by Rita McGrath
As NPR’s Aarti Shahani observed, a real issue for Facebook is putting engagement of users ahead of any other metric. “People who’ve worked at Facebook say that from Day 1, executives have been fixated on measuring engagement: how much you like, click, share, up to what second you watch a video,” she reported. “In product meetings, current and former employees say, any suggestion to tweak News Feed—Facebook’s signature product—must include a deep analysis of how that would increase or decrease engagement. This dogged focus on metrics is also apparent from the company’s own blog posts and research.”
The lesson here is that powerful business incentives can thwart the willingness to take in and absorb uncomfortable lessons. Indeed, when not carefully designed, powerful executive incentives can lead to results that nobody wants. Consider Enron, the disgraced energy trading company. Even as its business performance destroyed shareholder value, it lavished massive rewards on executives, which in turn incentivized them to keep bumping up the stock price, which in turn ultimately led to not only unsavory but illegal behavior.
It is worth remembering that it is entirely possible for companies to cease operations if what they are doing is found to be illegal. Consider, for instance, Aereo, a startup that attempted to resell broadcast television shows over the Internet. A coalition of powerful plaintiffs were so wound up about the company’s business model that they sued it, in a case that went all the way to the US Supreme Court. Facebook has by now attracted so many lawsuits that it actually mentions them in a special note in its quarterly Securities and Exchange Commission report.
7. Avoid Denial
While there is no shortage of evidence that something is seriously wrong at Facebook, the company’s public statements continually downplay just how bad things are. From its comments denying that anyone could think the platform could have influenced the 2016 presidential election to a later defense of the right of Holocaust deniers to spread their stories on the platform, there seems to be little genuine willingness to take responsibility for the use of Facebook for immoral, if not illegal, ends. This is doubly interesting because 2010 research done by Facebook itself showed that the social network had a big impact in turning out voters in the midterm elections.
This type of behavior is not new. Leaders turn a blind eye quite deliberately because it is just more convenient not to take in news that things might be changing. For instance, when Robert S. Apatoff, CEO of the iconic mapmaker Rand McNally, was interviewed in 2006, he basically dismissed the likely effects of the digital revolution:
Anyone who thinks old-fashioned folded maps are going away should think again, according to Apatoff. “It’s kind of like saying newspapers are going to disappear,” he said in an interview at the company’s headquarters north of Chicago. “There’s going to be some changes in how they’re used, but people still want to open them and read them with their coffee. Same thing with trip planning. People will continue to want to be able to consume maps this way,” he said, even if they use maps or atlases together with hand-held devices or the Internet.
Rand McNally was acquired by distressed-asset investment firm Patriarch Partners in 2007.
8. Talk to the Future That Is Unfolding Now
According to a quote widely attributed to science fiction writer William Ford Gibson, “The future is already here—it’s just not very evenly distributed.” One of my colleagues at the consultancy Innosight, Scott Anthony, has turned this concept into a practical prescription: Identify the places where you could go to talk to representatives of the future.
For instance, if you want to know how the twentysomethings of ten years from now will be looking at the world, you can be absolutely certain that you could have a conversation with the ten-year-olds of today. If you are interested in cutting-edge developments in almost any sector, there are bound to be conferences at which people present their ideas at an early stage.
For instance, one of my colleagues at Columbia University, Frank Rose, runs an amazing program called the Digital Storytelling Lab, dedicated to exploring how digital technologies are influencing the stories and experiences we share with one another. Among the lab’s initiatives is the Digital Dozen competition, in which awards are given to people who have engaged in developing “innovative approaches to narrative.” Frank’s reason for creating the competition was his belief that each revolution in human communication takes about twenty years to assume its mature shape. He has observed, for example, that when moving pictures were first commercialized, nobody knew what a “movie” was. So what did they do? They filmed stage plays! I would make a similar observation about online education. We don’t know what it really is yet, so we film professors talking at the front of the classroom. This is highly unlikely to be where the new medium takes us, but we don’t yet know what that will look like, and so experimentation and trial and error are essential.
With movies, it wasn’t until many years had passed that the elements of what we would consider absolutely normal aspects of the moviemaking business became standard practice. Filming out of sequence, using different camera angles to capture a similar scene, cutting and editing, and myriad other techniques were still to come when moving pictures were first invented.
The Digital Dozen competition pulls together digital works that, at the moment, defy classification. One contestant for the 2018 awards featured a hilarious series of ads and montages by the direct-mail processing company Mailchimp. Mispronunciations of its name are brought to life in montages such as “Mail Shrimp” (featuring a singing shrimp sandwich in a post office) and “Kale Limp” (showing kale-covered puppy dogs), all done with hugely immersive video and sound, and reflected in real-life billboards and other concepts, such as “Fail Chips,” which tie the messaging together.
Another entry immersed the viewer in the experience of visiting the US-Mexico border. Yet another was a cartoon-based project exploring what it was like to be in the Danish secret service in World War II. And so on. Don’t take my word for it; visit the Digital Dozen website at http://digitaldozen.io/2018-awards/ for an eye-opening look at the future of digital communications and storytelling.
The main point here is that the future doesn’t just happen all at once. It begins to unfold unevenly. If you can “interview” where it is starting to take place now, you can begin to develop an early point of view on it.
Sometimes Cassandra Is onto Something
The still unfolding drama around Facebook’s utilization of personal data to support its business practices continues to draw out the dangers of failing to pay attention to what is going on at the edges of your organization. It also highlights the importance of paying attention to those who are directly in contact with the emerging inflection point, as they may be in the best position to help you understand it.
If you are one of those people on the edges, keep this thought: Your time may be coming sooner than you think. Sitting ringside at a change that is about to unfold can give you tremendous insight into what actions to take now, before the outcome is obvious to everyone.
Key Takeaways
Snow melts from the edges. The changes that are going to fundamentally influence the future of your business are brewing on the periphery. To avoid being taken by surprise by an inflection point, you need to be exposed to what is happening at the edges.
The upheavals created by major strategic inflection points usually take quite some time to unfold. They are also not “complete” when you first see them. But if you are paying attention, you can begin to see the implications of their trajectory early on, when it is still possible to influence them.
Eight practices can help you make sure you are seeing what is going on along the edges.
Ensure direct connection between the people at the edges of your company and the people making strategy.
Go out of your way to include diverse perspectives in thinking about the implications of the future.
Use deliberate decision-making processes for consequential and irrevers
ible (type 1) decisions. Use small, agile, empowered teams for reversible (type 2) experimental decisions.
Foster little bets that are rich in learning, ideally distributed across the organization.
Pursue direct contact with the environment—“get out of the building.”
Make sure your people are incentivized to hear about reality, not the reverse.
Realize when your people are in denial.
Expose yourself and your organization to where the future is unfolding today.
You do not need to be a CEO to see how an inflection is likely to unfold. In fact, you are probably more likely to see it the closer you are to the external trends that make your business possible.
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Early Warnings
There are far more possible catastrophes than will actually happen.
—Patrick Marren, principal, Futures Strategy Group
Weak or faint signals of an impending shift, when recognized early, can give you a head start to prepare to take advantage of a coming inflection point.
An inflection point occurs when a change—what some people call a 10X change—upends the basic assumptions that a business model is built on. When the moment of crystal clarity arrives, that is the moment to mobilize the troops, to bring focus, and to bear down hard on preparing the organization for the post-inflection world.
This chapter is not about what happens after that moment of recognition. Rather, this chapter focuses on the ambiguous, messy, primordial soup of potential changes, threats, and, yes, opportunities that precede an “Aha!” moment. It is a confusing, frustrating period, when people can legitimately have major differences of opinion about how important, consequential, dangerous, or valuable a shift in the environment might be.
Digital Doubters
In a now hilarious repudiation of the early Internet hype, Newsweek published an article by Clifford Stoll in February of 1995 entitled “Why the Web Won’t Be Nirvana.” In it, he writes:
Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.
Baloney. Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works . . .
How about electronic publishing? Try reading a book on disc. At best, it’s an unpleasant chore: the myopic glow of a clunky computer replaces the friendly pages of a book. And you can’t tote that laptop to the beach. Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we’ll soon buy books and newspapers straight over the Internet. Uh, sure.
It should not be lost on us that the very publication, Newsweek, that used to churn out forty print editions a year itself went belly-up in 2012, a victim of the massive change that Stoll suggested would never occur.
Even so, seeing a shift coming does not always mean you should go rushing headlong into investments in it.
For example, in 1995, the same year Amazon made its first sales and Stoll expressed his skepticism, researchers did a study of what kinds of companies were using the Internet and for what business purposes. They found, upon looking at some three hundred companies that had created web pages at that point, that commercial use of the Internet was primitive at best. While some respondents were indeed positioning themselves for a “land rush” as the technology matured, the majority agreed with this sentiment, voiced by one of the study participants:
Sales are dismal and barely cover the cost of maintaining the Web page site through my Internet provider . . . I do not see the Internet being a viable marketing tool for products other than computer products for at least 20 years.
Recall that the Internet shopping experience of 1995 was radically different than it is today. Even in 1997, less than 40 percent of American households even owned a computer, and less than 20 percent had Internet access, which was provided mostly by slow and glitchy dial-up modems, often through the services of America Online. At that point, AOL was still charging its users an hourly fee to provide access. It changed to an unlimited flat-rate charge of $19.95 per month in 1996, which, while lessening the anxiety customers had about running up their Internet charges, also led to a flood of traffic. Many customers ended up dropping the service, which was plagued by constant busy signals.
In the early days, there were few trusted, convenient ways to pay for things over the Internet. The whole idea of e-commerce had not yet gone mainstream. Even finding what you were looking for was not simple. Competing search engines used different business models, some of which included pay per search—limiting customers’ interest and enthusiasm for them. Let’s not forget, while other early search engines existed, the advertising-supported, algorithmic, free-to-the-user model Google has leveraged so effectively was still years in the making.
Always-on, fast broadband as we know it today really only got started around 2000. It took until around 2007 for half of American households to have both computers and broadband connections. That year is also notable, of course, as the year Apple released the first iPhone, putting the equivalent of a broadband connection in everyone’s pocket.
In fairness, from the perspective of a traditional retailer in 1995, it would have been foolhardy to make significant investments in Internet capabilities, given the immaturity of the technology at the time. This is a very confusing period in the unfolding of an inflection point. While the AOL–Time Warner merger in 2000 spooked a lot of people into thinking that they should perhaps make a big bet on the Internet, the company’s rapid unraveling persuaded many that big Internet investments could only lead to no good. There is little joy in moving too soon to try to take advantage of an emergent inflection point.
The early web illustrates one of the sneakier aspects of inflection points. When they first emerge, although it is possible to speculate about what they could become, in the early stages they are inevitably incomplete in some way. Ecosystems can’t form until they have a complete enough solution to offer. Take blockchain, for example, a technology that is currently in the shiny object stage of development. While it offers promising solutions to some vexing long-term problems, such as the creation of trust in a distributed manner, the institutional framework for blockchain’s full deployment is incomplete. We don’t have agreed upon protocols, standards, or rules of the road for it to be mainstream—yet. That doesn’t mean we should ignore it, not at all. It just means that we need to develop a point of view on what would be necessary for the technology to be useful and when that might happen.
As of this writing, inflections represented by the emergence of big data, artificial intelligence, virtual reality, gamification, and many other innovations are all interesting but incomplete. Many observers quite sensibly conclude that they will never come to much of anything. In fact, there have been many superhyped potential inflection points that have indeed amounted to absolutely nothing (the paperless office, 3-D TV for the home, intelligent appliances . . . the list goes on).
By the middle of the first decade of the 2000s, the Internet had gone from being frustrating, disorganized, and chaotic to being a place that people turned to for useful information (Yahoo), to clean out their closets (eBay), to send and receive email (AOL), to connect with others in their local community (Craigslist), and to actually buy things (Amazon). Digitization and its potential impact on creative work was no longer a brand-new phenomenon.
In other words, the signals and drumbeat that this was going to be big were by then very strong, creating a clear and present promise of major change and a powerful impetus for those affected to take action. The quest in this chapter is to explore that period before the signals of an inflection point become obvious and strong. When there are so many things that could
represent a potential inflection point, picking out the weak signals that actually matter is no small challenge.
In a delicious bit of irony, Bill Gates published his book The Road Ahead in, you guessed it, 1995. In it, he observed, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.” The problem is something Gartner calls the Hype Cycle, in which some kind of shiny new object captures the public imagination and creates a lot of buzz, then fails to deliver any near-term change in anything. This in turn leads people to dismiss the emerging shift, discounting its importance. While Gates did anticipate an information superhighway, ironically Microsoft ended up being surprised by an Internet that eventually put the company on the defensive.
In 2000, Gates selected his longtime number two, Steve Ballmer, to succeed him at the firm. While the company was extremely profitable, in 2016 Steve Blank observed that during the Ballmer era, Microsoft failed to understand the five most important technology trends of the twenty-first century: “In search—losing to Google; in smartphones—losing to Apple; in mobile operating systems—losing to Google/Apple; in media—losing to Apple/Netflix; and in the cloud—losing to Amazon. Microsoft left the 20th century owning over 95% of the operating systems that ran on computers (almost all on desktops). Fifteen years and 2 billion smartphones shipped in the 21st century and Microsoft’s mobile OS share is 1%.”