Old Wineskins, New Wine, and Bottling up Value in Technology

John Hagel

John Hagel (Photo credit: superde1uxe)

In a brief and penetrating post, John Hagel and John Seely Brown focus the question best set up (though not by them) in the Biblical metaphor of wine and wineskins. Our institutions are the old wineskins. The new wine of disruptive technological innovation is being steadily poured into them. Its value is increasingly failing to be realized. In Hagel/Brownspeak:

we are reaching a tipping point of this exponential growth, and it is unclear how the cumulative effects of technology will reshape our economy, political systems, and collective future. One thing is clear: in the hands of existing institutions—firms, schools, non-profits, civic institutions and governments—this awesome technology will achieve only a fraction of its potential.

What is especially striking to me is that those companies and business models most closely correlated with the digital/Moore’s Law explosion are proving highly resistant to evolutionary development of their systems, assumptions, and corporate culture. Worse, some are clearly throwbacks. And there may be a principle here to be noted: That when disruptive technology drives value the companies involved will hunker down and defy any cultural alignment with the innovative principle.

I’ve written about this several times, both in  respect of Facebook’s Murdoch-style corporate governance, and the general failure of social media businesses to do anything other than follow the tired IPO route. We need congruent innovation of financing and governance models to enable these powerfully disruptive, tech-driven businesses to deliver value. Yet not only have they old-style approaches to governance, they are among the least “social” businesses on the planet. This huge disconnect has been noted far too little.

Hagel and Seely Brown are making a wider argument, but this seems to me as dramatic an example as one could find. New wine flows, and the search is on for antiquarian wineskins.

Something’s gonna give – suddenly, and with the dramatic impact that will leave the leaders of our current top social/search brands stammering with surprise. My money is on the emergence of socially-aligned governance models based on some version of mutualization and giving users ownership.

We need a social social network:

https://futureofbiz.org/2012/12/11/please-may-we-have-a-social-social-network/

https://futureofbiz.org/2012/11/21/unsocial-networks/

Hagel and Seely Brown:

http://techonomy.com/2013/03/whats-next-in-the-techonomy/

Related articles

Of Time and Management – and Women

DAVOS/SWITZERLAND, 28JAN11 - Sheryl Sandberg, ...

Sheryl Sandberg at the World Economic Forum (Wikipedia)

As the “Can we have it all?” discussion moves on to “Lean in,” Yahoo recalls its homeworkers, Europe stresses over board quotas, and – just today – Mary Louise Kelly, NPR’s former Pentagon correspondent (and fellow alum of Emmanuel College, Cambridge) tells why she chose to lean out . . .; my question is, what’s the question?

That is to say, when an issue proves intractable, it is generally the case that the question’s wrong, or if not wrong that it’s not the best one to be asking. Re-frame the question and the logs unjam. (Note to self: my new website re-framing.com needs to be activated.)

As to the issue of women’s gaining top roles in management and government, I am a medium-term optimist. Indeed, I am not sure if optimism is the word. I anticipate a tectonic shift, in which women come to dominate the ranks of senior managers and leaders in something of a mirror image of the patriarchy of the 1950s. Seems to me that huge shifts in our society and the innovative nature of our businesses will rapidly bring to the fore managers and leaders with high capacities to engage change and to bridge ideas and people. While there are men who excel at both (and, no doubt, women who do not), it’s obvious that of the current crop of males and females one of these human halves wins hands down. I am not here today to account or philosophize. Merely to note.

That having been said, how to get there – and catalyze the process? In a helpful WSJ column, start-up CEO Jody Greenstone Miller seeks to re-frame the discussion. It is not, she claims, that women lack the drive to “lean in” – it is that they do not like the assumptions of the 24-hour executive culture in which “60-plus hours a week” is the norm into which they are being asked to lean. How organizations break down tasks, how they assess their people, how they rate quality over against quantity – these are not (my phrase) laws of nature; they are assumptions of corporate leaders and the cultures they help shape.

In fact, one of the many ironies of the digital revolution to date has been the degree to which communications capacities have been vastly improved and, at the same time, led to the very opposite of better control over time, distance, and availability. The deep naivety that leads so many grown persons to grasp their smartphones and interrupt family dinners, dates, business social occasions, driving – and no doubt showers and yardwork – as if this is somehow a superior way of living and working is risible. (See this embarrassingly candid tirade against Piers Morgan by his wife: http://www.smh.com.au/opinion/life-in-a-goldfish-bowl–im-tired-of-my-husbands-tweet-nothings-20130130-2dl3t.html)

Point is: These technologies are enabling much more sophisticated work patterns, just as innovation requires them and the social changes that are finally offering women other than token roles in executive leadership demand them. While most of them would deny it absolutely, the phalanx of traditionalists who dominate the corporate world remain the legatees of an approach to leadership and management which we might broadly characterize as Fordist and which (while it was brilliant and indeed innovative in its day) is an increasingly deadly drag on efficiency and effectiveness in the emerging industries and society of C21.

I have written before of the competitive advantage being squandered by company after company as they ignore women applicants (and social media) with drunken abandon. I’ve argued it has been a tactical blunder to frame this question as one of equity (rather than advantage), which is one reason I am no enthusiast for quota solutions (though some other interventions such as requiring more board turnover work to everyone’s advantage).  https://futureofbiz.org/2012/07/07/the-two-most-stunning-facts-about-american-business/

Point here is: Time and communications management, together with the project-focused approach that fits innovative companies and products and other natural shifts, are slowly moving us in a direction better suited to women, innovation, and also (once they start to get it) men.

Jody Greenstone Miller:

http://online.wsj.com/article/SB10001424127887324678604578342641640982224.html?mod=wsj_share_tweet

Mary Louise Kelly: http://www.thedailybeast.com/newsweek/2013/03/11/when-the-sheryl-sandberg-approach-fails.html

The MOOC Scoop: Innovation and the Naive

MOOCs, Innovation, and the Naïve

A thoughtful piece by Clayton Christenson and Michael Horn was challenged this morning on Twitter by John Hagel @jhagel: “Sorry, Clay, we’re thinking much too narrowly abt MOOCs as disruptive force – is it really just-in-time mini-courses?” That may not be a fair way to characterize their position (see the link below). But it surely notes the wide-scale naivety of most of the movers in the MOOC game. This material is fissile. Read to blow in a global chain-reaction.

[My earlier discussion:https://futureofbiz.org/2012/12/20/yes-we-really-do-need-mooc-state-level-and-global/ ]

Memorial Hall de Harvard

 

It has long been clear that online education would become transformative. It has just taken longer than anyone might reasonably have expected. There are many reasons, ranging from broadband speeds to the clannishness of the academy and its accreditation systems to the rather simple fact that thinking analogically (out of the box, for those who prefer to speak in cliches) is hard. Smart people find it especially challenging. Their smartness equips them quite brilliantly to avoid the need for it. You will see this principle in action (it needs a name) everywhere from the Fortune 500 C Suites where no-one needs to take social media seriously (or, for that matter, women execs) to Washington, DC, where most of the time some of the shrewdest of men (and some women) are looking in their rear-view mirror.

Back to MOOCs. There has been “distance education” for over 100 years (begun back in the heyday of the USPS), and even now mainstream higher ed sees that as the template for what the internet can deliver. Along the way there have been wondrous and complex efforts to duplicate the environment of the classroom online – complete with cameras in a real room and all the accoutrements of a campus at a distance. 

Finally, the efforts of one or two major schools and a handful of renegade faculty have led to the offering of “massive” courses (yes, gaming is the model here along with the silly lingo) and the daring principle of “open” access (pioneered in the UK by the Open University, but anathema to the due-process calculus of American schools and their peer accreditors). A famous early experiment, when using rather primitive email-based methods an academic offered a course (was it in Byzantine history?) and recruited hundreds of applicants, led nowhere. Suddenly, catchup.

 

And as elite schools play around by offering a course here and there, and entrepreneurs join them – in search, as is proper in even the digital world, of a business model – we now confront a move by a whole tranche of midlevel colleges to use the MOOC technology to offer sampler courses in their traditional programs.  I could not avoid the broadest of smiles as I read the report. They seem genuinely to believe that an add-on course or two will help with recruitment. They seem to have absolutely no idea that they are playing not so much with fire as with a nuclear chain reaction. However exactly this comes about (I offer some suggestions below), the MOOC is set to devastate western higher education as we know it. Even in the UK a similar grassroots effort is now underway, with the British Library as a partner.

Here are some trajectories that, jointly or severally, are set to lay waste what for generations has been “higher education” in the United States and elsewhere.

·        I have argued elsewhere that the United States itself (perhaps through USAID) or one or more of our major foundations should very rapidly develop a global MOOC-based university offering full undergraduate and graduate degrees. My view is that such an initiative would offer the west a major strategic advantage vis-à-vis other contenders for global influence, and could initially take advantage of widespread knowledge of English (and, then, French, Spanish, Portuguese) in the developing world (Africa in particular). If this is done, there will immediately be blowback since the nature of the MOOC is that there is essentially no marginal cost for one more student, and the offering is accessible internet-wide. That is to say, these offerings would sweep the United States also.

·        A second salient into the future may emerge from initiatives taken by individual states or chambers of commerce or other entities with credibility and resources intent on improving the quality and flow of college-educated students and aware of the increasingly prohibitive cost, to states and individuals, of the standard approach. Let’s say state A takes an initiative and plows money into it while closing state university campuses to pay the bill. Again, the project will not be containable within the state. The key would be a first mover with the credibility to challenge the supremacy of the peer-accreditation system. I am actually a fan of that system (versus the European statist option), but it has institutionalized establishment control. We may expect other players to join the regional accreditors in standard-setting. Since the cost to the user will be zero, the control that accreditors have exercised through federal recognition of their decisions for student aid purposes will become moot.

The point is clear. Once a degree-granting MOOC is up and running, its impact will be viral, across the length and breadth of the internet. It will very rapidly destroy the economic model that sustains our current higher education system. Those colleges presently toying with offering sample courses in this subject and that had better look to their laurels. Many of them will not be around in 10 years’ time, and some I suspect in five. Some turkeys now veritably preparing for Christmas, while others believe it will never come.

I am not saying that this is all going to be to the good. But some facts seem clear and it helps us not at all to pretend otherwise:

  • MOOC economics – no marginal student cost – will lead to huge global institutions as well as niche efforts with base funding from foundations, governments, religious institutions, business leaders, in a vast free-for-all.
  • New, global accreditation mechanisms, probably competing with one another, will emerge.
  • There will be carnage among the current midstream state and private institutions without the branding and/or endowment to buck the supply and demand curves.
  • Huge new opportunities will be opened worldwide to hundreds of millions who currently are excluded; a dramatic driver of global innovation and development.
  • The plain initial focus on tech subjects and others readily susceptible of AI teaching and grading will give place to a wider curriculum as AIs rapidly improve their capacities.
  • The human/social dimension of these enterprises will mesh with exponential developments in social media.

Beyond the Buzz, Where Are MOOCs Really Going? | Wired Opinion | Wired.com.

Yes, we really do need MOOCs – state-level and global

When the venerable Economist magazine decides to take up a theme, you know it has arrived. Now MOOCs.

I shall come back to this, again and again. But for now, three things we need to note.

1. MOOC-based disruption is coming, whether we (or should I say the higher ed establishment, for-profit and mainstream) like it for not. By and large, “we” do not, and we have made that plain by covering our heads with a blanket hoping it will go away. My estimate: within 10 years, 50% disruption of higher ed in the west. Akin to the impact of digital disruption on publishing in the past ten years.

2. The curious way in which initial efforts have been rolling out – from Stanford and MIT, for example, directly and indirectly – is an important talking point. Institutions with little fear of oblivion dare to experiment, if slowly. Institutions facing the firing squad – like the mid-level state universities and generic liberal arts colleges – are busy focusing on faculty meetings and tenure and the chatter of a world about to be hit by a stray asteroid.

3. Two terrific opportunities to be seized.

(a) Innovative states can immediately (as in, within 12 months) develop MOOC/Khan academy models to overlay and supplant the existing systems.

(b) The United States, through USAID or another agency, can develop a global (initially English-language) university offering full undergraduate programs free of charge and without prerequisites. The former has a chance of saving American education, and thereby the American future.  The latter of vastly extending our influence, especially and initially in Africa where English is widely accessible. But moves into a range of languages will soon be AI-based. This will finally be more significant for U.S. global influence in C21 than another dozen carrier groups. I do not exaggerate.

So, let’s get moving in 2013.

Free education: Learning new lessons | The Economist.

Instagram and Life in the Haze: When Will Users Wake Up?

Twitter 6x6

Twitter 6×6 (Photo credit: Steve Woolf)

Twitter is hot today with Instagram‘s TOS changes, which mark Facebook‘s intent to bring their acquisition more fully into line with their own policies and emerging business model. The company quickly jumped in with a clarification – so brief it can reasonably fail to get to grips with the issues at stake. What this signifies is yet another sampling of the underlying problem with mainstream social media platforms and their way of seeking to do business.

In a word, it is use consciousness. Users sign on to these services in a haze of enthusiasm and with at best a partial understanding of how it is that company XYZ intends to make a bunch of billionaires out of giving you free stuff. And no, it is not by magic.

As we know – and as Twitter has kept reminding us, somewhat painfully – it is considered OK by investors to get a service up and running without needing to have that question resolved – the 21st century version of 1990s dot-com eyeballs hopefulness. But there is not an indefinite number of ways in which this can be done. Three are obvious. Sticking ads in front of your noses. Grabbing a portion of your intellectual property. And messing with your private info. The first and the third may work together. The second and the third are subsets of the same thing – su casa es mi casa, as it were.

One of the great mysteries of our time is why none of these companies has taken a traditional commercial approach to the issues involved – and offered their services (search, social, pics, whatever) on subscription; and/or offered a fee to purchase or licence your stuff. Given the vast sums we pay every month to the telecoms who enable us to access all this “free” stuff, it is hardly as if we don’t give evidence of valuing the service.

But my core point: The uber biz model under which most of these web-based services are operating, and on which they have raised many billions of dollars from the wise/gullible/hopeful investment community and recruited hundreds of millions of subscribers, is that the user will be happy to live in the haze, signing endless consantly shifting TOS and privacy statements unread, and handing carte blanche to those who can turn their 0s and 1s into serious cash flow.

Here’s my take. Users will begin to wake up, in ever larger numbers. They will grasp that their increasingly quantified selves are traded in a human meat market. They will (as the Instagram imbriglio illustrates) really resent the notion that the work of their hands, brains and eyes is available to their new feudal masters to use as they choose. And whoosh, down will come the empires built on haziness and the naive and disrespectful assumption that users don’t care.

And so? Well, first, as I keep saying, the financing and governance of companies in the social space needs to be aligned with, um, well, the social space, and not the top-down awfulness that drove the steel barons a century back. But I am not holding my breath. Second, for the moment, we need the steel barons of our digital lives to do their users the honor of treating them like decision-making consumers and economic agents. Yes please, I want search; what’s the monthly fee to access it and retain 100% control of every ounce of data you get from my end? Yes please,.email; and what’s the extra perm month to add on the pic app?

What’s ahead? Huge advantage for Facebook-esque options (as barriers to entry keep falling and interoperability handles the network effect issue) that are run like Credit Unions with some form of mutual ownership and capitalization, and on the leading edge of socmed business. And, in tandem, fee-based services that leave us with our privacy and IP intact. And, of course, the option to sell, rent, lease all what we have, should we so choose.

The future is not life in the haze.

Instagram Rings its Own Death Knell and Leaps to the Mainstream | Constellation Research Inc..

Please may we have a social Social Network?

Please may we have a social Social Network?

So who enjoys irony? Facebook is one of the least “social” companies on the face of planet earth. In fact on any governance spectrum you will find it jostling with the most archaic of our corporate behemoths. I almost compared it with News Corp., and in terms of board/share control issues there are strong parallels. But even @rupertmurdoch is a serious tweep. He gets social in a way we have yet to see any evidence that Zuck does. Read that sentence again, slowly.

I have written before of Facebook’s fundamental problems – interoperability is coming way before this Calif. corporation is permitted to become the new

Facebook logo Español: Logotipo de Facebook Fr...

Facebook logo Español: Logotipo de Facebook Français : Logo de Facebook Tiếng Việt: Logo Facebook (Photo credit: Wikipedia)

global comms everything. Before then, it will go the way of Yahoo and MySpace as barriers to entry keep collapsing. And what was once cool is already becoming infested with grandparents. In general, the more digital a company’s biz model, the faster it will age.

But this is a separate issue, and it would have been perfectly possible for a Facebook-like-entity to emerge run by people deeply imbued with the social idea. Hard to say this, as their guy demands enormous admiration and has mine, but in today’s corporate America MZ is a leader in anti-social as well as old-style board (or rather non-board) governance. In a world of growing alignment, this is 180 territory.

So the news that Facebook’s rather curious experiment with democracy has, through the democratic process itself, as it were, been abandoned, is a joke wrapped in a joke. And Facebook’s protestations to the contrary (see the great article below from Gigaom) just make it worse. There is an indefinite number of better ways in which Fb could have arranged its entry into the world of democratic societies. The approach they have taken lies somewhere between Napoleon and pre-Arab spring MENA.

Which raises a question that is much more interesting: when shall we see the emergence of corporate entities operating in the “social” space – a space that we know will define our relationships social, cultural, commercial, political, from now on – that both understand and choose to act in alignment with the social idea?

My sense is that while this may not be true of corporations delivering business in other sectors – some of which are slowly being attuned to the social idea – for social media enterprises there is no way around a governance structure that is aligned with social and therefore that cannot simply replicate the IPO-driven start-up culture or indeed any conventional model in which the users (who, of course, may or may not be the paying customers) are fundamentally distinguished from the owners of capital and their agents in management. That is, we need innovative approaches to corporate financing and governance that align with the social model.

At one level, this is hardly revolutionary. One of the most interesting features of C19th industrial revolution societies was the emergence of mutual models. In the UK the co-operative societies, still successful wholesale/retail businesses, and building societies, which demutualized into commercial banks during the past 30 years. In the US, credit unions remain. I’m not proposing these as templates. But one can readily understand why Facebook could tolerate the democratic principle only so far as the market would permit the BOD to hand responsibility to groups of users. Hence the ridiculously high voter turnout required, hundreds of millions of people to address technical issues of privacy, which has given the whole effort a pantomime character. And (sorry, but this is true) made democracy look like tomfoolery at a time when respect for democracy as culture and not simply narrow process lies at the core of the global crisis of government and legitimacy, from Russia to China to the Middle East.

So: I’m waiting for a social social network. It may be too much to hope for Twitter to take the lead, though what a superb example it could offer. Aside from social biz approaches to financing, or old-style mutualization (all active tweeters after two years get X shares . . .), perhaps the Gates Foundation will buy it out and establish a user-run governance model (and users include names like Dell, Murdoch, and Branson; the top business brains on the planet hold this network in affection and find serious value here).

Point is: We need social social networks. Facebook is pre-eminently not that. Which is one of several reasons why its future is not all that bright.

Why it’s a good thing that Facebook has given up on democracy — Tech News and Analysis.

via Please may we have a social Social Network?.

Unsocial Networks

Mark Zuckerberg, founder and CEO of Facebook

Mark Zuckerberg (Wikipedia)

Facebook’s decision to draw back from one of the few evidences in the governance of social networks that they understand that social is actually coming to mean for the future of the corporate effort is perhaps no great surprise. For a company whose governance is designed top-down like that of a 19th century steel magnate (or, to be fairer, well, 21st century News Corp), the anomaly of leaving users free to make actual decisions, always open to being “exploited” (aka used) by users actually interested in said decisions, could not long endure.

But the question is raised, yet again: when will it be that companies in the ever-broader “social” space will evolve governance (and financing) models that are actually suited to social?

None of the major players has given that thought much thought, so far. The Facebook voting thing being nixed was a vestigial organ from an earlier, pre-IPO, day when the visionary aspects of the company had more logic than they do now (though, for my part, I have no reason to believe that MZ believes them any less). Something much bigger, and strategic, is needed for these companies to align their social mission with their social identity as vast networks of users. The future will not lie with playing cat-and-mouse on privacy and imposing corporate policies from (in Fb’s case) unbelievably non-diverse boards. And for future read profit.

I billion and rising. Well, we shall see. Think Kodak and RIM and HP and (ouch, ouch) Apple for curves whose rise is halted.

My take? MS soldiers on; Apple crests very soon in all respects; Fb is close to its zenith. MZ, like SJ and BG, has earned his place on Mount Rushmore. What interests me is what, and who, come nest; and how they manage to align their corporate efforts with their users. Hint: it may involve actually engaging this thing we call “social.”

Oh, and Twitter? As a company, it is in the balance, for just this same reason. Its daily users include some of the very smartest minds on the planet – from @rupertmurdoch down. The interest of the Twitter high command in what they/we think is somewhere around zero.

Facebook to users: Please vote to abolish your right to vote | Internet & Media – CNET News.

Brands will shape Global Labor Standards: Apple-Foxconn Company

Tim Cook, Apple COO, in january 2009, after Ma...

Tim Cook, Apple (Photo credit: Wikipedia)

When Apple signed on to Fair Labor I wrote a column in which  suggested that the logic of their decision – a big shift in approach post-Jobs – would be to bring about alignment between western and  Chinese labor standards. Nothing that has happened since has changed my view. Not that this will happen overnight, of course. But it’s the result of several potent forces that are shaping, not least, this company’s effort: branding and global communications. Whereas these forces twisted the unwilling arm of Nike what seems a long time ago, the superlative quality of the Apple brand and the explosion of social media are together pouring gas on the flames.

While it has been traditional to label western brand efforts to ensure decent manufacture conditions for their products as “corporate social responsibility,” the logic of the Apple case demonstrates that it is naive to see CSR as an adjunct effort, or a marketing ploy, or as anything other than central to value. It’s a case where the values-value connection (another theme of mine) is especially glaring.

The harrowing case of the Foxconn worker with severe brain damage, whose family is now going to the Chinese courts to seek to maintain full company support of their son, drives the point neatly (if tragically) home. This man is, as all can see, a de facto Apple employee, whose conditions of service are so far removed from those of the guys at HQ as to be hard to compare. As his family struggles to ensure that he has long-term care after an undenied industrial injury, they have a bullhorn to the world, and that includes the fashionistas for whom the latest Apple gadget is a must, and who have helped drive up its astronomical share price and stack up a mountain of dollars that could buy Facebook twice over for cash (or buy everyone on the planet a half-decent bottle of wine). As the technological gap, and the design gap, between Apple products and those of its rivals narrow, the brand magic is going to be even more key – and therefore even more exposed.

It was a smart move for Tim Cook to jump into Fair Labor, and then arm-twist Foxconn into big wage increases. It would be even smarter for them to leapfrog the moral/CSR competition and drive excellence in Chinese manufacturing and labor practice without needing to be pressured further.

http://bclc.uschamber.com/blog/2012-02-03/csr-and-burden-outsourcing-apple-opens-door

Foxconn goes to court over severely injured worker | Business Tech – CNET News.

To the Bankers of Sibos: Integrate and Innovate from the Board down

Banking District

Credit: bsterling

The world’s global financial community’s annual bankers’ “Davos” should be a time for urgent reflection and remediation for our financial institutions.

It’s time for high-level integration for innovation – and that begins with the Board and the C-Suite of this very traditional set of institutions at a time of explosive disruption. They have a long way to go.

 “The past,” as novelist L.P Hartley famously wrote, “is a foreign country: they do things differently there.” When it comes to the future, we ain’t seen nothing yet. The pace of change is picking up very fast, and institutions – and whole industries – unable to keep up are finding themselves on the wrong side of history. 

Let’s be candid. Banking has never been everyone’s favorite industry. Hardly a customer has had a consistently happy experience on the retail end. And the events of 2008 have left a sour taste that may last a generation – like the losses that millions of citizens have accrued as a result. “Too big to fail” sticks in the craw of Americans of left and right – and makes capitalism, markets, risk, look ridiculous. It takes a lot to make Big Oil look good. And one way or another, the business-as-usual revolving door relationship between Wall Street and the Treasury/supervisory agencies and the Hill and the While House (donors . . .) is tottering. It may survive an election cycle or two. Not more.

So what’s ahead for the bankers? They are sailing into a perfect storm.

First, three potent waves they need to ride. If they don’t, can’t, won’t, then all the clever innovation ideas on the planet will not help them.

1. Service. Banking has to rebuild its brand from the ground up as a “service” industry that is actually seen and experienced as a service. Example: GEICO. Insurance is boring and costly. GEICO customers love their company. I called them the other day to sort out a problem, looked forward to it, enjoyed the experience, and am smiling as I recall it. Banking must be seen to be re-inventing itself as a service.

2. Shared. While “corporate social responsibility” (CSR) has now been almost universally adopted as an element in corporate strategy, by banks like everyone else, it continues to be handled by most players as an adjunct exercise. Michael Porter‘s notorious prognosis that “shared value” is properly the only source of value, incorporating the traditional bottom line and the “CSR” extra, has been treated with derision in private and sometimes in public. Banking must be seen as a leader in building shared value.

3. Social. “Social media” remains an outlier in most mainstream businesses, and barely registers in banking. Not only is social vital to customer service and marketing; more fundamentally it is emerging as the driver of innovation and the continuing renewal of corporate culture – which, as we know, is the cause of all competitive advantage and value creation. Banking must be seen to take the lead in social engagement.

Second, two (of many) special challenges coming their way.

4. Retail. Retail banking is ripe for dramatic innovation. It is almost entirely mechanical, and the perfect subject for machine intelligence. While we debate separating retail from banks’ investment operations, the former is peeling off in its own. The launch in the past few weeks of the Wal-Mart/American Express Bluebird debit-card based banking system is the first major shock. Look at the fee structure (to the consumer, there are none at all), the utter convenience (I opened an account online in literally 3 minutes), the services (huge range and they will be added). Traditional retail banking is ripe for collapse.

5. New currencies. This is more esoteric, and for another post, but from barter to Bitcoin the consumer need for standard money-based transactions has begun to shift. Just begun.

Third: What banking needs in the midst of all this and more is the skill-set it has so far shown it lacks above all else: flexibility, imagination, the capacity to turn on a dime, all those smarts that are distinguishing both New Economy successes and traditional organizations demonstrating themselves capable of re-invention. The core enabling capacity lies in a combination of board governance and executive leadership, and, specifically:

 6. Diversity across generations, genders, perspectives, and disciplines. I discussed this in respect of gender diversity and engagement in social media in an earlier post –  https://futureofbiz.org/2012/07/07/the-two-most-stunning-facts-about-american-business/

We know the problem, but to give an example: in a recent study American Banker found that of 9 large financial institutions operating in California 8 had boards that were at leas 80% white and 80% male. http://www.americanbanker.com/bankthink/board-diversity-greenlining-1039171-1.html

It’s unfortunate, to my mind, that gender diversity issue has been widely perceived as an issue of equity. It’s about value. And whereas in times of stasis a non-diverse board may have worked very well, in times of revolutionary change is represents the voluntary addition of a huge and indefensible element of risk to every decision. Boards and C-Suites need to represent diverse perspectives of all kinds. Only thus will these institutions designed to thrive in an entirely different environment have an opportunity to flourish a second time around in a dramatically different and ever-changing marketplace.

Otherwise, as Kodak and other failed and failing once-great companies like RIM are constantly reminding us, the market is unforgiving. Technology and other emergent forces are toppling the very assumptions that made old-style organizations successful. The logic of service, shared value, social media, and radical diversity at the top level, is finally the logic of the market.

My take? The next decade will see the disruption of financial services on a scale comparable with what has happened to print publishing in the last one. There is everything to play for. But thanks to Moore’s Law and globalization and other forces on the loose in C21, the clock is speeding uo all the time.

 

 

Sibos – Sibos – Osaka, 29 Oct – 1 Nov 2012.

Three Digital Fallacies Holding Back our Top Companies

Andrew McAfee Talk at the Berkman Center

Andrew McAfee Talk at the Berkman Center (Photo credit: Berkman Center for Internet & Society)

Make no mistake, a fundamental embrace of the revolution just beginning in digital communication is core to every company planning to be around in more than a couple of years. Not many (any?) of them really get it. Here are three key reasons.

1. The “social” fallacy. We use this term, yet it merges, blends, squishes together many divergent phenomena – from the chit-chat/cat pic end of the data explosion to what are still generally Sears-catalog marketing efforts – to what we are really talking about. Andrew McAfee recently explained why he coined the term “Enterprise 2.0” and avoids the term “social” with “hard-headed” C-Suite types, as it suggests something soft. I’m not suggesting we can give it up, or that “2.0” language (itself now, well, jaded) will answer. But we have a big branding problem here.

2. The digital/IRL fallacy. Someone tweeted today that in a year or two 25% of business will have a Chief Digital Officer. O boy. The “social” revolution is not about segmenting off yet another slice of the dispersed responsibilities of the C-Suite; it’s about integration. And now, I suppose, we await a new fad: the Chief Integration Officer. Integrative thinking comes very hard to “functional” people and, in a fundamental way, is rendering them systematically dysfunctional. There are a lot of people in high places in these organizations who need to check out their golf swing.

3. The generational fallacy. OK, there is a certain utility in throwing around “digital natives” language, but it’s getting not just passe but dangerous. The depressing lack of engagement of CIOs in social media (now well-documented) is nothing to do with their age. It’s to do with their inability to flex, to roll with the continuing punches of innovation, to grasp a rising level of risk as a friend, to grab the keys to organizational transformation – and value creation.

I’ve argued before that the neglect of social, side by side with a far more long-standing refusal to bring women into the top echelons, reveals a deep-seated death-wish on the part of U.S. business. What we need above all is to reframe the questions raised in the search for value, and rebrand the resources of the 21st century economy. Now.

What Sells CEOs on Social Networking.