organisational structure that supports their digital transformation. That involves identifying which skills need to be reallocated, what data and analytics resources are needed, and which customer opportunities require capabilities that need to be built, hired, or acquired. Systematic performance tracking needs to be in place to keep the efforts on track and make sure they having the desired impact (only one in five B2B companies systematically tracks digital performance indicators).

Business Models

Good: Optimise existing business model by digitising their traditional products, interfaces and distribution channels.
Great: Take advantage of platform models and thinking leveraging network effects, intelligent AI-powered solutions, developer/API enablement and ecosystems, and customer-centric orchestration. As every sector digitises – accelerated by the COVID crisis – the imperative to incorporate new digital business models becomes more urgent. This underpins the ‘great’ executors.

According to digital platforms expert Simon Torrence:

Platform thinking is about taking advantage of flexible software and digital infrastructure to leverage, at scale, other economic actors (complementary third parties and/or developers) to create new value for customers and markets.Rather than trying to design and build everything yourself – which is the default for most companies today – platform thinking encourages you to act as a coordinator or enabling intermediary between the needs of your customers, your own expertise and the expertise of others.

Simon goes on to say that:

Incumbent leaders admire and fear the big tech giants, and would love to emulate or incorporate some of their ‘secret sauce’ into their own businesses, but don’t know how. They have been happy to invest large sums to digitise their existing business model and fund experiments, pilots and CVC investments in new areas, but have found it difficult to fully embrace the types of digital business models that work best in a hyper-connected world and to take bold steps in re-allocating meaningful levels of capital and resources towards them.

In summary, a commitment to “great” is really what allows companies to reap the rewards from digital and build digital and supporting capabilities. Without it, organisations will find their improvements provide only modest benefits that cannot be scaled.

#6 Prioritise resource reallocation to digital initiatives (with a crisis mindset)

As outlined above, the COVID crisis will accelerate the gap between digital laggards and transforming leaders requiring firms to now evaluate investments, baseline ‘digital maturity’, and in the short-term, secure a stronger, repositioned role for digital investments in 2021.

In fact, in 2019 McKinsey believed a ‘crisis mindset’ was required. And that was before COVID….

This is likely to require an urgent reallocation of resources. Although most senior executives understand the importance of strategically shifting resources (according to McKinsey research, 83 percent identify it as the top management lever for spurring growth— more important than operational excellence or M&A), only a third of companies surveyed reallocate a measly 1 percent of their capital from year to year; the average is 8 percent.

This is a huge missed opportunity because the value-creation gap between dynamic and drowsy reallocators can be staggering. A company that actively reallocates delivers, on average, a 10 percent return to shareholders, versus 6 percent for a sluggish reallocator. Within 20 years, the dynamic reallocator will be worth twice as much as its less agile counterpart—a divide likely to increase as accelerating COVID impacts, digital disruptions, and growing geopolitical uncertainty boost the importance of nimble reallocation.

The disconnect tends to be because managers struggle to figure out (and agree) where they should reallocate, how much they should reallocate, and how to execute successful reallocation. Additionally, disappointment with earlier reallocation efforts can push the issue off top management’s agenda.

Although these challenges can be overcome, feedback and data from employees, customers, and the maturity benchmarking should help to align senior management commitment to prioritising the short-term digital investment requirements, and at the same time laying the foundation for more detailed discussions and analysis for longer-term strategic planning.

#7 Improve the digital acumen of the Board (and workforce)

A UK government report published in 2016 found that the digital skills gap is costing the UK economy £63 billion a year in lost GDP. Similarly, a report from Amrop, a global executive search firm, reveals that just 5% of board members in non-tech organisations have digital competencies, and that the figure has barely moved in the last two years.

In the new COVID world requiring adaptability and digital adoption at a scale never seen before, boards must get to work in reassessing competencies, adopting new ways of working (e.g. continuous strategic planning, collaborating internally and with the wider ecosystem), and being open to hiring diverse backgrounds if needed.

In addition, since many new digital directors may have atypical perspectives (e.g. deep technical vs product vs strategy vs HR), companies must make sure that they have strong on-boarding processes in place, to capture and maximise the impact of their new board members.

A critical first step is to ensure a consistent understanding of what digital and innovation means amongst leaders and boards, what are the best practices of leading tech and non-tech organisations, and what are the big opportunities for digital (and threats) in a COVID world. As part of this, improving the board’s understanding of the external environment and how it is shifting, and how the big trends and signals might impact the immediate and longer-term future.

In many cases, firms will need outside help across recruitment (e.g. diversity), training and education (e.g. research and insight, best practices, benchmarking), advisory, and briefings from experts, entrepreneurs, academics, and other ecosystem players.

Once the above happens (which in theory can happen quickly with committed leadership), this should provide the intent and focus to refresh strategic plans and budgets, and then roll-out or accelerate digital and innovation upskilling throughout the wider workforce as a strategic priority.

#8 Organise to build digital capabilities

Put simply, digital capability can be defined as doing everything it takes to develop an organisation and workforce able to:

Maximise the potential of technology, data and talent to address business challenges; and
Ability to respond quickly to continual shifts in consumer behaviour and external environment in a fast-changing connected world.

According to recent study by Deloitte involving interviews with industry leaders, achieving this is not easy as the survey had a multi-faceted response. However, organisations that have successfully adapted to this new environment typically make delighting the customer their #1 priority, set bold goals to achieve factors of 10x impact, and challenge the status quo by looking for new ideas to solve.

3 core critical success factors to building digital capabilities:

Leadership:

In these times of significant change, leaders must understand, collaborate, and champion the exciting potential of technology from the very top of the organisation.

However, understanding the full suite of digital opportunities (e.g. API-based BaaS platforms) are often new and alien to leaders of incumbent firms. Teams and advisers need to help them to understand how digital can work, and the options in terms of where to play and how to win. This is critical to getting commitment to re-allocating sufficient capital and resources from other initiatives to support this market opportunity in a meaningful way.

Organisational Structure and Operating Models:

Organisations need to embed and build the right structures and models that allows them to drive digital change and execute in an agile way. This requires clarity on the firm’s approach to digital strategy (e.g. build vs buy vs partner) as the implementation approaches to build digital capabilities will differ.

For example, many established firms will embark on dual-transformation or innovation portfolio approaches by

(i) executing process improvement and cultural change in the main firm (see ‘A’ below)

(ii) creating separate legal entities, JVs and alliances to tackle new markets, exploit new business models, sometimes at the risk of cannibalising the main business (see ‘B’ above or ‘Exploit’ below)

Source: Strategyzer

PingAn has pursued the above approaches to become one of the best-performing transformer of the past decade (and become a much sough-after MBA case study subject). It typically kick-starts new ventures with partners as part of the ‘explore’ portfolio which is one of the most effective approaches to reducing risk and increasing chances of success.

Typically these are best managed away from the core in an ‘explore’ portfolio of businesses within a new organisational structure and P&L.

Talent, Skills, Culture and Data:

Maximising digital opportunities require radically different skills, technologies, ways of working, and metrics. Organisations need to empower people to be creative, test and learn and challenge existing ways of working. They also need to cultivate diversity and a lifelong learning mindset, recognising that many will resist change. This was highlighted in PwC’s recent Skills Report.

In addition, whilst the focus of the ‘future workforce’ tends to focus on the technical and ‘hard’ skills (e.g. engineering, analytics, coding etc) it is the soft skills and humanities expertise which will gain increasing importance.

According to billionaire tech entrepreneur Mark Cuban:

“Twenty years from now, if you are a coder, you might be out of a job,” Cuban predicted. “Because it’s just math and so, whatever we’re defining the A.I. to do, someone’s got to know the topic. If you’re doing an A.I. to emulate Shakespeare, somebody better know Shakespeare.” Cuban acknowledged the importance of coding as a short-term opportunity. Long-term, however, the Shark Tank investor pointed out that A.I. is only as good as the data it’s given–meaning the highest-skilled workers in the future will be the ones who can identify “what is right and what is wrong and where biases are.”

Already today design thinking and human-centred design is a new differentiator in digital which complement technical mobile, cloud, AI, and other more technical digital skills.

“Creativity, collaboration, communication skills: Those things are super important and are going to be the difference between make or break” – Mark Cuban

In terms of data (the new ‘oil’) organisations need to capture, track, protect, analyse and maximise the business value of their data, as along with people, this is the most valuable asset.

Some further tactics might include:

Senior executive and board training, commitment and refreshed digital strategies
Centralising digital business expertise (e.g. Centre of Excellence) using hub-and-spoke engagement model
Hiring a Chief Digital Officer and team/function
New talent and up skilling (e.g. analytics, user experience)
Hiring external, flexible talent e.g. freelancers
Cross-functional governance
New incentives and behaviours
Collaborating with wider industry and ecosystem partners
Training will be integral which will also enable every C-level executive to be their own ‘Chief Digital and Innovation Officer’ for their functions.

Accenture summarise this using an 8 step ‘playbook’ below:

What’s next?

To better understand these issues further or explore our range of digital business advisory offerings, get in touch here andrew@rocketandcommerce.com or at ROCKET + COMMERCE

The Invincible Company

It is not often that you receive a business book and want to take a photo of it. And just like that amazing meal, post it on Instagram (I didn’t, but couldn’t resist a cheeky post on LinkedIn. And Twitter).

In fact, it is probably never that this urge happens.

That all changed this week when The Invincible Company by Alex Osterwalder (and others) arrived.

It looks and feels great. And knowing the track record of the authors, will be jam-packed full of great insight.

I’ll post a review here once I tuck in.

Facebook Commerce

Facebook have finally followed in the footsteps on their Asian competitors (e.g. WeChat) and just announced their big play to grab a slice of the accelerating global e-commerce market yesterday. And critically, provide some level of competition to the Gorilla out there (i.e. Amazon).

Shops started rolling out on Facebook yesterday in the United States and they are set to come to Instagram this summer. With this launch coming during COVID-19, it means commerce and community can finally play nicely together and enable SMEs to better respond to any e-commerce opportunities presented by the pandemic. For many, the online and mobile channel is the only hope for survival.

According to a survey conducted by Facebook and the Small Business Roundtable, a third of SMEs have stopped operating and an additional 11 percent say they could fail within the next three months if the current situation continues.

Here are the highlights (according to Facebook directly):

In a live stream, CEO Mark Zuckerberg said expanded e-commerce would be important to begin rebuilding the economy while the pandemic continues. “If you can’t physically open your store or restaurant, you can still take orders online and ship them to people,” he said. “We’re seeing a lot of small businesses that never had online businesses get online for the first time.”
Businesses can now turn Facebook and Instagram pages into online shops. They also joined forces with Shopify, who recently released their Shop app, to allow merchants to leverage their shipping, inventory and fulfillment features. The aim is to help new shop owners and small businesses to leverage their existing audiences to compete with Amazon.
Shops can be found on businesses’ Facebook pages and Instagram profiles, and they can also appear in stories or be promoted in ads. Items that businesses have made available for purchase will appear within the shop, and users can either save items or place an order. (Some businesses enable users to make purchases directly on Facebook, while others will take you to the business’s website to complete the transaction.)
According to Facebook, Shops will improve on the standard web commerce experience by storing users’ payment credentials in a single place that they can then use on any Facebook or Instagram storefront.
Businesses can handle customer support issues through Messenger, Instagram, and WhatsApp. Eventually, the company plans to let you browse store catalogs and make purchases directly from the chat window. It also plans to enable shopping from live streams, allowing brands and creators to tag items from their Facebook catalogs so that they appear on the bottom of live videos.
The e-commerce ecosystem around this will hot up to help store owners. For example:
- Elliot creates simple product landing pages with one-tap checkout
- Storr is for mobile commerce, so you can set up a store from your phone

A few initial thoughts include the following:

While Shops are free to create, they could create significant new business opportunities for Facebook in advertising, payments, and other services. Businesses will be able to buy ads for their Shops, and when people use Facebook’s checkout option, it charges them a fee.
This shopping rollout will no doubt have big algorithm implications on Instagram and Facebook. Early reports are showing how a “shopping” tab might interact with the “activity” tab on Instagram to increase the focus on commerce for businesses and their followers. Soon I suspect you’ll see Shops appear in stories and promoted ads.
Facebook Shops will eventually be integrated with WhatsApp, Messenger and Instagram DMs, so you can browse store catalogs and make purchases through chats. The influencer marketing industry is set to benefit too as live streaming and shopping will be pairing up.

Facebook has been dabbling in commerce for years. In 2016, it introduced Marketplace, a destination within the app for peer-to-peer buying and selling. Two years later, Instagram began working on a standalone shopping app, though it was later abandoned. Instead, last year, Instagram added in-app checkout.

Given the devastation caused to many traditional physical retailers by COVID-19, hopefully this announcement makes it easier for SMEs to reach existing or new markets (or better serve existing customers).

With billion+ global userbase of the Facebook ecosystem and ongoing pandemic, you would think it will be a slam dunk. That said, I don’t think Jeff Bezos will be having any sleepless nights. But it will be interesting to see how it goes in these E-Commerce Wars.

6 Ways To Make Digital Investments More Successful

Recently I posted here about how organisations can go back to basics and understand what digital really means. In the context of today’s rapid acceleration of digital and IT investments to support remote or new ways of working – from cloud to SaaS tools to desktop VC solutions – this is critical to understand.

Another key fact to consider is that some of the most successful companies ever were started during or just after times of crisis (e.g. GE, GM, IBM, Disney, Facebook).

For leaders who can seize the ‘re-set’ opportunity this crisis provides – and start to engage with more long-term, future-focused, and exploratory strategic planning with digital at the core – this presents a potentially game-changing moment.

This presents a critical question: how should firm’s approach and organise to make digital or innovation investments and transformations successful?

Whilst there is no playbook, below I pull together a number of perspectives from some of the world’s leading management thinkers and practitioners on strategy, digital, innovation and change.

The Challenge

Digital transformation is extremely complex and requires new ways of approaching strategy. Starting big, spending a lot, and assuming you have all the information is likely to produce a full-on attack from corporate antibodies—everything from risk aversion and resentment of your project to simple resistance to change.

Start Small, Think Big

Professor Rita McGrath calls this ongoing learning approach to strategy: discovery-driven planning (DDP). It was developed in the 1990s as a product innovation methodology, and it was later incorporated into the popular “lean start-up” tool kit for launching businesses in an environment of high uncertainty. At its center is a low-cost process for quickly testing assumptions about what works, obtaining new information, and minimizing risks. According to Rita:

By starting small, spending a little on an ongoing portfolio of experiments, and learning a lot, you can win early supporters and early adopters. By then moving quickly and demonstrating clear impact on financial performance indicators, you can build a case for and learn your way into a digital strategy. You can also use your digitization projects to begin an organizational transformation. As people become more comfortable with the horizontal communications and activities that digital technologies enable, they will also embrace new ways of working.

2. Soft and Hard Facts About Change

Managing change is tough, but part of the problem is that there is little agreement on what factors most influence transformation initiatives. Ask five executives to name the one factor critical for the success of these programs, and you’ll probably get five different answers.

In recent years, many change management gurus have focused on soft issues, such as culture, leadership, and motivation. Such elements are important for success, but managing these aspects alone isn’t sufficient to implement transformation projects.

According to consultants from BCG in an Harvard Business Review article entitled The Hard Side Of Change Management:

What’s missing, we believe, is a focus on the not-so-fashionable aspects of change management: the hard factors. These factors bear three distinct characteristics. First, companies are able to measure them in direct or indirect ways. Second, companies can easily communicate their importance, both within and outside organizations. Third, and perhaps most important, businesses are capable of influencing those elements quickly. Some of the hard factors that affect a transformation initiative are the time necessary to complete it, the number of people required to execute it, and the financial results that intended actions are expected to achieve. Our research shows that change projects fail to get off the ground when companies neglect the hard factors. That doesn’t mean that executives can ignore the soft elements; that would be a grave mistake. However, if companies don’t pay attention to the hard issues first, transformation programs will break down before the soft elements come into play.

3. Breaking Down the Barriers

According to a 2019 article from the partners from Innosight, a critical reason for businesses failing to get the impact they want is because they’ve failed to address a huge underlying obstacle: the day-to-day routines and rituals that stifle innovation.

Innosight Partner Scott Anthony talks further about this below:

4. A Systematic Approach

A study by McKinsey here of leaders post-transformation has shown there are 21 best practices for organisation’s to implement to improve the chances of success.

These characteristics fall into five categories: leadership, capability building, empowering workers, upgrading tools, and communication. Specifically:

having the right, digital-savvy leaders in place
building capabilities for the workforce of the future
empowering people to work in new ways
giving day-to-day tools a digital upgrade
communicating frequently via traditional and digital methods

One interesting best practice was that firm’s who deploy multiple forms of technologies, tools and methods tended to have a great success rate with transformation (see below).

This might seem counterintuitive, given that a broader suite of technologies could result in more complex execution of transformation initiatives and, therefore, more opportunities to fail. But the organizations with successful transformations are likelier than others to use more sophisticated technologies, such as artificial intelligence, the Internet of Things, and advanced neural machine-learning techniques.

Out of 83 practices that were tested in the survey, the following are those that best explain the success of an organization’s digital transformation:

Implement digital tools to make information more accessible across the organization.

Engage initiative leaders (leaders of either digital or nondigital initiatives that are part of the transformation) to support the transformation.

Modify standard operating procedures to include new digital technologies.

Establish a clear change story (description of and case for the changes being made) for the digital transformation.

Add one or more people who are familiar or very familiar with digital technologies to the top team.

Leaders engaged in transformation-specific roles encourage employees to challenge old ways of working (processes and procedures).

Senior managers encourage employees to challenge old ways of working (processes and procedures).

Redefine individuals’ roles and responsibilities so they align with the transformation’s goals.

Provide employees with opportunities to generate ideas of where digitization might support the business.

Establish one or more practices related to new ways of working (such as continuous learning, open physical and virtual work environments, and role mobility).

Engage employees in integrator roles (employees who translate and integrate new digital methods and processes into existing ways of working to help connect traditional and digital parts of the business) to support the transformation.

Implement digital self-serve technology for employees’ and business partners’ use.

Engage the leader of a program-management office or transformation office (full-time leader of the team or office dedicated to transformation-related activities) to support the transformation.

Leaders in transformation-specific roles get more involved in developing the digital transformation’s initiatives than they were in past change efforts.

Leaders in transformation-specific roles encourage their employees to experiment with new ideas (such as rapid prototyping and allowing employees to learn from their failures).

Senior managers get more involved in digital initiatives than they were in past change efforts.

Leaders in transformation-specific roles ensure collaboration between their units and others across the organization when employees are working on transformation initiatives.

Senior managers ensure collaboration between their units and others across the organization.

Engage technology-innovation managers (managers with specialized technical skills who lead work on digital innovations, such as development of new digital products or services) to support the transformation.

Senior managers encourage their employees to experiment with new ideas.

Senior managers foster a sense of urgency within their units for making the transformation’s changes.

4. Execute AND Innovate

For any followers of the work of the late Professor Clayton Christensen on Disruptive Innovation (view his HBR collection of popular articles here), this is a fundamental challenge for almost every established firm which often becomes a matter of survival during industry, business model, technology or other shifts.

According to Alex Osterwalder:

This continues to be one of the biggest challenges we see companies face: to create two parallel cultures of world-class execution and world class innovation that collaborate harmoniously.

Watch this video here to read more about how leaders can overcome this challenge.

5. Constant Learning

In a constantly evolving landscape, it is critical for leaders to keep learning and evolving their thinking and tool-sets for strategic planning, crisis management, innovation, problem solving, and other business processes.

There are lots of sources out there (including those mentioned above), but below I provide a few great ways I do this (NB I am not formally affiliated with any of these organisations):

Strategy Upskilling:

Thought Leadership

Havard Business Review
MIT Sloan Management Review
Innosight, McKinsey, BCG
Ten Steps To Innovation by Doblin
Stratechery

Webinars

WOBI

Podcasts:

HBR Ideacast
The Disruptive Voice
Masters of Scale
a16z

Startups

Techcrunch
Crunchbase

Summary

There are a number ways to improve the thinking and planning of the approach to digital investment strategy. This not only improves the chances of benefit realisation and achievement of strategic goals, but in the current time of crisis, can set up the firm for long-term success.

Whilst there is no playbook for leaders, these initial set of resources can help organisations to refocus current thinking and initiatives during these extraordinary times.

In summary, the themes were:

Start Small, Think Big
Soft and Hard Facts Of Change
Break Down The Barriers
Systematic Approach
Execution AND Innovation
Constant Learning

What Digital Really Means

“Everyone wants to go digital. The first step is truly understanding what that means” – McKinsey

I was talking to a COO of an off-shore investment bank yesterday and he mentioned something which gave me the impression that his bank did not understand what ‘digital’ really meant. According to McKinsey:

For some executives, it’s about technology. For others, digital is a new way of engaging with customers. And for others still, it represents an entirely new way of doing business. None of these definitions is necessarily incorrect. But such diverse perspectives often trip up leadership teams because they reflect a lack of alignment and common vision about where the business needs to go. This often results in piecemeal initiatives or misguided efforts that lead to missed opportunities, sluggish performance, or false starts.

As COVID-19 continues to rapidly accelerates the shift to building more digital capabilities within organisations, it is a critical time to take a step back and reevaluate existing efforts in light of the new challenges ahead. This means properly understanding what digital means, assessment of existing efforts, aligning to future strategy, and identifying what capabilities are needed across leadership, culture, and execution.

Whilst extremely hard, now is the best time to refocus efforts toward accelerating digitisation as the case for such change is for some a matter of survival. Think about how many food and other retailers are rapidly shifting to e-commerce models requiring new skills, software, tools and mindsets.

You can read more on this from McKinsey here

Reimagine The Future Online Conference

This Reimagine The Future virtual conference starts today and I have signed up for it.

It is being run by Thinkers50 and Outthinker and features 24 top management experts doing 24 sessions in 24 hours including Renee Mauborgne (INSEAD and Blue Ocean Strategy), Scott Anthony (Innosight), Daniel Pink, and Hal Gregerson. Recordings of every session will be available on-demand so there’s no need to be live.

All profits are going to a range of charities involved in COVID-19 relief. You can access tickets here.

Part 1 – Current and future use cases of AI in legal and compliance services

2. Key issues for the future of AI-power legal and compliance services

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1) Have we set an innovation agenda in many, if not most, of our meetings?

2) Do we regularly review “make-or-break” innovation projects?

3) Do we regularly review and discuss the company’s innovation strategy?

4) Do we regularly review and discuss the company’s innovation risk?

5) Do we set specific innovation goals for management?

6) Do we review innovation management issues with the CEO?

7) Do we expect management to conduct innovation audits?

8) Do we expect management to report on innovation performance?

9) Do we know and occasionally meet our main corporate innovators?

10) Do we take innovation into account when appointing new leaders?

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Key Ingredients Of An Efficient Digital and Innovation Ecosystem:

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#1 Understand productivity, value and benefits

#2 Diagnose digital performance and opportunities

#3 Scale digital capacity for increasing demand but manage complexity

#4 Review and upgrade cybersecurity measures

#5 Move from ‘good’ to ‘great’ across 4 key areas

#6 Prioritise resource reallocation to digital initiatives (with a crisis mindset)

#7 Improve the digital acumen of the Board (and workforce)

#8 Organise to build digital capabilities

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The Challenge

Start Small, Think Big

2. Soft and Hard Facts About Change

3. Breaking Down the Barriers

4. A Systematic Approach

4. Execute AND Innovate

5. Constant Learning

Summary

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