No, not an article about how board games are making a comeback during lockdown, but a brief look at something that was supposed to be consigned to history - business monopoly.  This is also an update on an article I wrote last year, which you can find here - turns out even the digital space can be monopolised...

It wasn’t supposed to be like this.  The thrust of so much legislation and tech innovation was designed to eliminate any risk of being fleeced by some sort of fat, unchallenged controller.  Look a little closer, however, and things take a distinctly medieval turn.  As governments have withdrawn from doing things (initially to pretend such liabilities didn’t exist on their balance sheet, but more latterly because they lack the competence), they have replaced operating with contracting: inevitably such contracts contain clauses to protect the supplier’s market, a bit like that offered to the Sheriff of Nottingham to farm taxes in the days of King John.  A government monopoly is at least leavened by political accountability, a contractual one not so much. 

It is, in many ways, a perfect world for a small number of clever men: why bother with the exhausting complexity and costs of stimulating strong client demand for your product by innovation and improvement, when that over-demand can come from a clever lawyer with a mandate to snuff out any attempts at competition.  Thus we have the worst of all worlds: the service levels redolent of the worst of nationalised monopolies with the nasty inequalities and employment precariousness of the private sector.

But what about the much-heralded role that technology plays in the destruction of controlled markets?  Surely competition is “just a click away”?  Actually, monopolies can work in this environment too, driven not so much by government fiat as the glorious gift of complexity and the fear of being wrong.  Let me explain.

Take Salesforce, in many ways the embodiment of the new way of doing things.  Its strategy in the late nineties was to stay simple (“No Software”) and appeal over the heads of the IT bods, steeped as they were in the expensive shibboleths of the LAN, directly to marketing teams who only needed an internet connection and a credit card.  It was a brilliant move - I became a client in 2002 and built an effective system with nothing more than a knowledge of our business, not a ninja degree in applied computing.  Fast forward to 2020 and how it has changed.  “No Software” Salesforce simplicity has given way to “whateverforce” in all sorts of flavours, bouncing between different software versions depending on how far down the stack you go.  It has become really difficult to solve simple business problems.  Why would they do this?

As much as disruptive simplicity suited them as insurgents, protective complexity is now what they need as incumbents.  Salesforce operates an extraordinarily sophisticated training programme (“Trailhead”) which, on the face of it, is really altruistic.  One consequence of it just so happens to be that converting a bunch of people inside a company from client data people to Salesforce qualified people means that whatever the question, the answer is Salesforce.  And with the crushing unanimity of the product, so comes the screaming fear of considering anything else.  No matter that most problems that Salesforce solves are pretty prosaic combinations of  disparate datasets and variable processes, and that there are literally hundreds of really good alternatives at a fraction of the cost.

It turns out that emotion can run hotter than rational analysis  - even when considering something as rational as software.  And well done Salesforce for recognising this, it's not illegal to be reassuringly expensive by creating the next shibboleth.  So Salesforce's premium is an insurance down payment against the risk of looking foolish, always an attractive trade given the down payment is company money, whereas the foolishness would be uncomfortably personal.  How do you legislate for that?   

Forgive a little invective after so many weeks in lockdown. This article is all about getting on and actually doing stuff.  As many of you will know, Supl was born with a mission to make businesses more flexible.  In times of rapid, internet-driven change, the ability for a business to keep up is the key to sustainable margins and a relevant brand - much more important than the old Henry Ford stuff about driving down the unit cost of a widget.

With that in mind, I see the business challenge primarily through a digital lens.  Yes, it needs to get its people strategy right, and of course it ought not to get over-leveraged.  But those were challenges that existed before the digital revolution, and have become simply a necessary baseline.  What's changed, and changing rapidly with the pandemic, is the need to drench the business in digital, leaving nothing untouched.

What do I mean?  So often when I go to see a business and ask about digital, people refer to their website, as if that piece of digital lipstick will disguise the analogue pig underneath.  To drench a business in digital means so many things: first it means the collection, maintenance and dissemination of a clean and uniform set of information that is independent of the business structures that consume that information.  With that in place, that businesses can change quickly without going blind.  I've banged on about that for long enough, so I won't flog a dead horse....except to make the obvious point that by reducing the firm's dependence on emails to get things done, you make the firm less vulnerable to socially engineered phishing attacks.

What other weakness does a business need to address?  In short, it needs to stop talking, and start doing.  Because the historic costs of technology were so high, with each project essentially unique, it paid to plan very carefully before the first virtual shovel broke the ground.  And thus a whole industry was given a shot in the arm: the world of key deliverables, timelines, Gantt charts and critical paths.  Indeed, bizarrely, if you ask the average analogue business person what the key indications of IT investment success were, they would invariably say "on budget, on time".  Not a word as to whether it had actually brought the company forward.  It has also led to the point where the majority of the project cost is spent to monitor the project cost: most would prefer to spend £100k with a £5k overspend (5%), than £20k with the same overspend (25% overspend).

This attachment to the due process rather than the outcome is due, I think, to two things.  First, most people and businesses struggle to articulate and value any benefits that are qualitative.  Thus, just as economic historians have always struggled to quantify the benefits of brighter light to nineteenth century factory productivity, so businesses now get indigestion when asked to accept something as simply "better".  Cue silly exercises to put numbers on it.  The ROI of cleaner client data?  Hmm.  Let's concentrate on something more quantifiable instead, and wrap it into a "project" with a cost code and some deliciously (and spuriously) accurate reporting.  Second (and it is, sadly, a particularly English disease), people seem much happier talking, thinking and writing to actually doing anything. Snobbery is never far from the surface on this Island, and it is always interesting to see the reaction I get from some people when I say that I spend my time building stuff in the Cloud: they give me the look that they reserve for the person they've called out to fix the boiler. 

This has produced a ruling class with no sense of the practical.  Faced with the operational reality of being able to do only a handful of COVID tests a week at the start of the crisis, the Government wonks used their expensively acquired syntax to fit a beautifully eloquent strategy around those operational shortcomings.  It did not seem to occur to anyone that we needed a better operational capability.  If around these days, Lord Beaverbrook would have had a spell at one of the big five, then gone into private equity and made a packet from balance sheet optimisation, rejoicing in a witty and clever twitter feed.

Businesses need to digitise, and the tools to do so are lying around all over the place.  What they need is the courage just to pick a couple up and embrace them.  Will it require some three point turns?  Probably, but keeping bureaucracy away from them means that the impact is limited to having to recognise you were wrong.  Maybe that's why it never happens.

With the UK Chancellor's heroic claims of a return to post war trend growth, the importance of productivity improvements have once again hit the headlines.  Whilst the plans for better transport links and free ports might help at the margin in the long term (and, more importantly, provide a reason to vote for the Government in the next election), real improvements in productivity can only really come with doing better things with the inputs (labour, capital) to achieve higher outputs.  Of course, education comes in here and that is an area where the government of the day could make a difference.  Let's hope. 

Supl has always argued that we can improve how we manage information, offering huge productivity gains.  As we've argued before in these articles, making best use of cloud software (without expensive IT departments), surfacing and making comprehensible all of a company's information inside easily accessible portals would dramatically shorten response times whilst taking out layers of cost, as people would no longer need to ask someone to find out something.

Indeed, it has often seemed baffling to me that this simple formula has not caught on more widely.  Not only would businesses be more efficient, it would be less expensive.  Of course, change is always resisted and, as the IT departments are typically responsible for IT strategy, they are hardly going to recommend their own demise.  But there are also deeper forces at work.

First, we have become much more risk averse in our wider society.  Where before the word "daring" was the ultimate compliment, it is barely used today, and if it is, it is often used to describe someone emotionally illiterate and a little bit dangerous.  It's way beyond my pay grade to understand why this has happened, but it has: gone are national symbols of pride in stuff we build (empires, technology, companies), to be replaced with The National Health Service, where we take pride in how we are looked after.  Of course, the NHS is wonderful, but its position at the top of our collective tree shows where our priorities lie.  Even the film 1917, ostensibly about a conflict a century ago, has as its main theme the desperate organisational bid to save lives, obvious to a film goer in 2020 but incomprehensible to a soldier in the trenches in 1917.  So what does this have to do with the productivity argument?  As I stated above, given the freedom to find things out without having to ask around, the employee is free to make the decisions they need to make, equipped with the information at their fingertips.  Brilliant.  Except that exposes that employee to the consequences of that decision, and the process of asking around can usefully be combined with co-opting colleagues into any decisions that need to be made.  Even better, decisions can be delayed, subject to further finding out. 

Second, as businesses have become more "flat", they have become more centralised and (ironically) more hierarchical.  As the US found in the Vietnam War, the fact that the President could speak directly to a young lieutenant on the ground through modern radios, didn't mean he should, as it caused havoc with established chains of command.  Modern forms of communication have only made this could/should problem worse, and in practice has meant that little is done without the sayso from the very top, the opposite of efficient.  With little in the way of staff, a senior bod will be a bottleneck, and will swither this way and that, rather like a drunken searchlight charging all over the place,  providing others with brief unexpected moments of blinding attention followed by eons of darkness. 

Where does that leave things?  We need to be honest with ourselves about the cost of caution, and the dangers of risk aversion.  It's all very well having the NHS as our shibboleth, but we need to earn the gazillions we spend on it, otherwise it will collapse.  Furthermore, flat structures that were built around individual email inboxes need to be ripped out, to be replaced with clear divisions of responsibility, corridors of initiative and some incentive to execute with initiative. How ironic.  With greater structure comes the ability to move more flexibly.  This is not rocket science.  For anybody interested, study the German Army's brilliant reforms in 1916/17 that were built around infiltration tactics founded on the idea of pushing initiative down to the lowest level.

Oh, and then you need to tool up with some modern systems.

Given that Supl is all about IT investment, it may seem a little odd to write a blog piece highlighting the risks.  However, it's the elephant in the room for everyone I speak to.  Indeed, such is the level of disenchantment with technology, it's a wonder anyone does it at all.

What's the beef?  For a start, it always seems to cost more than advertised.  Second, it never appears quite when it was promised to appear.  Lastly, it never seems to deliver what is promised.  Apart from that, everything's just tickety-boo.

How does it all end up this way?  Ironically, the biggest culprits are those measures put in place to mitigate the risks.  The consequences of all that is the main focus of the effort becomes the project, not the purpose.  All that monitoring superstructure is a hugely expensive burden on any business, and one that they will stomach only rarely leading to tech development becoming a series of disruptive fits and starts, rather than steady, organic progress.

If steady, organic progress sounds like a pipedream, then read on. 

Organic is the key word.  Too often IT is something external, something that gets done to the company.  On my travels I am frequently struck by how little confidence otherwise immensely capable business people have in their ability to manage their own technology.  This leads to painful outsourcing arrangements where two mutually incompatible languages (IT: tech, business: their business) crash into each other with the only common phraseology being that of the project: deadlines, costs etc.  Then along comes the cloud....

The cloud represents, above all else, a governance revolution.  Good cloud services have solved all the pointy-headed IT issues (server load, update patching, networking) and offer up a series of buttons to allow those who know what they want to configure the service to suit them.  And who would know what suits them?  Them.  So it's actually better, and it's certainly far better value, shorn as you would be of expensive external resources and project teams.  So why don't people do it?

Partly it's a fear that they'll get things wrong.  In the project world, that's money down the drain and egg on face.  With the cloud, there's the undo button and another go, maybe during the free trail of the service.  Partly it's also advice from their existing IT partners, who are anything but impartial on this one.

Looking at this the other way around, actually the riskiest form of IT investment is the traditional sort.  It almost always fails to deliver, and the cost overruns adds the risk of a overstressed P&L to the operational risks already present that prompted the investment in the first place.  The only thing stopping the organic approach is the risk of doing things differently.  Given the car crash with familiar methods, surely this is a risk worth embracing.

On the face of it, this title suggests little relevance to my specialist subject, technology.  However, as I'll show, the two issues are quite tightly linked.

What do I mean by rent seeking?  It's the behaviour whereby some form of monopoly position is established over an economic activity, allowing the owner of that monopoly position to extract an unavoidable rent from those participating in that activity.  Sadly it is a British disease.  Of course, the most recognisable form of rent seeking is rent itself: the buying of property and the control of planning laws to tax people whose need for a roof over their head puts a gun to it.  This is a British sport, a pastime that seriously crimps the economy: The roughly £50bn a year spent by Brits on property investment is broadly equivalent to the market (over) value of Tesla.  If that money were instead invested in fellow countrymen, rather than to enable the taxing of them, we might actually get somewhere.

It's not just in the property market that we see this behaviour, however: the same reflex to establish monopolies (or small cartels) exists in almost all sectors of British business.  Why bother having to suffer the indignity (and risk) of having to compete , when the option is there simply to sit in a toll booth and extract the rent?  To give you an example: a British company I know whose innovative, cloud based technology for fund managers could be consumed at a marginal cost of zero, prefers to price itself off its lumbering custodian rivals, wanting to pocket the big margin instead.  That is not an isolated example: the recent fall in Sterling should, by rights, have proved a boon to British export volumes.  All the evidence suggests, however, that volumes barely shifted as UK exporters simply preferred to pocket the bonus margin.

What's wrong with that, I hear you say?  How clever, that's business.  Actually, this sort of cleverness is very unwise, and the reason is technology. In the past, legislators have sought to remove roadblocks (and toll booths) to the physical flow of goods, believing that tariff barriers were a lose/lose game.  In that, they calculated that the added volumes of trade would more than compensate for the loss of monopoly income.  Thus they prioritised the needs of an operation (world class production of a car part, for example) over the needs of local monopolies, whether it be poorer, local manufacturers or those that benefited from the customs apparatus. 

You will immediately point out that this process is going spectacularly in reverse, as populism raises important questions about the assumptions that lay behind the "win/win" globalisation calculation.  It's beyond the remit of this blog to wade into this (beyond to point out that both sides have a good point), but I want to look forward a bit to see how things might develop.

Whether you agree with the latest revolt against globalisation, the essential point is that they can do this.  With a physical car part, you can erect a physical toll booth.  All good, from a monopoly perspective.  Even technology, when intermediated by physical firms, behave like physical goods, so supply can be controlled, and so monopolised.

When an operation needs operators, it is vulnerable to being held hostage. However, when it doesn’t (or needs very few), then the monopolists are in trouble. And that’s where we are heading. There are many ways to look at technology development, but one way is to note the process of relentless disintermediation. Where before an integration would need a big “integrator“ (remember Logica?), you just need an enterprise app like Zapier or Automate IO. This of course has latency, like any change, but just because it’s not commonplace does not mean it’s not right. I have lost count of the times I have gone into organisations who have expensive outsourced IT arrangements whereby a cloud service, which could be managed in house, is resold to them at a margin.

Another way of expressing this is to observe that more value is migrating to the digital space, and there seems little likelihood of this slowing down. Indeed, given a network effect,  there is every expectation of an acceleration.

Software, when ripped from the clutches of  unnecessary intermediation, is no respecter of locale, borders, customs, or supply restrictions. Rent seeking (in all but the property form) becomes impossible, and such firms will be ill equipped to actually compete.

What is my point?  My advice is firms should chart a course set by the quality of their offer, not the control of competition. Work like the wind to digitise your operation and your offer. Furthermore, have a look (and keep looking) for areas in their supply chain of bogus and expensive intermediation, particularly in technology. 

I now return to an old hobby horse of mine - how a company's information is managed and governed. 

When I go into companies, their information pain is rarely due to previous neglect - far from it, most companies we see have spent copiously on IT, and have employed and contracted very bright people.  It is clear, however, that despite this great effort, almost all employees typically roll their eyes when asked about their own systems.  Is this down to monumental ingratitude, or something more substantial?

It is true that many employees don't really engage positively in the company's information efforts, rarely reading the careful user guides published by IT and preferring to hoard information their own way.  For these people, somehow IT should just "work" miraculously.  Added to this is a peculiarly British disease of being fashionably antithetical to technology, as if showing signs of aptitude or interest is to lack taste or sensibility. 

However, it takes two to tango and whilst there might be an incorrigible core of holdouts clinging resolutely to the nineteenth century, there are plenty of those with the predisposition to get involved who have been turned off by chaos, asymmetry and bureaucracy: too often IT systems (and therefore company processes) are changed constantly as the latest whizz-bang system goes in, there is almost always the demand that employees put in more to these new systems than they get out of them, and petty rules govern the use of the systems where many employees have to break them to do their job.

Why have we failed so spectacularly?  I believe the answer lies in the way information is governed.  Traditionally, information is managed by the Departments that use it: thus the marketing team will develop/buy a CRM system, and finance an accounting package.  Logical, eh?  Actually not.  By developing these systems in isolation, the company ends up with thickets of mutually incomprehensible information.  And the only way these thickets are connected is through the message: to know something, you need to ask someone.  Cue the awful reign of the email inbox: with no shared information language, the only common denominator is the message, bringing endless questions and data attachments forcing employees into a constant reconciliation - which of our biggest clients are behind with their payments?  Ah, that'll be the vlookup on the finance spreadsheet with the CRM version.  Umm, not sure that this "Smith" in the finance list is the same as the one in the CRM system - who can I email to ask? The recent rise in tools like Slack make little difference, simply swapping one messaging medium for another.

What is the answer?  Clearly impossible to answer this definitively for everyone, but I believe it should always contain an effort to manage information around the needs of the information itself, not around those that need that information.  Why so?  For a start, such a governance structure forces the organisation to focus on its information, arguably its most important resource after its people.  Surely companies do this?  No, they mistake information for its containers: documents, processes, departments.  Managing information from this perspective leaves it as an afterthought, simply the stuff that is poured in at the end, in lots of different formats that suit its particular container.

In order to illustrate why this is so important, allow me to digress:  I was thinking about this article when travelling for the first time to Allianz Park, the home of Saracens Rugby Club.  I was in central London, and whilst I knew I would need a combination of public transport to get there, I had no idea exactly which services I would need.  Enter Google (there are other providers available...).  They had done the hard work to surface all the relevant data in way that made sense, one to the other: think of a string of pearls, with the string being my travel query.  In the jargon, Google had normalised the information (I protest that such nerdish knowledge does not (by itself) make me less of a sensitive human....), connecting all the thickets of information in such a way as to transform the efficiency of asking any number of questions of it.  So despite my lack of knowledge, I was able to jump on the 221 bus from Mill Hill East and get off at the right spot as my smartphone had joined the dots.

The whole edifice of IT governance has, for well-intentioned reasons, been around supporting existing structures of business and the employees within.  The irony is that by doing the opposite and ignoring the employees and their structures, you can serve them better by working to surface the data in an organisation as Google has done with transport information.  So, the next time a vendor/head of IT comes to you with the latest idea for some new, expensive, "cutting edge" system, consider instead the slightly dull but truly transformative effect and going over what you already have, and joining the dots.