management | The Fourth Revolution Blog

What Should Be the Time Span of your Business Plan?

“Avoid predictions that are impossible. That means, among other things, not trying to peer too far into the future. A narrow question in a time frame of six months to a year, fine” – that’s the general recommendation about forecasting by Dan Gardner in ‘Future Babble: Why Expert Predictions Fail – and Why We Believe Them Anyway‘.

What you should absolutely not do when developing a business plan!

I am increasingly astounded by the boldness of those producers of business plans that extrapolate into the future… in 5 years or 10 years. That has been made much easier with Excel of course (just copy the formulas into the next years…) but how can that be used to support decision-making? How can we even entertain the idea that the future will evolve linearly and let the nice exponential formulas in our spreadsheet forecast huger and huger growth? Can you just remember how the world was different 10, or even 5 years ago?

For my company, I have decided not to have a business plan. Of course, I don’t need to seek external funding. When/if I’ll do then I’ll cook something knowing it is pure BS to please bankers or investors. In the meantime I just try to have an idea of what the next year will look like, and that’s enough to steer my venture… and end up widely off course already!

Stop spending time doing long term business plans, except maybe as a sensitivity. Concentrate on executing, now and in the next 6 months. You’ll get there much more easily!

If you are interested on some good elements on the limits of business plans, look up this interesting blog by Tim Berry. Although the founder of a business plan software company, his views on the matter are very refreshing.

Why Risk Management is Really about Long-Term Survival

Age old wisdom: In investing and in life in general, avoiding fatal situations that kill us generally means that we can’t strive for the best possible returns. In other words, trying to follow the best strategies giving the highest returns can be seductive but generally also entails fatal risks – great on the short term but unsustainable on the long term!

Jared Diamond just published a new book, ‘The World Until Yesterday: What Can We Learn from Traditional Societies’, in which he describes in details those cultural traits of traditional societies that we should maybe consider re-introducing in our modern world.

age-old farmer wisdom — Do you follow the age-old wisdom of having numerous small plots of value-creation?

In the field of risk management, he reminds us of age-old practices of hunter-gatherers and farmers, that evolved through time for their resilience. For example, traditional farmers generally farm a large number of different small plots (7 to 15 depending on the cultures) in different areas. This is clearly sub-optimal in terms of work, effort and yield. Yet it is the strategy that survived generations because it is the only strategy that ensures survival: diversity in location of the land plots means that even the worst years, some plots of land will give some returns and the farmer’s family will not starve. The current strategy of large fields and unique crops can only work in a developed system involving money where food can be bought in the case of a poor crop.

We are attracted by the stars that produce temporarily incredible returns on investment, that have incredible short-term success. We only forget that it always comes with substantial risks including bankruptcy or starving.

Success on the long term is about survival, and if possible comfortable survival; not great spikes of success followed by abysmal failures. Remember this the next time you’ll feel some hint of envy looking at some other young overnight success. It is defined by luck and in most instances, it is just the premise of a fatal evolution the other way.

Success is just about survival.

Why Reserves are Key to Face Uncertainty

It is a well known fact in military command that Reserves are the key to success in the uncertain world of battle. As exposed by General Vincent Desportes in his book “Decider dans l’Incertitude” (in French), an excellent book about decision-making in uncertain conditions, reserves are the main tool to manage uncertainty.

empty fuel gauge — How often do you run without reserves? Is that wise?

The higher the uncertainty, the more courage the commanding officer must have in increasing the size of its reserves. According to Churchill, engagement of the reserve resources is indeed the utmost responsibility of the one in command (and it often makes the decision in battle).

Jim Collins and Morten Hansen, in the book “Great by Choice“, come to the same conclusion: those organizations that thrive on the long term have a far more conservative view on balance sheet and establishment of financial reserves. They don’t necessarily seek the just-in-time; they don’t over-borrow; they don’t extend themselves too thin, even if they find an opportunity to do so. They make sure they are resilient to uncertainty.

Individually and in our organizations, reserves are important. Even if it means some loss of efficiency, they can make the decision when it comes to the realization of specific, unpredictable situations. Not to mention that reserves gives peace of mind when facing the usual ups and downs. Having some reserves is an important approach I also use in my small start-up even in growth mode.

What about you? Do you have enough reserves to face uncertainty? What about your organization? What will you do about it?

How a Paradigm Shift is Happening in Management

Forbes maintains an interesting column by Steve Denning about the paradigm shift in management.

Steve Denning believes that there is a deep change happening right now, from a shareholder-driven organization towards a customer-centered organization (read: ‘Don’t Diss The Paradigm Shift In Management: It’s Happening!’). According to him, this will require change from a bureaucratic organization towards new management models that are more flexible, agile, and customer-focused. As readers of this blog you’ll know I even believe the change is much more fundamental as it is related to customer collaboration, nevertheless Steve Denning’s view is quite useful for organizations nowadays.

As with all paradigm shifts it will be tough and take time – read his excellent column comparing that change to the Copernican revolution – ‘Why The Paradigm Shift In Management Is So Difficult‘. This is entirely applicable to the Fourth Revolution changes.

A paradigm shift is certainly happening, that will take time to be realized by all those that are still in the Industrial Age mindset. Be a Fourth Revolution precursor and see how the new approach of business has the power to change the world!

Complicated is not the same as Complex – and Why this is Important

Complicated is a very different concept from Complex. Yet most of us do not distinguish them. Even more, we try to manage Complex systems with Complicated solutions. And this turns out to be a very huge problem.

A watch: a complicated system - predictable and reliable — A watch: a complicated system – predictable and reliable

A watch is complicated. It is composed of a large number of pieces; yet they are carefully engineered to fit and move together. The system is very reliable (it’s a watch!). Most engineered systems are complicated, yet reliable. The more the components fit seamlessly together, the better the reliability.

A complex system: a representation of the situation in Afghanistan

On the contrary, a complex system involves a lot of different components or contributors; they are all interconnected and inter-dependent; but they all follow a different interest, and they make the system unpredictable. The now classical slide describing the situation in Afghanistan to General McCrystal is a classical example of the depiction of a complex system.

Complex systems are unpredictable. They are what happens in real life outside what can be carefully engineered. They are what creates the unforeseen, the adventure.

Because we mix all the time those two concepts we misunderstand a lot of what is happening around us. The way to tackle and repair complicated systems is completely different from how we can influence complex systems. The way these systems fail belongs to different realms. And when a complicated system encounters unpredictable complexity, it is where our engineering capabilities are overwhelmed. It is where our certainties become shaky. It is when catastrophes like Fukushima happen.

How to Take Decisions in a Complex Environment

How can you take the (right) (best) decision in a complex environment? Rely on your team. Decide on the ‘who’ and not on the ‘what’.

That’s all. That’s so much.

How can you take the right decisions in a real, complex world?

Jim Collins reminds us in his foreword to the book “Fortune: the Greatest Business Decisions of All Times“: “The greatest decisions were not “what” but “who?”, they were people decisions.”

“Fundamentally, the world is uncertain. Decisions are about the future and your place in the future when that future is uncertain. So what is the key thing you can do to prepare for that uncertainty? You can have the right people with you“.

The next time, instead of spending too much time developing spreadsheet projections over the next decades (which mean absolutely nothing), focus your energy on getting the right people in. Not just people like you, but a diverse and complementary team. Then through conflict and discussions, you’ll make your way through this complex world.

Where is your team right now? When do you start building it to thrive in this complex world?

The Motivation Revolution: how to move from extrinsic to intrinsic motivation

I loved reading the book “Drive” by Daniel Pink. We already referred to it a few months ago in the post “what motivates the K.E.E.N.“.

Daniel Pink uses a framework for the evolution of motivation in history that is similar to the ‘fundamental revolutions’ familiar to the readers of this blog:

Motivation 1.0 – 50,000 years ago – survival
Motivation 2.0 – extrinsic motivators: seek reward and avoid punishment (which lead to put some barriers for social life (don’t steal your neighbor’s wife), etc).
Motivation 2.1 – empowerment in organizations, greater autonomy
Motivation 3.0 – intrinsic motivators: autonomy, mastery, purpose. (the drivers of the Collaborative Age)

It is a real revolution to switch from extrinsic to intrinsic motivators. Yet as our live example of the Collaborative Age organization shows, in these organizations, only intrinsic motivation is at work.

How can we change our extrinsic motivation mindset? No, above a certain level, people won’t stay because you pay them more to do the same boring job. They need to find purpose and fulfillment. How can you give it to them? Only by allowing initiative, failure and releasing control. That will be the secret of success of the Collaborative Age organization. Are you ready for it?

(And for those that have not seen the RSA animation drawn from the book, here it is – and if you’ve seen it, watch it again because it is so fundamental:)

Get a glimpse in how the organization of the Collaborative Age will work, today!

Once upon a time there was a company that had no boss. There were quite more than 100 people in the office, and they just organized themselves fluidly around temporary projects: who has the best idea got the support of others.

Pages from Valve Employee Handbook — Extract from Valve Employee Handbook

Desks had wheels so that project teams can join spontaneously. Just unplug, replug, and there you could work next to your new buddy.

Failure was accepted as a learning opportunity and very quickly, new hires worked directly on the main products where they could wreck havoc so easily!

Employee evaluation was based on peer evaluation; a constant stream of feedback was organized to each employee from the feedback of peers; and even salary increments were based on a peer-review ranking.

Do you think this company exists in another galaxy or is just in the Fourth Revolution’s author imagination? No, it’s a company called Valve and its employee handbook is accessible here. Get a glimpse of how the workplace of the future will look like, it is absolutely eye-opening! A real MUST-READ!

Also stroll on the company website, where all current employees are displayed alphabetically. Even the founder, Gabe Newell, is just listed there as any other employee.

Brace yourself because the workplace is going to look more frequently like that: we will be expected to take initiatives in an unstructured environment and let our contribution shine in the eyes of the others. No more boss, no more instructions. Pure initiative, pure entrepreneurship.

Are you ready for the Fourth Revolution in organizations?

The link to Valve’s employee handbook was originally in a blog post by Seth Godin with various other useful references.

Change your mind first to change your life

“Progress is impossible without change and those who cannot change their minds cannot change anything” – George B. Shaw. The more I speak about the Fourth Revolution, the more I consult in the field of organizational change, the more I find this quote incredibly deep and powerful.

Most changes need to start with a mindset change. Many failures are caused by the failure to change one’s mindset. Of course you can change your environment, your processes, your organization. But if you don’t change your mindset, or rather more precisely, your mind perspective, change will not be successful. You will fail, and slowly become sour, frustrated and angry.

Only by changing your mind first, by changing your identity, your view of the world, will you be able to really change your life, and to change the world.

So, how do we change our mind perspective? It requires both openness and deep introspection.

Openness so as to apprehend the reality of what surrounds us without all the filters that we usually impose to our perception
Deep introspection to find the right way to change – our own way, the way that excites us deeply and fits with our inner self

It is an intensely personal quest, and it can be made difficult by how our environment might tend to push us back into our previous mind perspective. It requires solitude and mindfulness. Yet going through this exercise is a necessary preliminary. All the rest of the change is just a consequence of the mindset change: see the world differently, you will act differently.

It is amazing how this is applicable both for individuals but also for organizations: organization’s culture and mindset needs first to change for the organization to really change. Change programs that do not consider this as a preliminary will fail.

So, when do you start stopping for while, open your mind and seek your passion?

The best change programs are simple and applied ruthlessly

Yourself or your organization needs a drastic change? How can you do that?

Too many change gurus and consultants will engineer and recommend large, complex programs. Yes of course, you need to re-engineer processes, communicate, engage with people.

My take: any change effort is 0.1% decision, 10-20% engineering, 80-90% implementation.

Don’t exhaust yourself at the engineering stage. Spend less time designing the perfect change program. Focus on the one thing that needs to change, and design a very simple incentive system to get yourself or your organization moving in the right direction. Remember the elephant and the rider. You want to be emotionally engaging, capitalize on the elephant’s hot buttons to get it moving, and easy.

Then, however, be extremely disciplined and consistent in applying the new, simple system. It is simple, easy to communicate. Repeat, repeat, repeat; communicate, communicate, communicate; act consistently, act consistently, act consistently.

Remember: don’t consume all your energy devising the change. Keep it simple, and emotionally engaging. Keep your energy for the implementation stage. And there, be ruthless in your discipline and how you apply it throughout the organization.

100,000 people are ‘online game laborers’ today, and growing!

The Fourth Revolution also creates revenue opportunities for the citizens of emerging countries in more surprising ways than being service providers for commodity services that still require creativity and intellectual initiative.

According to a World Bank report, the market of gaming-for-hire, where people get hired to play games and earn rewards or virtual money on behalf of richer players living in developed countries, was worth… 3 billion $ in 2009. In China and India alone, more than 100,000 “game laborers” would be playing day-in, day-out to be able to earn precious tokens, levels and virtual treasures to resell them to richer players that don’t want or cannot put in the time!

And a definite market for “microwork” develops where people implement simple tasks like tagging pictures, removing double pages at Amazon, and get paid a few cents per task, . More on microwork in this interesting article from the Economist on “Jobs of the Future”.

These are not necessarily jobs people would dream of, but they start to provide, and will provide more an more livelihood to developed countries.

Who doubted the Fourth Revolution was not happening?

3 useful ideas for real entrepreneurs

Once in a while I see an interesting idea for entrepreneurs and I note it down – I sometimes lose its origin though. Here are some words of wisdom for the would-be entrepreneur. Funny enough they could also apply to all of us individually.

“Profit in a business is like gas in a car. You don’t want to run out of gas, but neither do you want to think that your road trip is a tour of gas stations” – Tim O’Reilly in a post about Steve Jobs, ‘A focus on things that matter most‘. In the same post there is an quote from Steve Jobs: “My passion has been to build an enduring company where people were motivated to make great products, the products, not the profits, were the motivation“. The lesson is that if you want to build a great companies, focus on the clients and the products first. Profit will come, as a consequence.

A useful piece of advice about cash flow management: Cash flow is like the depth of water below the keel of your ship. You don’t care if it’s more than what you need to move forward. It can be 100m or 2,000m and it makes no difference. But make sure you have enough to never run aground!

A fantastic concept from the last Jim Collins’s book, Great by Choice: Uncertainty, Chaos, and Luck–Why Some Thrive Despite Them All: “shoot bullets before you shoot cannonballs“, or in clearer terms, don’t commit large amounts of resources to a new project before you’ve tested it at small scale. The small scale experiments – the bullets – will give feedback and will allow to decide whether and where to shoot a cannonball that will commit lots of resources from the company. Do a lot of small scale experiments and shoot cannonballs rarely on those opportunities that are proven.

Do you have any useful piece of advice to add?

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