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Saturday, July 19, 2008

Value Creation in the GIX Bang World

We are living in a rapidly globalizing world. In this shifting world, rules of the game can change anytime; success will come to those who adapt quickly to the new rules. This new world has been defined by Thomas L. Freedman [“Lexus and Olive Tree”] in contrast to the earlier era as, “While the defining measurement of cold war was weight – particularly the throw weight of missiles – the defining measurement of the globalization system is speed – speed of commerce, travel, communication and INNOVATION”. How fast you innovate and adapt to the globalization is the recipe for success.
As is common understanding, the best way to adapt to the new rules is to write these rules. In these highly competitive times, with extreme uncertainties and time compressions, it is the successful exploitation of ideas, i.e., Innovation, which can be the only competitive advantage. New ideas can come from -- other industries, your competitors, your employees or your customers.
With the plethora of ideas available it is essential that the organizations need to choose the right and relevant ideas to pursue in their quest for competitive advantage. This involves choice, hence decision-making. One of the greatest challenges of human decision-making methodologies has been to help the homo-sapiens in choosing the right path out of many alternatives under the conditions of partial, incorrect and stochastic information about the future. To pursue a particular idea (especially a new technological idea) with unknown returns on investment is becoming one of the most risky decision making problem in the new world.
This brings to the third leg of puzzle, the compleXity (X) of the world. Number of alternatives, time pressure, need for analysis, information de-coherence, connections and networks are increasing at an unprecedented rate. However, human mind has a limitation as discovered of being able to process information within 5 to 9 things as discovered by George A. Miller (1956) and described in the landmark paper Magical Number Seven plus minus two ( Further there is a fundamental issue of framing the right problem before solving the problems; this is leading to an increasing depreciation of confidence of human beings on their minds. The result is the rapid explosion of complexity. The connections create value but dependencies create complexity, future is approaching us faster than history is leaving us, there is an increasing distance between user requirements of what they really need versus what they claim they want, and with every choice we make today we kill many possible futures.

Globalization, Innovation and complexity (GIX) are increasing simultaneously. This rapid acceleration - I call this the GIX Bang - on the lines of Big Bang. The GIX Bang is happening due to the three inherently coupled trends of increasing globalization, increasing complexity and increasing Innovation. However, these three are so deeply knotted with each other that one can’t have a model of GIX Bang. A mathematical model of GIX bang will involve coupled non-linear equations of rates of change of Globalization (G), Complexity (X) and Innovation (I). Of course, I am not proposing to create that model here. However let us look at the parameters that are impacting these three trends
G is impacted by connections (new ways of technological connectivity across the world), Value (economic, social, military, political, technological, human) across the globe that the connections are enabling, Global real time awareness that creates Ideas to increase globalization, Have-nots of the globalizing world are creating various barriers for controlling these connections which impact globalization adversely.
X is increasing due to dependencies which are global, in multiple dimensions, and much deeper with multiple feedbacks that can create pockets of chaos and pockets of order in the world which leads to more and more of possibility of new - the emergence phenomenon that we all know of.
I is the by product - the G and X interactions demand and will lead to more Innovations - it is the only way for all of us. Innovation feed on and feeds globalization; similarly Innovation reduces complexity and may be constrained by Complexity.
The question that becomes imperative is, “How to create Wealth and Value in the GIX Bang world”?
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