The Intelligent Workplace

The Intelligent Workplace

Episode 15

Decoding Disruption in the age of Artificial Intelligence

Larry Quick
Founder & Managing Director, Resilient Futures.

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On this episode of the Intelligent Workplace, I take a deep dive into the world of Digital Disruption.  Recognising and responding to disruption is an important strategic imperative for business leaders. Failure to adapt, or doing so too late, can be the difference between success and failure in the modern business environment.
 
What is Disruption? What isn’t it? What are the warning signs? How does it happen, and how can businesses become disruption ready so that they can leverage it?
 
My guest, Larry Quick from Resilient Futures, is well qualified to answer these questions, and more. Larry has been researching disruption and resilience for over 20 years. He is the co-author of “Disrupted: Strategy for Exponential Change” and the original developer of the Strategy in Action framework. As the Managing Director of Resilient Futures, he works with clients to leverage disruption and ensure success.
 

Chris :                   

Welcome to the intelligent workplace Larry Quick.

Larry:                    

Thanks Chris.

Chris :                   

Thanks mate, thanks for joining.

Larry:                    

Glad to be here.

Chris :                   

Yes. I’m really looking forward to this chat because I feel I’ve got a lot to learn this area.

Larry:                    

That’s for everyone. That’s all of us.

Chris :                   

Yeah, nice.

Larry:                    

It’s one of those things that has historically been part of the landscape. Disruption isn’t new. It’s been happening since man invented the wheel, but it’s what characterizes it as a different sort of environment today is the scope in terms of its everywhere. The scale, it’s everything, the… It’s systemic and that impacts everything, whether you’re upstream or downstream or value chain, or whatever that may be, and it’s about exponential speed. So it’s happening extremely fast.

Chris :                   

Before we get too deep into this, I want you to help me clear something up around the actual definition of disruption, because I feel like many people get a little bit confused about it. Often when you speak about it, people go ahead and say, “Yeah, I get it. Yeah, just like Uber.” But by definition, Uber is actually wrong, isn’t it? It’s a little bit more like Netflix, Skype, or Apple, because it’s all about the fact that an idea has existed before? Is that how you sort of see it?

Larry:                    

Well, we could go down the rabbit hole and talk about all sorts of scientific stuff, but if you think about it in a couple of different ways, first of all, if I put it this way, that there is no such thing as no change. There’s continuous change. That’s characterized by the seasons or time or whatever it might be. That’s always changing. We’re always aging, et cetera, et cetera. And they’re continuity’s or continuous change. A discontinuity is something that takes… It comes across the continuity’s, and there are certain aspects of change which will remain continuous to a certain extent, such as the seasons, except that we now have climate change and seeing discontinuities cut across that. But you’ve been able to rely on the seasons for some time.

                               

But a discontinuity is something that takes the continuity out of whack. And particularly what is occurring now to actually cause this discontinuous change or this disruption is, as I said before, the speed, the scale, the scope, the systemic impact of change itself. And those changes are not superficial changes. They’re fundamental systemic, social, economic, environmental and technological changes. So if you can imagine a whole ecosystem of change being disrupted at the same time. So when some people will look at disruption in its very sort of micro sense and say, “Well Uber disrupted the taxi industry,” and they did. And that was a business model disruption, a supply chain disruption. All of those sorts of things.

                               

But in the broader sense of disruption, there’s a whole bunch of other stuff going on behind Uber such as business model disruption, which is what they bought a whole cohort of unused assets such as cars that weren’t being driven and they’re able to utilize that unused asset without any risk, and formalize that agreement to people to take a taxi, which is not really a taxi.

                               

So then you look at, say, another one that’s used a lot is Airbnb, which once again took a whole bunch of dead beds and made them live and online and they put a system behind it. Both not technology disruptions to existing business models, but disruptions through… So not technology as such, but more about the shape of the business model, and the relationship of supply and demand and those sort of things. So if you’re thinking about when… when we think about disruption, we talk about it in its broader form than just digital. Because if you think about digital disruption, you’re thinking about anything that comes in a digital form can do. And that can be GPS, it can be a bigger broadband or it can be blockchain, AI, all of those things.

                               

People often get physical technologies such as an autonomous vehicle for automation are not digital. They have digital components to them, but the ability to roll out at an exponential rate is limited by making a physical object versus a digital object. So you have to really understand it in its more complex forms if you’re going to get your head around it. And that requires some understanding a bit of the theory behind it, because that is what enables you to then understand what strategy to use to leverage disruption. So if you’re going to… I mean, we’re not opportunity… we’re not optimists or pessimists, we’re saying can the current social economic system leverage disruption at the organizational and the work level? And there’s an immense amount of opportunity there if you’re willing to do what we call decode disruption.

Chris :                   

Okay. So explain decoding disruption.

Larry:                    

Well, it’s understanding some basic theory. Its very basic theory is, there’s no such thing as no change. Very simple. There’s continuing and there’s discontinuity. What’s the difference between a continent… people riding a discontinuity and remaining in a continuity is just the amount of knowledge they have of what’s happening. That’s what we’ve boiled it back to. It’s like if I said we’re on a ship and there’s someone on the deck with a pair of binoculars and they’re reading the emerging future. It’s coming at them, emerging conditions, and they’re saying, “It’s just all horizon. It’s all horizon.” Then there’s someone up the pole, [inaudible 00:08:07], the mast-

Chris :                   

Crows nest.

Larry:                    

The mast. And says, “Land ho, I can see it coming.” And that mast is knowledge, and the more that you know from a global perspective, the more you get to see those sorts of emergent conditions ,changes or just potential disrupters coming at you. So you’ll have some people who are really good at that. Most people aren’t because they don’t understand how to gather information on emergent conditions.

                               

An emerging condition like autonomous vehicles. We were talking about autonomous vehicles in very practical ways five years ago, maybe six, seven years ago. And looking at from controlled environments where you’ve got a mine site and you’ve got a big loader that’s autonomous and controlled in sort of Australia’s case, it’s operating up in the Northwest, it’s controlled from Perth. That was on the rise 10 years ago. Now it’s happened and people think it’s… “Well, where did that come from.” So there’s that type of thing.

                               

But if you look at even five years ago, we’re working with some clients, and we’re saying autonomous vehicles. And they were saying, “Well, how does that affect us?” Well, you own car parks. And it’s connecting those dots. If you own any asset like that, it could become what’s called a stranded asset. You got a car park without a business model that goes with it. And it’s very, very hard to shift that because it’s a fixed asset. It’s not a digital asset. It’s a fixed asset to be building with something in it.

                               

So in thinking through the strategic implications, you really have to understand the theory and that’s where we talk about decoding disruption and breaking it down. Really understanding how do you do a conditions analysis? What are you looking for? What are the early signals, the weak signals, et cetera? How does exponential change work? What is exponential versus linear sort of change? Which capabilities to invest in at any particular time? What to get into, what to get out of? And that’s where we work with organizations on decoding all of that information, and getting a fair sense of when they should shift, how they should shift, what to sell as a prime asset pump, still a prime asset.

Chris :                   

It’s funny, I think you talked to the everyday man on the street and you ask them about disruption, automatically they’re going to point to digital and the internet I’m assuming, because while disruption’s been around for forever, as you said, it seems to be that that’s where people’s minds go to. I think back to my childhood and some of the disruption in the eighties, you had VCRs, you had CDs, artificial heart, MTV. Is it just the fact that the internet amplifies everything these days that people immediately go to digital and internet as what disruption actually is?

Larry:                    

Yeah. Well, if you can imagine an ecosystem and you can imagine that everything’s connected, everything’s joined up in some way. So if you go back, I don’t know, 150 years ago, a hundred plus years ago, the level of connectivity was very shallow or very, very limited. If you said, “I’m going to post letter from London to Melbourne,” it would take six months, because it had to go on a boat and then go over, and then had to travel maybe by train or by horse and carriage, wherever it was, whenever that was. Took a long time for that letter to get there. And there was still connectivity, but it was multimodal and very, very slow. Not reliable because the horse might die or the carriage might get held up or the same boat might sink or all that sort of things. And if you’re looking at that from a social economic perspective, the relationships that you’re having with people, which is generally based on dialogue is very slow.

                               

So it’s like someone, in those days, in say in the 19th century, if people came to Australia, it was goodbye forever. Now it’s just one of the things, “Oh, Johnny’s gone off to England for six months.”            

“Oh, you’re back already.” So if you can imagine these social interactions very, very slow. Nowadays, it’s instantaneous. Facebook, you know what the kids are doing, you can look at all of those apps that go with that and that’s changed at an exponential rate of change. If you think that the letter that was sent a hundred plus years ago was an order for some goods and that took six months to execute. Nowadays it takes six seconds if that.

Chris :                   

Yeah, we get it.

Larry:                    

Well, my wife sometimes said I was going… “We’re going out this weekend, but…” And this is the Monday, “We’re going out this weekend.” I was trying to get down on this weekend to buy some stuff for the next weekend, but I said, “No, I won’t do it.” I’ll buy it on wherever she buys it, and it turns up on a Thursday and it came from Spain. All of that sort of stuff. Now when you break that down into a decoding, what’s going on there, it’s actually taking transactions, these transactions and speeding them up. So we have faster rates of transaction and very, very low cost transaction. Faster, lower costs transactions. So when you do a transaction and a cost analysis, it’s very, very cheap, a transaction. It can be multilogged where 55 people get the same transaction at time, and that that is, the raw materials are ordered, the… then it goes to this guy, he makes it, bang, bang, bang and it’s off.

                               

And I explained that dress that she bought on Monday may not have been made until Monday night. And then it was sent on Thursday. They didn’t even have the cloth there at the time. So, we classify those transactions as information, communication, education, production and trading transactions. I-C-E-P-T. And if you understand in an organization when you’re dealing with those sorts of transactions at the speed of light in a multimodal way, when you’re sort of sitting back there with a very simple supply chain and they’ve got these customers there and they’ve been there forever, we’ve got these suppliers, and then along comes something like AI that makes those transactions faster and more intelligent, and you don’t have to have any people to take the order or execute the order. So you’re saying this thing go even faster with the likes of AI.

Chris :                   

So is artificial intelligence actually disruptive then?

Larry:                    

Absolutely. Well it depends on… Well, it isn’t disruptive in all its forms, because to simplify artificial intelligence, there’s that artificial intelligence that that can replace rules based transactions. So something that is a yes, no, or just very, very simple, it can make a decision for you, and those decisions can be quite complex as it learns a different variety of yes, no’s, yes, no’s. So you can get the artificial intelligence side at a transactional level that just takes away a very basic job like ordering something or finding out and putting a map like Google maps and with an algorithm, because those roads don’t necessarily shift. Once you’ve done it, you’ve done it for a long time. So you can map that and that [inaudible 00:16:42] pretty quickly.

                               

Where artificial intelligence starts to get problematic is when we presume it’s going to mirror human decisions. Now that’s where it gets murky, because if the dictionary definition of intelligence is knowledge in action, now, this might take a little bit of a mind bend, so knowledge in action. Now knowledge is not the same as information.

Chris :                   

No.

Larry:                    

Information is codified things that have occurred. You can write it down. Knowledge you can’t because it’s tacit. It actually show up in experience. So when you start talking about knowledge in action, it’s experience in action, so you walk in this room and you’ve got the experience of being in this room, you’ve got that knowledge and you do it once, twice, three times. You know you’ve got the knowledge. Then you’ll try and write it down what to do and just give it someone. They can’t just go and do it.

Chris :                   

No.

Larry:                    

So there’s this crossover where people get confused between very low level transactions that are rules-based, and then there’s the ones where there’s a heavy decision to be made and you have to really think it through. And it comes from experience in action. So we’re in this part right now where we’re losing a lot of jobs, and people are even losing business models because someone’s cracked the rules based AI onto them. And a lot of business models are rules-based. Just simple rules based, but when you start getting into the really deep, intellectual if you like, decision based, that’s a different kettle of fish. And then they’ve got to understand the difference between the two because if you think about competition. Now, 75% of the businesses in Australia as service based industries. A lot of those are being impacted by rules based AI and that sort of stuff that where they can just disintermediate five people in the chain and go and do it very simply. And that means loss of organizations, loss of jobs.

                               

On the other side where you’ve got these deep decisions that need to be made, a lot of the value that sits in say, they call it corporate knowledge, is in… a lot of the competitive value is in what the people have in their experience. So question number one is, are you really going to outsource your competitive knowledge to a computer? So there’s a big question in that because people most probably don’t even know what that is. The knowledge they have that makes them competitive. They know they have a competitive advantage in some way, but do they really understand what they’re doing when they outsource that to a computer? And I’m not saying that they don’t or they do or whatever. I’m just saying think it through. And then if you go and look at it from a decoding perspective and say to yourself, “I’m going to do that,” and everyone else does it in the same way, you’ve taken your competitive advantage and mixed it up with a whole bunch of data that now everyone does the same thing.

                               

So what we say to organizations really with AI, you’ve got to really understand it from a business perspective. Also from a jobs perspective. But it all gets back to that one thing that we talk about is decoding disruption. Understand what disruption’s all about, which 99% of people don’t.

Chris :                   

That brings me to our next question, how can a company actually get in on being disruptive? Is there a playbook, a secret template, or how do you do it?

Larry:                    

Well, we’ve done it by 20 plus years of research. And-

Chris :                   

A little bit quicker.

Larry:                    

We basically teach it and-

Chris :                   

It’s a bit of a mindset, isn’t it?

Larry:                   

Yes. Well we talked about mindset, skill set and strategic focus. And the thing that we haven’t done well, particularly our business schools, is set people up for disruptive change, for leveraging disruptive change. What they’ve done is mostly dealing with markets and how businesses work, business models, regulation, all sorts of things as stable state.

                               

You have to flip it and say, “This is not a stable state.” You’re not working, you’re working very dynamically, fast changing environments. Where our background comes in is we study these things as complex adaptive systems. Now I won’t take you down that rabbit hole, but you have to understand it as an exponentially changing complex adaptive system that is like a football match. Football decisions are made like this. and the next decision is only as good as the last decision you made, and they are happening at faster, faster rates. Now most organizations, the way they’re structured from a communication perspective to make those information, communication, education, et cetera, decisions requires this sort of heavy load. What we’re talking about is making those a lot faster, particularly if you can use AI to help you with that decision making.

                               

But we’ve been caught, I think, our education systems been caught in a dark spot that it hasn’t… In the 60s after the second world war, people started to go to university. They came back from the war and it’s like, “I’m not going to go back and be at a logging assistant, or whatever it is. I’m going to go and get a degree.” And people started to get formalized. Particularly the baby boomers having kids, they went to university, et cetera, et cetera, and we picked up some basic models from the ’50s into the ’60s, ’70s and ’80s, but none of it was designed for the digital ecosystem. We haven’t take for granted of that. None of it was designed for stable state, linear transactions. In fact I’m not sure I can remember… If you remember this, I can remember first time I saw a fax machine. And it was like, “Wow, a fax machine.”

                               

And the interesting thing is we still have say a health system that uses fax machines today. So you get the disparity between say, what you guys are up to, LiveTiles, and what a hospital does. It makes you want to spin around, it’s like…

Chris :                   

Absolutely.

Larry:                    

So we’re caught in an education black hole when it comes down to understanding the operating environments for business organizations and in governance. You only have to look around. How do you handle a Twitter driven revolution? What we say is, and we’ve worked in the civics area, the economic… social economic area in the States, and we work with corporations, et cetera, in Australia, and we find that you have to start with the organizations and teach them different ways of operating.

Chris :                   

Do you go a top down or bottom up?

Larry:                    

Both.

Chris :                   

Both.

Larry:                    

You have to do it both ways.

Chris :                   

And then you try and get it entrenched in the culture.

Larry:                    

That’s right. We do diagnostics as to where people are at, and then we teach them a framework, Strategy in Action. And we teach it as a very simple way of thinking that people already have without trying to explain it over a podcast, but that’s why you got to buy the book, Disruption.

Chris :                   

Yes, absolutely.

Larry:                    

If you go to our website, resilientfutures.com, you’ll see explained there that we have a cognitive ability that we don’t use all that well. And where we developed the framework from was just watching how people worked. So we would go with your business models of visions and missions and guiding principles and all this sort of stuff, and well, it doesn’t take long for people to forget those things.

                               

But how do they actually work? And how do they work at the micro level to the mega level? We’re going to do a big plan or we’re going to take some small actions, or do a small plan? How does football work? And what we found is that it doesn’t matter whether it’s sport, someone planning a holiday, someone just thinking through what they’re going to have for dinner. There’s a certain mindset that they use and when they get good at it, the skill sets there, and the strategy for cooking a cake or for playing football uses the same frameworks, and they just learn it without really knowing they’ve learned it. So what we do is we bring it to the fore and put it as an organizational capability. That’s what we do.

Chris :                   

All I’m hearing is that that me as CEO of Lukianenko’s widgets, I don’t think I’m going to be able to just going to be able to flick a switch and turn on disruption overnight.

Larry:                    

Turn it on.

Chris :                   

Well, you can turn it on, but not be a up and running. It takes time.

Larry:                    

Disruption is there. It’s not like someone says, “If everyone just stop disrupting.” If you look at… just do an appraisal of the world today. Look at the political system. That’s not stable state, that’s in what we call managed adaptive decline. M-A-D, MAD. All the Western world has that issue. If you look at the climate, if you look at… There’s a whole bunch of these parts of the ecosystem that are deeply out of control when we think they’ve been in control for a long time, they really haven’t been, but you can’t turn disruption off by ignoring it. You have to make a choice whether you’re going to embrace it or fall foul of the consequences.

                               

We believe that if you use frameworks like we’ve got, is that you can embrace it and you can generate value and whether that values… however you base value on, whether you value the planet more than a dollar or whatever, but you can make big differences in the areas of social change, economic change, planet, right the way across to making surplus money out of business. But you can’t do it with the current linear way of how we operate businesses. And I’ll give you a for instance in that the big end of town is locked into quarterly reporting and then there’s the annual report that comes out, and I often say, “Yeah, it’s fantastic the way that the world changes according to a financial year.” That you’re never going to worry because when you report on the 30th of June or whatever your reporting day is, that’s when the world has saved up all of its changes, and then will make it from that date.

                               

30, 40 years ago you might’ve been able to get away with fitting a financial year into rapid rates of change in markets and climate and all those sort of things. You can’t do that now. You really have to operate at a level of, at the speed of change. So we’re talking about changing ahead of change in sync with changing conditions, not trying to wrap it into an annual business plan. It’s just a fallacy that… and somehow we’ve been successful and you go, “Yeah, but I’m not too sure that’s because how we planned or put strategies together. It’s more luck than judgment.”

Chris :                   

An old mate of mine used to say that everyday is a school day, and today is just… it is so true. I’m just learning so much here talking with you. We could go on this forever. We probably need to wrap it up shortly. I can see you’re a very passionate man about this. Have you got one example that you always like to cite when someone says, “What’s the best example of disruption you’ve seen in history?” Have you got a favorite? Mine’s the VCR by the way.

Larry:                    

The VCR? Well, everyone pumps out KODAK, and that seems to be the one that everyone grabs hold of. But Uber or Airbnb… But I think there’s a couple that I talk about, small changes over time that have made immense changes now. And we still don’t stand back and look at a wheel and go, “Wow, what a brilliant invention.” To think that there was a time before the wheel. Okay. That’s mind blowing. That they didn’t have a wheel. And then the wheel they had was made out of stone and et cetera, et cetera. But you look at the wheel and say, “That’s pretty magnificent,” because you can open up a computer and there’s still a wheel in there somewhere.

Chris :                    T

his has been a fantastic discussion assessment. I feel like I need to have a little lie down on the couch here and just steal everything, either that or organize to have a beer with you one day and get deeper into this, because it’s absolutely fascinating, and I hope everybody listening out there has gotten as much out of this chat today as I have because it has just been magnificent. We’ll leave details in the show notes around how to find your book and how to find resilient futures. Mate, this has been fantastic. Thank you so much for your chat today.

Larry:                    

[crosstalk 00:30:13]. Really appreciate it.

Chris :                   

Thanks for joining me on the Intelligent Workplace podcast brought to you by LiveTiles. If you have any feedback on what to suggest a guest for a future show email podcast@livetiles.nyc. Thanks for listening. I’ll catch you next time.

 

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