DistributedX: The force shaping business and IT

It’s more than “Digital = Faster,” and you’ve got to factor it in. The Kellogg School of Management’s Robert Wolcott adds “futurist” to the CIO’s core competencies.

By Brian McDonough
October 20, 2015

 

Everyone knows we’re in an era of tremendous change that’s reshaping the way business and life are conducted. We call it the Information Age, the Digital Age, the Internet Age—and we’re missing a larger point, says Professor Robert C. Wolcott.

Wolcott, the co-founder and executive director of the Kellogg Innovation Network (KIN) at Northwestern’s Kellogg School of Management, argues that it’s not exactly the bits and bytes that are truly driving change, but something he calls “DistributedX.” Wolcott, who is also a partner in strategy consultancy Clareo, says it’s one of the most powerful forces reshaping human activity, in which the production and provision of goods and services moves ever nearer to the end user.

“We’re modestly calling it a unified theory of technology and markets,” he says in a recent video presentation. “The impact of technologies in aggregate will be to enable us to produce and provide products and services of an increasing variety closer and closer to the moment and location demand arises.”

Think 3D printers. Think streaming media. Think delivery by drone. And the implication is greater than just consumer trends. Just as railroads in the nineteenth century directly shaped the development and structure of the modern corporation, so digital technology is shaping what business is rapidly becoming. Think Uber, think Airbnb, think of writer and designer marketplaces like Contently and Visually. The nature of a company, and how it hires, buys, stocks shelves and delivers goods or services will change fundamentally—for industries from transportation and manufacturing to media and energy.

In our conversation, Wolcott discussed what this conversion of technology trends means for business—and what it means for the CIO, a company’s point person on tech.

Charting an unusual course

The marketplace is getting faster and stranger, to put it bluntly. So the solution is to fight fire with fire, right? They get faster and more innovative, we get faster and more innovative. But motivating a large enterprise to do something new, much less do it quickly, is like trying to drive the Titanic like a speed boat.

Established organizations, Wolcott says, optimize and scale around their core functions, “to do them better and better over time, to remain competitive and maintain margins,” Wolcott notes. In other words, to stay the course. But the nature of competition has changed, and that sharp focus can be a liability.

“Today, change is not just faster, it’s also more diverse and more volatile. So the numbers and types of competitors arising are far greater, across industries, than ever before.” Now, Wolcott notes, a vital competitor can come from almost anywhere in the world. “And they can arise from technologies that hadn’t been an issue in particular industries before.”

So you may think you see where your industry is headed, but you might be in for a surprise. As an example, Wolcott talks about the power of microscalablity. Yes, Uber quickly scaled an international transportation business worth billions of dollars, yet owns no vehicles, but it doesn’t stop there. He points to SolarCity, the Elon Musk venture that proved that distributed energy generation could work at scale.

“Five years ago, very, very few people in the industry believed that,” he says. “And now everybody knows that it’s feasible at great scale. And in an industry that has always been defined by big cap-ex, energy, you’ve now got a fundamental shift beginning.”

 

In lieu of a crystal ball

The changes being wrought by compounding forces of technology, Wolcott says, demand a true innovation strategy in response. And he notes that many companies don’t even have a business strategy, much less a vision for innovation.

“If what a corporation has is an extrapolation of next year’s operating plan, out another two or three years, that’s not a strategy, that’s an operating plan,” he says. “A true strategy considers how will the world might change over the next few years, what we need to do to be best positioned to succeed within that environment, and what investments I need to resource. What portfolio options we need to focus on—and which ones we don’t—to remain relevant and to thrive.”

That portfolio of options, he says, is the essence of an innovation strategy.

“Nobody can predict the future. There are certain things that we can nearly predict, like demographics, that can be helpful, but you can’t tell for sure where the world will go,” he says. “How many people thought that Lehman Brothers would go out of business when it did?”

So instead, you define plausible futures. Not “likely” or “probable,” but plausible. What reasonably could happen? And within those scenarios, how does your business remain relevant and successful? The company must, he says, build a portfolio of options around those plausible scenarios.

Next up: Identify leading indicators that will help you see where the world, where your industry, is trending, so that you can stay just a little ahead of your competitors—existing and up-and-coming.

“There will be uncertainty,” Wolcott admits. “If there’s no uncertainty in your projects, then there’s no innovation. It’s axiomatic.”

As such, “the essence of innovation management is resolving uncertainty through a rational process.” A company must continually implement rational ways to resolve uncertainties in projects, so that it can make better decisions and accelerate its pace and accuracy of innovation.

 

The CIO as innovation pioneer

While leadership starts at the top, with the CEO and board, Wolcott says IT leaders need to help drive innovation strategy, because technology is so critical to business and innovation today.

“More than ever, the CIO has to be part of the corporate strategy discussion,” he says. “It need not be a ‘CIO,’ per se, but somebody deeply enmeshed in emerging IT, to understand what impact that could have for the company. That has to be incorporated into the way corporations develop or implement strategy, or the company will miss opportunities and be exposed to far more significant risk.”

But the CIO also has a day job—serving the operational needs of the business, and reacting to nearer-term trends in the marketplace.

“The trick for CIOs is that today, they must do both. They have to support the businesses as they are today, helping enhance them incrementally over time,” he says, “and they have to be exploring where the world might go, and be ahead of the business unit leaders in terms of what IT means in the future.”

It’s a lot to ask of a single executive role, but an understanding of the market forces at play not only provides a clue to getting the job done, but underscores how vital a job it is.