Yet how can large organizations with thousands or even millions of customers express real empathy?

I interviewed Jo Allen, Customer Engagement Ambassador at enterprise software company Pega to explain how their clients are doing this.

In the video below Jo describes how companies can use the framework of “Listen, Understand, Balance” before acting, using the example of Australia’s Commonwealth Bank in how they have tailored their customer conversations to their situations, both in identifying financial hardship during the COVID crisis, and also the bushfires at the beginning of this year, putting into practice the concept of empathy of scale. Watch the video for the full story, or read the transcript of the conversation below the video.

TRANSCRIPT
Ross:
Jo, welcome. Great to be talking to you.

Jo:
Hi, and you.

Ross:
Pega has this intriguing concept, empathy at scale. It sounds a bit counterintuitive, empathy is a very human thing. So tell me, how can you scale empathy?

Jo:
That’s absolutely right. Empathy is something around how you interact with people and how you go about understanding and put yourself in their shoes.

That’s very straightforward to be able to do when you’re a small organization. You can replicate that friends and family feel by having a close conversation. I always talk about my hairdressers as having that great relationship, they very much interact with me, build that relationship and have that personal touch and show empathy.

So if I’m having a bad day, they’ll acknowledge it. It’s much harder to do at scale for organizations who might perhaps have 10 million customers. You can’t literally have that same personal conversation all the time, but you can get very close. I talk about that in three things that you need to think about.

Those three things are being able to listen, understand, balance and then act based on those three elements. So if you think about understanding, the way we listen to what’s happening is we are looking at the data that our customer is bread crumbing for us.

Where they have just been online, have they just called the call center, listening to their kind of current activity and what’s going on with them right now. Then you need to be able to understand what that means.

There are times when those bread crumbs might be red herrings or there might be real significant events that you need to be able to distinguish the difference between and understand what’s going on.

To give you an example of that, if a customer is browsing the website, that’s one thing, but if they are actually looking at a page in relation to leaving your organization, that’s far more significant and you need to be able to sort of have listened, seen that and understood that that’s more significant.

Then you need to think about how you might balance that with what else is going on. I’ve seen organizations in the past think the retention is really important and it’s one of the things that we need to focus on first.

But what if that customer is also looking at a new product which is more important and I need to be able to balance that for the customer and balance that for the organization so I can make a clear decision about what’s best for everyone involved and interact with that customer in a relevant way at that scale.

That’s really about replicating exactly what a brain does. Our brains help us process that information, listen to what’s going on, understand then act and we do that through a brain ourselves, which is the Pega customer decision hub.

Ross:
So there’s a whole process behind that. To bring this alive, can you give an example of how a reliable organization is doing this as implementing empathy at scale?

There’s a fantastic example over in Australia, the Commonwealth bank of Australia, they’ve been using what they call the customer engagement engine which is the I’ll pay the customer decision, how there’s power in that and what they were able to do backs up fast and bring in that personal touch when it’s most important.

Very recently we’ve seen spikes in particularly in certain areas, Australia, they talk about Victoria as an example of seeing where from a COVID perspective, we’ve seen the number of cases start to really spike.

What they’re able to do within hours is changed the conversations that we’re having with those customers and reflect what was going on in terms of the local announcements.

Earlier on in the year, they made kind of 50 releases within a matter of weeks to change those conversations for customers who were going through financial challenges due to what was happening with COVID.

They were able to then tailor that conversation specifically, think about whether a customer had particular financial problems and address what they were engaged with about specifically based on that customer circumstances at that point in time, in a specific area of the country.

They’ve also did something very similar with the bushfires much earlier on where they were able to react very quickly and were tailoring conversations based on the postcode and as the fires move, they introduced new postcodes and we’re able to really get on board and tailor an emergency package for those individuals, particularly, which I think is awesome to be able to then you’re basically you’re using the data that you have available to the situation, the customers, current situation, combining that to have a truly wonderful engagement your customers and turn that situation around for them because you’re able to add that empathy and really think about what’s going on for a customer and respond.

Ross:
That’s fantastic. Those situations you’re describing, it’s absolutely required. It’s great to hear that organizations do have some tools and platforms to be able to be empathetic and understand the context for people’s challenges.

Jo:
Absolutely. When you have that data and you’re able to harness that, we talk about it as being able to operationalize your insight and your data. So you have that data.

Jo:
Well, we know organizations have plenty of data scientists. They’re able to understand that data, but being able to put that into action and use it effectively is something completely different and that it’s quite aware of and to help our customers do that.

Ross:
Indeed. Great, thanks so much for your insights Jo.

Jo:
Thank you.

Accelerating trust development

Participating in the network economy requires very actively developing new and existing relationships with customers, suppliers, and partners. As you saw earlier in this chapter, companies’ external relationships are becoming both deeper and broader. Some firms do whatever seems right each time they take on a new customer, supplier, or alliance partner. Others have careful and detailed processes for building closer relationships that benefit both parties. IBM spends almost $1 billion on its alliance program for software developers, getting its return through the generation of over $4 billion in additional sales. It has a formal 40-step process that executives must go through with potential partners before signing an alliance agreement, including examining the fit with IBM, and getting a senior IBM executive to agree to act as an internal sponsor for the alliance.

On the other hand, in high-value professional services such as accounting or investment banking, many firms celebrate winning an account or major client transaction with a boozy dinner, but have no clear processes for actively developing trust and deepening relationships with these accounts. Each industry and situation will call for a different approach to trust development. However since the ability to develop trust faster and deeper with new clients and partners is becoming a key competitive differentiator, it is not something that can be left to chance. There are five key steps in accelerating the development of deep trust in relationships.

1. Establish an overt trust development program
2. Create transparency
3. Treat security as a business enabler
4. Streamline legal issues
5. Work to align objectives, culture, and technology

1. Establish an overt trust development program

One of the most powerful actions to develop strong trust quickly with partners is simply to openly discuss the issue. Frank conversations can vastly accelerate the process. The first step is to raise trust as a key issue, and together talk about the potential benefits of developing strong mutual trust. You and your clients, suppliers, and partners can together certainly gain far greater value from higher levels of trust, but you need to define the specific activities and ventures that will be made possible by this. Once you start to identify clear opportunities that will depend on mutual trust, this creates a stronger drive towards accelerating trust development, and helps to clearly establish the risks and concerns that prevent these happening immediately. Once you and your partner understand where you want to go with your relationship, and the perceived risks in doing so, you can agree on a staged program for both parties to gain the necessary confidence to build a truly collaborative relationship. This kind of process is very useful across every kind of high-value relationship, however it should be approached slightly differently depending on the situation. For suppliers seeking to develop a relationship with a powerful client, the initial emphasis may be a more one-sided effort to demonstrate the potential value of higher trust levels, and getting clients to precisely articulate their concerns so these can be addressed.

Ultimately, deep trust comes from the repeated experience of positive expectations being met. As such, a trust development program must set a sequence of expectations for both sides. An initial workshop will not only establish where the program is going, but also a series of highly specific commitments from each side. Fulfilling these—or sometimes even the frank communication of reasons why they weren’t met—will deepen trust that future commitments will also be met. Trust is all about taking risks. In building trust you need to take a series of steps that each stretch the willingness of your partner to take a risk with you. Every time a risk is taken and trust is shown to be merited, it allows you to move a step further. Expecting too much trust initially can break the relationship—the process must be staged. Depending on the nature of the relationship, regular workshops can be run to review whether the commitments have been achieved, make adjustments to the program, and recognize the activities have been enabled by higher trust levels. Often discussion of the trust development program will be incorporated into the agenda of other regular meetings.

In one case, the European operations of a multinational chemical company worked through a series of workshops with its major client, helping to bring out unspoken concerns, and eventually establish an information sharing initiative with strong mutual benefits. One of the issues that became clear to the chemical firm through the process was the importance of addressing the internal politics of its client. The involvement and interaction of key stakeholders in your partner organizations can enable or derail the trust development process.

2. Create transparency

In today’s economy, trust increasingly depends on transparency. Clients or partners may choose not to become closely familiar with every aspect of their external relationships, but the knowledge that they can access and become involved in details provides a solid foundation for trust. This is not just about information systems, but the ability to walk into partner firms, see what is being done, and have frank discussions.

Call center operator Convergys expects executives from its clients to drop in at any time to observe its day-to-day workings and gather information and insights on its work for them. As described in Chapter 9, contract electronics manufacturer Flextronics provides complete transparency on every aspect of its operations to its clients. They have access to the same information systems as Flextronics, and can become involved to any level of detail that they choose in the outsourced operations.

3. Treat security as a business enabler

Systems security should be treated as a business enabler, not as a problem. Security is an absolutely vital issue in a connected world, because so much can go wrong. As companies become increasingly dependent on their information system, and confidentiality and privacy become their legal responsibilities, they will tend to avoid unknown risks. Potential customers or partners will only be prepared to deal with you if they trust that your systems are secure, and that their information and computers are not exposed in any way as a result of doing business with you. Similarly, you won’t choose to establish deep relationships involving systems integration or confidential information flows unless you are fully confident in your partners’ security. Security issues must be dealt with as a starting point to all trusting, collaborative relationships. However if security is demonstrably sound, it allows a higher level of trust with partners, deeper integration of systems, and in turn real competitive advantage.

Whenever companies exchange information directly, other than through e-mail or website access, they need to engage in a frank discussion about security issues. This is essentially a form of “due diligence,” which may include exchanging written security policies, and identifying precisely what technology and policies are in place to safeguard information and systems. Firewalls should be designed to let through only specific traffic, and monitor even trusted clients’ communication, in case their systems have been successfully breached by a hacker. Encryption of sensitive information should be standard practice.

Virtual Private Networks (VPNs) are specifically designed to provide privileged access to trusted third parties, making the public Internet safe by creating an encrypted “tunnel” for information flow. These types of systems should be actively implemented for all significant relationships, as they make information flow both easier and more secure, enhancing the ability to create value together, and creating an advantage over competitors. Physical tokens, such as smart cards, can be used along with passwords to make both you and your customers more confident in information security.

4. Streamline legal issues

Trust always trumps legal agreements. You can try to pin down details in long contracts, but without trust there are major limitations to how much mutual value you can create in relationships. However in most cases legal contracts provide a useful foundation to build strong, trusting relationships, especially in the early stages. Perkin-Elmer and MDS Sciex, in establishing their alliance entity Perkin-Elmer Sciex in 1986, set up a basic legal agreement at the outset, but the two firms have never drawn on the documents in resolving issues along the way. Baird Textile learned the value of legal contracts when British retailer Marks & Spencer, which accounted for 30-40% of its sales, suddenly terminated its relationship after 30 years without a legal agreement, despite the retailer openly describing the relationship as a partnership. Baird took Marks & Spencer to court, but lost.

Another approach that can sometimes have value in the early stages of a relationship is bonding, in which one or more parties deposits a bond with a trustee. If any of a specified list of conditions is breached, the bond is forfeited. The problems are in designing an effective bonding contract, and being able to prove that it has been broken. Clearly bonding does not build trust in itself, but it can help to create the conditions for faster initial trust development.

5. Work to align objectives, culture, and technology

Companies need to ensure that they are working in the same direction and communicating effectively. It is very hard to engage deeply unless each party clearly understands the other’s objectives from the relationship. Aligning objectives requires designing a partnership so that the same activities contribute to each participant’s desired outcomes. Procter & Gamble, when it sets up collaborative supply chain initiatives with retailers Wal-mart, Tesco, and others, begins by establishing and documenting high-level agreements on each party’s objectives for the projects.

Often different cultures and ways of communicating can result in unnecessary misunderstandings. Interactive media firm Giant Step hires staff from its major clients’ industries, and publishes a glossary of terms for its staff and clients to use. It gives this to its clients, and encourages them as well as its relationship managers to keep it on hand during conversations. Since the Internet world generates an immense amount of jargon, with often different meanings ascribed to the same words, this helps ensure that confusion is minimized. In the following section we will look in more detail at the issue of aligning technology with your clients and partners.

Introduction

What is the value of academic–business collaboration? The current landscape suggests that there is much potential value that is not being realised, which begs the question, what is possible? What value can be created through utilising the wealth of resources we have in the academic–business sector, for the benefit of the business community and society more broadly?

To answer these important questions we must first understand the true value of collaboration. Collaboration is the source of new ideas – it is where innovation comes from. Collaboration makes connections between things that already exist and can be brought together. As Kary Mullis (1999), the Nobel Prize Winner for Chemistry, said about his own research: “I didn’t find anything new; I just connected things that existed before”. This is at the heart of the value creation that comes from collaboration – from being able to pull together the seemingly disconnected.

Making connections starts in our minds, but the connections take shape through many different paths, notably in conversations and in organisations, where capabilities and resources are channelled by technology and research.

The Academic World

The pace of knowledge creation in academia is rising. We have evidence of this in the increase in the number of peer-reviewed articles published. Figure 1 shows the growth in scholarly and peer-reviewed journals from 1900 to 2010 and Figure 2 shows the monthly submission rates on arXiv, an open access journal. There has been increasing emphasis on openness in academic research and this shift in accessibility has the potential to be transformative. It moves research from a cumbersome process of lengthy peer review and a narrow audience to immediacy and accessibility, where new ideas can be immediately used and connected to create new possibilities. The potential of these connections are rapidly growing, requiring greater collaboration.

Figure 3 shows the average number of authors per paper from 1930 to 2010. It shows that in the past papers were more commonly authored by one person, however the number of authors per paper has increased significantly over the years. This increase in collaboration is driven, at least in part, by the growing complexity of the interconnected world, in which it is necessary to bring more expertise together to push out the boundaries of knowledge.

There are a range of methods for ranking academic institutions. Figure 4 shows the Shanghai ranking, which is mostly based on research publications, citations, and related factors. It demonstrates that the key to success in the academic world is in publishing – this is how institutionalised reward mechanisms are set up and how institutions themselves are ranked. University success, therefore, relies on a narrow measure, one which is contrary to facilitating collaboration. Embedded reward structures in universities do not encourage engagement and impact in the business world.

Similarly, university timeframes are not aligned with those in the business world. Businesses operate on very short timeframes while research projects take a much longer time. Another significant challenge in the academic world is the intellectual property structures of university administration – patent offices, technology transfer offices, and so on, which set boundaries on collaboration. Boundaries are everywhere in the academic world, not least in the way universities have traditionally been structured into faculties based on disciplines. This is counter to the widely recognised way forward for collaboration – multidisciplinarity. Discipline boundaries are artificial structures even in the purest academic terms but much more so when thinking about academic–business collaboration,n because every aspect of every other faculty touches business in some sense.

Bounded thinking also constrains academics – the concept commonly referred to as ‘the ivory tower’, in which academics consider business as someone else’s work. Academics are good at collaborating with each other (see Figure 2), but how well do they collaborate with others? Figure 5 shows the OECD ranking for firms collaborating with universities. Australia appears at the bottom of the chart.

The Business World

Increasingly value creation in the business sector does not happen only within organisations, but across business ecosystems. This is at the heart of how business works today, where organisations collaborate with their partners, customers, suppliers and other organisations. Business, unlike universities, is one of the most transdisciplinary domains. However, just as academics may be characterised as looking down at business from their ivory towers, business may also be perceived as thinking of academia as far removed from the reality of a world in which people ‘get their hands dirty’. Figure 6 shows the percentage of innovation active businesses sourcing ideas from universities or other higher educational institutions (DIIS/ABS). Only a small percentage of Australian businesses say that they source innovation from universities. This suggests that in general business does not even think to involve universities in innovation – in other words, there is little interconnectedness.

The interconnectedness required to form better relationships between universities and business is the same as that already used by business ecosystems – it is enabled by flows of information through technology and integration of systems. Contemporary business model design focuses on how to create value with others and take an appropriate share of value for ourselves (see Nielsen, 2017). Figure 7 is an illustration of business model design. In this context, there is a very definite role for universities as a part of that ecosystem of value creation. But how can these work together to create an ecosystem of mutual value creation?

Working Together

The future of both universities and business is in transcending boundaries between organisations – between sectors, between silos, between working. There are a number of challenges to developing an ecosystem in which the academic world and business world not just co-exist but actively collaborate (see Stokes, 2017). In order for connections between these two worlds to be meaningful they must be visible and clear, so that they can be further developed. This is important because different people think in different ways. For example, some people are drawn to the academic world and some to the business world. We ask, what interests these different people, what excites them about their work, what do they value? These core personal philosophies are framed by people’s environment – the structures of their workplace, the reward mechanisms and organisational ways of thinking. The institutionalisation of these philosophies has a profound impact on how people go about being connected.

As outlined by Stokes (2017), one of the challenges to developing the ecosystem is opposing timeframes. The constraint of short (business) versus long (universities) timeframes is a simple and soft constraint, one that can be quite easily worked around. It means thinking differently about research design (see section six). Another challenge is the rigidity of the structures of the commercialisation and intellectual property efforts in universities. Again this is a constraint that can be worked around.

In addition to constraints to working together there are connections – already academics and business are tied, and these ties provide some potential domains for value creation. One of these is education. The academic-business interaction is, I think, unique, in its feedback loop. Rather than a lecturer imparting knowledge to a student, in business there is a focus on postgraduate and executive education. Many executive educators report that they learn a lot from their students: the positive feedback loop, where relevant education is enabled by insights from those being taught, creates faster change. Similarly, the feedback loops mean that lessons learned in business can be applied in university structures like commercialisation. If lessons and experience in entrepreneurialism and innovation are embedded in business faculties, these lessons can then be applied across the university. While currently, in the most part, university commercialisation activities are a constraint, it is an area in which business faculties can take the lead, because they best understand, out of all faculties, the issues around innovation and business. Some universities are beginning to embed a Graduate Certificate in Commercialisation into their PhD programs. This furthers the concept of transdisciplinarity, recognising that many of the capabilities of business not just can, but must, be applied across universities to develop innovation and places the business faculty at the core of the ecosystem.

Business model innovation is an important domain, because innovation is not necessarily in technology but rather in and around what are the new models that are applying. There are many ways in which academic insights can be applied in a business context. In quantitative areas there are many ways in which network analysis and network science, among other domains, can be applied very effectively in business model innovation. These are beyond the capabilities of many organisations, including many of the large consulting firms, but within the capacity of universities and provide understanding of the issues around business model innovation within industries.

For universities and business to develop a stronger relationship it is important to recognise that collaboration is a capability. It starts from a mindset: a way of thinking, and is supported by skills, processes and structures. These range from the technological aspects of how to expose information, the processes for trust building, and how to understand the issues around effective business collaboration. These should be core capabilities that are a focus for business faculties so that they a source of excellence in understanding in which they ask and answer: what are the processes; what are the structures; what is the mindset; how can we teach this; how can we model this; how can we understand the collaboration capabilities that can be applied to businesses, to other faculties in the university, to the students and the people we work with?

Entrepreneurship

Entrepreneurship is an interesting lens through which to examine the idea of the business ecosystem because it offers many opportunities for engagement. It is a particularly useful example of the benefits and application of value-creating relationships, particularly in academic–business relationships. More and more large businesses are looking to the entrepreneurial sector to understand what they need to do to keep up in an extremely dynamic, fast moving world.

There are many entrepreneurial courses across Australia. MBAEs – MBAs with entrepreneurial courses, some of them entrepreneurial degrees themselves – but not all of them are run in business faculties. In fact, engineering faculties often run entrepreneurship programs. Entrepreneurship is applied quite differently in different domains, be it in fashion, or in medicine, or in information technology and, therefore, approach collaboration differently. But business faculties can, and should be, involved across all the schools in the university to drive innovation.

There are broadly two major frames for how startups are institutionally assisted: acceleration and incubation. Acceleration is the idea where over a set period of time, often three months, sometimes up to six months, new ventures are assessed and provided with resources, mentorship, connections, and relationships. One such example is the University of Melbourne Accelerator Program, in which startups that have originated from within the university are provided with skills, mentoring and a community in which networks are fostered.

Incubation is the provision of space and support, over an undefined period of time, in order to develop ideas and connections to be able to drive value. Cicada Innovations, which is owned by UNSW, the University of Sydney, UTS and ANU, has been voted the best business incubator in the world by the International Association of Business Incubators.

These programs are not necessarily run by business faculties. Rather, there is a proliferation of different structures around entrepreneurship in universities in Australia, with some based in business faculties, others run by engineering or computer science faculties, and others independent of any one faculty, or with ties to business. While no one model is preferable, clearly business faculties need to be able to bring to bear the full breadth of their capabilities to ensure that these kinds of entrepreneurship programs have the greatest chance of success.

Other entrepreneurship activities in universities are more aligned with venture capital organisations, for example, Uniseed, a joint effort by the University of Melbourne, the University of Sydney, UNSW, the University of Queensland and the CSIRO that funds medical, biotech and other research. Uniseed is essentially a separate organisation, with its board run by the universities and its activities funded by the universities. It has been able to provide healthy internal rates of return on the funds deployed in these ventures. This kind of venture moves beyond traditional commercialisation to providing, in addition to funds, networks, connections, and support.

Entrepreneurism also suggests a new way of combatting an old problem, that is, new metrics to measure the impact of a business faculty. Instead of measuring success by the number of graduates who are employed and their starting salaries, new measures could assess how many startups have been formed, how many have lasted for three years or more, what has been their financial success, what has been the trajectory of those startups, what is the degree of collaboration across the university, what are the number of jobs created.

Collaboration is a Capability

According to Norman and Ramirez ‘the only things that matter in the economy are knowledge and relationships.’ This has become increasingly true since Norman and Ramirez first wrote these words – everything else has been commoditised. Knowledge, expertise, capability, innovation – cannot be connected without the relationship. This why the ability to collaborate must be a core competence and capability of universities and business faculties.

There are different styles of relationships, and in the range from a commoditised to a collaborative relationship, much relies on openness to new opportunity, the degree of trust and relationship scope. Universities come to this from a good starting level of trust, credibility and openness to exploration. But they must also be move their partners’ attitudes more and more to the collaborative: academic–business relationships must shift from a black box relationship to one which is a true knowledge-based relationship. Such a relationship must be characterised by both parties being more knowledgeable as an outcome (the positive feedback loop, discussed above). This is illustrated in Figure 8.

Building such relationships is based on initial engagement, alignment, deepening of the relationship and finally partnering. These steps are outlined in Table 1.

Often universities make the mistake of wanting to become partners right away, without understanding that it is a journey. Perhaps because of this, very few Australian organisations even think of universities as places to look for innovation.

David Kolb’s learning cycle illustrates this cycle of knowledge development (see Figure 9), framing the ideas of doing, experiencing, reflecting and conceptualising. In a crude sense, this cycle shows a divide in learning experiences of business and academia. Business is concerned with the doing and experiencing; academia with the reflecting and conceptualising.

Despite its somewhat basic approach, the learning cycle framework suggests that the knowledge-development loop within the business and academic world relationship needs to be linked together. In an ideal collaboration and partnership, universities and businesses would look to each other to be part of knowledge development and develop their own knowledge capabilities, in partnership, drawing on each other’s strengths.

Considering the specific capabilities required to develop the potential for academic–business collaboration, it is critical to identify first, what is the aim? What the relationship is designed to uncover and achieve is not always clearly articulated, or understood, or communicated within business faculties and the broader university. For example, academics want the publication of research, which is of no interest to business. Ideally, business and academics can develop a relationship in which they both get what they want, but this can only be achieved if they first focus on a shared, common vision of what they want to achieve.

As for many aspects of organisational change, key individuals can make significant change. These are boundary spanners, who are independent of organisational silos and bring people together (see Figure 10). Social network analysis (see, for example, Stuructural Holes, Ron Burt; The Hidden Power of Social Network, Rob Cross) identifies this phenomenon in which some people are able to span boundaries, be they across departments, organisations, faculties, or cultures. Not everyone has this capacity and this is equally true of universities – not all academics will be good at engaging with business, while for others this will be a strength. Therefore, it is important that universities develop a strategy of identifying and supporting the boundary spanners, through reward mechanisms and resources. This may even mean creating a specific role for a boundary spanner.

A key collaboration capability is to be able to identify a research topic. This cannot happen in isolation and requires academics to be exposed to current issues in the business world. Businesses are often not aware of the parameters of the academic world and researchers need to assist business in navigating the gaps in the literature and the potential for collaboration beyond consulting. Of particular importance is research design, that is designing research so that it works for business. Eric Ries (2011), in his book The Lean Startup, identifies the key elements as generating ideas, building something, measuring results, collecting data and getting feedback. These elements form a central loop of doing and learning, not dissimilar to the Kolb Learning Cycle.

The advocates of this lean startup movement claim to take up a scientific approach: they form a hypothesis, design an experiment, learn from that experiment, and then change and adapt based on the results. However in the startup world they do this over a day, unlike the academic world where these activities would take place over three years. Herein lies an opportunity to design research that can transcend the challenges, by incorporating short-term iterations into longer-term research initiatives. A parallel can be seen in the medical world where there is a shift from clinical trials, in which a hypothesis is formed and tested over a lengthy trial period, to so-called adaptive clinical trials, where the trial is changed almost daily on the basis of data as it’s collected. This adaptive model is ideally suited to academic–business collaboration because it involves day-to-day learning but also fosters long-term research frames and outcomes.

Finally, it is important to consider leadership. According to James Carse: “Finite players play within boundaries; infinite players play with boundaries”. Business faculties have the potential and the possibility to play with the boundaries between organisations; between domains of study; between capabilities today. And in moving to that space, the question is: who is going to lead on that path; is it going to be the business faculties; is it going to be the startups; is it going to be the people in big business? In my view, businesses are not going to take the lead because they do not see the value that lies within, so leadership must start with universities.

Essential for industry leadership is vision. What is it that is worth creating? What are the foundations for that vision? Understanding the roadblocks and finding the paths around those roadblocks is where leadership will make a difference.

Conclusion

Undoubtedly there are challenges to developing more meaningful and effective academic–business collaboration. While it is important to acknowledge them and understand them, it is also critical that we recognise that they can be overcome. The way forward lies in connectedness, in relationships, capabilities and leadership. The potential for academic–business collaboration is immense. Not only is it likely to change the university world, and the business world, but it has implications for society more widely in its capacity to foster national prosperity. These are exciting times if we build the right foundations from which to leap forward into the future.

References
Carse, J. (1986), Finite and infinite Games: A Vision of Life as Play and Possibility, Ballantine Books, New York.
DIIS/ABS
Mullis, K. (1999), Dancing Naked in the Mind Field, Bloomsbury, London.
Nielsen, N. (2017), ‘Value exchange in university–industry collaborations: European experiences’, Academic Leadership Series, Vol. 8, pp. xx-xx.
Norman, R. and Ramirez, R. (1993), ‘From Value Chain to Value Constellation, The Harvard Business Review, July–August, pp. 65–77
Ries, E. (2011), The Lean Startup, Crown Publishing, US.
Stokes, G. (2017), ‘Improving collaboration between commerce and business researchers to improve innovation’, Academic Leadership Series, Vol. 8, pp. 102–105.

The session was primarily framed around helping the partners understand the degree and nature of the shifts impacting their major clients in industries such as financial services, mining, construction, and infrastructure.

However I also delved into the impact of new technologies including AI on the delivery of high-end professional services, a topic I have been doing substantial work on recently with several clients.

The impact of AI on professional services

There are many specific issues stemming from the rise of AI and automation in professional services delivery, including the modularization of what have often been aggregated services, increased choice on service providers, changes in pricing models, and shifts in the relative roles of junior and senior professionals.

However arguably the biggest single impact is on the scope of the firm-client relationship.

The core of this was described in detail in the first edition of my book Developing Knowledge-Based Client Relationships: The Future of Professional Services, published in 2000, which described the relationship impact of new technologies in ways that are completely relevant today.

The spectrum of relationship styles

There is a spectrum of relationship styles, as shown in the figure below taken from the book.

Over the last decade and more many corporations have been actively pushing their professional services providers towards commoditization, for example through the use of panels and bringing in the procurement function to administer their relationships.

However many firms have in any case implicitly acted as commoditized providers, attempting to respond competitively to requests for services rather than helping clients frame the strategic intent that precedes looking for professional services.

All of the variables that shift between commoditized and partner relationships described in the diagram are important. However arguably the most important one is relationship scope.

Relationship scope in an AI world

The tools and approaches of machine learning and related technologies are proving to be incredible powerful. However for the meantime their application is always within a highly defined domain.

This allows specific service domains to be shifted to other service providers, brought in-house, or repriced. Each time this erodes the scope of the client relationship.

There are increasingly distinct strategic positions possible around service, industry and outcome specialization or generalization.

Broadening strategic scope

The greatest value will accrue to those firms that move to a broader relationship scope, not so much in numbers of different services being provided, but in the strategic scope.

More than ever in an age of AI, professionals need to be working alongside their clients in framing their strategic needs, responding to shifts in the business environment, and acting as a true partner.

As part of the workshop we used a framework that I originally developed over a decade ago in the context of collaboration in the financial services industry, but I have used in the last year in industries as diverse as healthcare, airlines, and professional services.

The future of every industry lies in value creation across organizations. To achieve that we need explicit discussions and engagements among all industry participants on what it is that they’d like to collectively achieve, and how they can get there. This framework lays out the key components:

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You have to start with:

Vision

This comes from discovering and finding alignment between participants:
What world do we want to create? What might be possible?

From there you delve into the required:

Foundations

This is where you examine:
What institutions, business models, platforms and systems will enable this vision? What is missing now?

You also need to understand the:

Roadblocks

There are always obstacles; you need to understand and explore:
What is blocking the potential? How can we take away or bypass these blocks?

To get to your vision you need to explore the many possible:

Paths

Having a successful journey to your destination means you must ask:
What possible paths forward could allow us to reach our vision? What is most feasible? What are milestones along the way?

This will inevitably require a high degree of:

Collaboration

In order to build this you first must understand:
What collaboration is needed between whom? How can we foster and enable that collaboration?

And finally you will never achieve the vision without clear and consistent:

Action

Collectively you need to define and agree:
What action today can be taken by the industry? What action can you take to enable the industry’s potential?

This framework, or variations on it, can be applied in any industry. Every industry requires leadership to change from where it has been to where it can create substantially greater economic value for its participants, and social value for all stakeholders.

Some may wonder why they should invest their energy in leading their industry forward rather than focusing solely on their organization, however leading beyond boundaries always brings value to those who help move the system forward.

As I wrote in Living Networks:

Today, you must be a leader across a domain that often extends far beyond the borders of your company. In order for your company to succeed, the whole value network within which you work must succeed as well. Unless you provide the leadership for that to happen, you become the subject of industry forces rather than creating them. Industries will inevitably shift dramatically as the network economy comes to life, and those that will take best advantage of those changes are those that lead them.

In every industry, the opportunity is there.

More recently I have met Catherine Stace, CEO of Cure Brain Cancer Foundation, who has brought inspiring and truly disruptive approaches to medical research philanthropy, by focusing on making research far more collaborative and effective rather than simply funding antiquated research models.

It is no surprise that collaboration between Mark and Catherine has created something exceptional: SWITCH Festival, to be held in Sydney 27-29 August.

The event brings together large corporates from different industries, entrepreneurs, innovators, universities, students and more with the express intent of fostering inter-industry collaboration and to support “unlikely alliances”.

Major participating organisations include ANZ, Australia Post, Blackmore’s, IAG, and Scentre Group (Westfield), which are each sending around 20 staff each, while other companies are sending smaller teams. They will bring intellectual property and energy to the event, to see how the exceptional network present can catalyse new cross-domain ideas and innovations. The intent is to create compelling cross-boundary ideas and innovation that could not have come from a single organisation.

The first day will be a rich conference day with some oustanding speakers. I will be presenting on The Future of Work and Organisations.

Over the following two days teams will compete for the innovation prizes. I am honoured to be one of the judges among a highly distinguished group.

There are already 150 participants and limited remaining places, but individual tickets are available until 23 August for a 50% discount using the code SWITCHVIP. Entrepreneurs and students get an extremely low registration fee.

The central theme of my keynotes was the boundaries and relationship between humans and machines in customer experience.

Today, extraordinary insights from data and analytics enable us to address individual’s unique preferences to an unprecedented degree.

Yet the emotion, empathy and engagement of humans cannot be replaced – we all seek personal connection and a real sense of caring.

Virtual agents mimic humans in providing customer service. Until recently they have been very crude, little more than animated puppets. Yet the state of the art is very rapidly progressing.

The video below shows a real-time rendering of a human face being taken through a range of emotions. Have a look to see how far the state of the art has advanced.

This face takes 2 Teraflops of computing power to render. To put that in context, that is equivalent to 2,000 Cray2 Supercomputers, which were not that long ago the extraordinary pinnacle of computing.

This is the state of the art. But it won’t take much longer until this kind of technology can render a human face on a video screen that we cannot distinguish from a real human. We still need to improve at speech recognition and Turing test-passing conversation, but it is fascinating that we can already generate a human face that is virtually real.

Networks are always at the heart of innovation. The new comes from combining the old in original ways.

Chemist Kary Mullis aptly described how he arrived at his innovations that won him the Nobel Prize in 1993:

“I put together elements that were already there, but that’s what inventors always do. You can’t make up new elements, usually. The new element, if any, it was the combination, the way they were used.”

Whether it is bringing together existing ideas to create new ideas, or connecting people in ways that generate new insights, organizations must design how they work to facilitate value-generating connections.

Organizations are rapidly shifting to network frames for their structure and operations. Those that do it in such a way as to better support high-value innovation are leading the way.

Below are the slides for a recent keynote I gave to the C-level executives of clients of a major telecommunications firm.

While the slides were designed to support the story I told through my keynote, on their own they still give an indication of the issues I raised, in placing networks at the heart of innovation.

Zuckerman began by running through the severe challenges for the news industry, going on to highlight branded content as the next source of growth for the industry. Below are a few slides from his excellent presenatation.

BCG sees branded content growing at a 21% rate over the next 5 years. I believe it is likely to grow faster than this.
Source: Boston Consulting Group

A study across four countries showed some variation between countries, but overall a strongly favorable reception from consumers. Overall they identified a 21% net increase in likelihood to purchase due to branded content, and a 20% net increase in affinity for a brand. However if consumers already have a negative perception of a brand, branded content will accentuate that perception.

I was very interested by BCG’s taxonomy of branded content, in particular identifying native advertising as a distinct subset of branded content. There is much confusion over the language used in this domain, with ‘content marketing’ being commonly used, as well as ‘sponsored content’, ‘corporate publishing’, and of course still ‘advertorials’.

As made clear in this framework, one of the key distinctions is in the platform used. Many news publishers focus on creating content for their own platforms, yet they also have the capability to create outstanding content for use on other platforms, and indeed even the brand’s dedicated platforms. The intent of the content, from product-specific marketing through to emotion-based branding, implies very different types of content.

There is no question that branded content will be a massive part of the future of media. Its scope is far beyond traditional media boundaries. Brands are rapidly developing their own capabilities in both content creation and platform development. However established media companies have exceptional capabilities to play extremely successfully in this rapidly growing space.

It is just over 15 years ago now that my first book was released with the subtitle The Future of Professional Services (now out in its Second edition). While these days my work covers a far broader scope, over the years I have worked extensively with professional services firms to help them create successful futures.

There has been substantial change in the professions over the last decade, however there will unquestionably be far greater change in the years to come.

It was an absolutely fascinating day at the conference exploring the future of professional services. I will be sharing more from the conference over time, but today would just like to put down a few initial thoughts from the three themes of the day.

Changing Clients

One of the biggest challenges to professional firms is how clients are changing. In my not-so-recent white paper The 7 MegaTrends of Professional Services, the first MegaTrend I named was Client Sophistication, and since that was written this trend has gone a lot further.

At yesterday’s conference, two executives together responsible for purchasing over $1 billion in professional services showed how far the bar has gone up recently.

One company is consistently increasing its in-house capabilities, through staff acquisition, improved processes, and the introduction of task automation, virtually all at the expense of the use of external providers.

Another major company, while it recognizes the importance of relationships in professional services buying, is doing more work internally as well as finding ways of tapping the network of its staff to find the best professional providers.

Unquestionably client organizations are rapidly changing, developing their capabilities, and are increasingly capable of selecting and working with the best specialist firms in highly collaborative relationships, moving far beyond the “one-stop-shop” mentality.

Digital Disruption

There are three major domains in which digital technologies are disrupting professional services.

Connected work and crowdsourcing. Work can be done anywhere, leading to the globalisation of both clients and service delivery. More importantly, connectivity is allowing crowdsourcing of professional services, including expert marketplaces such as SkillSapien and Expert360, and expert aggregation services such as Kaggle, 10EQS and Wikistrat.

Process automation. Many tasks that have traditional been done by people, notably context-relevant document generation, can be readily automated.

Artificial intelligence and machine learning. The emerging generation of artificial intelligence is being applied to highly complex tasks and decisions, in domains including medicine, law, and consulting.

Business Model Innovation

It is clear that traditional professional services business models are being challenged on many fronts. Three of the high-level issues that need to addressed are:

Business model transition. There are a wide variety of fundamental factors that firms can consider changing, including pricing structures, workforce models, ownership structure, and market positioning. Legacy models are often poorly suited to an evolving marketplace, and important strategic decisions need to be made about which levers should be changed and how to do this.

Positive feedback loops.
A sound business model needs to have built in to it mechanisms that reinforce the foundations for future success. I described one of these feedback loops as the heart of professional services, in linking great people and great client work. Every firm is either in a positive or negative cycle on this critical front. New business models also need to be designed to have positive feedback loops at the center.

Business model portfolios.
Professional services firms almost always have not just one business model, but multiple business models. Professional firm leaders need to recognize the diversity of business models, and make clear choices about which current business models should be maintained in a changing business environment, but also which potential new business models will strengthen with change, and be complementary to existing business models.

Over the next while I will share more insights on how professional services leaders can shape a successful future in a rapidly changing world, drawing on my own work, that of my colleague George Beaton and his team at Beaton Research + Consulting, and the insights developed by the participants at yesterday’s conference.