8 Implications of Venture Capitalists Getting into Crowdfunding

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Is VC crowdfunding the future of venture capital?

Angel investors traditionally have two pathways to buy into new enterprise. They put their money into a fund which seeks out high risk, high return projects; or they find projects and do due diligence themselves.

Some venture capitalists, observing the crowdfunding model, are exploring avenues to exploit the global reach the internet and social media provide. One such venture capital group, the Israeli startup platform OurCrowd, brings together venture capital and angel investment strategies into a new model for equity crowdfunding.

OurCrowd claims to curate best in market projects, does the due diligence, and provides initial capital investment to set projects in motion. Hereafter, they raise the balance of funds through their own global, sophisticated investor network, via their own crowdfunding equity platform. The platform allows these investors to review a range of projects available, and choose the ones they like.
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Inside-Out versus Outside-In

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Providing the social tools and IT environment the front line needs

In my last article, What to Do When Your Business Model Changes, I concluded by stating I would define the emerging focus and need for ‘platforms’ to provision and manage the use of technology within an enterprise in a later article. However, first it is necessary to add one more demand, or requirement, that is linked to the change in business models and relates to another of my articles, Free Your Users (or They Will Free Themselves). The subtitle for that piece is The Vexed Issue of Social Media and BYOD in the Workplace, which leads to this article about the biggest driver for change – people – and the manner in which they are using technology to work in new ways.

An important element in the article on business models that I want to build on is the concept of “Inside-Out” versus “Outside-In”. These terms define the difference between internal business processes focused on supporting some degree of external web access, Inside-Out, versus externally focused cloud, mobility solutions, apps, and of course, social tools (all which need restricted internal access), Outside-In.

After over twenty years of optimizing internal processes and workflows, the manner in which people work inside the business is fully understood. Linking the business activities of the back office with the Inside-Out focus of technology helps to bring technology and business together.

The disruptive technologies of cloud-based applications, delivered through browsers and apps to a variety of devices, are all part of the external environment and linked to the role of front office. New business models are focused on taking these external capabilities and redefining how to find, win and deliver new forms of competitive offerings.

Front office environments are focused on people who create value through external interactions to win and deliver business, people working Outside-In. This is unlike the back office where the focus is on process removing people and cost.

Outside-In technologies enable the people in the front office to find and share the resource they need to improve their performance within these new business models. “The Future of Work” is a term used to describe the manner in which these new technologies are deployed in new optimal ways.

Much of the confusion about the increasing use of social tools, Bring Your Own Device (BYOD) programs, and trend to bypass the IT department to use external cloud solutions, arises from the disconnect between the Outside-In work practices of the front office and the Inside-Out practices of IT’s traditional back office deployments.

Understanding this and refocusing on the new working practices of the front office is a necessary break through in reacting to the inevitable changes already under way in most enterprises.

Whether it’s called BYOD, Shadow IT, Business-Technology, or Consumer IT, there is a common change in the younger generation from around 35 years of age down who have grown up with technology and see it as a lifestyle tool. This is markedly different to the generations before whose relationship with IT was most likely forced on them, directed to use a locked down enterprise PC with a narrow selection of relatively unfriendly monolithic applications. The difference in approach to technology can be broken down into nine common attitudes to different aspects of work.

 

Source: Adapted from IBM report ‘Driving Workforce Productivity by Enabling Social Connection’ (June 2009)

Of course nobody is an exact fit to all the nine behaviors but this table goes a long way towards explaining some of the internal tensions in an enterprise.

Front office roles tend to employ younger people whilst senior people controlling the enterprise through its back office processes tend to be in the older two groups.

Most of the senior management will have reached their current level through the business model revolution called Business Process Re-Engineering during mid 1990s when Enterprise Resource Planning (ERP) was developed to make integrate the disruptive technology capabilities that networked PCs introduced into the mainstream of the business.

Business process engineering and the redesign of a firm’s business processes, workflows and the technology that supported them highlighted the need for a new form of enterprise communication along the new processes, the introduction of email! The redesigned business processes deliberately crossed and broke up the old departmental management structure substituting a process based management structure in its place. Email was seized on as the replacement for the office memo and an efficient means to communicate with the known and named people in each process.

Today email has become one of the most significant tools used to manage an enterprise.

Actually, we should probably say “manage back office defined processes” because as many front office staff would be quick to point out it doesn’t help them to try to find answers to external questions, events and opportunities. The ‘structure’ of email and the mapping to names, rather than knowledge, is exactly what Inside-Out back office needs. A senior manager will want to know who is responsible for what in the core processes. However, for a front office worker the limitations of this are severe; after all if their role is externally focused they simply will not know who they should send which question on what topic to if it doesn’t fit with the enterprises internal processes.

The new Outside-In business models, supported by social tools and collaborative working, need answers to questions based on their topic or content, without having to determine which person to address an email too.

The issue is to integrate these tools and work practice into a business in accordance with the nine characteristics of the ‘technology conscious generation’. This almost certainly requires the front office staff to adopt BYOD and the Outside-In model.

At this point it should be clear as to what, where and why a change is taking place in the tools being used by employees. The strategic nature of this change, from an enterprise point of view, should also be clear.

The new focus for an enterprise is to reform the front office capabilities to enable it to support new competitive market demands. As such, the adoption of new working practices will be a given.

More particularly, it should enable a thoughtful CIO to decide when and how to accept the introduction of new technologies, using the concepts of Inside-Out and Outside-In as the basis for technology separation.

Its been a big topic to cover but hopefully it brings out the key issues, relating them to the immediate tactical needs to address the issues being raised by the use of new technologies by employees, usually backed by their younger business managers. However, it also raises some very critical issues about enterprise management and the governance of its technology empowered employees. This is where “platforms” enter the equation.

Creating a new business platform is the strategic answer, a platform that will enable the management of people and their use of apps and devices in enterprise business activities, all in accordance with business rules established by management. That’s the topic for the next article, bringing together all the elements of my previous three.

As a closing thought, this is the beginning of a longer journey that will see radical change in the manner in which an enterprise functions. Businesses will become truly driven by the need to find optimal responses to external market events, opportunities, and requirements. Thought leaders are already actively providing research papers and presentations that really address a whole redesign in what and how we work in the long term. To understand exactly where this may take the future of work, listen to John Seddon make a series of logical connections that make it hard to deny the manner of the change.

15 theses about the future of the Internet and how we can shape it positively

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PewResearch Internet Project has just released a report on Digital Life in 2025 based on expert interviews.

One of the interesting aspects of the report is the ‘theses‘ that they have distilled from the interviews, which they have divided into ‘more-hopeful and ‘less-hopeful’, concluding with one very important piece advice. These are:
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Demographics will shape Asia’s future

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Last week I gave the keynote at the Board Strategy Planning offsite of a major Philippino bank at a beautiful location a few hours outside Manila.

The bank’s board and executive team recognize the need to respond to the challenges and opportunities of the future, so themed their strategy offsite around the future, inviting me to presenting on Creating the Future of Business to kick off the session.

My presentation delved into the essence of technological, societal, and economic structural change today, and the leadership required to succeed in the emerging world.

One of the topics I touched on was demographic change. Demographics in the Philippines is a very different issue than it is in most developed countries, where rapidly ageing populations are at the forefront.

The following chart shows the anticipated demographic profiles of Philippines and Japan in 2050.

Age_profile_Philippines_Japan
Source: Nationmaster
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The World in 2030: Four scenarios for long-term planning and strategy

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Recently I did the opening keynote to the top executive team of a major organization at their strategy offsite. It’s not appropriate to share the full presentation, however I can share the rough scenarios I presented for the world to 2030. The scenarios were presented after having examined the driving forces and critical uncertainties for the company.

As always, a strong disclaimer comes with any generic set of scenarios like these – scenarios really must be created by the users themselves for specific decisions and in context (for the full disclaimer see my scenarios for the future of financial services).

SCENARIO FRAMEWORK FOR THE WORLD IN 2030

A traditional scenario process identifies two dimensions to uncertainty, that when combined produce a matrix of four scenarios. Once the framework is created, the full richness of trends and uncertainties uncovered in the research process are integrated into the scenarios. Here the two dimensions selected are:

RESOURCES AVAILABILITY: Resource Poverty TO Resource Affluence

Availability and real cost of key resources including energy, food, water, and environmental stability.

COHESION: Cohesion TO Fragmentation

Cohesion of society, government, nations, and institutions.

Together these dimensions yield:

FOUR SCENARIOS FOR THE WORLD IN 2030

SCENARIO: SHOCK TREATMENT

• Economic divergence: developed world stagnation
• Protectionism rises and markets localise
• Little global action on climate amid massive impact of global warming
• China and India fragment
• High-impact terrorism: bio, nuclear, radiation
• Infrastructure becomes primarily private
• Inexpensive and highly mobile labour
• Immigration tensions and rioting
• Urbanization accelerates, often in squalor

SCENARIO: NEW HORIZONS

• Economic shift to East
• Billions become middle class
• New energy sources/ planetary engineering
• Innovation yields food and health to the poorest
Artificial intelligence applied to real-world issues
• Robotics attenuates impact of aging workforce
• Life extension for the wealthy, retirement age rises
• Remote work leads to more distributed living
• Affluence drives tourism and travel

SCENARIO: HUMANITY MATURING

• Climate becomes extreme and volatile
• Food and water shortages, famine and pandemics
• Global coordinated action on climate
• Trade liberalisation accelerates, EU extends
• Corporate activity driven by triple bottom line
• Social entrepreneurs invest $100 billion and seed a billion enterprises
• Cities become compact and resource efficient
• Rise of public/ shared transport

SCENARIO: AGENT ECONOMY

• Fluid global economy
• International outsourcing of most functions
• Mega-corporations become lean and micro-business rises
• Market solutions for environment
• Governments lose control and ability to tax
• Agents seek best price for everything/ customer loyalty is zero/ commoditisation of everything
• Distributed energy and manufacturing
• New capital markets, volatile financial markets

Could online lobbying be the future of government?

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Recently I spoke on the potential of crowdsourcing at the EngageTech conference, an event focusing on how government can best use technology to engage with community and citizens. One of the very interesting conversations that emerged at the event was on how interested and informed citizens are on government decisions.

It’s a truism that representative democracy is not very democratic.

One of the primary reasons that we elect representatives is that the vast majority of people do not have the interest or time to have informed opinions on the many things on which government must decide and act. However the rise of a hyper-connected world has fundamentally changed the relationship between citizens and government.

People have the opportunity as never before to be well-informed on the issues that interest them. The newspapers and TV stations that supposedly informed us pre-Internet were never better than adequate, and very rarely even that. We are better informed than ever before (and happy to debate it with anyone who disagrees).

Moreover, we now can have our opinions or input heard in a way that was never possible before. Switzerland, which has more referenda than any other country, is in the vanguard in e-voting, allowing easy remote participation in government decision-making. Of course the challenge is that citizens’ input to any particular decision will be swayed by the degree of participation of advocates of different approaches.

But this is certainly not sufficient reason to discard this kind of participation. Arguably all elections are subject to the same issues: degrees of participation in voting, extent of knowledge about the issues at hand, and influence by partisans. Is the fact that the proponents of a particular view can muster widespread online – or offline – engagement sufficient reason for their stance to become policy?

As a straw man, I suggest that it is entirely viable for public policy to be shaped – issue by issue – by online lobbying and engagement with voters and citizens. Yes there would be potential problems in this system, but these would not necessarily be worse than the current very broken system we have in most “democracies” around the world.

Let us imagine a world in which all major issues are open to debate, discussion, and lobbying in the public sphere, leading to participatory decision-making. For all the potential flaws of this system, it could well be better than what we have today.

Keynote at Critical Horizons conference: The potential of a connected world

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Recently I spoke at the Critical Horizons Regional Futures conference held in Bunbury, Western Australia, which “examines emerging global trends and how they might affect regional communities in the South West Region of Western Australia”. It is fantastic that a non-urban region runs a regular event to examine its future. It is clear that the attendees from across business and government had a keen appetite to explore the future and what they need to do to create a prosperous region in years to come.

The regional economy is still largely driven by mining and to a lesser extent agriculture (including the delightful Margaret River wines). It is experiencing many issues common to regional areas, including the loss of younger people to cities. However it has a particular context in its location. Australia is one of the most urbanized countries in the world, and Perth is the most isolated city in the world. Bunbury is over 2 hours drive away from Perth. It took me 10 hours door-to-door to get here from Sydney – by far the longest it has taken me to get to a speaking gig in Australia.

The region’s geographic isolation means the topic of my keynote here, Power to the People: Thriving in a Hyperconnected Society, is immensely relevant. I discussed the overwhelming trend of how a connected world is shifting power from institutions to individuals. However, I also covered the implications for regions of the emerging global talent economy. Crowdsourcing tools on one level provide access to extraordinary talent that can be harnessed in ways limited only by imagination. Yet a connected world also provides opportunities to provide services, both in existing domains, and especially in managing projects.

To the extent that they are useful (usual disclaimer: my slides are created to accompany my speeches, not to be viewed on their own) here are the slides for my keynote (minus the Flash animations).

5 shifts that will shape the future of IT

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How empowered consumers and the consumerization of technology are shaping business

It’s not often that a week goes past when I don’t hear a new story of a company being ripped apart as it struggles to deal ever more demanding and fickle consumers. Marketing and sales, it’s usually said, have gone rogue leaving finance and IT to pick up the pieces. It’s obviously important to keep selling (and to keep generating revenue), but it’s equally important to do so in a safe and compliant manner (so that you’re still in business next year).

This situation has become bad enough that the analysts are now suggesting that a shift in operating model will be required to solve the problem. That sounds about right, and it looks like the trigger for the shift will be external pressure from regulators.

The problem, then, is to form a sensible picture of how this to-be operating model will function.

Coming up with some general statements about that nature of this new model is fairly easy: it will be more collaborative, it will favor services over assets, innovation will be important, and so on.

What is more important, and much harder to do, is to develop a picture of how the shift to a new operating model will change the roles and responsibilities within a business. How will we heal the rift between the front office – sales and marketing – and the back office – finance and IT?

This is not a question of tweaking the role of the IT department, for example. The IT department’s role – as has been pointed out elsewhere in this publication – is already well defined. IT is the part of the company that is responsible for procuring and maintaining the IT assets a business requires. This isn’t changing. Many businesses need for this role is, however, diminishing.

Nor can the problem be fixed by creating new technology-based roles outside the IT department, such as the Chief Digital Officer or Chief Marketing Technology Officer. While these roles might help the lines of business use technology more effectively, and they may work closely with the CIO and the IT department, they don’t address the root cause of a disconnect forming between the front and back office.

The interesting question then, is “What’s the role of IT in business?” How can the entire business consume and manage IT in a safe and compliant way while still meeting the needs of today’s empower customers?

To answer this question we need insight into who will make the decisions on what IT will be used where and how it will be knitted together. We need some understanding of the drivers behind the current transition in how we consume IT in business.

5 drivers for change

The easiest way to identify these drivers is to consider the shifts we can already see in how we’re managing the technology we have today. We’re not interested in changes in the technologies themselves. Nor are we interested in how the business uses individual technologies. We’re interested in how technology is managed across the business: who gets to decide what and how are conflicts resolved.

First there’s the shift in where technology comes from, and who is responsible for the infrastructure it relies on.

IT has expanded beyond the IT department. The development of on-demand IT (such as Software as a Service, SaaS) and the consumerization of enterprise IT (the use of consumer technology in a business context) mean that businesses, and the lines of business, no longer require the deep IT infrastructure skills that they did in the past. Nor do they want IT to act as a gatekeeper, selecting and procuring the technology to be used by the business.

From this we can identify two obvious trends shaping enterprise IT:

  • Driver 1: Enterprise IT is no longer an infrastructure problem, it’s not an asset we own
  • Driver 2: Consumer trends drive enterprise IT, rather than enterprise IT driving consumer trends

Next, is the impact of these trends on how we manage technology within a business.

Many business stakeholders today feel empowered to make their own decisions on what technology to use where, a result (for many) of a childhood steeped in technology. They’re using new technology in new ways to solve new problems, creating new business opportunities in the process. They don’t want the IT department mediating access to the technology they need, and slowing everything down. Many IT departments are finding themselves on the back foot, unable (or unwilling) to support the business as technology moves out of an automation and cost focused role.

This gives us another two trends:

  • Driver 3: The old core IT skills are not as valuable as they used to be
  • Driver 4: How we define the value of IT has expanded (it’s a lot more than ROI now)

While the previous four trends show us the how IT governance might flex and adapt to changing needs in the business, it is the external constraints that will determine the final role of IT in business.

So what external governance requirements are going to shape how IT fits into a business?

Audit is an obvious candidate. With marketing departments going rogue, often there’s only a tenuous link between what’s happening at the coalface that the company’s chart of accounts. In some instances the only link between sales and the general ledger is a spreadsheet containing the P&L for the new initiatives that is manually uploaded once a month. One day the auditors are going to come in and they will want to see a clear trail of evidence from sales by the new division through to the general ledger.

Another example is anti money-laundering and counter terrorism financing, which is receiving more attention from government as complementary currencies – such as Bitcoin and the “points” used to purchase virtual assets and services in games and social services and which are sold for cash – grow in popularity and attract organized crime. As businesses, even privately held businesses, integrate themselves into new commercial environment they find themselves increasingly subject to AML and CTF regulation.

Consequently our final trend is:

  • Driver 5: External obligations – such as financial reporting, anti money-laundering and counter terrorism financing – will trigger the transition to new operating models

The future role of IT

The future role of IT, as well as the role of the IT department, is not carved in stone. Both are likely to change as businesses find new ways to use IT to create value for them and their customers. The challenge is to understand what is driving this change and which, consequentially, will shape the role of IT, and the role of the IT department, in the future.

What trend do you think will shape the future role of IT and of the IT department in business? What are the drivers that we should be paying attention to?

 

6 key elements in effective innovation governance

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Earlier this week I ran a two-day workshop in Bali for the Malaysian Directors Academy on The Innovation Zone: Unleashing The Mindset.

I ran the same program in Phuket last October for another group of directors of large Malaysian companies, with the feedback from that session prompting the Malaysian Directors Academy to ask me to run the workshop again.

The topic of “innovation mindset” is an excellent one for company directors, as that must be the starting place for successful innovation initiatives.
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Design Anthropology and the IT Leader

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Leveraging the synthesis of design practice and the study of human culture and behavior

Who is responsible for design in your IT department? If your answer is your Architecture or Business Analyst teams then you may be missing a vital factor. Take a moment to reflect on what design really means and who utilizes the outcome.

Design is led by the individuals and groups that populate your organization’s ecosystem; in internal departments, trading partners, service providers and customers. They grapple daily with sets of increasingly complex information. Where they may have once begrudgingly accepted what was offered, modern consumers will not sit idly by if presented with systems and processes that are increasingly misaligned to their needs.

This shift in behavior means how you manage design (in particular, your service design) must change. Now is the time for the CIO of the Future to consider design anthropology – a powerful, emerging practice that blends the study of humankind with design thinking.

Why the old ways aren’t working

Business problems are often resolved with the materials and capabilities that are on hand. This makes sense if operating in a steady state. Leveraging existing assets means that organizations can make the most of what they have already invested in.

The problem is that an organization does not operate in isolation. Their operating environment is influenced by changes in the competitive landscape, the emergence of new technology and shifts in social behavior.

These changes are not under your control. As a leader you will find yourself increasingly unable to respond to such chaotic and fluid influences with binary and linear solutions. A direct technology or process response will be insufficient. Relying on history (doing the same things you’ve always done) or adopting best practice (copying what others have done) will burn a lot of energy and resources with an ineffective result.

The “I” in CIO is not solely about the provision of information. It is about how it is gathered, shared and applied for the best outcome.

Consider the following trends:

These trends create a major challenge for the traditional practice of design. An isolated, once-off exercise undertaken at the beginning of a project will not produce a sustainable and effective result. This is where design anthropology comes in.

Introducing design anthropology

Systems analysis and design is generally recognized as a defined set of processes followed by individuals or small groups who work in relative isolation from consumers. They produce a concept or specification that is then handed off to engineers to be built. This rigid, closed-door approach results in design outcomes that are no longer meeting consumer needs.

In contrast, design anthropology brings together the dynamic study of people and their behavior with the practice of design. According to Design Anthropologist Julie Cook, key aspects of this practice are that it is:

  • Multi-disciplinary; the diversity of perspective and behaviors is critical
  • Group and socially inclusive; opinions matter strongly and must be identified and captured
  • Critical that participants and leaders embrace ambiguity
  • Taking a holistic, systems view of the organization
  • Beyond “design thinking” and goes to the origins of consumer action and response
  • Radical, in the sense that it is transformational and revolutionary

Supporting this approach, Cook says, is the application of the social science of ethnography – the “collection of data about people through direct observation and interaction”.  This change of focus – from what people say they do to what they actually do – is the ignition point for true innovation. Without this, leaders will be faced with a growing gap between what the consumer desires and the solutions being offered to them.

Expanding the concept of the “consumer” to include the wider workforce of an organization results in a shift in thinking. Team members are no longer seen solely in their role as a “utility” where the most productivity can be yielded, but as consumers of the data, tools and processes that they work with. This is increasingly the case in service-based organizations where people, to put it bluntly, are an organization’s raw materials and processing machines rolled into one.

If the creativity and curiosity of employees is constrained by traditional management methods in the workplace, then it will find ways of manifesting elsewhere. Ideally you want that energy to be directed inwards, to your organization.

Applying the principles

It takes a fundamental shift in how you lead your team to introduce and support the principles of design anthropology. There is no fixed recipe, however Cook provides some essential guidance:

  1. People and coaching. The ability to lead people through change is an increasingly sought after skill. Changing the way things are done consumes considerable time and effort. Your people will be watching you, and taking a cue from how you are seen to support their design approach. They have an emotional value system that is influenced by their consumer experience. Be aware of organizational norms that may have a negative influence on them, such as feeling the need to conform to a set of pre-existing rules and patterns of behavior.
  2. Systems thinking. Design thinking and the impact of consumers cannot be pinned down to a single process or department. Any organization is a set of interdependent systems. Influence mapping tools together with open and critical brainstorming help to uncover the impact of new ideas on far reaching aspects of your organization and the environment it operates within.
  3. Data valency and the missing context. In chemistry, valency refers to the number of bonds or connections an atom can make with another to form a molecule. Valency is an important concept to consider with collections of data. By itself, the data forms an incomplete view of a particular, often narrow, aspect of your business. Go looking for how this data can be joined with other sets and experiment with combining them. Fresh information will emerge as a result, similar to that of a chemical reaction. Use this to explore different outcomes that a single set of data is unlikely to reveal.
  4. Measurements. In a traditional process measurements are made on an absolute (it fits the criteria/tolerance, or it doesn’t) basis. Most organizations will expect formal measures to support the investment required to achieve the outcome. However this must be complemented by measuring consumer sentiment, design success and emotional values. This is especially the case as a result may be many factors removed from the original problem being studied. Observation of how consumers actually use the resulting solution, together with conversations which capture their delight, displeasure or disinterest in the outcome are also important.
  5. Embracing workaround. As frustrating as they can be for a CIO, the implementation of workarounds, also called “shadow IT”, is on the rise. Cook advises that CIOs should fight off their initial reactions to shut them down, as they can be an indication of what people really want. In some environments it may be necessary to do this for compliance and control reasons. However, in effect what has been created is the voice of your consumers saying “this represents what we want.” The CIO of the Future has a role to play in ensuring a continued dialogue as well as supporting initiatives that produce and sustain new insights in an organization. In the emerging workforce where team members cannot recall a time before pervasive internet and personalized devices, this will be an increasingly tough battle for a command-and-control CIO to fight. But it is not a declaration of war; it is a conversation starter about what is desired and needed.

Leaders in design anthropology practice include the Mayo ClinicXeroxIBM and Intel, in particular through the work of Genevieve Bell.

How would you go about applying the principles of design anthropology to your organization? Have you seen examples of where it has produced surprising results?