Why decentralised business models always win...

Brace yourself, Global Recession Coming…and maybe you haven't been told, your technology vendors and your IT function have been lying to you for decades...

You probably already know this, but with bonds in negative yield curve, and with Deutsche Bank, UBS and other banks sacking back office staff, analysts and marketing, you know what is coming next is noteworthy. It is serious people. Banks after 2008 are good at unloading the crap before everyone else, as regulators and central banks simply looked the other way. The next global recession is predicted to be the deepest and worst economic downturn of a century, made worse by the declining value of fiat currencies, because the FED keep the printing presses running. Let us not forget the immanent collapse of the EU, as Italy looks to default and the UK leaves the corrupt EU members club that masks the inefficiency of Germany's industrial might.

As a director, CEO or business owner what can you do? Consultants will be all over you. Their strategy is predictably cut costs, pull back on marketing, stop hiring, do another round of outsourcing or sell some apparent non key divisions/assets..? And yes its all predictably useless, and it won’t help one bit.

Or,

You can make bolder strategic decision to move to a decentralised operating model. For no other reason to eliminate all artificially imposed costs of what traditional centralised business models says you must have, if only for historic reasons, or business schools position these as mandatory. . There is no viable argument to support todays business models other than everyone is doing it, and everyone is impacted at the same time when problems like a recession occur… So why should you? Why leave yourself exposed and do exactly what everyone other manager in every hierarchy does when hard times fall...

Everyone wants to save costs, protect customers, create new products, release new services and make up ground on the competition. But with so much cash and resources tied to non productive, non customer facing, non revenue earning activities, where compliance dictates what you need, where I some markets they dictates to the business. Inadequate IT systems and poor data handling strangle any hope of getting useful information, with the statutory demands of reporting on things that add no value to anyone.

The issue here is the solution you are offered is not the solution. You're being forced to carry costs and overheads to satisfy other lame business and regulatory models. The new dictators are those that monitor regulatory compliance, an all powerful function that uses GDPR like an enema that will always turn out to be a fools errand. As real compliance comes from doing the right things and the right time and getting your community to support and deliver what is needed.

If some of all of these factors are coming onto your radar. And you feel history is repeating itself. Another recession, another belt tightening and cost cutting exercise. It is time to get with the new program and move to a decentralised operating model, that takes the pain away.

Decentralised Operating Models 

For the past few years I have been working with founders and management teams to help them understand the opportunities moving to a decentralised operating model can offer. To start, these models at their core have an inherent ability to take the brakes off commerce, to accelerate customer growth, to simplify decision making, remove unnecessary administrative tasks, do away with bonehead concepts of reconciliation, settlement and balancing the books, whilst supporting expanding quickly into new product and service areas the are designed and refined with partners, customers and participants, around the things people actually want to buy and use.

The key of course is to design a decentralised operating models that can scale at pace, reaching not 20 million customers, but 50m and even 100m customers in just a few years. The world has moved on. When Barclays bank complain they have 21million customers, most of whom are retail customers they don’t care about, because they cannot make money from their basic need. Western businesses have little or no concept that businesses in Asia have 500m customers, the likes of Tencent, Alibaba, Baidu, thinking Amazon, Facebook as platform economies, are the new standard. I have bad news, they are not. Platforms are fundamentally bad for business, they polarise participants and monetise data unfairly.

Decentralised models break the rules of the traditionalists. Old thinking and ways that focus on keeping control of everything from their centralised empire, held in place by a hierarchal structure that justifies their existence. Structures that add no value and are a drag on the business and industry. The centralised model is the industry models, with layers upon layers of participants, all drinking from the customer fees trough, inflating any real customer value, while forming a perceived protective barrier around what they do, in an effort to hide and insulate themselves from problems and being found out.

Old, tired, engrained models that traditionally rely upon a regulatory licensing model as another protective layer, that require an enforcement of investment in infrastructure, sold to shareholders as a necessary barrier to entry, therefore a benefit to Investors. But from where I stand this thinking that is bankrupt, devoid of meaning and has no future. It cannot be justified and is a steaming pile of what comes out of a cows arse!

New Pathways…

Decentralised Operating Models come with a new mantra, a new way to benefit and reward stakeholders, new ways to create and exchange value, new ways to create equality and reward inclusivity. they incorporate new governance models that deliver better outcomes for all, as they eliminate discrimination and harness new tech layers, that create inherent trust in operations and transactions, supporting a single version of the truth.

By default this approach opens the options to deploy the latest tech innovations to collectively move everyone forward, rather than spending a small fortune to paper over the cracks, to defend perceived valuable turf and maintain the old ways. Decentralisation doesn't involve divide and conquer, segmentation, only rewarding a few, penalising certain communities and ignoring and marginalising others.

Decentralisation starts with ethos. It requires an adjustment in approach, in thinking and an expectation of different outcomes. And why I created a methodology and tool set that can be used to define a new future…

New Tools, New Model, New Competitive Advantage

Since studying computer science in the 1970s, with 5 starts ups in the 1980s and attending a traditional business school, it is clear the thing we teach entrepreneurs, business people and management is as useful as a one legged man in an arse kicking competition!

The education of the next generation of business people is devoid of decent and relevant content. Instead universities peddle the same old courses they have been doing for decades, taught by largely old people who believe old models and traditional thinking is a path to the future. Has everyone gone mad? I worked in the tech services industry for 25 years that fed from basic inefficiencies in every industry and sold them computer systems that made no difference at all. Deploying at best some services that took advantage of the disparity of labour wages between nations, an arbitrage to save money. That saw jobs move offshore. Same business model, same processes, just cheaper salaries. Technology delivered nothing! Just how is that solving the problem?

Until 'double spend' in 2008 gave rise to creating new governance and incenses options that could prove fairness and truth, decentralised business models had been muted since the 1970s, but it wasn't possible to build new models until now. Models that were not just improvements on the old, but entirely new ones.

When operating models are free of traditional shackles they ‘scale at pace‘ delivering a 10x 20x sometimes 100x improvements, while delivering new levels of customer experience, and more than halve the operating costs, in some cases reducing cost to acquire and serve customers by 80%.

“Now you can gain competitive advantage by redefining your industry and move the game away from the competition. Acquiring new customers at a fraction of the cost, benefiting from a collaborative environment where everyone is incentivised to help you, where all participants in your market are recognised and rewarded for their contribution, where their efforts are open, transparent and trusted. When you have this good things happen” 

But first let me explain why things are the way they are? Have you thought why this is?

Have you asked the question; what is wrong with the current systems, processes and industry models today?

Why are your business systems and processes are a mess? A patchwork of overlays, making good and papering over cracks? Why what you have no longer works, probably never worked. Why all paths lead to incremental faddish trends that never resolve the real issues. Issues management often as scared to face, as they look to survive a tenure, accumulate enough money to retire. In itself a sad outcome for a lifespan's working effort.

It is finally time to put the lipstick away!

Historic Context

Why are things they way they are?

Since the Industrial Revolution spawned new era’s of Steam and then Electricity, sited as the first and second Wealth Creation (Accumulation) Revolutions, that enabled businesses and industries start to scale for the first time, moving away from a rural cottage industry, to larger businesses that were society changed to new cities, new industry models for a new future. The problem of course no system had been designed to manage much bigger businesses and deal with scale. An early solution manifested as ledger cards, and where standard cost accounting came about, to enable owners could record and control time/cost. Now this so called modern approach is the nemesis of all large corporations that are slaves to a system that serves different masters from a different time in history.

The problem accelerated as we entered the third Wealth Creation Revolution of Transistors (unlocking computing and miniaturisation), that promised so much. The new mainframe technologies that emerged from 1950's big business, introduced applications that were based on systems that copied these early hierarchal transaction measurement models. They essentially embedded the theory of management of the times, of layers to sign things off, for approvals and decisions. where lines of authority and power were top down. A series of systems and controls that turned into enterprise resource applications (SAP and Oracle), as the name suggests, which have remained largely the same today.

These early industry models were used as the ‘blueprint’ and hard wired inefficiencies into everything we do, and yes we may claim progress has been made, that we process orders quicker, communications are faster and products get delivered quicker, therefore claiming productivity has improved. But this is not necessarily the result of better core technology or improved processes. It is not real! A facade.

Most business and industry models are already busted and merely await a slow death. Retail Banking, Asset Management, Venture Capital, Brokerage, Custody, Pharmaceutical Distribution, Selling Houses, Telecoms, Healthcare Provisioning, Energy Generation, Accounting, Legal Services, Distribution, the list is seemingly endless… They remain on life support, and only keep going because of protective regulations, nationalist government policies, direct government interventions for purposes of draining capital and profit from the system like Venture Capital. Rather than be left to die, because ultimately the customer always picks up the cost and pays for everything, where most economies of the world remain 'extraction economies', including ours.

Your Technology IS the Problem

I spend much of my time helping business owners and boards to come to terms with two things. Firstly, they have been lied to for years, and second introducing new technologies that change business fundamentals. And yes they often get a little scared. Helping them understand, what will be the impact of Quantum Computing? How should we be using advanced Machine Learning? How do you deploy NanoTech and what practical things can you do with it?  So management teams can prepare new strategies and make adjustments to their operating models not just for competitive advantage, but for survival. But the biggest barrier is centralisation of thinking!

Because these teams are wedded to old ways, relying on papering over cracks, kept blind by advisors and consultants, warned off by the threat of fines by compliance, and trust their tech vendors who continue to lead them down costly dead end alleys. Their thinking is strange, yet predictable, as they come from a generation, often a similar age to me (60 years old), who believe their business is safe. How could we possibly go bust? We are the biggest, we make huge profits, we have market share. All true of course, and I am sure the CEO’s of Blockbuster and Motorola thought the same.

Most industries are so badly run, so disorganised, a place where innovation is stifled rather than encouraged, where being different is frowned upon, where the arbiter of decision making is often a regulatory framework, an association or central authority, handed control by Governments who make money from licensing, taxing the industry model. Its purpose is to bog everything down in its own bureaucracy.

When you think of today's industry models were are reminded they are a consequence of history, they were not designed on or for a purpose. They evolved, came about to support a need for measurement and control, for industrialists to control their new wealth, and for managing seat shops, factories and child labour.

Dare I say it not much has changed today...as people everyday are trapped on the treadmill of life, want to get off, but convince themselves now is not the right time.

when you research why companies are successful, CEOs may claims great strategies and their leadership was key. Or they will claim to have superior competitive advantage over cost and price. By my research shows a different picture. Often successful businesses are consequence of a single piece of innovation, while the majority are only successful by chance, benefiting from the fact all the others do things far worse. What they teach you in business school (and come to that school) is pretty worthless really when you think about it, has little relevance today, and no relevance for what is coming.

You may also be surprised to learn modern technology is not your friend, it is very much the problem. Technology in a business context is not the reasons we have advanced. During WWII we went from bi-planes to jet engines in a handful of years. This was down to necessity to survive and human ingenuity and need to create. A time of manual processes, albeit quite old fashioned, that still allowed humans thinking time.

The problem is you have been sold the wrong answer to a problem that was invented 100 years ago. Modern tech simply hard wires post industrial models of command and control inefficiency and has eliminated thinking time, reducing peoples roles, their jobs and lives to filing in forms. Re-enforcing theories of management, organisational behaviour and culture that are 100 years old. Pre computers, pre Jet Propulsion, pre Internet, pre Blockchain and pre Quantum.

We came from a time where the work to be done was packaged so that it could be measured, not for efficiency, or god forbid for people to enjoy while doing the work. This attitude and approach to packaging the work to be done remains today.

Work was designed for measurement. Enforced by the organisational gestapo that is the HR function, a horrible and destructive function that keep people in their boxes, coerce and bully people into doing as they are told, and only exists because management are frightened of them.

The tech you buy is generally rubbish and you do not need most of it, and Big Tech know it. Why are the most valuable companies in the worlds are Big Tech, they are laughing at you. Most tech doesn't work, will never deliver, for you or anyone. They even hold your data, but try to get it back. They have you on the back foot, committed to the next upgrade that delivers for their shareholders, not for you.

Layers of technology are added to apparently improve productivity, create better reporting, speed up core processes such as Order to Cash and Purchase to Pay, focusing on Cash conversion cycles that feed the finance and accounting audit. It is a transaction monitoring system. Technology layers that include ERP systems that hard wire inefficiencies into your business model, into industries. And supports the baddest actor of them all, and the reason trust in business is long gone, the very nasty System of Record. A system that creates not only an us and them culture, but one of blame, zero trust, where the focus is to screw the customer and partners to profit at the end of the day.

So here is how this nonsense plays out.

Every company operates in a centralised multi layered industry where each party has their own IT systems, comprising email systems, a range of centralised applications that sit over a series of databases. It is this model that is the work of Satan. The very concept of ‘centralisation‘ is the embodiment of the framework of how Deep State that prefers everyone to work within it. A structure born of a historic generation enforced by early big tech firms that create new tools that don't solve the fundamental problems. Tech solutions only partially help, delivering incremental improvements that are tough to spot. Because they don’t exist, the benefits are not real. The costs simply shifts to a different place and is much harder to spot.

All centralised systems create friction time cost that cannot be sustained.

The System of Record - why was it designed by Satan

I am a big fan of Design Thinking but unfortunately the tools on which to build new go to market models, rapid design and prototyping to support the development and deployment of new products and services, given the current tech infrastructure, cannot unlock and unleash its full potential. Instead, it places constraints upon it. Until now.

A System of Record is a technology hierarchy that enforces inefficiency and feeds from it. Whether it is Insurance, Asset Management, Healthcare, Energy, each have their own computer systems and databases that hold the company information and those of their suppliers, customers and partners, from which transactions go back and forth. And this IS the manifestation of the fundamental problem.

Each company has what I call its own version of the truth. Duplicate, incomplete, inaccurate versions of information it stores on its customers, its sales and purchases, customer and partner contracts, design rights and Intellectual Property and other proprietary information, on numerous databases. Information the company wants to protect and keep safe, information it will see as valuable and delivering a competitive edge. But also information the company doesn't fully trust. And this is when it all starts to go wrong…

Regulation forces the need to check and protect data, where armies of back office staff are deployed tasked with checking, amending, monitoring, reconciling and correcting information. A place where human interventions, re-keying data, duplication, error and mistakes mean companies don't trust their own information, let alone that from others. What if it is wrong? Can we be held accountable? Can we be sued? Will we loose our licence or get fined by the regulatory.

It’s all rubbish, it’s wrong and in a decentralised model completely unnecessary. As nearly all of this falls away. In a single stroke when the information and data being shared is seen as reliable, as the truth, used by others, I normally shout. House!

Most business will not accept information from another source. Because 99% of the time it will be different from the information they hold. Compliance will demand it. And why compliance is hurting you. Yes it WILL be different for no other reason the systems, the database, the structure of the data and its accuracy will be different, involving human error, bad inputs or scans, lazy staff or misleading unreliable information.

What ensues is this back and forth theatre between businesses in every industry, at each layer where each party doesn’t trust the information they freely trade between the layers, about us as customers, our information, orders, service records and bank information. Endlessly passing information back and forth, creating friction, time and cost, that sucks an organisations working capital dry. All driven by the fear of getting it wrong, the threat of litigation, please spare us? So your business refuses to change for fear of making a mistake? You deserve to fail. And now fear of losing client data is embedded into GDPR which is now the most used excuse by business not to do something. GDPR hides inefficiencies, buys time, but also loses you customers, kills creativity and sucks your cash.

I wrote to 100 businesses after GDPR came in asking them to disclose what information they held about me, my right. I was told by half that due to GDPR they could reveal what information they held about me. I request my right to erase the data. Two said they would but singularly failed to provide evidence. My conclusion, it is a scam as my data is already out there and I cant get it back.

Do you really think Chinese business models care about this stuff? Do you think your competitors in emerging markets will play by these rules? Ask a big company to provide evidence they have deleted their records of you under your 'right to have your date erased'.

All of this is non productive, meaningless activity drives an odd behaviour, requiring armies of back office staff that spend their time checking, re-checking reconciling, amending errors, issuing credit notes, chasing invoices and trying not to be sued. Just think for a moment.

And then someone in IT mention automation software, which removes some friction, time and cost yes, or robotic process automation that removes some headcount. But in my world these activities shouldn't be improved, they should be eliminated, and shouldn’t be there to begin with. It’s madness.

Under GDPR, compliance is given an extended mandate increases overheads exponentially, because there are rules about information, disclosure and identifying who? How it is stored and protected, how it may be passed and exchanged, often without a care for sovereignty, permissions and necessary care. The core concept of least disclosure and data sovereignty is not considered. It makes no sense as there are already 1000 version of me on the Internet, 25,000 copies of records in databases with my name on it, purporting to be a data set held on me. It is already out there. And there are 100 people impersonating me, writing all sots of rubbish about me, and no doubt trying to be me for financial purposes. And this is why nobody really trusts, won’t accept as the truth and even when it comes from their own systems, will not underwrite its accuracy.

80% of operating costs are spent on doing things the business doesn’t need to do…and should not be doing..!  

Break Out Strategies

Only by exploring the benefits and advantages of decentralised operating models do organisations have a chance to outperform the market, unlock value for stakeholders (not shareholders), and improve business longevity. The game is how not to become a Blockbuster who misread the threat from Apple, or abuse a market leading position like Motorola, or Sears that ignored changing consumer behaviours. Consultants talk about business agility? But what does that mean? A centralised business will never be agile?

The is always the smoke and mirrors of Digital Transformation, sounds great in the annual report. But never seen it work in 10 years. Two reasons, in a centralised organisation you cannot change culture and behaviour, its engrained, and second, management will never put revenues at risk, and why it has always been a myth.

"The objective is the create a model that sustains itself and the people who use and rely upon it. A model that creates and embeds trust as a doctrine of respect and equality for all."

The centralisation effect of technology is a choice, peddled by the big brands IBM, Oracle, Microsoft. SaaS is also a centralisation play using a platform service models - Amazon, Alibaba, eBay, UBER, centralisation of telecoms options Verizon, Vodafone, AT&T, as Big Tech hoover up everything in their path, as new technologies emerge Machine Learning, Artifical Intelligence, Virtual Reality, Automation and Robotic Processing and and…they use to push the new improved centralisation solution story that never delivers.

Big Tech, software companies, consulting firms make their money from inefficient markets, industries and the centralisation effect of commerce. They sell you incremental dreams, knowing you have no need to change because organisations and industries always remain the same, making billions delivering incremental improvements, that are hard to measure, allow management to hide behind the myth that of trends such as ‘digital transformation’ and other quite useless fads, because it sounds like progress is being made. But cannot offer the supporting data to prove it. Its all rubbish, it’s a facade, it isn’t real and we see you…

Summary

Of cousre the old guard, the politicians and unproductive people will de-cry decentralisation, attack it and rubbish it. As they feel threatened by what they know will be an inevitable tide changing against them, as things cannot continue as they are. They will claim decentralisation means losing control, when it actually means better control. They will say it creates more risk, lower profits and you will loose customers, while in truth delivering faster and more reliable experience to customers attracts them in bigger numbers, and delivers better quality of income.

Decentralised operating models do not just mean, decentralised or shared tech, a blockchain, or inviting competitors to the table. It doesn’t have to mean huge investments, as most implementations are low cost, frictionless and easy to deploy. But be warned, decentralised models scale quickly, because they involve everyone, and they can all gain confidence from what they can see, delivering faster, better, cheaper, and they may just save your future, and your job.

As Big Tech scrambles for AI Supremacy with US and China fighting it out, new technologies on the near horizon, technologies such as Quantum Computing which will redefine and reshape your industry anyway. And if you aren't Quantum Safe directors will be in breach of their fiduciary and directors duties.

Decentralisation is a path to deliver on the real promise of your business, to look after customers, staff and all stakeholders, to treat them as participants, even the ones that don't buy from you, but will promote you and tell their friends, in a way where everyone benefits. Where the mantra is participation, fairness, transparency drives a business model much faster and more profitably for no other reason everyone can see how they can benefit, can exchange stores of value that encourage cooperation and collaboration to find new ways that enable the business model to scale at pace!

It is madness to keep putting lipstick on the pig, doing just enough until your pension pot is full as you retire. Remember how you will feel sitting in your chair at 75, knowing you could have done more, but instead you chose to sit back, take the money like your predecessor blames everyone else. Shame on you.

To find out more about the decentralisation methodology and how to design and deploy them, you know what to do…

Find out how your business could benefit from a decentralised operating model and message and lets see what we can do together…

Email: [email protected]

Website: www.nickayton.com

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