Digital Culture & Corporations, Not What We Think.
Digital Culture is not About Agile or Startups
A changing environment requires flexibility and adaptability. A static one, no matter what its features are, doesn’t.
Most of the things that people describe as being digital are things that are needed to survive the transition not flourish in the end state. Because of this, many corporations’ digital strategies are fundamentally wrong.
Digital Culture is commonly used to describe organisations that adapt and change. Specifically it applies to those who use iterative, evolutionary approaches to development which involve rapid experimentation, such as agile and those that use historically low costs of capital to make lots of small bets via investments in things like startups.
To identify this as being digital confuses the types of organizational cultures that are needed when the world is shifting from one paradigm (industrial) to another (digital) rather than the ones that are needed when the new paradigm is in place.
Being Digital After the Transition Phase
As the transition from industrial to digital ripples outside of technology sectors to things like mobility, manufacture and financial services, the transition phase is reaching a climax and organizations need to begin to prepare for the new environment in the long term rather than just survive the transition.
Currently, low borrowing costs, new technology and changing markets mean corporations need to make lots of new bets. Investing in startups, incubators and partnerships are a better strategy than large scale R&D in a few known areas. This will last a while, but not forever, and in future being a digital culture will have little to do with these things.
Just as an industrial organization today shares little in common with the entrepreneurial risk taking of Brunel, and mirrors more accurately the operational model and organizational hierarchy of a feudal land owner, digital era corporations of the future won’t be like startups. Any corporation trying to be digital by wearing jeans and t-shirts and being agile is copying the wrong things without trying to understand them and so is no different from a cargo cult.
In future we won’t need adaptive corporations we will need corporations that maximise the permanent characteristics of a new business landscape created by the two principal phases of the digital age: networks and intelligent automation. Yes, corporations will need to be structurally different and they will need to innovate but being digital will not mean what it does now.
Being Digital, After the Transition
There have been three phases to the information revolution.
1. The development of the Universal Turing Machine (the computer).
2. Linking computers together (the Internet).
3. Software as networks (AI)
The second phase triggered an awareness of the fact that the world was undergoing a change as fundamental as the Industrial Revolution, the impacts of the third are just beginning to become apparent. The two together will define what digital era corporations are.
Being Digital (a) Networks.
The Internet allows many to many communication — there are infinite channels. In the past these channels of communication were very expensive and only owned by the rich and powerful.
Before the era of broadcast channels communicating with people over large distances required an army of people on horseback and to disseminate culture with live presence required owning theatres which could communicate to a maximum audience of a few thousand people at a time.
The broadcast era meant that things like movie theatres could communicate the same drama to an audience of millions, and so collective purchasing power of the masses watching Hollywood movies was greater than that of the elite and opera houses. Popular culture was born, but there was still asymmetry between channels for disseminating and receiving information.
This asymmetry is at the root of organisationally hierarchies where those that issue commands disseminate information to larger and larger cascading groups of people who receive them. Corporations before the internet were top down structures, and these defined the industrial age.
With the Internet, anyone can talk to anyone, and it costs almost nothing to own a channel of communication. This would inevitably result in a meritocracy were it not for the fact that the popularity of these channels can be artificially inflated by either traditional marketing spend or by fuelling people’s base instincts and emotions at the expense of the truth — as we have seen with the rise of populist politics.
Within an organization, meritocratic flow of information represents an efficiency gain and so a truly digital corporation is characterised not by how agile it is but how it allows free flow of information, not just bottom up as well as traditional top down, but from any team to any team.
For any team to be able to talk to any other team requires their capabilities to be known and what the expected deliverables are. You don’t need to know how a team does something but you need to know what you can ask it to do and what it will deliver.
To achieve this you need to be able to discover organizational capabilities (e.g. via a directory) and a list of inputs and expected outputs for each, much like an API in computing. In addition you need facilities to broker, prioritise and manage access to these capabilities so that they aren’t overloaded by people who abuse them.
This requires new types of organizational components, mandates and structures.
Being Digital (b) Intelligent Automation.
AI is a different phase of the digital revolution from the Internet one, just as the factory assembly line one was a different phase of the industrial era, nearly a century after the invention of steam engines.
If the creation of the computer allowed for a machine to run any program to perform a calculation, AI allows for a program to perform any calculation. In some ways, AI is universal software. It isn’t yet self learning software as unsupervised AI is not yet commercially viable, but even in its current form it dramatically changes the way we will use computers.
AI removes the need to codify how you did something in order to have a machine do it. Because of this, all the things we do that are not consciously understood (the things we perceive as human rather than mechanical) can potentially be performed by a machine.
In the past, to get a computer to throw a ball, a human would have to understand the physics of throwing and translate these into formulas and logic. More people can throw a ball with their brain subconsciously doing a complex calculation based on the laws of mechanics than can consciously translate the act of throwing in logical terms so that someone else, including a machine can replicate them. The few people that can codify things — coders, are much in demand.
AI might replace the jobs of bureaucrats and radiologists, but the elephant in the room is that it will replace the jobs of software engineers.
Coders codify things and AI does not need people to do that. There will be armies of people that prepare machines to automate things, but very few of the these programers of the AI era will not be blue collar workers.
Knowing what digital corporations, post AI, will look like is far more difficult than knowing what post Internet ones do, because the effects have not yet played out. However, they will operate in an economic and business landscape that has the following features:
(a) the people that own the means of production will also own the workforce (the bots). As such, there will likely be new types of social pacts, more rigid taxation and regulatory systems and much greater control of the flow of capital, particularly across international borders. Many more corporations will work in regulated environments.
(b) new middle class jobs may be quickly replaced. For example, the majority of ‘programming’ jobs may be blue collar and they will replace bureaucrats or current service industry jobs, both skilled (e.g. radiologists) and non skilled. Much as the industrial era needed workers to prepare the machines to do physical tasks, the digital era will need workers to prepare machines to do mental ones, but in future this preparation may not be highly skilled.
(c) ‘human’ jobs will be defined by those which display obvious physical or emotional characteristics of humans rather than ability to perform specific mental or physical tasks. Organisational structures which already have to operate more as ecosystems as a whole, due to the effects of the Internet, will have to be more ‘organic’ and human to create differentiation and advantage.
(d) workers’ cognitive abilities will be removed as leverage (much as their physical ones were post industrial). However, as the marginal costs of things produced by automated systems will be low, they will compete for large numbers of customers and so the only functioning markets will be those where the masses can still earn enough to buy the things the robots offer. People’s attention, which is already scarce due to saturation via networked devices such as mobile phones will be an increasingly valuable commodity that corporations will have to compete for. A digital corporation will know and understand the value of attention and personal data and a digital era society will group together to hold onto and leverage that data, in aggregate.
(e) even if corporations will have to work in more regulated environments the scope of their operation may not be diminshed. The number of state run entities may not increase as the only way that people’s attention will have any leverage is if it is competed for by multiple parties rather than state run monopolies.