People, History, and Philosophy: Driving the Business Model of the Future with Roy Woodhead (Sheffield Hallam University)

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[General intro omitted.]

Chad Perry:

Today, we’re speaking with Roy Woodhead, senior lecturer in digital innovation for Sheffield Hallam University in the United Kingdom. Previously to his role at Sheffield, Roy worked as a transformation leader in some of the largest technology organizations in the world, including Hewlett Packard. So Roy has spent the last 30 years working on some very interesting projects from small investments to multi billion dollar digital overhauls.

And central to that work has been the integration of people and technology to counter our natural resistance to change that can be such a significant barrier to adopting digital workflows. So that’s what Roy is going to be sharing with us today, a mature perspective on the business model of the future, how digital twins and IT systems can support that business model, and most importantly, how people play a vital role in enabling the next generation of productivity. Roy, thanks for joining us.

Roy Woodhead:

Well, thank you, Chad. Thank you for inviting me to your conversation.

Chad Perry:

Now you have what I would describe as a pretty rich set of experiences across both enterprise and academia. So why don’t we start with a little bit more about your background and how you arrived at Sheffield as an instructor of digital innovation.

Roy Woodhead:

Yes, I’ve had quite a curious career, none of it planned. If I had my plan, I would have been playing football for England. So it’s been very mercurial which unfolded. I got very interested in innovation early on. So this was before the digital era really kind of took grip. I ended up working in a lot of major oil and gas projects, driving large scale innovation. And I think really, in hindsight, that was my apprenticeship. Set the digital aside, how do you get a large organization or even a consortium of organizations to share information in ways that improve decision quality and rethink their plans and so on.

So I was an academic at Oxford Brookes University for over 10 years, and then went into industry. I had my midlife crisis, and decided that I didn’t really want to progress to become a professor as such. I wanted to get out there and do it. I was very much enamored with actual research, of actually going into the data and working with it.

So I began in EDS, and this was in the days of the large tenure outsourcing deals. I was at the start of what became known as cloud but it really began with virtualization of servers and kind of just grew out of that. And then we were taken over by Hewlett Packard, and it led to morphed into Hewlett Packard Enterprise. I think, in that experience, does one company in particular that was very formative to my thinking, and that was the Alchemist Shell. There were much more aware of the world than I’d ever seen before. You know, they had these ideas about organizational learning could tightly coupled to performance management, they talked about mental models.

And you know, from these guys, I kind of had an epiphany, it really was a way of seeing things differently. And this played out then later on when in Hewlett Packard, we were working on innovation projects in manufacturing, the arrival of, for me, it was the industrial internet was the first introduction into this kind of new world where IT and operational technology, OT, were converging. But in Europe, we saw the rise of industry 4.0. There is a slight difference in scope between the industrial internet and industry 4.0, but they’re of a similar direction, you know, they’re moving to automation. In this then I was getting involved with things like edge analytics.

So we were looking for used cases that would suffer if the connection to the data center to the cloud was vulnerable. So how could you actually do the analytics on the edge? And again, whilst I didn’t get involved in connected car, that was the kind of real agenda. It was things like, can you put compute power in an edge device, be that a car or a mobile phone or whatever, and draw insights for the users in that sphere? I’ve got quite a variety background. I was also part of a team that was inside Rolls Royce, back in the early 2000s, when, about 2006 I think I went there, when they were moving towards a business transformation that moved them from selling plan engines into selling power by the hour.

The technology side of things was very complex. How do you suddenly have a relationship where you can see into the engine and monitor its performance? So rather than reacting to problems, you know, actually predicting problems, and you put in mitigation plans into play. You know, this began with federated databases and that kind of technology, but it kind of morphed into what you now see as that kind of industry 4.0 model. And what we didn’t call them digital twins, we had the capability of the digital twins. So we knew what parts are in an engine, what batch those parts came out of, and so on. So I think I’ve been very lucky in my experiences in industry.

Chad Perry:

And how did you end up at Sheffield?

Roy Woodhead:

Well, my wife is from… She’s very mundane. My wife is from Sheffield and she became ill so we decided to try and get back to be closer to friends and family. An old friend of mine said what why don’t you come back in so Sheffield Hallam University. It’s where I did my first degree was and it was a Polytechnic, that’s where my edge now. I said why not? So that’s really, I came back to be in there.

But I don’t think I have a stop being an academic. I think, you know, the whole idea of action research. I mean, I even wrote a peer reviewed papers whilst working in HP. I did one on the what is technology where we questioned, you know, technology literally just the device, or is it something more than that? I’ve always been active in that, so it is a natural place for me to kind of gravitate to.

Chad Perry:

Yeah, and it sounds like they can really benefit from your varied experience, really out there in the field on the ground. But also having that academic mindset where you’re very interested in the theoretical models and how you can get from there to real world use of those models.

Roy Woodhead:

Yeah, yes, so I mean, we’ve seen new philosophical paradigms emerge, we saw modernism which had this kind of belief in a single right answer. Which really did struggle given that the world is so complex and things can be seen differently from different perspectives. We saw post modernism attack that view, you know, the to the pluralism. The problem with post modernism is you still got to make a decision on Monday morning, so which one do you make.

Chad Perry:

That’s reality.

Roy Woodhead:

Yeah, yeah. I mean, you have to commit to a belief. We also saw socio technology, kind of, I don’t know, it treated the social side of things in a certain logical side of things as if they were distinct and separate. And then you kind of somehow try to work one with the other, and we’ve seen that grow in the last 10 years into a new view, that’s socio materialism. Where they’re arguing that they’re entangled. I think, you know, my readings into philosophy or technology, I feel close to that view than others.

Chad Perry:

Yeah, this is so fascinating. Because if you just listening to you talk about the last 30 years of your work, what I’ve heard is that you’ve really seen all of the things that are now converging into what is called industry 4.0, but has really been happening for decades. All of the pieces have been slowly moving into place to enable the commoditization, the availability, the use of technology, backed by a well-defined or, I would say, a usable, useful business model that is driven by these philosophies that you’re talking about. So these things have converged to now we’re at the point where we’re an inflection point, where the market is now ready to adopt this.

And of course, we’ll have early adopters, and we’ll have late adopters, but that’s what we’re seeing right now. And so that’s kind of my next question is, what is your take on the state of the market? And I want to caveat this by saying that we are obviously in a very uncomfortable transition period we have been… Digital is not something that’s native to the manufacturing industry, especially to smaller business owners who have so many things to juggle. But we’ve been talking about urgency for years now, and now we’re actually seeing that, especially with current times with the Coronavirus outbreak and the whole world being forced to look at digital as a way to stay alive.

Roy Woodhead:

Yeah, yes. I mean, it would have had this conversation a couple of months ago, we would have been talking about Brexit. Nobody mentions Brexit now because Coronavirus is at top of the list.

Chad Perry:

It’s a perspective, right?

Roy Woodhead:

Yes.

Chad Perry:

It’s relative urgency.

Roy Woodhead:

I think human beings tie our ties that threat which is closest to them, and quite right. But we see lots of these kind of short term threats come on and they dominate the agenda. I think there’s actually a slower one that’s taking place. The innovation economist, Joseph Schumpeter, called it creative destruction. So what we’re seeing now, in terms of the digital revolution, we’ve seen compatible cases many times before.

So for example, you know, if you look at the story of humans, we talk about the Stone Age, we talk about the Bronze Age, the Iron Age, the Steam Age and so on. It’s fairly easy to see why people might believe in technological determinism, you know, one of these epochs sets up the conditions for the next one. I’m not sure that technological determinism is as strong as some would argue. But I do recognize that there is certainly something to it, it can’t be just dismissed. But I think what we’re doing now is we’re focusing on the last 30 years, and ignoring this longer history.

If you look at the history, I mean, for example, around 1100 AD, we saw the invention of the deep plow in Northern Europe, and this planted seeds about a foot deep, rather than six inches, which meant that more of the crops survived the cold winter. And because of that, you started to get surplus crops and you needed a team of people trained to drive the deep plow. So you saw the emergence of skilled labor markets.

You saw this kind of transformation happen, where the start of capitalism started to take roots, you know, beyond the old, feudal system. And, you know, it doesn’t happen overnight, it takes a while for it to come through. But you also saw economic and political power move from around the Mediterranean up to the Northern European countries. So we’ve seen this kind of thing before. I mean, the Gutenberg Press in the early 1400s, you know, was a mechanism that allowed books to be published, an idea shared more readily.

So I think, you know, at the heart of the threat that we’re interested in, certainly around technology, is the communicative power that these things unlock. And it’s that communication of seeing new ideas, becoming more aware of the complexities of the world, of making better more informed decisions, is that that’s kind of pushing us to the next level. But with Schumpeter’s creative destruction, you know, there’s also downsides to it. So, obviously, if you are going to be replaced by a robot, you know, you will not necessarily view this as a positive thing. So I think that the whole situation needs to be considered and looked at with a great deal of courage.

For example, if you look at the way that society runs today, you know, if you use a Keynesian lens, the firm provides wages to the employees, the employees spend the wages in the shops, the shops buy things from the firm. You know, there’s a kind of symbiotic relationship between the different entities. So if we move to automation, how will money flow through the economy? How will capitalism survive and so on? So that there’s all kinds of questions and challenges still ahead of us. And I think that you know that this is an exciting period. But I think, if we can learn from the past, and we can learn how these transitions have taken place, we can answer them with our eyes open.

Chad Perry:

Yeah, speaking of the past, you mentioned two things there that I thought were very interesting and I’d like to hear more about. One is, what does it look like when you move from phase to phase but you don’t have deterministic, I forgot the exact phrase you use, but technological determinism? And then also, how is our modern day transformation different in that previously, when there were shifts in power and technology or driven by technology, they were geographical shifts, whereas, this is very much a democratization of technology around the world that we’re seeing. So how do those two things look? And how are they related?

Roy Woodhead:

Well, that’s an interesting question. So I think we need to have a theory of what drives all these changes in different epoch. If you think of the human being, they are drawn towards bettering their lives, they are drawn towards notions of value. And given the understanding of how to manipulate the world, we see the different phases of technological development. So really, what you’re seeing in the difference between today and the Stone Age is today we have a much more sophisticated understanding of the world and much more sophisticated ability to manipulate it, and I think that that’s going to be the case in all of these epochs.

When we look at an innovation. So if we look at the bullet train, why would we not go back to the steam train? Well, it’s because the bullet train offers more value than the steam train. And there’s the pattern. So with every innovation that succeeds, it displaces alternative rivals that bring less value. And I think that’s the kind of general direction of travel, and this is why innovation is so important. It also fits with the idea of capitalism and the profit motivation, you know, they’re striving to get to a technology that produces more value. So I think that explains why the phases unfold as they do.

In terms of democratization, I’m not sure I see it quite like that. If we look at the platforms, you know, the reason the high street is struggling against the internet is not because of the internet, it’s because of platforms. And when we start looking at some of these platforms, such as Amazon, eBay and so on, what you see is the relationship between the customer, the guy that pays for something, and the provider, now has an intermediary, the platform. So the providers of solutions become suppliers to the platform. And this can be good for them, you know, I’m not saying that it’s bad.

But I think what you’re seeing today is a change in the way that relationships between customers are managed. And this is why for a lot of companies, especially SMEs, why they really should be taking the relationship between the customers far more seriously than some of them are, and looking at innovating in such a way that data can cement that relationship. So I’m not just selling a thing. I’m no selling a thing that does provide other sources of information so that it becomes more than a physical object.

It also gives them insights, you know, let’s say, an umbrella. You could sell them a dumb umbrella. If we make a smart umbrella, where they hold the handle, it checks the pulse and another kind of health statistics, it’s much more than an umbrella. You know, it could be linked to GPS and become a way of guiding them around the city, and so on.

So I think what we’re seeing is this move from a face to face customer relationship, that relationship now has intermediaries in it, particularly via platforms. The future this is about either finding a platform that will work for you and that you trust as a provider of goods, or making your own platform, there’ll be a smaller platform in which you can build a closer relationship with the customers. If a company fails to understand the significance of the role platforms play, then they will become commoditized, no matter what they make. Because the relationship with the customer will be owned by somebody else.

Chad Perry:

And that’s really what the Internet has done for the world is it has enabled both of these paradigms, it has enabled the platform where you have these huge dominant middleman like Amazon. But at the same time, it’s allowed some companies to have better direct relationships with their customers. And so you have to kind of pick what you’re going to do or pick where you’re going to, if you’re making a product, you know where your product fits into one or maybe both models.

And so it sounds like that’s what you’re saying is that we’re really at a crossroads where if you’re not aware of how this is really fundamentally shifting the behavior of the market, both, at the buying, selling and manufacturing end, then you’re going to have a real problem. Does that sound right?

Roy Woodhead:

Yeah, yeah, I will share a story. And I forgotten the name of the company but there was a guy in, I think it was Sweden, who had a passion for old fashioned tractors. And so he sets up an obvious website about ultra, you know, Massey Ferguson’s from the 1950s, and so on and so forth. And other enthusiasts gravitated to this website and it became a conversation about you know, have you seen this 1970s version of whatever.

And then later on this site is I’ve got one but I need a new carburetor. Does anyone know where I can get a carburetor? And all of a sudden, it’s grown into becoming a platform where these guys, who are very interested in very old antiquated tractors, can source parts and so on. So I see that kind of emergent strategy, classic Mintzberg stuff, I see that also being a player.

The question then is is what’s the difference? Well, if I were a tractor enthusiast and I’ve made a psychological commitments or bond to this platform, that’s one kind of relationship. When I go onto Amazon, my relationship is I know what I want, and I just want it the cheapest way I can get it. That’s a different strategy. So I think what you will see emerging, especially for the smaller players, is a much more nuanced set of relationships between the providers, the platform, and the end customers. And I think central to all of this is trust.

So in the past, a company could have treated the customers badly and just assume that the majority of customers or never find out about this or, you know, they might be angry today, but they’ll forget it in the year. Today, I think that’s going to become less and less the case. I think the integrity of organizations, the integrity with which they treat customers, I think that’s going to become much more powerful in the choices customers make.

Chad Perry:

And that’s a narrative that fits with the overall shift of the market, not just in manufacturing. And in fact, this applies to personal lives as well. The internet and technology has enabled us to get further and further into specialization. And with the ability to find and connect with people who share our interests or who share our professional lives, the ability to niche down there is ever more important. So if you make parts for a tractor, or if you, let’s say, make something that does the same job as a tractor, but you know, you rely on people still needing that kind of thing. You really have to take a look at this and think seriously about how your customer is getting the outcome that they desire because there are more and more options to get better and more defined products.

Roy Woodhead:

And I think it’s also about the relationship. I mean, since the Coronavirus, I went on the internet to you know what… I’m very ignorant about this virus. So what should I be watching out for in this annular? And the amount of conflicting information you get off the internet. So I think that the real value in these relationships is the trust and credibility of what you’ve been told.

Chad Perry:

Oh, yeah.

Roy Woodhead:

I think we’re entering a new model. I think, in the old model business was done through transactions. You know, you want a new book, you order it off my platform, I send it to you, that’s the end of the relationship. Whereas I think now where we move into is that it’s relational trading, is where I’m looking out for you now. I mean, I’m just gonna be really good at this. The number of times that I go onto Amazon, and it’ll say, people who like this book like these books as well. Aren’t they right? These guys know me better than I do. I think that that relationship and that becomes a source of both customer care, but also there’s a danger that you know, maybe I am being offered books from an algorithm that’s got an inherent bias in it. We have to be careful with algorithms.

There’s a lady wrote a book, O’Neil was her name and I forgot the name of the book. But she talked about me all these where algorithms get it wrong. She talks to a case of where in America, a state decided to test the quality of the teachers in high school with an algorithm. A female teacher was decided she was not good enough, and yet her students like to staff flights or and everything and nobody could explain why we should sack her. But the algorithm said she must go.

I also saw something in America where in these websites where there was an artificial intelligence just to match you with job opportunities. Females were not sent as many executive roles as males because the algorithm had learned that men tend to get these jobs more than women. So what’s the point in sending them to women?

So I think the other thing from this new world is we will surface these hidden injustices that we may be unaware of, you know, right now. We don’t know that certain biases are at play in the world. And it’s only when these algorithms start scaling them up to become noticeable, and I know we have to do something about it. So I think there’s upsides and downsides with it all. I think the role of ethics in the internet is gonna become far more powerful than it is today. I think at the moment, with things like GDPR, these are seen as kind of quality check points type approach rather than an authentic desire to do right. And I think that will become a distinction that we’ll see as we move forward.

Chad Perry:

This is such a classic, broad, commentary and example of how technology really is just an extension or an expression of human behavior. Because on the one hand, you can say things like, well, social media is causing us to become more and more distance. But at the same time, it also enables more and more specialization and enables more trust. Because as we find ourselves overwhelmed with data and too much information and too many choices, and just inability to see what’s clear, we also turn to sources of trust that can be facilitated, that can exist outside of, you know, normal physical existence.

So now you can connect with people all over the world. And so what I’d like to kind of turn our attention to is in particular in small businesses, how they can leverage these ideas, but in particular, how they can leverage IT systems to start moving toward this or at least to acknowledge it. So like, what is the small business owner need to do given that they see this and acknowledge it?

Roy Woodhead:

First of all, before we look at, you know, which technological paths should they follow. I think it’s important to just step back and understand their advantage. The problem that you have in large organizations is the structures are already in place, the remuneration packages are already in place. When you try to change things, it’s incredibly hard. I remember being in a large transformation project, and the killer idea meant that one manager with a budget would pay for it to be developed because the source of it was in his realm. But another manager, who would do absolutely nothing, would be the recipients of the revenue growth. So when it comes to next year’s annual appraisals, the guy that made the investment would have been over his budget, so that’s no bonus for you. And the guy that did absolutely nothing, he would be a rockstar.

And you know we have to have these conversations about how do we rework things so that new ideas can actually flourish. And that’s just an example of why, in large organizations, the digital transformation is more problematic in middle management. Because middle managers are tasked with delivering results based on how we did it yesterday. And you come along with new ideas and you’re disrupting that and you’re asking the organization to run with two business models simultaneously, the old business model and the new business model. And certainly during transformation and especially the transition phase, this transition mode of operation, costs will go up.

Will the more senior managers and the shareholders, will they be willing to forego profit gains in the short run in order to get them in the long run? And then it becomes really hard. So the small firm has an advantage here, because there are not that many people in the firm as compared to these companies with 80, 000 employees and so on. They can have a conversation, they can come to a collective view of complexity, and they can adapt their systems much more easily than the larger companies. I mean, I remember in HP, I forget what the call was, Meg Whitman was the CEO. I had a lot of time with Meg Whitman. I thought she was a terrific CEO.

But she was saying, we’re gonna head north, and mainline management was say no, no, we’re going to go to South. And you’re thinking, what’s going on here, guys? This whole idea that the leaders set direction and whatever, it just doesn’t kind of pan out in the real world. And that’s because of all these local decisions that are made by middle managers and looking after their own self-interest and so on. It just becomes an incoherent cacophony of noise. And that’s where it’s really hard. So a small firm can avoid that, small firm has the ability for internal coherence.

The only guy I came across that really got what I’m saying was Steve Jobs. In Apple, they only did one big projects at a time. You know, so all the company booked an iPhone, all the company then moved on to iPad and so on and so forth. And because of that, he had an internal coherence that would have brought synergies. You know, in HP, we’d start that many objectives, you know, it’s sometimes hard to see where we were going. So the small firm has that advantage.

The downside for a small firm is because there have not got that many people, they have to put effort into dealing with today’s demand. They’ve not got the spare capacity to kind of grow new capabilities and so on. So the small firm that really does get that been on this transformational journey, moving from making things into delivering outcomes as a service, they’ve got to kind of carve out some time for that. If they don’t, then they’ll end up being a provider to a platform, and their economic bargaining position will weaken. The platform guys will use market forces to drive down the prices. They’ve got an advantage, but they’ve also got a disadvantage.

Now in terms of the technological path, this depends on what they want to do. So if they want to be a platform on then the obvious is to get into a cloud. And you know, maybe you’re at the beginning, you could either try and build your own cloud. That’s so hard, so expensive.

Chad Perry:

Very risky.

Roy Woodhead:

Yeah, I would, I would suggest they look around in the marketplace, you know, there’s Microsoft, they’ve got these analytic platforms, Google. Look at one of the established, you know, Amazon Web Services. Look at one of these established cloud providers, and try and find out which one is the best for you. And the key thing to watch out for there is that the costs rise as the solution scales. So some of these platforms, they look fairly cheap at the beginning, but as you get into using them, the costs start to rise, so you have to keep an eye on that.

Or maybe they want to build alternatives. So for example, peer to peer networks. Where they don’t actually go for a platform, they go for a smart way of communicating with end users and so on. So there’s a number of options but it’s really about the digital strategy. So I think, step number one is you know, how do you see your relationship with customers in the future? What do you do today, and how could that be augmented by combining different functionality.

Now, earlier on in this conversation, we talked about the umbrella. You’ve got a dumb umbrella, but if you put sensors on the umbrella, you can make into something that’s much more than just an umbrella. And from that, if you have, say for example, some way of gauging the health of the guy who’s holding the umbrella, you may find all of a sudden that you’ve got links to an health care provider, health analytics and so on. And so you know, the umbrella manufacturer is now in the medical insurance industry. And I think those kind of creative leaps are going to be all over the place. I think, I think the real, the real driver of success is the ability to see and be creative in where you think you’re gonna go. And I think that that vision is step number one.

Step number two is about your strategy. How are you going to get from where you are today to where you’re going to be? And how are you going to do that in a way that gives you unique advantage? Why would a customer flick through 10 pages of Google to find your product or your service? What is it about you that’s unique that you bring to that customer relationship? It’s about then building an internal culture of innovation, because nothing stays still. In the 1960s and so on, the R&D department used to be about what five mile away from manufacturing facility, they kept them very separate. I think in the future, every employee is part of the innovation process.

So that the other thing that the small companies can do is they can foster that innovation culture, and they can harness it and manage it so that ideas come from within and outside the organizational boundaries. There’s a clear way in which those ideas can be tested, where they can then implement those ideas and it becomes the next iteration of whatever they’re doing. And I think that’s very hard for large companies to do because in the higher hierarchies of the large companies, you know, you the classic way of seeing the tops of middles and the bottoms, the bottom tier often feel unloved, undervalued, and so on. So, turning around to them and saying, you know, have you got any great ideas that can help us make more money, it’s usually met with cynicism.

Chad Perry:

Right, why bother?

Roy Woodhead:

Yeah, I think small companies really do have an advantage in this world because they’re more agile by design. I think you know, there was a wonderful book, I think it was the 1960s, Small is beautiful by Schumacher. And I think that’s the kind of where to see our growing in the internet age. It’s how can you keep things small. As soon as they scale, they tend to become much more difficult to manage and much more commoditized. And if you selling something that is a commodity, that that may be fine. But if you’re selling something that’s more than a commodity, that’s augmented in some way, that’s personalized, you know, it’s got some kind of stickability to users, then that’s a trade off that might be a step too far. You need to make it much more human centric.

Chad Perry:

Yeah, and that’s how a lot of these conversations go as we end up realizing that the technology is actually kind of the, I wouldn’t say the simplest part, but I would say almost the easiest problem to solve. Because there are very smart savvy providers out there who can do whatever it is that you need done, once you identify the why, and the what, they can take care of how. The why is, what is it about the future that is changing that compels you to adopt a certain technology. And so you mentioned a couple of things.

One, as you mentioned, is data analytics platform. Those things can be, they come in all different shapes and sizes, they can be extremely generic, they can be as simple as piping information from your machines, or the machines that you sold that are on site, you know, into a spreadsheet, into the cloud. So those are decisions that have to be made with a view of what is the company all about. And then simultaneously, you have to have an organizational culture that understands the value of this. And you have to have a management structure that supports the ability of everybody at every level of the organization, to have these ideas and to propose or to test these various ways of implementing. And one thing we hear a lot is fail fast, small experiments.

Roy Woodhead:

Yeah, I mean, I think that idea I first came across that in a book; Discovery Driven Growth by McGrath. They were plotting easy to do versus technical complexity, easy to achieve versus technical complexity. And when you’ve kind of positioned most innovation projects, they’re in that bottom left quadrant, you know, everybody feels very comfortable that what is being asked for can be delivered and so on. And it’s not that complex. The problem is, is that that’s a very crowded area. And what they were saying is, is that you should go the top right quadrant, the hard to do, and an incredible amount of technical complexity. Because if you can figure that out faster than your rivals, then they can’t replicate, they can’t imitate you.

And what they’re then we’re saying is, is that you should set up all these little projects, not necessarily to be successful in of themselves, but to give you insights into various uncertainties, so that you can master that top right quadrant. So they would setup smaller projects deliberately to fail. And the gold, the mantra was, you know, fail fast, fail cheap, learn quick. And I think that idea then fits very much back into what I was saying a moment ago about the small firm needs to see all its employees as part of an innovation, culture. You know, where that kind of experimentation is done regularly.

Chad Perry:

So it sounds like it’s all about really not achieving the specific outcome that you would ideally like to achieve, but really getting to the point quickly, where you have more information.

Roy Woodhead:

Well, no, it’s about understanding that what differentiates you from a rival is uncertainty. So if you understand your customers and what your customers need much more deeply than your rivals, and you understand the technological means of meeting those needs much better than your rivals, then you have an information advantage. So if you go for easy technology, you know, try and do everything in excel spreadsheets, and so on, you are limited in what you can get to. Whereas if you look at more adventurous projects, more adventurous agenda, you end up with an information then, you can do things your rivals don’t know how to do it.

Chad Perry:

And I will caveat this by saying that something like excel could be an extremely effective way of learning or figuring out what you need very quickly, and then maybe taking the next step and investing and experimentation with some sort of other technology.

Roy Woodhead:

So excel is a wonderful tool. It’s very easy and intuitive to get into. If you ever meet a problem, there’s a YouTube video that explains how to do it.

Chad Perry:

That’s true.

Roy Woodhead:

The problem with excel is it locks the data inside your spreadsheets and so the ability to do big data becomes more and more difficult. So when working in HP, we were taken into a trading floor. These guys were buying and selling oil and gas. And all the analysts at their own spreadsheets, they had different metadata. They guarded them, you know, jealously, because you know they got their sense of job security out of the secret sauce, so on. And the problem was that the collective intelligence that they had could not be accessed because they’re all locked in there. So there’s a trade off with that. And that brings me to another risk for the small firm.

About a year ago, a firm nearby to me in Barnsley said, can you come and help us out we can get close to industry 4.0. So I went, these guys they did laser cutting. The problem that they had was they couldn’t do shop floor scheduling, scheduling of jobs and so on. They didn’t know the stats of the different machines and they couldn’t kind of build an algorithm that would sequence the jobs so that you optimize throughput. And the problem was compounded by the fact that the manufacturer of these 120, 000 pound piece of kits had their own IOT strategy, had their industry 4.0 strategy, and they were taking the data for themselves, and they wanted to sell this as a service back to the company. So the OEMs, there can become problematic in this as well.

So again, it’s about understanding that data is valuable. And so when you buying a machine, do you own your own data? And if you do on your own data, is it easy to access? Is there an API available so that you could pull that data out and put it into your own application and do shop floor schedules? All of this, I mean, the danger that we academics bring is we talk as if everything’s very easy and straightforward, and the practical world is no, it’s not, there’s always wrinkles that you haven’t foreseen.

Chad Perry:

Yeah, and we’re gonna have to wrap up here in a couple of minutes, but I do want to ask one final question around this. You mentioned the term collective intelligence, which I think is such a beautiful simple term, to describe the nature of the cultural change that you’re trying to make. So I want to know what your thoughts are on how you build collective intelligence with the younger digital native generation, so to speak, and the more mature skills of the older generation. How do you bring those together to create more collective intelligence?

Roy Woodhead:

Again, let’s just step back. What is it the Uber did that gave them the advantage in the taxi industry? They’re joined different stakeholders together, people that want to drive taxis people that want to get a taxi ride. But they also found ways of reducing uncertainties, particularly for customers. Before Uber, if I wanted to taxi, I either had to stand outside on the road and wave to come by or walk up to a taxi rank. By using Uber, I could order it in the restaurant and the taxi would arrive.

So if we look at the interactions, users and customers take, and the interactions within the firm, the employees take, we see all over the place that a lot of decisions are made under uncertainty. So I think first of all, if we see the goal, as you know, shining the light on those informational black spots, those informational areas we don’t know that much about. We shine that light through sensors that push data to the decision maker and so on, then we will automatically get a more informed view of what needs to be done by the decision making. And that decision maker could be, you know, a guy on the assembly line or a carpenter or whatever.

When we look at the younger generation, particularly those that have come up through an engineering technology background, the years they spent learning the subject matter is at the expense of the subjects they did not take. I remember in HP, we are the data scientists, very clever chaps from India. And we had so we were trying to predict oil and gas in substrata data, well logs and so on. And they would come up with answers but they didn’t know what the answers meant, they had no domain knowledge. And I think this is where the unification of the older generation who have been in business for many years, who know what has been done before, who have a feel for things and so on, can be complemented by the younger generation that are much more digitally savvy, much more willing to move with digital. But the unification, the value it offers is in reducing uncertainties.

So the older generation, they will know a lot about the domain but not much about what technology can do. I’m making a sweeping statement here, forgive me. And the younger generation, they know a lot about technology, but they don’t know that much about the domain, they don’t know that much about the idiosyncrasies of the major customers, and so on and so forth. So I think it’s by seeing the collective endeavor of information technology. We call it IT and we lose sight that it’s technology that’s about information. And it’s about reducing uncertainties and turning that into knowledge that allows us to make informed decisions and value then would be assumed to improve, if we make more good decisions, then we make poor decisions.

Chad Perry:

So what would be some practical ways then, of really bringing those two sides of the house together?

Roy Woodhead:

Well, again, this is where the advantage of the small firms are. I think there needs to be an innovation culture that says you’re all equally capable of coming up with a great idea. As soon as hierarchy comes in, the older guys turn around to the youngsters and say, you’ve only been here five minutes, you’ve not yet earned the rights to a view that will get nowhere. So it’s about seeing the organization as an entity that is learning how to adapt and take advantage of new ways of delivering value.

And I think that culture, that kind of respectful culture, the youngsters respect the older guys, the older guys just about the youngsters, I think that’s the kind of glue that says, listen, guys, we’re all on the same team. Some of us know more about one thing than others, others know more thing about this than that. But collectively, if we can somehow pool this knowledge that we have, and if we can somehow share this knowledge in a fruitful and productive way, then we have a source of advantage over arrivals that are arguing or whatever.

Chad Perry:

And this really comes back to outcomes. Because if you sit down with a master craftsmen, they intuitively know how to do certain things, they know what they’re trying to accomplish. And they may not know exactly why they do certain things. So it can feel a little, almost irritating for somebody who is younger and less experienced to come in and all of a sudden start questioning, why are you doing it that way or whatever.

And from the flip side, if you’re a digital native, or you’re a millennial, or younger, and you’re used to questioning things, or you’re used to a very fast pace of change across your entire life, and you come into a business, and you’re saying, well, wait a minute, why are you doing things? I resent the fact that you’re telling me just do it that way and shut up and don’t question it. So that goes both ways.

Roy Woodhead:

Yeah. I mean, in the kind of conversations I’m suggesting customers have is they ask a question, such as, what is the cause of frustration? So, you know, you youngsters, you now saying we’re not moving fast and you’re thumping the table, you’re obviously frustrated. But what is that sense of frustration source? And in that particular case, I think the inner experience of frustration is a result of not being able to control the outside world and foreseeing some kind of downside that you’d want to avoid.

I think by creating a culture where we can arrive at work as full human beings rather than a role, I think that’s the key to unlocking this. It’s about an intelligence and compassion inside organizations that is experimental in nature. And at the beginning, people will make mistakes, that’s the nature of learning. But I think that really the idea is to create a kind of an entity that that sees itself as an entity, as a single unit, that comprises lots of individual human beings.

Chad Perry:

Yeah, that’s so well said. So we want to think about people in terms of this cultural transformation, people as human beings instead of as roles. And unfortunately, that’s what we’re going to have to wrap up. But I do want to ask one quick thing, if there’s anything you want to leave our audience with, what would be the key takeaway. And then the second would be how to get in touch with you if they’d like to do that.

Roy Woodhead:

The key takeaway for me is change is happening. You can either out your head in sand or you can ride the waves of change. I think the key takeaway for me is you have to think through what you’re going to do, and you have to own the consequences. So if you choose not to be part of a digital revolution, and later on, your firm cannot survive or you’re pushed into a commercial relationship through a platform where your profits are squeezed and squeezed and squeezed, you have to accept that that was the consequences of your choice.

If you go in a different direction and you embrace change, then, you know, you have to accept that you the way you embrace change will lead to the success or failure, and again, you take responsibility for that. This has been absolutely wonderful, Chad. Thank you very much for inviting me to this conversation. I worked at Sheffield Hallam University in the Sheffield Business School. If you type in Roy Woodhead Sheffield Hallam University or Sheffield Business School on Google, you’ll probably find my contact details. But my email address is r.m.woodhead@shu.ac.uk. Please feel free to drop me an email and start a conversation.

Chad Perry:

Yeah, right. Thank you so much, such a fascinating conversation. I mean, the mix of technology and philosophy and theoretical meets practical. It’s just so fascinating. So thank you so much. I really appreciate everything you’re doing for the industry.

Roy Woodhead:

Well, thank you for inviting me, Chad.

[General outro omitted.]