Back to the Future – A Radical Manifesto for Digital Leaders

Part One

This three-part series of papers outlines the disruptive forces that take us from the industrial structures of the twentieth century to a post-industrial age of decentralised autonomous organisations (DAOs) and the rise of the digital artisan. The driving forces behind this radical transformation are successive waves of technologies. These waves started with cloud, mobility, social media and data analytics in the first two decades of the third millennium. This helped generate a new era of hyper-connectivity. A second wave is now breaking, with a more powerful set of disruptors, such as blockchain, cryptocurrencies, non-fungible tokens (NFTs), drones and sensors, virtual reality (VR) and artificial intelligence (AI). These disruptors are helping to redefine the World Wide Web (now referred to as Web 3.0) and take us beyond hyper-connectivity towards hyper-personalisation. 

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Who have been the winners so far?

Big Tech has benefited immeasurably from early disruptive forces. Just five digital giants – Microsoft, Amazon, Apple, Alphabet and Meta (MAAAM) – dominate the global economy, holding a 25% share of equity market value. This is due primarily to their ability to capture and monetise our personal intellectual property on a grand scale. However, their predominance might be challenged by the forces of decentralised networks and autonomous organisational structures in the coming decade. In this new economic order, we see ownership and control reverting to its rightful owners – you, me and the virtual communities we inhabit.

At the epicentre of this new order will be the principal players who we call digital artisans. Aided by intelligent robots and decentralised platforms, these artisans will be able to create new digital products and experiences, trading these using NFTs and cryptocurrencies. The advent of the metaverse, fuelled by augmented and virtual reality, will further accelerate the transition from physical to virtual goods and services. However, manufactured products will continue to exist, serving our need for ‘stuff’. Manufacturing entities will be highly automated and digitally connected.

What does this shift mean for digital leaders?

At CIONET, we have been investigating and documenting the qualities of today’s most successful digital leaders. This analysis will be published as a Cookbook for Digital Success in 2022. Now, more than ever before, it is imperative that digital leaders comprehend and communicate the possible impact of disruptive forces on their organisations. Here, three actions are crucial:

1. Comprehend and test the disruptive forces that will shape the coming two decades, such as the combination of technologies that constitute Web 3.0 (for example, blockchain, crypto, NFTs, AI and VR, which show how software is still eating the world). 
2. Assess the implications of disruption for your organisation, such as: ‘hollowing out’ more front-, middle- and back-office functions through automation; identifying new sources of competition emerging from Web 3.0; and dealing with the ever-growing war for talent.
3. Learn to survive and flourish in this new environment by redefining the mission, purpose and vision of the organisation to attract the best talent and empower creators with the necessary software tools and financial incentives.

Digital leaders must adopt a parallel approach to transformation. The immediate imperative is to modernise the existing ‘factory’ by introducing further automation (such as software robots and AI), flexible partnerships and agile development processes. The second imperative is to create new business models based on Web 3.0 principles, as described in a recent CIONET publication, that could create a new generation of DAOs that leapfrog Big Tech. 

Digital leaders should also explore possibilities for transformation within their own organisations, laying the foundations for new structures and skills that might evolve into virtual villages set within the corporate enclave. This transition will require a move to open-sourced software, decentralised architectures and automation tooling.

Enabling the digital artisan

Perhaps the most intriguing aspect of Web 3.0 is the prospect of the digital artisan. Like the villages of past time, digital artisans will acquire skills to contribute digital experiences within their local communities. The rise of digital artisans might require the reassertion of guilds as centres of future educational excellence, potentially replacing universities. Artisans will take on a range of competencies within the village, such as data mining, data hoarding, web plumbing and innovation funding. Automation and decentralised networks will help artisans to scale their innovations and become the next generation of equity giants. Welcome to the Trillennium.

Contents 

• Part One Why the corporation needed to reinvent itself in pre-2000
• Part Two Atomisation and the new theory of the firm (2000 to 2020)
• Part Three Preparing for the nuclear option (towards 2040)

Acknowledgements 

The author is grateful for the contributions of his USA associates, including Brad Power at bradfordpower.tumblr.com, Joe Weinman at joeweinman.com, and Andy Singleton at maxos.studio, all of whom collaborate through the MAXOS community.

A Radical Manifesto for Digital Leaders – Part One: Why the corporation needed to reinvent itself pre-2000

A radical manifesto was contained in two books published at the start of the new millennium: ‘The Atomic Corporation – a rational proposal for modern times’ (2001), and ‘Atomic – reforming the industrial landscape into the new structures of tomorrow’ (2003).

This trilogy of three short papers examines the confluence of disruptive forces that led to: the requirement for a new theory of the firm (Part One); the radical predictions that preceded the dotcom revolution of the past two decades (Part Two); the need for a fresh vision of the future up to 2040 (Part Three). 

The rise of the corporate enterprise

For the past 100 years or so, the fastest growing economies have chosen to organise themselves into corporations as the most efficient means of production. The critical innovation of the Industrial Revolution was the creation of limited liability enterprises – today’s corporations. Why? Because it helped to mobilise the flow of capital, which was the scarce resource in the late nineteenth century. 

It was no accident that Andrew Carnegie, who founded the Carnegie Steel Company that later became US Steel, was closely connected with Paul Mellon, the eminent banker of his age. The growth of the banking system and the ability to fund industrial-scale projects was enabled by the development of the corporate form of organisation. 

But the power of this new economic species proved almost too great. The technologies that these corporations, such as at Exxon, Ford and General Electric, developed on a mass scale created so much value and required so much capital that they acquired enormous leverage. Democratic societies had to create new instruments and institutions to curb this power, including anti-trust laws and labour movements. Despite these tactics, corporations still took on capabilities that used to belong to governments.

The underlying assumption of industrial corporate structures was that the whole was greater than the sum of the parts.

The impact of disruptive technologies

American academic Clayton Christensen recognised that when a technology with truly disruptive potential first emerges, it doesn’t work well. The birth of the internet in the late twentieth century heralded a new era of hyper-connectivity that offered to transform every aspect of business and government. But with the dotcom boom and bust in 2000, the full impact of the internet was delayed for almost two decades, just as the transistor took a comparable period to displace the thermionic valve. 

Christensen concluded that successful corporations are generally managed according to short-term rules that militate against investing in new and risky technologies.

The dotcom economy – comprising hyper growth start-ups and interlocking digital platforms, bound together by their shared mastery of new network technology and an equally shared set of values about knowledge, relationships and competition – created the perfect environment for the rapid proliferation of information-based, non-capital-intensive businesses, which was the early internet niche of the late 1990s. The collapse of many such businesses in 2001 did not wipe out the new way of working, only the approach to getting such companies funded to achieve scale.

The working assumption was that connectivity and collaboration would drive power from the institutions to the individual.

Yet well into the twenty-first century, large corporations continued to hold their monopoly power through access to institutional money and the inefficiencies of the labour market, which prevented individuals from seeking new jobs. But over the past 20 years, the flowering of the internet has sponsored new opportunities for talented and entrepreneurial individuals rather than corporations.

The corporation is now in trouble

The corporations born of the nineteenth and twentieth centuries are now in trouble. There is nothing to prevent their demise given that what had previously been their advantage is becoming less and less important. In fact, their accumulation of power is becoming a kind of historical aberration, like centrally planned economies. The new technologies of hyper-connectivity and hyper-personalisation are driving economic power from the traditional institutions to new organisational entities that can benefit from these disruptive forces.

To place this shift within an economic perspective, the total value of Apple at $3 trillion far surpasses the sum of the UK’s FTSE 250 Index. Just five digital leaders – Meta (formerly Facebook), Alphabet (formerly Google), Apple, Amazon and Microsoft (MAAAM) – are worth more than the entire European equity market. Digital-native firms already represent a quarter of the value of the S&P 500 and should exceed 50% by the latter part of this decade. 

COVID-19 has accelerated the race towards the digital economy, compressing 20 years of development into just 18 months.

The move to hybrid working – and online access to retailers, banks, educational establishments, healthcare organisations and many more critical sections of society – has brought about a revolution in how we work and live. Few, if any, heritage corporations have been able to adapt fully to this new environment. Instead, they have been left behind by digital natives that were designed at the outset to take advantage of a hyper-connected, hyper-personalised world, fuelled by today’s internet.

A radical manifesto for modern times

During the period of momentous change at the start of the twenty-first century, Martin Farncombe and I combined our extensive experiences and future insights at EY to develop a radical design for the new economy. In our book Atomic, we recognised that new digital platforms based on cloud technologies would enable start-up companies to gain global scale and scope advantage in years (or even months) rather than decades, such as the hyper-growth of Amazon and Facebook. We also foresaw the ability of small ‘two-pizza teams’, or ‘Atoms’, to create companies of unprecedented value, often exceeding tens of billions of dollars. WhatsApp, consisting of just 30 staff, was acquired by Facebook for $19 billion just three years post incorporation.

Using Gill Ringland’s analogy of the ‘Coral Reef and the ‘Deep Blue Sea’, we envisaged a bi-polar economy consisting of small, volatile atoms and global utilities.

To achieve this radical design, we broke the corporation down into its constituent elements, identified the forces that determine how these elements can and will be put together in a hyper-connected context, and predicted the combinations that would survive over the coming decades. We recognised the formation of a ‘chemistry of the enterprise’, allowing digital entrepreneurs to develop their own new compounds, to test them, and to determine the most promising.  

This networked, bottom-up perspective echoes powerful currents in today’s economy, such as individual data mining and mass customisation – the emerging era of hyper-personalisation. We presented a ‘periodic table’ of elements that can be combined to form valuable molecules that explain the power and rising dominance of digital natives. In this process, we described an economy of the people, by the people and for the people. 

In summary

The radical manifesto contained within Atomic is a powerful tool that helps us understand the power of digital insurgents and the alternative forms they are taking. It provides a guide to transforming the value locked within heritage corporations into a new form, adapted to the connected economy and able to continue adapting on its own. It illustrates a challenge that will face every corporate leader in the decades to come.

Read about Atomic and the new theory of the firm in Part Two.