Digital transformation requires a return to "first principles"

Image source @ Visual China

Text | Cheung Kong Graduate School of Business, Author | Wei Qing (Microsoft China CTO)

In the past few years, if the hottest new word in the enterprise circle, "digital transformation" can be said to be more than enough. The slogan is very loud, the family is doing it, but there are few successful people.

"Digital reform is a complex giant system project. Innovation is needed from the thinking paradigm to the cultural paradigm, to the organizational paradigm, the institutional paradigm, the performance paradigm and finally the behavioral paradigm. ”

"Don't be labeled by new concepts like artificial intelligence and NFTs, but use them as tools to learn and leverage them essentially." In the real practice process, most people who pay attention to nouns or are limited by nouns are eliminated. ”

Wei Qing

01 Think clearly, explain and do it

What is the original model of new concepts such as digital transformation, intelligence, and the numerical age?

More than 20 years ago, there was an information theory pyramid called DIKW (Data-Information-Knowledge-Wisdom or digital-letter-knowledge-wisdom), and the current hot big data, artificial intelligence, informatization, metacosm, etc., are all in the DIKW pyramid framework.

If you look back, you will find that the new concepts proposed now are only the realization of the ideas of the predecessors twenty or thirty years ago.

There is some basic logic for the actual combatant, if you are always following the trend, doing business is very tired, and always know only one and do not know the other, it is easy to be biased.

Musk mentioned in an interview that "first principles" is a return to the source and a philosophical term.

In the same interview, he also mentioned another insight -

"I suggest that in this era, we should try not to use metaphors when thinking about problems, we know that human communication, learning to play metaphors, telling stories is originally a specialty, but why in this era, as a leader, try to use metaphors in the thinking paradigm, that is, in the framework of thinking, to be careful with the method of metaphor. This is because what if the object being compared is going to be broken? ”

"When a theorem comes out, there are new tests, studies, and measurements that prove it wrong."

Scientific methodology refers to the fact that science cannot be verified, but can only be falsified.

In the same way, when we provide services to our customers, there must be a premise, a critical eye, that is, to see if it can be falsified. If a solution can solve the current problem without adding a premise, that is, the constraints of adapting time to local conditions, then the solution is mostly unreliable.

The more people work on the front line and lead the way, the less they believe that there are still "experts" in this era, and there are "correct leaders" who can follow. Instead, in this day and age, everyone can be a leader at a certain time or at a certain point.

When we have this basic thinking logic and method, we will know that there are two divisions of learning, Chinese that is, "learning and learning", and there are two words in English, one is learn and the other is studioy. Study emphasizes learning a theorem, while Learn emphasizes the dynamics of continuous learning, constantly merging knowledge with action, and constantly breaking the game.

We have entered an era in which certainty has disappeared, and more and more companies are groping into the "no man's land".

For example, Huawei, Microsoft, their future development no one can answer, because these companies have been on the road that no one has walked.

In fact, there have not been many new technological breakthroughs in the past 20 years, and most of them have been written decades ago and gradually achieved in a better engineering way.

Then, since you want to innovate and want to lead, you may wish to read the first few Papers on Systems Theory, Cybernetics, Information Theory, artificial intelligence, machine learning, and methods and practices of Systems Engineering, such as Turing and Wiener.

In this era, everyone should change their views to learn, that is, the real "learning and learning" and "the unity of knowledge and action". Forget about tricks and tricks, explore how to get tricks and tricks of thinking, so as to form your own cognitive framework.

When we enter the digital age, because we are facing new human-machine relationships, this is an era that has not been encountered in a hundred years, or even in a thousand years, because there is a potential hidden topic in it - everyone thinks that we have entered the digital age, but in fact, it is more precisely the information age.

According to the DIKW model, the stage of data is still preparing for the information and knowledge society, but so far, there is no consensus on what information is and what information really does.

Those who regard digitalization as a post-informatization stage are debatable, rather than entering the digital era after completing informatization, perhaps we can rethink whether we have really completed informatization, or just realized paperless office or automated production.

In digital transformation, too many people are tied to those concepts and sayings.

From the perspective of the century-old history of the electrification era, although we are talking about digital transformation today, we have not yet entered this era fundamentally.

To truly enter this era, we don't have to talk about transformation, we don't have to talk about digitalization, we talk about the business itself, and we talk about the most basic food, clothing, shelter and transportation of human beings.

For example, if we entertain visitors at home, no one will be bored enough to tell visitors that there is an electrical outlet on the wall of the home, and at most they will introduce what kind of electrical appliances are in the home, in fact, most of the situations are to introduce their lifestyle, food, clothing and housing, rather than electricity at home.

Imagine the various technical terms that we often talk about, like a hundred years ago, when people used to nag that they were using electricity. Returning to the basic demands of human life may be the true destination of all the new technologies that prevail today in the next few decades or even hundreds of years.

For enterprises, one day, just as they will no longer show off to others that they are using electricity, people will no longer have to talk about any technical vocabulary, talk about digital transformation, but talk about their own work, but it has been empowered by information technology.

In the final analysis, what kind of technology is to meet the material and spiritual needs of human beings.

We are often prone to misunderstand the difference between thinking clearly, explaining it, and doing it. And the most common thing is to think that we can do it, and ignore that we are entering a no-man's land.

One of the biggest features of no man's land is that utopian and hypothetics have no effect, and there is no basis for high probability premises, because you have no precedent to follow.

The way forward is empirical, learning by doing, learning by doing, and approaching the goal step by step. And this empirical evidence, the high probability of events is far more lessons than experience, if it is such a scene, it may be more likely to walk on a closer to the truth of the road.

In the age of no man's land, if our thinking does not change, it is easy for us to follow the so-called leader or leader. He may know better than you think, and then speak more than you can, and eighty percent of you will be taken away, but pay attention to whether he really did what he said, and at the same time, it also depends on whether this kind of doing belongs to the category of survivor bias, which is the characteristic and challenge of this era.

It should be noted that contextual logic is important, and if the context is not constrained, it is easy to waste resources on useless things. Paying attention to context can also be understood as paying attention to the premises and constraints, which is the basis of rational thinking, the premise of everyone making every judgment, every decision and every thing, but there are very few people who can develop this habit of thinking.

Let's talk about the importance of clarity.

Travel alone and travel far. This era has entered a no-man's land, and no one has brought enough equipment and necessary resources to walk through the swamp in advance, so everyone is walking together.

It is best to bring more like-minded people with you, and to identify and attract more like-minded people, you need to first explain your own ideas, there must be debate, the so-called reason is more and more clear, which requires people to master the basic rhetoric and debate theory, but also to continue to practice.

This theory and practice in the West can be traced back to Aristotle's rhetoric. In the East, it can be traced all the way back to the Spring and Autumn Period and the Warring States Period.

Then it is done, and there is a set of ways to do it. It is necessary to distinguish between science, technology and engineering. Among them, the ability to engineer is most needed.

Think clearly, explain, and do it, and the thinking paradigms of the three are different but interrelated. If you can't recognize it very calmly, the probability will go with the flow.

02 New wine in old bottles Noun of technology and the essence of technology

In this era, the judgment of technological advancement and engineering practicability can be expressed by drawing four squares: the horizontal axis is the new bottle and the old bottle, referring to the concept of technology; the vertical axis is the new wine and the old wine, referring to the value essence of the technology.

There are four quadrants in this way, which will evolve into the following possibilities accordingly:

One is that the old wine is in the old bottle, which is easier to identify; the other is that the new bottle is the old wine.

And the really powerful company, because of the practicality of the project and the advanced nature of the technology, focus on the realization of high efficiency and not always use the most advanced technology, can be called new wine in the old bottle, which is the most cost-effective for us, because it can not sell at a high price.

Of course, I fell back to the second, paid a high price but bought a good thing, that is, a new bottle of new wine.

Digital transformation, in this era where technology is king, we must make ourselves into:

First, try not to turn into a new bottle of old wine, so that in fact, 90% of the people are filtered, what is the use of putting a bunch of bottles there at home? Completely satisfied with their vanity but did not buy good wine.

After that, it is necessary to slowly progress to the new bottle of new wine, and finally further exercise to the old bottle of new wine. At this time, you can compete with people of the same grade in real cost and efficiency, and you will reach the extreme stage of competition.

This requires a clear understanding of the similarities and differences between science, technology and engineering, and not a one-sided one-size-fits-all view of advanced technology as useful technology. In the next twenty or thirty years, we all need to go to such a stage before we can say that the next round of tests can begin.

People are often willing to pursue new concepts because they are willing to look at new bottles and even ignore what is in the bottles. So the first thing we have to exercise is not to talk about wine in bottles, but to talk about wine in terms of wine.

Whether it can be done or not depends on a change in the paradigm of thinking. Especially in an era of uncertainty, if you don't die, you have a chance to live, and you have a chance and a chance.

When really doing enterprise management, we must pay special attention to the ideological unity of enterprises, and the first condition for ideological unification is the unity of language.

A complex organizational system whose products and services are segmented by the composition of the institution. Therefore, when people say that they want to open up the data wall, in fact, what they really want to open up is the department wall.

Organizational barriers are a human problem, a redistribution of power. If this problem is not solved, technology alone will not be enough. It is precisely for this reason that every modern enterprise needs to complete the unified task of "books and books on the same track" before they can make full use of digital technology.

How does the company set the principle? Is there a consensus with everyone? This is a fundamental problem of data access and entering the era of intelligence, which is the core.

The Internet is a very short-lived phenomenon in the long river of historical technological development. In this era of complexity, if you insist on labeling, the so-called labeled traditional enterprises should be shouted with arms, and this label must not be accepted.

The Internet is just a tool, traditional businesses can pick it up at any time, can also put it down at any time, pick it up because it is useful for businesses, not because it is a trend.

Even the Internet, it will eventually become a daily technology like electricity, and the means of current implementation will be eliminated, and it will certainly evolve and reborn due to changes in the times.

Don't be labeled by these new concepts such as artificial intelligence and NFTs, but should be used as tools to learn and use them in essence. "Whatever you call a rose, it will still be fragrant." (Editor's note: This is a line from Shakespeare's play Romeo and Juliet).

When it comes to digital transformation, it's not appropriate to build a new database or build a middle office. The key is where is the "medium"? In the real practice process, most people who pay attention to nouns or are limited by nouns are eliminated. But when focusing on the essence, there is no concept of middle office.

Some are specific problems and the current situation of the company, the so-called long time must be combined, long time must be divided, the company's biggest pain point is the position of the middle office. It can be foreground, it can be backstage, and of course it can be in the middle, which is a logical concept not a physical concept.

So it can be the data level, it can be the organizational level, the business level, the process level, it can be the talent level, which can be called the middle office.

So the question is, if it is such a flexible plan, a problem-oriented plan, why should everyone be bothered by what must be called the middle office?

Does "Medium" really help you solve your problem? The stage of development, maturity, capital reserves, talent capabilities, industry characteristics, and user groups of each company are different, how can there be a unified "medium"?

All of this needs to go back to the source and think about it. Our understanding of digitalization must not only stay on the noun, nor do we have to worry about whether to go to the blockchain, NFT, artificial intelligence, use the middle platform, use distributed computing and other superficial issues.

Instead, we should pay attention to the most essential problems, the problems to be solved, and how to solve them with the most efficient engineering methods, rather than the most dazzling technology. This is an ability that we can really produce the ability to reduce dimensions and strike others.

03 Microsoft, an atypical typical story

As a company that consistently ranks in the top five in terms of market value from 2007 to 2020, Microsoft's experience in digitalization and the logic behind it are worth pondering.

There is a book "Thinking, Fast and Slow" that is worth reading, and some brain-burning need to calm down and think while reading.

The main solution in the book is the human thinking bias, no matter how ready to do things after the problem, it is difficult to produce a complete logic and desired results.

Taking digitalization as an example, if last year's popularity in the middle office, with a distributed database, or with some kind of data modeling, failed, then please ask, this year, can you still do this?

If you look at this problem with static thinking, especially if some companies are still labeled as traditional enterprises, because too much emphasis is placed on correctness and controllability. Usually if you make a mistake last year, you don't do it this year.

This is the standard "once bitten by a snake, ten years afraid of the well rope" mentality, and this is a typical cognitive bias from the perspective of probability theory. In the book I just talked about is the issue of cognitive frameworks.

In the field of digitalization and intelligent transformation, it is very dangerous to carry this kind of thinking logic, because what was wrong last year is not necessarily wrong this year. Similarly, what was right last year is not necessarily right this year.

If this basic point is not solved, or if the correlation and causality are confused, it is easy to connect the unrelated actions with the results when making decisions, so that no matter how it is done, even if it seems to be temporarily effective, it is easy to become a moon in the mirror and cannot last.

The importance of cognition is only known after really experiencing it, especially when it is experienced without experiencing things, and with this belief, the law of large numbers can also be derived.

We hope to learn about successful people and success stories, but in fact, if we really believe in the Bayesian origin principle of the world (a theorem about the conditional probabilities or marginal probabilities of random events A and B, that is, when the analysis sample is large enough to approach the population, the probability of events occurring in the sample will be close to the probability of events occurring in the population), we will know that all methods will eventually return to a regression value. That is, if you study the cases of these so-called successful people, you will find that the results and methods are a probability distribution.

For example, domestic learning Huawei, international learning Microsoft, Google, should not learn? Of course, you can learn, but when you learn, you will find that you can only learn from it and not copy it.

In terms of digital transformation, enterprises need not cloud computing, middle office, and artificial intelligence, but computing, storage, and networking, because in fact, what computers do is computing, storage, and networking. Essence determines concept.

Take data silos, for example. Data islands are because the data standard formats generated by various departments are different, so when new data is generated and applied, there must be a set of data standards that are applied to various plates, is this a technical problem or a human problem?

The high probability is a human problem, especially the power struggle between different departments within the company. To solve the problem of digital islands, it is not difficult to open up data, but it is difficult to achieve consensus.

In fact, what is missing is not the solution of data silos, but the ability and courage to achieve the company's internal "book and book on the same track".

Digital transformation is actually a reform, and the methods, strategies, steps and steps of company management are completely different.

Digital transformation also has its objective laws. Taking Microsoft as an example, Microsoft has its own unique management logic:

1. "Microsoft has only 18 months to live, and if it doesn't innovate, it will die." --Bill Gates

2. "I hope Microsoft is a business where bad news spreads faster than good news." --Bill Gates

3. "Don't lie to others, and don't lie to yourself." —Satya Nadella

4. "All successes are in the past, and our industry only respects innovation." —Satya Nadella

The evolution of the change mentality: from the negative mentality of worry, doubt, hesitation, wait-and-see, disdain, and resistance that has not yet begun to transform, to the learning, reference, learning and finding/recruiting people and team members who are ready to start the transformation, and then to the repeated wandering between anxiety, joy, anxiety, impatience and disappointment after embarking on the road of transformation.

We believe that "culture, talent, process, product, model, and ecology" empowered by "technology" are indispensable.

Regarding cultural transformation, there are 10 points of experience:

1. Only by respecting one's own history can we better face the future.

2. All changes are ultimately changes in thinking.

3. Changes cannot be pretended.

4. "Have ideals and ambitions" to be long-lasting.

5. Make the fruits of reform everywhere.

6. Unity of knowledge and action.

7. Propaganda, publicity, publicity, you don't say what others say.

8. Let technology act as an accelerator of change.

9. Either "all-in" or leave.

10. Reform is always on the way.

Knowledge and action, simplicity and complexity, technology and human nature, are full of contradictions and unity. But the core contradiction is that we hope that in the era of the disappearance of certainty, we will use the deterministic way of thinking to form a strategy based on the definite result, and to determine the method to solve uncertain and complex problems.

Digital reform is a complex giant system project. From the paradigm of thinking, to the paradigm of culture, to the paradigm of organization, the paradigm of institutions, the paradigm of performance, and finally the paradigm of behavior, there is a need for innovation.

In this giant system project, hard-core capabilities such as scientific exploration, technological innovation, engineering realization, digital modeling, and soft-core capabilities such as humanistic literacy, leadership, management practice, economics, operations research and gaming should be improved.

Reform is always on the way!