A few months ago publisher Ashley Crawford (of 21C and World Art fame) asked me to contribute to a Photofile Magazine roundtable about a mysterious bunny image. I sent Ash a brief piece with in-joke references to the Discordianism movement, the horror author H.P. Lovecraft, Richard Adams’ novel Watership Down, intelligent design, and the 1977 hoax Alternative 3 (in Photofile #84, Summer 2008, p. 60). It was a lot of fun. The image turned out to be Polly Borland‘s Untitled III (2004-04), and private collector David Walsh now curates a billboard version in Melbourne, Australia.
15 Years In The Wilderness
Actor Mickey Rourke is an Oscar favourite for his Method role in Darren Aronofsky‘s The Wrestler (2008). Press coverage focuses on Rourke’s rise-and-fall: how his bad boy image led to onset difficulties in the late 1980s, a bitter breakup with model Carre Otis, and living humiliated, destitute and largely forgotten by the mid-1990s. Arrogance, self-loathing, and rejecting offers for roles in later blockbusters all played a part in Rourke’s banishment to straight-to-video films. He has waited 15 years in the wilderness before a career turnaround.
The Guardian‘s Carole Cadwalladr captures this destructive career arc in a poignant interview in which Rourke examines his poor decisions and their impact. It’s as if Marlon Brando had coauthored Sidney Finkelstein’s study Why Executives Fail (Portfolio, New York, 2003): see Finkelstein’s homepage, the book’s website, and a video lecture. Rourke admits to many of the communication problems, career-blocking moves and blow-ups that Allen N. Weiner identifies in his book So Smart But . . . (Jossey-Bass, San Francisco, 2006).
I reflected on Cadwalladr’s profile for a week: Rourke has insights about why star performers can blow-up. And then Pat Jordan of The New York Times decided to do some fact-checking with others after an interview with Rourke. What emerges from Jordan’s investigation is a far more nuanced view of Rourke’s anecdotes and self-narratives to Cadwalladr and other journalists. “He has spent his entire adult life playing not fictional characters but an idealized delusional fantasy of himself,” Jordan observes. Maybe so, but Cadwalladr and Jordan have both written detailed and emotive portraits of Rourke who now could have a fourth act: following Finkelstein and Weiner on the corporate seminar circuit on how not to make decisions that destroy careers and reputations.
Neil Chenoweth’s 2008 Walkley Award for Business Journalism
Congratulations to forensic journalist Neil Chenoweth and his colleagues on their 2008 Walkley Award for Business Journalism: an investigation into the failed stockbrokers Opes Prime.
I interviewed Chenoweth in 2002 for a Masters paper on Rupert Murdoch’s negotiation strategies. During our talk, Chenoweth gave me a couple of “aha!” moments on how to conduct a forensic journalism investigation, Murdoch’s use of game theory to understand other parties in a deal, and the murky underworld of cable and satellite television.
Chenoweth writes regularly for the Australian Financial Review, an Antipodean equivalent of the pre-Murdoch Wall Street Journal. Chenoweth’s Virtual Murdoch: Reality Wars on the Information Superhighway (Secker & Warburg, London, 2001), published in the US with new material as Rupert Murdoch (Random House, New York, 2004) chronicles his decade-long investigation into the world’s most powerful media mogul. Read a chapter-by-chapter summary here. Chenoweth’s book Packer’s Lunch (Random House, Sydney, 2006), reviewed here, also has substantial research on Sydney’s corporate dealmakers in the 1990s and their Swiss bank accounts.
A Challenging Conversation on Integral Futures
The Journal of Futures Studies (Tamkang University, Taiwan) has published a ‘trialogue’ on Integral Futures between colleagues Josh Floyd, Jose Ramos and myself.
The trialogue is an exploratory method that the late ethnobotanist Terence McKenna used at the Esalen Institute and Omega Institute to cocreate new knowledge informed by interdisciplinary expertise. McKenna’s trialogues featured mathematician Ralph Abraham and biologist Rupert Sheldrake. More recently, Erik Davis and Douglas Rushkoff have continued the tradition. The theoretical physicist David Bohm developed a similar method for dialogue and group work.
Floyd, Ramos and I discussed this approach in February-April 2006 after taking three different
iterations of Advanced Professional Praxis a ‘capstone’ project unit in
Swinburne University’s Strategic Foresight program. Richard Slaughter provided a focal point as he assembled papers for a special issue of the journal Futures (Elsevier) on Integral Futures Methodologies (November, 2007). For over a decade, Slaughter had synthesised a Futures knowledge base of new frameworks, methodologies and visions. Informed by Ken Wilber‘s Integral vision, Slaughter proposed Integral Futures as a “broader and deeper” horizon for Futures work. Wilber and Slaughter galvanised a new cohort of practitioners to develop new Integral Futures methodologies. Yet new creative horizons may create new problems.
How can Integral Futures practitioners be ethically informed about their new methods? Our trialogue proposes Embodied Foresight as one possible way to achieve this: the cultivation of ethical sensitivity, situation awareness about the Teacher-Student relationship and pedagogical barriers, and self-reflection on the transformative potential of initiatory knowledge and wisdom traditions. Or, “foresight-in-context” may anticipate and prevent hazards that might have unforeseen consequences.
The trialogue creates a space for each of us to bring theoretical frameworks and practitioner reflections into the discussion. Floyd brings expertise in Zen Buddhism, cognitive science and phenomenology, and a familiarity with Wilber and Evan Thompson‘s research. Ramos brings transcultural experiences in Futures, action research, and postcolonial insights on “model monopolies”. I added some insights from mid-1990s exploration of the Gurdjieff Work and the Temple of Set, and experiences during Masters studies, publishing and research projects.
From our trialogue’s conclusion:
Embodied Foresight offers some emergent solutions for the individual practitioner to the challenges and difficulties of Integral Futures practice. These reflexive ‘problems’ are part of diffusion, initiation and knowledge transfer in many wisdom traditions. Our ‘trialogue’ has raised several ‘reflexive’ problems-from Teacher-Student relationships and pedagogical barriers to the archetypal dangers of Phobos and Thanatos-that each of us has personally experienced within the Futures Studies community and in other initiatory and wisdom traditions.
CPRF08 Paper: Disruptive Innovation, Radiohead & Nine Inch Nails
I recently blogged about a presentation the 2008 Communications Policy Research Forum in Sydney on disruptive innovation in the music industry.
You can now download an Adobe PDF version of the PowerPoint slides here.
The refereed paper has been published in the Proceedings of the Communications Policy Research Forum 2008 (pp. 155-175 or PDF file pp. 179-199). You can also download a local copy of the paper here.
The paper’s case study examines why Radiohead and Nine Inch Nails released their new albums as digital downloads. I suggest a major reason why, and one that was overlooked by Web 2.0 pundits, is that each artist was in the ‘label shopping phase’ of a new contract and defected after negotiation problems with their major labels. This fits a pattern in mergers and acquisitions: the major labels lost artists due to integration problems in a merger or acquisition. Terra Firma Capital Partners has since partially confirmed this hypothesis: the private equity firm endures more post-acquisition integration problems with EMI and is fighting against government regulation of Great Britain’s financial services sector.
The paper’s data appendices contrast the artists’ strategies with signficant events and innovations in music industry contracts, conglomerate mergers and deal structures. Somehow I missed U2‘s March 2008 deal with Live Nation: I found out about it in an October 2008 announcement. Guns n’ Roses also finally released Chinese Democracy (MySpace audio stream): a new album that has taken 15 years, a rumoured US$14 million budget and 14 recording studios in New York, Los Angeles, Las Vegas and London. I may write a paper on it . . .
Efficiency Perils in Global Food Markets
The New Yorker‘s James Surowiecki provides an overview of volatility in the global food market. Three insights emerge for me:
(1) Differences between policymakers and food security experts at the problem diagnosis stage may have complicated the implementation of structural adjustment programs. Food security poses solutions that are potentially counterintuitive to policymakers: the former will value food stocks to ensure stability in sovereign nation-state the international political economy whereas the latter may prioritise food flows for international trade, to hedge commodities and currency risks. Surowiecki explores a contemporary scenario of potential market failure due to demand-supply, pricing and other distortions with the allocation mechanisms.
(2) David Ricardo‘s theory of comparative advantage – in which each nation specialises in the efficient production of goods and services to trade with others for maximum payoff – may not be scalable in its simple form to a complex, interconnected and global system. Surowiecki’s analysis suggests tha the over-reliance on a few countries for specific foods will undermine the global system’s resilience and capacity to cope with exogenous shocks and volatility.
(3) Paramaters for investor and market models of the global food market using Vensim simulation software: production supply, demand volatility, pricing, subsidies/tariffs, stocks and flows, and leverage points. Undertake different short- and long-run simulations noting the role of capacities, dynamics and thresholds, and the impacts of exogenous shocks and volatility.
Value Chain 2.0 Precursors
Paul Roberts has an interesting post on Value Chain 2.0: the use of Web 2.0 methodologies and platforms in value chain analysis, process redesign and supply chain management (SCM).
Value Chain 2.0 transformations actually predate Tim O’Reilly’s Web 2.0 term but this is largely hidden from non-domain experts. One reason why is the historical influence of engineering and mechanistic models on public perceptions of SCM. Logistics, operations and industrial economics all moulded Michael Porter‘s value chain model. Mainframe interfaces shaped SAP‘s materials management and enterprise resource planning systems. A climate of downsizing and recessions influenced how business leaders applied Michael Hammer and James Champy‘s business process reengineering. SCM has evolved yet the public perceptions remain.
There’s a broader context and history to Value Chain 2.0 that some Web 2.0 descriptions may not do justice to. Some of the more well-known examples: Eric von Hippel cast the die in The Sources of Innovation (New York: Oxford University Press, 1988) about 3M‘s ideation, innovation and new product development processes; von Hippel elaborated on discussions which occurred since the mid-1970s. SAP and other ERP vendors have had end-user case studies in conferences for over a decade. Dell‘s dotcom era choiceboard for consumers to customise their orders meant more efficient throughput and higher inventory turnover. Lego Mindstorms builds on decades of insights in constructivist learning and robotics. Procter & Gamble‘s Connect + Develop initiative reflects P&G’s expertise in brand development and consumer goods marketing, and leverages decade-long trends in knowledge management and information systems. This suggests a deep history or a path dependence to many ‘new new’ Web 2.0 cases and trends.
Perhaps Value Chain 2.0’s initial contributions are to make these initiatives more explicit to non-domain experts and to provide an accessible interface for consumers.
Decision Sciences For The Masses
Malcolm Gladwell‘s new book Outliers: The Science of Success (New York: Little, Brown & Co., 2008) appears to be the publishing event of the week.
Gladwell (The Tipping Point, Blink) spearheads a group of writers who are masterful at using anecdotes about insights from statistics, system dynamics and the decision sciences that will interest a broad readership. This group also in Chris Anderson (The Long Tail), James Surowiecki (The Wisdom of Crowds), Nassim Nicholas Taleb (Fooled by Randomness, The Black Swan), Tim Harford (The Undercover Economist), Steven Levitt and Stephen Dubner (Freakonomics), and Michael Lewis (Liar’s Poker, The New New Thing, Moneyball) also belong to this group. Apart from outliers and tipping points these books explore intuitive decisions, long tail distributions, the Law of the Many, chance, low probabilty high-impact events, martingales, and data-driven decisions. Each author has a different background: Taleb is an epistemologist and former trader, Anderson is a technology pundit, and Lewis, Gladwell and Surowiecki are essayists and journalists.
For me, six observations emerge from these authors. First, they have a writing style that appeals to a broad audience. Second , they provide an introduction to quantitative elements of decision-making and judgments. Third, their publishers have created a niche market in airport reading and popular science paperbacks. Fourth, they differ in their approach to theory building: Anderson, Gladwell and Surowiecki take an insight, interview people, and promote it; Taleb, Harford and Lewis draw on their domain experience; and Levitt and Dunbar illustrate how a subject matter expert can collaborate with a journalist to reach a broader audience. Fifth, their books have seeded a range of Web 2.0 strategies, which vary in rigour, validity, generalisability and applicability to real-world analysis.
Finally, their publishers have used their marketing appeal to build an audience during turnarounds and post-acquisition integrations: Gladwell and Surowiecki helped revive The New Yorker, Levitt and Dunbar’s blog gained The New York Times an Internet readership, and Anderson revamped Wired after Conde Nast‘s acquisition.
Goldman Sachs’ Foresight Culture
Recently I posed two questions about Foresight in Organisations: What are are the intervention points? After five or six years, who are the teachable case studies for successful implementation of the foresight function?
I’ve only read the Los Angeles Times and New York Times reviews but Charles D. Ellis’s The Partnership: The Making of Goldman Sachs (Penguin Press HC, New York, 2008) has some answers to both questions.
Ellis suggests Goldman Sachs has three intervention points to cultivate a foresight function: (1) a human resources function staffed by A+ people who recruit “A+++ people” usually in computational finance, financial engineering and statistical arbitrage; (2) an organisational culture tolerant of the “longer-term view” that is linked to the “[operational] details” necessary for strategic execution; and (3) a creative tension between past excellence and new frontiers. Intriguingly, the “longer-term view” or “forward view” in Foresight parlance, emerges from people in a supportive culture who are faced with challenge at the boundary of the firm and the external competitive environment.
Two other biographies partially validate Ellis’s insights.
Perry Mehrling’s biography Fischer Black and the Revolutionary Idea of Finance (New York: John Wiley & Sons, 2005) and his working paper ‘Understanding Fischer Black‘ describe why Goldman Sachs recruited the economist Black: to tap his academic knowledge to design new financial instruments, and use his influence as coauthor of the Black-Scholes equation in finance to impress clients.
Emanuel Derman describes his Goldman Sachs collaboration with Black in My Life As A Quant: Reflections on Physics and Finance (New York: John Wiley & Sons, 2004) and how the firm benefited from the influx of PhD graduates in the 1980s. Derman was bored at AT&T Bell Labs which had a reactive culture of research management. He transitioned into Goldman Sachs’ fixed income division in 1985 and then moved to equities in 1990 where he thrived for the next decade in a culture that appreciated how conceptual expertise can underpin a firm’s competitive advantage in new growth markets.
The contrast was so different that I pointed Derman’s experience out in a private submission to Australia’s National Innovation System Review (aka Cutler Innovation Review) in comments about the institutional design and research management culture of Cooperative Research Centre consortia. Maybe given the subprime fallout CRCs can also learn something from Goldman Sachs and Berkshire Hathaway‘s Warren Buffett who has now taken a $US5 billion equity stake in Sachs’ foresight culture.
Foresight in Organisations Revisited
A few years ago I took a Masters unit of study about Foresight in Organisations. In its early iteration the unit covered several topics:
∙ Conceptual theories of strategic planning: Alfred Chandler‘s structure and strategy, Michael Porter‘s 5 Forces model and contributions to industrial economics, Gary Hamel & C.K. Prahalad‘s early work on core competencies and industry whitespaces, and Henry Mintzberg‘s eloquent critique of the strategic planning function.
∙
The operational span of strategic planning including an overview of
business units, corporate level strategy, and multi-national
conglomerates.
∙ Good practices in change management and organisational interventions such as Elliott Jacques‘ requisite organisation, Ralph Stacey’s shadow or informal networks in organisations, Richard Hames‘ strategic navigation, and Peter Senge‘s view on learning organisations.
∙ Practitioner reflections and post-implementation case studies on creating a foresight function in organisations from Andy Hines, Sohail Inayatullah, Peter Hayward and Joe Voros.
The most fun part was a lunch with Hines around the launch of the Association of Professional Futurists.
The
student cohort grasped several hypotheses from these topics: (a) the
limits of traditional strategic planning in a complex environment, (b)
the emergence of anticipatory management and strategic foresight as two
new paradigms, and (c) how the foresight function may be embedded in
organisational culture.
In retrospect three broad trends may have influenced the topics and hypotheses:
(1)
Hamel & Prahalad’s view led a new wave of practitioners to frame
the foresight function as a managerial core competence in pragmatic
strategic thinking (thanks to Mike McAllum
for his practitioner insights on Hamel’s influence). In the contract
phase of a consulting engagement this meant the practitioners often
linked foresight to growth options, visioning and corporate strategy.
Clients were receptive, partly due to Hamel & Prahalad’s solutions
at the firm and competition levels. More broadly, exogenous factors
played a major role in creating the macroeconomic climate for client
demand: the 10-year Juglar business cycle, the late 1990s Internet bubble and the M&A wave of European industry consolidation.
(2)
Hamel & Prahalad’s work coincided with the diffusion of new
frameworks for organisational interventions from management theorists
into consulting firms. Senge’s systems modelling at MIT’s Society for Organisational Learning and Arie de Geus‘s scenarios work at Royal Dutch Shell
were two such frameworks. If Hamel & Prahalad provided the
strategic rationale, then Senge, de Geus and others suggested the
intervention points: how a forward view and systems awareness could
enhance managerial decisions about corporate strategy. However this
alignment of the foresight function with strategic thinking did not
explore other potential intervention points: cost management systems,
project hurdle rates for risk-return, and operations management.
Attention to these would bridge the strategy|operations divide in
organisations that demand quantifiable results.
(3) An
alternative route for contract phase buy-in was to connect the
foresight function with a hot topic that interested the client. On the
upside, this was a way to raise awareness of dynamics, forces, trends
and challenges beyond the firm or market. On the downside, the buy-in
now depended on the currency of the hot topic, the differential
diagnosis skills of the practitioner, and the value created by the
solutions. If the hot topic waned, so might the buy-in for the
foresight function.
With the benefit of five years hindsight I now see how some barriers to Foresight in Organisations might be avoided.
Foresight
in Organisations gives students a grounding philosophy that informs
their consulting approach. However its philosophy is also a relatively
young discipline with multiple schools of thought and stances, and in
competition from other frameworks, methodologies and stances for client
dollars. This poses translation challenges between the Foresight
practitioner and their client that arise in the contract, data
collection and implementation phases of a consulting engagement.
Clarity on how philosophy informs rationale may help the engagement go
smoothly.
The Foresight practitioner also faces cognitive biases
and judgments that can affect their consulting decisions during an
organisational intervention. The Foresight practitioner’s enthusiasm
for Foresight as a normative stance and silver bullet solution can set them up to fail or give their solutions a shorter half-life. Specific cognitive biases that the Foresight practitioner may be prone to include positive illusions about their implementation competencies, illusion of control
over others, and unrealistic optimism about the likelihood of
organisational transformation. The client may also have a shadow
agenda about power and the direction of organisational change which can
blindside any intervention. Finally, as the Foresight practitioner is
not embedded in the organisation their enthusiasm for change can
trigger defensive routines from others that may delegitimate the
practitioner, block the microprocesses for change, or derail the
organisational intervention.
I learnt the most from the war
stories of other Foresight practitioners: what worked, what didn’t, how
and why interventions failed, and what was done the next time. You may
mess up as others have messed up before you. Now I have my own war
stories to add . . .