Designing Your Business for the 21st Century

April 1, 2018

How companies will succeed in the algorithmic era

The 2018 MHEDA Convention Keynote Speaker, Mike Walsh, designs companies for the 21st century. Companies built to survive the future are no accident. They are a result of deliberate business design decisions smart leaders make today. In his ongoing research on the world’s most innovative companies, Walsh has organized these decisions into seven strategic priorities.  Learn the megatrends shaping the future and the lessons learned from successful companies on leveraging disruptive innovation, adopting a data-driven mindset and leading change through digital transformation.

Mike was kind enough to speak with The MHEDA Journal about his presentation.

The MHEDA Journal: You did a presentation about “Designing Your Business for the 21st Century” and that’s a topic that is very interesting for our group. Can you give a quick summary of your presentation?

Mike Walsh: I guess, in essence, we’re really at the beginning of an entirely new era. We’ve already seen many organizations that have started to make the transition from traditional organizations to essentially digitally transformed organizations. It’s been much more than just a change in technology. There are more sensors that collect a lot more data. They’ve been starting to experiment with new forms of organization, new forms of decision-making. Shortening cycle times. Starting to use data in a new way. This has been a transition that has happened over the last five years. What is going to happen next is probably even more profound, which is the transition from the digital era to truly the algorithmic or the AI-First era. This is when we start to use all that data that we’ve collected and combine them with machine learning. To start letting platforms and systems make decisions for us. To automate processes and to really do things that were never previously possible. So, what I’m going to be talking about are essentially key topics.

1) How is the world changing? Who is the consumer, the customer and the employee of the future? What does it mean that they’ve grown up, essentially in an algorithmic age and what does this mean for their expectations?

2) How do we now design organizations that are responsive and adaptive enough to survive and thrive in this kind of environment? What does this mean for culture? What does this mean for the way we need to organize and design teams?

3) What does this mean for leaders? Now that we’re in an age where we’ll have to increasingly trust AI and algorithms to make more and more decisions, what is the role that human beings play in all of this? What makes for a great leader in the 21st century if now so many of the decisions are actually not even made by you anymore?

TMJ: One of the things that I’m interested in is that within MHEDA there is a dichotomy between the suppliers and the distributors, where a lot of the suppliers really are on the cutting edge. They’re very automation focused. Whereas the distributors are certainly not on the leading edge of technology. For companies that are lagging behind the technological curve, how does a company like that get caught up to where they really need to be and where do you see everything going?

MW: I think there’s good news and bad news. The good news is that the price of entry for getting caught up is much lower than it has ever been in the past. With cloud computing and standardized platforms and really all of the solutions, it’s much easier to participate in a truly digital, datadriven ecosystem. The bad news is that technology is no longer the main barrier. Culture is. This is much more difficult to change. Because what the leaders of these organizations are being taught to do is really in opposition to the way they’ve done things in the past. Everything that has made them successful in their organizations up until now are exactly the kinds of mindsets and practices that will probably undo them in the future if they continue. And, it’s becoming increasingly obvious, especially in logistics and the supply chain where the weak links are. Organizations like Amazon are really driving this. They’re ruthlessly driving to every part of the supply chain looking for any inefficiency. For any part of the overall chain that is not being truly data-led.

TMJ: There’s a YouTube clip from one of your presentations to U.S. Bank discussing some people’s concern about how if everything is automated, where does that leave the workers? That’s certainly a concern within this industry where a lot of people are not only entrenched in the way they’ve always done something and a very tenured work force. What will it mean for them?

MW: Human beings are going to be more important than ever, it’s just that their role will change. Rather than handling paperwork and doing the final processes, the role of human judgment will be very much to work between the gaps in the systems. To solve problems, handle exceptions, to bring some sort of common sense to the context in which these automated systems and algorithms are making their decisions. So, this is something that even in 5 to 10 years, machines are always going to struggle with the complexity of human business and what drives great customer experiences. But, as we discussed, there are many aspects of the back office that will be totally automated. Those jobs, as they currently exist, simply will be radically transformed. I think the industry and countries have to make a commitment to reskilling, retraining and reeducating. This is something I often talk about, in the same moment that you automate, you have to also elevate the people in your organization. This is something that America has been through before. If you look at when they first brought automation into agriculture, this happened at the same time that we invented the K-12 Education system. It was no accident that we invested in education at that point of radical automation. It was in recognition of the fact that a new economy would need new skills, which means you had to change the way you were training and teaching people.

TMJ: With the pace at which technological advancements are coming up, even things that were absolutely cutting edge five years ago are probably out of date now, how do companies plan for that ever-changing trend and keep up with it?

MW: Well, the thing is that things are happening quickly but it’s not like it’s going to be a total surprise what’s going on as well. I think the writing is really on the wall. This process has been happening really for the last decade, which is greater amounts of data, more and more sensors, more connected machines as well as processes. And all that’s happening now is I think organizations are being called to experiment on an on-going basis, rather than waiting for the dust to settle. If you wait to see how everything is going to fall out, you not only will be too late most likely in order to salvage your business, you will have missed your opportunity to gain essential skills and knowledge in that transition process.

TMJ: Another part of your bio discusses how you have spent time researching the world’s most innovative companies. Are there a few characteristics that all of these innovative companies have?

MW: That’s a big question. I think the ground is shifting a lot around this. One of the biggest things that I would say define these organizations is that they truly have a culture of data-driven decision making. So, rather than rely on experience or ego or who has been around the longest or who has the largest corner office as being the determinant of what gets decided, it’s really about defining an objective in which everyone in the organization, whether it’s somebody loading a pallet in a factory or a member of the board, can input and come up with ideas and critique decisions that have been made. Amazon is an example of this but so is Google, so are a lot of these newer types of organizations. I think this is important because it very much takes from this idea of statistics. Rather than try to be right, it’s better to be less wrong with time. Rather than try to find the perfect decision, what 21st Century organizations need to do is constantly collect data and update their views of the future, based on what’s happening with their customers and their systems. So, transparency is sort of an essential element in these new types of organizations. If you think about it, specifically in the logistics industry, when UPS first introduced track and trace in the 90s, the main driver for that was improving the customer offering. I think it was only later that they realized that this transparency that they got through digitization actually allowed them to completely rethink their processes around the way they managed vehicles and parcels and distribution. So, I think, by having a transparent view of data and decision-making it really does change the way you design your business.

TMJ: One of the things with Convention attendees that people have mentioned is that during the presentation, people will fill up entire notebooks with thoughts and ideas to bring back to their company. And they get back to their company and are really excited to do everything and then they find that it’s overwhelming and they don’t end up doing any of it. What are one or two key, actionable takeaways that you want attendees to walk out of your presentation with?

MW: That’s something that I will be giving them. The way I’ve organized my talk, is that I will give everybody the big questions to think about. I will be giving them specific next actions to do and then I will offer them what I call a “mind grenade,” which is a challenge question to think about later. Essentially, what I’m hoping to give attendees is a bit of a road map for what is going to unfold for them in their organizations and other industries as well in the next few years. But I also want to give them something quite tangible to immediately act on. But they’ll have to wait for that! The big message I really want to convey is one of optimism. There’s a lot of fear, I think, now around the types of transformations that are going on. And uncertainty around what that means. But we’ve gone through several cycles of this before and generally it just leads to better companies, better industries and much more interesting jobs for people.