1EdotpCNf0.md

We Are Not Playing A Short Game

[TODO: contextual linkages. So we enter this chapter having claimed that specialization helps with trust-earning, and defining 4 "types":

insider (vertical specialists) articulate craftsman (specialized for a while) mountainclimbing guide (leadership) visionary (leadership)

We've also talked about the Rogers curve and commoditization, and leadership styles.

• Generating vision
• Inspiring action
• Clarifying direction
• Reducing the risk of action
• Organizing/managing implementation

Boy, this all feels like a giant mess. :) What to do? Need to map it out better I think.]

In your business, you're not playing a short game, are you? If you are, this chapter might get under your skin. I doubt it'll change your mind though; short game thinking is usually driven by difficult circumstances like poverty or by or powerful external incentives, neither of which are easy to change.

So, I'm speaking to the long-gamers here. We think about how things change over time, and make decisions about what to do now in the context of that systemic change over time. Our decisions might only make sense to others who share this context.

Time

When we make decisions now, we have to live with the consequences of those decisions, or expend time and effort and face additional risk changing them. That's why it's worth looking for the patterns in how things change over time so we can make decisions that will hold up better over time.

One clear pattern is commoditization. I've already touched on commoditization — in rather poetic terms in the context of platforms — in an earlier chapter. Commoditization is a phenomenon that is far broader than just platforms.

Over time, things that society needs at scale — electricity, railroad tracks, project management methodology, design frameworks, etc. — move from innovation, where novelty and relative chaos prevail to standardization, where utility and relative order prevail.

An innovation is an idea, practice, or object that is perceived as new and provides perceived relative advantage.

The early stage of an innovation's existence is defined by waste. When the innovation enters the market, it is poorly understood, and the innovation itself is relatively unreliable and un-standardized. This means that a few customers who have no business buying the innovation buy it anyway, and others who are better equipped to benefit from the innovation spend lavishly on understanding, customizing, implementing, fixing, and supporting it. From the perspective of people and companies who embrace innovation early on, these are all normal forms of risk and overhead cost required to unlock the value (relative advantage) of the innovation.

From the future perspective of the commoditized form of the innovation, these are all forms of waste. They threaten the widest possible adoption of the innovation, and so they must be reduced or eliminated. As both the supply and demand sides of the market learn how to reduce the waste involved in producing, distributing, and consuming the innovation, prices inevitably move downward. Hungry suppliers use lower prices as a path towards greater volume, and the demand side of the market is always happy to normalize and insist on a lower price so long as it does not threaten the quality, consistency, and availability of the thing they are seeking.

And so as time marches on, if society needs the innovation at scale, it matures into a commodity. When the thing is new, we don't know if society will need it at scale because... it's new! But we do know that if society ends up needing it at scale, it will commoditize.

Even in commodity markets, the bespoke will still exist. Society wants automobiles at scale, yet there are still companies selling hand-built cars at a dramatically higher price point. But these hand-built cars represent a tiny share of the total trade in automobiles.

Adopter Categories

Markets sort themselves into adopter categories on both the supply and demand side. There are companies that sell new innovations and commoditized stuff to every kind of buyer (Amazon.com comes to mind), but it's more common to see companies specialize in selling to a certain kind of buyer, and buyers — or adopters of innovation — definitely have differing appetites to consume or resist consuming innovations. If your company is optimized for selling to those who are eager to consume innovation and then you try to sell to those who resist innovation, everything about your marketing and sales process will be misaligned with your buyers expectations and needs. It will be a disaster.

It doesn't seem to matter whether the innovation is an idea, a practice, or an object – all innovations move through a lifecycle from innovation to commodity, and as they do these innovations are also spreading more widely – or diffusing — through a social system.

The ever-broader adoption of an innovation is best seen as a social process, not a mechanical, technological, or economic process. It is based on personalities and emotions and relationships and systems of human relationships.

The late Everett Rogers' research is very helpful here. He has observed the same S-shaped adoption curve for innovation over a surprisingly wide variety of innovations, from safer sex practices among gay men in San Francisco to the adoption of new agricultural practices among indigenous farmers in

@ILLUSTRATION: S-curve showing the 14-year long diffusion of a hybrid seed corn through an Iowa farming community (p273 of Diffusion of Innovations)

Those who tend to adopt innovations the soonest are called innovators (2.5% of us), and the latest to adopt are referred to as laggards (16% of us!). Between these two extremes are early adopters (13.5%), the early majority (34%), and the late majority (the remaining 34% of us). The visualization of this normal-ish distribution divided into 5 slices is so widespread and ubiquitous, at least in the world of technology adoption, that we may not recognize it as anything other than a fact of human nature.

@ILLUSTRATION: diffusion curve

It is a fact of human nature, but Everett Rogers 1962 book Diffusion of Innovations is what has seared the image above into our consciousness. This, from Wikipedia is a fascinating note about the relatively settled nature of Rogers theory.

Because there are more than four thousand articles across many disciplines published on Diffusion of Innovations, with a vast majority written after Rogers created a systematic theory, there have been few widely adopted changes to the theory.

This brings us full circle to the idea of commoditization. We could think of Rogers theory on how innovation diffuses through social systems as a commodity. Like Rogers theory, an innovation that has reached maturity and has become commoditized is a settled issue.

Who thinks that the electricity that comes out of wall sockets in North America should be 50 volts and 90 hertz? Nobody!! Who thinks we should revisit the direct vs. alternating current debate? Again, NOBODY thinks that!

The North American standard for mains electricity has long been standardized, and this contributes to commoditization, and this commoditization unlocks significant value. You don't have to wonder if the table lamp you are considering buying will work with the electricity in your house. You may not notice it, but this lack of uncertainty about interoperability creates significant value.

We see a striking parallel between how innovations diffuse through society and the idea of commoditization. In fact, we can look at the S-curve that describes adoption of an innovation also as an S-curve that describes commodity-ness.

The more widely adopted an innovation is, the less innovative it is and the more like a commodity it is.

The Value Of Leadership

As innovations diffuse through systems and mature into commodities, the value and nature of leadership changes. Not leadership broadly, but leadership that is connected to the adoption of innovation. For example, at some point the world of business got convinced that it needed digital transformation^[Let's set aside for the moment the leadership required to get the world of business to embrace that vision.]. You could see digital transformation as an innovation, and broad innovations like this need leadership. They need people to offer guidance, inspiration, and support.

As an innovation becomes a commodity, leadership changes in nature from a bold, swashbuckling ability to figure shit out to a more tame, resolute ability to enforce or maintain standards. Both forms of leadership are valuable, but because innovation is an inevitable by-product of the passage of time, the former leadership style will become less valuable while the latter becomes more valuable within the context of an evolving system.

This means that if your style of leadership is that bold, swashbuckling ability to figure shit out, the value of this leadership will erode as the system you are within commoditizes. You can, of course, respond by changing your focus to a different system, or periodically refocusing on a less commoditized aspect of the system you are within.

Leadership Styles

This is a good place to remind you of several previously mentioned aspects of leadership:

• Generating vision
• Inspiring action
• Clarifying direction
• Reducing the risk of action
• Organizing/managing implementation

It's probably obvious now that these aspects of leadership are listed in the same order they would unfold around an innovation that is marching towards commoditization. At first, vision and inspiration are the highest-value forms of leadership because the novelty and uncertainty surrounding the innovation need a counterbalancing force to kick-start adoption.

As the novelty and uncertainty start to erode, the more risk-averse and thrifty early and late majority start to adopt the innovation. They need clarity, risk-reduction, an emerging body of best practice, and a robust ecosystem of support to enable their adoption. They need leadership that is oriented towards these things. Vision and inspiration were never really going to work on them anyway; they respond more to a clear business case and a robust implementation plan.

@TODO: section title

So where does this leave us?

• Your leadership style -- which is your "trust engine" -- might dictate your way of focusing.

• You might ponder the vectors by which you maintain the value of your leadership style over time: onioning out, platform surfing, etc.

• You might assess the dynamism of the system you're operating in and consider whether that will supply enough "fresh blood" to match up with your leadership style.

• You might think of a growth ladder for your trust-earning ability where you mature "backwards" from the more-commoditized to the less-commoditized end of the market.

    	- The highest-value forms of leadership (in an indie consultant context) [I think this was a summary note in Xmind that got put there. I think this summary bracketed generating vision and reducing the risk of action. ]
    - The opportunities to deploy the highest value forms of leadership diminish rapidly once something reaches the late majority.
  

  • The above two patterns about leadership and time have real implications for how we cultivate expertise and use expertise to lead our clients.
    • Just like the future is unevenly distributed, so is the value of expertise.
    • But it's not random! There are patterns in valuing expertise, and those patterns follow the innovation/commoditization pattern we've described above.
    • Implication: the value of leadership is unevenly distributed. We can earn trust through leadership that is deployed outside the high-value areas, but we also have a choice to focus on those high-value areas instead and generate MORE value. Why not go for the higher value contribution?

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