For decades, the dominant view of strategy was based on Michael Porter’s ideas about competitive advantage. In essence, he argued that the key to long-term success was to dominate the value chain by maximizing bargaining power among suppliers, customers, new market entrants and substitute goods.
Yet digital technology blew apart old assumptions. As technology cycles began to outpace planning cycles, traditional firms were often outfoxed by smaller competitors that were faster and more agile. Risk averse corporate cultures needed to learn how to “fail fast” or simply couldn’t compete.
Today, as the digital revolution is coming to an end, we will need to rethink strategy once again. Increasingly, we can no longer just move fast and break things, but will have to learn how to prepare, rather than just adapt, build deep collaborations and drive skills-based transformations. Make no mistake, those who fail to make the shift will struggle to survive.
The March on Washington, in which Martin Luther King Jr. delivered his famous “I Have a Dream” speech, is one of the most iconic events in American history. So it shouldn’t be surprising that when anybody wants to drive change in the United States, they often begin with trying to duplicate that success.
Yet that’s a gross misunderstanding of why the march was successful. As I explain in Cascades, the civil rights movement didn’t become powerful because of the March on Washington, the March on Washington took place because the civil rights movement became powerful. It was part of the end game, not an opening shot.
Unfortunately, many corporate transformations make the same mistake. They try to drive change without preparing the ground first. So it shouldn’t be surprising that McKinsey has found that only about a quarter of transformational efforts succeed. Make no mistake, transformation is a journey, not a destination, and you start by preparing the ground first.
In many ways, 2009 seems like a prelude to 2020. A global economy that many thought to be roaring just a year before, all of the sudden just went up in flames. It appeared that the world–or at least the world as we knew it—was ending and, in some sense, it was. Nothing would ever be the same after 2009.
2009 was just as much a turning point for me personally. The founder and chief shareholder of our media company in Ukraine had decided to sell it to a chocolate tycoon named Petro Poroshenko and I decided to leave my position as Co-CEO. Without much else to do, I started a blog in my Kyiv apartment and Digital Tonto was born!
That seems like a lifetime ago. In 2009, the mobile web really wasn’t a thing yet and artificial intelligence wasn’t even on the radar screen. I had no idea that my little blog would turn into a new career, complete with two books and over 50 articles in Harvard Business Review, but that all happened! As in past years, I’m celebrating with some of my favorite articles.
In 2011, IBM’s Watson system beat the best human players in the game show, Jeopardy! Since then, machines have shown that they can outperform skilled professionals in everything from basic legal work to diagnosing breast cancer. It seems that machines just get smarter and smarter all the time.
Yet that is largely an illusion. While even a very young human child understands the basic concept of cause and effect, computers rely on correlations. In effect, while a computer can associate the sun rising with the day breaking, it doesn’t understand that one causes the other, which limits how helpful computers can be.
That’s beginning to change. A group of researchers, led by artificial intelligence pioneer Judea Pearl, are working to help computers understand cause and effect based on a new causal calculus. The effort is still in its nascent stages, but if they’re successful we could be entering a new era in which machines not only answer questions, but help us pose new ones.
When Steve Jobs was trying to lure John Sculley from Pepsi to Apple in 1982, he asked him, “Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?” The ploy worked and Sculley became the first major CEO of a conventional company to join a hot Silicon Valley startup.
It seems so quaint today, in the midst of a global pandemic, that a young entrepreneur selling what was essentially a glorified word processor thought he was changing the world. The truth is that the digital revolution, despite all the hype, has been something of a disappointment. Certainly it failed to usher in the “new economy” that many expected.
Yet what is also becoming clear is that the shortcomings have less to do with the technology itself—in fact the Covid-19 crisis has shown just how amazingly useful digital technology can be—than with ourselves. We expected technology and markets to do all the work for us. Today, as we embark on a new era of innovation, we need to reflect on what we have learned.
It’s easy to look at someone like Steve Jobs or Elon Musk and imagine that their success was inevitable. Their accomplishments are so out of the ordinary that it just seems impossible that they could have ever been anything other than successful. You get the sense that whatever obstacles they encountered, they would overcome.
Yet it isn’t that hard to imagine a different path. If, for example, Jobs had remained in Homs, Syria, where he was conceived, it’s hard to see how he would have ever been able to become a technology entrepreneur at all, much less a global icon. If Apartheid never ended, Musk’s path to Silicon Valley would be much less likely as well.
The truth is that genius can be exceptionally fragile. Making a breakthrough takes more than talent. It requires a mixture of talent, luck and an ecosystem of support to mold an idea into something transformative. In fact, in my research of great innovators what’s amazed me the most is how often they almost drifted into obscurity. Who knows how many we have lost?
On September 12, 1962, President Kennedy addressed the nation from Rice University. “We choose to go to the moon,” he said. “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills.”
The speech galvanized the country into one of the most vast collective efforts in history, involving politicians, scientists, engineers and the general public to achieve that goal. Perhaps even more importantly, it imbued the country with a sense of shared purpose that carried over into our business, personal and community life.
Today, that sense of shared purpose is much harder to achieve. Our societies are more diverse and we no longer expect to spend an entire career at a single company, or even a single industry. That’s why the most essential element of a leader’s job today isn’t so much to plan and direct action, but to inspire and empower belief in a common mission.
So summer is finally here, but not the way we thought it would be. Although most places have opened up, we still need to be careful and keep our distance. Some places, unfortunately, are having second waves and may have to shut down again. Life in the age of Covid is never normal or easy.
Yet we can still enjoy ourselves. Pools and beaches are opening, albeit with restrictions, and even a global pandemic can’t stop the warm weather. That’s what makes summer such a great time to catch up on reading, hours of lying in the sun with nothing better to do than spending time with a good book.
When I’m anxious about something, I usually try to learn more about it. Although the facts aren’t always pleasant, I find that once I understand something, I’m able to follow events in a more constructive way and that, at least, gives me a feeling of calm. That’s why this summer, I’m focusing my reading list on books that will help you understand the Covid crisis better. read more…
Clearly, we live in a time of great flux. First, #MeToo, then Covid-19 and now a new racial consciousness in the wake of the murder of George Floyd. The most important task for leaders over the coming years will be to guide their organizations through change. Make no mistake, it won’t be easy. Important changes always encounter staunch resistance.
In Cascades, I researched dozens of change efforts ranging from historic turnarounds at major corporations like IBM and Alcoa, to political revolutions like the color revolutions in Eastern Europe and social movements like the struggle for civil and LGBT rights in America. Every one had to overcome entrenched opposition to succeed.
Yet probably the most impressive strategy for overcoming opposition I came across was how the Serbian movement called Otpor devised a plan to turn arrests to their advantage. The key to their strategy was to study their opposition, anticipate its actions and leverage them for their own benefit. Business leaders can use similar strategies to drive change forward.
Humans tend to think in a linear fashion. If something is growing, we expect it to keep growing. If it is decreasing, we expect it to continue to decrease. We are natural trend watchers and instinctively look for patterns. Yet it is often the discontinuities, rather than the continuities, that have the biggest impact.
The mathematician Benoit Mandelbrot referred to this cycle of continuity punctuated by discontinuity as “Noah effects and Joseph effects.” Joseph effects, as in the biblical story, support long periods of continuity. Noah effects, on the other hand, are like a big storm creating a massive flood of discontinuity, washing away the previous order.
Throughout history, inflection points have defined the future. Business models, built on top of Joseph effects, are disrupted by Noah effects, creating new opportunities for those who are able to identify and adapt. Today, we’re in the midst of a series of inflection points in what was already a time of enormous flux. We can’t predict the future but we can prepare for it.
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