Superfluidity realized

How to unlock value creation by challenging friction in organizations

At last year’s EY Innovation Realized Summit (IR), C-suite executives contemplating their innovation ambitions discussed the notion of ‘superfluidity’. In science, superfluidity speaks to the ability of a liquid to flow without viscosity or friction, like liquid helium which loses no energy as it moves. As supply and demand connect faster than ever, and disruptive technologies break down barriers between buyers and sellers, accelerating markets can also be described as moving toward a state of superfluidity. During our workshop at this year’s IR Summit, we asked C-suite executives for ideas to challenge the status quo and increase the fluidity (and therefore return) that can be derived from people, time and investments, to maximize value creation over both the short- and long-term.   

Superfluidity of the enterprise

The early days of fluidity in business were enabled by the ability of the internet to aggregate demand or supply, bring more real-time data into purchase decisions and enable more seamless payment capabilities, for example. Now, as we actively see technologies like blockchain, IoT, artificial intelligence (AI) and automation come into play at scale, even more friction is being removed from the connection between supply and demand. Indeed, markets across a range of industries are now increasingly achieving a state of superfluidity.

With external dynamics accelerating further, the question posed at this year’s IR focused more around superfluidity of the enterprise: how can we remove the friction inside organizations to move faster and become more competitive? The thesis is intuitive: scarce assets inside a company, like time, talent and investments, must be optimized to maximize value creation. If there is friction in how those assets are deployed — that is, delayed or sub-optimal use — we cannot maximize the creation of new ideas and intellectual property, scale new products and services, partner intelligently across ecosystems, and fuel new business models. 

The obstacles preventing organizations from moving people, allocating time, and deploying capital nimbly, in such an environment are clear. To manage large-scale companies, organizations necessarily create hierarchical constructs to govern complex businesses, organize people, report on financial performance and drive decision-making. But the structures of budgeting, profit and loss statements, and org charts may be too static to align with the dynamic realities outside the company. So, let’s take a look at what attendees at IR told us about these inherent challenges, and how companies can operate differently to unlock the value.

Money

It goes without saying that capital should be invested to maximize enterprise value. And, done right, investments are deployed to unlock optimal strategic and operational priorities — balancing the now, next and beyond. But investment often ends up locked away in the nodes of the organizational matrix, cascading via functional or divisional structures. And, money locked at one node may be better deployed elsewhere. We asked the leaders in our workshop: how can we bring more dynamism to investment decisions to optimize value creation? They had some great ideas to challenge our collective thinking:

1. Reduce the incentive to hoard. So often, a leader may have budget that could be deployed more successfully in a different part of the business, and they may even be aware of this. But fear of having to forgo this investment the following year can create a “use it or lose it” mentality. Can we reward people for freeing-up budget to be re-deployed more optimally?
2. Use AI to review business cases. Perhaps a bit futurist, but it’s worth considering if companies could submit business cases for competing uses of investment funds, and let (hopefully) unbiased AI prioritize the return on investment having considered the full cascade of cost and benefit analysis. Can we build more objectivity into allocation decisions?
3. Move to continuous budget cycles. Budgeting has a cadence – by year, by quarter, by month –which informs how companies make plans and reconcile them. But circumstances in the external market change more rapidly than a defined cadence, and companies may need to activate a strategy by investing nimbly in marketing, product development, talent or a new partnership. Can we get to more dynamic budgeting (and perhaps financial reporting) cycles to reflect the new dynamism of business?

Time

Time may be the scarcest resource for us all – both personally and professionally. If we ask ourselves if our time allocation is aligned with our strategic priorities, likely no one will feel their calendar is optimized. So, how can we take friction out of the way we allocate time? Our attendees offered a few thought-starters to change the dynamics:

1. Ramp up virtual collaboration meaningfully to reduce travel. We have all flown 10x the duration of a meeting just to be there. As virtual meeting technology continues to advance, can companies challenge the cultural norms to enable them to better and more consistently take advantage of it?
2. Give every meeting a purpose. Meeting agendas are often not transparent, and at best, displayed as bullets at the beginning of a session. In addition to mandating pre-reads where needed, a clear taxonomy such as “decision point” or “ideation” can illuminate the purpose upfront, thereby setting clear expectations. Can we shift how we approach the concept of ‘meetings’, positioning them as more intentional and outcome-driven experiences, while also reducing unnecessary attendance by inviting fewer people to achieve critical mass?
3.  Ban email as a workflow tool. Email has de facto become the core workflow tool for most organizations, even while so many better tools exist for workflow management, collaboration and project management. Can we reduce email volume to free-up time and increase project efficiency by harnessing more innovative tools?
4. Dedicate problem-solving time. A typical challenge is finding the time to assemble all those required to join a formal in-person discussion. Calendars become peppered with priorities that prevent individuals from convening efficiently to solve problems that bridge different functions, talent and teams. Could companies regularly dedicate a half-day (banning “normal” meetings) to enable hackathon-type sessions, where cross-functional teams could assemble to progress priorities more efficiently and in a more consolidated timeframe?

People

For all the focus around automation, there is no question that humans are still – and will continue to be – critical drivers of value creation in any enterprise. Leaders must ensure that the talent mix is aligned to the business’ short- and long-term priorities; they need to deploy each human in the organization such that they can add the most value at a moment in time – both in light of own their career ambitions and the company’s goals. However, talent is often sequestered in a single part of the organization, sitting in a box on an org chart without the requisite mobility or organizational dynamism that reflects the competitive reality. How can companies build more fluid models for talent acquisition, skill development and deployment? Our workshop participants had some great ideas on future talent models:

1. Create a marketplace of people and projects. Fundamentally, talent strategy is an effort to connect internal supply and demand. Can new technologies replace static talent deployment models to enable projects to be transparently connected to resources with the right skills to complete those projects?
2. Describe talent through a broader set of dimensions. Most resource management approaches use traditional descriptors to describe a worker, such as years of experience, title, role, or competencies. However, there are other workforce dimensions that are critical to understanding each person more holistically – such as teaming style, performance history (assuming more transparent and accurate feedback), prior experience, working approach, or virtual/physical work location. Can we meta-tag humans with more dimensions, so we can understand workforce supply in a more sophisticated way?
3. Pay based on value creation. Today, people are often aligned to KPIs which, at best, cascade from broader business objectives for the organization. And that assumes that the metrics have been artfully crafted and aligned. However, there is friction between that cascade of objectives and talent being deployed to maximize value creation to the enterprise. How can people’s pay be more closely tied to value creation?

Not all ideas targeting superfluidity of the enterprise are palatable or feasible today. However, they provide a provocative challenge to the way most companies operate at present. Businesses may not want to take on all of these challenges, but are there one or two ideas worth considering that can unlock internal friction around people, time and capital, so leaders can create value more quickly? As markets gravitate ever closer toward superfluidity and overall acceleration, businesses can challenge the inertia of legacy-based constructs – moving more quickly to create and capture value.

At Innovation Realized 19, April 7-9 in Boston, EY convened leaders to further explore how companies can continue to create and deliver value by planning in three dimensions simultaneously: Solve the now. Explore the next. Imagine the beyond. Continue to join the conversation by following #InnovationRealized and visiting www.ey.com/innovationrealized.