How to Bolster the Impact of Today's CIO -- Moving Beyond Faster, Better, Cheaper

We are honored tonight to have Mr. Jim Stikeleather with us. He’s the executive strategist of
innovation for Dell Services. For more than twenty-five years Jim has designed, developed,
and implemented information and communication feedback technologies and that has helped
businesses and institutions succeed. Organizations worldwide rely on Jim for guidance on digital
infrastructure, evaluation of emerging technologies, and strategic guidance on their applications.
He participates in international technology standards bodies as multiple book and industry
article contributions. To his credit and advises a number of technology incubators. Jim’s
leadership experience includes technology based startups and turnarounds as well as
the information technology departments within large global enterprises. Additionally as
I mentioned before he holds two patents. Came to Dell via Perot Systems where he was a founder
of the Technical Research Connection or TRC, which was acquired by Perot Systems in 1996.
Currently Jim serves as the executive strategist of innovation for Dell Services, which is
an approximately $8 billion IT services arm of Dell Computer where he leads a team of
information technology and business experts who identify, evaluate, and assess the future
potential of new technologies, business models, and processes to address evolving business
and economic and social trends for the company and for their customers. Ladies and gentlemen
please join me in welcoming to the podium Mr. Jim Stikeleather.
Good evening. Did I turn it on alright? Can you hear me? Okay, now the truth of the story
is, he may have said that but actually I just make things up. I mean that’s really what
my job is. I’m going to talk to you a little bit about the future. The innovation group
within Dell basically performs several functions. One function is we provide foresight to the
organization. Just we try and create what our future scenarios, what’s the world going
to look like in the future. And from those we try and create themes or major drivers
that are associated with, with those scenarios. Everybody in the company wants to come to
work for my foresight group. Part of the reason is the things they get to do is they get to
read a lot of science fiction. They spend a lot of time in social media looking at what’s
going along, going on on the fringes of the world. They pay a lot of attention to thought
leaders, what they’re saying, what and more importantly sometimes what they quit saying.
I also have an insight group, which is looking at things like the RNV activities inside of
the company, patents, legal and regulatory constraints, basically they’re the ones
who take my foresight group and ring em in. In fact once a year we get together and put
them into a room and whichever one emerges less bloody is the winner.
In reality what happens generally is the insight group convinces the foresight group that they’ve
been enjoying things too much and the world’s not going to look like that. But really interesting
breakthroughs happen when the foresight group changes the mind of the insight group that
yeah we really can do some things. So, what I’m going to walk you through today
is what has come out of those teams. And I have other responsibilities, but they’re
not named to what we’re going to talk about. I’m going to talk to you a little bit about
what’s coming out of those groups, what they see the future looking like, and what
the implications are for the future of information technology groups and chief information officers
in particular. The key to where IT is going is IT will probably
be the foundation for most innovation within the business community. But the problem with
innovation is if I asked everybody in this room to give me a definition of innovation
every one of you would give me a different one. So, one of the things we start with is
what is innovation. Obviously, the starting point for innovation is new ideas. It’s
not new ideas in terms of new, new. It’s basically new ideas applied in a different
context. For example we discovered maybe something is working in the manufacturing space and
we then apply it to healthcare as an example of a new idea. It’s not a new, new idea
but it’s a new use of an existing idea. It has to be forward thinking. It’s not
innovation if you’re basically working on a problem in the past. If you’ve already
solved that problem then what’s the point of putting any more effort into it. So, you
need to be forward thinking. Something that’s often missed is it has
to be feasible. Now what do I mean by feasible? Now a lot of people in a business situation
in business settings when I talk about my team actually is required to read science
fiction. I will generally get giggles or laughs or yeah right. And then I will point out to
them how many of you are walking around with communicators on your belt? And the fact of
the matter is we all are. In fact Star Trek actually underestimated the potential of the
communicator because our communicators have the entire sensor array of the Starship Enterprise.
We don’t only talk on our communicators, but it knows where we are, who we’re with,
what we’re doing, where’s the closest restaurant, how to get from point A to point
B. That took the entire sensor array of the Enterprise to do. So, it’s feasible. What’s
not feasible is a transporter. There’s this little law of physics called E = MC2. The
transporter will never exist. Or not very likely to do. So, therefore that’s a piece
of science fiction that’s not feasible. So, if something’s going to be innovation
it has to be feasible. You actually have to be able to do it.
It has to be viable. Most of you are associated with computers in some way, shape, or form.
Right? Have you ever heard the term SMOP? Small Matter of Programming. Anything is possible.
It’s just a small matter of programming. Well the fact of the matter is you can do
anything once, but for it to be viable you have to be able to do it over and over again.
And that becomes a criteria of a piece of innovation.
Lastly it has to be valuable. If somebody’s not willing to pay you something for it, or
exchange something for it, then there’s no real point in doing it. It’s not a marketing
term, and we also differentiate within Dell innovation and invention. Invention is the
process of taking capital and turning it into knowledge. Innovation is the process of taking
that knowledge and turning it back into capital by creating something valuable that somebody’s
willing to pay for. So, we make that differentiation. The other thing that we do is most people
think of innovation in terms of products and services, but the fact of the matter is some
of the most significant innovations that have taken place have been different business models.
It has been different process models. Radical changes in the way value is created and value
is delivered rather than the actual value itself.
The one other thing we do when we talk about innovation is the fact that there is a continuum
of innovation. There is what we call incremental sustaining innovation that’s continuous
improvement what you’ve heard of is sic sigma. It’s doing the things you’re doing
today better, faster, and cheaper. That’s table steaks in the innovation world. There
is also this idea that I can take my existing technologies and processes and create new
value proposition for my customers. That’s a form of breakthrough innovation. Or I can
take new technologies and new processes and deliver the old form of valued proposition
to my customers. That’s also a form of breakthrough innovation. And then once in a while you have
new technologies, new products and services and you create a whole new value proposition
and that’s disruptive innovation. How many people in the room think I-pod was
a disruptive innovation? That you’re all smart so you’re not going to fall for the…ah
he fell for the (unintelligible) back there. He raised his hand. The fact of the matter
is in most business conferences everybody will say yeah the I-pod was very much a disruptive
innovation. It wasn’t. What was the disruptive innovation? ITunes. A business model. It was
iTunes that basically took away changed the nature of the entertainment industry and how
it actually did things. One of the other things that we talked about
in terms of innovation in particular is the Apple example. I’m older than most of you
in the room. So, you won’t appreciate it as well. But one of the things that we talk
about is the fact that you ask people how many people were surprised that a computer
company totally re-wrote the business model for entertainment. In a group of business
people they’ll all say yeah I was totally amazed. That wasn’t the amazing thing. The
amazing thing was why wasn’t it Sony? You may not be able to remember a thing called
the Walkman that Sony owned the marketplace, they owned the brand, they owned the distribution
channel, they owned the technology. And on top of all they owned the content at that
point in time. But it was Apple that totally re-invented the industry.
So, this is, that’s, that’s a definitional form of innovation. Now I’m going to talk
to you about how you do innovation. How many people in here are engineers? You’re all
doomed. And why are you doomed? Because you are being taught to think in a convergent
mode. You’re being taught to be analytical and to be rational. And the fact of the matter
that’s good but for innovation to take place you also have to think in a divergent mode.
There’s a famous quote by F. Scott Fitzgerald that says “the definition of an intelligent
man is someone who can keep two totally divergent thoughts in his mind at the same time and
still function.” And in fact if you want to be innovative you’re actually going to
have to develop this by cameral approach if you will of thinking to be able to think convergently
and divergently at the same time. Now the way that we accomplish it inside of Dell is
I have a group of convergent thinkers and a group of divergent thinkers, because it’s
very hard to get people that can do both. But you actually have to be able to do that.
You also have to have a way of thinking about the future. And I mean I sort of alluded to
this. We have an architecture of innovation that we have developed at Dell and it basically
involves foresight and describes you thinking about the future, what the future’s going
to look like, all of the possibilities. Insight, what are the constraints that are associated
with all of those futures? And we then turn that over to our strategic planners to figure
out where do we want to play. Because what we produce are scenarios and themes. Here
are all of the potential scenarios of the future and here are the driving themes. Our
strategy people do things like what are our strengths, weaknesses, opportunities, threads.
Where do we want to play? Where do we need to do improvements? And we then translate
all of that into plans and activities so that innovation becomes a managed repeatable measureable,
moderable, predictable process within the organization. We aren’t relying on magic
to happen here. In addition to that you have to have a culture of innovation. You have
to have an environment which encourages people to think differently, to challenge activities,
to have a common vocabulary for talking to each other, because I refer back to the Apple
and the Sony example. What happened to Sony is all of the towers basically got in the
way of the communication or allowed the breakthrough of something like iTunes or the IPod.
Okay, now I’m going to talk to you a little bit about what’s happening in the world.
And it’s really interesting. We’re really at a reflection point of what’s happening
in the business world and the implications for what we in technology will have to deliver
to our customers. I’ll start with Enterprise 2.0. We are starting to totally rethink the
way we organize for work. We’re starting to take large organizations and break them
down into smaller organizations. We’re starting to basically give to other people work that
normally would be done inside of an organization. If, how many of you have had more than one
economics course? There is a concept of economic friction. And what economic friction talks
about is if you’ve ever had a business course Peter Drucker (?) used to talk about it a
lot, the reason companies get big is basically to reduce economic friction. It is to overcome
transaction costs. Costs from getting from raw material to finished product that have
nothing to do with the finished product. The Accounting Department, the HR Department,
Payroll, Legal, all of those types of things. Well in Enterprise 2.0 we’re starting to
break all of that apart and realize that scale and size are not associated with each other
anymore. So, we’re moving away from large bonolific too big to fail organizations into
digital business ecosystems as smaller companies that contribute to each other.
There’s also the issue of Capitalism 2.0. How many people have heard of the one percenters
and the ninety-nine percenters? They took over Wall Street. Basically sat there and
said capitalism is not fair. Well it sounds kind of like; I’m going to show my age,
kind of hippyish type of thing. But the fact of the matter is it’s the people at Harvard,
The London School of Economics, MIT, Slone, Chicago, The University of Chicago are all
saying the same thing. Back in May in The Harvard Business Review there was a big article
about the inevitable failure of capitalism because we focus on one thing and one thing
only, return on investment, return on asset. And what they compared it to is peacock feathers.
You know (unintelligible) select peacocks for their wonderful tail feathers. The only
problem is they’ve done such a good job of selecting them that peacocks can’t exist
in the wild anymore. They can’t get away from predators. They’re doomed. And we’ve
kind of done the same thing with capitalism. So, there’s a re-think about how we create
value and what the definition of value is. Management 2.0, you are what we refer to as
the new generation of workers. You don’t work the way we do. You work very differently.
You’re motivated very differently. And as a consequence all of the philosophies, principles,
and practices for management that we have today were designed to take an agrarian workforce
and turn it into an industrial workforce to get them to do the same thing over and over
again with predictability and quality. That’s not what we need you to do anymore. We need
you to be creative. We need you to be problem solving, solvers. And it turns out that the
things that incent people to solve problems are the absolute opposite of what incents
people to be, basically do the same work over and over again. So, a re-think of management,
a re-think of economics. Going back to your economics course, how many
people remember the fundamental principle of economics? The one assumption all of economics
is based on the rational decision maker. How many of you are rational decision makers?
Humans aren’t. So, the fundamental principles of economics are all wrong, and in fact you’re
starting to see it. You’re seeing behavioral economics come to the forefront. You’re
seeing behavioral finance beginning to take over in the areas of investments and managing
investments. So, the whole concept of economics is being re-thought. And on top of that the
mathemeticians have showed up finally. You know most of the communists are basically
the statisticians. Most mathematicians will tell you statisticians are really not mathematicians.
Well the mathematicians have showed up. And they are now applying the principals of complex
adapted systems theory to economics, which gets a whole different set of results than
what traditional economics would predict. And then what’s really interesting is IT
is the thing that’s enabling all of this to take place. What you see up here are just
ten of the major themes that my group are working on. How many people have heard the
term big data? It ain’t big data. It’s smart everything. Smart everything precludes
big data. Smart everything is what’s creating big data. If you just look at big data as
a big data problem you’re going to miss all of the implications that are associated
with smart everything. There are sensors appearing everywhere. You have a phone that knows where
you are, what you’re doing, who you’re with. What’s the last thing that you bought?
Where are you going? What are you shopping for right this minute? That’s a lot of information
that you’ve got to maintain the context of if you really want to. So, that’s part
of the smart everything. Now on top of that we have refrigerators that
are now smart. We have stoves that are now smart. You have a car, which is now extremely
smart. It’s telling the world where you’re going and what you’re doing and how fast
you’re driving. In Asia they have smart toilets.
How many people, how many people are familiar with the new offering from Progressive Insurance?
It’s that little thing that you take and you plug into your car, and now they know
how you drive. And what do they do? They give you a discount if you’re a good driver.
Right? Now let’s assume you have a smart toilet and you have a healthcare insurance
company. You’re laughing guys but that’s where we’re heading up to. So, that’s,
so that’s some of the things that we talk about. Smart everything.
Work mobility. How many of you basically go into an office, sit down and do work? Don’t
do it. The work goes wherever you are. If you’re like me you spend a lot of time in
Starbucks doing your work and other places, but we’re not going to talk about that.
But it’s not just that work itself is mobile that you do work in the mobile sense. The
work itself now has become mobile and it’s now crossing enterprise boundaries, that I
may start a transaction in my, you know on my computer and it may go to my payroll company
and do one thing, and then go from my payroll company to my benefits company, and then go
from my benefits company back to my HR Department. So, work itself has become mobile in this
process. Before I go to this slide, one of the things
that we’ve learned in my group, how many people think technology drives change? You’re
used to me now, so only a few of you are going to be foolish enough to raise your hands.
It doesn’t. Technology enables, facilitates, and accelerates changes that want to take
place already. When you start really examining what we think are the drive the changes that
were driven by technology, at the fringes you can see people were already trying to
do those things. They just didn’t have the capabilities available to them. So, one of
the major changes that we’ve done in our forecasting process is we don’t look at
technology and say this is what is going to change, we look at the changes that are taking
place in the economy, in the social situation, the government regulatory situation, socially
what people are doing and let those dictate what changes want to take place and in back
end look at technologies that will enable, accelerate, or facilitate that.
So, we put all of this together. We put, come out with what are scenarios. The first scenario
that we’ve been working on is something we call the serendipity economy. You know
one of the basic concepts of business is I create value as I go through my supply chain
and my manufacturing process that work in progress has a certain value. The concept
of the serendipity economy is that value only exists in a moment. It’s there and then
it totally disappears. Your smartphones are a good example of that. Your smartphone has
a certain value, right? I can make a phone call with my smartphone. Now you’re in this
strange city you’ve never been in before and you’re lost. The value of the smartphone
went up in that instance didn’t it because it has a GPA and a map situation, map application.
You can now figure out not only where you are but how to get to where you want to go
to. So, the value of that smartphone went from here to there real quick. Once you get
to where you’re going to it’s gone again. Right? Now as you’re looking at your smartphone
you’re walking down the street you realize you’re hungry. You go to the (unintelligible)
and you say you know I really like Chinese food is there a Chinese restaurant nearby?
Yes, there’s one right here. So, suddenly the value went up even more and on top of
that you have four friends in this city that you didn’t know about and you want me to
give em a call and you can meet em for lunch. That’s the serendipity economy. Value takes
place in an instant. As a lot of implications associated with it the key one is that companies
move away from delivering the products and services and move towards making capabilities
available to their customers. That the customers can then combine into a value proposition
in that particular moment. How many people have ever done any complexity
theory work or looked at complexity theory? What we’re find…very good. Santa Fe Institute,
right? Humm? Ahh. Cool. What we’re finding is and, and, and this doesn’t go over very
well with, with business IT people. What we’re finding is the world that business have been
living in is basically a simple world. Now they won’t, you know they’ll go wait a
minute; you obviously haven’t implemented SAP anywhere have you? No, it’s actually
a very, very simple world, because the rules are very, it’s a very simple rule world.
And what you have in a simple environment is if you want to succeed you apply best practice.
I mean I don’t know if any of you have been involved with commercial IT, but every IT
shop in the world is pursuing best practice. We always want to do best practice. Well the
problem is that only works in the simple world. When you start moving into this idea the serendipity
economy that basically things only exist for an instant and you need to be able to deliver
value (unintelligible). You have now moved over into a complex world. In the process
you move through a complex complicated world. So, you begin moving away from concepts like
best practice and move into things like having a portfolio best practices that you can apply
given to the specific situation. Or creating novel and emergent practices, things that
you’re doing instantaneously on the fly. Total re-think of the way we’ve been running
IT for years and years and years. The other thing that comes across in this,
in concepts of the serendipity economy is if you’ve read Peter Drucker one of the
things he talks about is the only reason a company should exist is to create a customer.
That’s one of his fundamental precepts. And on top of that, he says the sole purpose
of a company should be to be a buyer for the customer, not to go sell the customer something,
but the customer comes to you and say I need x and you go figure out how you’re going
to deliver x to that customer. Well we’re moving into a world that that’s now a possibility
thanks to the internet and thanks to us and IT who we’ve created all this capability
where customers now have access to weigh more than they’ve ever had before. So, the key
to success is to move companies away from being competitive to moving companies into
being collaborative. You know I referred to Sony and what they, the fact that they weren’t
able to come up with the idea of the IPod and iTunes because they were so fixed in their
silos, what you find in when you study innovation is most innovation takes place in the white
space. It takes place across these silos. And you know the same thing is true. Most
innovation that you see now is actually taking place when multiple companies come together
to do something new, unique, and different. So, as a constant we’re moving away from
a world of competition to a world of collaboration. Basically, Edward Debono (?) has written a
book called Surpetition where he basically says the only way you’ll be able to survive
is if you own your customer and the customer always calls you first and then you turnaround
to your competitors, your suppliers, your partners, or whoever, or even other customers
to be able to meet their needs. That’s again a radical re-think of how we actually conduct
business and the consequence of this is the formation of digital business ecosystems.
It used, how many people remember, have ever heard of Henry Ford’s River Rouge Plant?
Henry Ford, when he was creating the Ford Motor Company had this idea and he basically
owned everything from the iron mines and the coal mines. Turned the iron into steel all
the way out to the dealerships to the car. Totally vertically integrated. We are now
going to a world where that’s totally reversed, totally changed. That you don’t unless you
specifically are the best at doing it, it creates value for your customer or you’re
required to do it for legal and regulatory reasons you won’t do it in. Totally the
opposite vertical integration. We also need to change the way we manage our people. This
is the whole concept of management through .0 (?).
How many people have heard of Gary Hamill? It’s from the London School of; Professor
Hamill is from the London School of Economics. He created something called the Management
Innovation Exchange. He has been driving this concept of Management 2.0. And it changes
the precepts of management. Basically we move from traditional management planning to one
of preparation. If you’re talking about something like a serendipity economy, you
can’t plan for what people are going to need. But what you can do is you can prepare
yourself to be able to supply capabilities whenever they’re required. You move from
directing people to mentoring people. Instead of telling you what to do I began explaining
how to do things and different ways of doing things. And what works and what doesn’t
work is in the past. You move away from staffing to engaging.
If you haven’t read it there’s a wonderful, there’s actually two wonderful books by
a gentleman by the name of Dan Peake. One is called Free Agent Nation and what he’s
talking about is the economy is evolving that most of you when you’re my age and you’ll
be young whipper snappers then because of the way medicine is progressing. When you’re
my age, you won’t work for a company. You’ll work for yourself. We will all be independent
contractors that basically come together on demand to deliver values and services as companies
need them. Have any of you heard of a company called
Top Coder? You should take a look. Google Top Coder and go take a look at their business
model is a company made up of, I think they have less than actually forty employees, but
they have 4,000 members. And what happens in Top Coder is if I’m a company and I need
something I go to Top Coder, I give them the requirements and then the 4,000 members form
up in teams and compete and actually deliver what I’ve asked for and I get to pick which
one I like best. And I only pay for the one that I get. Total re-think. Now what’s interesting
about Top Coder, in May of this year they had their first member cross the million dollars.
One person who made a million dollars in less than six months doing this type of work. Now
it’s not as Darwinian as it sounds, because they actually reward the, you know I may pick,
I may pick team A’s solution. They also pay who came in second, who came in third,
and who came in fourth. So, that it’s not a, you know take all or nothing type thing.
What that means is in the world that we’re moving to, instead of hiring employees I have
to create an environment where people would like to work on things. I have to engage people,
becomes a voluntary effort. How many people have, how many, how many of you have contributed
to Open Source? Oh come on now. Good. Okay if you think about it you have people working
and most Open Source actually doesn’t come from the academic world if we really look
a lot of it comes from basically people who have full time day jobs, are being paid big,
big bucks for and then on their own in the evenings they contribute to Open Source software.
It’s because it’s interesting to them. It’s engaging to them.
So, I was talking about Dan Peakes. You should take a look at Dan Peake’s Free Agent Nation,
because that’s probably how you’re going to work in the future. And he also has a book
called Drive, which talks about how if you’re going to do creative work, if you’re going
to do problem solving work that the traditional types of management that we have in place
today, don’t work. The new workforce, going to talk about you
guys for a little bit. You know in the old days we had it easy. We’d hire somebody
and say look, you know, welcome aboard. There’s your desk. There’s your phone. There’s
your computer. And there’s the software that you’re allowed to use. Have a nice
day. I hire one of you guys, what happens? You walk in the door with your own IT infrastructure
and I got to make mine work with it. Right? You’re different. So, that’s one problem,
opportunity, challenge, how you want to look at it. There’s another one. There’s my
generation workforce. How many people have heard the term baby boomer? Okay, ya’ll
know that you know I, I fit the concept of baby boomer, and we’ve known for thirty
years that we baby boomers are about now approaching the retirement age. Right? So, for thirty
years we know that the majority of current American workforce was going to retire. How
many companies implemented the knowledge systems, the institutional memory systems to preserve
all of this stuff that we have in our head as we retire, forget, or die? The answer is
none. So, we have that problem. And oh we have another problem. The way we remember
things, the way we teach things, the way we learn things is very different than the way
you learn things, the way you remember things, and the way you would like to be taught. So,
we have that problem. So, oh, another problem. In addition to bringing your own IT infrastructure
with you, how do you go about solving problems? Social networks. My generation did a lot of
time and we did a lot of research. We’ve thought about things, we focus on it. We might
talk to one or two people. You encounter a new problem. What’s the first thing you
do? You’re at Google. So, you’ve got that. And if you don’t get the answer on Google,
what do you do? You go to your social network. You say hey I’ve got this really neat interesting
problem at work. I’ve never seen it before. Have any of you guys seen this problem? Do
you know a good solution? Now as a business person that’s pretty cool, because all of
a sudden I’ve literally got thousands of people working on my problem that I may not
have wanted the rest of the world to know that I have. So, you work differently. You,
you, you, you work by and you’ll appreciate this. You know when I’m talking to a business
group I say one thing that’s different about this cohort that’s coming into work is you
guys work seven by twenty-four. And of course all of the old business guys like me start
laughing their heads off and not the ones I’ve met. Well you do get up in the morning.
You get on, you do a little bit of work and you go for your run. Then you come back and
you do a little bit of work and you take your shower. Do a little bit more work and you
head over to Starbucks and meet your friends. Might do a little bit of work while you’re
at Starbucks. And then maybe you go do, go see a movie or do something else and you come
back, do a little bit of work. You basically work seven by twenty-four you just do it in
little increments throughout the seven by twenty-four. Now the problem that it presents
from a business perspective is first off, don’t you get really upset when your computer
doesn’t work? Suddenly we business guys who basically kept our systems up 8-5 now
have to keep em on seven by twenty-four by fifty-two, because you tend to be oblivious
to things like holidays and Sundays and Saturdays and stuff. You’re still doing the same amount
of work. So, that’s one problem. The other problem is for some reason you guys
won’t get on the same schedules. You’ll work one, one increment, you’ll work another
increment. You’ll work. So, I literally have to move all of my systems which were
designed for synchronous work patterns into systems that do nothing but asynchronous work
patterns. You guys are more of a problem than you’re worth is the problem.
If you get a chance you really should take a look at Dan Peake’s Drive. If you don’t
want to read the book there’s a wonderful YouTube video out there. You just basically
Google Dan Peake and RSA and it’ll take you or Dan Peake and Drive it’ll take you
to that video. That’s fifteen minutes you’ll spend.
Now, I alluded to it, but we’re totally re-thinking how we organize companies. We’re
basically calling (unintelligible) organizations now. We’re basically taking away all of
the things that don’t create value for our customers, don’t we aren’t the best at
doing, or we aren’t required to do for legal or regulatory reasons and they give you other
companies to do for us. We’re becoming customers for them. That’s the evolution of business.
You’re starting to see companies shrink because of that.
The other thing it does is it changes the way that you get work accomplished. Because
what you’re doing is you’re setting things in motions as opposed to managing a project
how we traditionally do them. You’re basically saying here’s the things I want to have
happen and now I’m going to have my ecosystem basically solve the problem for me. Large
companies are having a hard time with this, but small companies are being very, very successful
at it. And a good example of that if you’re familiar with Node Excel, Node Excel is an
Open Source product that you can actually go get and it will look at a social network,
and monitor a social network for you. And you see the little graph up there on the left.
That’s actually a small California start-up company that had quote un-quote an attractable
technical problem, posted it to their social network and literally within hours had over
two-thousand engineers and scientists working on it for free. And eventually the problem
was solved. Now, when I talk to a business group, their first reaction is what do you
mean, for free? And it’s good. And they said well yeah. But the other thing is I don’t
care how good your organization is or how good your business is I’m willing to bet
you can’t get two-thousand of your employees working on one problem within two hours if
your life depended on it. In fact you probably can’t get past the few employees working
one problem at the same time anyway. So, the fractal organization and the concept
of Enterprise 2.0 is another major change taking place. And if you’re really interested
in knowing the impact on organizations, Dan, Don (unintelligible) has a great book called
Wikinomics, which is a total re-think of economics and how organizations work in those environments.
And that’s just, and by the way all of these slides I’ll leave you a copy. They’ll
be available to everybody (unintelligible). Now, talked to you about a whole bunch of
themes that are going on. What is the consequence of all of this? The consequence is the successful
organization of the future. It has to be a socially enabled enterprise. You move away
from a transactional orientation and move to an orientation of collaboration, cooperation.
You are driven by people coming together dynamically in doing the work as opposed to forming up
teams and making activities happen. It’s a total re-think in how we basically run our
businesses. And one could almost argue the concept of running a business kind of goes
away in this environment. You’re basically creating affiliations to accomplish goals.
You know within, within the business community there’s been a lot of work in terms of successful
companies. And the most successful companies have purposes. And those purposes generally
are not to make the stockholders rich. The purposes are generally associated with something
of social value. And in fact what you see happening in the socially enabled enterprises
is that’s where you’re seeing more and more productivity, more and more performance,
and actually some of the best profits that you see taking place. And how many people,
most of you know what Facebook is right? If you look at how Facebook operates, it’s
totally a socially enabled organization. They have very few projects, very few planning.
They basically bring groups together and they do their work. There’s another very, very
large company that operates exactly the same way. It’s called Google.
So, what does all of this mean for and IT and jobs inside of IT and how we operate IT?
Well basically it means the fundamental purpose of IT is going to move from doing transactional
type of activities to enabling the socially enabled enterprise. Now, my group did a whole
bunch of research and came up with these. We then went and validated it by actually
sponsoring research from Harvard, The Economist Intelligent Unit, Harvard, hold on. I’m
sorry. The Economist Intelligence Unit, The Corporate and Executive Board, and we did
a joint study of you guys on, with Intel. And some interesting things came out of this.
First off the key role of the CIO will move away from Chief Information Officer to Chief
Innovation Officer. Why is that? Well if you think about it within a company, what department
more than any other sees the whole company, sees the white space? All transactions flow
through the IT Department. Nothing can happen without the computers getting involved, right?
So, suddenly other than the CEO there’s only one person in the company that sees the
entire company. It’s the CIO. Now a CEO generally isn’t very technologically oriented.
In fact most CEO’s still have their secretaries doing their e-mail for them believe it or
not. I didn’t believe it, but there’s a study that actually says that. So, who’s
the one person who sees the entire company and understands the possibilities, potential,
and the promise of the technologies and where the technologies are going? So, who is the
one person who can bring the business and the future together and identify opportunities
for innovation? It’s the Chief Information Officer. So, IT’s going to evolve into that
role. What that means is IT will move away from transactions, infrastructure, technology
code, the things all of you got into this business for. It’s still there; it’s just
under the covers, but the actual business IT functioned again focusing on collaboration,
choreography, orchestration across all the participants in the digital business ecosystem.
People who I’ve got to have their systems integrate with my systems to be able to deliver
a value to my customers and the movement to services. IT moves away from delivering the
applications to delivering services. And if you think about it, one of the earlier slides
had consumerization in it. Consumerization is a major theme inside of what’s happening
inside of IT. Think about apps and smartphones. They’re really services. They’re not applications
in the sense we think about applications in IT. And in fact the most sophisticated of
the apps on smartphones are aggregators of other people’s services. Where are my friends?
Where’s the Chinese restaurant? How do I get there? That’s a single app, but it’s
using multiple services to be able to get there. The key thing is if you have been inside
of commercial IT for the last few years, what you had been facing as your number one priority
is efficiency. Take ten percent out of the budget. Take ten percent out of the budget.
Take ten percent out of the budget. That doesn’t work anymore. Because IT now has to move away
from a focus on efficiency to a focus on efficacy. I have to move away from scale issues and
make my IT be adaptable. The speed with which I can deliver services is much more important
than the cost the services are to deliver. So you see, are beginning to see a very radical
shift in the way that IT, the expectations of IT by the business in particular the CEO.
And most of this came out of the Harvard study that the leading CIO’s in the world is 500
companies across Asia, Europe, and North and South America. The shift is to the expectation
that if I just want efficiency I’ll just outsource it and give it to somebody else.
So, you’re starting to see that happen. What I want on my IT group is I want them
to be effective. I want their speed, my ability to respond to my competitors, my ability to
entice you guys to come work for me because you are the future, the ability to enable
engagement, the ability to basically do things like crowd sourcing and collaborative copriation
and value, much different than traditional transactional systems.
One of the other things that came out of this study is we’ve reduced it to the IT meditations,
that if you are a CIO today, every morning you should get up and do this meditation.
And the meditation is I am no long…I have to continue in the role of being a pragmatist,
but I also now have to become a visionary. If you’ve had much experience with traditional,
commercial, chief information officers, they’re not terribly visionary. In fact we jokingly
referred to em as chief infrastructure officers. They like to keep the lights on, but that’s
about all that they want to do. They now have to truly become visionaries and see not only
where the technology can go but how the technology can radically change the business. And to
do that they also have to take on the role of business leader which is not something
they have been in the past. They actually have to marry up the technology with the business
and say this is what our future is going to be. They also have to change the nature of
the relationships they have. Most CIO’s don’t really interact with CEO’s terribly
well. They generally don’t interact well with CFO’s but that’s who normally have
to interact with. They generally don’t interact with the customers rarely if all, and sometimes
not even with suppliers although other than their IT suppliers. So, in effect what they
have to do is start re-thinking their relationships who they interact with, resources and what
they allocate them to, the questions they ask, what they focus on and what they’re
trying to achieve. And what we’ve done is we’ve constructed this into a meditation.
We’re actually running a seminar across, across the globe right now bringing CIO’s
in and running them through some exercises. And their goal is to get up every morning
and say what is the one thing I’m going to stop doing across these four areas? What’s
the one thing I’m going to start doing that I’m not currently doing? And what are the
things I’m going to start to do differently? And the issue is we’re in reflection point.
Most companies will no longer be brick and mortar. They will basically be cyber.
The other things that’s come out of these studies is what this IT of the future look
like. And what we see is we see three levels of IT. At the lowest level is what we’re
calling fabric. You’ve probably heard of virtualization. That’s the starting point.
You’ve probably heard of cloud. Cloud is the next step beyond virtualization. You starting
to hear vendors talk about converged infrastructure, which basically says I no longer think about
(unintelligible) network and storage. It’s all just one thing and I don’t have to manage
it as independent things. Some interesting work being done in content
centric networking, content centric storage, and content centric compute, which is basically
saying I no longer have to know anything about physical addresses or anything else, I just
reference the content and it magically appears and is available to me. I use the term magical,
but the fact of the matter is Xerox Park actually has, has a lot of this actually running. A
guy by the name of Van Johnson who along with (unintelligible) kind of the you know the
inventors of the internet, Van Johnson actually has his stuff working.
The fabric is what will be, if you think about what internal IT groups normally do eighty
percent of their efforts are basically infrastructure, doing this low level work. When you get to
fabric based computing that kind of goes away. That work basically begins disappearing. It’s
still there, but it’s highly leverage what happened has been automated and it’s been
abstracted up. How many people do assembly lineage work here? Few and far between. Used
to be that’s all that we did. I’ll tell you how old I am. My first programming job
was on an IBM 1620. Now if any of you know if any of you know what that is, you now have
aged yourselves as well. The only way you could, not only did we not have, you didn’t
even use, it was a machine language. There was dials on the front that you would turn
the dials to that and then press a button and that would store the value. And that’s
how you programmed it. I miss the good ole days.
Well the same thing is happening in the world of infrastructure. Nobody does that anymore
for the most part. We’re dealing with high level languages like Java and sometimes we’re
not even dealing with those. We’re basically just issuing search queries and turning those
into some type of programmic activity. So, the same thing is happening at the infrastructure
level. Then on top of the fabric what you’re starting to see is this evolution of industrialized
services. A commercial IT shop moves away from the delivery of services to the procurement,
management, monitoring, provisioning of services. So, rather than actually delivering the services
they basically become the procurement department for all things associated with information.
And then on top of that the third level is basically the organization specific services.
This is where things like digital business ecosystems live. This is where all the tools
for collaboration, integration, choreography orchestration. You’re starting to see how
many people have heard the term infrastructure is a service, platform is a service, software
is a service? Well now the new thing, the big thing is this concept of business services
is a service. I don’t even care about the IT, I’m just going to go to this company
and all of my transactions will be taken care of. I don’t even know that IT is running
into that. That’s what IT of the future begins looking at, what we begin managing.
How are companies getting there? It’s basically a three step process that they’re beginning
to go through. You’re starting to see the beginnings of this now. First off is this
concept of standardizing. Generally considered a bad word, most people think standardizing
means do it my way and you know or take the highway. But actually what standardizing is
saying is first and foremost decide what it is that you’re going to do that creates
value for your customers through the best stat in the world or you’re required to
do for legal or regulatory reasons and then get rid of everything else. What’s the highest
form of efficiency? Stop doing something you don’t need to be doing, absolute efficiency.
So, that’s a starting point of standardization. Then once you’ve standardized it, start
modernizing it. Come up to speed on the newest technologies and the newest ways of doing
things. There’s a wonderful presentation you can Google it, and generally find it.
It’s by Rob Carter. He’s the CIO of Federal Express. It’s called the Four Horsemen of
Dominant Design. And what he argues in his presentation is we have reached an inflection
point with information technology in the business space where we no longer have to be worried
about which server, which storage mechanism, what networking technology do we use. The
dominant designs have been determined and we’ll see significant productivity because
of that. So, that’s what you’ll want to do when you modernize.
The next thing that you want to do is you want to simplify. The starting point is simplification
for most people is to begin virtualizing their environments. Because what virtualization
does is it starts abstracting out the hardware from management of IT. If you have a highly
virtual environment you’re not managing servers, storage and everything anymore, you’re
managing virtual instances. Now under the cover somebody is doing it, but you’re bringing
up the level of abstraction that you’re dealing with it. And they even begin centralizing
and not centralizing in terms of these people are responsible for that. That’s the old
management (unintelligible), but centralizing in there’s one point of truth. There’s
one place you go to when you need resources. If you go to most IP shops, even if they virtualize
you say hey I need a server, a virtual server, okay well talk to Joe and get an IP address
for me and Joe will give me the IP address and I will spin up the server. Oh you’re
going to need some storage to go with that? Okay you need to talk to Marty and let him
get a couple of loon addresses. And somebody’s laughing obviously you’ve gone through this
experience. Now I happen to know you probably experience it here a little bit too. So, that’s
what we’re talking about centralizing is, it’s one place, one point of truth, one
point to get what you need.
And the next step is this automation that what you really want to do is you want to
take out as much human interaction in the provisioning of services you possibly can.
Because really where you want to get to is self-service. Think about the serendipity
economy for just a second. Yet value is created in an instant. This moment in time that these
things have come together we have an opportunity to create value. Are you going to be successful
if you have to pick up the phone and call and enter in a service request? Not likely.
You want people to be able to self-service and then more importantly you want to be able
to anticipate what they’re going to need and provide it for them ahead of time.
So, those are the three steps that IP shops are beginning to go through in order to get
to the future, which is basically the cloud, the big huge cloud. Now how many people think
cloud is a new concept? It’s not. In fact in 1961 John McCarthy is a National Science
Merritt Fellow. He won another, he won the touring award. In 1961 at the MIT Centennial
Celebration he gave a speech. And in that speech he described the ultimate inevitable
endpoint for all information technology and it was the cloud. He didn’t use that term
but it was the cloud. And actually if you do a basically history of IT and where it’s
going and all you find that it all leads to this end steak. Now will there be one big
huge cloud. Yeah, probably not. But there will be lots of clouds. We will federate across
clouds. We will basically have clouds interacting with each other.
So, in terms of the future of IT it is this federation of computing clouds built on top
of some type of fabric. Now there’s a downside associated with this. How many people have
ever watched the movie WestWorld? Great movie. Yul Brynner, he’s a robot. He’s a gun
slinger robot. The WestWorld was a place, Disney Land for adults. You would go there
and all the robots you know you could kill them in gunfights. You could use them as slaves.
You know it was really great, great world. Only problem was is the robots were built
by computers that were built by computers that were built by computers that were built
by computers. And no human understood how any of it worked again. Well unfortunately
that’s the kind of path we’re starting to go down.
Now I’ll leave you with one thought and you can just watch this and I’ll tell you
what it is as I get to the end. How many people have heard of the book The World is Flat?
It’s written by Thomas Friedman. It’s a brilliant expose about what’s going on
in the economic world today and it’s basically saying that there is no economic friction
anymore, that you know if I have an idea I can actually have it produced in China. I
could have my support in India. I could have sales activities going on in Europe, and I
can all do it instantaneously. Well, he wasn’t quite right. A guy by the name of (unintelligible)
basically wrote a book and said no the world’s not flat. The supply chain of the world is
flat. The demand chain is still extremely erratic because the government regulations,
social differences, and whatever. So, basically it said nah the world’s not so terribly
flat. You guys enjoying the little chart. I see you’re fascinated by it. Well I love
this. Well no they’re wrong. It’s not that it’s not flat and it’s not that it’s
flat; it’s that it’s curved. It’s really curved. Right? So, Schmitt basically wrote
well they’re both right, which is you know it’s great. One says x and one says y. And
you can come in saying you’re both right, or you can say you’re both wrong. But if
you say you’re both right nobody argues with you. So, Schmitt came in and he basically
said look they’re right in the sense that the supply chain is flat. There is no friction
in the supply chain anymore. I mean literally I can do a design, e-mail it to China, and
have it here via Federal Express within twenty-four hours. I mean literally the supply chain is
basically flat. The demand chain is not flat yet. So, what happens when you have erratic
demand driving a perfectly, a perfect supply chain? Catastrophic errors. Case in point,
the mortgage crisis. You had a perfect supply chain that could deliver mortgages and derivatives
based on mortgages anywhere in the world and you’ve had an erratic demand chain which
basically didn’t know what it want, wasn’t paying attention to it and basically disrupted.
So the consequences of all this is we’re now in an environment where the opportunity
for making a mistake has catastrophic or chaotic consequences.
Now how many people have figured out what’s been going on with the chart? That is from
2007 I think to I think it goes to February of 2012. I don’t remember now for sure.
Transactions per second on all the stock exchanges in the United States. Now what’s interesting
about that is as you get closer to what the economists call a perfect economy, anybody
remember what that is? It’s when my supply chain and my demand chain are perfectly matched.
There’s an interesting consequence of a perfect economy. There is no profit. Because
if there’s profit a new (unintelligible) will come in and supply at a lower cost at
a lower price and take away your profit. So, the wonderful thing about supply and demand
chains is you always have exactly what you want at the price you’re willing to pay.
The bad thing is nobody makes any money at it. Well in effect there actually exists the
perfect economy already, called the stock exchanges. They’re basically; I mean there’s
a certain amount of economic friction and knowledge difference. It’s almost the perfect
economy now. And as a consequence there is very, very, very little margin in every transaction.
So, how do you compensate for that? More transactions. That’s what you’re seeing and we’re
moving into 2011 and there we go. That’s what’s happening in stock exchanges. Now
the reason I use this example is the supply, the demand chain is starting to become perfect
now. Your ability to get on the, you know how many people go and buy a car anymore?
How many people have recently gone to buy a car? Did you go into the dealer and say
I want to buy this car? No, you got on the internet and say what care do I want. What
are the prices? What have other people in the world been paying for this? In what condition?
At what time? What are my insurance rates? What are the deals I can get for financing?
You now have all of the infor…the reason the demand side was always erratical is the
information friction. Buyers and sellers were dealing with different levels of information.
What we’ve now is created a world where that’s going away. So, what that means that
is that our everyday economy is going to start looking like that. And the only way you survive
there is your ability to be in the moment ready and able to respond to the opportunity
when it presents itself. So, I think I went a little long. If you guys
have any questions. I’m going to hang around. You can ask questions or whatever. If you
want to reach me you have my email address. (Unintelligble), because I tend to be very
controversial when I actually Tweet things, and with that I thank you very much.