~ Geoffrey Moore, author of the seminal book Crossing the Chasm, captivated the lunchtime audience at yesterday's Washington Innovation Summit with a fast-paced and ranging, but conceptually deep exploration of the digitization of everything, globalization, the reconfiguring of how business is organized, social media and the future of work. Some of his ideas he's already put in earlier books, but perhaps some will find greater elaboration in his forthcoming book, Escape Velocity: Free Your Company from the Pull of the Past, which will be published September 6th by Harper Collins. Some of the corollaries of his remarks are very encouraging for the future competitiveness of America business and, in what would be a great relief for many locally, for Microsoft in particular.
The Digitization of Everything
"We are all leading a digitized life. Period." More than just pictures and video, more than even all information, our machines and processes are all becoming digitized. Our cars. Our wars. Our interpersonal interactions, both social and in the workplace. There are three pillars of this inexorable trend: (1) the growing universality of access to the Internet; (2) broadband (speed), which has made the Internet an "emotional medium, beyond mind to heart and soul"; and (3) its omnipresence due to mobile devices. This triumph of digitization means that everything about our lives, and especially our work, business and commerce is going inextricably virtual.
Reflecting that he has had the privilege of attending the annual confab in Davos "7 or 8 times", Moore cracked that the summit affords a "planetary view of the economy. You're high in the mountains, drinking very nice wine. You get very philosophical!" (Yep, in the cloud both figuratively and literally!) His planetary view includes an accelerating cycle of business trends:
|Vicious or virtuous circle?|
It's certainly Darwinian, and forces innovation
The globalization of business and the nature of the cycle illustrated above is forcing innovation not just within the business, but of the business itself. The old structure of business "is a pyramid scheme": a hierarchy of workers directed by middle managers who delegate down and report up to a CEO. These centrally directed and vertically integrated enterprises are giving way to a new model: business networks of specialized enterprises that operate within horizontally integrated value chains comprised of similarly structured businesses. The business machine has been turned on its side.
The burden of this new model falls directly on middle management. The lowest level employees are generally transactional and execute the daily operations of the business rather than integrate it flexibly to the outside. The CEO and most senior management, while engaged horizontally, are overseeing at a broad strategic level; they lack the bandwidth to manage or even orchestrate the myriad connections necessary in the new business model.
Middle management provides American business with a strong competitive advantage that will endure for decades. While many worry over the economic growth and competitive rise of the BRIC countries (Brazil, Russia, China, India), Moore is more sanguine. He claims that "there are no middle managers in China" and that those in India are "dysfunctional" and will be for a generation until they can "reboot." (I missed any aspersions cast on Russia and Brazil, if he in fact made any. Perhaps Russia is still too beholden to tight vertical integration, a legacy of statism, to unchain their middle managers? Maybe the Brazilians are too busy dancing and playing futbol?) American business, to seize the competitive high ground in the global economy, must empower its middle managers so they can nimbly and effectively operate within the newly horizontal value chains.
Information Technology (IT) systems are designed for the old model of business and work much less well for the new one. Business is still accountable to the same stakeholders, but now has a greater need to communicate, coordinate and collaborate across and between these newly emerging business networks. The challenge is to engage peers globally to solve problems; this requires intelligence and energy of course, but also adaptability and a level of trust that wasn't nearly as essential in the old model of vertically integrated business. Fortunately, there's already a set of tools to facilitate this: social media. Unfortunately, they are not (yet) designed for the enterprise.
The challenge of empowering middle managers can be met with enterprise social media systems-on-demand. Existing consumer social media applications (Facebook, Twitter, search, YouTube, et al.) can and need to be recast as enterprise tools. The systems of record, databases, CRM, ERP and so forth are largely done and working. The systems of engagement, at the enterprise level, are yet to be made.
As the workforce ages, middle management will be increasingly filled with those who have grown up with sophisticated consumer IT, and especially including social media. Says Moore, the Millennials Lament is: "Why am I so powerful as a consumer and so lame as an employee?" The answer is that enterprise finds it hard to embrace consumer IT and bring it into the enterprise. Some businesses and their leaders dismiss social media's utility, and others go as far as to restrict its use at the workplace. They make a mistake says Moore. "Systems of engagement are not for placating Millennials; they are a Darwinian response to the future of work."
The Future of Work
All of the above trends converge in describing the future of how work gets done, both by businesses and individuals.
The Virtualization of Work. Digitization, and the transition from vertical companies to horizontal value chains will accelerate the virtualization of work. More work is already occurring in an informational layer rather than a physical one. Work becomes portable in space and time and is no longer much hardwired to a specific location (a reality I observe every day at my various virtual offices in coffeehouses around the area.) Management becomes less supervisory as workers are less tethered to an office during "office hours"; being elsewhere, they cannot be directly and continuously overseen. Instead, the employee becomes a contractor with deliverables and the employer a client with acceptance criteria. (The worst boss I had at Microsoft placed an absurd emphasis on face time at my desk; my protestations about the higher importance of getting results, and being evaluated thereon, did not persuade. It seems I was ahead of my time.)
As workers, Millennials see themselves as a "company of one" (a phrase suggesting the US Army's "army of one" slogan may have more target marketing depth than I realized.) The new relationship of the worker to the business is less one of employee to employer (notwithstanding the legal arrangement) and more of a contractor to a client: it is contractual and eschews any paternalism or social contract. Everyone is a free agent in the global marketplace for labor.
The Architecture of Enterprises. "No large corporation belongs to a country," states Moore flatly, voicing a reality we have all observed for some time. First it was manufacturing, then finance and energy companies that spread their operations across the globe, reducing their footprint and reliance on any one country, including the US. They now routinely try to hold governments and their taxpayers hostage, extorting an endless number of tax and regulatory concessions without which they claim they will flee to another jurisdiction. The corporation has become free-floating and stateless in all but the most nominally legal way. (This is why, incidentally, corporations, their stock prices, and entire stock bourses can continue to do well even as their host countries economically struggle and flounder.)
Companies more and more organize entirely around value and risk. They most economically successful maximize investment in their core competency to maximize enterprise value. They in-source their core, keeping their differentiation and specialty essence in-house, while outsourcing the context of their business to syndicate risk. Surrounded by enabling value chains, they become uniquely excellent at that core. In time, globalization will copy the core and commoditize it; companies must continuously innovate to recreate and change the core that provides their competitive advantage. They die only when they get "tired" as Moore suggests ATT, Lucent, Sun and others, all great in their day, did.
The New Dynamics of Location. Globalization has separated the physical location of demand and supply. All great growth markets have become "away games" for US companies, which have only had to play "home games" until now. They must now learn to play away games; the world is not just America: "If the UK held the World Series, they would invite other countries." With the demand side location away, the supply side location must be at home, otherwise we are left with nothing. To have a strong home field advantage and supply the rest of the world necessitates the development of domestic centers of excellence. Every region needs at least one which is our business core and is virtual, i.e. occupying a critical and unique place in the global, horizontal value chains. Around that core many other business can flourish. Investments in them are intrinsically local; they are context to that critical core.
Such an ecosystem is what creates massive wealth and broad prosperity. The US needs to focus on and accelerate the creation of our own centers of excellence: "For what should we be world-famous?" Answering that question and implementing it the result is dauntingly difficult, but our innovation-friendly culture is an advantage that we can leverage. "We play adaptive better than anyone by far ... unless we get righteous." (While we have "bouts of righteousness" we have always gotten over them.)
Washington State's Center of Excellence. Every true center of excellence is unique. "No one will be famous for what Silicon Valley become famous for. You don't need two of them." Washington has been a leader in technology for decades, first with aerospace, but for a long time now in software and IT. Moore believes that our great opportunity lies in the creation of systems of engagement for enterprise, the social media for business that will provide the collaborative sinews that hold the horizontally integrated body of future business together. Washington State is "a natural" to be the global leader and center of excellence for Enterprise IT and this transition. It can provide the metaphorical picks and shovels of the next global business gold rush, and the company perfectly poised to fill that need is Microsoft.
Can we do it? Systems of record don't want to live in the cloud, whereas systems of engagement don't want to live in the data center. The nature of work and of Enterprise IT will both change. Both will change each other. There are implications for education: we need to invest enough that our workforce is competitive globally in the information layer. There are also implications for immigration: we must be willing to globally source the talent to acquire true leadership.
The future of work is changing rapidly as is the future of business, and the social changes are outstripping even the technological ones. In an aside, Moore also mentioned the morning discussion about privacy, largely agreeing with Ellison and others: "We had a little thing about privacy" earlier, but it's rendered moot by the trends he identifies. "It's over. You can't control the guy pointing a phone at you."
Moore didn't go there, but it seems an obvious upshot: The intersection between the diminution of privacy, increasingly embraced by everyone, the rise of horizontal value chains, and the brainpower needs of any center of excellence will propel us to a global marketplace of fungible talent. In the free-for-all of virtual workers, each a company of one, and each known at multiple levels through a globally incestuous spiderweb of social connections, information will become more complete. A perfect ("free") market of labor will arise to parallel that which already exists for capital. It may, but probably won't be a meritocracy, at least not one based solely on the capability to do a specific job. Connections will matter more than ever, as will reputation, transparency, and authenticity.
I chatted with Moore briefly afterwards and asked about this aspect of the future of work. He enthused that workers in future may (or even already, I think) create multiple virtual personae to address different needs and different audiences. This Darwinism of the labor side of the economy could get very interesting as people create adaptations in response to economic situations. "They may create camouflage!" said Moore. Indeed. They might also figuratively borrow from the full gamut of evolutionary strategies adopted by life in general: mimicry, specialization, attack and defense attributes, parasitism, symbiosis and more. I suggested that this is already happening, but will become simultaneously more obvious, urgent, and essential. Moore smiled and confided that he, however, had a "competitive advantage": he is "old enough" and has enough "personal value" to go "off-grid" and so need not compete entirely in the ruthless and brutal maelstrom of the new employment Darwinism. Lucky him.
It's truly turning into a jungle out there.