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CHAPTER 11

Corporate agility

Enterprise-level learnacy

One of the best examples of almost perfect enterprise-level learning in humanity is the Indian ‘Tiffin’ system of lunchbox deliveries. I learned directly from the street about this amazing piece of human ingenuity when working in India many years back, having dabbled with the idea of riding on the train roofs to experience the Indian Railway system as a commuter. I watched in wonder at the clockwork precision of the Tiffin system as chaos abounded all around at railway stations in Mumbai. The Financial Times stated that from 80 million deliveries per year there were no more than 300 errors or 0.0000000375%, a figure that compares favourably with any computerised Six Sigma operation. Experienced dabbawalas attribute the achievement to their own organisation (33%), the bicycle (33%) and the train network (33%), leaving 1% for serendipity!

However, the Tiffin system is a purely human enterprise with no computers currently involved, which makes it even more remarkable. We discuss beehives as complex adaptive systems later, but the Tiffin system has been a gold standard of complexity management for 125 years that most organisations struggle to beat. Even FedEx visited Mumbai to learn from the Tiffin system about how to improve their own excellence.

The Tiffin system is a complex web of relationships that delivers home prepared food via dabbawalas to some 130 000 workers in the centre of Mumbai, right first time, on time, 365 days a year. But what are the secrets of the Tiffin? It comes down to having a very simple but effective system of identifying the boxes using numbers, letters and colours, a simple process that all follow, supreme time-management skills (collections are timed with great precision, which is remarkable in itself for a city that is not known for precise time management) and great people who follow the rules but are also flexible in terms of local adjustment when necessary. The Tiffin system is the ultimate example of human ingenuity and intelligence to adapt and learn inside a structure. It is also an exemplar of mass personalisation, long before the term was coined in business circles. To achieve such seamless efficiency requires the democratisation of intelligence and the freedom to utilise it to adapt service delivery to the individual.

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If individual learnacy is relatively easy and team learnacy more difficult, then networking the intelligence of a whole enterprise is the greatest challenge facing a BBE due to the nature of complex adaptive systems and the difficulty of achieving alignment in a disruptive age. In this section we merge ideas about social approaches to learning with that which comes from machines – a kind of ‘cybersocial’ approach to learning. As well as a thirst for learning, is there a case for us to become ‘comfortably numb’? In other words, in a world where we consume 48 Gb of information every day in our leisure time, is there a time for ‘social loafing’ in order to reflect and renew? Is there an absolute necessity to shut down in a business world that never stops 24/7/365? What oasis points can leaders offer in order to help with personal and corporate renewal?

Peter Senge’s seminal book The Fifth Discipline was more than 25 years ahead of its time. In the book Senge described the concept of a ‘learning organisation’, an enterprise that continually transforms itself. Building on the work of Argyris et al., expounded in their book Organisational Learning, the concept has now properly come of age in an era of digital disruption. In an age where the half-life of learning is in free fall, Senge’s concepts of ‘unlearning’ and ‘relearning’ become more important for enterprises, especially ones that have strong embedded cultures. What strategies, assumptions and mental models in the business world are up for unlearning and challenge in the Man-Machine age?

Sacred cow # 1. First-mover advantage

Traditional ‘taken-for-granted’ thinking suggests that being first to market with your product or service confers advantages in terms of market penetration and ultimately dominance. For example, Sony was able to make a success with the Walkman and preserve market share for some ten years due to superior design skills, marketing skills and the Sony brand. However, this did not translate into similar levels of success in video recorders. Similarly Hoover gained first-mover advantage through incremental improvements over 30 years. Starting in 1908, the first upright vacuum cleaner was slow to diffuse into the market with only 5% of households owning one by 1930. With further design innovation Henry Dreyfuss produced a streamlined model, which became a dominant design until James Dyson disrupted the market with his dual cyclone cleaner in 1993. By that time the word Hoover had replaced the word vacuum as a verb, further solidifying Hoover’s market dominance.

In the Man-Machine age, however, what Michael Porter called ‘barriers to entry’ are often relatively low. Just take the example of crowd funding giant Kickstarter. I had cause to use Kickstarter to fund a cancer project a little while back. All was going well, but then I started to receive reports that people were being refused when trying to pay through Kickstarter’s payment wall. I investigated and discovered that this was a well-known problem at the time. On contacting them I faced denial that the problem existed by Kickstarter’s corporate immune system and an insistence that people should simply try harder. They seemed not to appreciate that once you get a letter from your bank suggesting that you have attempted the F word, i.e. fraud, people tend not to try again. Despite my protestations at the highest level, I got the same response. My hunch is that Kickstarter have been so successful that it mattered not if a few people are unable to get through their payment wall. Yet, in the wired world this is a dangerous assumption. When compared with a shipyard with huge physical assets and hard-to-find skills, Kickstarter’s net assets, crudely put, are 200 kids, 200 laptops and a brand. Once word of web gets around, there are very few barriers to entry for a competitor to enter the market and improve the service. So, first-mover advantage can work when you have a chance of branding your product/service/enterprise so that it effectively prevents people looking elsewhere . . . for a while. But migration is much easier to do for customers these days. I sincerely hope Kickstarter takes note, as every other aspect of their service is excellent.

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In other cases, the short half-life of some technology innovation demands first-mover advantage in order to gain the full value of the product before extinction. Netscape would be a good example of a pioneer technology that spurred the age of Internet browsers, although in Netscape’s case the massive growth in the market they pioneered meant that it was extremely attractive to large players such as Microsoft, who threw huge resources at the opportunity. Eventually Netscape arranged a sale for $10 billion to AOL. If you choose first-mover advantage it is imperative that you then brand and protect your brand in a fast moving market.

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Speed in business is thus an inviting concept to gain first-mover advantage. It is exciting and gives us a rush of blood to the head. Most businesses are controlled consciously or otherwise by a ‘rhythm section’. Sometimes this will be a function of leadership, in other cases it might be the speed of the slowest division via the theory of constraints, regulation or internal/infernal ‘red tape’ that impedes innovation velocity. Consider for a moment what would happen if your company was working to a tempo like a piece of music and started playing ‘dance music’ at 126 beats per minute (bpm), rather than a ‘blues’ at say 98 bpm? Try using a metronome or listening to different music to get a feeling of the differences in energy between these tempos.

The attraction of speed in business is easily demonstrated:

126 ÷ 98 × 100 = 29% performance improvement

If it takes three years to get a new product to market, this translates into:

3 × 0.71 = 11 months reduction in time to market

Some industries have fast product development cycles. In aerospace, development times can be as long as 20 years. Imagine the impact that this would make to the bottom line. It could also contribute to increased competitive advantage through gaining first-mover advantage where this is of value. In the pharmaceutical industry an enterprise can spend $1.6 billion to introduce a new drug to the market, taking 12 years and involving the screening of some 2 million compounds. Any improvements to the cost and speed of screening through automation can make a major impact on the cost of this process. Getting the enterprise to up its tempo by a few beats without losses can be a very attractive notion.

The blockages to higher speed change over time. For example, it was a popular assumption that the main barriers to faster product development in the pharmaceutical industry are all about resources and organisation. This has driven a number of initiatives such as introducing project management approaches to companies. Yet a major emerging barrier is the ability of these companies to convert data into information. The average number of clinical trials required to satisfy regulatory authorities of the safety of a new drug has almost doubled in ten years. This translates into approximately 1 million individual observations that must be converted into information that can be interpreted. Clearly this has a very big implication for the information processing capacity of firms operating in this sector.

So speed is all about efficiency. It might not always be effective. Just consider the story of the hare and the tortoise and its relevance to business. Contrary to popular belief, it is not always an advantage to be first to market. The first-mover advantage is based on assumptions such as:

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Sacred cow # 2. From competition to coopetition

Another one of Michael Porter’s ‘sacred cows’ is the notion of competitive advantage. Porter’s famous five forces for competition are about driving costs down, driving prices up, locking in customers, locking out competitors and new entrants. In a flat networked society, the notion of competition is augmented by cooperation as a means of accessing the multiple talents necessary to innovate. In such a society the idea of coopetition might be more useful, in other words a merger of cooperation and competition between enterprises, to deliver a superior service or complete a customer value chain. Enterprises such as Google, Uber, Airbnb and Facebook are great coopetitors.

As long ago as 1766, Adam Smith mentioned ethics as a prerequisite of sustainable business. Trust has now become a major strategic issue in enterprises in a world where we transact business with people we might never have met face to face. Barbara Brooks-Kimmel, CEO of Trust in America demonstrated superior returns from companies who exhibit high levels of trust, showing that America’s most trustworthy companies have produced an 82.9% return versus the Standard and Poor’s 42.2% since 2012, so this is not just a nice-to-have part of your enterprise value chain.

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At the same time people have been moved to rage against the capitalist machine. We see this manifested through seismic shifts toward populism in Europe and the USA. I believe capitalism has some questions to answer in a world where the perceived gap between the haves and have-nots is growing and the visibility of this gap becomes more visible through social media. The big question for capitalism is not:

Should an enterprise make a profit?

But rather:

How much profit should an enterprise make?

To what purposes should it put that profit?

In a coopetive world, we know that what gets measured and rewarded gets done. Enterprises need to reform the measures and rewards to encourage coopetive behaviours, especially as these may run counter to the human condition, so voluntarism is unlikely to deliver the expected results in this regard. Table 11.2 shows some ideas on how we might go about these shifts.

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Sacred cow # 3. From strategic alignment to strategic drift

The CEO’s dream enterprise is one where everyone points toward the same goals, values and behaviours naturally within the context of doing their job. In extremis however such a culture prevents corporate curiosity and the agility needed to respond to opportunities. Much more than ever, CEOs need to encourage at least some divergence from the path and, in some cases, to encourage departure from strategic goals. To some degree enterprises can have their cake and eat it by encouraging internal entrepreneurs or intrapreneurs.

Sir Richard Branson’s Virgin Group is a very good example of a group of companies that are built around strategic drift and intrapreneurship. Richard might live on Necker Island, but he gets out all over the world to look for ideas. In the same way, it is no good behaving like you are an island as an intrapreneur. He is also skilled at encouraging others to do the scanning for him with people pitching ideas on a constant basis. You need to diffuse and spread your ideas widely in the company to build up support. Get out and talk to people who can help you spread your idea. Many companies use innovation champions to support intrapreneurs and we explored the idea of cross pollinators in Dialogue II. A champion will help you diffuse your idea within the company and could help you when the night is darkest.

Sacred cow # 4. From learning to unlearning and relearning

We cannot solve our problems with the same thinking we used when we created them.

Albert Einstein

Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young.

Henry Ford

Unlearning is not forgetting. It is about conceiving of alternative ways of doing things and crucially relies on creativity. When we learn, we add new skills or knowledge to what we already know. When we unlearn, we step outside the mental model in order to choose a different one. Unlearning takes place at a simple level every time I travel by car to Europe. When my awareness is high I am normally very good at ‘reversing’ my driving pattern, changing gears, driving around roundabouts the right way, etc. Thirty miles (or kilometres) inland it is quite easy to forget. Anyone that has been to Weight Watchers will be able to relate similar stories in terms of managing their diet and exercise optimally.

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The same thing happens in business. 3M and Nokia are supreme examples of enterprises that made unlearning their modus operandi. In 3M’s case, the company was built on a glorious mistake, having bought some mountains with the intention of mining corundum but which actually produced very little of the mineral. This set the tone for much of what has contributed to 3M’s success in the innovation game over many decades. One-third of 3M’s products were invented within the past five years. Nokia started life in 1865 with a single paper mill. At one point Nokia made toilet paper. Nokia subsequently transformed themselves through rubber tyres to being the market leader in phones over a decade. It remains to be seen if Microsoft will preserve Nokia’s ‘agility gene’.

Unlearning requires a recognition that your mental model is past its sell by date before you can do anything about it. Without processes or routines to increase our awareness of the need to change, we are doomed to repeat ourselves. I will just say that again. At the moment of recognition that there is a point of inflexion, the search for a better option can begin and, most importantly, the new approach must later on be embedded as business as usual. When working with companies trying to unlearn I have found that they find some kind of intellectual model helps them make the process a conscious activity rather than relying on serendipity. This helps people become conscious of their mental models and ambidextrous in their thinking. The process is moved from one of pure serendipity to planned luck as well.

I asked Simon Warren of CaseWare to speculate on the question of how humans might respond to developments in AI, what capabilities they would need and what ‘unlearning’ might need to be done:

Despite prophecies of doom it is not likely that AI will completely overtake the professional world in a short space of time. That means that the human element of the overall ‘machine’ is still essential, but professionals and those that employ them will need to adapt.

First, it is becoming essential that users become properly adept at using technology. One might think that a professional would be fully expert in their use of IT in the same way that a master carpenter or plumber is at one with their tools. In my experience this is very much not the case. We see time and again users who learn the bare minimum, who either lack the curiosity or (more probably) are not encouraged by their seniors to ‘waste time’ experimenting with technology. This is a particular problem in the professional world, caused by the ‘curse of the timesheet’. This approach will almost certainly spell doom for a future worker, and they will have to exploit their technology toolkit to the full.

Another challenge facing professional businesses is the looming training gap. Take, for example, a young lawyer who spends their early years becoming expert in the field of contract law by reading and analysing contracts. This process is being replaced by machines that can read contracts and, with AI and machine learning tools, highlight problems and suggest changes. Now our lawyers are being asked to review and give an opinion on potentially only the trickiest and most taxing parts of a contract, but how will they develop the skills to get there? Will a firm, under fee pressure, continue to do these things manually for the long-term ‘greater good’, or go for the profit and competitive advantage?

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There is of course another threat here too. Contracts will be automatically drafted in the first place, to ensure they pass through automated readers because that is the most cost effective way of getting through that part of a new business relationship. So not only will we not need lawyers to read contracts, we might not need them to draft them in the first place!

So, businesses will have to learn whole new ways of training their people, imparting the job experience in other ways or perhaps changing the very nature of their professional training structure. After all, young accountants are taught bookkeeping as part of their foundation, but what happens when every transaction is via a closed system like ‘touch and pay’? The bookkeeping is done, the internal audit AI carries out all the necessary checks with 100% accuracy, and passes the data onwards through the system. What then for bookkeepers?

HMRC are moving toward their ‘Making Tax Digital’ destination, removing us as middlemen and linking straight to bank and other data. Ernst and Young recently reported that large companies are starting to invest more heavily in internal audit and anti-fraud automation. Why? Because in one of their surveys of FTSE company employees, a significant number stated they would not ‘whistle blow’ on a colleague out of loyalty to their peer group. Now that is a very real concern indeed to complex businesses where they rely extremely heavily on whistle blowing to expose what can be very well hidden and complex fraudulent activity. The humans are being treated as the weak points in the system.

Humans in the professional sphere will have to learn their trades in a new way, and possibly at a more advanced level from the start. Firms will require fewer staff, competition for those training contracts will get stiffer, and selection processes will become harder. It might also mean there will be fewer higher earners, with the corresponding impact on government tax-take, which is why people like Bill Gates are urging governments to look at the concept of ‘tax the robot’ not the employee. If the former becomes the more productive engine of industry it makes sense to tax the higher producer, not the lower. Exactly how you do that is not clear, but it is being discussed in certain circles as an important future consideration.

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Alongside learning and unlearning, the concept of antifragility is also an alluring one here. The basic idea is that something when stressed becomes stronger rather than more fragile. Who would not want that in their personal and business lives? Hitherto, the concept has been mostly reserved for biological systems but we are starting to see the emergence of antifragile materials in the form of the earliest signs of self-healing materials. Professor Stuart Rowan at Case Western Reserve University developed a polymer-based material that repairs itself in response to an intense beam of ultraviolet light. He says: “What you can imagine is essentially a paint coating on your car that you can heal whenever someone has rubbed a key down the side of it.”

What then is the self-healing enterprise? Perhaps the answer lies in working hard on resilience in a disruptive world, where competitive advantage on one day could be ancient history the next. Enterprises can increase their resilience through strategic rehearsals, learning to improvise and scenario planning among other approaches. The design of enterprises that learn, unlearn and relearn is the domain of great HR strategies and tactics and it is to these issues that we next turn.