Professor Julian Birkinshaw: Managing the Company of the Future

WEEK 1: Beyond the Knowledge Era

This reading provides some additional thoughts on the consequences of living in a world with
“too much information”. It is intended to be a bit provocative- don’t feel obliged to agree with
everything that is written here.

We live in a period of human history sometimes called the “knowledge era” and sometimes
called the “information age”, which according to Wikipedia is a period characterized by the
shift from industrial production to one based on information and computerization.

Nothing surprising there, except for the idea that this is “a period in human history” – which
tends to suggest it will come to an end at some point. The industrial revolution in the late
nineteenth century ushered in the industrial age, and the digital revolution in the mid
twentieth century spurred the emergence of the information age. So it is not entirely crazy to
speculate about what might lie beyond the information age.

Of course, I am not arguing that information will become obsolete. Firms will always need
to harness information in effective ways, just as most of them still need industrial techniques
to make their products cheaply and efficiently. My point, instead, is that information will
become necessary but not sufficient for firms to be successful. All this talk of “big data,” for
example, feels like an attempt to strain a few more drops of juice out of an already-squeezed
orange, just as Six Sigma was a way of squeezing more value out of the quality revolution.
Both are valuable concepts, but their benefits are incremental, not revolutionary.

So just as night follows day, the information age will eventually be superseded by another
age; and it behoves those with senior executive responsibility to develop a point of view on
what that age might look like.

So here is a specific question that helps us develop this point of view: What would a world
with too much information look like? And what problems would it create? I think there are at
least four answers:

1. Paralysis through Analysis. In a world of ubiquitous information, there is always more

out there. Information gathering is easy, and often quite enjoyable as well. My students
frequently complain that they need more information before coming to a view on a difficult
case-study decision. Many corporate decisions are delayed because of the need for further
analysis. Whether due to the complexity of the decision in front of them, or because of the
fear of not performing sufficient due diligence, the easy option facing any executive is simply
to request more information.

2. Easy access to data makes us intellectually lazy. Many firms have invested a lot of
money in “big data” and sophisticated data-crunching techniques. But a data-driven
approach to analysis has a couple of big flaws. First, the bigger the database, the easier it is
to find support for any hypothesis you choose to test. Second, big data makes us lazy – we

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Copyright Julian Birkinshaw 2014
 Professor Julian Birkinshaw: Managing the Company of the Future

allow rapid processing power to substitute for thinking and judgment. One example:
pharmaceutical companies fell in love with “high throughput screening” techniques in the
1990s, as a way of testing out all possible molecular combinations to match a target. It was a
bust. Most have now moved back towards a more rational model based around deep
understanding, experience and intuition.

3. Impulsive and Flighty Consumers. Watch how your fellow commuters juggle their
smartphone, tablet and Kindle. Or marvel at your teenager doing his homework. With
multiple sources of stimulation available at our fingertips, the capacity to focus and
concentrate on a specific activity is falling. This has implications for how firms manage their
internal processes – with much greater emphasis being placed on holding people’s attention
than before. It also has massive consequences for how firms manage their consumer
relationships, as the traditional sources of “stickiness” in those relationships are being
eroded.

4. A little learning is a dangerous thing. We are quick to access information that helps
us, but we often lack the ability to make sense of it, or to use it appropriately. Doctors
encounter this problem on a daily basis, as patients show up with (often incorrect) self-
diagnoses. Senior executives second-guess their subordinates because their corporate IT
system gives them line-of-sight down to detailed plant-level data. We also see this at a
societal level: people believe they have the right to information that is in the public interest
(think Wikileaks), but they are rarely capable of interpreting and using it in a sensible way.
The broader point here is that the democratization of information creates an imbalance
between the “top” and “bottom” of society, and most firms are not good at coping with this
shift.

Consequences for individuals and for firms:

So what are the consequences of a business world with “too much information”? At an
individual level, we face two contrasting risks. One is that we become obsessed with getting
to the bottom of a problem, and we keep on digging, desperate to find the truth but taking
forever to do so. The other risk is that we become overwhelmed with the amount of
information out there and we give up: we realise we cannot actually master the issue at
hand, and we end up falling back on a pre-existing belief. For example, in debates about
fracking or genetically modified food, very few people get to grips with the scientific data, and
even fewer change their views. The challenge for individuals is to steer a course between
these twin perils. This puts a premium on an individual’s ability to monitor her own analytical
style –knowing when to stop digging, when to ask an expert, and when to rely on personal
experience and judgment.

For firms, there are three important consequences. First, they have to become masters of
“attention management” – making sure that people are focused on the right set of issues,
and not distracted by the dozens of equally-interesting issues that could be discussed. A
surplus of information, as Nobel Laureate Herbert Simon noted, creates a deficit of attention.
That is the real scarce resource today.

Second, firms have to get the right balance between information and judgment in making
important decisions. As Jeff Bezos, founder and CEO of Amazon, observed, there are two
types of decisions: “there are decisions that can be made by analysis. These are the best

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 Professor Julian Birkinshaw: Managing the Company of the Future

kind of decisions. They are fact-based decisions that overrule the hierarchy. Unfortunately
there’s this whole other set of decisions you can’t boil down to a math problem.” One of the
hallmarks of Amazon’s success, arguably, has been its capacity to make the big calls based
on judgement and intuition.

Finally, the ubiquity of information means a careful balance is needed when it comes to
sharing. Keeping everything secret isn’t going to work anymore – but pure transparency has
its risks as well. Firms have to become smarter at figuring out what information to share with
their employees, and what consumer information to keep track of for their own benefits.

The bottom line

For the last forty years, firms have built their competitive positions on harnessing information
and knowledge more effectively than others. But with information now ubiquitous and
increasingly shared across firms, these traditional sources of advantage are simply table-
stakes. The most successful companies in the future will be smart about scanning for
information and accessing the knowledge of their employees, but they will favour action over
analysis, and they will harness the intuition and gut-feeling of their employees in combination
with rational analysis.

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Copyright Julian Birkinshaw 2014