The Great Fragmentation
Thursday, August 7, 2014/
It used to be that you’d get a job and stay with your employer your whole working life. Smart employers, and certainly startups, are now beginning to look for people with wide experience, otherwise known as ‘horizontal personnel’.
A thin experience base of vertical climbing is not robust enough in a world that’s facing shake‐ups in every economic arena. It’s not going to augur well when things get shaky. The more specialised any person or company is, the higher the risk they can be replaced in a technology revolution. We’ve been encouraged to diversify our investment portfolio since the beginning of investment and portfolio theory. And yet, people are not encouraged to do the same thing with what’s most often their primary form of income for life — their salary.
This puts employees into a career paradox: the obvious strategy for achieving high office in a company is ultra‐specialisation and vertical climbing. Yet, the probability of being successful this way is low. At the same time it reduces the value of the employee who doesn’t make it to a corner office and has to follow another career path because they have what I call a thin market proposition. In the end it often becomes an all‐or‐nothing bet. Companies creating employment didn’t care about this while all the risk was with the downsized or stagnant employee. However, these days the risk of not having employees with wide experience is starting to impact the future performance of companies. It’s not a very future‐proof human‐resource plan.
Over the past 20 or so years, since the internet has been opened up for use as a commercial platform, the strategy of staying in the one industry and trying to climb the corporate ladder hasn’t served the humble employee well. It has displaced many employees and many employers who couldn’t see the error in their ways. While many employers espouse that their employees make the company, it’s sometimes hard to believe they really mean what they say.
From employees to projecteers
Over the past 10 years I’ve transformed myself to de‐risk my career and income. I’ve made a transition from a consumer‐goods marketing executive to something I haven’t quite been able to define as yet. The most apt description is probably ‘entrepreneur’, although it doesn’t always translate to my advantage on an immigration card when travelling overseas.
projecteer: a person who works independently for others on projects
Essentially, I’ve gone from a thin, singular career base of ‘marketing person’ to a range of income‐generating activities including business blogger, web startup founder, startup investor, university lecturer, technology journalist and radio commentator, viral video maker, public speaker, car company board member, industrial era company consultant, government technology adviser and business author — none of which involved vertical climbing, but horizontal hopping. What I try to do is find the Venndiagram overlap in each opportunity. Each overlap invents the right to step into another realm, which then overlaps with the previous one, and so on. It’s something businesses have been doing for a long time: related diversification. Unfortunately the people working within these businesses rarely adopt the corporate strategies they implement for their own careers and income purposes. When it comes to careers in the technology age I always tell people that Venn is Zen. (It must be true because it rhymes!)
The important point to note is that I didn’t have the right, or permission, to do or learn any of this. I just went ahead and did it. I did it because I could. There was no gatekeeper and I could do most of it for free using the gift of democratised knowledge and connection tools. Now it makes me antifragile. ‘Antifragility’ is a term coined by author Nassim Taleb to describe something that improves when it breaks or is disrupted by shocks so it can reconfigure and grow stronger. I have multiple sources of revenue and the relative diversification of a personal index fund of tech revolution-proof skills. It’s what both employees and employers need to do: focus less on functional departments and more on connecting seemingly disparate skills and overlaps.
All of this comes back to the education system. It’s not surprising, given our current government‐funded education systems are a child of the industrial age. The industrial template was used to design a schooling system that could produce great workers for the industrial era and promote orderly political behaviour. This model has indoctrinated people’s thinking. From the government, to parents, to kids, to companies, to their eventual employees. Learn the syllabus, reproduce it in tests, do well at school, get into university, get a qualification employers want, get a job in a good, stable (preferably big) company, climb the hierarchy, get paid more and, finally, retire in a reasonably independent financial state. It’s the path most people I know are on. Yet most people on this path agree that it rarely leads to riches. It’s a linear and rational B‐follows‐A method for educating our children and grooming them for their working life plan. It doesn’t work now, and it’s only going to get worse as new systems and technologies increasingly disrupt the workplace. I’ll go into detail about this in chapter 16.
The skills that get someone to the top within a company are, unfortunately, not the same as those needed when they get there. This may just be a contributing factor to the highly paid, please‐take this‐money‐and‐goaway exits of corporate CEOs.
The two imperatives for success as an employee in a large organisation are financial risk mitigation and internal political performance; in other words, don’t blow the budget, and make the quarterly number for Wall Street. Regardless of the long‐term impact of their decisions, the high‐performing corporate executive must find a way to get the number. No brazen careerist would push out a game‐winning launch if it risked their position at the firm or if the probability of its success wasn’t high, regardless of the benefits the company could receive from a significant innovation. They’d rather research the goodness out of any innovation, ‘wait and see’ how the technology emerges and incrementally refine what they already have in the market. It’s what their employer rewards, so it’s the right choice for staff in most organisations.
The reason we see so many startups doing well isn’t because the entrepreneurs are necessarily smarter than their corporate‐dwelling counterparts. It’s because the reward structure for entrepreneurs is different. As a startup founder, you win if you create value and invent revenue. The corporate executive plays an entirely different game, one of reducing cost and protecting against losing market share. The prize in the corporate executive game is a relative wages contest against fellow staff members, which endures regardless of the company’s performance.
Yes, there’s an obvious difference between a large existential revenue base and trying to build something from scratch. Some may even say comparing the two types of organisation is irrelevant because they’re at different life stages and trying to achieve different outcomes. But this is no longer the case. How people operate within these different structures matters more than ever because when eras come to an end, the rules change and we all have to start again, regardless of how big or established we are.
The culture of big is ‘don’t make an error on the big project’. Mistakes are bad and costly, or they’re perceived to be bad and costly because that’s the way it was for a very long time. This thinking is largely driven by the history of where companies emerged from, rather than the reality of the market they compete in today. It was super expensive to get a factory design wrong. It was (and is) expensive to get your product ranged in a national retail chain. It was downright scary to run a national advertising campaign that didn’t resonate with the audience. It was a disaster if the new warehouse had design flaws. If a company failed to launch something, it hurt financially. In an industrial world, all the things that major brands and companies did had a lot riding on them financially. And that’s why we mostly see incremental innovation — which is an oxymoron, if you ask me.
In a technological world, the cost of mistakes is lower. If you happen to be running a nondustrial company, mistakes are actually good. The cost of getting it wrong in digital firms becomes low‐cost iteration, a form of market research that’s actually tested in the market, rather than in some contrived, demographically profit led research group. And the mistakes we make are sometimes invisible. Perhaps no‐one used whatever was launched; it most likely didn’t have national advertising support; and it most certainly can be replaced by reconfiguring the computer code that went into building it.
nondustrial company: a company whose DNA is not of the industrial era, but the new technology era
The truth about competitors
Sure, not every business will be digital. Sure, factories, mills, warehouses and other complexes and expensive business infrastructure will still exist. And yes, it’s clear that not every business will be involved in technology. Hard costs that come from delivering industrial‐level, hard, physical goods are valid, needed and will remain a part of the business landscape. But the reality is that every legacy industry is competing against its digital brethren. They’re competing even if they’re not chasing the same customers or revenue pool.
During a transition from one age to another, companies don’t just compete for market share. During a shift in ages we start to compete heavily in a way that’s indirect and difficult to perceive. We don’t just compete for customers or shelf space either. We compete for a wider set of fundamental business resources.
We compete for awareness and interest in what we’re doing. The more boring the item we’re selling, the more we need to spend on media.
We compete to get high‐quality personnel who understand the emerging landscape and people who can provide intellectual horsepower in a changing landscape. If our industry or brands are undesirable to work for it becomes difficult and expensive to attract the people who can create the changes needed to escape the boring downward spiral to irrelevance. We compete for financial capital. In a market where funds are being raised in non‐traditional ways (crowdfunding, for example, which I cover in chapter 12), we compete against industries whose financial upside is greater. It starts to increase our cost of capital as we’re limited to traditional and more expensive methods of financial growth.
We compete for the ability to collaborate with others. The new platform orientation in business means brands need to collaborate more often. Brands without in‐market cache will find it increasingly difficult to find collaborators. Mash‐ups and corporate marriages of value tend only to occur when both players get positive rub‐off from each other.
We compete for the future and making it through the transition to the emerging landscape as if we’re competing for the primary resource of sustenance just to stay alive.
The global nature of this revolution has conspired to give us a global voice. And what’s most interesting about the voice is that it hasn’t just been magnified, it has also been unified.
What is fragmenting
This revolution is a truly global one. It’s affecting every person, not just the fortunate few in developed economies.
What it means for business
Business can’t simply try to implement industrial‐era strategies in emerging markets. The technology revolution means that many industrial‐era ideas and markets will be leap‐frogged by developing economies.
Excerpted with permission of the publisher John Wiley & Sons Australia, Ltd. from The Great Fragmenation, Copyright © 2014 by Steve Sammartino. Available from all good booksellers from now RRP $29.95 or ordered online.
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