Redefining organisations for an exponential world (and why NZ needs a Minister of the Future)

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A version of this article was published in the NBR on 11 Dec 2016

I just spent a week immersed in the future.  I was lucky enough to go along to the SingularityU summit in Christchurch and afterwards go down to Queenstown and spend three days in training with the speakers and founders of SingularityU.  The week was about how exponential technologies (such as AI, Robotics, Autonomous/Electric cars, Nanotechnology, abundant solar energy etc) are going to change, well, everything. For those that didn’t attend some of the video are now just out and I recommend Kaila Colbin’s opening talk to give you a flavour of the concepts.

The whole week (beginning with an earthquake to kick things off) had quite a profound effect on me with the realisation that the future is here and we need to start planning for it now. A few examples: i) I’m not going to advise my kids to embark careers that have long expensive training programs (e.g. doctors/lawyer etc), AI is already starting to give better results, ii) Our town planners need to think about what to do with with all the carparking spaces when we all pay-per-ride in autonomous electric cars, iii) what is New Zealand going to do when synthetic milk/meat becomes far cheaper to produce than “natural” options?

It also crystallised much of my thinking around how individuals, organisations and governments are going to have to fundamentally change over the next few years.  The massive centralisation of wealth, power and data that the Internet has accelerated has left us (as a country and a global village) very fragile.  We need a way to fundamentally re-engineer how organisations work and how we work together as a society.

This change is both a threat and opportunity for New Zealand.  If it’s going to be an opportunity I think we need act fast (and I’ve got some ideas as to what we might do).

Adaptability Quotient

With the reality that our jobs are going to either disappear or change beyond recognition, one of the themes that came through at the conference was the concept of Adaptability Quotient. We all know about IQ and many people are aware of EQ (a measure of Emotional Intelligence) but now it’s becoming increasingly clear that AQ, the ability to adapt (i.e. to learn and unlearn) quickly, is going to be critical to both individuals and organisations in a new world of rapid change. Although AQ is quite a new term the concept is actually as old as Darwin.

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How we as individuals increase our (and our children’s) AQ is a topic for another article. Great to hear Sue Suckling, Chair of the Boards at NZQA/Callaghan make some pretty bold and contentious statements about the current education system in NZ and how it needs to change.

What I want to focus on is how organisations increase their AQ and therefore chances of survival. It is something that I have been interested in for many years and over the last few months it has dawned on me that my interests in agile processes, organisational structures and a technology called the blockchain are intersecting in a fascinating way.  

First a little history to give the context to my thinking.

Agile - a way to deal with rapid change

I’ve spent my career in software and therefore rapid change. Back in around 2000 the software development world was coming to the realisation that the traditional engineering based process used to build stuff wasn’t working for software.  The traditional process, known as the “waterfall process”, where projects were broken down into a number of rigid stages (typically requirements gathering, design, build, test) relied on a certain level of predictability which typically wasn’t there in a software world of high complexity and rapid change.

Imagine building a bridge. You get halfway through building it and realise that advances in material science and construction techniques means that it is easier/cheaper to knock the first one down and start again. That’s what was happening in the software development world.

Then Agile and Lean Startup arrived. New processes where projects were broken down into smaller chunks, you iterated/evolved your product, you accepted “you don’t know what you don’t know”, you embraced changes in direction based on knowledge gained and you validated assumptions by using working code throughout. Methodologies like Scrum and extreme programming and terms like sprints, standups, retrospectives suddenly became part of our vernacular.

For some it was hard and frustrating, for others it was liberating and obvious. Fundamentally this new way of building stuff made it easier to work in a world of uncertainty and rapid change.

I started my company 3months around this time. We were a wonderfully naïve services business emerging out of the dot com crash and specialising in building software using this new agile approach. I say naïve because pretty early on we seemed to get recurring problems when we won projects with larger organisations and government agencies.  We were passionate about this fast moving, collaborative, open and flexible process but were finding ourselves trying to shoehorn it into a corporate world of silos, bureaucracy, risk aversion, patch protection and just plain old inertia. It seemed to us that many of the people we were working with were more concerned about covering their backsides and moving up the corporate ladder than they were about making the project a success.

We had to come up with tricks like physically isolating the client project team members from their environment, hiding what was really happening from people up the chain of command and crafting the right story to give the legal and procurement teams a false certainty so we could actually get started. It was frustrating. I even started ranting about it in public.

At the same time as this was happening, I was struggling to run my own company effectively. We were growing, I was employing lots of people and I did what all the expensive business advisors told me: I created a hierarchy.  I then began to get my own taste of what some of the corporates had to deal with: I became more removed from what was actually going on, I had to make bigger and more stressful decisions, as an organisation we weren't reacting as quickly as we used to to opportunities and changing market conditions. I also realised that people are messy, it can often be pretty difficult to create a truly meritocratic environment.  I love this image from Brian Robinson author of Holacracy.

Teal (creating responsive organisations

I spent quite a lot of time reflecting on this and came across a book called Reinventing Organisations.  This book had a huge effect on me and gave me a fresh set of lenses. I realised that that the Agile process was all about building stuff (mostly projects) but it didn’t deal with the more fundamental problem of organisational agility.

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The book was the result of a 2 year research study by a Frenchman called Frederic Laloux. What I found fascinating was that it wasn’t a set of untested theories but instead a set of best practices distilled from a whole lot of very successful companies around the world who were independently challenging all the traditional theories around how organisation should be structured. These were in many cases large organisations that didn’t have managers, HR departments, a strategy, budgets, targets. They were purpose driven and inherently responsive/adaptive. Fredrick labelled the organisations he studied (that he argued were at the next level of organisational evolution) as “Teal”. I recommend reading this book (there is also a great introductory presentation)

For me it was an “aha” moment: there is a different way. Aside from the challenges of achieving real meritocracy, the organisational hierarchy that we tend to think has to be a part of all large organisations starts to fall down when the rate of change gets to a certain point.  Think about it, in previous generations the people up the chain of command would typically have gained a whole lot of relevant experience as they were working their way up the hierarchy. Increasingly in today’s world, by the time somebody has worked their way up, too much has changed, they have lost touch with what happens at the coal face. The other problem is inertia: with every layer of hierarchy it becomes harder to adapt quickly.

The principles and practices outlined in Fredrick’s book gave an alternative. A large organisation with the scale to compete in a global marketplace but without hierarchy. Could there now be a way to create and scale organisations that are more reactive, less fragile, more fulfilling for people involved. Something far better suited to exponential change that the world is starting to see across every industry as everything becomes digitised.

The Global Village

The other realisation was that increasingly, in order to compete and thrive in the new rapidly changing global marketplace that the Internet has created, organisations have to think bigger than their own city or country. This is especially true for New Zealand. For example in the NZ software world there is intense competition for developers who have the right skills at the right time which has driven up salaries/rates and held back the potential for many companies to scale quickly. Many have gone the route of outsourcing to a developing country but that brings a whole lot of new risks and challenges.  

We know in the software world that amazing things can be build by big globally distributed non hierarchical communities who align on a goal and are passionate about making a difference. Open source software communities have built some of the most sophisticated and successful software on the planet.

As a country we are only going to be able to compete if we can efficiently integrate into the global workforce.

The Blockchain trust protocol

Around 2 years ago my team started to get involved with blockchain technology.  The Blockchain is a difficult concept to understand but from the start we realised it was one of those truly disruptive technologies.  I wrote an article for the NBR which outlines the basics in April and we ran a conference in May as part of a campaign to educate and inspire the business communities in New Zealand.

Much of the focus/discussion has to date been around the first blockchain implementation: Bitcoin. However, what the Blockchain actually gives is something more fundamental: a trust protocol layer that sits on top of the Internet communication layer. It allows untrusted parties to transact without an intermediary.  

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This has massive implications, as our entire global commerce and government system is builton a different paradigm that is reliant on often hugely powerful centralised intermediaries (think platforms like Trademe, Uber, Google or institutions such as Banks, Government etc).

The Collaboration Operating System

What the blockchain doesn’t do, “out of the box” is to actually allow people to come together and work towards a purpose (i.e. an organisation). The final piece of the puzzle is what could be described as a “collaboration operating system” layer. This layer of software would allow people, anywhere in the world, who don’t necessarily know or trust each other, to work together and collaborate.

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This layer would need to incorporate things such as ways to:

  • Manage/track reputation (e.g. a non-transferable unit of measure that reflects the degree of alignment of a participant within a network of peers). Think Trademe/AirBnb reputation on steroids.
  • Manage/track value distribution, (e.g. tokens that are issued automatically whenever a contribution is recognised as valuable by the majority of reputation in a network). Similar to shares in a company but tied not only to financial investment but also time/effort investment and reputation.
  • Allow voting so that decisions to be made by the community (perhaps weighted towards people with higher reputations or token ownership). True decentralised and transparent governance?

Ultimately this layer could support an autonomous organisation that can have an evolutionary purpose and even the ability to replicate and “fork”.  If you think this if getting far fetched, check out this experimental project built on the Ethereum blockchain.

The collaboration layer is being built currently. I am aware of three organisations working on separate projects on the Ethereum blockchain: Colony, Backfeed and Boardroom, I’ve been in contact with the people behind these products, seen early beta’s and it’s pretty exciting what is coming. Creating a blockchain based company will become as easy as creating a facebook group.

So could we start to see a new type of “Teal”, evolutionary, decentralised, global, anti-fragile, transparent, meritocratic, truly purpose driven organisation that could ultimately become more powerful that Google, Amazon or indeed Governments? Are these new organisations the ones that could actually solve the big problems like global warming which aren’t likely to get solved by politicians looking after their own publicity ratings and swing voters or mega-corporations looking after their shareholders? I hope so. For the first time in human history we have the technology to allow these organisations to not only exist, but to thrive and become the new normal in a post-corporate world.

What we don't know is how on earth these blockchain organisations are going to fit into our existing legal/financial/regulatory systems. Bitcoin has been around almost 8 years and most governments still don't know what to make of it. Blockchain based Decentralised Autonomous Organisations (DAO) that don't live in any specific country are a whole new concept.

The rise and rise of the co-working space

I believe the creation of these organisations is going to accelerate another trend we are already seeing.  More and more people are going to be freelancers or working for multiple organisations. For example by 2020 it is estimated that more than 40% of the American workforce, or 60 million people, will be independent workers—freelancers, contractors, and temporary employees. We humans are genetically programmed as social creatures, to stay sane we need to interact with other humans.  If the future of work involves more and more people working with teams that are geographically distributed they still need to interact physically with other people.  The rise in popularity of the co-working space is now becoming apparent.

So what does New Zealand need to do?

We’re already falling behind the rest of the world.  In order to turn this into an opportunity we have to play to our strengths: we’re a small, developed country, with a great lifestyle and a relatively high degree of trust between ourselves and between us and the rest of the international community. I wonder if we need to balance/curb our desire to creating the next Xero. Yes, we need to continue to encourage innovation and the startup community but we also need to encourage the creation and participation in international decentralised projects/organisations. We can’t do everything, but we can carve out some niches within specific technology/domain areas. We also need to encourage the best people in the world to come and live here.

The public and private sectors need to work together on this. Specifically some of my thoughts:

  • Setting up a cryptocurrency exchange in New Zealand. This has been a frustration of many people for a while: currently it’s really hard for people in NZ to become involved in blockchain organisation space.  To become “investors” or participants in the new organisations living on the blockchain you generally need some crypto-currency (e.g. Bitcoin or Ether) and while we can’t buy our groceries with Bitcoin we need a way to easily convert it to NZ$. One of the most common questions we get asked is “OK, how can I buy Bitcoin or Ether”.  There are plenty of ways but it’s not easy, it can be risky and often involves high fees. In many other countries such as the UK, Australia, US it is so much easier, they have trusted and/or regulated exchanges. We know of numerous instances where the banks have actively shut down entrepreneurs trying to set up exchange or set up bitcoin ATM’s in NZ. I think we need the politicians/regulators to get involved to change this.

  • We need to invest in understanding the legal challenges of organisations that live on the blockchain (i.e. outside geopolitical jurisdictions).  We need to create a legal/regulatory framework that encourages the people behind these organisations to live in NZ.  

  • The government needs to more actively support entities that are helping to grow centres of excellence in key areas of new technology and encouraging cross sector R&D.  For example, with limited or no funding entities in the blockchain space like the Blockchain Association and BlockchainLabs.NZ (which we’re involved in) and in the AR/VR space, the VR/AR Association are trying to grow awareness and encourage cross domain collaboration within New Zealand.

  • Techweek was great initiative that ATEED ran last year in Auckland. This year it is a national event run in May 2017 by NZTech with backing from ATEED, MBIE and NZTE. This is a great opportunity to shine the international spotlight on NZ around key technology/domain niches and bring the best international speakers over here (and show them what a great place this is to live). Let’s get some real investment into these events to make them world class.

  • Let’s embrace the coworking trend and look on it as a great export opportunity.  It’s something we are doing well now and companies like Bizdojo are starting to export that IP into other countries.

A lot of the above needs support from the folk at the Beehive. At the Singularity conference Amy Fletcher gave a talk where she concluded that we should create a “Ministry of the Future”. 

This is a great idea. Perhaps a good start would be to create a Minister of the Future (other countries have done this).  Now that we have a new Prime Minister, what a great time to do this. Come on New Zealand, let’s use some of our strengths, pull together, take some risks and start truly investing in the future.