Disruption, ambidexterity and English lit. Buying software sensibly: Part 1.

The first excerpt from my HR Tech Europe talk.

I was at HR Tech Europe last week at the RAI, in Amsterdam.

These industry events are useful and often fun, especially because of the people I bump into. I also attended two excellent VC events, a dinner with Endeit Capital and a breakfast with Rubio Impact, No Such Ventures and Mediahaus Ventures . I really enjoy chatting with other investors who have an appreciation of the slightly odd world of HR Tech / Future of Work. I had a lovely dinner with friends from the PE world. I was also on a panel with Anita, Jens and Paul. Deutsche Bahn also behaved there and back. Tough job this.

I gave a talk about how I think HR leaders should buy software. I called it Buying Software Sensibly. I targeted the session at large enterprise HR and HR IT leaders.

Unfortunately it wasn’t recorded, so I’ll blog about it instead.

Ozymandias and the modern enterprise organization

I first came across this poem at school. I was reminded of it when I listened to The Rest is History podcast about Lord Byron. It took me back to Andrew Cook’s classroom. Shelley and Byron were mates and rivals, what a story.

As we think about change and disruption, this poem is very relevant. Many large enterprise companies are thinking hard about how to avoid an Ozymandian outcome. Whether AI is the harbinger of disruption and destruction is for another day.

It is worth listening Richard Attenborough reading it.

Power Failure. The Rise and Fall of General Electric should be compulsory reading for anyone interested in business. It is a fantastic example of the dangers of hubris, and of the failure to innovate. Cohan’s book is brilliant, it reads like a fine novel.

I’ve written before about exploit and explore, and how important it is for enterprises to figure out how to be both hyper-efficient at driving incremental improvements of the core business, and experimenting to find the next big thing. Today, Microsoft is brilliant at this. This is ambidexterity.

When organizations buy software, I argue that they need to take a similar approach. When they are dealing with large, market incumbent vendors, they need a strong procurement function to balance out the sales machine and marketing muscle of the large vendor. You are often dealing with multiple millions, and the decisions you make have a long term impact. The software acquisition and ongoing licensing engagements require a sophisticated scepticism. Working with those core vendors is part of your exploit competence.

Some HR leaders underestimate the commercial power and savvy of the large vendors. They think, naively, that buying a suite will be a bargain, and they will get all the functionality and they need. The economic incentives for the suite vendors to build out additional features is far weaker than the buyers realise. Large, established vendors are often more innovative in their pricing models than they are with developing new product capabilities. And what they develop as new, they invariably seek to price separately.

HR teams spend a lot of time and effort maintaining roughly what they have. I call this the Ship of Theseus problem. This is a story from Greek mythology, where the ship gradually has all its planks replaced, is it then the same ship or a new ship? Maintenance is important, but it isn’t really innovation. You need to get really effective and efficient at keeping your suite shipshape, but that isn’t enough.

Buying AI stuff

AI is obviously the talk of the town in HR Tech land. I’m looking at some sort of AI play almost everyday. I would urge anyone involved in HR tech to actually carve some time out and learn something about AI. I ranted on about this on the SaaS n’ Sizzle podcast recently. Do have a listen. Thanks Vikas and Julie for having me on the show. I blogged about it a while ago too.

There is a lot of significant innovation going on. Start ups, incumbents, consultants and more are all bombarding you with tales of AI awesomeness. There is also a lot of nonsense and Potemkin AI.

Whenever I hear an AI pitch, I think of the Carbolic Smokeball.

If the invention is too good to be true, it probably is.

In the next post, I’ll explain how I think large enterprises should work with niche vendors and startups, and I’ll give you a framework to balance the two worlds of exploit and explore. I’ll also explain where some startups go wrong in positioning to and building for large enterprises. It will involve Thomas the Tank Engine as the literary reference.