schneiderism

Click on the image above to enlarge the graph to make it more readable. It paints a picture that is probably not that surprising, but definitely attention grabbing. The United States faces a very different reality in the world today than it did toward the end of the 1990’s. Today we face a diverse spectrum of new players who are incredibly competitive, players who are in some cases much more disciplined, ambitious, and intensely focused on innovation. The elephant in the room is China which, again, is no surprise. China has been nothing but resurgent over the last decade and nothing tells that story as well as the graph above. China’s rise over the other 33 nations in the survey demonstrates a much changed world economic landscape in technology. Note also the ascendancy of Mexico, South Korea, India, Singapore, and Taiwan. We all owe Thomas L. Friedman of the NYT’s a small bit of deference on this matter.

The graph is the result of a study conducted bi-annually by the Georgia Institute of Technology that measures the technology standing of 33 countries based upon four key technology focused factors:

1. National orientation toward technological competitiveness
2. Socioeconomic infrastructure
3. Technological infrastructure
4. Productive capacity

From the intro to the Georgia Tech report on the study findings:

“…China may soon rival the United States as the principal driver of the world’s economy – a position the U.S. has held since the end of World War II. If that happens, it will mark the first time in nearly a century that two nations have competed for leadership as equals”

The graph above and the recent editorial by Thomas Friedman intersect with some grim realities. The steadily rising price of oil has created petro-authoritarian states that no longer see the United States as a nexus of power in the world. In fact, they actively work to counter American interests globally, and do so fairly effectively right now. Huge amounts of money is flowing into states like Venezuela, Russia and Iran, and power and influence follow money. Energy and security expert Gal Luft testified to Congress last week and pointed out that as oil approaches $200 a barrel, OPEC will have amassed the wealth to:

“…potentially buy Bank of America in one month worth of production, Apple computers in a week and General Motors in just three days.”

Gal Luft

In his editorial, Thomas Friedman points out that the really startling issue here is that despite the confluence of so many negative catalysts around oil for our nation, and catalysts that will have long term socio-economic implications for us as individuals AND globally as a nation, we still do not have an effective energy policy in place that moves us past this desperate reliance on oil. What is it going to take?

The convergence of seemingly random events (the Print is Dead blog, this t-shirt, Groundswell by Charlene Li and Josh Bernhoff, and this presentation by Lynne d Johnson) has put the “Print is Dead” mantra in front of me several times in the last week. Oddly coincidental or representative of a growing sentiment, you decide. Obviously, print is still very much alive, but how we use print has changed, is changing, and will continue to change. Dramatically. The reality is that for some, print is in fact very dead. For others it is dying, and for a shrinking portion of the population… print is all there is. Print isn’t dead, but it is pretty ill and the prognosis is not good. You would be hard pressed to argue otherwise, that print is alive and well, as there is so much happening that clearly supports the hard reality that the ways in which we interact with information has quickly tilted to the digital.

Our mobile technology increasingly breaks down the usability barriers between where we are and the content we want. This is not just about convenience, either, it is very much about connectivity and the ease with which we can leverage diffuse networks to find what we want. How can the printed page compete with that? Print publishers are struggling with this reality, and working hard to figure out how to transition their content assets in a meaningful way to the array of digital channels before them. Some have pioneered great strategies for this, and benefit from not just increased audiences, but from the concept of content adoption. That’s what we do on the web, we adopt content and send it around. We point people to it. We fold it into how we navigate information, and personalize its place in our information networks. This is incredibly useful, and is the reason why I no longer subscribe to a physical newspaper and only a few printed magazines (that I subscribe to because I like them and there is not yet an online channel for that content). I don’t even hit most newspaper and periodical websites anymore as the content I want finds me through a myriad of personal technologies that do all of the work of searching for me. Popular and free technologies like RSS and Twitter. I have always been a reader, but I have never read as much as I have the last few years and I would say that close to 90% of what I read is online. Garrick Van Buren wrote a somewhat related post about this a few weeks back, and in that post he passed on a line that is unforgettable to me from an article in the New York Times:

“If the news is important, it will find me.”

Print is the opposite of that.

You might remember the original Shift Happens video that made the rounds just over a year ago. It put forth some pretty startling information about the modern realities we face with regards to globalism, the internet, and the exponential rate of change in technology. I was recently sent this “updated” version that builds on some of the information put forth in the original. It’s well done, very interesting, and a little bit awe inspiring. We live in interesting times. The updated version above is from around June of 2007, meaning that much of the information is already outdated.

I am fascinated by change in organizations, by what drives it, what leads it, and what makes it happen. There are a number of businesses that are in a struggle right now, and this struggle is driven by their inability to previously anticipate market conditions and the realities within which they operate. Some are quickly and effectively reinventing themselves. This is exciting, and as business culture, irrespective of industry, can be prone to many legacy notions of practice, process and value creation, we know that through effective leadership and strategy legacy thinking can be overcome. Most of us would acknowledge that we can literally see change in business on a daily, if not hourly basis. How we work, and the markets within which we operate, are subject to exponentially increasing change as it relates to communications, globalism, competition, continuous improvement, consumer/client need, collaboration, user experience, teaming, talent… I could keep going, but imagine that you get the picture. I have posted about this a number of times, but I want to elaborate on some of the broader principles that I am beginning to consistently identify:

1. Nothing motivates change like the “near-death experience”

There was a great post back in October at Mavericks At Work that touched on this issue without really revealing any conclusive answer, but that got me really thinking. Why is this? Does it take a brush with disaster to shake people out of stasis? Is change fear based? My current observations are that this is often the case, though it does not need to be. However, people tend to be lazy and comfortable, and change is hard, dedicated work. Change is often also very entrepreneurial, entails risk, and not everyone is programmed to approach business in this way. But when the survival of the company is at stake, people suddenly perk up and pay attention. They become focused. This is an opportunity. Effective leadership seizes on this opportunity.

2. Leading change is clearly identifying what needs to happen, and then executing

We have all sat through too many meetings where somebody in leadership makes a compelling case for change, and then you never hear about it again. Change is war. Change requires thorough and well-thought-through strategy and the tactics to achieve that strategy. This is a fundamental rethinking of a business, of process, and of market relevance, and a fundamental reformulation of how a business navigates these successfully. This is then followed by action, by execution. There needs to not only be next steps, but next steps to the next steps, and the right people need to be in ownership of the direction and management of the business course in support of this direction. Otherwise, you just sat through another hour you will not get back.

3. Effective change leadership requires a strong connection to operational reality

Given a situation where an organization needs to undergo some fundamental reassessments of business model, practice, and market relevance, it is imperative that those leading such assessments be grounded in the contextual reality of the organization. You cannot set the bar impossibly high out of optimism. You need to set incremental targets that are reality based and mostly achievable with hard work and focus. I am a firm believer in the benefits of failing forward as a way to test concepts and ideas, but if the goal is an unattainable target you will do a better job demoralizing your team while also undermining the larger goal of moving the organization forward. Respect the need for action, but take the time to plan effectively. Base your assessments of problems, current conditions, and even future possibilities on hard data, when possible, and avoid the mistake of presenting baseless assumptions as actionable strategy. Manage goal setting very, very carefully and tie those goals directly to the expertise and resource required. Also, consider an exit strategy for goals insofar as your team understands that if Plan A is not successful, that Plan B very quickly goes into action. I think that the I Ching nails this with the idea of “wind over wind,” which presents the approach of “…gently overcoming any impasses that are in your way by being consistent and having well defined goals to focus on. This way changes and will have long-term and far-reaching effects.”

4. Passion can be an effective motivator of change, but you have to authentically show it

While it cannot be the sole catalyst for success, passion can certainly get you far in creating energy and impetus behind a strategy. However, it needs to be bolstered by awareness, connection to reality, and a deep knowledge base. Without passion, though, you face a much more challenging process. Let’s face it, change should be exciting for an organization, and it is an opportunity to bring everyone together for a unified purpose. This begins with passion for the power of an idea, for the importance of an effort coming from the top. Consistently. The more directly this passion is communicated, the more resolute your support for these efforts will be. Leaders need to tap this, the people that support them feed off of it. This is about as close to politics as leadership in business might come, but we’re talking charisma and energy here. Change that is mandated by a detached, disconnected, and aloof leader is doomed to failure. Change that is lead by an effective leader who is passionate, invested, and connected is a rallying point. We love leaders who work as hard, or harder, than we do.

5. With the right team, anything is possible, and effective change leadership demands the right team

There are few businesses where one or two people can achieve a successful transformation. We need the support of people who are better at some things than we are. Not necessarily a lot of people, depending on the organization, but certainly people who deepen the capabilities and potential of a change effort. In most business books about this topic some significant amount of content will be dedicated to effective teaming around and in support of a strategy. This is because they’re right. Teams need to be built for speed, steeped in commitment, with members chosen for both what they bring to the effort and a devotion to work with others to achieve success. Not everyone is cut out for this, and one person that is not operating from this place can sink the efforts of an entire team. Replace them. Test for acumen and energy. Profile for passion and thought leadership. Surround yourself with people who are not afraid to challenge convention and work to do things better than they have done before. This should be leadership team best practice. For truly successful companies, it most certainly is.

I would say that these five principles are very much a work in progress, but it seemed appropriate and compelling to begin to commit my thoughts to review by a broader audience. What I know is that there is no one magic process for effectively leading and managing change within an organization. Change is based on customization of approach, and that is borne out of a deep and thorough understanding of what challenges a company faces, and an intense investigation into how it might successfully overcome those challenges. The most important piece, though, is a cohesive commitment to action.

Those that know me well will be shocked by this post. Yes, I have been a Dell hater. My personal experiences with their products over the years have left me both very frustrated and disappointed. Then I went to Adaptive Path’s MX Conference in San Francisco in February of 2007, just about a year ago. It was a dense, terrific conference loosely themed around managing for the user experience, and I thoroughly enjoyed hearing all of the speakers. One in particular, though, really caught my attention. It was Brooks Protzmann, the manager of the then recently launched Experience Design Group at Dell. I would be nice saying that he had his work cut out for him in front of this obviously predominantly Apple loving crowd. I think he did a great job presenting. He owned Dell’s past mistakes regarding the user, and made a point to own why those mistakes had happened (despite these realities being inherited challenges). That alone was refreshing. He then outlined how Dell’s approach to product design and the user experience was in the process of being radically transformed. He was incredibly honest and open, and provided us a window into the course he and his team were setting for Dell.

The results of that direction are now evident. Though I have yet to interact with any of these products, it includes a range of desktops, laptops and the above monitor (a refreshingly complete, if somewhat overwrought, departure from Dell’s design language) the photos for which made it to all the various gadget blogs late last fall. This is certainly a step in the right direction for design and user experience over at Dell, and these changes are beginning to surface not just within Dell’s product line, but with Dell’s entire customer engagement strategy and is evidence that Protzmann delivered on his promise to improve experience and interaction design for Dell customers. This is an exciting transformation to see, and it has been enough of a change for me, and many others, to take notice. What is even more impressive, and demands attention and acknowledgment, is how quickly Protzmann and his team were able to redirect Dell’s approach to interaction and product design, and ultimately redirect Dell’s culture and approach to their customers. It’s been less than a year since MX. That’s impressive. The big question, though, if it will be enough to truly transform Dell and market perception in the long term.

Update: Just saw another new product design leaked over at Engadget, a laptop, that definitely looks nice.

The British Design Council has emerged from a period of serious introspection and reinvention. The results? New leadership and direction in the form of Chairman Sir Michael Bichard (pictured above with sleeves rolled up and ready to dig in and get to work), and sharper focus replete with a new tagline:

“Helping businesses become more successful, public services more efficient and designers more effective.”

Not so much catchy as vitally important in describing its direction, I suppose. The Design Council has long been a resource for the design industry, but has suffered mounting criticism in the last few years due to a predominance of product, industrial and graphic design focus in its efforts and events. This despite the reality that the Design Council has done much to show businesses all over the world the real value of design when applied to a diversity of industries.

Sir Michael Bichard’s recent appointment as chairman is in support of the refined Council mission of being the strategic body for design in the UK. The operative word now being “strategic.” Bichard has a long record as a successful public servant, leader in arts and education, and vocal supporter of the value of design. He received attention recently for his Five Rules of Design:

1. Great design can change the world and move people

2. If you think good design is expensive you should look at the real cost of bad design

3. Design, creativity and innovation are essential if we are to meet the global challenges of sustainable development

4. Design is not just about products and communications, it’s also increasingly in the services we receive or buy

5. To consume design is a creative act - and everyone can be creative!

I chuckle each time I read rule number two, as it is so, so true. These rules are important as the Council still finds itself embroiled in debate about exactly how design fits into the British, or global, economy. Despite their best efforts, the design community in the UK still finds itself somewhat adrift from the core of British industry and business. This is partly due to overconfidence, and partly due to the increasing irrelevancy of design education in the face of the realities of real world practice. These challenges are no different than those faced here in the United States, and amount to a massing of missed opportunities for design. Changing this begins, perhaps, with the importance of combining a deep understanding of business and business processes, of business thinking, with the methodologies and practices of design thinking, a concept getting much airplay in a diversity of business magazines as of late. It would seem that the British Design Council is going down this road, and most probably in a smart way, and as they are known for their quality publications and case studies I look forward to learning more about their new focus in the coming months.

via beyond the beyond

We’re going through some very important exercises at work. The goal is a real and unflinching assessment of the state of our industry, architecture and design, and the role we play in that industry. The goal is to seriously challenge notions of status quo, and to question accepted practices. Hard questions are being asked. Tough answers are being put up on the white board. None of us disagree. But, what are we to do with this information, with these confirmations?

We are to change.

Actually, we have already been changing. We know that architecture has become a largely commoditized business, that the value provided by many architecture design firms has been slowly and consistently eroded in the United States over the last 20 to 30 years. Architects have allowed this to happen, and it has happened as issues of liability and responsibility have come to dominate project realities. But instead of embracing this and accepting the challenges, architecture has retreated behind drawings and plans and allowed others to step in and manage the process of building, of making. A long list of other trades were only too happy to step in and take on the historically traditional role of the architect, that of a master builder. Allowing this has effectively removed architecture from the value stream of building. Many, many firms now exist to produce drawings. They are production houses.

What we are finding is priority is the importance of reinserting ourselves into the making and effectively taking back the control of the value stream. We know that we must do what it takes to become the most relevant and influential force in building culture, this much is clear. What is unclear is exactly how we will get there, and I suspect we will continue to challenge and explode traditional notions of design and building. Embodied in this is the reinvention of our firm around core goals of design excellence, as we define it, and the reconnection of our design to implementation, to execution. Architecture is a strategic move, and that move will not be successful if architecture does not protect the value and integrity of the idea, the idea power, from inception through implementation.

While I have framed this discussion around my immediate industry, the reality is that it is powerfully meaningful for a diversity of creative professions who face very similar challenges.

That’s a good question, and one the answer for which is elusive. Architecture, as a profession, is changing. It is also being subjected to change. Architects and architecture firms have little, if any, control over this and fight to stay ahead of the change. This involves technology, liability, commoditization, and asymmetrical competition (among many, many other things). While the world has changed, architects have retreated behind flimsy ramparts with a “let’s just wait this whole mess out” mentality, a recurring theme on schneiderism. This evening I came across a post on miragestudio7, a Malaysian, studying in Australia, architecture student’s blog which I have been frequenting (great writing, great perspective), that was a full-on shot across the bow. It was the posting of a comment left by a person who did their work in understanding where the value stream lies in the built environment. Here’s the entire comment as it is worth the read:

“I’m not an architect/architecture student. I’m a cad monkey. I did not chose architecture but I chose building design because the course was only two years, vs 5-6 and a 5 digit HECS debt.

It wasn’t just that, though.

I called lots of architects and building designers and the continuous complaint I heard from both is “grad architects are useless, they don’t know anything about construction or costing.” Also, there was the fact that building designers (evil, soulless creatures that we are) get 85% of the design work out there - and the grad architects I spoke to were only making 35-40K a year. Looking at Job ads, I realized that a building designer with 5 years experience earns around the same as an architect with 5 yrs experience (85-100K)-and the building designer has no HECS debt.

From my contact with the building industry so far (very minimal) it seems that architects have gotten a bad rep for often being impractical with actual building and structural specifics.

Construction is at the heart of building design and architecture. Whichever is better, if you don’t know construction and are depending on others to provide it you’re wages will reflect this. It’s that sentence, “As per engineers specifications” - everytime you write that, what you’re saying is, “I’m not capable of working this out, I’m referring it to someone who can -” and that engineer will be better paid than you because his skills are more necessary. A long time ago architects did all this technical planning themselves. The only modern equivalent is Santiago Calatrava. He says, “As per MY specifications.”

The more divorced architects become from the origin of their profession the less necessary they will be to it, and they’ll be paid less.”

Now, this comment echoes the reality of the place that architects have created for themselves. The money issue is but one manifestation of this place. The real implications are that for a process that was once architect driven, managed and owned… architects now find themselves sometimes totally ancillary, and not necessarily useful.

Just read a terrific article on Businessweek online that is absolutely right on and intersects perfectly with The Upside by Adrian Slywotsky, which we discussed here a few weeks back. If you’ve not read this book, do. And soon. Then, let’s chat. Both expand on the whole “Innovate or Die!” theme. The article starts with the assertion that we must learn to embrace the edges of our businesses, edges being the outer limits, the danger area, the unknown. Edges are the peripheries of the global business environment, the places where innovation potential is the highest. The article asserts that comfort with operating at the edge of your business and industry is the most expedient way to identify opportunity and advantage. More:

“Edges define and describe the borders of companies, markets, industries, geographies, intellectual disciplines, and generations. They are the places where unmet customer needs find unexpected solutions, where disruptive innovations and blue oceans get birthed, and where edge capabilities transform the core competencies of the corporation.”

This is important from the perspective of Slywotsky’s concept of strategic risk assessment. First, the edges are the frontiers, the limits, of what is known and accepted, of what has worked up to this point. It is beyond these frontiers where tremendous opportunity resides. Change is self-sustaining as the business environment continues to speed up with improved technologies, communications and time-to-market. And heats up with changing customer loyalties, expectations, and need. In this intense environment we see ideas constantly delivered by companies from the frontier (and quickly), and we also see this opportunity and innovation fundamentally change companies and markets with stupefying speed. We have been inundated by game changing innovation and change, so much so that we are sometimes jaded to it. But think about how business has changed in the last ten years. This change has not only been exponential, it has been paradigmatic. This has been driven by a diversity of catalysts, the most obvious being technology, communications, the internet, and globalization. Companies that harnessed these drivers found themselves in a very different place. Those that did not, most often, disappeared. Adrian Slywotsky’s ideas in The Upside really begins with the notion of surveying the frontiers for strategic risk. Slywotsky asserts that nothing can beat robust strategic risk assessment for both identifying and mitigating potential threats to a company’s health and well-being, but also for identifying what game changing opportunities for innovation might be highlighted as a result of that assessment. Both the article’s authors and Slywotsky agree that for companies to innovate they must understand what is happening at the edges of their business, and to innovate they must bring back from the edge ideas that challenge the status quo in products, markets and practices.

Sun Microsystems is six years into a program that takes full advantage of their technology and is modernizing the way their employees work and adapt to a rapidly changing business environment. This Open Work program has met with tremendous success, and anticipates the type of radical change we are beginning to see more progressive companies embrace. At Sun, more than half of their employees do not have an assigned office space in a fixed location. Employees are allowed to work wherever and whenever it suits them, and Sun arms them with the best in mobile technologies to support this.

Why is Sun doing this? Because they can. The cost of maintaining a legacy notion of “office” is incompatible with the concept of an agile, adaptive, and flexible workforce… especially one that is determined to do business where their clients are. Are they saving money? Most definitely, and in the range of $250 million. This is radical, innovative and apparently effective. Sun is now offering their expertise in Open Work as a consulting sideline business to other companies. For those of us in the workplace design and innovation space… we should be taking note and work to balance this with our own efforts to effect change in workplace environments.

I hope that you are seeing a theme developing here on schneiderism. If not, you’re either new to the blog, or an idiot. Either way, let me quickly recap:

- Creative enterprise of all sorts face a range of new strategic risks

- Business models and business practices demand investigation and innovation

- Many have lost the priority of the relationships between innovation, strategy, and execution

- We’re our own worst enemy, and actively devalue the work we perform

- Design is about value creation, not about providing a service

Last evening I received an article from a colleague who shares my perspective on the state of creative enterprise. Basically, we’re at war. We find ourselves embroiled in the challenges of navigating the mess, risks, and threats before us and orienting organizations in the proper direction. It’s exciting. The email with the article that he sent had this as the subject… “F**K Service…” Well, that definitely got my attention, so I thought it appropriate to headline this piece. But, what did he mean by that?

He meant that creative enterprise is not a service industry. It does not exist to service its clients. It exists to create value for its clients. The mindset of a service business is to operate at the whim of the client. This not only devalues our work, it prevents a creative business from having a relationship with clients that is truly compatible with effective design. You’re too busy reacting to be creative. You’re too busy producing. It is a rock you will never be able to push to the top of the hill. As a service provider you have inverted the value proposition. You may as well be a lawyer or an accountant (note that I have nothing against lawyers or accountants, I just don’t want to be one…).

The article sent is entitled “Will You Become A Master Builder?” Read it. It is from a few years ago but still meaningful.. which only means that we’ve been thinking and talking about this for a long time. And doing precious little about it. The article relates specifically to architecture design professional service firms and their inability to adapt and embrace change. Really, though, it could apply to any number of creative businesses. A terrific quote:

“Those who do not like change will like irrelevance even less.”

James P. Cramer

Cramer points out that design firms, and the environment in which they operate, are changing. Some are evolving. Some are specializing. Some are dominating their markets. Some are struggling with being relevant and are in decline. His article is a call for intervention. I would like to think that it is the clarion call of revolution for creative businesses, and we know that he is most definitely not a lone voice in this call. But what are we going to do about it?

In an article titled “Innovate or Perish: New Technologies and Architecture’s Future” for the Harvard Design Magazine author David Celento posits that architecture’s refusal to embrace technological innovations is ensuring irrelevancy to the audiences that have historically valued their services. More directly, architecture is on a path to extinction. He is absolutely right. Architecture struggles with a fixed, backward view and legacy thinking. Let’s just say that the world of “The Fountainhead” is alive and well inside the offices of many a prestigious architecture firm. At issue is the reality that a diversity of professions are claiming the traditional territory of the architect. Technology has efficiently removed architects from the value stream of the built environment (through their unanimous inaction and determined resolve to not evolve their industry, their practice), and empowered any number of competitors, including “furniture system designers, sustainability consultants, construction managers, and engineers.” Celento sites Martin Simpson of the rockstar engineering group Arup Associates as suggesting that architects may “eventually become unnecessary — except, perhaps, as exterior stylists.”

I can’t believe he just said that out loud. Ouch. From an engineer. Somebody get the architects a glass of water.

Honestly, David Celento has only voiced what everybody is already thinking, and what the industry as a whole is struggling with. This is a reality shared with a number of creative enterprises, and those facing this reality have nobody to blame but themselves, really. This storm has been brewing since the advent of desktop workstations in the 1980’s. Go to the business section of your local bookstore and count the books that offer a perspective on the phrase “innovate or die.” Why so many? Because the range of strategic risks facing contemporary business demands a strategy of innovation for survival and longevity. It demands business model reinvention, and architecture has not yet gotten the memo on this.

A parting shot:

“To increase its desirability and market share, architectures need to harness emerging technologies and tap more deeply into consumer desires, using both plurality and branding in product delivery methods. These efforts would be self-correcting — they provide an opportunity for architects to evaluate the success of their offspring quantitatively. Doing so would also encourage architects to move beyond “isms” geared toward revolutionizing aesthetic and social agendas every decade or so — a phenomenon that architects themselves can’t even keep up with — let alone the public at large, since architectural journals which feature these sorts of rapid-fire volleys (including this one) are rarely found nestled between The Economist and Vanity Fair at newsstands. Two decades of fanciful catalogs stuffed in mailboxes have done more to shape popular taste (and educate people about design) than the club of architectural priests that has elevated its game by preaching to the converted while leaving out the laypeople that architects ultimately need.”

David Celento

By the way, he’s an architect and this is classified as tough love.

I do not think that anybody can question or doubt the realities that most creative businesses face. The business environment for creative organizations is changing rapidly and presenting unique challenges to those charged with leading successfully. Specifically, our firms face issues of technology use and integration, team organization, process development, leadership and leadership transition, intense competitive realities (and increasingly global), and the commoditization and devaluing of our work. Many of these specific challenges have been discussed on Schneiderism already. I speak the obvious when I say that determination of success in the future is dependent not on navigating one or two of these challenges successfully, but all of them.

I had the opportunity to recently attend a presentation by Adrian Slywotzky, the author of “The Upside: The 7 Strategies for Turning Big Threats into Growth Breakthroughs“, at an event for YPO. It was especially good, and prescient regarding the challenges that many organizations face, but it seemed especially relevant to creative businesses (design, marketing, advertising, architecture). At a high level everything comes down to innovation, being innovative, and how you innovate. Easy to say, hard to do. But beyond those relative truisms, there was one all encompassing concept that I loved hearing about:

STRATEGIC RISK MANAGEMENT

The presentation began with the concept of business model design and that business models that remain static are destined for failure. The environments in which we all operate are changing and evolving in ways that were not possible 10, 15 and 20 years ago. This demands reinvestigation, in an ongoing manner, of a company’s business model and introduces the opportunity for business design innovation. Most industries have seen dramatic change, and those of us who anticipate change and evolve our companies as our markets change will be around to talk about. Adrian Slywotzky not only aligns with this thinking, he takes it much, much further.

“Our greatest growth opportunities are our greatest risks - reversed.”

Adrian Slywotzky

The strategic risk management piece is important in several ways. Obviously, this is hugely informative as we investigate the threats and opportunities of a given business model, and the proper identification and understanding of strategic risk is what ultimately determines a course of action. Elements of this is knowing the reality of where your center of gravity resides with respect to your customers and clients. To ensure prolonged success, that center of gravity needs to reside at the heart of your company, at the core of what you do and the value you create. Inevitably, though, it resides with the customers who have a range of relatively equal options from which to choose. The challenge is in retaking that center of gravity and subsequently reversing or inverting the value chain. A traditional value chain begins with assets and ends with a customer, inverting it creates a business model around the customer that results in assets. Think about that for a second and get back to me.

Getting into more detail about strategic risk management… it is the perpetual survey of your landscape for those things which will make you irrelevant, those things which can damage your business design. Things like:

• Misreading your customers
• Damaged reputation
• Commoditization of your product or service
• Technology
• Ownership/leadership transitions
• Global politics
• Currency fluctuations
• Supplier changes
• Factor of costs
• Talent deficits
• Changing customer demographics

Now, that list is by no means comprehensive and is pretty high level. So, stop for a second and reflect on your own business. What would your list look like? Can any of these strategic risks be turned into opportunities? To be successful, the answer needs to be a committed “Yes.” We live in an age of volatility and our lives, our businesses, are subjected to a diverse and evolving range of generators and catalysts of this volatility. What we do about this is also evolve our businesses in advance of these risks and in answer to the volatility. When these risks are unmanaged they will affect even the very best teams and the very best business models. No one is immune, and we are seeing this play out seemingly everywhere. There are innumerable case studies of companies not managing this risk:

• Contrast the S&P High-to-Low Quality ratio of A-ranked stocks to C-ranked stocks over the last 25 years. The A-ranked stocks have decreased from 31% to 14% of total value while C-ranked stocks have increased from 12% to 30%
• Why has Procter & Gamble taken 5 years to recover from the 2000 market value drop? Why did they suffer the drop in the first place?
• Other blue chips face the same fate… look at McDonald’s, Siemens, Merck and Deutsche Bank. Their performance lines are nearly identical.
• More specifically, why has Coca Cola lost market value while Pepsi has gained market value over the same time?
• Sony has lost while Samsung has won, Johnson & Johnson is winning while Merck is losing, and Maytag tanks while Whirlpool takes off. Each example, two companies in the same industry. One wins, the other is losing.

What is going on here? The winners sited properly assessed risk and realized that the time of maximum value is the time of maximum risk. This is really tough for most companies, but especially difficult for historically successful companies to address. Legacy thinking persists. This can be scary, and sometimes is not something anybody really wants to talk about or bring up in a meeting. Even worse, it just is not what management wants to hear… they can’t handle the truth. The reality is that strategic risk is the killer of business models. It is killing the US automotive industry, it is working its way through consumer electronics, and (getting back to the beginning) it is challenging creative enterprise.

Knowing this, and anticipating risk at this level begins to tell you how to protect and grow your business. For creative enterprise it entails a concerted effort to identify what the true value is in the work we do. Really, do our clients VALUE the work that we provide on their behalf? Do we create value at all? Who in our space is being successful and why? What are they doing differently and what is setting them apart from the rest of the firms around them? This starts with shrewd competitive analysis, but it cannot stop there. What are the technology risks that we face and what are the event horizons for these risks? Where are we allocating capital to activities that give us no differentiation? Ultimately, after answering all of these questions (and many, many more) what are the business designs that take advantage of the fact that all of our competitors face the same questions, challenges and realities?

How do we turn our problems into our competitor’s problems?

A summary of the risks we face, and that successfully navigated will inform your business model design:

• Technology shift
• Industry economic squeeze
• Brand investment mix (advertising, design, PR, training, information…)
• Project risk
• Customer shift
• Stagnation risk

An ongoing area of interest for me is how we can innovate in the guidance and leadership of a creative enterprise, and thus sustain successful operations. This is centered around the challenges facing most professional services in the creative arena, something that it would seem all are struggling with, at least at some level. The core of this is the commodification of creative work, whether that be advertising, architecture or graphic design. Many firms have allowed themselves to become factories, to become production houses. In some ways, this is the result of our own devaluing of our efforts. In others, it is born out of an entirely different decision-making process that has been progressively gaining ground with the clients for creative services… the prevalence of value assignment based on time worked and not on value created.

I came across an article that was very insightful in relation to these realities by Avi Dan in Advertising Age. It succinctly lays it all out. His article is leveled squarely at advertising agencies, and why so many are facing the music as their business model is yanked out from under them. As I read his article I could not help but see strong similarities to the realities we face in architecture, and those I experienced in other creative businesses. Avi outlines five key areas that agencies, and by extension most creative enterprise, need to investigate:

• COMPENSATION
  Should be tied to value creation and not based solely on labor. Clients and creative firms need to work out a fairer compensation scheme recognizing the value of intellectual capital.
• OUTSOURCING
  Smart creative organizations should evolve into creative portals, outsourcing external creative talent in areas such as production, as well as in logistical operations.
• REVENUE STREAMS
  Firms need to explore ways to monetize new areas of involvement such as licensing, e-commerce applications and even the work itself.
• SPEED
  Creative enterprise must recognize that in a web-based world that moves at warp speed, speed itself is a strategic asset and those that can help their clients with speed-to-market executions will have an advantage.
• SOCIAL RESPONSIBILITY
  The firm model should recognize that social responsibility is at the core of the modern firm, hand in hand with its financial accountability to shareholders, and is essential for recruiting top talent.

Of special note are the ideas around outsourcing and revenue streams. There is a controlling mindset in most creative firms that they must own all waypoints in the project process. I cannot help but ask “why?” Outsourcing is a tremendous opportunity to not only diversify your talent, but to allow you to focus on what you are truly good at… and seek support from partners who are better at the other project roles than your team may be. Additionally, seeking complimentary and supplemental revenue streams is enormous. As creative businesses we are perpetually innovating with respect to our client’s businesses. Why is it that we cannot bring this same approach, this innovation, to benefit our own businesses? Over the course of a year there will be any number of revenue opportunities available to a firm that are outside of their traditional business model, but because of that model these ideas will make it scarcely farther than the whiteboard.

All of this to say, many companies face an environment of intense change and competition. Those that get it are focused on changing with the environment in which they operate. Some are changing fast, with a cultural premium on innovation and knowledge in the value created by their own people. Those that do not are not going to last. I feel it is that simple.

A colleague of mine has launched his blog at knowlesystem. His focus is honed and specific to the forces changing and shaping the world of architecture and design. Cool stuff. We have had an infinite number of incredible discussions and brainstorms on this topic, and this was suggested as a way to begin capturing this content, and involve others in the conversation. I highly suggest subscribing as there will be a proliferation of compelling content coming forthwith.

Congrats on the site, Stephen.

Another colleague introduced acmesiren a couple weeks ago, and I wanted to offer a more formal welcome and congrats to Nick as well. His blog is focused on finding and revealing what is new, cool and interesting in the world of experimental music. Also, very cool stuff. And a terrific resource.

Both blogs are featured in the schneiderism blogroll in the right column, which is naturally an incredibly high honor.

I was going through some old resources this evening and found this page of quotations related to design by Erik K. Antonsson, a professor at Caltech. Below are two of my favorites:

“If a major project is truly innovative, you cannot possibly know its exact cost and its exact schedule at the beginning. And if in fact you do know the exact cost and the exact schedule, chances are that the technology is obsolete.”
-Joseph G. Gavin, Jr., discussing the design of the lunar module that landed NASA astronauts on the moon.

“And let it be noted that there is no more delicate matter to take in hand, nor more dangerous to conduct, nor more doubtful in its success, than to set up as the leader in the introduction of changes. For he who innovates will have for his enemies all those who are well off under the existing order of things, and only lukewarm supporters in those who might be better off under the new.”
-Niccolò Machiavelli, “The Prince”

The first quote, by Joseph Gavin Jr., just nails it. It also covers well the ruts that teams fall into when they “think” they are being innovative, but really just operating on retread. The quote by Machiavelli kills me… I mean, how many times do we see this play out? I read The Prince back in high school. I think it is time to read that book again…

Machiavelli also said “Men ought either to be well treated or crushed… injury ought to be of such a kind that one does not fear revenge.” Right. Must remember to crush or injure people so badly so as to not fear retribution. Got it.

For so many industries, the competitive situation is perpetually morphing. There is more seemingly asymmetrical competition for the same customer, and that customer’s expectations are changing as they become more and better informed. Lately, I have been part of an ongoing discussion and effort to generate understanding on the way that the architecture industry has changed, and how to take advantage of this change. It seems strange to call a design enterprise like architecture an industry, but it is… and its history would seem to self-fulfill this type of description. Oddly, in some cases it seems that architecture functions more like manufacturing than like design, and that mindset is everywhere and unfortunately goes far in devaluing the work of architecture design. The opportunity for innovation in the process of architecture, in the ways we organize, problem solve and design for the built environment is huge, and only beginning to really be tapped.

There is no denying that the world of architecture has already begun to change rapidly, and on an international scale. It is actually humorous, and a little scary, to talk to architects who were practicing in the late 1980’s and ask them to contrast that to the present. I am sure this is not unique to architecture (reference my previous post on online publishing). In so many ways, this change is driven by a flattened competitive reality, one where small firms empowered by technology can leapfrog the decades of capabilities building invested by larger and more established firms. There are 5-10 person firms beating forty year old 100+ person firms for projects that in the past would require thirty person teams to complete, that only the large firms could have taken on. Small studio teams are able to accomplish incredible technical feats, and accomplish them quickly. This was rare if not impossible 10 years ago, and it is because technology had not caught up to the practice. Now, the obstacles to talented architects and designers starting their own firm are becoming more and more minor, and this is empowering as it allows them to eschew the politics and mind-numbing hierarchy of the legacy firms and get on with the creating and the making. They are fighting the commodification of architecture design by competing on the merits of their ideas, and the efficiencies with which they can deliver these ideas on behalf of their clients. Small is the new big, and all that phrase connotes.

These small studios are driven by innovation in their process, in the ways in which they leverage technology, and by the materials solutions they create in the name of both sustainability and cost effectiveness. At least, that is the hope. In some cases there is just a flooded competitive situation with an abundance of small firms and a shortage of work to support all of them, and the big ones too. There is something important here, though, and it warrants exploration by all in the field. There are opportunities for architecture firms to investigate the way in which they organize around their clients and their projects. Within this is the investigation into how process can change to meet new challenges and support innovation. The practice of architecture is damaged by every firm that looks at their work as production, and that fits the previously mentioned manufacturing analogy. There is a studio model, one that is cross-functional, multi-disciplinary, and with a flattened hierarchy that is gaining prominence and is being maximized by the successful smaller studio based firms. At the heart of this model is the drive to create value for the client, and to support design, and the reality that these are inextricably linked. That is a competitive differentiator.

What does all of this mean? It means that to stay in business a firm needs to deeply understand what it is to be competitive, what is the value to the client, and how to structure and organize itself around this. It means that the old methodologies need to be assessed, and potentially dispatched. It means that there is a powerful generation of empowered designers entering a capital intensive industry who are figuring out how to do things right, do them better, and are not afraid to take the risks to do so. Ultimately, it means that those controls that allowed so many firms to get where they are today may now be the obstacles to their success from this point forward, and that is a very difficult reality to acknowledge.

I found this cartoon over the weekend over at gapingvoid, Hugh McLeod’s notoriously compelling blog. He only posted the cartoon, but it made me stop and think. We live and work in a time when we are inundated with change. Our customer’s are changing, our processes are changing, markets are changing… we operate in a very fluid environment. This is driven by both technology and our insatiable appetite for information, but it is also driven by a competitive environment that is smarter and faster, and by customers who have intense expectations. Those individuals who stay on the curve of change, who inform themselves, and who adapt are ensuring their value as participants in the collaborative nature of business. Look around you at work, you will see these people. You will also see those who choose to be complacent, who avoid change or attempt to inhibit it. Ten years from now who is going to be relevant? Who is going to be creating value for your enterprise? We are at a crucial point where people who resist the speed of business are going to be left behind simply because they have become useless. Look at all of the industries that have found themselves in this situation and are either gone or a mere shell of their former organization… and on their way to obsolescence. Look at other companies in your industry and I bet you can identify which one’s are creating the change, which are following that change, and which one’s are clueless. Where would you want to work?

Last month I took my team on a three day innovation tour, the goal of which was to spend time with and survey a diversity of businesses that had overcome significant challenges. The commonality between them is that they achieved this by creating and supporting a culture of innovation, by thinking far beyond their typical model. The results in each case was that these unrelated companies had accomplished incredible change in relatively short periods of time, and these changes were game changing events within their respective industries. With all of the companies we were fortunate to spend generous time with senior leadership and really begin to understand what it took to ideate, support and execute such significant reinvention. We visited a total of six companies, but there are two that I want to focus on as their stories are especially compelling, and this is the first in a two part series. This was our messiest stop, and we had to go to Iowa to see it:

Robotic Brickworks
Bricks just aren’t that sexy anymore. They are still desirable as a building material and various designers have come up with some cool and innovative applications of the brick, but really… a brick is a brick. Historically, they were made at smallish family-run brickworks that were distributed around the country and served the brick laying needs of an immediate area or region. Like many other manufacturing industries, brickworks have been disappearing altogether or have been bought up and merged into larger industrial conglomerates. This has become an incredibly competitive business, and brickworks located in the southeast, northeast and midwest vie for the same customers all of the time. Typically, because a brick is in fact a brick, this comes down to a competition on price.

United Brick decided to get aggressive and dig into what it really means to be competitive in their industry. Business as usual in the brick business did not bode well for their future. They knew that they had to continue to manage costs effectively, but their approach needed to be innovative as compared to the labor management solutions of their competitors. The leadership of United Brick trekked to Europe and toured manufacturing operations looking for opportunities to innovate. They landed on one immediately. Robots. This is a significant opportunity, as serious contributors to the cost of manufacturing brick is labor and the rate of flaws in the manufacturing process (and how those two are linked…). Typically, a brickworks with a traditional human manufacturing line will have a failure rate between 10 and 20%. They believed that with a robotic production line they could shrink this failure/flaw rate to well under 10%, which would be a significant reduction, and reduce labor costs dramatically in the process. The second opportunity they found was by accident while visiting a factory facility in Spain looking at fuel alternatives for firing their gigantic kilns. Traditionally, the kilns had been fired by coal or natural gas… both very expensive and coal obviously being incredibly damaging to the environment. A factory manager at this facility in Spain mentioned in passing that they should explore petcoke as a fuel alternative. Petcoke is a waste product from the petroleum industry and it is typically dumped in landfills. This idea had serious promise.

The team returned from Europe and set about investigating the options they had uncovered. They partnered with a French robotics company, after intensely interviewing several from around the world, for designing both a fully robotic brick manufacturing facility and in creating the world’s first petcoke fired brick kiln. The United Brick facility in Iowa would be the test case for the technologies they created together. The French robotics company dispatched a team to Iowa to begin what would become an intense and valuable partnership. At the same time they began intense research into creating the world’s first petcoke fired kiln, and again partnered with the French robotics company to both fully automate the firing process AND provide this alternative, efficient, cost effective, and more environmentally friendly fuel alternative. The plant opened this last spring, and to great success. First, the plant is achieving its production goals with one shift, though the robots would not complain if they were asked to work more. Second, the failure rate for the bricks produced has dropped below 10%. Lastly, the prototype petcoke fired kiln is working incredibly well, and the cost savings here alone contributes significantly to United Brick’s competitive edge.

A former colleague, now working in publishing, and I have been trading emails on the future of print publishing and the implication of hesitating to actively engage an online publishing strategy.

That’s just how we roll.

Anyway, this dialog is motivated by conversations I have had recently with a couple people intimately ensconced in the traditional print world and who are struggling with how they might begin changing their model. They know that there are quality opportunities for them by engaging an online strategy, they are just profoundly unsure on where to start and what to do. Generally, I think it is safe to say that most people in print publishing accept that online communications are increasingly dominant over printed communications. This may scare them, but it is being increasingly accepted as the way things are going. There is an exponential effect at play here. For traditionally print based organizations, the transition from a print model to an online model is incredibly difficult, despite the potentially massive opportunity. The difficulty is largely from the perceived threat of online publishing within these organizations as those whose entire career has been based on print, despite most probably having a place in a company that also pursues an online strategy, will resist change, progress and the future. This can be said for so, so many industries. My colleague pointed out what we have all seen before, that when people feel threatened they do funny and irrational things… And this is the situation the two people I mentioned before are faced with. They know they need to change. They know that the future of their organization lies with a smart online strategy. They are prevented from the first steps of even investigating their options by the legacy notions of what print publishing is all about. They are being held back by the inability of their own people to grasp the importance, and the inevitability, of this future. Perhaps the internet is just a fad.

My friend also correctly states that if print publications are not smart enough to adapt on their own they will eventually be forced to adapt through the demands of their advertisers. We’re already seeing this as requests for online advertising opportunities begin to out pace an organization’s ability to deliver them. The big question is… Will these companies be irrelevant by the time they catch up with demand? Will they be beaten to their audiences by somebody faster and more nimble? It can be very difficult to teach an old dog new tricks, but audiences increasingly want to control when and how they access content. And all of this, sadly, doesn’t even touch on the opportunities related to social networks, user generated content, etc… This is especially threatening to an organization that has always maintained total control of its communications. The thought of giving power back to the people is enough to cause seizures among many a management group.

It is easy to see how legacy issues anchor publishing based organizations in a 1980’s mindset, it’s happening everywhere and old habits die very, very hard. The future is inevitable, though, and I surmise those publications that are at the vanguard of merging their online and offline editorial (think about BusinessWeek, Fast Company, Forbes etc.) in a COMPLIMENTARY way are the ones that are still going to be around in 15-20 years. Outside of the infrastructure limitations of print, there is the whole access to customer/audience quotient that newstands and subscriptions just cannot touch. Also, proportionally leveraging the web and interactive marketing opportunities potentially far surpasses the traditional arcane reliance on direct marketing for subscriptions.

In orgs that predate the advent of the internet I suppose one way of bending the corporate agenda is to be non-threatening. Approaching the re-purposing of content, the marketing via the web, and the creation of interactive channels that give customers the information they want, when and how they want it, is something that can be proffered as an “enhancement” of traditional business practices. Over time, though, the results will be a vastly changed situation.

At some time or another most companies struggle. They face challenges related to a changed competitive environment, or they face the daunting task of re-engineering business processes. We’ve all been there, we’ve all seen it. Years of success seem to culminate in seemingly insurmountable threats to the organizations very survival. These are decisive situations, and they require sound, considered leadership… but leadership not afraid to commit, to make decisions, and to act with an urgency that has at its core the future of the enterprise.

Such was the reality that Porsche found itself in a little less than 15 years ago. They were in serious trouble. Despite the storied history they had lost sight of their audience, of their relevance, and were watching worldwide sales numbers dip dangerously close to 10,000 vehicles (from a high of 53,000 in 1986). In 1992 an engineer named Wendelin Weideking was brought on at Porsche to head their materials and production group. He immediately traveled to Japan to survey the Japanese automotive industry, and what he saw both inspired and terrified him. He realized that Porsche could never survive with current processes and methodologies. He returned from Japan determined to pull the Porsche manufacturing mindset into modernity. He promised a 30% reduction in production costs and brought in a team of Japanese consultants from Toyota to dissect the Porsche process. He then cut the number of managers by 35% and fired 95% of the sales and marketing managers. He knew that change needed to start at the top, and that Porsche as a company needed to change its culture, its leadership and its vision. The traditional Porsche way was incorrect. That meant those who had managed Porsche into the present challenges had to get out of the way for new ways of thinking, of executing. I’ll let you read the full story through the link below, but suffice it to say that Porsche asked Weideking to take over as CEO in 1993 at the age of 39. He immediately went to work setting in motion a plan that not only turned Porsche around, but reclaimed their position as a high performance engineering company AND recast the company as the most profitable automotive manufacturer, per vehicle, in the world. A fascinating story.

original story via Cool Hunter