Saturday, September 3, 2011

The bigger picture

The excellent Shift Index Report produced by the Deloitte Center for the Edge, a Silicon Valley based think tank, is useful reading for anyone who wants to better understand why the world is suddenly more complex, uncertain and ambiguous.

There are two significant bumps in the index. One occurs at start of the 21st century. The other bump towards the end of the first decade, which the authors interpret as "the recessions in 2001 and 2008" which "particularly moved the needle, representing much greater pressures on firms, consumers, and talent during those times."

But what if the index is measuring only some of the factors contributing to the accelerating change we are experiencing? What if there are other factors in play which may have a more powerful impact on society than the three indices and 25 metrics the Centre for the Edge used to measure the forces of long-term change in terms of the impact on firms, markets and people. And what might these other factors be?

Here's an explanation of the Shift Index. A copy of the report can be downloaded here.

For markets the index tracks competitive intensity, labor productivity and stock price volatility. For firms it takes into account asset profitability, the return on assets performance gap, the firm topple rate and the shareholder value gap. The aspects of people change are consumer power, brand disloyalty, returns to talent and executive turnover.

The flow index factors in market flows, virtual flows and amplifiers. The virtual flows are shifts in Internet knowledge, wireless activity and internet activity. The physical flow component is made up of the migration of people to creative cities, travel volume and the movement of capital. The flow amplifiers are worker passion and social media activity.

The foundation index looks at changes in technology performance, with a focus on computing, digital storage and bandwidth. It also considers infrastructure penetration in terms of internet users and wireless subscriptions. On the public policy front it factors in economic freedom.

According to our Complexity Theory Model of Socio-technological change each wave of change is about one-fifth shorter than the one before, as many more people become involved in knowledge creation and ever more powerful tools are invented which ratchet up productivity, including knowledge creation productivity.

And according to this model, one of the blips The Edge identified should be the start of the shift from an Information Age world to a Knowledge Age world, and the second blip, the start of the shift from Knowledge Age to Wisdom Age way of performing work, engaging with others, or incorporating new, more powerful theories into products.

The model predicts these changes:

a) tools, technologies and methods automate the work of the previous paradigm and add a higher skill component to earlier periods e.g. currently the work of teachers is being displaced by on-line learning. Internet knowledge repositories and search tools are displacing the work of librarians. Middle-management work is being displaced by group decision support systems, simulators and rich new decision/learning methods from fields outside the world of business.

b) earlier classes of work decline as a percentage of the workforce composition. The latest new class of jobs emerging are "wise-application of knowledge" jobs which may be hard to distinguish from knowledge jobs (but include roles such as certified ethical hacker and global governance director), in the same way that many Knowledge jobs (librarian, teller, teacher) have been hard to separate from Information jobs (clerk, secretary)

b) just before the transition point, the system becomes more volatile, before settling down again to a new pattern of activity, as indicated in this figure from a paper, Beyond the Frontiers of Project Management, by Manfred Saynisch, a thought leader in the field of complex project management.

c) a greater proportion of people become involved in the process of new knowledge creation, which further accelerates the rate at which new technologies, methods etc. are developed and implemented.

d) more stages of socio-technological development remain "in churn", thereby increasing the complexity and volatility of the system.

e) after the fourth bifurcation, the system has many more states of stability (but more critical and hard to tune into). The lines on the logistic curve are dynamically stable states, the shaded areas are chaotic regions.

So here are some questions for any and every organization to consider:

1. What are the big shifts that are taking place in your world, and how are they different to 10, 50, 100 and 200 years ago?
2. In your experience, how is the rate of change changing for you? Gives examples, for example product development cycles are now....x years long compared to y years long in 19XX.
3. Who and how many people in your organization system are involved in the process of knowledge creation, sense making and strategy formulation and how does this compare to 10, 50, 100 and 200 years ago?
4. What kind of change is happening to products and services? How fast are they changing, how many fields/disciplines are products/services dependent upon compared with 10, 20, 100 or 200 years ago. e.g. a motor car mechanic now meeds a knowledge of computers as well as mechanics to be able to perform his/her job.
5. What has happened to relationships? Compare relationships of 10, 50, 100 and 200 years ago and the technologies that influenced them e.g. the letter, the phone, the internet, the jet aircraft.
6. What has happened to infrastructure systems (complexity, connectivity) over the past 10, 50, 100 and 200 years? Think about roads, telecommunications, rail, air, buildings, government, financial transactions).
7. Considering all these trends, what do you think are the factors driving greater complexity, uncertainty and ambiguity?

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