Brace yourself, Global Recession Coming…
You probably already know this with bonds in negative yield curve, and with Deutsche Bank, UBS and other banks sacking back office staff, analysts and marketing, you know what is coming next is noteworthy. Serious! Banks after 2008 are good at unloading crap before everyone else. The next global recession predicted to be the deepest and worst economic downturn this century made worse by the declining value of fiat currencies, primary the FED keeping the printing presses going, and the immanent collapse of the EU as Italy intends to default and the UK leaves the corrupt EU members club (hurrah to that).
As a director, CEO or business owner what can you do? Predictably cut costs, pull back on marketing, stop hiring, do another round of outsourcing or sell some apparent non key divisions/assets..? And yes its all predictably useless, and it won’t help one bit.
You can make bolder strategic move to a decentralsed operating model. Eliminating all artifical costs of a centralsied traditional business model that only exists for historic reasons. There is no viable argument to support todays business models other than everyone is doing it… So why do it?
Everyone wants to save costs, protect customers, release new products and services and make up ground on the competition. But with so much cash and resources tied to non productive, non customer facing, non revenue earning activities, where compliance says what you need, where inadequate IT systems and poor data and information dictate the other half of what you need. The issue here is the solution is not the solution, and simply carrying costs and overheads to satisfy a regulatory, compliance and GDPR is a fools erand.
If some of all of these factors are coming onto your radar. It is time to consider moving to a decentralsed operating model.
Decentralised Operating Models
For the past few years I have been working with founders and management teams to help them understand the opportunities a decentralised operating model offers. These models have an inherent ability to take the brakes off commerce, to accelerate customer growth, to simplify decision making, remove unnecessary administrative tasks, do away with bonehead concepts of reconciliation, settlement and balancing the books, whilst expanding into new product and service areas quickly.
The key of course is to design decentralised operating models that can scale at pace, reaching not 20 million customers, but 50m and even 100m customers in just a few years. The world has moved on. When Barclays bank complain they have 21million customers, most of whom are retail customers they don’t care about, they have no concept that businesses in Asia have 500m customers, the likes of Tencent, Alibaba, Baidu, Amazon, Facebook as platfrom economies seem to cope fine.
Decentralised models break the rules of the traditionalists, that like to keep control of everything from their centralised hierarchal empire, to justify their existence, part of industry with layers upon layers of participants, all drinking from the fees trough, forming a perceived protective barrier around what they do, in an effort to hide and insulate them from problems. Models that traditionally rely upon regulatory licensing as another protective layer, requiring an enforced large investment in infrastructure, sold to shareholders as a necessary barrier to entry, therefore a benefit to Investors. But from where I stand this thinking that is bankrupt, devoid of meaning and has no future. It can be descibed as a steaming pile of what comes out of a cows anus!
Decentralsed Operating Models come with a new mantra, a new way to benefit and reward stakeholders, new ways to create and exchange value, new ways to create equality and inclusivity, creating new governance models that deliver better outcomes for all (not just a few), a new tech layer that creates inherent trust, a single source of truths, and opens the options to deploy the latest tech innovations to move everyone forward, rather than papering over the cracks and defending the old.
Decentralisation works. It merely requires an adjustment in approach, some different thinking and an expectation of different outcomes. And this is why I have created a methodology and a set of tools that can be used to define a new future…
New Tools, New Model, New Competitive Advantage
I have distilled 30 years knowhow and knowledge involving operating model design, transformation and building disruptive industry models, into a simple methodology and a set of tools to help founders, directors and organisations create and move towards a decentralised operating model.
When operating models are free of traditional shackles they ‘scale at pace‘ delivering a 10x 20x sometimes 100x improvements, while delivering new levels of customer experience, and more than halve the operating costs, in some cases reducing cost to acquire and serve customers by 80%.
“Now you can gain a competive advantage, redefine your industry and move the game away from the competition. By acquiring new customers at a fraction of the cost, benefiting from a collaborative environment where everyone is incented to help you, where all participants in your market are recognised and rewardard for their contribution, where their efforts are open, transparent and trusted.”
But first let me explain why things are the way they are, and what is wrong with the systems, processes and industry models you work with today… Why your business systems and processes are a mess, a patchwork of overlays, making good and papering over cracks? What you have no longer works. The paths you tread are a dead end. Its time to put the lipstick away!
Since the Industrial Revolution spawned new era’s, of Steam and then Electricity that enabled businesses and industries start to scale for the first time, moving away from a rural cottage industry society, to larger businesses that were to become new cities, new industry models of a new future. The problem of course was there was no system to manage much bigger businesses and deal with the scale. The solution manifested as ledger cards, and where standard cost accounting came about, so the owners could control time/cost. Now this so called modern approach is the nemesis of all large corporations that are slaves to a system that serves different masters from a different time.
The problem accelerated as we entered the third Industrial Revolution of Transistors (unlocking computing and miniaturisation) that promised so much, the new maninframe technologies, based on systems that copied these inefficient hierarchal transaction measurement models of early industry. That embedded the theory of management, a series of systems and controls that turned into enterprise applications (SAP and Oracle) which have remained largely the same today. These early industry models were used as the ‘blueprint’ and hard wired inefficiencies into everything we do, and yes we may claim progress has been made, that we process orders quicker, communications are faster and products get delivered quicker, therefore claiming productivity has improved. But this is not necessarily the result of better core technology or improved processes. It is a facade.
Most business and industry models are already busted and merely await a slow death. Retail Banking, Asset Management, Venture Capital, Brokerage, Custody, Pharmaceutical Distribution, Selling Houses, Telecoms, Healthcare Provisioning, Energy Generation, Accounting, Legal Services, Distribution, the list is seemingly endless… They are kept going by protective regulations, nationalist government policies, direct government interventions for profit rather than be left to die, because ultimately the people, the customer pays the price. And let’s not go near the issues with local and central government, that is Satan’s domain.
Your Technology IS the Problem
I spend much of my time helping owners and boards of businesses to come to terms with the new technologies that are on the horizon. And yes they start to get a little scared. What will be the impact of Quantum Computing? How should we be using advanced Machine Learning? How do you deploy NanoTech, what can you do with it? So management teams can prepare new strategies and make adjustments to their operating models not just for competitive advantage, but for survival. As they are Wwedded to old ways of papering over cracks. Many management teams simply don’t see how they can possibly be disrupted, blinded by advisors, technology experts and consultants who take them down paths for best profits for themselves. How could they possibly go bust? They are the biggest, they make huge profits, they have the market share. All true of course, and I am sure the CEO’s of Blockbuster and Motorola thought the same.
Most industries are so badly run, so disorganised, where innovation is stiffled rather than encouraged, where the arbiter of decision making is often a regulator, an association or central authority, handed control by Governments who make money from licensing, taxing the industry model and bogging it down in bureaucracy. When you think todays industry models were a consequence of history, were not designed on purpose, they just evolved, came about to support a different purpose for a different era. Often successful businesses are only successful by chance, benefiting from others doing things worse.
You may be suprised to learn modern technology is not your friend, it is very much the problem. You have been sold the wrong answer to a problem that was inveneted 100 years ago. Modern tech hard wired the post industrial models of command and control, re-enforcing theroies of management, forcing organisational behaviour, where the work to be done was packaged so that it could be measured, not for efficiency or god forbid enjoyment by those doing the work. And this thinking remains the same today. The tech you buy is rubbish and they know it. And why the most valuable companies in the worlds are Big Tech, they are laughing at you.
Layers of technology are added to apparently improve productivity, create better reporting, speed up core processes such as Order to Cash and Purchase to Pay, focusing on Cash conversion cycles that feed finance and accounting and audit. Technology layers such as ERP systems have already hard wired fundamental inefficiencies into a business model, into all industries, but of course the baddest actor of them all, and the reason progress is not being made, is the very nasty System of Record.
So here is how the nonsense plays out. Every company in a multi layered industry has their own IT systems, largely comprising email systems, a range of applications that sit over a series of databases. It is this model that is the work of Satan. The concept of ‘centralisation‘ is the embodiment of the framework of how Deep State prefers everyone to work within. A structure born of a historic generation enforced by early big tech firms that create new tools and ways of handling the inefficiency, for profit, rather than solving the fundamental problems. Tech solutions always only partially help, and the incremental improvements are tough to spot. Because they don’t exist, the benefits are not real, the costs simply shift a little. All centralised systems create friction time cost that can no longer be sustained.
Why the System of Record was designed by Satan
I am a big fan of Design Thinking but unfortunately the tools on which to build new go to market models, products and services given the current tech infrastructure, cannot unlock and unleash this thinking fully. Rather it places constraints on it.
A System of Record is a technology hierachy that mirrors and embeds inefficient into industry models, where all participants whether in Insurance, Asset Management, Healthcare, Energy, each have their own computer systems and databases that hold the company information and those of their suppliers, customers and partners. And this IS the manifestation of the fundamental problem.
Each company has what I call its own version of the truth. Duplicate, incomplete, inaccurate versions of information it stores on its customers, its sales and purchases, customer and partner contracts, design rights and Intellectual Property and other proprietary information. Information the company wants to protect and keep safe, information it will see as valuable and delivering a competitive edge. And this is why it all starts to go wrong…
With regulation enforcing the need to check and protect data, armies of back office staff are tasked with checking, amending, moinitoring, reconcilling and correcting information, a place where companies dont trust their own information, let alone that from others. What if it is wrong? Can we be held accountable, sued even? It’s rubbish, it’s wrong and in a decentralised model unncessary. As all this goes away.
Most business will not accept information from another source. Because 99% of the time it will be different from the information they hold. Yes it WILL be different for no other reason the systems, the database, the structure of the data and its accuracy will likely be different, often human error, bad inputs or scans, lazy staff or miselading unreliable information. What ensues is this back and forth theatre between businesses in every industry, at each layer where each party doesn’t really trust the information from within their own company, let alone front outside. Endlessly passing information back and forth, creating riction, time and cost, that sucks an organisations working capital dry. The fear of getting it wrong, the threat of ltigation, losing client data and now GDPR which is used as the biggest excuse in business not to do something, but provides a conveneient excuse to hide inefficiencies. Do you really think Chinese business models care about this stuff? Do you think your competitors in emerging markets will play by these rules?
All of this non productive, quite meaningless activity, drives an odd behaviour, requiring armies of back office staff that spend their time checking, re-checking reconcilling, amending errors, issuing credit notes, chasing invoices and trying not to be sued. Just think for a moment. And then someone in IT mention automation software, which removes some friction, time and cost yes,or robotic process automation that removes some headcount. But in my world these activities should be eliminated, not improved, they shouldn’t be there to begin with. It’s madness.
The overheads increase exponentially because there are rules about information, how it is stored and protected, how it may be passed and exchanged, often without a care for sovereignty, permissions and necessary care. Although its Information nobody really trusts, won’t accept as the truth and even when it comes from their own systems will not underwrite its accuracy 90% of the time. So ask yourself…
80% of operating costs are spent on doing things the business doesn’t need to do…because trust has been lost and old business models refuse to accept there is a better way of doing things…
Break Out Strategies
Only by exploring the benefits and advantages of decentralised operating models do organisations have a chance to outperform the market, unlock shareholder value and ensure longevity. The game is how not to become a Blockbuster who misread the threat from Apple, or abuse a market leading position like Motorola, or Sears that ignored changing consumer bahaviours.
The other consideration is the centralisation of technology choice from the big brands IBM, Oracle, Microsoft, the centralisation of platform service models Amazon, Alibaba, eBay, UBER, centralisation of telecoms options Verizon, Vodafone, AT&T, as Big Tech hoover up everything in their path as new technologies emerge Machine Learning, Artifical Intelligence, Virtual Reality, Automation and Robotic Processing and and…
Big Tech, software companies, consulting firms make their money from inefficient markets, industries and the centralisation effect of commerce. They sell you incremental dreams, knowing you have no need to change because organisations and industries always remain the same. Under regulatory control, the system of record and conventional management behaviours and management heirachy. They make billions of just delivering incremental improvements, that are hard to measure, allowing management to hide behind the myth that is ‘digital transformation’ and other quite useless fads, because it sounds and feels like progress is being made. But cannot offer the supporting data to prove it. Its all rubbish, it’s a facade, it isn’t real and you have to stop, because we see you now…
Of cousre the old guard, the politicians and unproductive people will de-cry decentralisation, attack it and rubbish it. As they feel threatened by what they know will be an inevitable tide changing against them, as things cannot continue as they are. Decentralisation doesn’t mean losing control, it actually means better control. It doesn’t mean more risk, lower profits and losing customers, it delivers faster and more relaiable sources of income. Decentralised operating models do not just mean, decentralised or shared tech (blockchain), or inviting competitors to the table. It doesn’t mean huge investments, as most implementations are low cost, frictionless and easy to deploy. But they do scale quickly, the deliver quicker, and they may just save your future and your job.
As Big Tech scrambles for AI Supremacy with US and China fighting it out, new technologies on the near horizon such as Quantum Computing which will redefine your industry anyway. Decentralisation is a path to deliver on the real promise of the business, to look after customers, staff and stakeholders in a way where everyone benefits. Where the mantra of participation, fairness, transparency drives a business model much faster and more profitably for no other reason everyone can benefit from and will collaborate in ways the enable the business model to scale at pace!
So what are you going to do? Decentralse it? Or keep putting lipstick on the pig doing just enough until your pension pot is full as you retire with the thought you could off done more, but bailed out, sold our employees and shareholders down the river for an easier life, that wasn’t. Shame on you.
Decentralised operating models win better and fairer.
To find out more about the decentralisation methodology and toolkit you know what to do…
To find out how your business could benefit from a decentralised operating model and message and lets see what we can do together…
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