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A Bright Spot in the Dark Side of Technology

01/26/2014 09:54 am ET | Updated Mar 28, 2014

It was a privilege and an honor for me to have the opportunity to interview John Hagel, who brings 30 years of experience of working at the intersection of business strategy and technology. As a management consultant, author, speaker and entrepreneur, Hagel is the co-chairman of Deloitte's Center for the Edge, where he is helping to identify emerging business opportunities and persuade CEO's to put them on their agenda. Hagel frequently blogs about business and technology strategy.

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John Hagel, Deloitte

Deloitte's Center for the Edge considers the digital technology infrastructure to be one of the core forces which is getting exponentially better every year. But Hagel says there is a "delicious paradox" being that the very same technologies that bring awesome opportunities and new possibilities, at same time bring mounting performance pressures, accelerating change and growing uncertainty. He calls this the "dark side of technology" and it has real implications for businesses that have been built around the notion of predictability, standardization and tight integration to remove inefficiencies.

The effects of the "dark side" are showing up in research numbers. The Center for the Edge has documented that for all public companies in the U.S. since 1965 the return on assets has collapsed by 75%. Additionally, there is the declining age of the S&P 500, which has gone from 61 years in 1960 to just 16 years today. Hagel says the problem (and opportunity) is that both the digital technology components (computing, storage and bandwidth) as well as the infrastructure are not stabilizing which leads to companies that are running faster and faster yet falling farther and farther behind.

According to Hagel, we are going into a period where there is going to be no stability, a period of punctuated disruption coming at a faster and faster rate. Businesses will have to adopt a different set of practices and rethink at the most basic level the institutions they have built to figure out how to not only survive, but thrive, in a world where exponential technology will continue to drive uncertainty, rapid change and instability.

In his latest book, The Power of Pull, Hagel captures the essence of the changes going on in today's business landscape. Here, he offers his advice (the bright spot) on how companies can survive, and even thrive, in this new kind of world.

7 ways for individuals and institutions to thrive in these disruptive times:

1. Practice the power of pull - According to Hagel; we are in the transition of going from a world of push to a world of pull. "It is harder to predict and forecast in an uncertain world and those who master the power of pull will survive," says Hagel who offers the following three "levels of pull" for drawing out resources where and when you need them in a scalable way so you can operate in a world of increasing uncertainty:

  1. Access people and resources when and where you need them - a classic example of this is the powerful pull platform, Google.
  2. Attract people to you in unexpected ways - in an increasingly uncertain world we don't even know what questions to ask or what to look for, so individuals need to enhance serendipity.
  3. Draw out the full potential of individuals and institutions - focus on learning faster together for more rapid advancement.

These 3 levels together come into play in powerful ways in this new world and create opportunities. "Small moves smartly made can set very big things in motion if you have scalable pull platforms," says Hagel.

2. Focus on the long and very short term - The paradox of success is that the more successful we are, the more we come to rely on what brought us success and not even question it. As uncertain as the world is, executives need to fight the natural tendency in times of mounting pressure to shorten time horizons and instead take an outside-in perspective and engage in longer term thinking of where the world is headed. Hagel advises companies to look ahead and on a 10-15 year time frame develop a high-level view of what their market or industry might look like and what the implications are for their company. Without doing this companies get easily distracted by what's going on in the short term and risk spreading their resources too quickly on too many things because they are in a reactive mode.

Next, companies need to flip it around and focus on the next 6-12 months (not the typical next 1-5 years) and ask, "What are the 2 or 3 activities that will have the greatest potential to accelerate movement based on the larger goal?"

3. Move to a model of scalable learning - Not only is scalable learning a different rational and focus for an institution, it is fundamentally opposed to the scalable efficiency model that is the predominant model for large companies today. If you are operating in an environment where predictability and low risk are the essence of success, this is no space to innovate and without that you are not going to learn. Efficiency does still matter, so the question becomes how to achieve it in an increasing volatile and uncertain world. Hagel believes the way to get the highest level of efficiency is through scalable learning.

The idea behind the scalable learning model is that in a rapidly changing world the faster everyone can learn at scale the better we will be. Companies need to focus on broader eco-systems and connecting, mobilizing and learning from third parties rather than trying to do it all themselves. One of Hagel's favorite quotes is by Bill Joy, one of the founders of Sun Microsystems: "No matter how many smart people you have in your organization, just remember there are a lot more smart people outside your organization." Hagel says, "You will never scale unless you can find ways to connect with outside organizations and create relationships where you are all learning faster than you could on your own."

4. Tap into the power of corporate narratives - Hagel draws a distinction between stories and narratives; the later which he feels are powerful and will become very important to the pull thesis in terms of engaging at an emotional level. The essence of most stories is that they are self-contained. They are about "me" the story teller or about "those people"; not about "you" the listener. A narrative on the other hand is open-ended. There is no resolution yet; the resolution hinges on "you" and the choices you make will determine the outcome. "Millions of people have given their lives for narratives. How many people have given their lives over a story?" Hagel asks.

5. Scale at the Edge - Since politics can get in the way of transforming the enterprise, Hagel says the best way to drive change is not by trying to transform the core but going out to an edge that has the potential to scale and ultimately become a new core of the business. Doing this allows change agents to demonstrate the different approaches to business that are going to be necessary on that edge and overtime pull more and more people and resources from the core to the edge to the point where the edge becomes a new core. Hagel calls this the "methodology of scaling edges".

6. Ask the right questions - Hagel says that one of the key changes in leadership in a rapidly changing world is that power comes less from the answers you have and more from the questions you ask. In this new world the powerful leaders are those who have the right questions and help to focus people on the questions that are most important. This interesting reframing of what leadership is all about, has to do with the kind of networks you build. The old world hub-and-spoke network where everyone was connected to the leader and the goal was to get as many followers as you could is being replaced with the building of mesh networks where leaders are helping to create platforms and environments where people can connect with each other around the questions they are framing. This helps to find the right answers and move the ball forward. We need to stop settling for the perfect answers to the wrong questions.

7. Accept vulnerability as the path to earning trust -In this new world trust is more essential to achieving goals. Individuals and companies with a willingness to express vulnerability by admitting they don't always have the answer will build trust. This is the polar opposite of the notion of building a personal brand where we present all of our strengths and accomplishments in the most compelling way and hide any weaknesses at the cost of undermining the brand.

Being authentic will become increasingly important to participating in knowledge flows where a key issue in the interest of learning faster is acquiring tacit knowledge. Hagel explains that tacit knowledge is the most valuable form of knowledge, but the most difficult to share. It is the knowledge in our heads that comes from new experiences. We often have trouble articulating this type of knowledge and it does not flow easily, which makes it only accessible in the context of trust-based relationships. "If I trust you I will make an effort to try to frame the tacit knowledge I have," says Hagel. Pulling this type of essential knowledge and learning places an increased importance on trust-based relationships.
"At the end of the day the only sustainable pull is around trust based relationships," says Hagel, "it is the only way to amplify efforts so that small moves really do achieve amazing things."

You can watch the full interview with John Hagel here. Please join me and Michael Krigsman every Friday at 3PM EST as we host CXOTalk - connecting with thought leaders and innovative executives who are pushing the boundaries within their companies and their fields.