Digitize or Die book extract: The importance of leadership and middle management for IoT

Even though the digital transformation has been building up for over a decade, most businesses have yet to recognise it as a high priority. This is especially true of larger corporations with solid, apparently unassailable channels and markets.

It is true that some businesses will not be impacted by what IoT brings to the table. But are you truly confident, as you read these sentences, that your business is immune to the IoT revolution?

Many leaders may not see the threats to their business and are blinded by their current analog profitability. Our brain is ‘inherently lazy’ and will always ‘choose the most energy efficient path’ if we let it, writes Tara Swart, a senior lecturer at MIT, in her book Neuroscience for Leadership. “[The brain’s] need [to survive] focuses attention on the sources of danger and on trying to predict where the next threat will appear, on escape or full-frontal battle rather than on an innovative or creative solution, on avoiding risk rather than managing it towards a new suite of products, market or way of doing business,” Swart writes.

If leaders don’t see the threat and opportunities of the IoT and fail to understand how they can leverage that for their company’s benefit, then they are in danger of becoming yet another case study like Kodak, Nokia, and Polaroid.

On the other side of the coin, there are leaders who fully acknowledge that there are some risks and that those might be potentially deadly to their business. They struggle to raise the urgency of change and the associated orchestration among their employees. When properly tackled, digital transformation can ignite a sense of purpose among your teams, and more importantly raise the overall satisfaction and therefore increase buy in from them which often increases productivity. Studies show that when a clear digital strategy is being established and shared with employees, the satisfaction of those employees raises from 10% to nearly 90%.

The importance of leadership

John Kotter, professor of leadership, emeritus, at the Harvard Business School, author of numerous books on leadership, highlights this importance of leadership and the difference between leadership and management when dealing with change management:

  • Management gets the regular work done well, reliably and efficiently, even in exceptionally large and complex systems
  • Leadership sets the vision and the associate strategy. They have the capability to energise their troops to trigger innovation despite the recognised changing problems and opportunities.

Both are important when dealing with a digital transformation strategy in a complex environment and organisation. Leadership is a key success factor when dealing with market niche or in a world where opportunities and technological trends can change greatly. Good management is a key success factor in large organisations operating in protected markets and environments that changes little.

The importance of digital mine canaries

Another important aspect when dealing with people in a digital transformation environment is that there is often someone who will understand the necessary steps to digital transformation before the rest of the peers and thus challenge the status quo. Those within the corporation who recognise the need for change often face marginalisation from the minds of the ‘analog’ leaders and scepticism from peers.

Carl Yankowski joined Polaroid in 1988 as vice president in charge of the business imaging, US consumers and industrial marketing.

He quickly identified the necessity for Polaroid to embrace the digital transformation by acquiring electronic imaging technologies. Unfortunately, MacAllister Booth, his CEO, vetoed the plan and gave clear ‘analog’ feedback, “Anyone who says instant photography is dying has his head in the sand.” Even the next CEO, Gary DiCamillo, had a very similar analog approach. He stated in 2008 at a Yale interview that “People were betting on hard copy and media that was going to be pick-up-able, visible, see able, touchable, as a photograph would be.” A couple of years later he analysed the situation: “We knew we needed to change the fan belt, but we couldn’t stop the engine. And the reason we couldn’t stop the engine was that instant film was the core of the financial model of this company.” This is very similar to Fujifilm’s model; the major difference is that Fujifilm’s management made a clear strategic choice to cannibalise their own market in order to enable the transformation to happen and build a longer term success.

Such an environment unleashes the opportunity to get early warning detection systems for your business, much like a canary in a coal mine. So, keep in mind that the canaries are not the problem. Rather, it’s the way you, as a leader and as a company, leverage them to create value for your customers, your channels, your company and its employees and the shareholders.

Carl Yankowski was Polaroid’s canary, and unfortunately for them, he was ignored.

Polaroid could have been a pioneer in digital photography if the leaders had embraced original ideas and set a vision that included the understanding that failing fast, protecting teams that challenge the status quo, embracing culture change can create the conditions for successful digital transformation. Unfortunately, Polaroid failed in those areas mainly because they did not have the conditions for its employees to embrace change and accelerate the needed digital transformation. This example highlights the importance of the people side of digital transformation and in particular the role of middle management when dealing with change and adaptation of organisations.

The importance of middle management

When dealing with digital transformation, leadership must first set a vision and clearly state and envision the result of the changes that are necessary. But vision and leadership is not enough. The Polaroid case clearly shows that even though they had performed thorough market research, even though they could have acquired the technology and even though they had leaders that had perceived the opportunity behind the risk, they did not realise the importance of middle management in digital transformation.

George Caspar Homans was an American sociologist (August 11 1910 – May 29 1989), founder of behavioural sociology and the Social Exchange Theory. He expressed in his different publications the importance of middle status of individuals in social organisations as well as their capabilities to absorb and drive creativity.

He considers that any hierarchical social organisation is constituted of:

  • ‘Low status individuals’: individuals do not fear status loss as they feel that they do not have anything to lose. Status can be defined as respect, honour, influence on other groups with the associate benefits such as credit, control, attention, influence as well as material benefits.
  • ‘High status individuals’: interestingly high-status individuals have a very similar reaction to their social status in that they are not afraid of losing social esteem, but not because of the same reasons. The consequence of being at the top of the social pyramid are the associate advantages such as ego satisfaction, financial freedom and well-being which in turn gives those individuals a lot of freedom in their everyday life and decisions.
  • ‘Middle status individuals’: Those individuals are on the opposite side, when talking about fear of losing status, of both the low and high-status individuals. The threat of status loss is the highest in this category of individuals as they are respected and can influence the low status individuals while at the same time dealing with the high-status individuals that are more respected and influential to the whole group.

If you apply those categories to a standard medium size company, you could categorise the groups as follows:

  • ‘Low-status individuals’: skilled or semiskilled workers, administrative personnel, transversal function with low influential power, etc.
  • ‘High-status individuals’: executive teams and their associate N-1. Transversal functions with influential power.
  • ‘Middle-status individuals’: middle management that refer to high status individuals to seek for approval and or final decisions, etc.

Middle management and innovation

Recent studies seem to show that when dealing with innovation and transformation and change in a social organisation such as a company, the middle status individuals will be more concerned than other groups to follow the rules at the cost of creativity and innovation. From an innovation point of view (organisational, R&D, process and so forth), being criticised and negatively evaluated for suggesting creative ideas may be particularly salient to middle status individuals. Middle status individuals tend to be less creative than those with high or low status but on the other side they can boost the group’s performance by focusing on productive tasks and filtering out irrelevant information.

High status individuals seem to have more willingness to risk the expression of creative ideas due to the fact that they are well established as high status individuals and do not fear losing the position. Interestingly Michelle M. Duguid and Jack Goncalo in their article “Squeezed in the Middle: The Middle Status Trade Creativity for Focus” seem also to show that, even if the high-status individuals’ creative ideas are objectively not more creative than ideas from the middle or low status individuals, their status and associate confidence makes them more confident to persuade the rest of the group.

In the Polaroid case, middle management didn’t embrace the high-status individuals’ beliefs and because of that they were pushed to the side. This caused major issues with innovation, digital transformation, cohesion and keeping digital talents in the company.

Analog company leaders willing to embrace the IoT should help the company’s middle management to understand the goals and outcomes, as well as the risks and threats to the existing business.

Setting a vision and giving a sense to the mission is not only about defining what needs to be done but also about creating the environment in which employees can challenge the status quo such as the business model, processes, products and services and to the corporation itself and creating enhancements to those.

Explaining the ‘why’ to middle management and more importantly enabling innovative action in the edge of the ‘mothership’ creates the environment for change and adds a sense of urgency and accountability amongst the middle status individuals.

Editor's note: This is an extract from Digitze or Die, by Nicolas Windpassinger. You can find out more about Digitize or Die and purchase it here. All benefits from the book will be donated to the Alzheimer’s Association and Fondation de France.

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Book Review: Digitise or Die

This is a very big book. The review copy was a PDF file that ran to 251 pages. The title is somewhat dramatic but the author does make a convincing case for that statement, citing companies such as Kodak and Nokia. However that is a relatively easy task.

The main thrust of the book is to expand “on the IoT, beyond the pure technology element, in a way that would help companies understand how to transform, leverage themselves and supersede their competition.”

That is a commendable objective, but the book includes a lot of background information before we get to Chapter 3 on “Digitisation Strategy: The IoT Methodology” on page 37. For example, it covers the mainframe computer period from 1950 to 1980; building the backbone of the Internet from 1980 to 2000; and Internet services such as Google from 2000 to 2017, says Bob Emmerson.

The methodology starts with the customers: their needs and pain points, and then it indicates how to digitise the current portfolio while embracing technology, differentiation strategies, business models and a transition process. However, in Chapter 3 the book seems to contradict itself when covering the first step.

The stated starting point is four customer–centric bullet points, but this is followed by a statement that the first step begins by addressing IoT technology, which that has six different layers. If it’s not a contradiction then it is confusing.

The remaining three elements are summarised in Chapter 4, which devotes a mere eight pages to the customer’s needs. However, Chapter 5 employs 60 pages on IoT technology and the reader is told that “to understand the IoT you must understand what hides behind IoT acronyms such as CoAP, AEP, Thread and so forth.” It would have been better to cover technology after the chapters on differentiation strategies and business models and to do so in less detail.

Bob Emmerson

The main thrust of the book, outlined earlier, is somewhat ambitious and it is easy to criticise the result. That said, Digitise or Die covers a lot of IoT ground, too much at times, but that can be seen as a positive problem. It works well for business professionals who know that they need to understand the emerging environment but don’t know where to start. It’s also a book that can serve as a reference work.

The author is Nicolas Windpassinger, global vice president Partner Program, Schneider Electric. Sales revenue will be donated to Alzheimer’s Association and Fondation de France. It’s available for pre-order on Amazon and will be launched mid November.

The book has been reviewed by Bob Emmerson, freelance writer and telecoms industry observer

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Book review : Working with blockchain

“Working with Blockchain: all the basics” is a concise, clear explanation of Bitcoin and Distributed Ledger Technology (Blockchain) that is ushering in a groundbreaking way of conducting business. There’s been a lot of hype on the Net about Bitcoin, but this publication puts the business case front and center and backs it up real-world use cases.

The key message is obvious once you read it. “Business over the Internet is based on antiquated rules and processes that were conceived in the pre-Internet age and never designed for the scale, speed and granularity of today’s networked economy.” Think banks and letters of credit, says Bob Emmerson.

The 21st century much-needed alternative it to employ a crypto-currency, Bitcoin, and use a distributed ledger to enable cheap, fast, worldwide payments, conducted transparently and without intermediaries. This is not only doable, it’s being done. Blockchain is improving transparency and trust, simplifying business processes, creating brand-new opportunities and bringing benefits to society and businesses.

There is a clear analogy to the IoT. Although IoT is not essential for Blockchain to function, the combination packs a powerful punch. Check it out here followed by a search on Bitcoin.

The book doesn’t go into techie details but it is comprehensive. There is a brief history of Blockchain and a chapter that covers the issues that are addressed, such as immunity to hacks, the different types of Blockchain Technology and business basics.

Chapter 5 covers a key topic, where and how to apply Blockchain for business processes and it highlights aspects that add value in business ecosystems. They include: the involvement of multiple parties; areas where trust and confidentiality are important; where fast transactions are required; and where there is a community, e.g. a union, association or consortium.

Practical advice on how to get some hands-on experience comes in the next chapter. You start by installing a Bitcoin wallet, and pay for the proposed small number of Bitcoins. Then you download the Bitcoin Blockchain, and that enables participation in a distributed ledger. The authors do not advice investing serious money and speculating with Bitcoins.

Now you can make and receive payments and experience how the verification of payments proceeds transparently. The remainder of the chapter provides advice on how to identify and check use cases followed by a four-step process that will get your business up Blockchain speed.

The remaining chapters cover a variety of Blockchain solutions that include: climate change; critical infrastructure protection; financial services; government and utilities; travel and transportation; and finally the entertainment industry. The book concludes with real-world examples and references.

Conclusion: This publication is an easy, informative read that will get you up to speed with a breakthrough development that meets a real market need.

The authors: Louis de Bruin, European Blockchain leader with IBM Global Business Services, and Willem Vermeend, an Internet entrepreneur and a Professor of Economics at the Open University in the Netherlands. The book costs € 17,50 and can be ordered here.

The author of this blog is Bob Emmerson, freelance writer and telecoms industry observer

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Book Review: Implementing the Internet of Things

Implementing the Internet of Things by Boban Vukicevic and Bob Emmerson is not a technical manual, although the title might suggest otherwise. It’s a business-focused and practical guide to “Strategy, Implementation and Considerations”, as the sub-heading puts it, for those considering an Internet of Things (IoT) solution for their organisation. It describes the “profound impact […]

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Book review: The Future of IoT

This is a big book: 256 pages, 77,000 words. It’s sub-titled “Leveraging the shift to a data centric world” and it targets the executives and senior managers of both enterprise organisations and technology companies. The book does not assume prior knowledge of the subject so it’s an easy way to start thinking about the IoT, […]

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