A Markov process has no (zero) memory. An Ito process has a finite memory. A Markov process is an Ito process with a memory size of n=o. All of that is, for our purposes, talking about history, or more specifically, relevant memory.
In our ordinary conversations about memory or leaning in a firm, the memory is infinite. It is not an Ito process, so it can’t be a Markov process. We talk about brand and design as if they will always be relevant, and have always been so. We talk about a whole host of things this way. But, it is the technology adoption lifecycle that makes everything finite. We try very hard to make the late mainstreet market infinite. Sloan’s invention of management leads us to the infinite firm and the management practices that make the infinite firm. Blue oceans lead us to find another structure for a category after we can’t get anymore infinity from our management practices. These notions of infinity invite us to cut costs until there are no more costs to cut. These notions of infinity kill our companies, and kill our companies fast and faster.
Innovation and management are entirely different. Sloan didn’t innovate, except in his creation of the product he called management. He did not innovate cars. He grew his company through M&As. He consolidated his category. Such consolidations are an indicator that the market leaders have been chosen. Those market leaders get a monopoly or near-monopoly position. Everyone else is stuck in promo spend territory fighting over the scraps. Everyone else is stuck with competing on brand and design, because they have no market power, and no differentiation. This is late mainstreet phase of the technology adoption lifecycle (TALC) out to laggards (devices) phase. The later you are in the TALC, the more you have to spend on brand and design, the more you have to manage your costs and processes.
When we talk about the early mainstreet IT horizontal, geek facing internet of the 90’s as if it didn’t have design, the more we ignore the lessons of the TALC, fit the population you serve. Design is not a characteristic of geek facing products. Design in a characteristic of consumer facing products. The geeks that tried to sell dog food, or any consumer product back in the 90’s, in the early mainstreet market failed. Those same geeks giving something away for free, something technical, something infrastructural, something non-consumer succeeded. We came into the late mainstreet market knowing that free worked, that customer would not pay for anything, that paywalls were wrong, …. We came into the late mainstreet market having learned the wrong lessons. We are finally forgetting those lessons. We are finally learning that consumers pay for stuff.
Alas, we learned the wrong lesson still, when we try to sell something to geeks in the late mainstreet market. No, they will not pay… We are learning the wrong lessons from our success with consumers.
The main problem in crossing the TALC is that the TALC structures our memories. We have finite memories and infinite memories. But, we only have one memory. In my prior discussion of software as media, and in my TALC slideshare, I
So back to this Ito process.
The birth of a category begins by finding the B2B early adopters. Yes, lean does not start there. Lean is late mainstreet. Lean is built on other people’s whole product. It starts well within a category’s life. The birth of a category is 90’s era internet. That’s where today’s whole product came from. Twitter is probably the only such play we’ve had in Web 2.0. Even Google is a subsequent generation in an existing category and a promo spender to boot. And, no, we hear about how B2B needs design these days, sorry, but that is late mainstreet as well. It’s consumer and laggard/phobic facing.
The category is born with a Poisson game, aka a Markov process. These vendors have nothing to leverage and face the process of building tech, product, market, and company all facing the client. Unlike lean, they are stuck with the technology whose adoption they are fosters. Unlike lean, the best practice is to automate the client’s product visualization, not your own. Well, lean lets the users provide the product visualization instead of their own. The point is that n=o, aka we have a Poisson process with no memory. But, we do have a nascent finite memory on our hands. That we intend to repeat this process, we separate our phase processes from our customer facing people. Usually, companies do not do this. For them, the end of their category leaves them without a memory of the discontinuous innovation processes, so they start over again with the disadvantage of the cost issues with trying to use their current late mainstreet process to do what they cannot do, and economies of scale that are devoid of the needed customer base. Memory problems have costs, but accountants can’t tell you how much those problems cost. Memory problems kill innovation. Separation, Christensen’s real original concept, failed to gain traction against the cost accountants.
Christensen build his consulting firm with late mainstreet people who did not provide the early mainstreet effort needed to foster adoption of the separation concept.
So we start with a Markov process. With every capability we build in our consultative product implementation processes, we add to that memory. Call it n=20. Then, we start to build our vertical market chasm crossing processes, n=21 to n=60. But we partition these two capability collections. We keep our consultative processes going with a brand new discontinuous innovation when the time comes, when the bowling alley ends. Then, we focus on carrier, and build our IT horizontal facing processes, n=61 to n=90. Within the IT horizontal facing organization, we build our tornado capabilities, n=91 to n=100. The tornado capabilities will be harder to retain, but they only work in the tornado and in the post M&A tornado. It is hard to keep them loaded from an HR perspective. Likewise any IPO and further investor relations capabilities, again memory in terms of processes and people. Through it all our Markov process becomes Ito.
At some point we get to our six sigma normal and all things Markov/Ito become Gaussian. Memory becomes infinite. We move from discovery to enforcement, different types of machine learning. Our geometry changes from hyperbolic to Euclidean and subsequently beyond six sigma, to spherical, Euclidean and spherical being safe for management.
Still, there are events that drive us back to earlier memories. Commodification of core technologies make us go back to discontinuous innovation in the midst of our continuous innovation efforts. Mass customization forces us to focus deeply on carried like we did the B2B EA. There will also be processes that we use once and throw away. Before throwing them away, however, you need to think long and hard about reuse and load issues. If you need those people and processes don’t throw them away, and find a way to keep them loaded, rather than letting them dissipate in lateral moves.
Outsourcing is another of those late mainstreet methods for managing managerial focus that lead us to dispose of capabilities and learning, memory, that we may need again. Again, think hard. You can’t get these back after they are gone.
Devices phase leads us to gain a hardware capability beyond the software capabilities we already have. Hardware also drives new software capabilities. More memories, more people, more processes will all be required. Cloud, the phobic phase, similarly.
Like in my post on incommensurate, the water balloons, or balloon poodles model will help here. Where does the memory begin? How large does the girth of this memory get? How long does it last? Does it produce cash or wealth or loss? What balloons are inside other balloons? What balloons are outside the others? What are the interfaces? The coupling? The cohesion?
Know that you are managing your company’s memory. Learning is good, but it takes us away from our pasts even as it takes us to our future. Learning can prevent us from going back to the parts of our past that we will need again unless we were built to flip, built to exit. Manage memory.