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In my last blog post, I suggested that we're going through a big shift in strategy from strategies of terrain to strategies of trajectory. In that blog post, I made the case that strategies of terrain are increasingly dangerous in times of accelerating change, but I left you hanging in terms of what strategies of trajectory might look like.
Most strategies (strategies of terrain) tend to look from the present out to the future. Strategies of trajectory start with a view of the future and work back to the implications for action in the present.
Here's the paradox: strategies of trajectory become more and more essential in times of rapid change and uncertainty, while at the same time becoming more and more difficult. But that's exactly what makes strategies of trajectory so valuable. Most of us tend to fall back into our comfort zone and just focus on the present, leaving us vulnerable to the changes just ahead. Only a few will venture beyond their comfort zone. Those few who craft strategies to focus action today based on an anticipated future that's quite different from today will be in the best position to reap the rewards of a rapidly changing environment. They will stand out from the rest of us who are scrambling to respond to the latest event and, in the process, spreading our limited time and resources more and more thinly.
So, what's required to craft these strategies of trajectory? Five elements can help to make these strategies successful:
In a world of accelerating change, one of our greatest imperatives is to "unlearn" - to challenge and ultimately abandon some of our most basic beliefs about how the world works and what is required for success. But, how do we challenge ourselves when these beliefs are often so deeply held that they are often never even articulated, much less questioned?
I'm a proponent of scenario development as a tool to identify, assess and ultimately achieve alignment around potential futures. One of the great elements of scenario development is that it explicitly starts with the proposition of alternative futures. That in itself helps to pull us out of our comfort zones and challenges our preconceptions about where the future is headed. But, from my experience, this needs to be combined with two other elements to really challenge our most deeply held beliefs about the world around us and about the actions that will lead to success.
First, we need to find people who are deeply creative but from very different domains. Give them a deep dive into our current business and market arenas and then ask them to participate in the scenario development exercise with the specific task of imagining some potential futures that could disrupt our company's business. It's important that the scenario development includes people who will challenge the thinking of the leadership team.
Second, integrate the scenario development process with another key question: given the most likely future, what are the two or three business initiatives that we could take in the next 6 – 12 months that would have the greatest impact in accelerating our movement towards the kind of company we need to be successful in that future – and do these initiatives have a critical mass of resources and funding today?
One of the common traps of scenario exercises is that it's often easy to get senior leadership to sit around a table and nod in agreement to a likely scenario when it is viewed as a theoretical construct with no implications for what one would do differently today. By adding the question about near-term initiatives, it makes clear that this scenario will have significant near-term implications. In my experience, this surfaces all kinds of disagreements that would have been shoved under the rug if the participants believe it will make no real difference to what they do tomorrow. For more exploration of this FAST strategy approach, click here.
Strategies of trajectory can only succeed if the participants are aligned around a shared view of the future. In an exponentially changing world, that future is likely to be quite different from the present. The challenge is to ensure that the participants have escaped from the prison of the present and have a view of the future that is likely given the forces at work on the global business landscape. The good news is that view of the future doesn't need to be (and, in fact, shouldn't be) a detailed blueprint. It should be a high level view of key elements that can help us to focus and make difficult choices today.
Here's another potential problem with scenario exercises. They tend to put us into a passive mindset – we can assign probabilities regarding alternative futures but, at the end of the day, we're put into the position of analysts on the sideline, simply trying to assess how the future will play out.
What about the opportunity to materially alter the probabilities regarding potential future outcomes? Rather than just focusing on which future is most probable, ask which future is most attractive to the company in terms of positioning it to capture a disproportionate share of economic value. Then ask what actions the company might take to increase the likelihood of that future and to ensure that it is positioned in the most attractive part of the market.
In times of rapid change and growing uncertainty, we actually have far more degrees of freedom to restructure entire markets and industries than in more stable times. Yet, senior executives often fall into a passive, reactive posture in these kinds of environments, rather than exploring how they might proactively shape the future. Shaping strategies are classic strategies of trajectory – they begin by defining a desired market or industry structure and then focus on mobilizing third parties to invest to support the shaping strategy.
I've written extensively about the opportunity to pursue a shaping strategy and the three key elements that are key for the success of these strategies, including a Harvard Business Review article summarized here.
These shaping strategies are particularly powerful because they're highly leveraged on two levels – they mobilize the resources of a large and growing number of participants and they create a rich opportunity for distributed innovation so that everyone learns faster as more participants join.
People tend to magnify risk and discount reward when faced with rapid change and high uncertainty, prompting them to delay action or, at best, to make very modest and tentative moves. Successful strategies of trajectory need to find ways to motivate people to overcome risk averseness and to take bolder action.
Scenarios can be helpful in this regard, but they're unlikely to be sufficient. Scenario planners tend to emphasize the value of framing scenarios as stories that can emotionally engage participants. I would take it one step further. There's an opportunity to craft a powerful narrative, one that highlights a compelling opportunity out in the future and that provides a call to action for others to help achieve that opportunity. (For those who aren't familiar with the key distinctions that I make between story and narrative, check them out here).
Narratives are tailor-made for strategies of trajectory. They focus on defining a future opportunity and then work back to the present by making clear what choices and actions today will help to achieve that longer-term opportunity. Some of these choices and actions are clearly specified, but most are left open to the people we're trying to reach so that they have room to experiment, improvise and innovate in terms of approaches to achieving that longer-term opportunity.
These narratives become particularly powerful if they're framed as an opportunity for many others beyond an individual company. They can become a significant source of leverage by motivating others to invest to support and amplify the efforts of a single company.
As the name suggests, strategies of trajectory are ultimately about measuring movement in a particular direction. Any strategy of trajectory must therefore be explicit about the metrics that will indicate whether we're on track to establishing the desired position in the future.
Two important points about metrics. First, resist the temptation to focus on financial metrics. These are lagging indicators telling us how we have done. Wherever possible, identify operating metrics that are effective leading indicators of the kind of performance you are seeking to achieve. And focus on operating metrics that are specific to the desired position in the future even if these operating metrics are marginal to your current business performance. For example, if your strategy is to become a "trusted advisor" to customers in a particular domain, focus on the number of proactive recommendations you provide to relevant customers and the response rate of these customers.
Here's the second point. Forget about performance snapshots that focus on your performance at any specific point in time. Strategies of trajectory focus on acceleration – they're about performance over time. Is your performance stable, increasing linearly or accelerating? If it's not accelerating in an exponential world, something is wrong. So, strategies of trajectory are relentlessly focused on patterns of movement over time.
In a time of accelerating change, learning is essential to success. Whatever we know today is depreciating in value at an increasing rate. Strategies of trajectory are ultimately about how to accelerate learning at scale. In fact, the four elements explored above each contain a strong learning component.
No matter how fast things are moving, there's a paradox: the more time we take to reflect on our experiences, the faster we'll be able to move. But this only works if we have a destination in mind. Without a destination in mind, we will surely learn from our experiences but the learning will be random. If we have an idea of where we're headed, then we can profit much more from reflecting on our near-term initiatives and assessing how effective they are in accelerating our movement towards our destination.
And, by the way, we'll also learn a lot more about the destination we're striving to reach. Part of the learning process is to continually step back and ask how we might refine our view of the destination to help us make even more progress. That's the power of the "zoom in, zoom out" approach in the FAST strategies discussed earlier – we're constantly striving to learn more about the nature of the destination and about the approaches that will accelerate our progress. The key is to carve out the time to reflect on what can be learned from the progress (or lack of it) that we've achieved and to adjust our actions accordingly.
Bottom line
Forget about the path in front of you, no matter how familiar or well paved it might be. First, figure out where you want to be, then craft the path that will be most likely to get you there quickly. The terrain around you today is important, but only to the extent that it provides resources to support you in the journey to the terrain that's already taking shape under the surface.
If you're not continuously operating on two horizons simultaneously – a five-ten year horizon and a six-twelve month horizon – and rapidly iterating back and forth between these two horizons, you'll quickly get sidelined. But just remember, there's a very big upside: in an exponential world, small moves, smartly made, can set very big things in motion.
Some additional resources
In my quest to craft strategies of trajectory, I've been influenced by the following books, many of them ironically written over a decade ago:
Hugh Courtney, 20/20 Foresight
Gary Hamel and C. K. Prahalad, Competing for the Future
Bob Johansen, Get There Early
Peter Schwartz, The Art of the Long View
In an exponential world, it stands to reason that our traditional, linear approaches to strategy will need to be re-thought from the ground up. One way to characterize the big shift in strategy is that we are moving from strategies shaped by terrain to strategies shaped by trajectory. What do I mean by this?
Strategies of terrain
If you think about traditional approaches to strategy, they were profoundly shaped by the current landscape. The job of the strategist was to look across the surrounding terrain from the vantage point of the company and determine what were the most favorable positions to occupy – where could the company build positions of sustainable competitive advantage? Sure, there was a dynamic component to the strategy – your actions could alter the landscape and any good strategist would need to anticipate the likely actions of existing competitors and potential new entrants. But the starting point was always your current position and the current landscape surrounding your existing position.
But as the world changed, so did strategy. As the terrain become more unstable, evolving at a faster and faster rate with increasing uncertainty as to potential outcomes, the horizon of the strategist began to shrink in two ways. First, strategists shifted from a view of the external terrain to a view of the internal terrain. Rather than looking at the structure of markets or industries, the strategist began to focus on "core competencies." Strategists started to look inward, at the terrain within the company, in a systematic effort to identify the existing capabilities that were world-class and focus on approaches to strengthen those core competencies even more.
In parallel, there was a move to strategy as "hustle". Since the external terrain was evolving more and more rapidly with increasing uncertainty about outcomes, this school of strategy argued that those who could sense and respond most quickly to the near-term events would be the ultimate winners. The only terrain that mattered was the terrain immediately surrounding the company and the relevant time frame was today, not tomorrow.
But here's the problem. In a world that's more rapidly changing, there's a significant risk involved in focusing on a narrowing terrain today. The core competency approach can be easily blind-sided if it turns out that the capabilities that are creating great economic value today suddenly become obsolete. We may be focusing on making better and better buggy whips while missing the fact that the market is shifting from horse drawn carriages to cars.
The hustle approach has a different problem. First, it runs the risk of spreading the resources of the company way too thinly across too many fronts as the company races to respond to all incoming actions without any ability to prioritize which of these events are really enduring versus one-off distractions. Second, day to day hustling as a hard time dealing with fundamental disruptions that require more than an incremental, short-term response. If we are moving from horse drawn carriages to cars, we may need to respond with more than hustle.
I would suggest that our efforts to evolve terrain-based strategies to cope with an exponential world are yielding rapidly diminishing returns. If you want evidence of this, check out our analysis of the collapse of return on assets for all public companies in the US since 1965.
Strategies of trajectory
What we need to do at this point is to step back and reassess at a more basic level our approach to strategy. Rather than focusing on terrain, however narrowly or broadly defined, perhaps we should shift our attention to trajectory.
Here's the paradox. At precisely the time that change is accelerating and uncertainty increasing, we need more than ever to have a clear view of the trajectory of change and how it will reshape the business landscape in the decades ahead. We also need to assess carefully what degrees of freedom we might have in shaping these outcomes through our actions, rather than simply taking them as a given. We then need to develop strategies that will put our companies on a trajectory to compete more effectively on a rapidly changing terrain.
Rather than looking from the present out to the future, we need to look from the future back to the present to determine which actions will have the greatest impact and create the most economic value over time. As Yogi Berra famously observed, "You've got to be very careful if you don't know where you're going, because you might not get there." The winners in a more intensely competitive world will be those who know where they are going and accelerate their movement in the most promising direction.
Position in the future, not the present
As I indicated in a couple of earlier blog posts here and here, strategies of position still matter, but I didn't sufficiently emphasize that these new strategies need to focus on the most attractive and advantaged positions in future landscapes, not the current landscape. If we just focus on position in the current landscape, we risk being blindsided as the landscape rapidly evolves into something quite different. What looks like solid high ground today can quickly become quicksand, dragging us under.
Perhaps even more importantly, the most advantaged locations in the future landscape often are not even part of today's landscape and they will tend to emerge and be shaped by significant economies of scale and network effects that will play out very quickly once critical mass has been achieved. Playing a wait and see game in the hope that things will become clearer over time can be very dangerous. By the time you see what's happening, it may be too late to do anything about it. Fast followers in an exponential world will increasingly find that they are on a path to the grave.
Anticipating the future
But I can already hear the pushback. "John, the future's just too uncertain. We can't possibly know what the landscape is going to look like a decade from now." There's no question that there's a lot of uncertainty, but part of the problem when we shrink our time horizons is that we get more and more buffeted about by surface events and lose our ability to distinguish what is lasting versus momentary change. As a result, the more we shrink our time horizons, the more uncertain the world looks. It's easy to get overwhelmed and fall into a vicious cycle where the more we shrink our time horizons, the more uncertain the world looks and then we shrink our time horizons even more.
It helps to know that we don't need a detailed blueprint of that future landscape – all we need is enough detail to give us a sense of direction and to help us make some difficult choices in the near-term. In fact, by moving away from a perceived need for a detailed blueprint and focusing instead on the broad outlines of the future, we now have greater incentive to identify and understand the fundamental forces that are shaping the business landscape, rather than getting lost in the details. This greatly simplifies our task since the long-term forces shaping the business landscape are more predictable in terms of their broad direction than the swirling surface events that emerge unpredictably and just as quickly disappear.
So, what are the winning strategies of trajectory to replace the strategies of terrain that are getting us into more and more trouble? I'm afraid I'll have to leave that to my next post because this one is already reaching a length that will prove challenging for those of you who are struggling to keep up with the surface events that are competing for our attention on a daily basis. I assure you, there is more to come so be sure to carve out the time to explore this with me.
On Labor Day, I posted about movements and the foundations for successful movements. Many of the executives that I work with me gave me quizzical looks. They asked, "Why are you writing about movements? You're a business consultant. What does this have to do with business?"
Good questions. Let me see if I can offer some answers.
Movements and companies – what's the intersection between these two? Sure, there are movements against companies – we all can name dozens of boycotts against specific companies for a variety of reasons, ranging from unfair labor practices to the politics of the countries they're from. Even the labor movement that gave rise to Labor Day was at one level a movement against companies. But, what about companies that are catalysts and drivers of movements of their own? How many of those can you name?
There's something unnatural about the question. Companies aren't movements and movements aren't companies. We all know that.
I want to suggest something a bit heretical. Maybe it's time to call for a new set of movements – this time initiated by companies, but engaging large segments of the population in a collaborative quest to discover new ways to create value in an increasingly challenging economy.
Before I develop the reasoning for this, let me step back and quickly re-cap the definition of movement that I offered in my earlier blog posting. I suggested that a movement is "an organized effort mobilizing a large number of independent participants in a grassroots effort to pursue a broad agenda for change."
The Big Shift
So, again, what does this have to do with companies? As I've written elsewhere, we're in the early stages of a Big Shift that profoundly changes how we do business. We're only beginning to understand the new practices and institutional arrangements that will lead to success in this Big Shift. But one thing we know for sure: the new practices and institutional arrangements will require significant movement from where companies are today. (If you doubt this, see the significant long-term erosion in ROA for all U.S. public companies since 1965).
Now, companies can undertake this journey in isolation or they can invite others to join them in a movement of mutual discovery. If we try to make this journey in isolation, it will be a lot more challenging. No matter how smart we are in any single firm, we'll likely be a lot more successful if we enlist the help of others outside our firms and motivate them to make the journey with us.
This is especially true if, as we've suggested in the past, one key dimension of the journey is the shift from an institutional rationale of scalable efficiency to one of scalable learning. It's not surprising that companies and movements were viewed as so different in the past. Scalable efficiency fostered a quest to bring activities inside the four walls of an enterprise and to organize them as efficiently as possible. If outsiders were needed for anything (and inevitably they were, since no firm is completely self-sufficient) the focus was on reducing the number of participants from the outside and carefully dictating their activities to enhance efficiency.
Scalable learning changes all that. If we're seriously committed to learning at scale, we're inexorably pulled beyond the four walls of our enterprise and drawn to connect with an expanding array of other participants who can help us to learn faster. In other words, we're drawn to join, or organize, movements.
It may not be an exaggeration to say that movement of this magnitude requires a movement to significantly increase the odds of success. But, here's the problem. Most companies don't yet see the need for help (except, of course, for the ever generous subsidies from our government) and the few who see the need for help would be loath to admit it publicly.
But that's just the point. The few companies who see the need for help and are willing to be vulnerable and express that need just might differentiate themselves in a powerful way from their struggling colleagues. And they might find that they pull together a growing number of people and institutions who can be extremely helpful in exploring new pathways towards much more powerful value creation.
Movements shaped by companies
So, what would such a movement look like? Well, we're not talking about the conventional "corporate social responsibility" movement that's driven by some noble purpose above and beyond the company. We're talking about the future of the company – re-inventing its core rationale so that it can turn the mounting pressure of the Big Shift into growing success.
But, it can't just be about the company itself. One way of thinking about the Big Shift is that it's a movement from an era when individuals had to find ways to fit into the pre-determined slots established by our institutions to one where our institutions will need to find ways to organize around individuals. In this respect, movements are just a natural extension of this new reality – and companies will need to find ways to spawn and participate in movements.
It's about identifying an opportunity for the company and others to come together to create something of much greater value than the company ever could on its own. And, it's about finding a common purpose that can motivate and mobilize many others beyond the company to participate in a shared quest. It's ultimately about creating an environment for scalable learning where all participants can learn faster and achieve more of what is valuable to them.
What would we need to do that? Well, as I suggested in my earlier post, successful movements of any type are built on two key foundations: (1) a powerful and engaging narrative and (2) a creation space that focuses on accelerating the learning of a growing number of small groups committed to making a growing difference in their arenas of action.
The role of narrative
Just to re-cap, I drew a sharp distinction between stories and narratives. I suggested that stories are self-contained (they have a beginning, middle and resolution) and they're about the story teller or some other people, they're not about the listener. In contrast, narratives are open-ended, they are yet to be resolved and their resolution depends upon the choices and actions of the listener. As a result, they're a powerful call to action, emphasizing the ability that we all have to make a difference.
Now, here's the problem. As I discussed here, here and here, very few companies have anything resembling a narrative. At best, they have an open-ended story about how they had humble beginnings, faced enormous obstacles and achieved extraordinary things, with much more to come. It's still a story about them – the only thing that people outside the company are supposed to do is stand back in awe and await the accomplishments ahead. It's certainly not a call to action, except perhaps to buy more of the company's products.
An effective corporate narrative would identify an opportunity that's beyond the reach of a company today, an opportunity not just for the company, but for many, many others. An opportunity so great that it can't be achieved in isolation but requires collective action. It would move others to join forces and take action in powerful new ways. What would such an opportunity look like?
Well, in the context of the Big Shift, such a narrative might focus on harnessing the exponential opportunities made possible by the forces driving the Big Shift. Depending on the market or industry, it could be the opportunity to generate unprecedented economic value and wealth, the opportunity to achieve levels of wellness and longevity that were previously unimaginable, the opportunity to discover and express one's unique individuality and expand impact by connecting with others, or the opportunity to nurture our children so that they can achieve previously unimaginable levels of impact. These are just some of the possible opportunities that a narrative might focus.
The role of creation spaces
But articulating an opportunity is only a first step. A movement requires action and creation spaces are powerful ways to amplify action. As I discussed in more detail in my earlier post on movements, creation spaces help to organize activities in ways that accelerate learning. The basic organizational unit of a creation space is a small group of people. These people come together and collaborate in ways that help them individually and collectively to achieve higher levels of impact. Through this collaboration, they form deep trust-based relationships within their group because they're sharing their vulnerabilities in a quest to learn from each other. The real power of a creation space is that it creates an environment that can scale in ways that help the small groups to learn even faster by connecting with each other.
Companies can play a powerful role in catalyzing, nurturing and scaling these creation spaces. The key here is to move beyond organizing communities of interest (something that I wrote about extensively in Net Gain) and focus on organizing communities of action. Note also that these creation spaces are quite different from conventional crowdsourcing efforts that are usually focused on narrowly defined tasks or problems. In creation spaces, the opportunity is open-ended and invites the sustained collaboration of large numbers of individuals coming together in small groups that form deep, trust-based relationships as they experiment and improvise approaches to expand their impact.
The benefits of movements
But, what's in all this for companies? As I mentioned earlier, the Big Shift is requiring all companies to pursue models of scalable learning that extend far beyond their own four walls. Movements shaped by narratives and creation spaces can become powerful engines of scalable learning. By mobilizing a large number of third parties, movements create rich environments to accomplish the following:
Bottom line
The Big Shift can't be addressed in isolation. To make the transition from mounting performance pressure to exponential opportunity, institutions will need to catalyze broader movements, pulling in more and more participants over time to pursue a shared opportunity. If done right, small moves smartly made can set very big things in motion.
To get started, companies should focus on five questions:
What better day than Labor Day in the US to explore movements and narratives? Labor Day emerged directly from the powerful labor movement in the US. Throughout history, we've had a lot of movements that have shaped our economic, social and political arenas.
I believe we're on the cusp of a new wave of movements. These new movements will be built on two solid pillars – compelling narratives and nurturing creation spaces. In this post, I'll explore the role that both of these pillars play in generating movements that can make a difference. Narratives help to provide motivation and focus while creation spaces help to harness scalable learning.
What is a movement?
Here we run into the inevitable challenge of semantics – movement, like many words in our language, is used very loosely and can mean many things. One dictionary defines a movement as "an organized effort to promote or attain an end." This suggests two key elements: intentionality and organization. There must be an intent or goal that provides the rationale for a movement to exist and there must be some degree of organization to help focus collaborative effort to achieve that intent or goal.
But, like many definitions, this one has limitations. For example, by this definition, all corporations would have to be considered movements – they're all working to promote an end, whether it be shareholder value increase or enhancing the delight of the customers they're seeking to address.
So, let's modify the definition a bit to capture the kind of movement I have in mind: "an organized effort mobilizing a large number of independent participants in a grassroots effort to pursue a broad agenda for change." That certainly encompasses the labor movement that gave rise to Labor Day, as well as such well-known movements as the evangelical movement, the Civil Rights movement, the anti-Vietnam War movement, the women's movement and the Tea Party movement.
The rise and fall of movements in the US
It's interesting that movements were once central to American history, but they seem to have been marginalized in recent years. At least, that's the implication of Google's NGram analysis which shows that the usage of the term in books increased by almost 15 fold in a steady rise between 1800 and 1973, when it peaked, and then began a long and sustained decline of 25% over the past four decades.
What happened? Perhaps it's a reflection of the passivity that our mass market society has instilled in us. When there's mounting pressure to make a living and so much to see and experience outside of work, who has time to focus on a sustained program of change? And besides, it's all futile any way. Hipster cynicism suggests it's all a waste of time - far better to savor the kale salad and that interesting new Chardonnay. If it's something short and sweet, like dumping an ice bucket on our head or posting a pledge on Facebook, sure, we might be lured into doing that, but just don't expect any sustained effort.
Here's the paradox – movements become more and more feasible given rapidly improving technology infrastructures that can help us to connect with each other and collaborate in rich ways across great distances. Yet, it's exactly at this time that movements seem to be either receding or floundering.
Time for a change
Maybe, just maybe, it's time to revive the term and explore opportunities to bring a growing number of us together to drive meaningful change. We just might tap into that growing dissatisfaction on the edge of society with the passive consumerism and celebrity voyeurism that has defined our culture in recent decades.
Pockets of people are beginning to say "Basta!" and wanting to become more active "makers" of the products and experiences that shape their lives. Others are challenging the "wisdom" that one should go to work to earn a paycheck and save whatever passion they might have for after-hours hobbies or friends.
What would we need to see a resurgence of movements? Two things will need to come together and, when they do, they'll provide a powerful antidote to the passivity and cynicism that dominates much of our lives today. Those two things are: narratives and creation spaces. I've written a lot in the past about both of these, but I've never really tied these two together and certainly haven't addressed them in the context of movements.
The power of narratives
I began my exploration of narratives in contrast to stories here. To briefly recap, I've suggested that stories are self-contained (they have a beginning, middle and resolution) and they're about the story teller or some other people, they're not about the listener. In contrast, narratives are open-ended, they are yet to be resolved and their resolution depends upon the choices and actions of the listener. As a result, they're a powerful call to action, emphasizing the ability that we all have to make a difference. If you want to move people to action, narratives are a powerful way to get people off their sofas and into the streets.
Stories are very emotionally powerful but narratives are far more powerful. Throughout history millions of people have given their lives – the ultimate act of sacrifice – on behalf of narratives.
Narratives are also a powerful way to address the cognitive biases that grip us in times of high uncertainty and rapid change. In these times, we tend to magnify perception of risk and discount perception of reward, shorten our time horizons, fall into zero sum views of the world (it's a win/lose world) and lose trust in those around us.
Opportunity based narratives can change all that – they magnify our perception of reward, lengthen our time horizons, highlight the potential for a positive sum world (where the total value is increasing) and strengthen our ability to trust those who are on a shared quest – all key requirements for successful movements
As I've suggested before, narratives are also powerful vehicles to catalyze and amplify the passion of the explorer. Three attributes define the passion of the explorer – a long-term commitment to making an increasing contribution to a domain, a questing disposition that is excited by new challenges and a connecting disposition that seeks to find and collaborate with others in addressing these challenges. If you want to build a successful movement, wouldn't you want to instil this kind of passion in its participants?
Look at every successful movement for change throughout history - its foundation was built on a compelling and energizing opportunity based narrative that moved people to come together and act. We could learn a lot by analyzing these narratives and understanding how they might help us to craft new narratives to accomplish even greater things today.
The power of creation spaces
Narratives can be powerful catalysts for movements but they're not sufficient. Movements really take off when they're combined with a distinctive form of organization – something that I've called creation spaces.
Creation spaces help to organize activities in ways that accelerate learning. The basic organizational unit of a creation space is a small group of people who come together and collaborate in ways that help them individually and collectively to achieve higher levels of impact. Through this collaboration, they form deep trust-based relationships within their group because they are sharing their vulnerabilities in a quest to learn from each other. These small groups multiply and take a lot of local initiative – they're constantly experimenting and improvising in an effort to discover ways to achieve more impact.
These small groups are very effective in driving learning, but they have one critical limitation – they don't scale. Once they grow beyond 10 to 20 participants, they tend to fragment and weaken the deep trust-based relationships that are so critical to driving the learning process.
The real power of a creation space is that it creates an environment that can scale in ways that help the small groups to learn even faster by connecting with each other. These small groups learn from each other through a variety of mechanisms, ranging from regular gatherings of participants across groups to online discussion forums where participants in one group can ask questions and get advice from participants in other groups about a particular challenge they're facing.If you want to know more about creation spaces, I've written extensively about them in "The Power of Pull."
I originally came across creation spaces in arenas where you see sustained extreme performance improvement – arenas as diverse as extreme sports like big wave surfing and online video games like World of Warcraft. As diverse as these arenas were, they spawned environments with a set of common characteristics designed to scale learning so that the more participants who join in, the faster everyone learns. We begin to see collaboration curves in action.
I had been exploring creation spaces for quite some time but never made the connection to movements until I read an article by Malcolm Gladwell in the New Yorker on "The Cellular Church." His article addressed a key misconception about the evangelical movement. The media tends to focus on the mega-churches of pastors like Rick Warren where the faithful gather every Sunday by the thousands to worship together. Gladwell urged readers to pay attention to where the real action is in the evangelical movement – small groups of faithful who come together in "cells" and often meet a couple of times each week. The goal of these groups is to work together to develop practices that can increase their impact in their local community – their focus is on action and learning from that action. The participants in these small groups then come together on Sunday and in other forums to share their experiences and learn from the experiences of others.
This article really resonated with me. It certainly was exciting as yet another example of the creation space model of organization. It also reminded me of my days in the anti-Vietnam War movement of the 1960s where the focus of action was not in the massive street demonstrations which drew all the media attention, but in the local chapters of SDS and similar groups that were meeting and acting on a much more frequent basis to inform and mobilize people in a growing range of acts of resistance. And the more I researched other successful social movements, the more I saw this same pattern of organization in action.
The interplay between narratives and creation spaces
What's really interesting to me is how narratives and creation spaces reinforce and amplify each other.
Narratives provide the context and shared purpose that pull others into the movement and keep them motivated and focused as they encounter and deal with the myriad of unexpected obstacles standing in the way of meaningful change. Creation spaces provide an environment that encourages and supports local initiative in collaboration with others while also providing a much richer set of resources that these local groups can draw on, and learn from, as they mount their local initiatives.
The more rapidly participants at the local level learn, the richer the overarching narrative becomes, both regarding the nature of the opportunity ahead and the journey that participants will need to make in order to achieve that opportunity. The more compelling the narrative becomes, the more it draws in others to participate and learn from each other.
Bottom line
So, let's say we're interested in reviving movements as engines of social change. What are some tangible first steps that we might take? This is worthy of a series of blog postings, but let me start with some brief suggestions, all driven by one of my mantras: "small moves, smartly made, can set big things in motion."
First, bring together a small group of like-minded individuals and take on the task of crafting a short but compelling narrative that highlights the nature of the opportunity ahead, the forces that are making this opportunity more viable and the obstacles that are likely to make it challenging to achieve this opportunity. If it's going to be an opportunity based narrative (and it should), be sure to avoid falling into "oppositional" mindsets and languages – remember, it's now what you're against but what you're for.
Second, circulate this draft narrative to a larger group of people and invite their suggestions for refinement and improvement.
Third, as people begin to indicate their support for this narrative and the opportunity it describes, encourage them to find others in their local community who might share an interest in collaborating on this adventure. Encourage them to meet and identify some actions that they might quickly take to begin the journey. As they take these actions, encourage them to reflect on what's working and what's not working and how they might refine these actions to achieve even greater impact.
Fourth, create some shared discussion forums/workspaces where these people can share their stories of success and the lessons they've learned along the way. Remember, we can learn as much, if not more, from our failures as our successes. Willingness to share failures also helps to build trust.
Then, stand back and watch what happens. Double down in areas where you seem to be gaining traction and be alert to emerging unmet needs within the movement to see what you can do to help others achieve even more impact and accelerate their learning.
Just remember – the key to the success of movements is movement. Talking and theorizing is fine but only if it leads to action. Action is helpful, but only if it is focused and directed towards a shared goal. The real power emerges when theory and action combine to change the world.
I'm writing to announce an edge initiative from the Center for the Edge. It's the publication of a really, really short book, "Shift Happens", written by John Seely Brown, Duleesha Kulasooriya and me (with the significant help of our crew at the Center), now available on Amazon (bulk orders available here).
We all know that most executives are pressed for time – it's one of the main reasons companies fall into the "short-termism" trap. Who has time to pay attention to long-term trends? We all want the "sound-bite" or the executive summary that gives the key points and the "so-whats" in a fast, concise and compelling way.
In our quest to fight "short-termism", we've been evangelizing the "long view." We trade in paradox – one of our key beliefs is that the long view is increasingly essential to drive short-term success. Focusing just on the short-term will actually lead to short-term failure.
So, the Center for the Edge has been investing heavily to explore the "Big Shift", the long-term forces that have been playing out for decades and are re-shaping the global business landscape in profound ways. We've written a lot about this and, starting in five years ago, we've been publishing a "Shift Index" with 25 metrics that will help executives to better understand the rate of progress of the Big Shift.
But, here's the problem. Who has the time to read what we've written? Yes, a brave minority of you have carved out the time to dive into the details. And, for that, we're grateful. But what about the rest of you?
With "Shift Happens," we're trying something new.
In a very few pages with a very few words on each page, we focus on the broad themes of the Big Shift:
Our goal isn't just to make sense of what's happening around us - we want to help all of us make progress in harnessing these forces to create powerful new forms of wealth.
One key point: this isn't just about the future; it's about today. We're working harder and harder and performing less and less well because we're stuck in old ways of doing business, rather than seeing and shifting to the new ways of doing business that are available to us now.
At the risk of over-simplifying, the choice is extinction or evolution. While extinction may not happen tomorrow, the sooner we make this choice, the better off we'll be.
So, what choice will we make? The time to decide is now, not tomorrow. "Shift Happens" will help. And spread the word – your friends and colleagues will thank you for it.
Based on your feedback, we've got several more of these really, really short books on the way. Edgy idea, but then again . . .
(And, yes, this is the shortest blog post I've ever written!)
Platforms are becoming increasingly central to business value creation. Yet, not all platforms are created equal – some platforms have far more potential to trigger powerful forms of increasing returns that will ultimately marginalize other forms of platforms. In a rapidly evolving environment, it's important to understand not just the structure, but the dynamics, of different kinds of platforms. I recently had an opportunity to step back and reflect on this issue as I prepared for a speaking engagement.
I had the good fortune of being invited to speak at the Platform Strategy Summit held at the MIT Media Lab a couple of weeks ago. This Summit was organized by Geoffrey Parker, Marshall Van Alstyne and Sangeet Choudary – three guys who have spent a lot of time studying and working with platform-based businesses. There were great speakers and, perhaps equally important, the audience included a lot of people who have been building platform-based businesses.
What is a platform?
So, what did I learn? Well, first of all, that platforms, at least as the organizers think of them, cover a broad range of institutional arrangements. It was clear that they didn't simply view platforms as technology platforms. In fact, the definition they offer of business platforms is: "a nexus of rules and
infrastructure that facilitate interactions among network users" or, alternatively, "a published standard, together with a governance model, that facilitates third party participation."
Just to get the semantics aside, I tend to prefer the term "performance ecosystems" to describe this space rather than platforms simply because, to me, the term "platforms" creates an image of a much more tightly designed and specified environment than the term "performance ecosystems." For the purpose of this posting, though, I'll defer to my hosts and use the term "platform" since it's clear from their definition that they are talking about roughly the same domains.
So, are all platforms created equal? I argued in my talk that they are not. To make my case, I distinguished four different categories of platforms that are becoming increasingly prominent in the business world (and elsewhere).
Aggregation platforms
The basic focus of these platforms is to bring together a broad array of relevant resources and help users of the platform to connect with the most appropriate resources. We can think of data aggregation platforms, marketplaces and broker platforms like eBay and Etsy, and contest platforms like InnoCentive or Kaggle. These platforms tend to be very transaction or task focused – the key is to express a need, get a response, do the deal and move on. They also tend to operate on a hub and spoke model – all the transactions are brokered by the platform owner and organizer.
Social platforms
These are similar to aggregation platforms in the sense of aggregating a lot of people – think of all the broad-based social platforms we've come to know and love: Facebook, Twitter, etc. Social platforms also include more tightly defined communities of interest that come together around specific shared interests like certain genres of music, types of sports or academic disciplines like history or economics. They differ from aggregation platforms on some key dimensions. First, they end up building and reinforcing long-term relationships across participants on the platform – it's not just about doing a transaction or a task but getting to know people around areas of common interest. Second, they tend to foster mesh networks of relationships rather than hub and spoke interactions – people connect with each other over time in much richer and diverse ways that usually do not involve the platform organizer or owner.
Mobilization platforms
Now, we're talking about something more than individual tasks or networks of relationships around common interests. Mobilization platforms ultimately focus on mobilizing participants to engage in some kind of collaborative effort that will take considerable time to accomplish. Here, we can think about open source software platforms like Linux or Apache. There are also "process network" platforms that bring together participants in extended business processes like supply networks or distribution operations that help to select and orchestrate participants who need to collaborate in flexible ways over time. We might also think of mobilization platforms that support social movements like the Arab Spring movement. Bottom line, these platforms are not just about conversations and interests, they are ultimately focused on moving people to act together to accomplish something beyond the capabilities of any individual participant.
Because of the need for collaborative action over time, these platforms tend to foster longer-term relationships rather than focusing on isolated and short-term transactions or tasks. But the key focus here is to connect with, and mobilize, a given set of people and resources to achieve a shared goal. The participants, in other words, are often viewed as "static resources" – they have a given set of individual capabilities and the challenge is to mobilize these fixed capabilities to achieve the longer-term goal.
Learning platforms
Now, it starts to get interesting. These platforms have as their explicit goal to create environments where participants can learn faster and individually achieve higher and higher levels of performance as more and more participants join the platform. These platforms are what I've called "creation spaces" in some earlier work. They have a distinctive configuration.
Their primary unit of organization is a small team or work group that takes on particular performance challenges and where participants work closely together to come up with creative new ways to address the performance challenge. The emphasis on small teams or work groups is essential because the focus is on a powerful form of learning that involves accessing tacit knowledge. This in turn requires the formation of deep, trust based relationships. These relationships evolve quickly in small teams or workgroups but are very challenging to scale.
That's where the second key element of creation spaces comes in – they provide participants with ways to connect with each other beyond the individual team or workgroup to ask questions, share experiences, and get advice.
To my knowledge, there are very few examples of these creation spaces in business, but we can find very large scale creation spaces in arenas as diverse as online war games (for example, World of Warcraft) and online platforms to help musicians develop and refine their remixing skills (ccMixter). They also have emerged in a broad array of extreme sports arenas, including big wave surfing and extreme skiing.
As with social platforms and mobilization platforms, learning platforms critically depend on the ability to build long-term relationships rather than simply focusing on short-term transactions or tasks. Unlike the other platforms, though, learning platforms explicitly do not view participants as "static resources." On the contrary, they start with the presumption that all participants have the opportunity to draw out more and more of their potential if given the right environment.
Doubling network effects
Let's be clear. All four of these platform categories have the potential to create significant economic value for the platform owner and for the participants. All four have the potential to tap into network effects – the value created by the platform accelerates as more and more participants join the platform. Of course, the flip side of this is that, until and unless the platform draws in a critical mass of participants, it will have only minimal value to participants. That's why the vast majority of platform initiatives end up failing – the very thing that creates value once the critical mass is achieved, diminishes value before that point.
But, the fourth category of platform offers a second level of network effect, one that is uniquely associated with that platform. To understand this, it's useful to go back to the somewhat outdated example used to describe network effects: the fax machine. If you only have one fax machine, it has negative value – you paid money for it and it does nothing. The more fax machines that are connected, the more valuable each fax machine becomes. But, in that example, the individual fax machine is a static resource – its features and functions are a given and don't change as the number of fax machines multiplies. The increasing value comes from its connections with other machines.
What if we change the assumption, though? What if each fax machine acquired more features and functions as it connected with more fax machines? What if its features multiplied at a faster rate as more fax machines joined the network? Now, we'd have a second level of network effect – we'd still have the network effects that come by simply increasing the number of fax machines, but now there's an additional network effect that accrues as each fax machine adds more and more features as a result of interacting with other fax machines.
That's the potential of learning platforms. In a world of mounting performance pressure and accelerating change as described in our Shift Index, that learning potential isn't just an opportunity, it becomes an imperative. Those platforms that don't help participants to learn faster and faster as they work together will tend to be marginalized over time, especially once learning platforms become more prevalent. And this also applies to the participants. If we choose to participate on platforms that are not explicitly driven to accelerate learning, we'll learn at a slower rate than participants who choose to spend their time on learning platforms.
I also want to be clear that learning can and does occur on all four of the platforms, but on the first three platforms, it occurs as an unintended byproduct of participation on the platform. In the course of a conversation with someone on a social network, I'll often learn something new – but this is incidental and tends to be learning in the form of knowledge transfer. Knowledge transfer is inherently a diminishing returns game – the more the knowledge spreads across participants, the more the rate of learning will slow down. The only thing that can turn this from a diminishing returns game to an increasing returns game is to shift the focus from knowledge transfer to knowledge creation.
Platforms that are explicitly designed to drive new knowledge creation through collaborative efforts offer the potential for increasing returns to learning – we'll learn faster as more and more diverse participants join the platform, especially if we can combine the learning that occurs within high performing teams and workgroups with the learning that comes from connecting across a broader environment.
Bottom line
Which platform would you rather be on? In my book, The Power of Pull, I make the case that we're moving to a world where value creation will depend on harnessing the power of scalable pull platforms, where we can draw out the people and resources that we need, when we need them and where we need them. The highest form of pull platform is the learning platform - one that helps all participants to learn faster as more and more participants join in.
The good news from a platform owner perspective is that any of the first three categories of platforms can evolve to become learning platforms over time. But, it will likely not happen on its own. It requires thoughtful observation of where the opportunities for learning might be and initiatives to create more functionality on the platform to support and accelerate learning processes.
Four questions become central to harnessing the power of accelerating learning on platforms:
We're all trying our best to remain standing, but the ground beneath us is shifting at an accelerating rate. The implications for strategy are profound, but few have explored this terrain.
Strategies of position are back
Strategy was once all about position – all that mattered was where you were located and whether there were barriers to entry. As structural advantages eroded, this view of strategy fell out of vogue. In its place, we heard all about strategies of movement and capability – it was all about your "core competencies" and how quickly you could move across a changing landscape. Now, it looks like strategies of position will reassert themselves with a vengeance.
What do I mean by that? There's no question that the ground is shifting – for more on that, see our Shift Index. But, here's the paradox, at the very same time that the ground is shifting, it matters more and more where we're standing.
We've just released a major new research report at the Center for the Edge – The Hero's Journey through the Landscape of the Future – which focuses on one fundamental shift that will impact an increasing array of businesses. Specifically, we look at trends towards fragmentation and concentration in the economy. What parts of the economy are fragmenting into smaller and smaller entities and what parts of the economy are concentrating into larger and larger entities? The answer to this question is vitally important to executives yet few are explicitly asking this question, much less answering it in any systematic way.
Position shapes growth potential
If you're an executive in a large company under pressure to achieve more growth or if you're an executive in a smaller company seeking to achieve high rates of growth, where you stand matters hugely. If you're in a part of the economy that's fragmenting, growth will become increasingly challenging. Ultimately you'll find yourself trapped in a spiral of shrinking share and eroding economics. On the other hand, if you're in a part of the economy that's concentrating, growth can be amplified and sustained by riding the waves that are driving concentration. Position suddenly matters big time.
So, the choice of ground that you're standing on matters. But there's a second way that position is becoming more important. In our research, we discovered that winners in the concentrating parts of the economy are increasingly determined by the ability to connect with, and build strong relationships with, the participants who are operating in fragmenting parts of the economy. Look at Amazon. Its increasing growth – both in its online retail business and its newer cloud platform - has been driven by an ability to attract and support a growing array of smaller players who can benefit from the economies of scale and scope offered by Amazon. Or take Google. Its core economic engine – its advertising network – critically depends upon the value it provides to smaller merchants and smaller content websites.
This suggests another dimension of position which will increasingly determine the ability to generate growing economic value. Where you're positioned in expanding business ecosystems matters a lot. If you're on the periphery, with few connections to players in the fragmented part of the economy, good luck. If you're at the center of a growing cluster of relationships where more and more participants are seeking to connect with you, now you're in a great position to drive the economies of scale and scope that will make you one of the winners in concentrating parts of the economy.
Position within ecosystems drives leveraged growth potential. In a world of mounting performance pressure, growth alone is not sufficient. The key is how much investment is required to drive this growth. The two conventional approaches to growth – organic growth and growth through acquisition – are very resource intensive, requiring significant upfront investment, long lead-times and uncertain rewards. Far better to explore leveraged growth, a third path to growth – connecting with, and mobilizing, complementary resources and capabilities that can add significant value to your customers.
And let's not forget those who just want to make a living
By the way, position also matters if you have more modest aspirations and simply want to build a small and successful business that will support you in pursuing your passion. Far better to be thoughtful in picking a part of the economy that is fragmenting and that will support and reward smaller businesses providing distinctive and focused value. If you pick a part of the economy that is concentrating, watch out! You'll soon be run over by larger companies that will have distinct advantage over the small fry they crush along the way.
And, just as with larger businesses, you also need to be systematic in picking and participating in broader ecosystems that will help you to amplify the value that you deliver to the market. Just look at the growing array of small, niche product business that are emerging from platforms like eBay, Etsy and YouTube – part of their ability to sustain themselves comes from their participation in these platforms that help them to find and connect with customers around the world. Few, if any, of these businesses will grow to become large, public companies, but that's precisely the point – they are homesteading fragmenting parts of the economy that will be fertile ground for small businesses but at the same time that make it challenging to grow into very large companies.
What about core competencies?
So, am I suggesting that position is everything and that movement and "core competencies" don't matter? Far from it. All I'm suggesting is that position is a pre-requisite for success if your goal is to deliver sustained levels of high growth. If you're not positioned in the right places in the economy, you'll find growth more and more challenging, no matter how smart and agile you are.
If you're focused on parts of the economy that are concentrating, there's a fundamental challenge: concentration implies that there will be fewer and fewer winners over time – it's a "winner takes all" proposition. So, how do you prevail against all the others that have their eye on the same spot?
Here's where core competency comes in. You've got to be really, really good – distinctively good – at the skills and practices required to succeed in concentrating parts of the economy. But I take core competency to another level (see my article in Harvard Business Review on "Unbundling the Corporation") – you've got to be so focused on your core competency that you would be well advised to shed all other activities from your company. If you try to hold onto things that you're just good enough in or even where you have parity with others, you'll just consume resources and attention that could be better used in deepening and broadening your core competency.
One of the great things about our evolving economy is that you can increasingly find and connect to companies that are world-class in whatever business activities you need to support your business. If that's the case, why would you ever continue to do things that others can do better?
And what about movement?
Here's another reason to maintain a ruthless focus on your core competence. In our exponentially changing world, core competence is never static. If you're not totally focused on accelerating learning and performance improvement in your core competence, you'll soon fall far behind, no matter how good you are at it today. As I've discussed elsewhere, scalable learning becomes the key requirement for continued success.
This is where movement becomes central to success. You can't just stand still. But, on the other hand, you'd better not fall into the trap of random, reactive movement that's so tempting in a time of rapid change – simply sensing and responding to the latest event on the horizon. The movement must be directed by a clear view of what capabilities will be critical to success and how those capabilities are likely to evolve in a changing business landscape.
That provides the context for driving learning, both within your organization and across a broader ecosystem. And, make no mistake about it, if all you do is focus on learning within the four walls of your firm, you've already lost. The key to scaling learning is to be able to reach out beyond your enterprise and find ways to connect with world-class participants in a broad array of complementary domains in ways that will help all participants to learn faster.
And, that's again where position matters. If you're not positioned centrally in a broad array of relevant ecosystems, you'll be at a disadvantage relative to those who are. But you need to do more. You need to build relationships that will make it easier for you to access the tacit knowledge that others have and then focus those relationships on addressing really challenging performance issues. This requires movement, but it's focused movement, driven by rapid iterations of effort and frequent pauses to reflect collectively on what's working and what's not working from the performance improvement initiatives. In an exponential world, if you're not constantly moving in this fashion, you'll soon die.
So, in the end, movement and core competency still matter. But they'll only matter if you have picked the right position on the business landscape – a position that will foster and amplify growth. Position is a pre-requisite for everything else. Ignore it at your peril.
Bottom line
Here are four questions that should be on every CEO's agenda:
For a lot more insight into why these questions matter and into approaches to addressing these questions, please see our working paper available here.
When in the course of human events, it becomes necessary for individuals to dissolve the institutional bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of humankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all individuals are created equal and are endowed with the right to be able to achieve as much of their potential as possible. History, despite periodic setbacks, has been marked by a rapidly accelerating trend towards providing individuals and communities with more and more opportunity to achieve that potential.
We find ourselves now at a crossroads in history. The institutions – commercial, educational, political and civic - that we created in an earlier era in an effort to expand our potential have now become increasingly significant barriers to progress. It is not surprising that our trust in these institutions is plummeting around the world. We see so much opportunity and yet the institutions that are supposed to be helping us are increasingly standing in our way.
In response to this impasse, we are coming together around the world to build a new set of institutional platforms that will help to establish our independence from the institutions of the past. These new institutions bear little resemblance to the institutions they are designed to replace, and they are extraordinarily diverse, but they share a set of common characteristics:
Bottom line, these institutions are designed around individuals - to help the people within them and around them to flourish. This stands in sharp contrast to our existing institutions that are designed around standardized tasks and that demand we conform to the institutional "boxes" that have been assigned to us.
We have no desire to confront existing institutions head on. We have no desire to engage in battle unless existing institutions seek to undermine or destroy the new institutional platforms that we are building. We prefer instead to focus on building parallel institutions on the edge of existing institutions and strengthening them to the point where our tired, old institutions will have no choice but to retreat into the dustbin of history.
But, just to be clear, we are declaring our independence from existing institutions. We have too much to lose if we remain prisoners of the outdated institutions that surround us.
I admit that I'm mystified by Jill Lepore's article in the New Yorker attacking Clayton Christensen and his theory of disruptive innovation. Not only does it have a meanness that isn't warranted, but it leaves the reader with an unanswered question: if Clay's theories are not helpful (and I still believe they are), how do we explain the cascading disruptions that are playing out in markets and industries around the world?
Some of the commentators may be right: perhaps this article is better read as the most recent manifestation of the cultural conflict between the humanities-driven East and the technology-driven West. The irony here is that the conflict is specifically between two professors at Harvard University – one based on the east coast of the Charles River and the other based on the west coast of the Charles River.
Clay Christensen has offered a rebuttal of sorts in an interview here. He does a good job of responding to some of the specific factual issues in his case studies highlighted by Jill Lepore and emphasizes that he continues to evolve his theory of disruptive innovation based on new research. But perhaps his best question is why she didn't simply call him up or walk down the street to visit him before writing the attack to see if he might be able to clarify his position and his fact base.
I want to step back and use this controversy to underscore some key points that have been largely ignored in the recent discussion.
The systemic rise of disruption
First, while Jill Lepore might have issues with Clay's specific theory and some of his case studies, she seems unwilling to acknowledge one basic fact of life: disruption is occurring with increasing frequency in the business world. Whether it is good or bad, it is happening and becoming increasingly widespread.
For the purpose of this posting, let me define disruption simply as the sudden demise of leaders or incumbents in particular markets or arenas. This demise is typically brought about by one or more players adopting a different approach to a market or arena that represents a significant challenge to the established position of existing participants. Disruptions turn the assets of incumbents into potentially life-threatening liabilities.
We all know the iconic cases of disruption casualties, including such large and well-known leaders as Kodak, Borders, Digital Equipment Corporation. But those are just the tip of the iceberg. There's mounting evidence that disruption is spreading.
One of the issues with a case study approach is that it obscures the more fundamental and systemic trends and patterns that are playing out around us. When we pull back from individual stories and scan the world around us, it becomes clear that something very profound is happening - and it's largely escaped notice.
One of the metrics in our Shift Index looks at what economists call topple rate – the rate at which leaders fall out of their leadership position. In this case, we focused on the rate at which public US companies in the top quartile of return on assets performance fall out of this leadership position. Between 1965 and 2012, the topple rate increased by 40%.
OK, but the skeptic might reply that this is only about financial performance. Another more significant measure of fall from leadership position is provided by my old colleague and mentor, Dick Foster, who looked at the average lifespan of companies on the S&P 500. In 1937, at the height of the Great Depression and certainly a time of great turmoil, a company on the S&P 500 had an average lifespan of 75 years. By 2011, that lifespan had dropped to 18 years – a decline in lifespan of almost 75%. At the same time that humans are significantly increasing their lifespan, large companies have been heading rapidly in the opposite direction.
So, the bottom line is that leaders are toppling with much greater frequency. Sure, some of that toppling may be the result of incompetence or mistakes made by senior management but, to explain away these trends, one would have to believe that management is becoming significantly more incompetent over time.
It's also clear that some of the toppling is the result of the natural process of market competition. As Joseph Schumpeter famously observed, markets are a powerful engine for "creative destruction" - they invite competitors with a better idea or a better approach to come in and challenge incumbents. It happens all the time. But the key question on the table from this more systemic view of disruption is: why is it increasing so dramatically over a long period of decades?
This is where I found Jill Lepore's essay most wanting. It's easy to criticize an existing theory, but even assuming that this one doesn't work (which I don't), what's the alternative? What's going on? Jill Lepore certainly doesn't venture an alternative theory and she clearly believes that the phenomenon of disruption is far too over-hyped. Without rushing to the defense of the disruption evangelists, I would suggest that she should have done more to at least acknowledge there is a disturbing trend here that needs to be explained. One gets the distinct impression that she believes that disruption is not all that significant
Forces at work in the Big Shift
So, what's going on here? Based on the work that we've done on the Big Shift, let me suggest that the trend towards increasing disruption is a result of the convergence of two powerful forces that are playing out on a global scale. First, we have the advent of digital technology as a disruptive force.
Yes, we've had major technology disruptions in the past – think of the steam engine, electricity and the telephone. But there's one key difference that helps to explain a sustained and increasing pattern of disruption today.
In all those prior technology disruptions, we saw a dramatic burst of innovation in the core technology followed by a rapid stabilization with only modest incremental improvements in price/performance afterwards. Then one saw a burst of innovation at the infrastructure level in terms of thinking about how to most effectively deliver that technology to the broader economy and society – think for example of the insight that electricity could be more effectively generated in centralized facilities rather than on the premise of the user. But once again, that was followed by rapid stabilization in terms of infrastructure deployment, giving firms an opportunity to think through how to most effectively harness this technology in their business.
Digital technology is different – in fact, it's unprecedented in human history. It's the first technology that has demonstrated sustained exponential improvement in price/performance over an extended period of time and continuing into the foreseeable future (based on interviews with scientists and technologists pushing the boundaries of this technology).
So, there's no stabilization in the core technology components of computing, storage and bandwidth. As a result, there's no stabilization in infrastructure – cloud computing is simply the most recent manifestation of this infrastructure and it certainly won't be the last. And therefore there's no stabilization in terms of how companies can use this technology to create and capture value.
But there's more. This exponentially improving digital technology is spilling over into adjacent technologies, catalyzing similar waves of disruption in diverse arenas like 3D printing of physical objects, biosynthesis of living tissue, robotics and automobiles, just to name a few. The advent of exponentially improving technologies in an expanding array of markets and industries only increases the potential for disruption. We've explored this expansion of exponential technologies in a working paper here.
And this is just one of the forces at work. There's a second force at work as well – a long-term shift in public policy on a global basis towards freer movement of people, goods, money and ideas across geographic and industry boundaries. Certainly this has unfolded at a different pace in different geographies and industries, but if one steps back and looks at the period from World War II to today, the trend is clear and significant.
Now, I will grant that this second force is a wild card. There's nothing to guarantee that this force will continue to play out in the direction of further economic liberalization. In fact, there's a growing risk that there will be a significant public policy backlash. Incumbent players, whether they are taxi cab drivers in New York or global multinational companies facing disruptive attackers, will mobilize in an effort to use regulation and taxation to erect barriers and protect their positions from attack. While I acknowledge this risk, I'm an optimist and I believe that ultimately such protectionist efforts will be undermined by increasingly powerful consumers and by global technology infrastructures that will make public policy barriers difficult to enforce.
But, for the moment, these two forces – exponentially improving technology and economic liberalization – are combining to create environments that are increasingly vulnerable to disruption. In economic terms, they are doing two things. First, they are systematically and substantially reducing barriers to entry and barriers to movement on a global scale. Second, exponentially improving technology is offering untapped capabilities that can be a catalyst to fundamentally re-think business models and institutional arrangements.
Bottom line, they are catalyzing more opportunity for players to adopt new approaches that can be highly disruptive on three levels:
And, because they are reducing barriers to entry and movement, they are increasing both the motivation and ability of players to pursue these disruptive approaches.
So, at a macro level, I'd suggest that these forces help to explain why we are experiencing more frequent and widespread disruptions on a global scale. (And, by the way, while my focus here has been on companies, I believe that all institutions are becoming increasingly vulnerable to disruption as a result of these forces).
Some open questions
This perspective of course leaves a lot of open questions. For example, can we predict where and when specific disruptions will play out? I for one don't believe that such predictions are possible but I suspect that we can better understand specific patterns of disruption that are likely to play out and, as a result, better anticipate which markets or industries might be most vulnerable to certain patterns of disruption. In fact, the Center for the Edge is about to embark on a research initiative in this area and I invite any of you who find this interesting to connect and contribute.
Another question is what incumbent players can do to more effectively respond to these disruptive approaches (short of resorting to regulation and other public policy measures). This is a topic for a much longer post. While I certainly don't pretend to have all the answers to this, I believe that one key requirement for incumbent players is to find ways to expand the horizons of their leadership team beyond the next quarter or next year and to challenge on a sustained basis the key assumptions, often unstated, that they bring to the table regarding what is required for business success. And, perhaps most basic of all, they need to acknowledge the growing force of disruption and resist the temptation to dismiss or deny that it exists.
Narratives have great power, but their power increases dramatically when building on other narratives.
What does that mean in practice? It means that we need to be thoughtful and deliberately make choices about where we choose to pursue our narratives. Context and location are critical to enhancing the power of narrative.
I've made a distinction between stories and narratives here and here. Briefly, I've suggested that stories are self-contained (they have a beginning, middle and resolution) and they're about the story teller or some other people, they're not about the listener. In contrast, narratives are open-ended, they are yet to be resolved and their resolution depends upon the choices and actions of the listener. As a result, they're a powerful call to action, emphasizing the agency that we all have to make a difference.
I've also suggested that narratives exist at three distinct levels – personal, institutional and social. Most recently, I've been exploring the power of personal narrative here and here.
Start with your personal narrative
Now, let's pull back and explore how these three levels of narratives can be connected to achieve even more impact. We need to start by reflecting on and refining our own narrative. Few of us have taken the trouble to articulate our personal narrative, much less reflect on it.
Yet, if we look back on the major choices and actions in our lives, there is an implicit narrative, even if we weren'tt aware of it at the time. We owe it to ourselves to draw out that narrative and reflect on its usefulness in helping us to have the kind of impact we want in the world.
Many of our narratives are limiting or even self-destructive. We have an opportunity to achieve much more of our potential if we evolve more effective narratives that tap into what we are really trying to achieve and that more productively engage others in helping us to achieve greater impact. It doesn't matter where we are; if our narrative is limiting, we won't be able to take full advantage of the resources that our environment provides.
But, if we are pursuing a more effective narrative, then location and context can make a big difference. Remember, narratives are ultimately a call to action for the people around us. If the people around us are pursuing very different, and perhaps even contradictory narratives, we'll be much less effective than if we can connect with people who are pursuing complementary narratives. Yes, I know, digital networks can help to connect us, wherever we're located, but I continue to believe that face to face relationships in physical space are ultimately the most powerful form of connections.
So, what should we do? Well, once we've reflected on our existing narrative and determined what personal narrative would have the greatest ability to achieve more of our potential, perhaps we should start reflecting on relevant institutional and social narratives. I mean, start taking a hard look at the narratives of the institutions and societies where you are currently spending your time. Are they consistent with the personal narrative you're seeking to pursue? Do they offer the potential to amplify the impact of your personal narrative? Or, do they undermine and subvert the personal narrative you're pursuing?
Explore relevant social narratives
The best place to start is with relevant social narratives. What city or region do you live in? What's the narrative of that city or region? How does it map to your personal narrative? If it's not consistent with your narrative, perhaps you might consider moving to a city or region that more closely maps to your narrative. Then you'll be more likely to find and connect with people who can support and amplify your personal narrative. If the narrative of the city or region you live in is hostile to, or incompatible with, your personal narrative, you'll find yourself constantly swimming upstream and drained by the effort, rather than energized.
And, by the way, if you don't live in a city, perhaps you should consider moving to a city with a compatible narrative. As I've indicated elsewhere, cities can be a powerful accelerator of learning, especially if the city has a narrative that's consistent with your personal narrative. Unless your personal narrative requires you to live in a rural area, you're much more likely to be successful in pursuing your personal narrative if you live in a city.
Take a hard look at relevant institutional narratives
Once you've resolved that, the next question is what institution are you most closely affiliated with? If you're working as part of a larger group, does the company or group you work with have an institutional narrative that supports and amplifies your narrative? If not, you're likely to encounter the same issues I mentioned earlier with urban or regional narratives. You'll be far more successful in pursuing your personal narrative if you're located in a city/region and organization that supports your personal narrative.
I know we don't always have the luxury of being able to make choices on these two fronts, but I've become convinced that we'd be well advised to make sacrifices when possible to get better alignment between our personal narratives and the urban/regional and institutional narratives around us. At a minimum, we should explore the potential to join together with others in the relevant institutions to evolve the insititutional narrative in a direction that's more compatible with our personal narrative.
My journey to Silicon Valley
How does this work in practice? Let me share a bit of my personal journey. I've discussed the evolution of my personal narrative here and here. As I've indicated, my personal narrative has evolved to something like: "let's overcome our fear and feel the excitement that comes from exploring new frontiers on the edge together so that we can provide others with platforms to achieve more of their potential."
I grew up outside the U.S., living in a different country virtually every year, so I had no strong roots anywhere. I went to college in the northeastern part of the US and England, two areas that are not particularly known as edgy. But, during a summer in college, I had the good fortune to spend a summer in the San Francisco Bay area. I fell in love with the area immediately. I knew this was the area where I was meant to live.
It took me about 15 years to finally make the move to this area but, once I did, there was no looking back. Even though I had not yet started the process of articulating and evolving my narrative, I instinctively knew that this was an area full of edge frontiers to be explored. I was deeply moved by how friendly people were out here and how willing they were to connect and support each other in exploring frontiers together.
I moved to the San Francisco Bay area with a couple of friends to do a start-up in the computer industry. At the time, I knew nothing about computers but I learned quickly by diving into the deep end of the pool. It was an intense and deep immersion into an exciting frontier. The more I learned, the more I became convinced that this technology was an extraordinary platform to help all of us achieve more of our potential.
It was my first exposure to Silicon Valley, a region that has grown and evolved over decades, driven by a compelling narrative: "for the first time, we are in possession of a set of exponential technologies that have the potential to change the world but it won't happen on its own. Will you join us so that we can explore this digital frontier and change the world together?" It has drawn people from all over the world who share a commitment to changing the world through technology innovation. It drew me and has held me captive for almost 35 years.
I couldn't imagine a more perfect alignment with my evolving personal narrative. Over the years, I've met a dazzling array of people who, in one form or another, have joined me in exploring some very exciting frontiers on the edge of strategy and technology.
My journey through institutions
Over this exciting time in Silicon Valley, I've participated in many institutions, including start-ups, senior executive positions in tech companies and leading consulting firms. Although it wasn't explicit at the time, I've moved from one institution to another when I felt there would be an opportunity to have more impact on the edge frontiers that I was exploring. In each case, an institution with a complementary narrative provided me with far more leverage than I ever could have achieved on my own. When our narratives started to diverge, I knew it was time to move on.
For an extended period of time, I was on my own, pursuing strategy consulting and business research as a free agent. It was a wonderful and very rewarding time, but I missed the leverage that I achieved when I was able to participate in an institution that had a complementary narrative.
When I was approached by Deloitte eight years ago to set up an independent research center that came to be known as the Center for the Edge, I saw an opportunity to build an institution with a narrative that would reinforce and leverage my personal narrative. I've been able to gather a team of extraordinary people who have deeply bought in to our institutional narrative and who work together every day to achieve the opportunity that we see by engaging others in our journey.
One could say that I've been very lucky - serendipity has certainly played an important role in my life. But, on reflection, I would say that ny effort to make my own narrative explicit and then to evolve it in a more promising direction also played a significant role. And, even more importantly, I've sought and found alignment between my personal narrative and relevant institutional and social narratives.
When these three levels of narratives are aligned, small moves smartly made can indeed set very big things in motion. On the other hand, when these three levels of narratives are not aligned, even heroic efforts may only achieve marginal impact.
Bottom line
Don't just focus on your personal narrative. Be aggressive in assessing the narratives of the institutions and cities/regions where you're most active.
Start by asking the questions that I posed in a previous posting regarding your personal narrative:
Once you've addressed these questions, then ask a similar set of questions for relevant institutions and and cities/regions where you're most active:


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Does anyone grow indigofera kirillowii (false indigo)
I was given a start of this plant a few months ago with no information regarding its care other than it blooms continuously and is very carefree. I repotted it into a larger pot and it is now putting out beautiful wisteria-like pink blooms. I want to know more about its care before I place it in any of my garden beds. Anyone have info on this plant?
I grew this plant several years ago under a large water oak tree. I really liked this plant - it did bloom a lot and didn't require any care. However, when we had the water oak removed, I transplanted the indigo to another bed that had no tree root competition. It started to spread so rapidly that I sadly decided to get rid of it. If I had a contained planting area surrounded by cement (or some other substantial barrier) I would probably grow this again because I liked it so much; but my experience was that without the tree root competition it was what I would consider invasive. In doing research, I found that there are several types of indigo, and some reported to spread more than others. Also, I seem to remember that some sources thought that the different kinds were often confused in commerce.
Nice plant! I suppose any "indigo" other than i. tinctoria of dye fame is "false" in that respect, but wonder if 'false indigo' is a common name in general use for this one? Seems just 'indigo' or 'Chinese indigo' are used most often. I'm already challenged keeping the "false" natives amorpha fruticosa (false indigo) and baptisia australis (blue false indigo) straight. :-)

subset: commoncrawl