Learn to Adapt

In today’s hyper-dynamic world, the ability to solve problems quicker and bring innovations to market is essential to success.  Diversity is the foundation of better problem solving, innovation, and market prediction.  While there has long been anecdotal proof of diversity’s value, a sound mathematical proof was not available until Scott E. Page published The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies in January of 2007.

Last Wednesday I was fortunate to be spend a few hours with Scott.  Tiane Mitchell Gordon invited Scott to speak at AOL and asked me to join them since we are working together on a new, results-focused diversity and inclusion curricula.  After his presentation, Scott discussed at length how organizations can better leverage the power of diversity to improve performance and compete better in the 21st century marketplace.

Scott’s book is a revelation to any of us who have had to answer the “prove it” question regarding the competitive power of diversity.  Because the book presents a mathematical proof, it is not the easiest read you will pick up on the topic.  Scott is, after all, a professor of complex systems, political science, and economics.  He recognized the power of diversity from an economic perspective - instead of the typical sociology or human resources perspective.  Fortunately, Scott’s eclectic examples and great sense of humor soften his scientific treatise.

Our discussion was wide ranging, but can be boiled down to the title of this post: The Science of Diversity and the Art of Inclusion.  Scott recognized the mathematical power of diversity, but most of the (very good) books on the topic were anecdotal and qualitative (see Frans Johansson’s Medici Effect, Don Tapscott’s Wikinomics, and James Surowiecki’s Wisdom of Crowds).  Scott wrote his book to provide a mathematical equation that equates the power of diversity.  The hope being that quantitative proof would encourage leaders to diversify their teams.  Of course, building a diverse team is just the beginning.  For diversity to deliver competitive advantage, the art of inclusion must be applied to unleash it.  I’ll get to the art of inclusion in a bit, but let’s first finish pondering the science of diversity.

For too long, diversity has been viewed from a “representation” perspective.  Affirmative action, EEOC lawsuits, and representation quotas put organizations into a reactionary mindset of preventative precaution.  Only now are we seeing organizations emerging from this reactionary morass to recognize the strategic value of diversity.  Organizations are proactively courting diversity as a competitive advantage.  And we can see this dichotomy of reactive vs. proactive reflected in the current discussion of “identity diversity” vs. “skills diversity”.

Identity diversity is “old school” – the representation view of diversity using variables such as gender, race, ethnicity, etc.   And it is a two sided coin – both how you view yourself and how others view you.  While this type of diversity continues to be very important to building diverse teams, it may not be as important as skills diversity.  Skills diversity (you can substitute “cognitive”, “experience”, or “perspective” for “skills”) refers to the tools each individual brings to their team.  While the identity variables still apply to skills diversity, it is driven by the multitude of experiences that make us who we are.  A person’s primary language, type of education, level of education, social customs, political beliefs, value system, problem solving methods, work experience, geographic origins, and a host of other variables all contribute to her skills diversity.

With that understanding of diversity, Scott equates the value of diversity.  He mathematically demonstrates how diversity improves problem solving, innovation, and prediction accuracy.  I encourage you to get Scott’s book for the detailed mathematics.  But let’s bring this back to practical application.  If a leader recognizes the importance of both identity and skills diversity, how does she build a diverse team?  Many great minds are working to answer that question and it is what Scott and I spent the most of our time discussing.  We discussed the possibility for new evaluation tools, skills assessments, psychological profiles, etc. These tools could help leaders peer into the diversity of their current team and potential new hires.  But until those tools are readily available and easy to use, leaders will simply need to be diligent in gauging diversity.

No matter how a leader goes about building a diverse team, the team’s potential will never be realized unless the leader also masters the art of inclusion.  A deceptively simple definition of inclusion is “managing a group so that all diverse members are given the opportunity to participate equally.”  But it is more complex than that.  Depending on the team and the goals, the leader will need to artfully use a number of tools to unlock the team’s potential.

And what are the tools of the art of inclusion?  Because this post is already too long and my ADD is begging me to find something else to do, I will leave the art of inclusion for a future post.  A weaselly way to end the post, I know.  But here’s the (probably obvious) teaser: the tools are nothing that most effective leaders don’t already have in their toolbox.

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Ever since the first networked copier/scanner was installed in my office, I wondered how long it would be before the fax machine became obsolete. The copier/scanner makes it easy to scan any document to PDF and attach it to an e-mail - providing greater efficiency, privacy, and accountability than the old faxing process.

Today I received my fist “standardized corporate” business card that did not have a fax number. This was not from a techno-evangelist eschewing vestigial technology - it was from a salt-of-the-earth program manager. When I asked her about she said she wasn’t concerned that the number wasn’t there since she never uses the fax. Think about it. A program manager that coordinates scores of vendors, clients, events, contracts, etc. - and never uses a fax.

I take this as a sign that the fax machine has entered its golden years and will soon go the way of the telegram. My prediction is that we have about five more years before the need to scan paper-based transactions into digital form will become a relic as well.

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Today I had the great pleasure of presenting a session on Web 2.0 and Enterprise 2.0 at MIX08 Italy in Milan. I was there as a guest of our strategic partner in Italy and Germany, Reply. The day was kicked off with a keynote by Microsofy CEO, Steve Ballmer (see videos here). There are other posts about his comments on Yahoo! So I thought I would just share some of my thoughts on the other parts of his talk (and the follow-up Q&A).

Content + Community + Commerce was the mantra for the talk. This seems to be there way of recognizing that software is not the main driver in IT any longer. Now it is all about getting people what they want (content) in a social experience of their choosing (community) and, of course figuring out how to monetize that (commerce) so you can stay in business. The one thing that struck me from the talk was that the only monetization model he talked about was advertising. While I’m sure they are considering service subscription models as well, he didn’t mention it. During Q&A the theme came up again when he said the reason they were after Yahoo! was that they were a advertising and marketing platform that was already at “critical mass.”

Software + Services is the solutions theme for Microsoft. This is there take on how they will help us serve the C+C+C from above. Despite Ray Ozzie’s release of Live Mesh and some observations that MS finally sees that software is dead, Steve stressed the continued importance of software. He described how software will evolve in an environment that wisely balances desktop, Web, enterprise, and devices. Seems to me the “software vs. services” debate is semantic posturing. In either case we will still need engineers writing code that moves bits.

“Consumer, consumers, consumers.” That quote and his discussion of consumers was the only part Steve’s talk that made me cringe and think they still don’t get it. In this day and age, no business should look at their users/customers as consumers. I agree with Matt Jones’s definition of consumers. The people who use our products are our partners, not mindless consumers. Empowering people to partner with us to make our products better is at the heart of Web 2.0. If Microsoft does not get this, they are going to have a tough row to hoe.

Looking foward five years. Finally, perhaps the most animated and interesting part of his talk were his visions of the future of computing. They really were about services (supported by software) that reflected the pending convergence in media and technology. To paraphrase badly, he told a brief story envisioning a future when he is golf watching “TV” and shouts “Hey Bill, did you see Tiger sink that putt”. His intelligent “TV” would recognize that Steve wanted to say that to Bill Gates and would instantly find if Bill Gates was available for Steve. Bill’s “cell phone” would let Bill (sitting on a beach somewhere) know that there was a message from Steve and play the audio of Steve’s comment as well as the video of Tiger’s putt. Steve would respond, “that was nice – what kind of ball is he using?” Steve would rewind the video, zoom in on the ball, click it and get instant information about it and a link to buy it. He would tell Bill the brand and order two boxes for them. This was just one example of his crystal ball gazing - he also discussed ePaper and projectable surfaces.

Overall, his talk was interesting but didn’t break any new earth. But it did make me wear a tie. I try to avoid wearing a tie like I try to avoid root canal surgery. When I asked my Reply hosts if a tie was required for my presentation, the response was something along the lines of, “we know Americans don’t really wear ties - let’s wait and see what Steve does…” So, I was counting on Steve to go tieless. Wisely, he chose to show respect for the host culture and he wore a tie. So, I followed suite.  The most difficult part of the whole day was remembering how to tie my tie…

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Just a quick note:  If you will be in Milan on March 23, drop by the Crowne Plaza Hotel for MIX08 Italy.  Steve Ballmer and his Microsoft crew will be giving the Microsoft spin on what is hot in Internet development in the morning.  I will be joining a host of colleagues from our Italian partner company, Reply, for additional presentations on delivering Web 2.0 and Enterprise 2.0 solutions in Italy in the afternoon.  So, if you decide that Milan sounds like more fun than another year of Web 2.0 Expo in San Fran, drop on by!

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Here is some undoubtedly errant math from a former AOLer (me):

In December 2005, Google purchased 5% of AOL for just over $1 billion, pegging its market value of about $21 billion. The Washington Post ran this article today:

Murdoch and AOL Join Fight Over AOL

So, from the numbers in the article (notably all based on hear-say and conjecture), I did some back-of-the-envelope math:

Supposing first that Yahoo’s contention that the Microsoft offer of $42 billion undervalues them, let’s give them a 7% markup, bringing their current value to about $45 billion. From the article:

“Under the terms of the possible Time Warner deal, the AOL unit would become part of Yahoo. In exchange for AOL and an undisclosed sum, Time Warner would receive a 20 percent stake in the enlarged company, said the source, who cautioned that the terms were not final and that the deal could founder.”

I’m going to ignore the “and an undisclosed sum” to make my fuzzy math easier. Assuming the 80% of the new venture that Yahoo would keep reflects their current $45 billion value, then the resulting entity would be valued at about $56.25 billion. So, Time Warner’s 20% would be worth about $11.25 billion.

Now, that probably does not reflect the full current value of AOL. Earlier in the article it states:

“Yahoo, meanwhile, is working out a complicated deal to acquire most of AOL from Time Warner, the world’s second-largest media company…”

I’m guessing the part they won’t buy is the AOL access (i.e., dial up) business. It’s not news that Time Warner is seeking a buyer for that already, but I haven’t seen any guesstimates of what the selling price would be if they can find a buyer. So, I’m going to pull a sale price out of my elbow (see - clean language Mom!) and say they could sell it for $1 billion. That would give AOL a current market value of $12.25 billion (under the deal outlined in the Post).

So, loads of fuzzy math aside, that means since the Google purchase in 2005, the value of AOL has dropped 40%. Let’s compare that to the TWX stock price. On December 21, 2005 (the day after the Google purchase was announced), the TWX closing share price was $15.58. Yesterday it closed at $14.43 - a drop of 7%. If what Google paid in 2005 was just, and the AOL value tracks with TWX overall (a great simplification), then AOL’s current value would be about $19.5 billion.

So, if all the fuzzy math and conjectured prices in today’s article are correct, one (or more) of three things is true:

1. Google paid too much for its 5% stake in 2005, and/or
2. The other Time Warner divisions have compensated for the 40% drop in AOL’s value such that TWX overall value only dropped 7%, and/or
3. The deal speculated in today’s Post undervalues AOL by about $7 billion

Given the conjecture in the post article, “In the unlikely event that both deals close, News Corp. and Microsoft would control Yahoo, MSN, MySpace and AOL…” and the fact that Google can decide to sell (or keep) its 5% of AOL this July, 2008 is going to be a very interesting year for AOL.

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