23 Reasons Not to Talk to Strangers? Or...

...Little Red Riding Hood?

My friend and former colleague Eric Pelletier blogs in a wonderful post, Croissants and fairy tales. How storytelling makes strategy happen that

...when people in a similar context, are exposed to the same facts, they tend to arrive at the same conclusions. And so, when they're in the same organization then, they're also likely to arrive at the same conclusion about the right strategy to take the organization forward.

While he focuses on the power of getting people on board via storytelling to implement strategies, I have little doubt he'd agree about the power of creating shared conclusions on formulating a winning strategy in the first place.

In The Biggest Problem in Strategy? Mindset, I noted how the railroads in post war America missed out on growth opportunities because they saw themselves in the railroad business, not the transportation business, and how Blockbuster missed out on digital distribution, ignoring intelligence on the looming threat. While railroad efficiency made enormous strides post deregulation in 1980, it basically kept the surviving companies in the game. Rail's share of freight traffic in the US (measured in ton-miles) declined from about 75% in 1930 (A Short History of US Freight Railroads, pp3) to 28% in 2000 (Freight-Rail Bottom Line Report, pp 14). Worse, its share of freight revenues dropped to a mere 6%. Blockbuster went bankrupt in 2011, shuttering the last of its outlets in 2013. Other examples of failed strategies aren't hard to find: cell phone manufacturers Nokia and Motorola; bookstores Borders and Barnes and Noble; computer manufacturer Sun; the plethora of desktop application software firms - remember VisiCalc, Lotus 1-2-3 and Freelance Graphics and WordPerfect, all of which dominated at one time?

Storytelling works because of the evolution of the prefrontal cortex of the human brain, which helps us recognize and act on patterns. It also works, as Eric notes, because it creates a shared context, or "experience" (even if vicarious) in the tribe. 

But this pattern-recognizing ability is both a help and a hindrance, for individuals and groups. It helps tremendously when the situation is reasonably stable, but often fails us in times of significant environmental change, when we are unable to recognize new patterns. And the worst failures occur when the "tribe," and especially the decision-making leadership, is unable to jettison outdated mindsets.

The most powerful stories are the ones collectively arrived at, through shared experiences. And the most powerful of these are crises. IBM (where I worked for the better part of a decade), was able to reinvent itself in the early 1990s because the tribe members (the employees) knew there was no other choice, enabling Lou Gerstner to drive a change in the collective mindset. But it was painful, to the tune of 200,000 layoffs.

So I return to a theme readers of my blog will recognize: why not create simulated "crises" to enable decision-makers to "experience" the consequences of potential actions. Militaries, governments and airline pilots (see Chance Only Favors Prepared Minds) do this regularly. And some companies regularly incorporate scenario planning or business wargaming (among other experiential planning techniques), designed and facilitated by experts for maximum effectiveness, into strategy development.

Companies that invest in these now, incorporating the latest available intelligence on potential opportunities or threats, reap huge future returns and often avoid debilitating disasters.

The next great technological revolution

I continue to be fascinated by Carlota Perez’ work on Technological Revolutions and Financial Capital. Briefly, she identifies 50 or so year periods of great economic advancement, followed by a bust which then creates the conditions for a period of steady growth and prosperity; each period goes through five phases:

1. Irruption, which inaugurates the surge through a technological big bang in a world threatened by stagnation and inflames the imagination of young entrepreneurs

2. Frenzy, a time of new millionaires, when financial capital takes over; the rich get richer at the expense of the poor (Engels works were inspired in this phase in the 1840s)

3. The turning point, generally a ‘panic’ or a crash, a time of fundamental changes required to move the economy from the Frenzy mode

4. Synergy, often a true golden age if the framework created during the turning point creates the conditions for a sustained build out

5. Maturity – gradual saturation of markets creating the conditions of the next irruption; those who reaped the full benefits of the golden age hold on to their beliefs in a complacent blindness in the face of increasing dissatisfaction and frustration

Here are Perez’ five great technological revolutions:

o The industrial revolution, which she dates from 1771 when Arkwright’s mill opens in Cromford, Britain; turning point 1793-1797

o The age of steam and railways, dating from the test of the ‘Rocket’ steam engine for the Liverpool-Manchester railway in 1829; turning point 1848-1850

o The age of steel, electricity and heavy engineering, starting with the opening of the Carnegie Bessemer steel plant in Pittsburgh; turning point 1893-1895

o The age of oil, the automobile and mass production when the first Model T rolls off the assembly line in Detroit; turning points: Europe, 1929-1933; US 1929-1943

o The age of information and telecommunications, with the quiet announcement (at the time) of the Intel microprocessor in Santa Clara; turning point 2001 - ????

The intriguing element of her work is her investigation of how a new technology, often misunderstood at the time, launches a sequence of events that over time gather steam (OK, that was intentional…) and eventually create whole new industries and economic structures completely beyond the power of the inventor to envision. She writes:

“Each technological revolution results from the synergistic interdependence of a group of industries with one or more infrastructural networks…The technologies and products involved are not only those where the major breakthroughs have occurred. It is often the interlinking of some of the new and some of the old that generates the revolutionary potential. In fact, many of the products and industries coming together into the new constellation had already existed for some time, either in a relatively minor economic role or as important complements for the prevailing industries.

"This was the case of coal and iron which after a long history of usage during and before the Industrial Revolution, were transformed by the steam engine into the motive industries of the Age of Railways. Oil was developed for many uses since the 1880s by an extremely active industry; the same can be said about the internal combustion engine and for the automobile, which was produced as a luxury vehicle for quite some time. But it is the conjunction of all three with mass production that makes them become part of a veritable revolution.

"Electronics existed since the early 1900s and in some ways was crucial in the 1920s; transistors, semiconductors, computers and controls were already important technologies in the 1960s and even earlier. Yet it is only in 1971, with the microprocessor that the vast new potential of cheap microelectronics is made visible; the notion of a ‘computer on a chip’ flares the imagination and all the related technologies of the information that come together into a powerful cluster.”

I'm desparately trying to determine what the next technology constellation is - what are your thoughts?