In this episode, Frode Odegard, CEO of the Post Lean Institute, how edge computing is necessary to support the decentralization of organizations and the parallels between organizational design and technology architecture.
If you did not see the first part of this two part series, you can view it here.
Transcript:
Blaine Hello, everyone, and welcome to the Business at the Edge series by Pratexo, our series of short video interviews with thought leaders and practitioners in digital transformation as it relates to edge computing. My name is Blaine Mathieu and I’m the CEO of Pratexo, the Intelligent Edge Computing and Distributed Cloud Platform. And that is the only ad for Pratexo you will hear today! But note that you can reach myself at any time by setting a note to blaine.mathieu@pratexo.com and I’ll be more than happy to follow up.
Thank you, Frode, for joining us for part two of our discussion on decentralization of business, society, and virtually everything and the relationship to edge computing. We had a really interesting discussion in part one of this interview. For those that haven’t heard it, I recommend you go back and find part one first and listen to it.
But now we’re going to get into how businesses should actually respond to these forces. So we talked about this overall force toward decentralization. How should businesses actually respond both organizationally and technically? Maybe let’s start organizationally first. But I think there is also a technical element to this discussion.
Frode Oh, absolutely. I think if you are an entrepreneur and you’re building a new company, you don’t have to worry about any of this stuff because you don’t have a legacy business to transform. So, if you’re one of those, just keep going. That’s what I would say. But pay attention to not just finding product market fit. Pay attention to what’s happening with the structure of your industry. Don’t assume that supply chains that exist now will be unchanged. A lot of them will be unraveled.
I think what’s common to both startups and large organizations is the necessity of looking at industry structure. We can talk about what happened inside the firm, but you also need to understand what’s happening outside the firm. What is your environment going to be like strategically.
Whenever there’s some sort of a new emerging technology, technology paradigm, technology platform, because we have exponential technology development in many areas, when it emerges, a lot of established companies don’t take it very seriously until it’s too late, and then a lot of people in the value network that they belong to start jumping over to this emerging value network, and then you’re stuck in the old value network. You’re toast. What we actually see: it’s a development that’s a little bit different, where these value networks are sort of transforming from within and being hollowed out as more action moves to the edge. That looks more like disintermediation from one perspective.
You take a company like Vivino, out of the four or five links in the supply chain from winery to the store, Vivino disintermediates at least two of them. That’s very powerful capture of value.
When you look at large organizations that are engaged in existing industries and some of these are industries that they have helped build, it’s easy to be mentally locked into this mindset of the strategy for the next three years is going to be an incremental change from what we did the previous years. We play out of different scenarios and a portfolio of initiatives. There isn’t really a unified view of what Peter Drucker used to refer to as a theory of the business, as to what are the forces that are reshaping these industries or may change them dramatically. And very often, that’s viewed as more of a tech disruption conversation. Decentralization is a much bigger thing than just faster, better, cheaper.
Blaine What are some of those elements of decentralization? Specifically, what will companies look like in the future?
Frode One of the things that’s clear: large companies are focused on digital modernization, is what we call it. That’s not really transformation of the business units that they have. And so they’re not really changing the structure. I think what’s going to happen is because it becomes easier to build new companies that are small and very valuable is that large companies have to separate their efforts of modernizing. Rationalizing, if you will, the business units they have from building new ventures. These new ventures will look more like networks of nodes, what we call micro organizations. They will be linked to each other with machine-to-machine interfaces. We think smart contracts and distributed ledgers will play a big part in that.
But also, sociologically, what happens is that the people you have building these micro organizations. In the unit, we might call it a higher order organization or an organization dedicated to building new organizations, they will not have the kind of relationships with the corporation that ordinary employees have today. They will have more of a co-founder type of relationship. They will have shares and other entities that you create.
And so what happens then is you get this divergence of sort of legacy businesses that can still be valuable, still stick around, but will have a different culture, be more traditional in their operation. They will still need IT.
And then you have these new companies that will just naturally think in terms of decentralization that will be creating value at the edge and the IT mindset there is going to be very different. If you have a larger organization, the thinking is often more like it’s a factory or a mine. You talk about sales in terms of production. You know, just like in education, we still have a mass production mindset.
But these smaller organizations that are operating at the edge will be looking for these opportunities themselves to deploy IT at the edge, to create massive, scalable, distributed value from the get-go. And so they will take edge computing for granted. That will just be the only paradigm they know about.
Blaine It’s so interesting listening to you talk about this, because the way I describe the technical aspect of edge computing is almost the exact parallel to the organizational aspect you are discussing. I talk about edge nodes running in real time. They group together to form micro clouds running near the edge, which of course still have to coordinate to some degree with a central cloud. There probably does need to be some overall organizational coordination between the micro clouds. And you just said all the same words. You have a central organization, you’ve got the micro organizations, you’ve got the individual nodes in the organization. It’s an exact parallel to the technical infrastructure that we’re setting up with edge computing. It’s amazing, actually.
Frode Well, there’s a deep connection there because IT is our means of getting modern work done. So having centralized IT but having decentralized work is going to leave you in a very vulnerable spot. You’re going to be too slow to respond. It’s not just because you can optimize latency by moving the processor closer. That’s all true.
But it’s also in terms of how easy is it for you to marshal resources that you can deploy at the edge? How much do you have to do in terms of organizational coordination? How much bureaucracy do you have to go through to coordinate the deployment of those resources. If those resources that you deploy are able to spontaneously collaborate, coordinate, so on, just like these micro organizations, through software assistance. So a lot of what we think of management work today, organizing the lines of communication, decision making processes, and all of this will be eaten by software. So next-generation collaboration tools will be humans and intelligent agents, if you will, working side by side, passing the baton back and forth.
Blaine So interesting. Just again, to continue the analogy: so what you just talked about on the technical side is swarm computing, the notion of these nodes not being led or not in a hierarchy, but just collaborating and working together. The technical description here is the same thing that’s happening on the business side.
And then, of course, utilizing AI and machine learning in technical systems and you’re talking about how you have human machine collaboration fundamentally happening in real time, collaboration to achieve business goals. And again, all of this has an exact direct digital twin, you might say, on the technical side of edge computing. That’s really interesting, this parallelism of organizational and technical construct literally hadn’t occurred to me as fully until right now having this discussion.
Frode I should say that that this journey towards more and more decentralization, it’s not an overnight thing. So sort of multiple chunks of change, multiple generations of change. I’m not talking about human generations. We transition from one sort of IT platform to the next to the next, you have different standards emerging; people moving over to the next technology platform.
And that’s also true for how people think about work. So now we’re hybrid work. A partially virtual, partially physical, it’s becoming mainstream, and was less mainstream before. And these chunks of changes, let’s call them these generations/micro-generations of change, they have three essential components.
One is sort of an overall mindset and the culture: what are people’s attitudes about what work should be like, what career should be like, what their work experience should feel like, how society should work. So let’s call that mindset.
And then there is the consequence of that in terms of organizations. So with that mindset, what are the kinds of organizations that we will build? And and if people today have no background in management science or didn’t know the history of management thinking how it’s evolved, if you got together some 20-somethings and you asked them if you are going to set up a company, what would it be like? And just from the luxury of having that ignorance, they will probably come up with an idea for how a company should function that would be very different from that of their parents, for instance, or even the people who were 20 years older or 15 years older.
The third chunk of change is information technology that’s going to help facilitate this kind of work. And when you think about the delivery of services and products to real customers, which could be, you know, individual consumers or firms, more and more of them will be micro organizations. And, oh, by the way, the buyer may not be a human. It could be an AI making decisions. Then, of course, IT has to become decentralized in order to facilitate that as well. This sort of stuff is linked together.
Blaine This has been a really interesting and inspiring discussion. Any final tips for an organizational leader who is trying to figure out how to make this transition toward organizational decentralization and technical decentralization at the same time?
Frode I would say look at the outside before you get more bogged down in fixing the inside of the firm. Try to understand how the relationship between firms are changing and how the interface between the firms is changing, from human to human to machine to machine in your industry. And of course, at the Post Lean Institute, we’re building management tools to make that possible. Maybe that’s self-serving to recommend, but I think it’s good to understand the landscape before you try to think about how to maneuver from A to B. And as you do that, you will understand more why your own organization needs to change and how – in order to adapt to how that landscape is changing.
Blaine Makes perfect sense Frode. I think that’s great advice. And I agree one hundred percent that people should check out the Post Lean Institute. You dive really deep into many of the topics we just touched on today. I think it’s really important for organizational leaders to have that background or that deep understanding when they’re making critical organizational decisions. And the mirror, as we’ve been saying, technical decisions as well. So thank you very much for the time today. Really enjoyed the conversation.
Frode Great to be here.
Blaine Great. And if people want to reach out to you, what’s the best way for them to do that?
Frode I would say look for me on LinkedIn, Frode Odegard, or if you want to shoot me an email directly, it’s frode.odegard@postlean.com.
Blaine Perfect and the same for me as well. If anyone would like to reach out to chat with me, they can find me on LinkedIn and also get me at blaine.mathieu@pratexo.com. Frode, again, great discussion. We’ll talk to you soon.
Frode Always a pleasure. Thank you.
