What Happens When all the Friction has Gone?

The quick answer of course is that you slide right off.

friction sole-115156_640

I am fascinated by the continuing questions of what is the collective result of us making logical individual decisions that make economic sense. Adam Smith of course would say that this is the invisible hand of the market where we all benefit from everyone acting in their own self interest.

I am constantly telling clients and conference attendees that they need to remove the friction in relation to their interaction with customers and stakeholders. Through our level of connectedness and the developments in mobile technology we are training a generation of people that they can get what they want now. Want to be reading a book? Search on Amazon and it can be on your reading device before you board the plane. Want a TV show, click on your Netflix app, want to reach someone call them on their mobile. The list goes on and on.

Friction is anything that gets in their way about the capacity to do something, and especially if they have made a decision to act rather than just browsing. This is both a customer retention strategy and a talent retention strategy. If inside your organisation people cannot get the same level of capacity to do stuff they can in their daily lives they are less likely to stay.

It is  a clear economic benefit to reduce friction and increase the likelihood that someone will buy your products or services or will stay with your organisation. There are clear first mover advantages but the question is what happens when we have all done it and response time is down to milliseconds.

My thinking on this today was prompted by an article in MIT Technology Review:

Buy buttons are coming to Pinterest and will reinvent online commerce, the company claims.

The article describes the possibility of you seeing a recipe on Pinterest that you like and the capacity for you to click on a buy button that will buy the ingredients on Instacart which has a one hour delivery service. That theoretically means if you feel like it you can scan for recipes on your train trip home, click on the buy button and have the ingredients delivered for you to make dinner. This all makes sense from an logical economic part from Pinterest who will obviously make a cut for that transaction. If you see the recipe and leave the site without making a buy decision they get nothing. There are a number of other implications to this as well:

  • It is likely to be higher margin business for both Pinterest and Instacart (and other providers that participate) because your purchase is partly an impulse buy and you are not comparing prices.
  • It is aimed at the time poor consumer as much as anybody. You may have planned to shop on the way home but a late client call or an unexpected meeting with your boss had delayed you so this service provides a way for you to deal with this problem.
  • It means that the competition to attract and retain platform users for this sort of business is likely to get even more brutal. Accessing those high margin customers who may contribute 80% of your net profit will be vital.
  • Tracking and data profiling of the customers will become even more important and probably more invasive.

More and more organisation are going to be heading down this path in order to reduce any barriers for their customers.

So back to my original question.

Once everyone has removed every possible friction with customers it ceases to be a key competitive advantage. In my work with clients on business models we differentiate between survive competencies and thrive competencies. The survive competencies are the ones that you need to have just to play in the game. Thrive competences are the ones that will grow your organisation and its success. Over time many thrive competencies transfer into the survive category. A sort of commoditisation process. My work is partly about helping people think what the future will look like so they can refine their strategy and allocate resources. Lack of friction will no longer differentiate you in the future.

So what should you do:

  • First of all by all means continue to work on removing friction. It will give you short term advantage the faster you do it and you will need it just to survive in the future.
  • Think through the sorts of organisations and platforms that are likely to capture the attention of your high margin customers or your key stakeholders. You will need to figure out how to maximise your presence there while minimising your dependence on them. If you give up your key contact to the customer to someone else you are handing over power. If you have arrangements with them like Instacart might have with Pinterest make sure that you are in a position to collect customer data.
  • Think through how you support and maintain contact with those customers who are the ones that will promote your business and recommend your product. You may even want to support them establishing profiles on sites like Pinterest.
  • Concentrate on the one enduring competency. Delighting the customer. Removing friction will help that but in the end it is the experience that the customer (in the widest possible sense of the word) has with your product or service that counts.

Tell me what you think

Paul Higgns

Councils and Foresight

Yesterday it was both my pleasure and privilege to present a Master Class on Foresight for Councils to the Annual Mayoral Leadership Conference in Victoria run by the Victorian Local Governance Association and Leadership Victoria. I say privilege because it was fantastic to see such a committed and enthusiastic group of people determined to maximise their learning and capacity to make a contribution to their communities in what must be one of the hardest  but most important jobs in politics. This aligns with one of our principles of being engaged in work that helps others make a contribution to their community so it was a privilege in the strongest sense of the word. Here is a summary of what I presented with some additions based on some of their great questions. The structure of the presentation was to talk about some general principles and then to give the participants a taste of some tools they could use in their council activities. The title of presentation was Avoiding the Unknown Unknowns but from the outset I told them that this was an impossible aspiration. That we can get better at looking at what might surprise us but we will still have to react to surprises and there will always be crises to deal with. Foresight is essentially the process of helping people put together a few more pieces of the puzzle they face while recognising there will always be pieces missing The group as a whole were there to learn to think better about what might be happening in the future, to create new approaches to approaching planning and problem solving, and to look at how to open up their organisations and their communities to what the future might hold. The principles that we discussed around these objectives were: 1/ That we all have innate ability to think about the future. We cannot operate in the real world without that capacity. In such a simple process as crossing the road we have to project ourselves into the future by anticipating how fast cars are travelling and when they will arrive at our crossing point. However our brains evolved at a time when the sorts of threats and challenges we faced as human beings were nothing like the complex issues we face in today’s ever changing world. Our brains evolved in an environment where physical threats and challenges were the main issues and so the improving vision systems and pattern recognition systems that were successful in those environments won out. Our brains have not changed much since those times and so we need concepts and processes to augment the natural way in which our brains work. 2/ That getting people and organisations to think about different possible futures automatically increases the chances of spotting meaningful change. If our minds are already tuned to multiple possibilities we are more likely to see signals of change in the events, encounters, and reports that we see every day. 3/ That the use of as many diverse perspectives as possible in engaging in thinking about the future improves our chances of our organisations finding meaningful signs of change. We all have cognitive biases such as confirmation bias where we actively seek out people and information that confirms our “fantastic” decision making or recency bias where we privilege more recent information (see List of cognitive biases , Top 10 Thinking Traps Exposed — How to Foolproof Your Mind, Part I, or  Racial Bias, Even When We Have Good Intentions for many more examples). These biases mean that we see the world in a certain way and when talking about future possibilities we favour some forward views of the world, discount some forward views, and downright ignore others. No matter how smart we are these biases affect us and it is very hard to get away from them as an individual. Therefore we need to involve people with diverse backgrounds, ages, training, cultures, etc when looking at what the future might hold because we all look at things a different way depending on those backgrounds. 4/ That context is really important. The decision theorist Gary Klein once said:

“Intuition is the use of patterns you have already learned, whereas insight is the discovery of new patterns”

Some of the really good decision makers I have seen in the past were great because they were great users of their intuition. They had built up a large library of problems they had seen and solutions that worked and they were able to pluck those out and apply them. That is the use of patterns you have already learned. It works fantastically well where the problems repeat themselves and we can re-apply solutions that worked. However we live in a world that is getting more complex and uncertain every year and therefore we encounter more and more novel problems as we move forward.The real skill here is differentiating between problems we are familiar with and applying old solutions to them, and recognising what are new problems and creating new solutions for them. One of the underlying skills in foresight is discovering and understanding the underlying patterns that are driving change. One of the practical applications of foresight is using that to create better decision making by understanding context. One of the best ways to look for ways the world might be changing and more new ideas on strategy is to look at other sectors, other cultures, other industries and other organisations. However the real skill is understanding the context in which those changes are happening and being able to apply that understanding to your context, not just blind copying.

5/ That time frames are really important when trying to get your organisation to rethink what the future might look like. One of the lessons that I have learnt in the practical application of foresight is to extend the time frame well beyond the current strategic plan time frame. This may seem fairly basic as we are talking about the future but it is really important. If we move the discussions beyond current plan time frames then it helps get past current embedded positions. The hardest thing to ask people to do is to go through a long strategic planning process and then six months later ask them to rethink what they have done. After people have spent months grappling with the issues, and fighting for their ideas and views to be represented in the plan and have resources allocated to those ideas they will always fight to preserve those entrenched positions. If you can take people 7-10 years in the future we move move partly beyond those problems and have more open discussions. We can then take any strategy ideas generated by that process back into the present to apply them. As a caveat here I am not a fan of these process being thought of as being 20 or 50 years in the future except in very specific cases because the time frames and too long and not relevant to people.

Later in the session I demonstrated our Trend Sheet Conversation process that utilises different perspectives in an organisation to discuss and prioritise trends and the impact they may have on the organisation. During that process I cautioned the group on being over reliant on trends. All trends are historical in nature as they are based on evidence of what has already happened. All trends change or break at some stage so creating pictures of the future that is reliant solely on project existing trends is a very risky process. To highlight that point I displayed the following picture of total vehicle miles traveled predictions from the US Department of Transport :

transport forecast fiascoVMT-C-P-chart-big1-541x550.png.CROP.original-original

Source: http://www.ssti.us/2013/12/new-travel-demand-projections-are-due-from-u-s-dot-will-they-be-accurate-this-time/ 

It appears that the projections ignored changes in what was really happening on the ground and continued to project previous growth trends into the future despite evidence to the contrary. This is a major issue if national road planning and spending is based on the projections. The post I have linked to above describes the process in more detail. One of the Mayors then asked  a really good question which was how do you deal with this issue if trend projections are being presented to you by council officers or outside experts. This is part of a broader question of how elected councillors question and probe information that is presented to them by experts. My answer was in four parts: Firstly the experts need to be probed on the underlying components of the forecasts. What is driving the assumptions. A key approach here is to break down the numbers into their components. In the case above questions like what are younger drivers doing? what are the effects of increasing urbanisation on miles traveled? If those answers are not forthcoming then the understanding and expertise of the expert has to be called into question. People who really know their stuff will revel in good questions being asked. Secondly ask a series of “what if” questions. This can be phrased by stating something like “lets assume that is the most likely scenario but what happens if the trends change? This can be particularly useful if again the trends are broken down into their component parts. For example “what if young drivers change behaviour?’ or “what if urban densification in our area accelerates?”, or “what if petrol prices fall?” or “what if the demographic mix in our area changes?’This can be particularly useful in identifying risks that are present if the trend breaks or changes Thirdly create a single scenario that details all the things that must remain the same for the trend to remain unbroken. This is very similar to the first process above but can be done in much more creative and story-telling ways that may work better for communication. Fourthly studies show that experts can actually be the worst people for spotting changes in patterns and trends because they are so tied into the existing ways of thinking. Therefore bring alternative outside perspectives into the process of thinking about the trends. This is always useful. I wish the group luck in their leadership roles in their communities in the next year,. I continue to be inspired that there are great people willing to put up their hands and put in the hard work that our communities need Paul Higgins You can see the presentation at Embracing Uncertainty – Mayoral Conference Masterclass Jan 2015 A second blog post : Councils and Foresight – Critical Differences is now available If you want to see more of our work please go to  Emergent Futures

The Board’s Role In Complex and Uncertain Environments – Part One

A couple of weeks ago I delivered a Master Class Workshop for Not for Profit Organisations as part of the Leadership Victoria Director Dynamics Master Class Series : How do successful boards manage the“unknown unknowns?

As part of that process I re-examined my own thinking on what board’s should be doing generally in this area and decided I should write down my process of thinking through the issues in a format that allows more examination of the issues than the confines of the workshop.

As the start of the process I was drawn to an MIT Sloan Management Review article written by Didier Cossin and fellow futurist Estelle Metayer :  How Strategic Is Your Board? (sign up required) as I felt it provided a useful framework to overlay foresight thinking and approaches on to

In particular I was struck by the following graphic they used about the board’s role in the context of various operating environments:

Board's role in strategy dependent on context from MIT Sloan Review

In the article Cossin and Metayer have the view that the role of the board varies depending on the context they find the organisation in and that when those contexts change then the board needs to change its role.

My view is that boards are generally operating in an environment that is simple, complicated, or complex and occasionally dipping into chaotic environments, which most people would define as crises. If we look at the graphic from that point of view then boards that are operating towards the right hand side require both a different approach but also more time to commit to the organisation. As the context moves to the right the requirements for a supervisory role do not diminish but the requirements in the rest of the roles increases. More and more boards are operating in complex environments due to the increasing complex, networked and connected world we live in. This presents a problem in its own right.

In my experience a lot of boards and the management have not even thought through the context they operate in this deeply and are not really operating in the optimal way in a relatively stable environment (in this case stable does not mean the opposite of complex or chaotic but that the organisation is operating in one context or another). Thinking through this more deeply is highly valuable for the board because until they have decided what environment they are largely operating in then the role that boards tend to take are dependent on historic operating modes of the organisation, or tried and true ways that directors have operated previously.The problem with this approach is that confronting new problems with old approaches only works if the problem is similar to the old problems.  In my early days as a board director I was enormously impressed by a Chairman who seemed to be a great thinker and strategist. Over time I realised that it was the product of a long experience and applying previous approaches to problems. As the organisation encountered more and more complex environments his ability to strategise fell away dramatically as novel problems and issues presented themselves.

However I am not saying that we all need to start operating in a mode that suits complex environments. This works in both directions. Boards should not apply complex context modes of operating to simple operating environments. There is as much danger in doing that as applying simple modes of operating to complex environments.

I think that this is a particularly apt to thinking about the boards of not for profit organisations because in my experience they have the following issues which differentiate them from commercial boards:

1/ While strategy should be about the exploitation of risk defined by an appropriate understanding of the risk appetite of the organisation many not for profit board members are more concerned with managing their own risks rather than the risks of the organisation. This results in a risk aversion mindset due to their requirement for there not be be “problems on their watch” which means avoiding failure at all cost. Which translates into “avoid highly visual failure at all costs” . However failing by not taking appropriate risks is not as visible and therefore risk is minimised at all costs which includes either constricting the capacity of the organisation or creating crippling compliance requirements. I have witnessed a board that deferred to the lawyer on the board when talking about risk because they felt that he had the appropriate expertise without realising that he was all about building his board resume and looking for other board positions and so was highly risk averse for the wrong reasons. In the context of the framework that Cossin and Metayer have provided this often results in a board being overly supervisory and spending too much time in that role to the cost of their other roles.

2/ Not for profit boards generally have less time to commit to the organisation. This varies tremendously for individual board member, some of which spend an enormous amount of time and effort on the organisation. However the time for collective strategy efforts tends to be constrained by the length of board meetings and how much time the more time pressed directors can spend on the organisation. In the context of the framework presented this means two things. Firstly with limited time boards tend to feel that they have to get the supervisory role right and therefore co-creation tends to take second place. I have worked with several boards where it is the first time they have spent more than an hour on foresight and thinking deeply on their strategy (as opposed to reviewing a strategic plan presented by the management). Secondly in environments that are more complex the time commitments are higher and this makes it more and more difficult for the board to feel that it is carrying out its role well. This can sometimes work well in a chaotic environment  where it is all hands on deck in a heroic stance. However it is far more difficult when operating in a complex environment in an ongoing manner.

Before we move on to my thoughts on the role of the board and the foresight approaches and principles that need to be applied we need to define what is meant by these operating environments. My thinking on this has been greatly influenced by the Cynefin model and Dave Snowden’s thinking and writing. I recommend that you go to Cognitive Edge for a deeper and more nuanced discussion of thee model but basically :

1/ Simple environments are defined by simple cause and effect relationships which can be readily understood where best practice is the main approach.

2/ Complicated environments are defined as where cause and effect are still understandable but they are more complicated. This is the area of systems thinking and expertise. There may be feed back loops and time delays and multiple interactions but with sufficient expertise and analysis they are understandable.

3/ Complex environments are defined by interactions and relationships that are only discernible in retrospect. For example we may now be able to explain why the price of oil has dropped dramatically but a year ago it was impossible to predict because they are so many interacting factors and the reactions of actors in the environment to change cause even more possible forward scenarios. You can start again with the same starting environment and get a completely different future. Some people make the mistake of thinking that expertise is not important here because you cannot understand the system in prospect. However multiple expertise perspectives is the way to operate here. I recommend that you read Dave Snowden’s recent blog on this:

Of experts and expertise

In my next section of this series of posts I will explore what a board can do to operate in increasingly complex environments and then move on to ways of thinking about foresight and strategy.

You can now see that post at:

The Board’s Role In Complex and Uncertain Environments – Part Two

Paul Higgins

How to make Strategy SEXy

When I tell people that I am a futurist the reactions fall into two broad categories.

  • “That is so cool” – to which my response is generally “can you go and tell my 15 yr old because he in no way thinks I am cool”.
  • What the ****** is a futurist. That happened to me yesterday when I was sitting in the audience for the launch of a new Horizon Scanning tool that we are working on with the Department of Premier and Cabinet here in Victoria. The group in the seats behind me were saying “what is a futurist, there is supposed to be one here?” My general response to that reaction is : we help people think differently about the future so they can shape their strategy.

I like to show people the Futurist Meme from http://www.wfs.org/content/what-people-think-i-do-meme-futurist

because it is largely true from a number of perspectives and I do like to think that what I do is about helping people get a few more pieces of the puzzle about what the future might hold.

Because the future is inherently unknowable we need to take the possibilities that we see and put them into a forward strategy because while the world is highly uncertain, complex, and rapidly changing we still need to do stuff.

To do that we use the acronym SEX for strategy. Partly because it is easy for people to remember  and partly because sex is sort of involved. Sex stand for Strategy, Experimentation, and eXploration.:

Strategy

Strategy is about what we know enough about to create a hard, detailed plan. This can be the case even in the face of considerable uncertainty. For example if we look at agricultural research in the face of climate change there is a huge amount of uncertainty. Even if we put aside the arguments between those that believe in climate change being largely man -made and those that do not there is still considerable uncertainty in the macro models. Beyond that once we drill down into specific geographical regions the uncertainty is much higher. In the face of that uncertainty research into improving the water utilsation of plants is still very useful. If climate change does not occur then those plants will still be useful in areas that were previously too dry to grow them. If the actual regional outcomes are far different that the median models then the plants will still be useful somewhere, even if it may be far away from what was envisaged when the research began. Strategy is about creating a detailed, defined plan that fits how the organisation actually works rather than fitting the organisation to the plan. It is also about finding things to do that are successful in multiple forward scenarios.

Experimentation

The reality is that we live in a complex, rapidly changing and uncertain world. Most people respond to that  by trying to create certainty through forecasts or spreadsheet models derived from MBA programs that give the aura of robustness. The reality is that in a complex, disruptive world there are many things that will blind side us. This is hard for many people to accept, and especially for the smartest people in the room who have a hard time accepting that they cannot know the answers, Or even if they do, they have a hard time admitting it to others. This is where sex comes in……

Species and ecosystems respond to inherent uncertainty in their environment by having diversity, and populations or ecosystems that do not have that diversity are very brittle in the face of change. That diversity is fueled in part by sex and the exchange of genetic material. The parallel in organisations is to have an exchange of ideas and perspectives that are driven into many small experiments and trials that we are continually putting in place at the edges. Then as the environment changes we have multiple, pre-made approaches and capabilities that can respond to the changes. This requires a cultural change that accepts and even rewards failure, and also accepts that we have to feel our way forward.

It is our strong view that this experimentation is best carried out via a group of organisations so that we get a variety of ideas and perspectives, and also share resources  and risks in trying out things.

eXploration

No matter how good our strategy is, and how well we are experimenting at the edge we also need to keep our eye out for what might happen. This allows us to change our detailed strategy as necessary but also inform our thinking and and design of experiments and trials. This exploration needs to be both lateral and vertical.

The science fiction writer William Gibson is famous for saying “the future is already here it is just unevenly distributed”. There are lots of new and different things happening in different industries, different cultures, different areas of expertise and different countries. I am also fond of the saying that “good artists copy, great artists steal” Get out and have a look at what you can bring back into your organisation or industry and change how things work. That is the lateral approach.

The vertical approach is about deeper understanding. It is about getting below the surface of trends or ideas and understanding what is really driving them. It is about looking at the drivers from the point of view of behavioural economics, metaphors, philosophy, etc and getting a deeper understanding. It is about dropping the stuff you see into thinking frameworks and models so you can understand more deeply than anyone else and design approaches and strategy that others have not thought about. It is at the heart of business model innovation.

If you work out a way to put all this together in a way that suits how your organisation really works then you can create an organisation that can strategise and feel its way to the future more successfully.

Paul Higgins

p.s. – next month we are starting a collaboration process on experimentation with a number of organisations, and yesterdays launch with Dpt of Premier and Cabinet is about a formal scanning model for exploration. If you are interested in either of those approaches contact me at paul@emergentfutures.com

Why Great in the Market Place of Ideas Means a Power Drill not a Revolver

Last week Jason Calacanis sent out an email of his post that was up on The Launch blog called The Age of Excellence. In the post Jason argued that in a world of relentless openness and transparency it was no longer enough to be good, you had to be great.

Jason illustrated this by an image of a revolver, saying that your reviews had to look like a gun with lots of five star reviews making up the barrel, a few four stars making up the chamber, and very few 3 to 1 star ratings making up the handle. This creates an image as follows (from the launch post)

I agree that this totally applies to the world of start-ups and applications where the user experience and word of mouth from that experience is all important. However it is a dangerous analogy or way of looking at things in the world of ideas even though I have followed it almost exactly when buying books on Amazon. Reading this post has made me change my behaviour which is the greatest compliment anyone can pay to someone writing about an idea.

If you are involved in making applications for tablets or smartphones, or in producing movies for pure entertainment value  then you should be aiming for this sort of picture. However most of our work is involved in the marketplace of ideas and we deliberately avoid trying to achieve this picture. When I present a keynote at a conference I am actually looking for a picture that looks more like a portable power drill with a batter pack at the bottom:

Image from Amazon

With lots of fives, a few fours, then hardly any twos or threes but a fair number of ones.

The reasoning behind this is that we are trying to push people to change their thinking and re-examine their mental models in order to actually change what they do. The people that will do that are contained in the group that gives us a five star review. However if everyone loves what I have said or presented then I have not pushed the 5-star group hard enough. If I haven’t done that then there is likely to be less action in the five star group. Our mission is to leverage our skills and thinking to enable other people to take action.

There are plenty of quotes out there about ideas that change things first have to be seen as subversive or ridiculous. Therefore it is my view that if everyone likes what is being presented to them then it is too bland and too mainstream. That is fine in the area of entertainment or applications but it is dangerous in the market place of ideas. Our mission is to leverage our skills and thinking to enable other people to take action so if we are not pushing hard enough we are failing to be great. I agree totally with the sentiment of Jason’s overall post which is that in a modern world you have to be great because good is not good enough. However being liked and being great are not always the same thing.

Paul Higgins

If you want to see more about how we present and some of our audience ratings go to the Keynotes and Presentations section of our website