Why the Underlying Laws of Cloud, Social, and Digital Business Matter

I’ve spent much of my Memorial Day Holiday here in the United States pondering the Red Queen effect vs. network effects, seminal laws of technology and business both, that are often held as gospel by their adherents who believe they are the natural and intrinsic properties of their operating environments (digital ecosystems in this case.)

Both hypotheses apply to any connected, relatively closed environment of some kind, which very much includes everything from traditional marketplaces, online communities, app stores, cloud services, SaaS, enterprise social networks, social media, and cable/video networks to e-mail, telephones, and package delivery. I cite these, as many practitioners don’t even consider system concepts when trying to figure out why they aren’t succeeding as hoped, despite those very ideas defining the rules of the playing field they’re working upon.

Both Red Queen and network effects have years of rigorous research and thinking to back them up, and as far as they go, they make real sense of the modern world as explanations for why things are the way they are in various places. This includes how organisms compete, survive, and thrive in the natural world or how networked products and services grow and maintain dominance on the Internet, respectively. These combined environments will ultimately lead to what I’m currently calling the 4th Platform.

Digital Business: Network Effects and Red Queen

The issue here is looking at why there are so many so-called ‘winner-take-all’ players at the top of the technology industry, especially on the Internet. In the shadows, nowhere near as successful, there are usually hundreds — sometimes thousands — of also-rans, depending on the sector, who struggle mightily, but usually fail. Rarely are the winners dethroned, though it does occasionally happen (see: AOL, MySpace, Friendster, RIM/Blackberry, all top digital players in their day.)

What triggered this line of thinking was Gartner’s fascinating new report on the Magic Quadrant for Cloud Infrastructure, which makes the stunning claim that Amazon now has 10 times more cloud computing capacity in use than the entire total of all the other 14 providers combined. The company is deeply wired into over a million customers’ ecosystems, and thousands of online products. By any estimation it is uncatchable.

Sidebar: Interestingly, this hasn’t stopped technology leaders such as Staples CIO Tom Conophy from stating last week that they’re going after Amazon “in a big way.” This despite the fact that both organizations aren’t even playing on the same digital meta-level.

Or is Amazon uncatchable? Don’t we just need to go ‘up the stack.’ As it turns out, not if it just leads to commoditization.

If traditional enterprises — and yes, more likely, startups — can only understand the fundamental rules by which the Amazon, Apple, and Facebook et al became leaders, the reasoning goes, we should be able to use those very rules against them. We should then be collectively able to out-innovate, out-invest, out-maneuver our competition and get to the top of an increasingly shallow but very, very steeply inclined pile of winners.

Deep thinkers in this space like my industry colleague Simon Wardley note that network effects create enormous inertia for change that make it very hard for a new player to get started, even if they’re much, much better. Worse, this is true even if you realize this and try to organize and optimize for it. You are simply spitting in the wind. Market-leading network effects, in fact, nearly always easily trumps the seemingly-powerful Red Queen Effect.

None of this is a new discussion of course, and the power laws of digital networks, such as Reed’s Law, have been relatively well-understood for at least decade. But their effects are now inexorably felt in the traditional business world like never before.

Using Networked Relationships Built on Enduring Digital Values

Ultimately, as organizations increasingly perceive the imperative to put a digital layer over their entire organization, even completely re-imagine it for the new models of digital business, there are some key fundamentals that we have to remember to close the gaps:

  1. Count on nearly everything in the ecosystem to eventually drop to effectively zero cost. Do not build your digital business along the commoditization axis. Only the underlying properties, like network effects, are exempted from this rule and this is a potent realization. We will eventually get the cost of nearly all technology to nothing, making replication and competition both easy and rampant. This isn’t where most businesses would like to be. However, network relationships like communities, total aggregate API integrations of partners, total daily users contributing value, these cannot never be copied whole cloth on an increasingly low cost scale. When people are involved, commoditization is not possible, and real, meaningful human relationships then become the strategic coin of the digital realm.
  2. Use differentiated models for commodity elements of digital business, versus the methods you employ for the innovative (and most important) elements. Social business, bi-modal IT (actually, tri-modal), devops, and even agile, are still the mantra here. These methods have been discovered to operate on the scale, speed, and collaborative dimensions required of today’s rapid digital cadence. Even better, they connect people the best way — that we know of so far — with how modern technology profoundly alters and — mostly — improves the way we work.
  3. If you are a large organization, you’ll have to operate in sometimes truly unexpected new ways to deliver well on digital. In particular, this means powerful new network models of organization structure — in IT and everywhere else — as well as new widespread digital workplace skills to be able to change at a sufficiently high and sustained rate.
  4. In other words, most organizations must rapidly evolve their operating models to adapt to the rules of the digital networks. A few have, but most still have not. There’s still time in a few industries however, but not a tremendous amount. For most, however, it’s now later than they think.

How IT and the Role of the CIO is Changing in the Era of Networked Organizations

As I’ve examined the case examples below, and talked with many top CIOs about how they were operating their departments over the last several years, it’s become clear that the contemporary IT organization — at least ones that are successfully leading their organizations into the future — is now wielding a new kind of power.

I don’t mean power in the traditional, hierarchical sense through departmental mandate, titles, and the org chart. In fact, those don’t seem to mean nearly as much as they used to, as I hear more and more concerns about the growth of shadow IT and the lines of business increasingly going their own way with their budgets, all with minimal formal IT involvement.

Yet, looked at another way, these very trends — worrisome as they should be for most CIOs — might actually represent vital asset pools and change capacity that we could actually tap into and guide, as Red Hat CIO Lee Congdon strongly suggests.

Instead, I mean power in the sense of genuine, highly effective influence through trusted collaboration, proactive enablement, orchestration of bottom-up change agency, and new forms of digital leadership. We know that as our organizations update how they operate in today’s digital world, which has fundamentally different rules and highly effective new ways of working, the way we manage and achieve large-scale group outcomes is by leading through new networked models.

In other words, moving from inefficient hierarchies to self-organizing communities to deliver IT.

Legacy IT versus Next-Gen Contemporary IT: Change Agents and Networks of Enablement

The need to greatly augment our IT ‘metabolism’

Some would say that grassroots models of business change have always been with us. They would be right in a strictly literal sense, as the actual means and methods are different now. In my analysis this is clearly a new phenomenon in in terms of how new forms of influence are actually employed, how easily they can be scaled, how much fewer resources are required to marshal change, and how constituents can be cultivated, shaped, and self-organized more rapidly than ever before.

In the era of mass technology proliferation, with millions of new apps and billions of always connected devices and customers, the IT department in many organizations has become a tiny and badly outnumbered island of routine automation and application delivery. We’ve learned that such a small capability can’t possibly keep up with today’s truly vast digital change.

IT has also long been the primary guardian of data and infrastructure, along with its collective operational continuity and governance. Together all of these functions, given the nearly flat increases — or even declines — in IT spending for 2015 in a time of the all-time greatest amount of tech change, tend to wag the dog, making it very hard to focus on what IT needs now most to do: Lead the company through the increasingly urgent generational imperative for digital transformation and innovation.

Related: Is it IT’s last chance to lead digital transformation?

Blazing a new IT trail: Internal competition and change agency

Recently we’ve begun to see CIOs, and this includes CTOs with the same responsibilities, work with their organizations a very different way. We started to see it when Graham Holding’s Yuvi Kochar willingly decided to compete as an ordinary — albeit a highly informed, invested, and aligned — service provider to his own stakeholders using a lightweight and highly maneuverable cloud portfolio of solutions, instead of an iron-fisted controller of corporate technology pushing aging and difficult-to-maintain legacy on-premises systems:

As a result, I have structured my corporate technology team to be a service provider to our businesses. To ensure flexibility and agility required by our M&A strategy, I am pursuing a 100 percent SaaS technology portfolio. We acquire SaaS services, value add them with high-caliber functional support and project management and offer them as a service to the primarily functional teams at our businesses. We keep overhead costs to a minimum. Our businesses prioritize the agenda for our services by paying only for the ones they want and use.

It also happened when David Bray, the highly-respected and effective CIO of the FCC, needed to overhaul an increasingly complex technology landscape with antiquated applications. Bray’s open approach to the FCC’s IT strategy ended up with him listening to and then backing local change agents closer to the situation who suggested their own solutions, which ultimately led to considerably cost savings, faster deployment, and lower maintenance overhead. It wasn’t easy however, as this is not the way technology bureaucracies — especially in the public sector — have traditionally sourced ideas and direction. It was an struggle at first to work this way, says Bray:

There were a lot of skeptics to this new approach. Several who wanted to not make the change or even wanted to follow the much more expensive approach. My role was digital diplomat and ‘human flak jacket’ to help deal with any friction because this was a new way of doing things. With the SaaS approach, the data was not going to be kept onsite. We would be leveraging code and security provided by a cloud-based vendor. And in the end, it came together.

There are similar efforts in the queue with the Commission’s change agents for 2015. Working together, they demonstrate daily that positive change agents can transform how the mission and technology of the FCC best serve the public.

From this, and the stories below and other sources, we can begin to piece together a new mindset for modern IT and what I’ve previously called the New CIO Mandate:

Legacy IT Approach Next-Gen IT Approach
Impose tech decisions as faits accomplis Pro-actively collaborate on tech decisions
Lead all technology efforts Support tech leadership across the company
Sole source technology provider Confidently compete as a service provider
Hold stakeholders at arm’s length Collaborate with stakeholders on their turf
Wait for change champions to approach Actively seek out change champions
Occasionally listen to change champions Actively supply change champions with resources
Bureaucracy Diplomacy
Constrain IT to strict standards Enable local innovation within bright lines
Chokepoint for IT realization Coach and ombudsman for decentralized IT realization
Service delivery Learning and change delivery
Strategic initiatives, Center of Excellence Network of Excellence
Single or Bi-Modal Tri-Modal and beyond
Waterfall, ALM Agile, DevOps

Here are other essential stories of CIOs realizing IT in new, more decentralized, collaborative, and bottom-up ways:

  • AstraZeneca CIO David Smoley remade IT at the pharmaceutical giant to be a learning and collaborative organization focused on the customer and technical leadership, he recommends, “that, in addition to embracing technology, they better understand the business, focus on behavior, be bold, and build their networks. People rely less on curated information, he explained, and more on networking and learning what other businesses are doing.
  • Houghton Mifflin Harcourt. The incoming CIO Brook Coangelo had to rebuild the entire IT brand from the ground up. Central to this was including internal customers closely in the process of technology change, often taking their lead, using an internal culture he calls Nimble.
  • Etisalat. Francisco Salcedo, senior vice president of Digital Services, at the telecommunications firm reports they have begun to “provide IT services within the organisation in new ways as opposed to traditional methods, and become a business growth enabler, rather than a bottleneck.” Key to this process: “Focus on adding value to the business, while leveraging IT expertise of partners to support business experts in generating new revenue streamlines.”
  • IBM. New IBM CIO Jeff Smith says that for him, “clarity is more important than certainty, course correction is more important than perfection, self-directed teams work better than command and control, and innovation is for everyone, not just the select few.” How does he enable next-gen IT? One key way: Smith created an internal Kickstarter-like crowdsourcing platform called ifundIT. With it, anyone can formulate a project or problem that needs to be solved, and raise internal funding to get it accomplish. I think this is a terrific example of how to use internal networks — social and otherwise — to rapidly engage, then actively enlist, change champions and supporters.

All of this certainly represents considerable and difficult changes for many IT organizations, yet the benefits are clear: A rate of internal change that more properly matches today’s operating environment. But there will be bumps, as with what Tony Hsieh has dealt with at Zappos in fundamentally remaking the organization into a holacracy — a somewhat comparable change to what is described here, but org-wide, well beyond technology — some creative destruction is almost inevitable.

However, as with almost everything with technology change and transformation, the CIO has an absolutely key role to play today, and can be a leader or a follower as the business has to move now and seize opportunity in today’s challenging markets. As Adobe CIO Gerri Flickinger recently said, we are entering a new golden age of IT, if you’re ready to move to the next level.

Additional Reading:

Going Beyond ‘Bolt-On’ Digital Transformation

Closing the gap between executives and digital transformation

The Rise of the 4th Platform: Pervasive Community, Data, Devices, and Intelligence

These days it’s still pretty common to talk about social business, mobility, analytics (especially when it’s called big data), cloud, and the Internet of Things — SMACT is the current acronym for all this — as on the agenda of key digital improvements underway in the typical enterprise. While many organizations have executed solid starts against these fronts, and are usually just at the end of the beginning overall in incorporating these technologies into their business, the majority still have a good way to go for reasons I’ve explored recently on ZDNet and elsewhere.

In recent months, I’ve started to be asked what’s coming next in digital and the enterprise. While I examined the more strategic up-and-coming technologies for the last year, this doesn’t really begin to paint the strategic picture that organizations must manage to now. After all, a laundry list of technologies is just that, and won’t create results by itself. But carefully situating emerging technologies within a business in a way that truly takes advantage of their innate and unique abilities to realize value creation does, and is the essential description of the hot topic today among CIOs and others in the C-Suite, digital transformation.

After all, the whole point of digital transformation is realizing that technology fundamentally changes how you do business in just about every way. It therefore poses very difficult questions to business and technology leaders: Who best should do our work today? Where does the value come from? What do these new ways of working actually look like? How can we best organize to achieve them? To answer these questions, we must understand the overall narrative of our modern digital journey: Where is technology actually taking us? What is it making possible that wasn’t before? How can these possibilities give rise to uniquely valuable new types of assets that would allow us to sustain our businesses?

The Rise of the 4th Platform: Digital Community, Devices, Data, and Intelligence

These are a lot of open questions, but we do have a sense of some of the answers now. For example, in terms of who does the work and where value comes from, we’ve learned that the network can and will (and should) do most of it, if we only enable the possibilities through platforms and digital communities. The answers to other questions are more complex, though their broad outlines are becoming clear as well, such as how can we best organize this year to achieve digital change. Why are they tough quetions? Because while digital devices and networks enable broad and reasonably well-understood realms of possibility, how precisely they apply to our industry, our business, and our corporate culture is often very different between organizations.

So when we talk about framing up the overall digital journey we are all on, the discussion is often about “computing eras”, or the emerging of new types of platforms (the cloud, for instance.) while these views are often gross simplifications, these are also useful conceptual frame-ups. Probably one of the most widely referenced view these days is IDC’s articulation of a vision they’ve dubbed the 3rd platform. In the large, this view does indeed describe what’s happening, though it leaves out some of the unique flavor of what’s special about what’s happening in digital today. I’ve previously described some of the more detailed possibilities in a view I called Web OS, but this really never became a popular way of thinking about it, though it did provide the extra layer of detail many need to understand what’s happening and has held up well in my opinion.

What’s Missing, and What’s Coming for Today’s Strategic Digital Perspectives?

Probably the most important concept that’s almost always missing from these views is the unique power of networks, especially ones made of people. One of the more remarkable is the sheer number of connections between nodes on the network that are potentially possible. Old ways of thinking about digital created largely point-to-point connections. The advent of social media made potent many-to-many network effects possible. The key word here is possible. Just because we’re connected to just about everyone in the developed world 24 hours today, doesn’t mean we actually realize that possibility. But today’s global networked platforms gives rise to the potential. In fact, for many reasons, having the ability to tap live into one’s social network is often better than having data on-hand, which is likely to be out-of-date.

So, for example, my view of what’s coming next, I don’t track the amount of data that is accumulating today. That is a great deal and growing rapidly by every account. But data isn’t useful until it’s needed, instead the ability to produce whatever is needed, when it is in fact needed, has far more ultimate value. So in my view, it’s key to understanding the strategic business nature of digital networks. This is a key point that John Hagel wisely made in a recent entry in his excellent Power of Platforms series:

But in a world of mounting performance pressure, we should also expect a fourth form of platform to become prominent. Dynamic and demanding environments favor those who are able to learn best and fastest. Business leaders who understand this will likely increasingly seek out platforms that not only make work lighter for their participants, but also grow their knowledge, accelerate performance improvement, and hone their capabilities in the process.

The core concept here is that whoever learns fastest, wins, and those with the best platform and ecosystem around it, will have value that can be tapped into more rapidly for sustained strategic benefit. Plus, it will ensure coverage of virtually all of the top level types of collaboration in business today.

What’s Next: Networks/Sensors In Everything, Machine Learning, and Us

I’ve been speaking at conferences for the last year saying that just about every non-trivial object will be connected to our networks within 10 years, as part of the rapidly emerging Internet of Things revolution. With the introduction of low power protocols like Bluetooth 4 and ultra long-lived batteries in devices like the tiny — and terrific in my experience — Tile locator, I now believe it’s going to be more like five years.

It’s also clear that mobility is going to transform and essentially disappear, into us. Wearables and smartphones will very quickly quaint when everything we need can be beamed into our heads or embedded as needed. Computing devices will almost completely disappear into our personal and work objects, and even ourselves. While this is certainly as scary a topic as the loss of privacy on the Internet was to many of us a decade ago, it’s clear that our computing devices are going to vanish and meld into the backdrop, like any sufficient mature technology. In fact, thinkers like Koert van Mensvoort have suggested that almost every technology eventually becomes naturalized. This will be the case with the end-state of digital experiences as direct man/machine interfaces, which have long been in the lab and is becoming increasingly sophisticated en route to the market.

Thus it won’t be long from now — as strange as it may seem today — that we can turn on the lights in our office just by thinking about it or order a product from Amazon after having an algorithm sift through the reviews for us simply by conceiving of doing so. We will reach a state of shared perception through all of our mutually connected devices and having knowledge networks consisting of our social graph, all devices, and the machine learning capabilities we trust most. In other words, collaboration with people and our machines will soon be truly frictionless.

The Fourth Platform: Ambient, Pervasive, AI-Boosted Digital Networks

All of this together: Networks of people in digital communities, pervasive sensors/controllers in nearly everything, and new types of truly frictionless interfaces will give rise to new types of ecosystems, including on-demand app creation services such as the now-famous IFTTT service. The 3rd platforms enabled enormous commercial ecosystems such as those created by Google (especially their decentralized AdWords network), Facebook, Amazon’s Cloud, Apple’s phones, iTunes and App Stores, and the list goes on. In the 4th platform, these platforms will become even more important — rightly or wrongly — and the most useful ones to us will literally become part of our mental furniture. The fourth platform is ambient computing, which strong components that turn network potential from our favorite ecosystems into data, and then data into knowledge, and make it as easy as just thinking about it. The next generation commercial ecosystems will even augment time and thought for us, even predicting what we’ll need before we figure it out ourselves.

If all of this sounds a little futuristic, it is also now all just within the realm of possibility, and so it will almost certainly happen, it’s just matter of exactly when. It also gives our organizations a clearer target to shoot for, at least if your organization considers moon shots. Because most organizations are struggling with being a digital contemporary in basic terms, much less getting ahead of the game. But there are ways of getting there, if organizations are prepared, it just takes a vision of the future to aim for.

I’ll explore more about the fourth platform soon, but would love to hear your thoughts on how networks, people, and devices are coming together to create all new possibilities for the enterprises.

Additional Reading:

The Community-based Ecosystem View of the Next-Generation Enterprise

What Most Digital Strategy Underestimates: Scale and Interconnected Change

A CIO’s Guide to the Future of Work

How IT Can Change For the Digital Era and What Leaders Can Do About It

I’ve recently come to believe that we’re at a watershed moment in technology as it’s applied to business. The aging, creaky model of centralized IT departments has been increasingly challenged by waves of internal and external competition that it’s never had to face. It started with the outsourcing wave but picked up irresistible momentum with the arrival of SaaS, the cloud, app stores, shadow IT, and BYOD/BYOA/BYOT.

The reality is that IT is struggling mightily in most organizations to keep even basic technology up-to-date, dealing with critical cybersecurity issues, closing fundamental gaps between IT services and the business, and generally not guiding their business as a whole into the digital future. It’s time to call it like it is: The legacy model of IT is largely insufficient when it comes to modern digital enablement and transformation.

As I’ve said, the CIO has a new mandate today, and that is broad digital empowerment in scale.

But I’ve come to praise IT, not to bury it, as the saying goes. I explored yesterday on ZDNet the yawning funding gap between traditional companies and digital firms, the latter who spend just over two times what the rest of us do on IT. I’ve also explored how M&A has become a compelling model for companies to acquire digital innovation, instead of doing the hard work and taking the risks in updating their core businesses with the latest technology advances and new digital business models.

Can IT get where it needs to be today? Yes, but not in its present form.

How Digital Enablement and Transformation Is Changing IT and What the CIO, CMO, CDO, and CEO can do about it

Moving Well Beyond Legacy Technology Enablement

This has all been said before, however. We need to take a hard look at where we are today, and where we can go. They say that the first thing you do when you need to fix a major problem is to admit that you have one. This then is the problem statement for traditional IT:

  • The rate and scale of external technology change now far outpaces IT investment in most companies
  • IT departments tend to be overly centralized, insular, and disconnected from the business
  • The traditional model of IT is to internally assume all the effort for digital enablement and transformation, instead of tapping into anyone who is able to help
  • Previous management solutions to “fix” slow change or innovation, such as strategic initiatives, tech incubators, “bolt-on” transformation, and Centers of Excellence, tend to recreate the problem they’re trying to solve
  • Those closest to the business often have the least role in applying technology to it
  • There is a one-size-fits-all mentality to most IT, making all parts of the business accept limited solutions
  • Once a technology solution is found, it’s rarely revisited until the imperative for change is unavoidable (and therefore late)

Whatever comes after existing IT, is going to offer a clean and consistent way to address all of these challenges, likely inherently though it’s very nature. The good news, is that I think we’re beginning to see the outlines of what that is begin to emerging from collective industry attempts at solving these challenges, going well beyond existing models of digital enablement.

Over the last few years, I’ve been involved in a number of attempts to solve these problems at an organizational level. What’s struck me, and this has been an absolutely fascinating pattern that I’ve now seen or encountered a number of times, is that the efforts that actually succeeded did something quite different: They enabled change at the edge of the organization, proactively seeking it out, and giving change agents and their champions toolkits, playbooks, and real support to drive local transformation. My explorations of the case studies at Enterprise 2.0 SUMMIT in Paris this year with social business realization programs at some of the largest in the world has only underscored this for me.

It’s time we realized that like so much with emerging technology, everyone is in the IT department. That’s not to say that everyone should have full responsibilities of traditional IT, but that digital needs are so pervasive and so extensive that we need to reverse the direction of solution develop. We must move, as John Hagel famously said, from push models of technology enablement, to pull. That’s the only scalable and sustainable way of accelerating change, deal better with uncertainly, maintain high levels of flexibility, provide a much more authentic and compelling connection between what we do as businesses and our technology, and almost completely eliminating the misalignment between business and technology.

Moving to Pull Models and Networks of Decentralized Change

As I collect case studies and permission from clients to talk about these things, you can expect me to paint a clearer picture of how digital realization in the enterprise is changing, but for now, the new model of IT that organically seems to be emerging is one of a distributed network of enablement, something that for complete lack of a better term I’ve previously called a “Network of Excellence.” I find the evidence for this model is increasingly compelling and I ask that you join me in exploring this approach, because as of right now, it’s virtually the only new model — other than bi-modal/tri-modal, which I think is important but insufficient — that seems clearly evident to me in the dozens of major IT projects or initiatives that I take a look at every year.

In other words, how leaders will create and use networks of digital enablement is the agenda for the rest of this decade. I’ve explored what leaders can do to start enabling this model this year, but we need a longer term plan based on evidence across multiple industries.

The good news: I still very much believe IT can lead this transition to a new service delivery model. But our organizations are no longer waiting. They have alternatives and choice, and they will use them.

An Urgent Industry Discussion On the Future of IT: Please Join In

I would very invite your commentary, local stories, and discussion on this topic as we look at how the role and purpose of IT is changing fundamentally as we fully enter the digital era.

Additional Reading:

Imagining the Future of the Enterprise

Businesses Have Digitized But Not Transformed

The Role of the CIO in Digital and Social Business Transformation

What Are the Required Skills for Today’s Digital Workforce?

As I spend a great deal of time every year looking at the latest technological advances for the enterprise, I’ve noticed a trend in recent years that’s long been true but is clearly markedly accelerating. That trend is that technology has officially pulled well ahead of the workplace skills of even the most proactive manager or line worker. It’s not that the digital possibilities are getting ahead of our businesses, it’s that high technology itself is proliferating so rapidly in terms of potent and truly transformative new products and services (social software, collaborative economy, wearables, 3D printing, and the whole hype cycle) that it is now very difficult today even for experts working on the subject full time to keep up.

I posited today on Twitter that we need to figure out a way to catch up or, as Andrew McAfee seriously suggests, perhaps the robots will just end up doing everything for us as they might be the only ones that can manage.

Or is there a way forward for our organizations? Are there new ways to think about our digital workplace skills that allows us to take our thinking up to a new plane, the next meta-level of thinking and working where we have much higher leverage, can manage change that is an order of magnitude or greater in volume than today, work in fundamentally better and smarter new ways — and perhaps even work a bit less — yet produce much more value?

Internal and External Digital Chang Factors Impacting the Enterprise Today

We generally recognize that have to do something to improve our digital metabolism, as I see organizations struggle mightily these days with digital change and transformation, and often not getting very far.

Thus it’s become pretty clear that one of two things is going to happen: The world will continue to pull ahead of the average workplace, as our internal rates of change are greatly exceeded by the marketplace. We will steadily become irrelevant and ineffective, eventually replaced by digital startups and better-adjusted competitors. Or we’ll find entirely new ways of improving our capabilities in a way that allows us to maintain some kind of parity with progress in the world. (Whether technology change always represents progress is a discussion for another post.)

This means we have to find a way to change our selves and our workplaces, or the market will do it for us the hard way. Disruption is what happens when something new comes along that changes the underlying rules of the game. If we are doing the disrupting, it can actually be very good for us. When it’s imposed on us, then the results usually tend to be unfortunate. So we must be doing the disrupting to ourselves, and that begins and ends with shifting our mindset and perspective, especially in deeply understanding the nature of the truly pervasive digital operating environment we now find ourselves in.

Looking at the state of the digital workplace today, which I’ve been mapping for years now, and we can see from sources of hard data about what’s happening such as Jane McConnell’s terrific surveys, that “most organizations are just starting their journey to an effective digital workplace.” That’s Jane’s quote, but my emphasis: 30 years into the personal computer and networking revolution, and most organizations are still very early in their journey and often losing ground.

What Skills will Self-Sustain Digital Workers?

To be fair to IT and HR departments around the world, the digital workplace target does move incredibly fast and is picking up speed. And there never was a finish line. Fortunately, I believe there are novel, effective and increasingly well-understood new ways for most organizations to address their current digital workplace gaps, and it’s not (just) by “giving up non-essential control”, deploying liberal BYOD/BYOT programs to cultivate employee-led change, figuring out how to do things like learn or change behavior faster, or any of the ten strategies I’ve previously recommended.

No, instead it is by giving our workers genuinely transformative new digital skills that gives them the ability to adapt, provides them with the most relevant digital tools and platforms, conveys new motivations, and fosters the know-how to re-imagine their knowledge work in brand new ways that are much more adaptable, rich, scalable, and resilient — even embracing of — the inevitable march of digital progress.

While no one can yet represent that we have a full understanding of what the key next-generation digital skills of successful organizations are — as they are largely still being discovered — there is a broad realization of the important skills we know of already. All of the skills listed below are ones I’ve either seen being used successfully by large organizations or actively piloted with some promise. These should be on your shortlist as you plan your updates to the digital workplace, as I believe each is essential for working in a much more sustainable and meaningful way in our digital age. The enlightened leaders of today will enable these skills to tap directly into the “New Power” that digital networks are conferring on organizations that are willing and able to adapt.

Related: Today’s Digital Priorities for the C-Suite

Today's Digital Workforce Skills

The Essential Next-Generation Digital Workplace Skills

Working Out Loud

Also known as Open Work or Observable Work, this is the act of lightly narrating your workstream, usually on an enterprise social network, but it can be done using any participative medium. Working out loud allows one to let the network do the work (see below) and breaks down the silos that have rebuilt up with virtual workplaces and today’s far-flung multinational teams. Perhaps most importantly however is that is the key to unleashing agility using digital networks as it automatically collects institutional knowledge and critical methods, makes onboarding new employees much easier, and frees up your knowledge to work for the organization continuously while still ensuring your contribution is recognized. Credit goes to Deutsche Bank’s John Stepper who has done much to make this key digital workplace skill so well known recently.

Digital Sense Making + Personal Knowledge Management

These skills are something we’ve seen CHROs and HR departments consider how to provide in recent years as cognitive overload has become a common workplace malady. We now have many tools, channels, apps, and devices we must use in the workplace, and they will only grow in number, probably extensively. The attention they demand is squeezing out the time to do the quality thinking and analysis that we so badly need knowledge workers to spend time on. Harold Jarche has done excellent work over the years in mapping how activities like Personal Knowledge Management (PKM) is a discipline and practice that digital workers must acquire to navigate today’s knowledge-dense workplaces. PKM provides the tools, techniques, and time for consistent yet meaningful sense making. Next-generation organizations will actively work to reduce needless activities like excessive meetings by creating required time for the strategic activities of acquisition, management, and sense-making of digital knowledge. These skills are foundational to adapting more swiftly and organically to rapidly changing operating environments.

Open Digital Collaboration

As I’ve recently explored, collaboration is becoming the most important strategic activity in organizations, even becoming a vital top-level corporate strategy and major fast-growth new business model as well. Workers today must be experts in digital collaboration techniques, know all the relevant platforms, and maintain an understanding of the current collaborative “channel catalog” at all strategic levels. This includes the team and project levels, all the way up to the very business itself and its relationship with suppliers, partners, and customers. Becoming a connected, sharing knowledge organization using digital tools in global networks has, for example, become a top priority of large organizations like Bosch, BASF, Bayer, Michelen, and many others, some of whom even use techniques to ensure knowledge and observable work are kept out in the open. Open collaboration is a core capability of digital native organizations because it is how network effects and other power laws of networks are triggered, providing the scale and (literally) exponential ability to drive rapid change.

Related: How to Deliver On A Modern Enterprise Collaboration Strategy

Network Leadership

Today’s digital leaders — whether they are senior executives, managers, team leads, or line workers — must be able to wield influence and guide others over digital channels. Digital networks provide uniquely powerful platforms for self-expression that leaders can use to enlist others in common objectives, gain inputs from colleagues and especially weak ties, change minds, and drive collective action towards outcomes. In the industrial age, leadership was wielded through physical presence and (largely) one-way communication through traditional media. Today’s leaders must deal with networks that can and will engage back, and they must be effective at leadership through two-way dialogue, consensus building, and thought leadership. Showing the importance of this subject in leadership circles, the highly respected Executive Board has an excellent white paper on the Rise of Network Leadership that explores skills that must be developed in our workforce today.

Radical Transparency

In today’s digital world, rightly or wrongly, privacy is rapidly eroding and is now sometimes gone altogether. Forward-thinking organizations are going to take advantage of the change to build more scalable and sustaining trust, stronger relationships with their workforces, communities, and customers, and get the right information from where it is to where it needs to be. We’ve learned that any entity where people believe secrets that affect them are being kept is rightly regarded with considerable skepticism and growing cynicism. Edelman’s yearly Trust Barometer, whose results have been tracking the plummeting levels of trust worldwide in the last few years shows that the rules have changed. It’s often said that sunlight is the best disinfectant, and the proof in new ways of working has been the consistent positive results that more open and better networked organizations receive. Achieving this level of openness, however, will be one of the most challenging yet vital changes for most organizations to make: Creating a culture of sharing and near total transparency that drives much better decision making, faster feedback loops, stronger relationships, less searching for information, less customer and workforce frustration, and yes, especially more employee engagement.

Digital DIY Know-How

Maker culture, which can be quickly sampled in its current state by a quick browse through the thousands of active projects on Kickstarter, is an offshoot of the Do-It-Yourself movement, a trend towards finding ‘hacks’ that improve something by wielding simple but often unexpected solutions. While I believe this skill is not necessarily natural and amenable to every worker, hacking our workplace has become a common concept, often used to get around workplace barriers or antiquated ways of working without violating rules or policy. More recently, deliberately creating a hacker culture or business has been seen in the rise of hackathons and employee product startups/incubators, and other employee-led change processes. Encouraging digital DIY skills means tapping into a widespread but latent capability for change, improvement, and entrepreneurial spirit. Note: I’ll be exploring this topic more at my Ignite talk at IBM InterConnect next month in Las Vegas, on my session on digital leadership techniques. I’ll post the link to the slides here afterwards.

Letting the Network Do the Work

Perhaps the most truly disruptive of all the skills I’ve listed here, this refers to the technique for using the scale and asymmetric resources on the network (local, enterprise-wide, or preferably, global) to accomplish often otherwise impossible tasks. I’ve explored this strategic technique at length before as well as captured some amazing case studies in efforts like Fold.It. While some of the above techniques will naturally trigger this outcome (Working Out Loud most notably), the best results in my examinations of dozens of case studies comes when it is designed as an architecture of participation.

Are there other skills that should be here? Almost certainly. But as with all change today, so many parallel tracks often form that there simply must be a hierarchy, what’s most important, what’s next, and so on. I will collect and publish our updated view of all major digital workplace skills later this year, but I believe the ones above are at or near the top of the hierarchy and will genuinely enable rapid, transformative change in organizations. Visionary organizations that intend to survive and thrive in the near future will work on developing these skills and creating a workplace where they can be used to their fullest.

I would also like this to be the launching point for a more meaningful collective discussion of what we really need to do to modernize our workplaces for today’s operating environment. Please leave your comments below or better yet, write something that adds to this. Let’s work out loud and let the network do the work.

Additional Reading:

What is the Future of Work

Rethinking Work in the Collaborative Era

The Strategic Value of Social Business: What We’ve Learned

Recently, I had the need to gather our latest research from research, clients, and case studies on the established performance of social business for the Future of Work master class I delivered in Paris at Enterprise 2.0 SUMMIT 2015 this week.

The intent was to answer this question: What specifically is the business value in social-based ways of working today and tomorrow?

By this, I largely mean the design and deployment of enterprise social networks to create better business outcomes. The typical range of benefits can be ascribed to the effective use of newer types of situated collaboration tools that have a social layer, especially digital workplace environments that:

a) make the information that’s shared public by default and;

b) leave a permanent record of collaboration that is open to everyone for learning, analysis, and reuse.

These two attributes remain the critical difference between older generations of collaboration and communication tools in terms of providing differentiating results. While point-to-point collaboration methods have utility, they simply don’t have the strategic, long-term benefits of social-based approaches.

From this survey, I determined we can put the results into three primary classes of benefits:

Tactical improvements to existing ways of working

It’s clear from looking at the meta-studies of all recent measures of performance benefits to improving existing business processes by working through social network that significant results are to be had. Last year I assembled our latest such synthesis of results. It confirmed the consistent low double-digit business-wide returns that are likely if you employ the capabilities in the way that employees broadly work. These fall into a variety of categories that are both qualitative and quantitative: Finding needed information faster, lowering operational expenditures, higher customer satisfaction/retention, increased productivity, more successful innovation, and reduced travel/communications costs.

Strategic Benefits of Strategic Workforce Collaboration

It should be noted that while these improvements are typically in the lower double-digits — and can often form the core business case of an social business initiatives on its own — they are incremental and don’t describe the fundamental digital transformation of the enterprise. Though I noted here at Enterprise 2.0 SUMMIT this week that they can provide the entry point for such large-scale changes, these are the in-place improvements of existing processes that you get initially from getting the workforce connected better and sharing information more frequently and with less friction.

Supporting tacit interactions: Complex, highly variable problem solving

The next major areas where social tools provide strategic value is by aiming them at the last significant area where existing aids have left little mark. This is the area of knowledge work where the work is far from routine, consists of highly creative and/or analytic problem solving, is highly variable, may change its fundamental nature frequently, and is what today’s highest leverage workers adapt to and engage in to get their jobs done.

Tacit Interactions: Last Bastion of Productivity Improvements for Social Business

Historically, important economic activities such as farming (which was largely replaced by machines), and mental labor like accounting (again replaced by computers and spreadsheets) were supplanted by tools that had more capacity and far lessor cost. While today is increasingly the concern that everything humans will do might be replaced by robots, for this category of social business improvements, we’re largely referring to aids to humans for complex collaborative team work, and have long-resisted attempts at automation.

With today’s workplace AI tools, increasingly good access to a rich tapestry of contextual business data from employees working out loud, and situated solutions like decision aids or IBM’s Watson, today’s most valuable group of workers actually has a chance to significant improve the most strategic and high-impact 40% of work currently taking place.

Re-imagining institutional practices: Fundamentally rethinking business

The last category of benefits comes when companies have largely succeeded in networking their workers, often 3-5 years after their initial social networking efforts. Once an organization has a strong social foundation and workers generally are using the new platforms — in particularly understanding and using the powerful capabilities inherent in their design — then organizations are ready to begin the real work of digital transformation, at least internally (though it of course, has many external implications as well.)

Rethinking Institutional Practices with Social Buiness

This can mean everything from opening up forecasting and budgeting to be more participative and transparent to building collaborative communities for customer care between customers and the workforce, or even (or perhaps especially) just between customers. Whatever it means, it means taking a brand new look at the possibilities in terms of what networked ways of working makes possible, especially letting the network do the work, for example. The key here is that this third class of benefits is a highly strategic activity that doesn’t merely improve existing processes but rethinks them for the possibilities of the network era. Engaging in this activity at some point is critical for pushing the organization into the future, making it sustainable, and should be structured as a capability that is more or less continuous within the organization as digital change continues to unfold.

The business case for digital progress

I am asked frequently about being able to paint a clear picture of why there is an imperative for organizations to essentially disrupt what they’re already doing today, even though more or less successfully, and invest in new ways of working. I believe this framework is a good start in articulating this.

Using this lens, these three categories offer an increasingly strategic planes of improvement that companies can understand as they proceed through the journey of becoming a true digital/social business. This should provide a useful map that understand how to map value to the maturity of the journey that your organization has undergone thus far.

Additional Reading

Digital Priorities for the C-Suite in 2015

The Role of the CIO in Digital and Social Business Transformation

How Leaders Can Address the Challenges of Digital Transformation

How Leaders Can Address the Challenges of Digital Transformation

2015 marks ten years in which I’ve been working in the trenches with organizations at a leadership level to drive some form of major change that intertwines technology, networks, and people. Back in the early days it consisted mostly of the novel and heady topics of the Web 2.0 revolution. As things matured and the ideas were adapted to the corporate world, the discussion moved on to Enterprise 2.0 and finally became the social business movement.

These days it’s about the whole package: Pervasive digital transformation of everything that deeply involves our organizations’ products, services, engagement approach with employees, partners, and customers, entirely new business models, profoundly powerful new ways of managing, working, and even how to think about the purpose and methods of business itself.

It’s a very exciting time in business, almost certainly the most exciting as the proverbial curse goes. In fact, it’s pretty safe to say there is more potential and opportunity in business than there has been in history. But over those ten years I’ve also seen far too many organizations struggle deeply as they grapple with how best to adapt today’s incredible advances to the way they work and do business.

In this view I am not alone: The Harvard Business Review recently noted that transformation success rates still hover around 30% today.

Related: Designing the New Enterprise: Issues and Strategies

Collaboration Between CEO, CIO, CMO, COO, CDO, CHRO Essential for Digital and Social Business Transformation

For years, it’s been difficult to discern why organizations are having so much trouble doing something different. We used to say it’s about aging corporate DNA, and how hard it is to make it digital. Or there’s simply too much change, and we have to design for constant change. Or our bureaucracies and hierarchies are too inflexible and we should augment, or even replace them outright, with self-organizing networks on top of networks. Often we’ve said that our culture is wrong for the digital age, and we have to change it. There have been many other diagnoses.

I’d note here that most of these points of view are actually correct and must be addressed, but they aren’t the largest obstacle, even when dealt with. Instead, these days I’m increasingly sure the root issue is actually the way organizations apportion leadership and responsibility for digital change.

In recent years, as the imperative became obvious to even the casual observer (see Constellation Research’s latest CXO priorities survey), I’ve seen digital change land squarely into the lap of the top leaders in the C-Suite. Now, I thought, we’re going to see some changes, even though anecdotally, most of the major successes I’ve seen — and there are quite a few we can point to now — have often been unceasing struggles against entrenched powers, against nay-sayers, the skeptical, the beholden to the status quo, and holders of turf and fiefdoms who all feel impacted negatively (they believe) by the major changes that now simply must happen in most organizations.

Related: Going Beyond ‘Bolt-On’ Digital Transformation

Digital Transformation Fragmented by Top-Level Responsibilities

So what’s the real obstacle? As digital/social transformation has arrived at the C-Suite and the board level in 2015, we see the following dysfunction, as change — and who is responsible for it — has remained fragmented all the way up to the C-level. The issue in a nutshell is in fact lies within those very CXO purviews, which in most organizations — though yes, not all — usually badly distort the process of digital change. This goes well beyond the much-discussed CIO/CMO tug-of-war being debated today:

  • Today’s CIO is in charge of developing the connected infrastructure for things like social business, digital workplace, digital business, etc., but not the human component.
  • The CMO is in charge of connecting with customers via all available channels, but through vast digital infrastructure they largely do not create or own.
  • The CHRO is in charge of employee engagement as well as approaches for recruiting, hiring, and performance management, but not the technology or non-employees.
  • And the COO is in charge of getting results (efficiency, performance) from employees for the business.

This provincial focus on a certain domain or audience, even though they are now all connected, is making it very difficult to say who is in charge of digital transition in the enterprise. Even in the C-suite, no one has responsibility for the whole process, namely the technology and its connected constituents. And so digital change happens in fragments and pieces that don’t fit, which are primarily inward-only, outward-only, employee-only, tech-only, or business-only. That, as we’ve now seen for years, does not really work. Digital and social, and I keep them separate as concepts for a reason as social has always been possible without the digital, are part of a single continuum and so they must be addressed that way as an organization.

Examples of this abound: I can’t tell you how many times I’ve come into an organization and found two separate social business initiatives (one inward facing and one outward), or HR trying to deal with employee engagement in isolation from the technology, when we now know they’re deeply intertwined, or the COO focusing too much on the business activities at hand instead of the digital context and technology advancement of the company, which will dramatically improve said activities.

So, what’s the solution here? There are a number of them actually, pushing out well-beyond approaches like bi-modal IT, and we’re beginning to see evidence of what they are. But at the root of every major success story seems to be the effective working together of the C-Suite to holistically drive change in a more coordinated and integrated fashion. Rates of change across an organization will always vary, and simply must in order to manage dependencies, risk, and resource availability, so I’m not suggesting holistic change is necessarily big bang. No, it seems more agile than that and I mean that in the formal way of pods of teams coming together and using iterative approaches with fast feedback loops. Meaningful digital change in scale occurs as leadership defines the transformations that need to happen, supports them across C-suite boundaries, and empowers the organization more broadly, in an emergent architecture-style fashion which has been seen to work.

New Models Emerging to Drive Strategic Digital Change

Again, I’m not talking about management science astronautics here, I am suggesting this is what we are actually seeing happen. I believe the case studies and success stories we’re encountering now bear this view out: Digital change is a board level process that succeeds most effectively when the C-suite works together closely, pools resources, mutually reinforces each other, and drives change consistently through a well-defined (yet agile) process that also — and this is key — drives widespread empowerment on the ground across the organization.

Recently I’ve suggested the increasingly popular center of excellence (CoE) model is evolving in response to this into something we are now calling the network of excellence. I have sought to capture examples of this and I will explore it in much more detail soon, but it makes sense that organizations are finally hitting upon new network-enabled models to drive digital change and transformation.

So, while I frequently point out that the hard data says the technology change is relentless destroying companies today, I am at the same time heartened by the fact that organizations are at long last adjusting their digital priorities this year to deal with these obstacles. (For specific examples, see Schneider Electric and Houghton-Mifflin-Harcourt as partial evidence of this.)

In coming weeks I’ll post our case studies and frame-up of the new models companies are adopting to drive effective transformation in the emerging digital enterprise. Please contact me if you’d like to have yours included in this work.

Additional Reading:

Defining the Next-Generation Enterprise

The Digital Diaspora in the Enterprise: The Arrival of the Chief Digital Officer

Rethinking How We Transform Our Organizations for the Future

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