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FAST Strategy and Learning

We live in a world where stocks of knowledge rapidly diminish in value.  Strategic advantage increasingly depends upon privileged access to fresh “flows” of knowledge. But here’s the catch – there are so many flows that there is a real risk of drowning in all the knowledge that is potentially available.  How do executives, already pressed for time, process these flows in ways that accelerate learning and capability building?

Over the past seven years, I have been refining a new approach to strategy that has achieved significant impact with my clients. It turns much of the conventional wisdom about business strategy on its head.  I have written about this approach – something I call FAST strategy – in the past, but I continue to develop the techniques and explore their implications for companies of all sizes.

In my earlier writings, I emphasized the role that FAST strategy can play in building alignment and helping to overcome organizational inertia on multiple dimensions – time horizons, across functions within an enterprise and across networks of business partners. There’s significant value here but, as I gain more experience with the use of this methodology, I have become convinced that there is an even greater value – the ability to accelerate learning and capability building.

We have built institutions that are great at efficiency, but we have paid a heavy price in terms of undermining institutional learning.  FAST strategies deploy a learning architecture cutting across an entire organization. They also help to generate the productive friction required to drive and focus valuable learning.

Champions of institutional learning have often been their own worst enemies.  In their zeal for learning, they seem to say that all learning is good.  Well, that’s enough to make most executives cringe. There’s not enough time in the day to get work done – when is all this learning going to occur?

The real challenge is to figure out the answers to four questions:

  • What learning is most valuable?
  • When is it most valuable?
  • How can this learning be most effectively tied to near-term operational performance improvement?
  • How can this learning be spread throughout the organization so that its benefits can be amplified?

Effective strategy development is ultimately about focusing and leveraging learning across organizations.  In my experience, FAST strategies do this far better than other approaches.

For those who are interested in learning more about FAST strategies, I will be doing a webinar for Strategy World on Wednesday, May 9.   For more information, go here. I can assure you, it is not the approach to strategy you have come to know and love (?).

Complacency and Web 2.0

A number of recent events suggest a potentially significant evolution of Web 2.0 from a business perspective. Those who fail to notice these early signals may find themselves sidelined as Web 2.0 continues to unfold. 

Om Malik did a posting late last week on “Web 2.0: The End of Innocence” which nicely summarized some of these early signals:

The Web 2.0 story so far has been about taking APIs, mashups, low cost infrastructure and building applications that are then offered to customers for pretty much free, backed by an ad-supported business model. Think of this as the tie-dyed-free-love hippie phase. The Web 2.0 conference held in San Francisco in Fall 2006 was its Woodstock.

A lot of good things happened, innovation blossomed, but now we are entering a more pragmatic phase, where the large players like Google and Amazon who distributed the API elixir are taking control back.

APIs (Application Programming Interfaces, for my less techie readers) – especially open, standardized APIs – have been a key building block of Web 2.0, allowing one set of developers to leverage a growing array of functionality already available on the Web and bootstrap their way into delivering more value to Internet users. Rather than investing time on building applications or databases already available, developers have been able to focus on building truly distinctive functionality.

This has had a host of business implications.  It has dramatically reduced the investment required to establish an online service offering.  As a result, it has led to a proliferation of start-ups, all vying for audience attention (viral marketing diminishes in power as the viruses multiply) and, for those seeking to scale their offerings, investor dollars. For the large Internet players, Web 2.0 has been a great distributed innovation lab – watch and see what sprouts, then acquire the interesting players.

This has lulled many Web 2.0 entrepreneurs into a false sense of complacency.  Many, if not most, of the Web 2.0 start-ups are features masquerading as businesses. Business models? Fuhgeddaboutit! Their founders have little intention or ambition to build self-sustaining businesses – their exit strategy is to be acquired by one of the cash-rich gorillas. Business strategy: feed off the functionality of others long enough to get bought out, then start all over again. 

Well, recent actions by some of the large API providers like Google, Amazon, MySpace and Firefox suggest that there may be another, less welcome, exit – having the API rug pulled out from under you or, almost as bad, finding out that your friendly API provider has just introduced a service that competes directly with your own. Neither event is conducive to nailing that big acquisition exit deal. Apparently, the large Internet players are wearying of the high acquisition premiums for attractive Web 2.0 companies and are increasingly deciding to grow their own copy when they see an interesting venture.

Here’s the lesson that I draw from these recent events.  The only sustainable edge in Web 2.0, as in all businesses today, is to get better faster by working with others.  This isn’t a sprint where you can come out with a nifty new feature or service and then sit back until the buyer knocks on your door.  Web 2.0 is a powerful bootstrapping opportunity. It is most likely to pay off for those who take the resources available and rapidly build viable businesses with some reasonable barriers to entry – especially relative to the API providers you are bootstrapping on.

There are basically two ways to do this.  First, you can accelerate the innovation in the services you offer so that you are constantly one or two (or more) steps ahead of those tempted to copy you.  Second, you can find ways to use your service offerings to build trust-based relationships with your users, ideally with some powerful network effects that will make it very difficult for later entrants to pry these people away from your service. Ideally, these two approaches can be integrated by motivating your users to enhance your services themselves so that the more users you have the better your services become – the essence of Web 2.0.

In addition, you should explore the potential business trajectories of your API providers and try to make sure that you are not standing in their way.  At best, you want to be on the periphery of their field of play. When a supplier of anything decides to compete with its customer, it can be challenging for the customer.

For the large Internet API platform providers, there is also an important caution.  Sustaining a straddle between a platform business and an end-user business may become increasingly challenging.  If you become too greedy in terms of expanding into the end-user businesses of companies using your API platform, you may find that your platform business becomes less attractive. Before you start eating the young that are nourished by your APIs, you might want to be sure there are no other food sources to sustain you.

I suspect that sustaining the right balance in the Web 2.0 ecosystem over time will hinge on a new development – charging relatively nominal fees for API use.  This will put increasing pressure on API users to come up with viable business models and reduce the incentive for API providers to compete with their API users.

Magic and Fun with Emerging Technologies

Magic and fun – those are two words most people do not associate with today’s corporations.  Nevertheless, I came away from a recent conference more convinced than ever that these two words will become central to corporate performance.

I had the good fortune to attend Tim O’Reilly’s Emerging Technologies Conference in San Diego last week.  I spoke on the growing role of China in applying co-creation to physical products as diverse as motorcycles and consumer electronics.  In contrast to most conferences speaking engagements which are hit and run affairs, I was able to stay on and participate in a number of fascinating sessions. In the process, some interesting patterns and connections began to surface.

Magic - From magicians to enchanted objects

Magic - the theme of the conference, was inspired by a quote from Arthur C. Clarke: “Any sufficiently advanced technology is indistinguishable from magic.”  At first, I was skeptical, because I have always associated magic with illusions – very artfully done illusions, but illusions nonetheless. Also, magic is often associated, especially today, with magicians who specialize in displaying mysterious powers that mere mortals could not hope to possess – we can only watch in awe and show our appreciation with applause.

As the discussions unfolded, though, I began to see another perspective on magic, one that focuses on pushing the frontier of performance and capabilities beyond levels that we expect and that therefore appears to be “magic”.

Mike Kuniavsky in his presentation on "The Coming Age of Magic" in particular focused on the role of “enchanted objects” that embed unexpected performance and capabilities in everyday, familiar physical objects that becomes tools for everyone to use. As computing and communication resources become more widely embedded into everyday objects, we see the potential for “enchanted objects” to surface in the most unexpected places. Rather than relying on professional magicians, this approach seeks to empower everyone with access to these tools. Mark Weiser’s “ubiquitous computing” vision leads to the dissemination of magic in all areas of our life and to all people who have access to these objects.

By the way, when we think of enchanted objects, we should not neglect our physical bodies as another great presentation by Quinn Norton on “Body Hacking” made clear. Quinn was particularly interested in the opportunity we have to use technology to push the frontier of performance and capabilities of our physical bodies. Of course, our ability to fully exploit this potential hinges on societal norms and the degree to which we can assert the rights required to hack our bodies.

Hard fun

So far, this is interesting, but what really got me intrigued was the connection between magic and fun, triggered by a great presentation by Raph Koster on "The Core of Fun".

Raph was the lead designer of Ultima Online, one of the early massively multiplayer online role playing games, and a deeply thoughtful analyst of game design as revealed in his book, A Theory of Fun for Game Design.

His talk discussed the deep, fractal structures that underlie all forms of entertainment, including games.  He differentiated four different classes of fun – hard, easy, visceral and social – and suggested that games focus on “hard fun”, where the challenge is solving problems and mastering new techniques. What struck me is how analogous this challenge is to business in general, especially if you believe that the only sustainable edge comes from getting better faster than others. I won’t attempt to reproduce the richness of his presentation here, but instead wanted to pull back and reflect on its relevance to the broader business world.

We are all under growing pressure to get better faster.  In a previous posting, I reflected on the role that games can play in terms of acquiring skills and even shape one’s dispositions to the world.  But Raph’s presentation got me thinking – maybe the real opportunity is to more consciously structure our working environments along the gaming principles of “hard fun”. 

Listen to Raph’s basic principles and apply them to the broader challenge of building capabilities in the business world – core actions have to be repeatable, they have to require skill, they have to be able to handle statistical variation to facilitate learning, they have to be competitive, they have to provide ladders to climb and things to see, everything you did before must matter (never start an interaction without context), users should be able to solve the challenge with their choice of tools, results have to be highly visible to everyone and the best feedback is a greater challenge.  (Note, these are just some of the principles covered by Raph, but they give a sense of where he is headed.) 

Bottom line, Raph observed that “low risk activity for high reward is bad for fun”, “you need to drive users to challenges at the edge of ability” and “fun does not exist where you have zero consequences.” My key takeaway from his talk was that you enhance fun by providing a sequence of escalating challenges that push you to the edge of your capabilities (but not beyond them) with flexibility in terms of how to respond to these challenges and appropriate and visible rewards for succeeding. Now, what if we reconceived our business operations with “hard fun” and learning as the primary objective rather than simple efficiency?

JSB and I have talked about the transition from push programs to pull platforms as a key force re-shaping our business landscape.  In hearing me talk about this, many executives tend to get excited about the flexibility that pull platforms provide in responding to unanticipated event. From my perspective, though, that is only a small part of the rationale for this shift – the big reason to make this shift is to provide a robust learning environment for participants so that they can improvise, tinker and bootstrap their way into greater capability. Raph’s principles cannot be applied to business environments without a shift from push programs to pull platforms. His principles then provide a set of guidelines for institutions to maximize the learning that can be achieved through the use of pull platforms.

Adding in the social context

Talking about fun and gaming and the mixing of virtual worlds and real worlds leads naturally to Jane McGonigal’s great talk on “Creating Alternate Realities” addressing the opportunity for technologists to become happiness hackers. McGonigal is also a noted games designer and games researcher. Once again, I’m not going to try to reproduce the richness of her provocative talk (in particular, don’t miss her insights about integrating virtual and physical worlds in game design) but instead I'll zero in on her comments on the “science of happiness”. Building on the work of a growing number of researchers in this field, Jane highlighted three different realms of happiness:

  • pleasure – satisfying experiences
  • engagement – immersive, responsive systems
  • meaning – a powerful role, as actor and observer.

Tying this back to Raph’s talk, I heard him as primarily focused on pleasure and engagement, but not spending enough time on meaning as an element of fun, especially as it highlights the social dimension of building connections and relationships with others.

We construct meaning and roles in a social context.  Once again, executives often misunderstand the role of pull platforms – they tend to view these platforms as interesting ways for people to access and mobilize the physical resources they need.  They miss the fact that pull platforms are designed to help people connect and collaborate with other people in ways that are very difficult to anticipate in advance and in ways that accelerate learning through these interactions.  Danah Boyd’s talk at the conference on “Incantations for Muggles” focused on the need to pay more explicit attention to social architectures and the impact that technology can have in re-shaping and amplifying these architectures.  As JSB and Paul Duguid remind us in The Social Life of Information, learning occurs in a social context. We cannot hope to accelerate learning without an explicit consideration of the social context and the ways that it both inhibits and enhances learning. If there was one area that the conference did not adequately develop, it was this social dimension of magic.

Summing it up

There you have it – my grand synthesis of four days of extraordinary and stimulating sessions: magic, in the sense of pushing the frontiers of performance and capabilities beyond expectations, requires an integration of three very different elements – environments architected to foster “hard fun”, enchanted objects to amplify the capabilities of mere mortals and platforms to foster collaboration with others to get better faster than anyone possibly could on their own. Bring these elements together in a reinforcing way and magic happens. While this form of magic was largely discussed in the context of games and consumer life, it is highly relevant to business challenges as well. In fact, I would go so far as to assert that our ability to apply this kind of magic and fun in our enterprises will make the difference between the companies that survive and thrive and those that fall by the wayside.

As an aside, magic and fun most frequently occurs on the edge. The challenge for institutions of all stripes is to import this magic and fun into the core.

This is the real promise of Web 2.0 – not just creating environments where applications and data harness network effects but where people and institutions harness network effects to get better faster.  From my perspective, the missing element in Web 2.0 is the opportunity to go beyond applications and data and harness technology to accelerate talent development. Now that would be magic.

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