My professional life has luckily been with organizations that were pioneers in implementing global scale management philosophies. Whether it was applying Six Sigma, Lean or getting an early view into Internet scaling banking and financial services or the use of advanced analytics as a competitive differentiator.
I have also been fortunate enough to be at the right place at the right time when in the aftermath of the financial services crises, the opportunity to innovate out of the downturn was recognized. This allowed me to get more than a ring side view into the birthing of newer management philosophies like adaptive organization design, agility and the beginnings of mass scale adoption of design thinking.
As you can see, I have had the privilege of being lucky.
It struck me that the optimization philosophies that delivered high quality products efficiently have receded into the background, having become successfully entrenched and have given way (or are in the process of giving way) to interconnectedness philosophies. In some sense, I see this as a continuum. The wave of standardization that lasted decades is now facilitating a wave of interconnectedness. We are no longer members of disconnected organizations; rather we are a part of a fabric that is increasingly interconnected and is ironically reliant on controls to ensure friction (contractual controls, copyright, patents etc).
But with digital, something far more profound is underway. What is happening today is nothing short of the building blocks of a self-sustaining ecosystem. The Internet is the fabric; cloud makes everything ubiquitous and advanced analytics will soon blend into the Internet so as to be non-distinguishable and finally, everything that has a pulse, animate or inanimate is now capable of being communicated real time.
These changes are profound and require a very different way of thinking – a digital mindset. A digital mindset is needed for taking this interconnectedness and developing it into an ecosystem that has the potential of being self-sustaining. Clearly Digital is a new way of thinking. With Google’s AphaGo AI beating Lee Seedol (Go’s champion), Digital Thinking requires to be written with ‘D’ and ’T’ in capitals. And while for a few folks this might come naturally, for most of us this is going to be a challenge.
Digital Thinking will be the new source of competitive differentiation for some time to come.
IMHO Digital Thinking entails three philosophies:
Design Thinking: The need to create viable human centered products and services that evolve around the customer. This is a subject that has been discussed often and I won’t belabour it as the case is made.
Systems Thinking: Peter Senge’s seminal work on Systems Thinking brought about how successful organizations understand, create and learn from the impact of parts on the sum. The more we move towards designing products and services that are obsessed about the customer, the more our ability to orchestrate the value chain will benefit from Systems Thinking. This thinking will enable the underlying skeleton for an adaptive org design. If Design Thinking is for innovating product and services around the customer journey, then Systems Thinking serves the purpose of innovating the org structure and the value chain to deliver the product or service to the customer.
Ecosystem Thinking: I earlier wrote about platform and how they are going to shape all our interactions. The underlying thought processes behind platforms lie squarely in ecosystem thinking. It isn’t enough to involve the customer and the value chain rather it is also important that system is sensitive to the ecosystem and works with it and is indeed because of it. With the advent of social web, network effects have been given a lot of prominence and through IoT, advanced analytics and AI not far behind, Internet of things is giving rise to ecosystem. For example, a bank doesn’t become a platform without enabling and adding value to the purchase / investment that you want to accomplish. For this the bank needs to be as much in synch with the ecosystem as with you.
If you think through, this would seem a lot like the natural world. I do believe in a future where systems that try and enforce homogeneity through lack of choice or command and control will invariably give way to heterogeneous ecosystems that evolve, and the entities that are able to adapt will thrive. The fourth industrial revolution promises to take us closer to bio mimicry at a global scale. Well, maybe apocalypse is another possibility but I will remain an optimist who would rather make a contribution to the former scenario.
These three forms of thinking are critical towards building organizations that deliver the three greatest business needs of today:
- Products and services that are designed for, and evolve around, the customer
- Organizations structures that are agile and adaptive around the customer
- Organization processes and decision making that thrives as part of an ecosystem
It isn’t that the above thought process hasn’t been around. It is just that today technology has fundamentally changed a strategic necessity into an existential imperative that will get executed not top-down but at the edge and within organization’s decision making processes on a continuous basis. The technologies of today make it possible and I believe the best organizations will shape the future in the way of an ecosystem.
Both economies of scale and economies of scope will get tested in a digital business model and they can’t be accomplished without the combination of all three types of thought processes.
The most difficult part to accomplish would be the one in the middle – Systems Thinking. I believe this is the organizational challenge that we have been leading up to – the need for defining one’s offering around ever more sharply defined customer segments within an evolving, interacting and increasingly self-regulated ecosystem.
I will finish with misquoting Webster’s dictionary.
In the dictionary, an ecosystem is defined as a community of organisms interacting with each other and with their environment such that the energy is exchanged and system-level processes, such as the cycling of elements, emerge.
In the digital world, this will be re-written as:
A digital ecosystem is a community of people and things capable of interacting with each other and with their environment such that state data is exchanged and system-level processes, such as next best actions, emerge.
Digital Thinking = Design Thinking + Systems Thinking + Ecosystem Thinking