The Future, This Week 27 April 2018

Disclaimer: We'd like to advise that the following program may contains real news, occasional philosophy and ideas that may offend some listeners.

Intro: This is The Future, This Week on Sydney Business Insights. I'm Sandra Peter and I'm Kai Riemer. Every week we get together and look at the news of the week. We discuss technology, the future of business, the weird and the wonderful and things that change the world. Okay let's start. Let's start.

Sandra: Today in The Future, This Week: what we learn from digital business, feeling lonely and making rain the size of Spain and other news. I'm Sandra Peter, Director of Sydney Business Insights.

Kai: I'm Kai Riemer professor at the Business School and leader of the Digital Disruption Research Group. So Sandra what happen in the future this week?

Sandra: Our first story comes from Venture Beat and it's called "The traditional CEO/CIO relationship is changing". The story reports on Gartner's yearly CEO survey. Gartner of the Gartner Hype Cycle fame which we have covered previously on this podcast, releases every year a report serving CIOs on how their jobs are changing. Their latest one which they have released a couple of weeks ago has found that the pace of digitisation and technology innovation is fundamentally changing the role of CIOs, chief information officers, from a delivery role that was traditionally supporting executive functions within the organisation to a business executive function itself.

This means that CIOs are actually moving from the back office from a network support, a plumbing job if you will, to actively shaping the strategy that organisations have. So no longer being a cost centre focused on the delivery and the cost control but rather focusing on what to deliver not just how.

Kai: Yeah to me this article hits close to home because it concerns pretty much how my own discipline business information systems has been changing over the past decade. Information systems originally was all around systems analysis, designing of systems, the role of I.T. in organisations, delivery of I.T., how you organise the I.T. function, where the relationship to business has always been one of alignment. So I.T. would be a service function in organisations that would deliver whatever the business needs so it always had to think in terms of the needs of the various different divisions in an organisation and how you deliver for them, how you analyse their needs and then how you drive adoption of systems into those business areas but I.T. was traditionally seen as an internal function that works for business. That has changed markedly and that is also reflected in the way in which we here at Sydney for example have changed our curricula. It is much more about the frontline use of technology to for example create new business models, create new services for customers.

The distinction between I.T. and business is rapidly fading away and so the notion of alignment for example has become entirely unhelpful now because it's still sort of reaffirms that split between I.T. and business which we see disappearing very quickly which is embodied in that notion of digital business where many are now saying that this is almost redundant because every business is now becoming digital and so that of course means that the role of the CIO and I.T. managers within organisations has been changing rapidly.

Sandra: And this has captured well in the article in that shift from focus on efficiency and the focus on effectiveness to a source of innovation, an enabler of market differentiation or of revenue growth. The article also reports on a recent Harvey Nash/KPMG/CIO survey released last year that shows that approximately 62 percent of CIOs are now members of executive committees compared to only 38 percent about a decade ago and the likelihood that CIOs are reporting directly to CEOs rather than previously someone like the CFO of the organisation has risen at about 10 percent a year.

Kai: Yes so what that means is that IT in organisation has gone from a cost centre to an integral part of business and we CIOs be promoted to CEO level more and more as well. And so the success criteria under which a CIO operates has gone from IT delivery objectives more to actually core business based measures and it's also reflected in organisations changing the descriptor for the traditional CIO role.

Sandra: So this week for instance the CIO of Coles Claire Rawlins has gone from being the chief information officer to now being the chief innovation officer. Similarly just recently the CIO of Energy Australia another woman incidentally Anne Weatherston has gone from being the chief information officer to being the chief transformation officer. She was in a CIO role previously with ANZ fulfilling similar functions and when Anne was asked for instance what is the biggest change in the role of the CIO that she has experienced over the last few years she again reinforces this - the move from the back office right to the core of the C suite and she said that clearly this is not across the board but she's also seen the number of CIOs reporting directly to the CEO as reflecting the importance of technology to the strategic agenda for most organisations.

Kai: Again that is reflected in the way in which the discipline of information systems has changed from a focus on the efficiency aspects of business operations in which IT was often used to cut cost and make sure that we deliver whatever businesses needed effectively to a much stronger focus on innovation which these days is increasingly technology based and a broader understanding of change and transformation in businesses which comes largely on the back of digital technologies these days.

Sandra: This was indeed one of the points that Anne Weatherston the CIO of Energy Australia brought up when she was asked what are the major challenges facing today's CIOs. The pace at which technology is developing and creating new business opportunity was perceived as a real challenge because it was perfectly possible to get a new start up with a completely new business model that didn't even exist a year ago. She also mentioned a couple of other things and one of them was the difficulty in gaining the confidence of other people on the executive committee. The fact that very few people were trained both in the fundamentals of successful technology enabled business change and strategy and that this made communication and influence a real challenge. Lastly she mentioned the fact that there is a challenge due to this diversity of the role. The fact that CIOs are actually one of the most demanding roles in the C-suite because they need to have both a whole of business perspective as well as a technology perspective.

So not only thinking about operational excellence or risk management or value provision with increasingly whole of business execution of strategic opportunities that would push forward the business agenda.

Kai: And it is here that we want to bring in a couple more stories that made headlines this week because both Netflix CEO Reed Hastings and Amazon CEO Jeff Bezos were in the media talking about their management practices and so we thought was a good idea to actually look at how businesses that are digital at their core manage their operations and the values that they embody. And quite surprisingly the way in which both these companies are organised centres very much around people and the way decisions are being made than the use of digital technology or data per say. So let's take a look.

Sandra: So one such company is Netflix and in a recent interview in an article from a couple of days ago Reed Hasting's Netflix CEO said that there are actually months when he doesn't have to make a single decision and I quote from the Quartz article "I pride myself on making as few decisions as possible a quarter. Sometimes I can go a whole quarter without making any decisions."

Kai: So what he's obviously talking about is not the absence of decision making but actually the way in which the CEO has empowered everyone in the organisation to make decisions so this delegation and trust in the ability of people to make their own decisions without having to revert back upstairs is what he's talking about in the absence of top down micromanagement.

Sandra: These ideas of responsibility appear very prominently in Netflix's often quoted Culture Deck and I quote "We believe that people thrive on being trusted, on freedom, and on being able to make a difference. We are dedicated to constantly increasing employee freedom to fight the python of process".

Kai: And that contrasts markedly with Hasting's previous experience in other organisations where he says that the problem often was that we were trying to dummy proof the system and eventually only dummies wanted to work there. The idea that bureaucracies try to control everyone and therefore becomes stifling and discourage initiative, intrinsic motivation, and local decision making.

Sandra: So what this translates into at the Netflix is no set rules for instance on expense accounts or on travel, a completely open leave policy, take as much holiday or as little as you want and no spending ceilings on contract signings. The idea is to have good judgement not good administration.

Kai: In other words anything that would freak someone in charge of compliance in large organisations out of their shoes.

Sandra: This means that they've actually managed to implement what his co-founder Mark Randolph and him envisaged 20 years ago - an organisation that would run with no process but also no chaos. And this is enabled also by the fact that everybody gets access to all of the information. The moment people have access to the data and information throughout the organisation, they are both empowered and have a sense of responsibility.

This was reflected in an interesting incident last year that was shared with a group of our global executive MBAs on a site visit to Netflix in California this year. Netflix had just entered the European market and had gone into France and it had very poorly dubbed one of its US movies into French which meant that the next day employees in France woke up to a shitstorm on social media making fun of Netflix, making fun of their ability, of their cultural awareness and so on. The local social media manager part of a very small team of people working at that point in France had to make a very quick decision about how to respond to what was escalating to be a PR crisis for Netflix in Europe at that point. Now the manager had decided that a good idea would be to create a self-deprecating video of the Netflix CEO poorly dubbed in French apologising for the mistake. And he did what no manager would probably do. He consulted with his own team of people who had the opportunity to challenge the idea, another principle from Netflix, farm for dissent. Everybody thought it's a great idea to try to get the hold of the CEO of Netflix to see if this could fly, couldn't manage to do that in time so made the decision at the local level to release a video of the CEO poorly dubbed in French apologising. The whole campaign was a success and he woke up to congratulations from the top management.

Kai: So what this anecdote shows is both the way in which employees and Netflix are used to taking responsibility for issues that confront them but also the way in which they are empowered to actually act on this and zooming out and looking at the bigger picture this is nothing else than the agile principles at work. Now agile is often misunderstood and associated with anything goes, chaos and the ability to just be flexible and do everything at a whim when in fact agile is actually a very disciplined set of practices that rest on some fundamental principles that can be applied to organisations more broadly beyond the software development context where they originated and they fundamentally rest on empowerment of local teams and local decision making, trust in the ability of people, communication, information transparency over rigid processes and a strong belief in the quality of what we do and timely delivery. So true to the agile principle, the manager in the Netflix example not only took responsibility and was empowered to do so but also acted quickly and delivered and didn't actually wait and slow down to check for approval as any other organisation of form would have demanded clearly.

Sandra: There was another digital business in the news this week that we might turn to as another organisation that embodies principles of digital development really at a broader organisational level. Amazon CEO Jeff Bezos during an onstage interview at the George Bush Presidential Center on Friday and Business Insider reported on this a couple of days ago, mentioned his notorious habit of sending his executives emails with a single character. Jeff Bezos still has an email address jeff@amazon.com which he uses as a way to stay close to Amazon customers which actually have an opportunity to email him directly on this address to raise any concerns, to ask any questions, make suggestions for improvement and so on. This enables Jeff Bezos to actually stay quite close to the customers of what otherwise would be an extremely large organisation with many many layers between an executive and the day to day customer service that the company provides.

Kai: Again this embodies one of the fundamental agile or also design thinking principles of staying close to the customer and rigorously trying to design for the world of the customer. And so here we have a company where the CEO himself is still in contact with the end consumer and will do everything possible to actually be on top of customer issues.

Sandra: This enables the organisation to have different type of insights into the type of data that they gather. So what typically happens is that an e-mail will come in outlining an issue, Jeff will forward that e-mail with a question mark to the executive who is in charge of the specific area that is being highlighted in the email and actually what often happens to these emails is that the anecdotal data that they might get directly from a customer sometimes disagrees with the data that they have within the organisation.

Kai: And make no mistake, Amazon uses lots of metrics. Bezos explained that they have data and metrics on everything, are we delivering on time, in what city, to what kind of houses, whether the packages have too much air in them, wasteful packaging, so they basically collect data on everything but he says that the thing I have noticed is when the anecdotes that he gets from customers and the data disagree the anecdotes are usually right. There's something wrong with the way you are measuring it. So what we want to highlight is the way in which these businesses rigorously work with data but that that data is always embedded in a larger story in human judgement and a fundamental understanding of where the data is coming from.

So data becomes a material for human judgement and decision making but often with the caveat that the world is changing and we might actually have to not only iterate on the way in which we produce our service and our products but also what we measure and how we work with data which contrasts markedly with more traditional organisations that have rigorous compliance processes where data often takes on a life of its own.

Sandra: Which actually brings us back to organisations that might not fundamentally have a digital core such as Netflix or Amazon and takes us back to the changing role of CIOs where it becomes much more about the execution of strategic opportunities, about enabling innovation, about enabling change from a technology perspective, a whole of business perspective rather than just looking at operational excellence or efficiency or risk management.

Kai: Which requires and this is what we get from these examples, a rethinking of the way in which the organisation itself operates to make the organisation more responsive to disruptive markets and enable the organisation to absorb new technologies, to build new skills, and to be more innovative which can be achieved through embodying those agile principles at the expense of more rigid process control, narrow KPIs and the kind of micromanagement that we find in more traditional organisational setups. And it also requires a rethinking of the role of data not as an opposite to human judgement and intuition but as fundamentally embedded in a process that centres around empowered individuals.

Sandra: Let's have a look at our second story for today. Our second story again centres around people in organisations and it comes from the Harvard Business Review and it's titled "The painful cycle of employee loneliness and how it hurts companies". Obviously loneliness has been studied for a very long time by psychologists but it has usually been studied in romantic relationships or social lives or family lives and what this article does is start reporting on research that is being done around loneliness in the workplace.

So just to clarify loneliness is defined as the complex set of feelings that occurs where intimate and social needs are not adequately met. And we want to stress here that we are talking about a quality of a person's relationships not the quantity of relationships that they have. So what the authors are trying to understand is how people experience loneliness in their jobs. How does it affect their work? How does it affect their ability to be a productive employee or their relationships they have to other people at work?

Kai: And therefore ultimately what are the organisational implications for the business more broadly.

Sandra: The research they report on has recently been published in the Academy of Management Journal and the research finds that the person's feeling of loneliness does indeed relate to lower job performance and these people are also perceived by co-workers to be less committed to the organisation or less approachable but more importantly the study has found that loneliness, it's not just an employee problem but it equally influences colleagues as well as performance outcomes. So organisations should start tackling the problem of loneliness more seriously.

Kai: The article says that when social ties begin to fray among colleagues then a willingness to communicate and collaborate decreases feelings of trust, decline, and therefore the entire culture and ultimately the work performance and output of teams and the organisation more broadly suffer.

Sandra: So I think it's important we first take a step back and have a look at the issue of loneliness because awareness about loneliness and the problems that it causes has really been on the increase over the last year. In the UK Prime Minister Theresa May earlier this year actually appointed a Minister for Loneliness.

This came on the back of a report last year which highlights the fact that actually loneliness is one of the sad realities of modern life and a huge challenge for society. And even though we know the numbers - 40 percent of people in the US for instance and up to 60 percent of the people in Europe suffer from loneliness. Fifty percent of CEOs actually report very high levels of loneliness. It didn't quite occurred to us how big and significant this problem is. And we want to take you back to an article in The Harvard Business Review in 2017 titled "Work and the loneliness epidemic" and this was an article by the US Surgeon General which had a quote that got us really thinking about the size and the magnitude of this problem. And it turns out that loneliness and weak social connections are associated with a reduction in lifespan that is the same as that caused by smoking 15 cigarettes a day and it's greater than that associated with obesity.

Kai: So just to state that again loneliness is associated with the same outcomes in terms of a person's longevity as 15 cigarettes a day or the effects of obesity. So these are truly sobering stats which should put loneliness front and centre on anyone's agenda beyond the appointing of a dedicated minister. And the article in HBR raises this as a fundamental problem that organisations will have to grapple with going forward.

Sandra: So whilst loneliness we said can reduce task performance or make you less creative or less able to make good decisions, loneliness it seems is also associated with a greater risk of cardiovascular disease, of depression, of anxiety, of dementia. And guess what? We spend most of our time at work so actually probably companies are the best place to at least have part of the solution to addressing the loneliness epidemic. It are these organisations where we spend most of our time that actually can be involved in finding a solution.

Kai: So we talk a lot about the future of work on the podcast and loneliness seems to be something that has slipped through the cracks and is something that at least we haven't talked about yet. But I do think we need to reflect on where does loneliness come from? How does it arise? How is it tied to modern ways of working? What's your take on this?

Sandra: One reason might lie in the fact that we're seeing the millennial generation come into work and it turns out, and there was another story in The Guardian last week, that millennials felt lonelier than other groups of adults and these people are coming into the workforce but it might also have something to do with the way our organisations are structured these days with the time we actually get to spend in different teams and with different people. Also with the fact that we're changing our jobs much more often than we used to. We no longer have a job for life but I believe the number was something like seven or 11 different careers over our lifespan.

Kai: So the HBR article itself contains a hint and they talk about the quality versus quantity of social relationships. So in that respect I think we see something in the workplace that mirrors the way in which we engage with relationships more broadly. People tend to have many more contacts these days made through social media, long lists of friends or followers but they spend less and less time building the kind of long lasting friendships and more meaningful relationships that take weeks and months to develop which is reflected in the way in which modern careers develop where people switch jobs sometimes every year every couple of years where they collect many contacts along the way but never spend enough time to actually engage with people in the workplace in the kind of friendships that previous generations might have built in their careers where they would work for an organisation sometimes an entire lifetime. So I think there's something in the way in which work has become much more transactional than previously and that's most prominently embodied in the rise of the gig economy and the shared economy where we do not actually have any work relationship as such where work is entirely transactional. So maybe the feeling of loneliness is a product of the way in which work itself has become increasingly deinstitutionalised. So I do think we need to take this into account when we discuss the future of work and new models for how to organise work because we tend to focus on many of the benefits and some of the known downsides of things like the gig economy but loneliness and the negative effects that loneliness has for businesses and for organisations and not just individual hasn't actually featured in this discussion yet.

Sandra: And that's an interesting point to dwell on a little bit more because we really haven't focused nearly as much effort on providing better connections at work or enabling people to know each other better as we have spent for instance reducing the use of tobacco, banning smoking from work, or as much as we've spent on addressing obesity and cardiovascular disease with a whole range of programs from going upstairs at work to exercising at work to gyms at work to yoga and other things that encourage healthy physical behaviours. Which brings us to the fundamental questions of course who should have the responsibility to actually find solutions to these problems because as much as we can think maybe the health care system has an important role to play or government has an important role to play and indeed the surgeon general's comments point to the fact that they clearly have an important role to play in understanding the impact, understanding who and how they are affected and what types of interventions might work. Where those interventions will be implemented and whose responsibility that is is something that we haven't discussed yet so the places where people become lonely to begin with - companies, organisations, the world of work in particular have the power to address this challenge whether it's connections among employees or among a more loosely coupled networks of partners or clients or individuals in the broader community.

Kai: So rethinking the way in which HR for example understands its mandate rather than looking after the individual development of people and their careers. A development of the organisational fabric as a whole and a balancing out of the focus on relationships with individual skills. I think we'll leave it here. I think it's important that we raise this and we will probably hear more of this topic. Let's go to our Future Bites/ short stories and Sandra what have you learned this week?

Sandra: My short story is from Popular Mechanics and it's titled "China is building a massive network of chemical rainmakers". The story reports on the fact that China is actually trying to manufacture rain. They're looking to create 10 billion tons of rainfall in the Tibetan plateau. And for that the China Aerospace Science and Technology Corporation, a government corporation, is building hundreds and hundreds of furnaces that will release silver iodide allowing vapour to condense and then clouds to form. And this is happening in Tibet. There are hundreds of these furnaces, each one of them being able to generate rain on a five kilometre radius which means that the surface that they could now create rain on is about three times the size of Spain. This was the technology initially developed for defence so weather manipulation for defence purposes but it would now be used to create rain for the biggest river systems in China. It raises some interesting questions as to the side effects of releasing silver iodide in the atmosphere. What goes up must come down. And speaking of scale, this 10 billion tons of rainfall would also have to come from rain that would have fallen somewhere else so some area on the globe would be getting that much less rain.

Kai: So this sounds to me like more than just an experiment. This sounds to me like a broad scale application of a technology that most of us thought was just science fiction.

Sandra: So I definitely want to keep an eye on... I imagine more and more of these types of projects will go up in various parts of the world with maybe really unpredictable consequences to our weather systems. What was your short story?

Kai: Well mine is much more pedestrian but also slightly creepy. It's from the Los Angeles Times and it's again about Amazon "With in-car delivery, Amazon is testing how much privacy you will give up - even as backlash rocks Facebook".

Sandra: In - car delivery?

Kai: So the idea is that you might not be home, no one might be home. You might not want to give Amazon access to your electronic doorbell at home but you might have a late model Volvo Chevrolet Buick GMC or Cadillac vehicle which guess what? The car manufacturers can actually open via the cloud. So here's how it works. You will give Amazon permission for the driver to put the delivery into your car trunk. The Amazon driver will be informed via G.P.S. of the precise location of your vehicle, they will drive there and the Amazon app that the driver has on their device will communicate via the cloud with the car manufacturer's cloud who will send an over-the-air signal which will open the boot of the car for the package to be put in. Now we've previously learned from Tesla for example that they were able to increase the battery capacity over-the-air when people needed to outrun Hurricane Irma, and this relies on a similar technology. Now to me the more significant insight from this article was not that Amazon obviously would find yet another way to make it more convenient to shop from them but that car manufacturers can actually open your car via electronic signal.

Sandra: Two things come to mind here: one is that Amazon might look to employ some of the people we spoke about in a story last year where biker gangs were actually hacking cars, hacking jeeps and getting into them. Some really good skills there that they might want to employ and bypass the car manufacturers all together. Second is this seems like a brilliant service in case people actually lose the keys to their cars. It's actually good to know that there is a way to get into your car and maybe make it all the way home without your car keys.

Kai: Yeah. You or someone else who might be able to hack into the car. They could not only drive home with your car but could take your new Amazon shoes in the process as well.

Sandra: What could go wrong with this story?

Kai: And that's all we have time for today but we want to leave you with this little announcement.

Sandra: For those of you in Sydney to come and see us at Vivid Sydney on the 16th of June at the Museum of Contemporary Art. All the details will be in the show notes for a special panel on "Mummy can I marry my Avatar?" We're going to be looking at the ethical and societal implications of living with digital humans so you can join Mike Seymour, Rachel Botsman Kai and myself to witness a live interactive photo realistic computer generated digital person right there on stage but also to go a bit in depth into the long term ethical and social implications that will face us all once the distinctions between humans and digital avatars, digital agents, becomes blurred.

Kai: You are going to replace me with Siri aren't you?

Sandra: Siri, you can replace Kai can't you?

Siri: If you say so.

Kai: Well that settles it. Anyway tickets are free but they're selling fast so registration link in the show notes. Thank you for listening.

Sandra: Thanks for listening.

Outro: This was The Future, This Week made awesome by the Sydney Business Insights Team and members of the Digital Disruption Research Group. And every week right here with us our sound editor Megan Wedge who makes us sound good and keeps us honest. Our theme music was composed and played live from a set of garden hoses. You can subscribe to this podcast on iTunes, Sticher, Spotify, SoundCloud or wherever you get your podcasts. You can follow us online on Fliboard, Twitter or sbi.sydney.edu.au. If you have any news that you want us to discuss please send them to sbi@sydney.edu.au.