First Friday Book Synopsis

"…like CliffNotes on steroids…"

How Drucker Thought About Complexity

HagelHere is an excerpt from an article written by John Hagel III for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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Throughout his life, Peter Drucker strived to understand the increasing complexity of business and society and, most importantly, the implications for how we can continue to create and deliver value in the face of complexity. I have long been influenced by Drucker’s work. In the 1960s and 1970s, he was already anticipating some of the implications of the Big Shift just beginning to emerge: the transition to an information economy, the centrality of knowledge work, and the transformative impact of digital technology on all types of work.

Around that time, two forces coincided, each amplifying the disruptive capacity of the other. First, the deployment of the digital microprocessor and packet-switched networking marked the beginning of the rise of the digital infrastructure that would eventually span the globe, driven by exponential performance improvements in computing, storage, and bandwidth technologies. Digital technology unfolded on top of a second force that had been building for a few decades: a global movement in public policy towards economic liberalization which was systematically reducing barriers to the movement of goods, money, people, and ideas across the boundaries of nations and industries.

The combination of these two forces created enormous opportunities but also enormous challenges. They have systematically and significantly eroded barriers to entry and movement on a global scale. The result is relentlessly mounting performance pressure. Evidence of this pressure is starkly captured in the return on assets (ROA) for all public companies in the US since 1965. Over this period, there has been a sustained and dramatic erosion in performance: ROA has collapsed by 75 percent.

As the effects began to play out in the ’70s and ’80s, Drucker wrote extensively about the need for management practices to change. He knew that as the nature of work transformed and the pace of change increased, existing management practices, not to mention worker skill sets, would quickly become outdated and fail to meet the needs of the coming information economy. The widespread erosion of ROA confirms that our management practices and institutions are struggling to respond to the relentless pressure. Why haven’t they responded more effectively?

The vast increase in the complexity of the economic and social landscape over these decades offers at least a partial explanation. There are many ways to think about complexity, but one key dimension is the degree of connection and interaction among participants. Thanks to the forces described above, we are more connected on a global scale than ever before. Not only are there more connections among more people, the speed of interactions has increased significantly, so that even small events in remote areas can propagate quickly, setting off cascades of events that evolve beyond anyone’s expectations. Witness the grassroots political movements that are increasingly shaking up “stable” political regimes around the world. Power laws with spiky heads and very long tails progressively crowd out the familiar bell curves that made life seem predictable.

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To read the complete article, please click here.

John Hagel III, a director at Deloitte Consulting LLP, is the co-chairman of the Deloitte Center for the Edge, based in Silicon Valley. His latest book, co-authored with John Seely Brown and Lang Davison, is The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion. To check out all of his HBR articles, please click here.

Saturday, July 13, 2013 Posted by | Bob's blog entries | , , , , , , , , , , , , | Leave a comment

How to get your organization to and then remain at “The Center for the Edge”

The Center for the Edge, part of Deloitte LLP, helps senior executives make sense of and profit from emerging opportunities on the edge of business and technology. What is created on the edge of the competitive landscape—in terms of technology, geography, demographics, markets—inevitably strikes at the very heart of a business. Its mission is to identify and explore emerging opportunities related to big shifts that aren’t yet on the senior management agenda, but ought to be. While focused on long-term trends and opportunities, it continues to be equally focused on implications for near-term action, the day-to-day environment of executives.

To learn more about the Center and its unique perspective, please click here.

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In The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion, published by Basic Books (2010), John Hagel III, John Seely Brown, and Lang Davison explain how small moves, smartly made, can set big things in motion. Their book provides a key to how all of us —individually and collectively—can turn challenge and stress into opportunity and reward as digital technology remakes our lives.

Simply put, our institutions are fundamentally broken.

They achieved enormous success by harnessing 20th century infrastructures. Only a few institutions are beginning to discover the potential residing in newer infrastructures and technologies like social media.

By harnessing new pull practices and developing new institutional arrangements to support these practices, we have an opportunity to turn growing stress into expanding opportunity.

As individuals, we truly now have the potential to remake our world, not in a way that simply serves our needs, but in a way that deeply honors the potential of all of those around us as well as our own potential.

To harness the potential of pull, we must begin with ourselves as individuals and join together in the long march required to transform our institutions. On the way, we will discover that small moves, smartly made, can set big things in motion. To learn more, please click here.

Click here to see a  video of John Hagel III and John Seely Brown discussing The Power of Pull.

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John Hagel, III serves as Co-Chairman of Strategy and Technology Center of Deloitte & Touche USA LLP. His distinctive expertise involves perspectives on the emergence and evolution of new business models enabled by the Internet, restructuring opportunities created by e-commerce and new approaches to strategy under high uncertainty. John Seely Brown is a visiting scholar and advisor to the Provost at University of Southern California (USC) and the Independent Co-Chairman of the Deloitte Center for the Edge. Prior to that he was the Chief Scientist of Xerox Corporation and the director of its Palo Alto Research Center (PARC)—a position he held for nearly two decades.  Lang Davison is the former editor-in-chief of The McKinsey Quarterly and is the executive director of the Deloitte LLP Center for the Edge. The Silicon Valley-based Center conducts original research and develops substantive points of view for new corporate growth.

Thursday, April 26, 2012 Posted by | Bob's blog entries | , , , , , , | Leave a comment

Running Faster, Falling Behind: John Hagel III on How American Business Can Catch Up

John Hagel III

Here is an excerpt from an article about John  Hagel III featured by the Knowledge@Wharton website, sponsored by Wharton School of the University of Pennsylvania.

To read the complete article, download/or listen to the audio, check out all the other free Wharton resources, and subscribe for Knowledge@Wharton email updates, please click here.

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In the early 2000s, Silicon Valley-based business guru John Hagel III was involved in a high-tech start-up and hired Stephen Gillett, a young man right out of college. Less than a half dozen years later, Gillett was named a senior vice president and chief information officer for Starbucks — the youngest CIO of a Fortune 500 company at that time.

And Hagel thinks he knows a primary reason for his one-time employee’s meteoric rise. Everything that Gillett needed to know, Hagel said, he learned while becoming a guild leader in the popular online game World of Warcraft.

The co-chairman of a tech-oriented strategy center for Deloitte LLP, Hagel told the annual Wharton Leadership Conference that Gillett — just like other top players on the massive online multi-player game, with an estimated eight million participants — reached out independently to build a large team of allies that solved complex problems and developed winning strategies.

Guild leaders in World of Warcraft “require a high degree of influence,” noted Hagel, a successful author and longtime consultant. “You have to be able to influence and persuade people — not order them to do things. Ordering people in most of these guilds doesn’t get you far.”

The look inside World of Warcraft and its relevance for today’s complicated business environment was part of a recent research project and book by Hagel and two co-authors — John Seely Brown and Lang Davison — that examines how companies re-invent and revive themselves by moving away from secretive, proprietary shops and toward a more open, collaborative business model. Their findings resulted in the recent publication of The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion.

The bottom line, they found, is that American companies will continue to fall behind their counterparts in emerging markets such as China or India unless they move toward what Hagel called “the edge,” which is where passionate, change-driven employees collaborate with others on the kind of innovations that prevent a company from seeing its core business model slowly erode. “The only thing that succeeds,” Hagel said, “is to take those initiatives on the edge and pull more and more of the core out to those edges — rather than trying to pull them back in.” He asserted that chief executives who stick to the conventional wisdom and cling to secretive proprietary business systems are doomed to fail.

Sustained Erosion

This year’s Wharton Leadership Conference  — titled, “Leading in a Recovering (and Even Rebounding) Economy” — came at a time of increasing focus on corporate executives and the role they play in defining a business’s direction, its image and its accountability. The conference was organized by the school’s Center for Human Resources, Center for Leadership and Change Management and Wharton Executive Education, in partnership with Deloitte. Hagel heads Deloitte’s Center for the Edge, which studies emerging business strategies.

Hagel’s more than 30-year career in the business consulting and high-tech industries also included a stint at iconic 1980s video game firm Atari, as well as launching the e-commerce practice at McKinsey. He said the bad news uncovered by his research team was that the erosion of American business leadership was not so much a function of the downturn beginning in 2008 as it was a systemic decline dating as far back as the mid-20th Century.
In trying to quantify the problems facing American industry, Hagel and his co-authors found little existing data to measure the overall performance of U.S. companies. So they worked up some measurements of their own — and even they were surprised at what they uncovered. Since 1965, they learned, the return-on-assets for all American firms has eroded by 75%.

“The erosion has been sustained and significant. There is absolutely no evidence of it leveling off, and there is certainly no evidence of it turning around,” Hagel noted. Indeed, another measurement showed that survival is also an increasing problem for U.S. corporations. Firms in the Standard & Poor’s 500 in 1937 had an average life expectancy of 75 years; a more recent analysis of the S&P 500 showed that the number had dropped to just 15 years. “When I’m in executive boardrooms, I hear the metaphor of ‘the Red Queen’ and the notion that we have to run faster and faster just to stay in place,” Hagel said, referring to the character from Lewis Carroll’s Through the Looking-Glass. “I would make the case, based on the analysis that we’ve done, that the Red Queen is actually an optimistic assessment of our situation, that we are running faster and faster and falling farther and farther behind.”

What went wrong? Hagel argued that American companies and their leaders were essentially not prepared for a move away from a corporate model of “knowledge stocks” — developing a proprietary product breakthrough and then defending that innovative advantage against rival companies for as long as possible — and toward a more open and collaborative business model that he called “knowledge flows.” The problem, he said, is that because of the increasingly global nature of business competition, the value of a major proprietary breakthrough or invention erodes in value much more quickly than in the mid-20th Century.

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To read the complete article, download/or listen to the audio, and check out all the other free Wharton resources, please click here.

Saturday, April 23, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Revolution from the Edge

John Hzgel III

Here is an excerpt from an article written by John Hagel III, part of the Edge Perspectives with John Hagel series, one that offers an on-going “exploration of emerging innovations on a broad array of edges that are rising up to challenge the core.”

To read the compolete article and check out other resources, please click here.

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What fills you with wonder? What do you wonder about?

These different, but related questions were posed often during the TED event last week.  The annual TED event that I attended was organized around the broad theme of the rediscovery of wonder.

As always, TED catalyzed deep thinking and deep emotion as I navigated through awesome sessions and stimulating conversations lasting late into the night. Before too much time passes, I want to step back and reflect on what fills me with wonder. It was only peripherally addressed in the TED sessions, but like many catalysts it helped to coalesce and amplify some thoughts that have been coming together over the past couple of months.

I am filled with wonder by many things, but in recent days I have been especially awed by the revolution that is taking shape before our very eyes.  It has been gathering force for quite some time but it began to erupt in a serious way with the intensifying turmoil in the Middle East.  Most people observing these events from the outside have been guardedly optimistic that these revolutions will be a peaceful force for change in the Middle East.

They seriously under-estimate what is going on. We are witnessing one dimension of the Big Shift that will shake and shape our world in ways that we can only begin to imagine.

The convergence of edges

How to describe this dimension of the Big Shift? It is the convergence of multiple edges, erupting with a force that will be felt in the most distant parts of our globe. What do I mean? The force of this eruption is shaped by three edges coming together: geographic, generational and technological.

The Middle East and North Africa is a geographic edge defined by the intersection of three continents. In economic terms, this region is part of the developing economies operating on the edge of more developed economies.

This region containing a large and very rapidly growing concentration of a well educated younger generation – a generational edge. These young people has been systematically excluded from meaningful jobs capable of developing their talents. Growing unemployment rates within the younger generation have been the catalyst to set the movement in motion.

That younger generation has embraced new technological edges – especially the Internet and online social networks – to connect in ways that had not been feasible before, not just within their individual countries, but across the region. They have shared news and inspiration in ways that gave them the courage to proceed and helped them to focus the attention of the rest of the world on their quest.

It is an explosive convergence. One of the many things about it that fill me with wonder is that so far has been playing out with minimal violence from the youth movement.  They are simply gathering in ever larger numbers to demand an end to regimes that have blocked them from expressing themselves and from pursuing meaningful work. Their example of conviction, courage and commitment has pulled others into the streets and squares, not just in their own countries but in a spreading ring of countries in the region.

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To read the compolete article and check out other resources, please click here.

John Hagel III has nearly 30 years experience as a management consultant, author, speaker and entrepreneur, and has helped companies improve their performance by effectively applying information technology to reshape business strategies. John currently serves as co-chairman of the Silicon Valley-based Deloitte Center for the Edge, which conducts original research and develops substantive points of view for new corporate growth. He is the author of a series of best-selling business books, including Net Gain, Net Worth, Out of the Box and The Only Sustainable Edge. He has won two awards from Harvard Business Review for best articles in that publication and has been recognized as an industry thought leader by a variety of publications and professional service firms. Additionally, he and Center Co-chairman John Seely Brown contributed a chapter to Business Network Transformation: Strategies to Reconfigure Your Business Relationships for Competitive Advantage (2009) and more recently published with Lang Davison The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion (April 2010).

Thursday, April 21, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , | Leave a comment

Designing for Propensity

John Seely Brown and John Hagel III

Here is an excerpt from an article written by John Hagel III and John Seely Brown for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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Compare a standard company org chart with a network analysis of the day-to-day relationships and interactions in the same company.

The contrast is striking. On the one hand, clearly delineated boxes with a few set relationships driven by formal authority; on the other, a bewildering array of rapidly evolving connections. The two representations are so different that one might question whether they in fact are focused on the same organization. Such is the chasm separating two mindsets.

Mindset matters, and we each need to make explicit, and challenge, our most basic assumptions about what is required for personal and business success. Business today requires a mindset that is fundamentally different from the dominant existing mindset, and we have, so far, considered two specific dimensions: short-term versus long-term and fixed versus growth. A third dimension is control versus propensity.

This aspect of mindset addresses how to get results and reduce risk.

In a control mindset, the assumption is that we need to own resources and tightly direct them in order to achieve objectives with the minimum amount of risk.

A propensity mindset focuses on the intrinsic development paths that characterize all resources and the dynamic relationships across resources that are continually shaping those paths. From this perspective, the best way to reduce risk is to understand these paths and find ways to leverage them.

The concept of propensity is richly developed by Francois Jullien, a French sinologist, in his book, The Propensity of Things.

Jullien explores the Chinese concept of shi, a term whose multiple, related, meanings often confound Westerners but is central to the way Chinese view the world. Although it may be described as position or potential, Jullien translates shi as “propensity” — “a tendency that stems from a situation” and “which, once set off, cannot be arrested.” In this understanding of shi, the only countervailing force is a natural tendency towards balance; when a propensity plays out to an extreme, it tends to self-correct and reverse course. Thus, we are still contained within some range.

Shi initially emerged in the realm of strategy and politics but evolved to have a much broader philosophical meaning. In the widely quoted The Art of War, the legendary warrior, Sun Tzu, draws heavily on the concept of propensity: a battle may be won even before the fighting begins if you understand and act upon the propensities of the opponent and the battlefield. By understanding and leveraging these forces, you can avoid direct confrontation and achieve your objectives with minimum effort.

This idea of propensity reinforces the differences between Eastern and Western views of the world so powerfully described in Richard Nesbitt’s The Geography of Thought .

In thinking about mindset, propensity has two key components:

• A dynamic verses static view of the world: everything is in a state of becoming.

• A focus on relationships versus objects: the process of becoming is shaped by context and relationships to others.

This mindset focuses our attention on the dynamics that continually shape the tendencies and potential of the people and resources around us. One cannot understand their propensity by examining them in isolation. Everything exists not just in bilateral relationships, but in complex webs of relationships among people, objects and the broader environment.

Propensity is not abstract; it is shaped by a specific context. For example, years ago Stewart Brand wrote a marvelous book called How Buildings Learn. His point was that buildings are constantly evolving in response to the needs of owners and inhabitants, not to mention weather patterns. The same structure may evolve along very different paths depending on the specific location, owners and inhabitants.

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John Hagel III and John Seely Brown are co-chairmen of the Deloitte LLP Center for the Edge, and have written several books focused on technology and innovation. Their most recent is The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion, published by Basic Books (2010).

Wednesday, December 29, 2010 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , | Leave a comment

Pulling for the Long Term

John Seely Brown and John Hagel III

Here is an excerpt from an article written by John Hagel III and John Seely Brown for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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The Big Shift presents many challenges, including developing new practices and institutions. But from our experience, the greatest challenge will be creating a new mindset, one that stands in stark contrast to the dominant mindset of the push world. A mindset is comprised of assumptions (in this case about how to succeed) so basic that they are rarely made explicit, much less challenged and refined. Yet these assumptions drive all of the decisions and actions we take to address the growing pressures around us. Our next few postings will examine some of the key dimensions of the new mindset that is needed to harness the power of pull.

The time horizon: “Pull” does not mean thinking only about the short-term

Many of the people we have talked to about our book have the misconception that pull is driven by a short-term mindset. After all, one of the key drivers of the move from push to pull platforms is the increasing difficulty in forecasting and predicting demand and the consequent challenges this presents. If change is so constant and disruptive that it makes predicting the future impossible, what is the point of taking a long-term perspective? Pull lets you respond rapidly and effectively to near-term developments, but a short-term mindset undermines the potential power of pull. Paradoxically, successful deployment of pull techniques designed to cope with near-term uncertainty actually requires an increased focus on long-term direction.

As one moves up the levels of pull, a long-term view becomes increasingly important:

Accessing resources when and where they are needed works in the near-term but can become totally reactive if you adopt only a short-term perspective. You respond to the latest events but risk never getting enough attention and effort focused against any one initiative to make progress. Whether you own them or not, resources must be managed and used in a way that makes progress.

Achieving impact requires ensuring a critical mass of resources and attention. Easier access can lure us into spreading ourselves way too thin across too many fronts. Critical mass requires making choices about what to pursue longer-term and to avoid the momentary distractions that can drain resources and attention.

Attracting resources that can help you succeed often seems to function in the short-term (such as the serendipitous encounter just when you need it). Attract actually works better if you (as an individual or an institution) can define and communicate your long-term direction and quests. What domains are of greatest interest and what are your performance goals? These act as beacons to attract people who share an interest in, and can help support, longer-term efforts and allow you to make choices that improve the odds of connecting with those people, shaping serendipity.

Without this guidance, we compound the problem of wasted resources and lost attention that occurs with short-term reactive access — we attract people who can help with near-term events, intensifying the focus on short-term stimuli and consuming attention without making any progress toward longer-term objectives.

Achieving our full potential through collaboration and experimentation is where the long-term view is especially important. Learning, sustainable performance improvement, and talent development all occur over a longer timeframe. Interesting and challenging quests can engage the passions of the people in your organization and mobilize a critical mass of participants in the right direction. Long-term quests also help to focus all of the experimentation and tinkering, providing a clear context and framework for evaluating progress and enhancing performance feedback loops. Without long-term goals, it will be difficult for the organization to connect with individuals’ passions or to transform activities into achievement.

Resolving the paradox: the long-term guides the near-term

The paradox we cited at the outset can be resolved: the long-term view is not a detailed forecast but a high-level direction, a trajectory and a set of challenging goals, which help to focus and guide near-term efforts.

How do we arrive at a long-term perspective that is useful and relevant in a world of pull?

The following three questions frame the issue:

•    What will the relevant markets and industries require for success in 10-20 years?
•    What are the implications for the kind of company we will need to become, the kinds of relationships we will need to develop beyond our company, and the kind of performance we will need to achieve?
•    What are the implications for the practices that we, as individuals, will need to adopt and the kind of performance we will need to achieve?

This long-term view is built on understanding the deep forces that are shaping the business landscape over decades. We have to be explicit about the assumptions we make about these forces and their impact so that we can test and monitor them. While scenario-thinking may be appropriate, you have to choose one. Usually it’s the one that seems most likely or which you have the ability to shape, to orient your actions and choices. This perspective about the future helps us make sense of the changes playing out around us, focuses our efforts and provides important feedback loops.

Pull requires alternating perspectives: short and long

The key for pull is to iterate rapidly back and forth between two horizons — long-term direction and short-term (6-12 month) action. This ability to rapidly zoom in and out — to dive into the details of near-term choices and actions and then pull back to assess longer-term implications and guide the next wave of choices and decisions — is also a key element of the entrepreneurial mindset.

This type of iterative thinking can create a powerful form of productive friction. Conflicts arise as we repeatedly test our actions and findings against two time horizons; the process of resolving these conflicts can lead to new insights about our quests. In the corporate context, we call this as a FAST strategy (Focus, Accelerate, Strengthen and Tie it together), but it applies to individuals as well. We need to alternate between evaluating and adjusting our long-term goals in response to new developments and using our long-term direction to guide near-term choices and actions. In its most powerful form, this simultaneous attention to two time horizons can become the basis of successful shaping strategies that we have discussed elsewhere.

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John Hagel III and John Seely Brown are co-chairmen of the Deloitte LLP Center for the Edge, and have written several books focused on technology and innovation. Their most recent book is The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion co-authored with Lang Davison and published by Basic Books (2010).

Monday, November 15, 2010 Posted by | Bob's blog entries | , , , , , , , , , | Leave a comment

   

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