IEX#233: The Age of the Iceberg Organisation

An increasingly larger part of every business is going to be under the 'technology line', making the organisation look more like an iceberg.

Sometime ago, I was presenting at a retail client event along with the CIO and when somebody from the audience asked him something about dealing with “the business” - he responded by saying to his team, “You are the business. You are the largest single team in the organisation”.

Also recently, I was a in a discussion with another CIO and his team about how tech needs to speak the language of business, and we agreed that that increasingly, its also as true that ‘business’ needs to speak the language of tech. You also hear phrases now such as 'A bank is a computer with a marble gate' or 'a car is a computer on wheels'.

Over the past few months, an interesting thought has taken form in my head, from a number of these unconnected conversations, like the pieces of jigsaw coming together. It’s what I call the Iceberg Organisation. Let me explain through this timeline of software introduction into business.

70 years ago, the first businesses such as GE and American Airlines started using mainframe computers like Univac and IBM 1401 for inventory control, and reservation management, signalling the dawn of computing in business. Since then over the decades, we’ve had the introduction of databases, the rise of the personal computer and spreadsheets, word processing and in recent times the evolution of cloud and web based tools. But let’s look at who was actually using these tools?

In the 60s, it was largely ‘computer operators’, data entry clerks, and specialised programmers who had any kind of direct interaction with the machines and the software. Systems analysts translated the needs of the business and formed a bridge to the users of the output. These were payroll managers, accountants, bank tellers, and some executives whose work was made easier thanks to these systems. Less than 1% of the workforce would have been a part of the ‘IT’ organisation at this point, not least because of the limited use and high cost of computers and software systems.

In the 1970s, driven by the growth of mainframes and minicomputers, the landscape started to shift. Data processing emerged as a profession. The Personal Computer made an appearance in the late 70s and Visicalc allowed business users to work on computers directly for the first time, paving the way for Lotus 123, and then Excel, along with word processors. Approximately 2-5% of the workforce would have worked in IT in the 70s. Sometime in the 70s the idea of IT outsourcing was born as well.

The 80s saw the dramatic growth of the PC, but also of the LAN, allowing corporations to build out their own networks. Early email meant that telecom and IT systems started to converge. Alongside this there was the rise of both deskop (Microsoft) and Enterprise (SAP) Software, as well as custom software and database development. All of these changes necessitated the growth of the IT departments as you now had network engineers, programmers, IT support, and security specialists, as well as project managers and business analysts. The IT manager became the CIO, there was recognition of the importance of IT and by the end of the decade you would expect to see 5-10% of the staff of a large organisation in the IT Department. A significant percentage of people were also using desktops at work.

You know what happened in the 90s: the rise of the internet, and eCommerce, the ubiquity of ERP systems, client server architectures and distributed applications. Software development and customisation had become a massive industry and IT and software outsourcing grew alongside. Cybersecurity and Y2K became hot topics - a watershed - as these were problems created by the technology industry itself. Banks and media/ telecom businesses jumped ahead in their use of tech and software. If you included outsourced roles, some 15-20% of the people working for many large organisations would be in technology roles (back of the envelope calculation). By this time most execs had starting using desktops and laptops and by the turn of the century, people not using tech themselves were a minority. But the perception of IT and tech was still very the stereotypical 'geeks in the basement' depicted in the sitcom 'The IT Crowd'

This trend continues, through the dotcom and financial crashes through to today’s AI enthusiasm. But more so, there are some other trends joining up. The convergence of Operations Tech (OT), Information Tech (IT), Product Tech, and Customer Tech (eCommerce and self service systems), means that we are at a point in many industries where 50% or more of the staff are in some way technology people. Outside of the obvious area of Tech and software businesses, and their cousins, the Fintechs (Stripe), or Health tech (Philips), you’d expect to see this trend in banks, telecoms, media businesses, and even automotive, especially with the volume of tech going into cars now. Even aerospace, defence, and other traditional industries such as oil and gas are starting to digitise in earnest. Five years ago a banking CIO told us that while the banks overall headcount had gone down in the previous three years, his team size had gone up significantly. So in percentage terms the growth was even more pronounced.

What I’m getting at is that for any organisation, the chances are that the number of people working in tech of some kind is likely to become more than 50% in this decade. If you think of an imaginary horizontal line and consider everybody above the line to be what was traditionally called ‘business’ and those below the line as ‘tech’, then the picture of the organisation has changed drastically from the picture on the left to the picture on the right, below. A much larger portion of the organisation is in fact below the line. Welcome to the iceberg organisation.

So what are the implications of the Iceberg? Here are 5 things to ponder.

1. The New Competence?

The new competence in every industry is digital mastery. But it’s not a simple thing. It’s not one thing, or even a dozen. Digital mastery encompasses hundreds of areas. Just have a look at this Gartner model for the key trends and competences below, and keep in mind that this is just a subset. It doesn’t include eCommerce, Software development, or any operational technologies, for example.

Or consider this radar from ThoughtWorks which focuses only on software development. It has over a hundred entries spanning the 4 quadrants of tools, platforms, techniques, and languages & framework. It’s downloadable here.

Suffice it to say that there’s an entire galaxy of individual areas within tech and digital that you need to build competence in. And in the age of the iceberg organisation - this, more than your traditional competence may be the difference between success and failure. You may still need to build great cars, but that will be a necessary but not sufficient condition to flourish in the automotive industry. Your digital competence is more likely to make the difference, as more and more of the value of the car itself shifts to software and tech, and the experience of driving starts to be defined more by the technology of the car than the mechanical engineering of the car.

This will be made more challenging by the accelerating speed of evolution of tech, so a part of your new competence will be the ability to add new competences faster than the rest of the market!

2. The New cultures

What will the culture of the iceberg organisation be? This is very much a double edged sword. The stereotypical technology community is explorative, playful, discovery driven, but it’s also often lacking in gender diversity, sometimes with pockets of misogyny, and often described as ‘bro-culture’. This is something to guard against.

There are many aspects of tech cultures that will be new to traditional businesses - the levels of autonomy, the level of informality and lack of hierarchy, for example. On the other side the lack of work life balance, the risk of burnout, and high turnovers are things that may also create new challenges for organisations.

Also expect the counter-culture of design to keep flourishing amidst this strongly engineering oriented culture. Engineering tends to componentise problems, which works very well for machines and less well for complex systems involving humans. We’ll continue to see the resurgence of design and systems thinking because of this.

3. The New Leadership

Leadership is actually where a significant shift needs to occur. Most CXOs who are not from technology tend to take a very hands off view of tech. Many people in senior positions today are proudly technophobic. Many are benignly tolerant of tech, or downright supportive, but very few are really willing to engage with technology deeply enough to understand the opportunities, risks, issues, and challenges. And this can be a problem. It’s easy to make an under-informed decision, or be swayed by arguments from any one provider or colleague when you don’t have the wherewithal to create your own decision model based on your understanding of the issues. There are very low (or zero) costs to asking questions.

A second aspect of leadership in this environment is to be able to take progressive decisions when the technology is changing so fast. As our clients told us at our AI workshop in Athens recently, both the longer term costs and benefits of AI solutions are unclear. Also in many businesses decisions must be taken with respect to much longer product development cycles - for example drugs and cars, both of which take the better part of a decade or more from concept to launch. This is longer than the tenure of many CXOs, and also far longer than technology improvement cycles currently. As one of our pharma clients recently told us, you need to focus on progress as much as final outcomes. And in an agile strategy world your leadership approach must be based on a series of scenarios.

The switch to data driven decision making is another new aspect of leadership. In the iceberg organisation you will have more data than ever before, about almost every part of your business. Setting up the right metrics and signals so you don’t get swamped with meaningless data, and using the right mix of human judgement and data driven decisions will be a difference maker. These are new capabilities for many business leaders today.

4. The New Work

The thing with technology work is that a significant amount of it can be done anywhere. I submit to you that the phenomenon of remote working has gone through a typical hype cycle. The trigger in this case was the pandemic.

5. The New HR

One of my pet phrases is: IT is the new HR. Your primary interface to the organisation outside of your team and your manager is no longer the helpful HR person, it’s actually your intranet, and your company app. The quality of these interfaces and the extent to which they are responsive and easy to access and use, will more define the employee experience than your HR policies will. Some of these traits are also shared by Gen Z workers, so you’re not just talking about technologists here.

Especially with the Iceberg organisation, you have a team of tech-comfortable crew who are typically good at self help given the right tools and resources online. Make it easy for them. Provide flexibility and choice wherever possible. Make it possible to remote work easily, even if your policy requires people to come in regularly. And above all, give your teams efficient tools. Nobody likes to feel that their productivity is being sucked by poor systems.

One of the tenets of technology world (and many other knowledge based workplaces) is that a good software engineer is not just a few percentage points more valuable than an okay developer. They are an 3x, 5x, or even 10x more productive (hence valuable). In the iceberg organisation you’ll have to get used to identifying your top performers and over compensating them.

Beyond the Iceberg?

If we adapt Mark Andreessen’s famous line - we might say today that AI is eating software. So what we should expect to see in future is that a lot of the technology and software components being replaced by, or run by AI. The tech stack is highly susceptible to being rewired with AI. Which means that our basis for the iceberg model - which is based on headcount, may need to be rethought. However, the relative importance of the technology underpinnings i.e. of the section of the organisation below the line line, will continue to dominate. I don’t know what to call it but let’s talk about that in a couple of years.