5 questions for… Auddly, targeting the source of music creation

Auddly essentially logs metadata around the creation of a song, in a centralised database. But more than this, it offers collaboration and information tools: it’s a kind of Sharepoint for songs, which takes a creative project from an idea to the finished article.

Many disputes come from the very early days of a song — where a bunch of collaborators become embroiled in the song production process, it can be hard to keep track of who was involved in what. So Auddly offers song section management tools, enabling agreement between participants as you go along. Then finished songs can be shared with a publisher, pitched to a label, uploaded to the cloud and so on.

So, does it deliver on its objectives? I spoke to Niclas Molinde, who has partnered with songwriters Max Martin and Björn Ulvaeus on Auddly, to talk about what it brings for songwriters and the broader industry.

1. Why does Auddly exist — what problem does it set out to solve?

I started Auddly out of a clear need. I’m a songwriter/producer, so I know what it is like to be a passionate music maker: what matters is what comes out of the speakers. But this also needs to generate an income. If someone uses your music, you will want to get a piece of the pie. The average song today has 4 song writers, I’ve seen one with 19. The beauty of copyright is that everyone can have an opinion, but if there’s any disagreement, if the data is missing or wrong, the money ends up in the wrong pockets.

For example, an artist or writer could get more money than they should, as a streaming service is not aware more songwriters exist. Or the money can end up in a black box, circling around and eventually ending up in settlements which get divided up by the big companies. This is the challenge Auddly is looking to address.

A few years ago, myself and a colleague wanted to start a collaboration with three 3 really talented young songwriters. The normal way to do this is to start a publishing company — so, for the first time ever, I was a publisher talking to creators. All I needed was who they wrote with, the name of the song, and the ‘split’ — how royalties should be allocated. I suddenly realised how bad I had been at doing this, with my publisher!

If I want to make sure we are all paid, we need the right information. Not just by itself, but to link this to other information from other sources. In this collaboration, it became a full-time job (and of course, it’s worse for the big publishers). I went online to find a system for this, but couldn’t find anything. Everything started from there.

2. How did you approach Auddly in terms of both product and getting it out there?

The idea behind Auddly is to capture data from the creators, who are the only people who know the truth about what they are creating. Traditionally, you ask creators once a song is out on the market, but then it’s too late. You have to capture this early, from the studio.  We created the platform so we don’t force creators to talk about splits in the room. You can discuss the split when you are ready, and log the information directly. All creators are using phones, so that’s the obvious place to do it.

Having faced this situation, I decided to develop a platform for myself. I didn’t know anything about the tech side, so when I spoke to a system developer, he said, “It’s going to be huge, why don’t you do it for whole industry?” That’s where it started! This situation has evolved dramatically, now we’re not trying to affect one company or country, we are trying to change industry internationally by setting the standard for how data is captured.

In terms of outreach, I had a brilliant start, as my first partner was Max Martin. When I spoke to him, I found he has same problem in his publishing company, this led to Björn Ulvaeus from Abba so I had an amazing start. From all my years working in the music industry, I have learned it’s all about politics. I knew that me by myself wouldn’t be enough to reach out, so the strategy to involve Max and then Björn was a great help. With that team, we started to try to sell to the industry.

3. What are Auddly’s biggest challenges — does it require mass adoption to be successful?

We are different to many music startups, in that we are in it to make change happen for creators. The majority of startups are focused on post-release but very few are working on creation process before it goes out to release.

Our first goal is to become a standard for the industry, then we have succeeded — my shareholders want to see big change. Of course, commercial success for the platform would make it a double win.

A significant challenge has been the creators themselves — as soon as you mention rights, they glaze their eyes, it’s a subject they don’t want to talk about! But in the next sentence they complain they don’t get paid properly. I spoke to one creator about his other job as a waiter, he said it was very important for him to fill in his time reports. That’s it, I said, we’re the time reports for the song writing process!

Another challenge has been engaging with the music rights management ‘bloc’ — publishers, performing rights organisations (PROs) and so on. They don’t want to distract people from making music, but at same time this bloc knows how messed up the system is right now. Industry rights management is based on 4 codes, which need to be in harmony. At the moment, codes are not linked and matched but if the information was clean from the beginning, then it would be much more transparent.

4. What’s happening right now in Auddly’s world?

There’s a lot of things happening right now. We are focusing on PRO collaboration, plus engagement with digital streaming providers such as Spotify and Apple Music. This is very important as streaming providers want to be able to add credits to their songs, which helps them deliver their services. It’s a win-win, as then creators see more revenue. All this can be achieved with the creator using our platform 20 seconds after they create.

We are also, finally starting to get major support, e.g. with the PROs such as PRS For Music. As I’ve said, these organisations are very important to us.

5. How will things map out over 1, 2, 5 years?

The big vision is to become a standard platform for all the metadata in the studio: to achieve this, we need to get to a few milestones which we’ve set out as how is a song is created.

– First the songwriters — publishers and PROs are important here.

– Second the recording — so, the labels and managers

– And next, mastering — which is where streaming services come in.

We put a lot of effort to get all of these organisations engaged, but our main focus is to get to creators — these will always be the ones who know the truth about what they are doing. For this, we see education as hugely important. Today 50% of the world’s population has access to streaming, when this gets to 80% there will a great deal of money in the industry, but the rights management world is not prepared or that.

Education to creators is going to be hugely important, so we started the Music Rights Awareness foundation, whose main purpose is to inform and educate creators about music rights and to prepare the next generation. I try to get as many partners involved in this. Many creators don’t know the difference between a recording and a composition, for example. They shouldn’t have to know everything, but we want to make it simple and easy to create.

6. Bonus question — what’s your desert island disc?

I would take if I only took one CD to a desert island, well… I would have to say Sting. The soundtrack to Leaving Las Vegas with Nicholas Cage is an album I enjoyed so much, I would without a doubt take that one.

My take

Writing songs is both the easiest, and the hardest thing in the world. Getting the creative process right can be is like trapping mist in the middle of a scrum — so it’s understandable that just doing it becomes the absolute focus. At the same time, not logging who was involved in what can lead to financial loss, the disputes that emerge years down the line (only if a song has been successful) come from not spending a little bit of time on what goes around a song.

Auddly is trying to make it possible to capture both the spark of creativity and the boring metadata that goes around it. Behind it all is a big ask — to get creators to do “the boring bit that gets you paid.” This will need not only simple tools, but also a critical mass of expectation across the industry.

Like cycling helmets, this is possible but it requires a great deal of education and support particularly among younger creatives, who may doubt the possibility of anything they do ever achieving success (“Aw, man, why do we have to deal with that stuff right now, can’t we just get along?”).

This being said, to have an accepted standard for data format, and then potentially for accepted best practice, is a very important step in the right direction. As the number of creators continues to broaden, this problem isn’t going to go away. We didn’t talk about initiatives such as Ethereum which of course play a part — there is nothing technological stopping the right answer, at the right time, becoming de facto and therefore solving this continuing challenge.

Can Frugal Innovation models apply to Western corporations?

Frugal Innovation, seen in 2012 as “a distinctive specialism of the Indian system” — is about delivering innovation while minimising costs. Here’s how UK research body NESTA put it back in 2012: “Frugal innovation responds to limitations in resources, whether financial, material or institutional, and using a range of methods, turns these constraints into an advantage.”

As examples such as Tetra Pak’s pyramid-shaped “samosa” packs (lower manufacturing cost, higher efficiency) illustrate, it is possible to use cost minimisation as an innovation driver; the four conditions of “lean, simple, clean and social” can lead to products and services more applicable to populations without access to resource levels available to more ‘developed’ countries.

Organizations looking to replicate the perceived benefits of frugal innovation (for example, to address healthcare challenges in the US, or as per this BearingPoint report) face several difficulties, not least definition. How can the term, also known as jugaad (“making do with what is around”) apply in a traditional corporation — is it simply a case of cutting off the money, or is it an exclusive feature of developing economies — only possible if you have less in the first place?

This contextual factor begs a question of whether it is just marketing speak, turning a limitation into a differentiator — “all our ingredients are hand-picked (because we haven’t got a machine)” or “we only work with a select group (because we don’t have the bandwidth to do otherwise)” and so on. It also opens itself to accusations of post-colonial patronization or even exploitation, as Western-headquartered investments and partnerships target the emerging middle classes.

Whether there is something in frugal innovation for developing economies, as USP or simply as a response to challenging conditions, Western corporations looking at it as an answer may be looking the wrong way through the telescope. To understand why, we need to think about their chequered relationship with the notion of innovation itself.

Back in the day (and to this day), the biggest tech companies would show their prowess through the amount of money they put into research, or through the number of patents they created. With reason, as hardware and software engineering presented a phenomenal number of options, with enormous economic and business potential. At the end of the Second World War (during which many resources had been allocated towards ‘the effort’), money was no object.

As a result, for companies such as IBM, the emphasis was on ‘pure’, rather than the ‘applied’ research models followed by the likes of AT&T’s Bell Labs. “The Watson Lab’s first director, Wallace J. Eckert, gave researchers license to pursue their interests without concerning themselves with business imperatives,” says IBM’s article on the topic.

This approach lasted several decades before IBM and many others had to move to the applied, that is, justification-based, model. They were not alone: I can remember my own programming alma mater, Philips Electronics, announcing that it would follow a similar strategy. (In Philips’ case, it was perhaps catalysed by the repeated failure to monetise its great ideas, such as the compact cassette and compact disk.)

Fact was, and remains, all such companies were hitting the law of diminishing returns, in which each new success requires a bigger effort than the last. With the advent of digitalization (that is, with all companies becoming tech companies) every vertical now faces a similar challenge. Companies can adopt a number of strategies to counter this — for example big banks such (as Credit Agricole) may create a new entity for innovation, to side-step the sluggishness of the mothership.

Or, as happens so often in the technology industry, they can feed the ecosystem and acquire any successful startups that result. Microsoft once had a (negative) reputation for innovation-through-acquisition, and meanwhile Oracle, CA, Cisco and many others have built their businesses on it. As someone from IBM once said to me, “We’d be able to do so much if we could just get our act together.”

So, about that telescope. Rather than seeing limited-resource models as an opportunity, organizations would do well to think about how they can freeing innovation from the constraints and shackles of over-resourcing. So, what can these be?

1. Too much money. The finance industry has a reputation for buying its way out of a crisis, or into an opportunity, with the resulting layer-upon-layer of complex, sluggish technological junk.

2. Too many cooks. Sometimes, indeed much of the time, less opinions are more valuable than more. Making a decision, trying something out and working with the outcome delivers results faster.

3. Too long timescales. We try to do everything we can, adding features and meeting as broad a set of needs as possible, resulting in project timescales that last longer than the problems they were looking to solve.

4. Too many options. Thank Geoffrey Moore for the fact that the entire tech industry is founded on differentiation, meaning we spend far too long investigating options and not enough time solving problems.

5. Too much paperwork. Policies and procedures, sign-offs and authorizations matter, but in many cases have become and end in themselves, making jumping through hoops more significant than achieving goals.

6. Too much stuff. Many of the challenges we look to address — integration, interoperability, virtualisation, network and storage management, cybersecurity, data analytics — are about dealing with the quantities of materiél we have created.

7. Too much thinking. Yes I know, that’s rich coming from me, but all this complexity makes it harder to see the wood from the trees, leaving us stymied or at least, working inefficiently.

Of all of these, perhaps the biggest is that we have too much money. We have the Web’s shotgun approach to spending advertising dollars, to the discontent of, well, everyone; indeed, the “which 50%” model also applies to start-up economy (when I was leading a development team, we struggled to understand what start-ups were doing with the 20-million-dollar cash injections they were burning).

From this, highly encumbered point of view, Frugal Innovation becomes like a holiday experience — it’s what happens when you can stop, think and perhaps even dream. We all know what happens when we come back from holiday and the real world comes flooding back in. All we really need for innovation is the ability to think. And yes, if developing economies have a make-do mindset, that becomes a differentiator worth paying for.   

Disruption, Innovation or Process Model Change? Why Banks Are A Great Example of Every Firm’s Dilemma

The debate

What do companies really need to do to succeed over the next five to ten years – and give yourself some strategic latitude here. Is it more innovation, more social communications in the enterprise? The need to find more creative responses to disruption? Or is it the bogey most firm’s fear most – deep process reengineering?
In this update we’ll look at the case of banks and conclude that, sorry, the future is all about process model innovation, or some kind of BPR. Process model innovation requires companies once again to look deep into how they do business and redesign how their people execute on company objectives.
The new process model is the business platform and executives in finance are beginning to realize they need one too.

The E2.0 Era and Social Business

Over the past decade an abundance of literature told us the real answer to productivity issues and workplace performance was “social”. In a variety of guises “social” has been the modern day but gentler business process reengineering meme.
There are various definitions: “Enterprise 2.0 is the strategic integration of Web 2.0 technologies into an enterprise’s intranet, extranet and business processes.” Yes, it represented a change in process but a manageable one for the folks affected. Enterprise 2.0 is “the use of emergent social software platforms within companies, or between companies and their partners or customers.”
This was change without layoffs, an answer to silos without process redesign.
Gigaom was on top of it from the start (see The Future of Work Platforms and the discussion around Technology and The Future of Work ) and is one of the few places that maintained a critical viewpoint. The challenge for banks is that no amount of socialising the enterprise will provide the answer to  the current disruption they face. If that’s the case for banks, it’s also the case for many other sectors too. And the reasons go deep.

The Changing Economy

Banks, as we know, are more susceptible to global economic change that other companies. They had a bull run during the period 1995 – 2005, some would say on the back of collateralised derivatives but perhaps more pertinent, on the back of a long run of increased global trade that was closely tied to growth in gross domestic product in major economies like the USA. The 1980s and 1990s were the era of booming trade in goods. It’s over, according to a recent working paper from IMF staffers.
The key reason? The relationship between US growth and Chinese growth is broken. That conjoined growth is fixed in most people’s minds by the Apple-Foxconn relationship. Apple creates the IP and design values, Foxconn builds and ships. While nothing can derail Apple, a new reality is emerging – in many emerging markets local manufacturers and suppliers are beating out the multinationals.
The graph below shows the bald truth of China’s changing position as an importer of parts for onward manufacture and shipping.
Figure 1. China’s Share of Imports of Parts and Components in Exports of Merchandise and Manufacturing (percent)

china parts and goods

The evidence supports the idea that globally we will trade less. However there is a parallel development. Small companies are trading more – a whole lot more.
Evidence for the internationalization of small business trade comes from a variety of sources.
Figure 2. Small Business Internationalisation to end 2016

small business internationalization

The table above is supported by evidence from surveys by the World Trade Organisation and by companies like DHL that have a stake in any small package international trade. According to DHL:

81% of high performing SMEs trade internationally – high performing being measured as 3 years of 10% + growth in the OECD and 20% annual growth over three year in the BRICM (BRICS plus Mexico) countries, and much of that performance is attributable to a range of international activities – import, export, partnering, sub-contracting etc. and 60% of these companies expect to increase their international activities to a total of 20% of all turnover over the coming three years.

So here is the problem for banks. In fact it is a generic problem for companies looking a few years out.
Their large customers are being beaten out of emerging markets by local competitors because there are too few supportive financial functions for western companies in, say, the second cities of Vietnam, or the third cities of China. It is tough to get the credit checks, to provide the merchant credit, to find the data on consumption patterns, all the things that go into a western market entry campaign. So much so that Nestle is less able to sell its ice creams or P&G to sell its detergent.
Their small customers are meanwhile expanding into new markets. Traditionally these are precisely the customers that banks don’t want to loan to – sub-$1million dollar loans are not cost effective for relationship managers.
Leave aside the esoteric discussion banks are currently having about Bitcoin and distributed ledger technology, they are losing credibility with customers. This is not necessarily a fatal position but does call for substantial process change.

The case for banks as platforms

Banks will have to gravitate towards platforms if they are to serve small businesses and if they are to improve their relationships with larger ones. The importance of the first of these is that the rosy future (growth) lies with the small business that is internationalising. The second is their mainstay. It’s where the big money mandates come from.
In the case of small businesses, banks typically have too high a cost base for serving small business needs, depending on real-world relationship building, high margins and outdated credit scoring. New limited feature platforms like Cashflower can help with transparent cash management and platforms like PayPal are stepping in with working capital support.
Platforms like Alibaba fund the customer, the merchant and the manufacturer, as well as hiving off cash to fund managers, as well as providing escrow to secure trust. US and European innovators have a long way to go to be competitive in this area.
For larger customers banks need to adapt the integrated model that Alibaba has proven, and provide cash visibility, new foreign exchange management services, innovate in credit references, and devise other services that will make more trade happen in more localities.

The Process Model Innovation Challenge

Here’s the challenge. Most people who do not understand the world of platforms, think Uber. That’s essentially an upgrade of the late 1990s Application service provider-thin client model of platform that has people raving, has VC money gushing, but is not era defining. Integration is era defining.
For banks to move to platforms they have to look beyond Uber or the two-sided market model. They need to think how to deal with  x 10 the number of customers on a small business platform, how to engage the developers who might innovate around it, how to brand a platform with no ethnic or nationalist legacy, and how to promote brand inspirationally. They need to learn new traction rules. They have to go beyond departments to a Netflix style of internal platform configuration so that they can move with agility to solve problems as they scale.
In that context E2.0 makes sense too because suddenly everything you want people to do comes back to how they communicate, project the brand and engage people online at low unit cost.
The challenge though is how to get a departmentally silo-ed organisation with a traditionally minded executive team to see itself owning a platform that requires a totally new skill set. In that context here are some thoughts wrapped up in the takeaways but here is a final piece of evidence to ponder.
In a recent study of innovation capability among banks, conducted by The Disruption House, we found leadership to be the single biggest deficit of these august organisations. The graph compares the top 10 companies in terms of innovation capability from a 2013 study of innovation across all sectors (blue line) with a 2015 study of financial institutions (red line, including companies like Alibaba), with the top 10 banks in the same study (yellow line) and the top 10 Globally Systemically Important Banks (or G-SIB, green line). It shows the G-SIB with the lowest innovation leadership capability.
Figure 3. Comparing Financial Institution Innovation Capability

fintech comparisons

Takeaways

  1. Large scale economic change is upon us, even if we set aside any notion of some new technology or idea being disruptive. The old supply chain complexity model is flatlining.
  2. The momentum lies with smaller businesses that need different types of support
  3. Platforms are the answer but we are over-seduced by the Uber model and should be looking instead to integrated platform models.
  4. To do that, large organisations, like banks, need to develop an inter-generational leadership dialogue.
  5. The inter-generational leadership dialogue is a forum that large banks, and their peers in other industries, now urgently need in order that they can explore options openly. Optionality as a strategic tool was explored in this Gigaom paper. Process model innovation is an imperative but the ones who have to make it succeed are likely not the ones who commission the change. Difficult pill to swallow for many banks but leadership has to be a shared vision.

The Return of Middle Managers

“That experiment broke. I just had to admit it.” — Ryan Carson, CEO of Treehouse Island, on his attempt to run the company without managers

There is currently a widely-held view among organizational design experts and pundits that managers, particularly middle managers, are a harmful artifact of hierarchically-structured, command-and-control organizations. Conventional wisdom holds that middle managers, and their responsibilities and stereotypical behaviors, are outdated and severely constrict the speed at which a business can operate. Flat, democratic organizations made up of loose, recombinant relationships have gained favor in the org design world today because they enable agility and efficiency.
There’s just one problem with that view – it’s not entirely accurate. It represent an ideal that may be right for some organizations, but very wrong for many others.
Carson and Treehouse Island’s failed experiment was one of the examples given in a recent Wall Street Journal article (behind paywall) titled “Radical Idea at the Office: Middle Managers”. The common thread between the companies mentioned in the article was that the elimination of bosses had the opposite effect of what had been envisioned. Productivity decreased because workers weren’t sure of their responsibilities and couldn’t forge consensus-based decisions needed to move forward. Innovation also waned, because new ideas went nowhere without a management-level individual to champion and fund them. Employee morale even took a hit, because no one took over the former middle management’s role of providing encouragement and motivation when they were needed.
Research of over 100 organizations conducted by an INSEAD professor led to this conclusion, cited in the WSJ piece:

“Employees want people of authority to reassure them, to give them direction. It’s human nature.”

Enabling Technologies that Don’t

Another problem experienced by many of the organizations mentioned in the WSJ article was that technologies meant to enable employees to work productively in a manager-less workplace failed to do so. Enterprise chat systems were specifically fingered as a culprit, for a variety of reasons.
At Treehouse Island, which had never used email, decision-making was severely compromised by employees opining on chat threads when they had no expertise on the given subject. This led to “endless discussions”. The chat technology drove conversations, but ideas rarely made it past discussion to a more formal plan. Work tasks informally noted and assigned without accountability in the chat application mostly got lost in the shuffle and weren’t completed. Treehouse Island eventually turned to other communications channels and even acknowledged that email has valid uses.

Worker Education and Training, Not Managers, Are the Problem

While I agree with the assessment that human nature is a barrier to effective manager-less workplaces, I also think that our base impulses can be minimized or completely overcome by alternative, learned attitudes and behaviors. Society and institutions in the United States have programmed multiple generations to submit to authority, seeking and accepting its orders and guidance. Our educational system has largely been designed to to produce ‘loyal and reliable’ workers who can thrive in a narrowly-defined role under the direction of a superior. Putting individuals who have been educated this way into situations where they must think for themselves and work with others to get things done is like throwing a fish out of water.
As for enterprise chat technology, it has seen documented success when deployed and used to help small teams coordinate their work. However, most of those teams working in chat channels either have a single, designated manager with the authority to make things happen, or they are able call upon a small number of individuals who can and will assume unofficial, situational leadership roles when needed. Absent people to act with authority, chat-enabled groups become mired in inaction, as document in the WSJ article. As I put it in my recent Gigaom Research post on enterprise real-time messaging,

The real reason that employees and their organizations continue to communicate poorly is human behavior. People generally don’t communicate unless they have something to gain by doing so. Power, influence, prestige, monetary value, etc. Well-designed technology can make it easier and more pleasant for people to communicate, but it does very little to influence, much less actually change, their behaviors.”

We will see more experiments with Holocracy and other forms of organization that eliminate layers of management and depend on individuals to be responsible for planning, coordinating and conducting their own work activities. Some will succeed; most will fail. We can (and should!) create and implement new technologies that, at least in theory, support the democratization of work. However, until systemic changes are made in the way people are educated and trained to function in society and at work, companies without managers will remain a vision, not a common reality.

No, you really do need a CIO…and now!

For those that follow my writing, this post may have a familiar ring to it. Unfortunately, there is a reason I’m writing about this yet again as the point still eludes many.

The curious case of Acme Inc

Take a recent example for Acme Inc (company name changed). Acme is a mid-sized organization without a CIO. I spoke with the CEO and another member of the executive team that were trying to solve tactical technology and information problems on their own. In this case, Acme is experiencing solid growth of 50% CAGR. They believed they were being strategic in their technology decisions. The truth was far from it. It was painfully apparent they were way out of their wheelhouse, but didn’t realize it. In a way, they were naive that the decisions they were making were locking them into a path where, near-term, the company would not remain competitive. But they didn’t know that. They were looking to solve a technology problem to support their immediate growth trajectory without thoughtfulness of the opportunity. They were also relying too heavily on their technology providers whom they believed had the company in their best interests. Unfortunately, this is not a fictitious story of what could happen to a fictitious company. It is a real situation that occurred with a real company. And sadly it is one of many.

Trust is incredibly important in business today. There is no question. But as one mentor once taught me many years ago: Trust, but verify. In the immortal words of Deming “In God we trust, all others bring data.”

What is a CIO?

What is a CIO and do I need one? This is a question that many chief executives ask as their business evolves. I addressed a similar question about the CDO in ‘Rise of the CDO…do you need one?’ last year.

For small to mid-size enterprises, the conversation is not taking place soon enough. Many are still contemplating how to task the IT manager or director with more responsibility. Or worse yet, the responsibilities are being shared across the executive team. In one example outlined below, the results can be catastrophic.

So, when do you get your first CIO? And if you have a CIO, do you still need one? Isn’t the CIO’s role simply about managing the computers? In a word, no.

Do I need a CIO?

The short answer to this is yes. From small to large enterprises, the need for a CIO is greater today than ever before. Many will see a CIO and their organization as a cost center that eats into the bottom line. If so, that is a very short-sided view. Today’s CIO is very strategic in nature.

More than ever, business relies heavily on technology. But more than the technology itself, it is how it is applied and leveraged that makes the difference. The how relies heavily on context around business value and applicability. It requires someone, the CIO, to make the connection between business value across multiple disciplines and the technology itself.

Can other executives provide this capability? No. They can provide a different caliber of tactical implementation, but not the cross-functional strategic perspective that a CIO brings to the table. And it is this cross-functional strategic perspective that brings significant value to differentiate companies.

Information is the currency of business. It is what drives business decisions that will affect the success and failures across a myriad of dimensions. The CIO is the best position to understand, drive and expose value from information. The value of the information

What does CIO stand for?

This seems like a perennial subject. What does the ‘I’ in CIO stand for? Information? Innovation? Inspiration? Integration? The bottom line is that the I stands for the same thing is has always stood for; Information. Today’s business is driven by information. Technology is simply an enabler to leverage information. Integration, innovation, etc are all functional means to drive the value of information to a company.

If information is gold, what is technology? Technology is similar to the mining and refining equipment to extract and process the gold. Without it, the gold may be discovered, but in small quantities using ineffective means. A major factor in today’s business is speed. Access to information quickly is paramount.

The evolving role of the CIO

The CIO’s role (past and present) is far more complicated that many appreciate. A CIO is really a business leader that happens to have responsibility for IT. In addition, a CIO is really a CEO with a technology focus. A CIO is strategically focused and able to traverse the entire organization at the C-level. That last attribute requires a level of experience very different from the traditional CIO.

In the case of Acme, a CIO would be a great asset moving forward.

5 things that prepare the CIO for innovation

Last week, Amazon (NASDAQ: AMZN) held their annual re:Invent conference in Las Vegas. Gigaom’s Barb Darrow summarized her Top-5 lessons learned from the conference here. Specifically for CIO’s, there were a number of things coming from the conference that every CIO should take note of. One of those is to prepare for innovation. It is not a matter of if; it is a matter of when.

Innovation is not a destination, but rather a journey. The path is not always rosy and presents a number of challenges along the way. The upside is an outcome that positions the CIO, the IT organization and ultimately the company in a unique position among their competitors.

There are a number of core items that prepare the CIO for advancing down the innovation path:

  1. Keep it simple: The world of Information Technology (IT) is getting complex, far more complex, and not simpler. Yet, the importance to become agile and responsive to changing business demands is ever-present. The IT organization must find ways to streamline their processes across-the-board. We all know the KISS principle.
  2. Create innovative culture: Innovation is not innate for most. Current culture may actually inhibit innovation within the organization. Understand that culture must change. A good friend and CIO, Jag Randhawa wrote the book “The Bright Idea Box: A Proven System to Drive Employee Engagement and Innovation.” Jag outlines a process that he found to be successful and applicable to many different types of organizations.
  3. Avoid constraints: It is easy to find ways to avoid problems. Preparing for innovation can cause disruption. However, questioning the status quo may be exactly what the organization needs. Look for ways to address constraints whether from technology or from conventional thinking.
  4. Find leverage: IT is not able to do everything. In the past, it was necessary for IT to do everything (relatively) since there really was no other alternative. Fast-forward to today and there are many more options available. Identify what is strategic and should be a focus for IT. Find leverage for the other points to avoid distraction and paralysis.
  5. Seek difference: Being different is often a scary proposition. Many see differentiation as a sign of risk. The thinking that there is safety in numbers. But the thinking must change. Differentiation is something not just to be cherished, but sought out! Look for opportunities to change and provide differentiation.

The combination of these mantras set the stage for a different perspective and line of thinking. Are these the end-all, be-all list of steps? No. But they present a good short-list to start with. Start small and do not expect the changes to happen overnight. It will take time and reinforcement.

Many of the discussions taking place last week at AWS re:Invent spoke of innovation and new ways of thinking. They spoke of a future state for IT. Consequently, traditional thinking had a hard time gaining a platform for discussion.

Connecting the dots

Yet, much of the challenge traditional enterprises have is around connecting the dots between current state and future state. For the CIO, setting the stage, cadence and direction is much of the challenge. It is a lot of work, but still needs to be done.

The first step is in setting a vision that aligns with the business strategy. Understand the core business of how the company makes and spends money. Seek out ways to provide innovative solutions. Start out small, learn from the experience and grow. Look for ways to streamline how IT operates and continually improve IT’s position to become more innovative.

Innovation is about the journey, not the destination. Innovation is an opportunity for differentiation that must be accepted and celebrated. Innovation presents a significant opportunity for companies from all industries. And IT plays a key role in driving today’s innovative processes.

What do cloud consolidation and disruption have in common?

One thing is for sure, we can expect to see much more of cloud consolidation and disruption happening in the IT space over the coming months and years. Recently, Cisco, EMC, HP and IBM have all acquired startups from the cloud space. And each of these acquisitions was disruptive in their own way.

Cloud, in theory, should not be that disruptive. However, the essence of cloud actually presents a compelling disruptive story that is intoxicating to those whom fully understand the potential. That being said, enterprise IT organizations will leverage a combination of traditional IT services and cloud-based solutions.

Not surprisingly, the recent cloud acquisitions sit closest to the current state of the traditional enterprise. Key to this strategy is to 1) expand the portfolio by offering new solutions and 2) evolve the enterprise (and provider) toward a cloud-based strategy.

Keeping score

For those keeping score, Cisco acquired Metacloud. EMC acquired Cloudscaling. HP acquired Eucalyptus. And IBM acquired SoftLayer. Based on the momentum, one could look toward IBM to make the next move. On the other side, with Cisco, EMC and HP going after private cloud solutions, there is a position to take that it is these three to watch. An additional factor to consider is that a startup may have a great solution, but not enough runway (money) to keep them afloat until the market is ready to adopt. Watch for more of these situations, as the overall IT market takes longer to adopt disruptive solutions such as cloud-based solutions.

Shifting the incumbents

Regardless of who moves first, second, third or fourth, the act of acquiring cloud-based solutions will create a shift in the provider’s overall strategy. For the enterprise CIO, one key to watch will be momentum among the cloud startups. Which solutions are up-and-coming and getting quite a bit of attention by early adopters? Two that come to mind are Docker and OpenStack. If OpenStack were a company, this would be the one to watch. In any case, enterprise IT organizations need to keep close watch of this area.

As enterprise IT organizations shift from traditional IT infrastructure to converged infrastructure and onward to cloud-based solutions, the incumbent provider must have an answer to the shift. Let it be noted that the incumbent need not provide all parts of the solution. This is where the ecosystem comes in to create value and fill the gaps in the strategy.

Leveraging innovation

Many ask why the incumbents do not innovate internally and build out their portfolio like they have in past years. With a vibrant industry of up-and-coming potential solutions, there are easier paths to success. Why take the risk and invest significant funding into a number of different strategies only to have one pay off? Instead, watch the space and acquire the right solution that has a proven technology and fits the model well. The key is finding the point when the solution is proven, but not so successful that it demands paying a premium.

For the CIO, this means keeping close tabs on how the cloud space is evolving regardless of the stage of adoption they are at. Cloud solutions impact organization, services, and processes in addition to technology.

Divesting leads to Consolidation

The big breakups of 2014 are leading to further cloud consolidation. Many of the large IT providers have simply gotten too big and too diversified. Divesting is essentially a healthy way to trim their portfolio and refocus the company in leading areas within their industry. Divesting also opens the door to an interesting side effect of acquisition opportunities.

Intersection of cloud consolidation and disruption

Each of the acquisition targets is disruptive in their own right. The market as a whole is also very fragmented with solutions solving a similar problem, but in very different ways. And each company does one thing and one thing very well. The opportunity to explode the solution comes with building out the ecosystem. For the startup, what better way than to sell to a larger organization that has several of the building blocks already integrated and productized. Plus, the alternative of heading toward IPO is just not as appetizing of an equity event as it used to be.

5 things to prepare the CIO for disruption

For years, IT organizations operated in a certain way. They provided a relatively standard service in a particular way. Of course, both of these evolved incrementally year over year. Over the past 5-10 years, that direction has changed pretty significantly. And it shows no sign of stopping anytime soon.

Data Center

10 years ago, if one said ‘death of the data center’ in a room of IT leaders, it would be seen as heresy. Today, IT leaders are actively looking for ways to ‘get out of the data center business.’ If you are one of the corporate environments not already thinking about this strategy, you are behind the curve. No longer is a physical data center a representative requirement to operate IT. Today, many options from colocation to cloud Infrastructure as a Service (IaaS) exist to replace this functionality. Not only does it exist, many solutions are already mature and more sophisticated than traditional approaches within the corporate data center.

Organization

At the other end of the spectrum, the organization is undergoing a significant shift too. Traditional organizations thought of their ‘customers’ as the internal users of the organization. The focus was predominantly on the internal operations of the company. Development may have spanned externally to partners and customers, but in specific ways. IT organizations are shifting to determine who their ‘customers’ really are. The shift in thinking starts with a change in focus. And that focus is one of the preparations.

Partnerships

The way IT organizations interacted with ‘customers’ was typically as two different organizations. The discussion typically included a distinction between IT and ‘the business.’ To some, this appears as an us-and-them perspective. The two were seen as very different and therefore required a different level of partnering within the company. At the same time, IT needed to clearly understand how ‘the business’ operated and at times translate between business requirements and IT deliverables. Part of the changes over time created a means to clarify this partnership. However, changes to the perspective assist with the introduction of disruptive methodologies. For example, Shadow IT, to some a threat, can become a real asset.

Changes in customers and users

Consumption expectations for customers and users changed as well. Consumers became more technologically savvy and demanded more. Overnight, consumers become familiar, and more comfortable with solutions quicker than IT organizations could adopt them. The technology available to consumers rapidly became more sophisticated. The combination of these two drove a change in consumer behaviors. Consumers, and customers became more demanding of technology…and by extension, corporate IT.

Getting ready for disruption

So, how does the CIO respond to these changes in a timely and meaningful manner? Start at the top and work down. That means, start with a business-centric approach that takes the perspective of the true customer (the company’s customer) and work your way down.

  1. Business-Centric Perspective: Change the culture and perspective to focus on a business-centric approach. Stop focusing on IT as a technology organization. The CIO needs to be a business leader that happens to have responsibility for technology. Not the other way around. Instill this change within the IT organization that is both meaningful but also helps staff adapt to the changing landscape. This will take time, but must be a mission for IT.
  2. Adopt DevOps: A fundamental premise behind DevOps is the ability for IT to work more holistically across traditional silos (applications & operations). Brining the teams together to work collaboratively and effectively is essential to the future IT organization and their customers.
  3. Stay Flexible & Responsive: Customers expect quicker response to change. Instead of building a fortress that will withstand the test of time, build one that will adapt to the changing business climate and requirements.
  4. Engage Cloud: Cloud is the single largest opportunity for IT organizations today. Plan a holistic strategy to leverage cloud in appropriate ways. For many this will look like a hybrid strategy that evolves over time versus a haphazard approach.
  5. Challenge the Status Quo: Lastly, do not assume that the way things were done in the past will work moving forward. Many organizations struggle to find success with newer methodologies because they apply past paradigms. In some ways, it is almost easier to forget the past and think about how to start from scratch. Momentum can provide some resistance, but it is healthy to challenge the status quo.

Each of these steps provides a different perspective that helps shift the thinking around IT. It starts with the CIO and involves both the IT organization and the business organizations outside of IT. Each of these five steps provides the change in perspective to evolve the IT organization and value it provides.

Seven Things the CIO should consider when adopting a holistic cloud strategy

As conversations about cloud computing continues to focus on IT’s inability at holistic adoption, organizations outside of IT continue their cloud adoption trek outside the prevue of IT. While many of these efforts are considered Shadow IT efforts and frowned upon by the IT organization, they are simply a response to a wider problem.

The IT organization needs to adopt a holistic cloud strategy. However, are CIOs really ready for this approach? Michael Keithley, Creative Artists Agency’s CIO just returned from CIO Magazine’s CIO 100 Symposium which brings together the industry’s best IT leaders. In his blog post, he notes that “(he) was shocked to find that even among this elite group of CIOs there were still a significant amount of CIOs who where resisting cloud.” While that perspective is widely shared, it does not represent all CIOs. There are still a good number of CIOs that have moved to a holistic cloud strategy. The problem is that most organizations are still in a much earlier state of adoption.

In order to develop a holistic cloud strategy, it is important to follow a well-defined process. The four steps are straightforward and fit just about any organization:

  1. Assess: Provide a holistic assessment of the entire IT organization, applications and services that is business focused, not technology focused. For the CIO, they are a business leader that happens to have responsibility for technology. Understand what is differentiating and what is not.
  2. Roadmap: Use the options and recommendations from the assessment to provide a roadmap. The roadmap outlines priority and valuations that ultimately drive the alignment of IT.
  3. Execute: This is where the rubber hits the road. IT organizations will learn more about themselves through action. For many, it is important to start small (read: lower risk) and ramp up quickly.
  4. Re-Assess & Adjust: As the IT organization starts down the path of execution, lessons are learned and adjustments needed. Those adjustments will span technology, organization, process and governance. Continual improvement is a key hallmark to staying in tune with the changing demands.

For many, following this process alone is not enough to develop a holistic cloud strategy. In order to successfully leverage a cloud-based solution, several things need to change that may contradict current norms. Today, cloud is leveraged in many ways from Software as a Service (SaaS) to Infrastructure as a Service (IaaS). However, it is most often a very fractured and disjointed approach to leveraging cloud. Yet, the very applications and services in play require that organizations consider a holistic approach in order to work most effectively.

When considering a holistic cloud strategy, there are a number of things the CIO needs to consider including these six:

  1. Challenge the Status Quo: This is one of the hardest changes as the culture within IT developed over decades. One example is changing the mindset that ‘critical systems may not reside outside your own data center’ is not trivial. On the other hand, leading CIOs are already “getting out of the data center business.” Do not get trapped by the cultural norms and the status quo.
  2. Differentiation: Consider which applications and services are true differentiators for your company. Focus on the applications and services that provide strategic value and shift more common functions (ie: email) to alternative solutions like Microsoft Office 365 or Google Apps.
  3. Align with Business Strategy: Determine how IT can best enable and catapult the company’s business strategy. If IT is interested in making a technology shift, consider if it will bring direct positive value to the business strategy. If it does not, one should ask a number of additional questions determining the true value of the change. With so much demand on IT, focus should be on those changes that bring the highest value and align with the business strategy.
  4. Internal Changes: Moving to cloud changes how organizations, processes and governance models behave. A simple example is how business continuity and disaster recovery processes will need to change in order to accommodate the introduction of cloud-based services. For organizations, cloud presents both an excitement of something new and a fear from loss of control and possible job loss. CIOs need to ensure that this area is well thought out before proceeding.
  5. Vendor Management: Managing a cloud provider is not like every other existing vendor relationship. Vendor management comes into sharp focus with the cloud provider that spans far more than just the terms of the Service Level Agreement (SLA).
  6. Exit Strategy: Think about the end before getting started. Exiting a cloud service can happen for good or bad reasons. Understand what the exit terms are and in what for your data will exist. Exporting a flat file could present a challenge if the data is in a structured database. However, that may be the extent of the provider’s responsibility. When considering alternative providers, recognize that shifting workloads across providers is not necessarily as trivial as it might sound. It is important to think this through before engaging.
  7. Innovation: Actively seek out ways to adopt new solutions and methodologies. For example, understand the value from Devops, OpenStack, Containers and Converged Infrastructure. Each of these may challenge traditional thinking, which is ok.

Those are seven of the top issues that often come up in the process of setting a holistic cloud strategy. Cloud offers the CIO, the IT organization and the company as a whole one of the greatest opportunities today. Cloud is significant, but only the tip of the iceberg. For the CIO and their organization, there are many more opportunities beyond cloud today that are already in the works.