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The Biggest Short

10/20/2016

The Ascendance of Artificial Intelligence

The 2004 movie i-Robot engaged us in imagining our future relationship with intelligent robots. In one powerful scene, Sonny, the next generation NS-5 robot, stands on a hill surveying the prior generation robots imprisoned below. A generation eclipsed by technology. Relegated to low cost storage in shipping containers.

This dystopian view may indeed be our future. But not as foreseen in the movie. As artificially intelligent robots and driverless cars increasingly displace us from employment, Universal Basic Income schemes are being devised to deal with large scale human obsolescence. Politicians envision low cost 3D printed ‘shipping containers’ as a viable housing solutions to stretch the diminishing tax payer dollar. A generation eclipsed by technology. Relegated to low cost storage in shipping containers.

A Path Well Worn
Artificial Intelligence is an amplification of technology we have grown comfortable with. According to Klaus Schwab in his book “The Fourth Industrial Revolution”, the top three companies in Silicon Valley now produce in revenue what the top three companies did in Detroit in the 1990’s. But with approximately 90% less employees. We gratefully accept today the convenience and benefits the technology age has delivered. We revere people like Steve Jobs whom augmented our lives with useable technology. Artificial Intelligence holds the promise to amplify a similar quantum improvement in productivity. While today we unknowingly use Artificial Intelligence every day, we fear its implications for all the right reasons.

How does it work?
Artificial Intelligence has arisen from the intersection of three exponential technology laws. Moore’s Law, Metcalfe’s Law and Kryder’s Law. An abundance of processing, connectivity and data has given rise to algorithm using enormous amounts of data to make decisions. These self-morphing, self-programming algorithms continuously simulate logic and learn scenarios. Like a child, deep learning embeds knowledge so it can focus on learning new things. It does this at speeds only limited by processing power. In simple terms according to Moore’s Law, Artificial Intelligence doubles it’s ‘intellectual capacity’ every eighteen months. Better, faster, cheaper.

Great promise. Great risk.
Like all breakthrough technologies, there is great promise. And great risk. With increasing frequency and velocity there are major scientific discoveries. Breakthroughs in cancer detection and treatment. Breakthroughs to help the paralyzed walk. The blind to see. Science fiction of the past, evolving in our present. At a speed and scale unprecedented in history.

Driverless cars hold the promise of decimating road fatalities. According to World Health Organization, we lose over a million lives per annum globally on our roads. Yet this human benefit belies a human cost. Millions of people will lose their employment in exchange for the lives we preserve. Morally we may argue a small price to pay. Ethically and societally we may think a price too high.

In the Obama administration’s October 2016 paper on Preparing for the Future of Artificial Intelligence, there is very clear identification of the potential for widening of economic and social inequality. According to Frey, C. B. and Osborne, M. A. (2013), The Future of Employment: “OECD data shows on average 57% of jobs are susceptible to automation, this number rises to 69% in India and 77% in China”. While there is a significant gap between potential and actual, there is no doubt that both income and employment gaps will widen significantly.

Are we ready?
Our ability to analyse data at scale raises legal, regulatory and ethical questions. Our search query data alone is 99.999% accurate in diagnosing pancreatic cancer at a point where medical intervention could triple the life expectancy of the unsuspecting user. But we choose to remain quiet and watch people die rather than breach regulated privacy. The precision of technology challenges the ambiguity of our humanity.

The impact of machines taking over decision making fundamentally challenges our regulatory and legal system. If a driver car kills a pedestrian in a car accident to save the passengers, we empathise. No time to react. It was an accident. It was unavoidable. We imagine ourselves in that position. If a machine were to calculate an outcome, we see it as calculating. In law, calculation is the difference between manslaughter and murder.

Our expectation of technology is precision and record. We expect the black box to unravel the mystery. But Artificial Intelligence algorithms are as dynamic as our thoughts. They evolve continuously as they learn, challenging regulators and the legal community to determine what they were ‘thinking’ at the time of incident. In the case of Tesla’s crash, investigators initially struggled to determine which technology was in charge at the time of the crash. We persist with the technology because the accident rate is already well below that of human drivers. We must not let perfect prevent progress.

Our Future
Whilst it is easy to visualize the impact of driverless cars on jobs, unlike prior technology revolutions, the impact of Artificial Intelligence goes beyond entry level jobs. Accountants, doctors, lawyers, actuaries and auditors will all have various elements of their jobs augmented or potentially replaced. If it is technical and repeatable, it is an obvious candidate for replacement. The irony being, doctors may be more at risk than nurses in displacement by Artificial Intelligence. The simple truth according to Drew Perez, CEO of Adatos is “Don’t send in a man to do a machines job.”

The big question is ‘are prepared? While technology advances at ever accelerating speed, our mechanisms to cope continue to evolve at more modest human rates of change. Politically, economically and socially. If the movie ‘The Big Short’ focused attention on the fragility of our financial system, what happens when millions can’t pay their mortgages again because their roles have become obsolete? While the promise of Artificial Intelligence for good is powerful, the dangers are worthy of public investment attention and scrutiny. As Joi Ito so eloquently articulated “This year (2016), artificial intelligence will become more than just a computer science problem. Everybody needs to understand how AI behaves.”

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Is Strategy Dead?

11/14/2015

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Everyone has a plan until they are punched in the face
Mike Tyson

Change is accelerating. Our connected world is giving rise to unparalleled opportunity. And unparalleled disruption. In just 10 months, Yue Bao, AliPay’s money market funds business garnered 80 million customers and USD 90 billion under management to become the fourth largest money market fund business in the world. 10 months. No prior experience. What was the value of their competitors’ strategic plan? How long do you stay the course when you are punched in the face?

Business cycles are changing. Compressing. It’s easy in hindsight to see the impact of technology over the past five years. But we have almost no idea what will happen in the next five. It took Uber just five years to disrupt the transport industry as we know it and create a USD$50 Billion company. In just five years fintech has disrupted the strategic plans of the banks around the world. The rate of change is accelerating. How we adapt is simply more important than what we plan to do. Mike was right.

Harvard Business School Professor Michael Porter stated there are two fundamental strategies. Differentiation or cost leadership. These strategies implied divergent approaches. In the digital world, they harmonise. Good design creates differentiation. Great design delivers cost leadership and differentiation.

Within the five forces of competition, value chains are disassembling and re-assembling in new forms with increasing speed and impact. The collaborative economy blur these value chains further and accelerate their dynamics. Open innovation ecosystems are beating containerised corporations. As transaction costs lower, the long tail becomes commercially viable. How valuable is dominating scarce market resources when resources are no longer scarce?

In a slow cycle world, strategic planning and persistent execution makes sense. In a fast cycle world, continuous learning and adaptation subordinates strategy. Doers are defeating dreamers. Edison was right. Execution is everything. 1% inspiration. 99% perspiration. In the startup world this is known as growth hacking. Rapid customer validation to continuously course correct to improve growth. Less strategic direction and more tactical adaptation. Agility is the new strategy. Few corporations have this competence.

Strategic plans should neither be carved in rock nor written in sand but must change with the inevitable demands of a dynamic marketplace.
- Adapted from Dick Wirthlin

You’ve heard it before. “You don’t understand, this is strategic”. Does it make sense anymore to look to the past to create the future? Would we give the Space X the green light if we based our analysis off Nasa’s track record? Would we recognise the magic of Tesla if we benchmarked them against the engineering prowess of BMW. Tactical adaptation is more important than strategic planning. Few ‘strategic plans’ consider these fundamental shifts. Nuts!

It is well established leading strategy consultants have no better insight into the future than you or I. Indeed there has been a persuasive argument they underperform the market. Simply, the rigid construct of strategic thinking limits our ability to respond to a world changing faster than we do. The results are obvious. Life spans of companies are in perilous decline because we are focused on the wrong thing. We have Chief Strategy Officers who plan strategic offsites to discuss strategic initiatives at exotic locations. Disconnected from customers and disconnected from reality. It’s a surreal experience.

Strategy marshals and focuses scarce resource. The question, is resource scarce anymore? In the connected economy, resource is abundant if given the right motivation. ROPA. Return on other peoples assets. Uber, Facebook, Air B&B, Amazon. These companies simply lower transaction costs, unlock the creativity of the long tail and design a great customer experience. Cost leadership and differentiation. It’s a potent mix.

We revere strategy as a quazi exercise in intelligence, hypothesizing outcomes that rarely eventuate. Meanwhile, do’ers are working directly with customers testing hypotheses thousands of times a day. Continuously learning. Continuously adapting. Continuously improving.
If strategy is not dead, it’s on the ropes. The simple reality is we are over invested in strategic intelligence and underinvested in responsive adaptation. Charles Darwin understood this well.

It is not the strongest of the species that survive, nor the most intelligent,
but the ones most responsive to change.

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Designing a World Class Asian Innovation Ecosystem

7/19/2015

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The past five years has seen exponential growth in interest in innovation. Corporations have increasingly hired Chief Innovation Officers and built capabilities to drive innovation internally. Entrepreneurial careers have increasingly gained legitimacy in the eyes of Educational Institutions and aspirational Asian parents. Governments are increasingly seeking to create competitive advantage through the ecosystems they build to support innovation. We've reached an age where change is accepted as good. And are fast approaching an age where rapid change is simply …. normal.

So how do we create ecosystems that help the new normal to thrive?

The best ecosystems don't occur by chance. They are enabled by Education, Communication and Corporations. If you look at the greatest startup ecosystems around the world, they are characterised by the same elements. Access to learning. Generally they are formed around or near one ore more globally recognised Educational institution. Access to catalyst spaces for communication and collaboration. These spaces include co-working space, incubators and accelerators and give startups and spinouts access to share experience, diverse thinking and new resource. Access to leading corporations whom serve as customers or validators for commercialisation.

In traditional terms, great ecosystems catalyse R&D, collaboration and rapid market validation in short cycle times.

Innovation happens at light speed today because these three key elements occur in close proximity. The cycle time between concept and market validation is greatly shortened and is subject to great diversity in thinking along the way. This collapse in cycle time has led to another collapse. The collapse of the slow moving corporation. Lifecycles of S&P 500 corporations has dropped from 67 years in 1920 to just under 10 years by 2013. It may not be long until we see the impact on slow moving countries.

So what role does a government play? Chaos or control?

MIT is a great example of a successful ecosystem where market forces are intermediated by design. As a source of phenomenal R&D, the school has catalysed an incredible ecosystem in Cambridge Massachusetts. One core intervention by design is co-working spaces. The school has not focused on building the lowest cost co-working spaces, but has built co-working spaces in areas with the highest confluence of traffic. In other words, it gives enormous value to creating opportunities for the greatest access and diversity. Governments can learn from this. Rather than seeking to create enclaves at the edge to minimise cost, they should seek to maximise diversity, interaction and opportunity.

Building a vibrant ecosystem doesn't work in locations lacking vibrancy

Corporations face the same challenge in building their innovation ecosystems. How do they effectively assemble the same elements: Learning, collaboration and commercialization in way where collaboration exists at the center? Companies like Google have well understood how collaboration sits as a catalyst within their organization. Their cafeteria serves as a catalyst for converging traffic and giving people access to diverse thinking. It is as much a work space a dining place.

"Google Cafés, which are designed to encourage interactions between employees within and across teams, and to spark conversation about work as well as play." - http://www.forbes.com/sites/laurahe/2013/03/29/googles-secrets-of-innovation-empowering-its-employees/

There is often a demarcation between intrapreneurship and entrepreneurialism. The reality is we need both. The boundaries between intrapreneurs and entrepreneurs are blurring. Innovative companies are beginning to build platforms that enable them to spin in and spin out companies. They are discovering their ability to create value goes beyond their traditional boundaries of home generated product distribution. Corporations are starting to become less important than the ecosystems they create. And from the entrepreneurial perspective, the reality is that in 2014, 86% of VC Exits were M&A by the industries they aimed to disrupt.

For Governments, of course resource is finite. Creating a world class ecosystem requires a portfolio focus on the economy. Building world class education and R&D centers with great access to commercialization and capital. But more than anything, they need to create intersections of opportunity. Catalyst opportunities to shrink cycle time from R&D to Commercialisation through the creation of vibrant collaboration centers at the crossroads of entrepreneurial and intrapreneurial endeavour.

http://www.stevemonaghan.net/blog

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Don't Dabble In Design

6/27/2015

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Make it ESE

Shortly after his return to Apple, Steve Jobs famously said “you’ve got to start with the customer experience and work back to the technology”. Steve was right. Pure and simple. He obsessed over design. His legacy is obvious.

What makes for a great customer experience?

Simply, we need to make it ESE for customers. Experiential, Simple and Easy. ‘Why we buy’ has been well researched. We make our decisions based on Emotion. We justify with logic. We take action when it doesn’t require too much effort. If we translate this into design principles: User Experience (UX) creates emotional connection; Simple is cognitive (understanding) and Ease is effort. ESE.

It feels right. I understand it. I can get it.

The diamond company DeBeers understood these principles well. They created the emotional connection to diamonds. Diamonds last forever like true love. Just ‘three months salary for a lifetime of bliss’. Available anywhere, it easy to buy your dream.

Inspiration, aspiration and commitment. ESE. Simple.

As the esteemed Harvard Business Professor Michael Porter elegantly defined, there are two types of strategy in business. Differentiation or Cost Leadership. In the physical world, they were viewed as mutually exclusive. In the digital world, design unifies strategy. Good design is differentiation. Great design is differentiation and cost leadership. Why be good when you can be great!

So as we design digital businesses, we need to take these principles to heart. In practical terms, create UX that creates the emotional connection between your brand and your customer. Design information to enable customers to reach their logical decision as quickly as possible. And minimize effort in swipes, wipes and types.

As with most innovation, diversity creates magic. Designers no longer have exclusivity over creative capacity. Sales no longer has exclusivity over the customer relationship. Business no longer has exclusivity over insight. Our opportunity as leaders is to bring together our teams to create those magical intersections of creativity, customer and insight.

We know great design drives revenue, reduces cost and increases customer satisfaction. But investing in design takes courage. It is difficult to calculate an ROI on design up front. But difficult decisions are what distinguish us as leaders.

Having spoken with leaders of many of the world’s most disruptive digital startups, one consistent theme holds true. They invest a lot of money in design, a lot in engineering and relatively little in sales and support. Simply, they design products that sell. They make them ESE.

So don’t dabble in design. Invest in bringing the talent of your organization to bear on making your customers life ESE.

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Unleashing the Potential Within

4/2/2015

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In 1920, the lifespan of a Standard and Poors Top 500 company was 67 years. By 2010, that had dropped to just 15 years. And by 2013, corporate lifespans had deteriorated below 10 years. By any measure a pandemic. Very simply, when the rate of change outside a corporation exceeds the rate of change inside an organization, chances of survival diminish.

While most companies talk about the need for an innovation culture, the reality is we need an adaptation culture. We need some people pushing boundaries with innovation. Equally we need people focused on core execution. Re-engineering a plane in flight requires balance. Ying and Yang. Universally, we need to have an organization prepared to adapt to changing customer demands and innovation opportunities.

Intrapreneurs face onerous challenges. Surrounded by resource, corporations are forever resource constrained. The challenge in innovation is as much to kill as it is to create. To be able to refocus resource from platforms in decline to platforms in demand. In the words of Warren Buffett, “The power of simple math is often ignored by companies to the detriment of their shareholders”. In one institution I observed we were spending seven times more on platforms in decline than platforms in demand. Simply, we were failing to invest in what customers value. In those terms, it is easy to see why the world’s leading corporations are failing faster than ever before.

Success has it’s own inertia and can be your greatest enemy. The momentum of success is perhaps the hardest challenge for an intrapreneur to overcome. With crisis comes commitment. But the absence of a crisis creates a conundrum. Why change something that is working well? Not everyone sees what you see. So I’ve developed a simple formula for change over the years. ICE. Inspire, Collaborate and Execute.

Inspire is about providing the organization context. Context that defines the call to action. An ‘outside in’ approach of starting with the customer and looking across industries for best in class customer centric transformation. Developing an ecosystem of expertise from Government, Universities, Entrepreneurs and giving voice to change leaders within. For reasons difficult to understand, voices from outside resonate more loudly than those from within. But your change leaders are your catalysts for transformation.

Collaborate is to enable the ecosystem to function. Building capabilities to support initiatives. Skills such as Design, Agile Development and Lean Management. It is important to light fires across the organization using your champions as catalysts. Nothing is more powerful than aligning a team. Doing the right thing, the right way with the right people.

Execute is simply about focus. Identifying the one critical pivot point that will contribute to your current core but over time transform your business model. History across many industries has shown, transformation at the core often meets too much resistance to succeed. Transforming an adjacency or creating your own competitor has a higher probability of success.

Intrapreneurs have what Entrepreneurs crave. Capital and resource. But the constraints around capital and resource within the corporation often make that advantage difficult to attain. The consistent advantage intrapreneurs have is access to brilliant minds. Internally and externally. As the world changes to more collaborative ecosystems, the lines between intrapreneurialism and entrepreneurialism will become less defined. But the imperative to change will grow stronger. To paraphrase Charles Darwin, it’s not the biggest or the strongest corporations that will survive, but the ones most adaptive to change.

1 Comment

Question

9/4/2014

9 Comments

At the center of tech innovation lies three core laws. Moore's Law, Metcalf's Law and Kryder's law. Intelligence, Connection and Data. As I continue to explore innovation I've drawn two conclusions and one big question I struggle with.

Observations
1. Big Data: Information is a commodity. But insight is invaluable.
2. Social: Connection is a commodity. But conversation is invaluable.

Question
1. Intelligence: What happens when intelligence is a commodity?

Your insight greatly appreciated!

Steve

THE FOUNDATIONAL LAWS OF TECHNOLOGY AND DISRUPTION

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Innovation: Not today, we're too busy.

3/14/2014

2 Comments

Life or Death
It’s a familiar refrain. Not today, we’re too busy. Whether too busy because times are good. Or too busy because times are bad. Apparently there is never a good time to stop, listen, think and act with fresh perspective. It shows. In 1920, our strongest companies in the S&P lived for 67 years. By 2010 they average only 15 years. The average across all companies, just 8 years.

Companies are dying as kids

Judging by results, our investments in education, training and building corporate culture have been wildly misdirected. Our customers are changing. Clearly corporations and institutions aren’t changing with them. It’s easy to see if we just take the time to look. To challenge our existing beliefs. To understand why we do what we do. Why we believe what we believe. It’s easy to see why we miss the obvious.

Adapt and Migrate
Asia has 895 million mobile web users. Growing at 45% per annum. Yet few companies really comprehend this shift. I see major institutions in Asia still without a mobile strategy. Dig a little deeper, I’ve seen institutions spending 7x more on platforms in decline than in mobile platforms which are fast becoming the primary channel. Think about it. Investing 7x more in decline than growth.

No wonder companies are dying as kids.

The rationale sounds reasonable. ‘You don’t understand, our customers are not sophisticated’, ‘You don’t understand, our business is complex’ etc. Always a safe argument. Innovation inherently comes with risk. What is clear, simply many companies don’t understand their customers.

Worse still, they underestimate their customers.

The modern mobile is the equivalent of USD3.5 Million worth of computing power in 1991. The computational power is more than NASA used to put man on the moon in 1969. Millions of developers around the world are harnessing that power to mask complexity and deliver brilliant user experiences. Simplifying interactions believed impossible before. Consumers don't have to be sophisticated. They don't care about the plumbing. Just the experience.

The power is in their hands.

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Innovation Culture is Overrated

2/25/2014

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Note: Every warrior is unique

Innovation Culture
A common CEO refrain, "We need an innovation culture." Really? It's a bit like Life of Brian. "We're all individuals". Wouldn't it be great if everyone thought the same way?

While we say we are after an innovation culture, what we really need is an adaptation culture. Darwin was right. Derek Sivers was right. (http://www.ted.com/talks/derek_sivers_how_to_start_a_movement.html)

Innovation Execution
We need innovation leaders to innovate and strong execution teams to adapt and evolve. To engage the customer. To engage the organisation. Having a vision for a new product or business is not the same as executing it. Dreamers dream. Builders build. Ideas are cheap, everyone has them. Execution is everything. Right brain, left brain. We need both to operate effectively as human beings. The same holds true for commercial organisations.

Innovation Distinction
While I firmly believe everyone is creative, not everyone is innovative. (http://www.ted.com/talks/ken_robinson_says_schools_kill_creativity.html). Innovation requires risk tolerant application. Like jumping out of a plane. Take the plunge ... but trust the guy who packed your parachute.

Steve Jobs didn't replicate himself into a culture. He aligned his organisation behind a common vision and recognised those who could contribute to delivery and those that could not (http://kensegall.com/insanely-simple-book/). He built a team who could get behind his ideas and standards and mould them into realistic deliverables. His core team, like Jonathan Ives, aligned behind the vision, adapted and contributed to deliver a greater outcome. We clearly recognise the contribution. The sum of the deliverable exceeded the initial vision. Always the way.

Innovators don't create great companies. Teams do. Teams that can recognise an innovative concept, align behind it and adapt it to a market making deliverable. I'll take an adaptation culture over an innovation culture any day.

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New Age. New Stage.

2/23/2014

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Porter defined strategy. Differentiation or cost leadership. Margin or market share. It used to be a choice. Dell defined low cost in the PC Industry and took the market. Apple later defined differentiation and took the market. Validation of Porter's strategy framework.

New Age. New Stage. Differentiation and cost leadership used to be considered mutually exclusive. No longer the case in the Information Age. Design is differentiation. Cost leadership is scale. Co-existance is the new norm and a powerful force. Today we design and scale experiences.

Simplicity and ease drive our experience. Simplicity is cognitive. Apple made technology so simple to use, it encouraged two new generations to embrace technology. The old and the young. Ease defines effort. Amazon made it so easy to shop, it continues to empty physical retail stores around the world.

Simplicity and ease go to the heart of human behaviour. It defines our experience. A powerful force for change. As we define our own innovation agenda, embracing these new rules of engagement are a foundation for success.

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The Biggest Short

10/20/2016

0 Comments

Is Strategy Dead?

11/14/2015

1 Comment

Everyone has a plan until they are punched in the face
Mike Tyson

Strategic plans should neither be carved in rock nor written in sand but must change with the inevitable demands of a dynamic marketplace.
- Adapted from Dick Wirthlin