Digitalization, Innovation, What if companies do this?
Imagine you were the CEO or the Management Team of a company that its business model is disrupted (like one of the 40% of the Fortune 500 companies the coming 10 years). What would you do? Where would you start? What should be the focus areas to initiate change?
As we can never predict accurately what will be the future but only we can create it, ultimately we want to find out what are the key elements of change that we need to be successfulin the era of minimum 10 X better/faster/smaller/….. and massive changes.
But what is driving all these accelerating changes?
– Digitalization of information content
– Hyper-Connectivity with a few additional billions coming on line
– Exponentially growing new Technologies (e.g computing, AI, Robotics, 3D printing, Data Analytics, … )
– Urbanization Growth
– New Business models that increase the information content and consequently dematerialize, demonetize and/or democratize industries,……..
– New generation of people with different attitudes
These are the preconditions for the ‘perfect storm’ that will soon rage through most incumbent businesses and will disrupt many…They are also the preconditions for an unparalleled surge in innovations by new and (some) incumbent new businesses that will reshape the corporate landscape for decades to come….
Before I answer the question of what companies will succeed let’s use examples to underpin WHY is the perfect storm :
- Digitalization:The smartphone (Apple, Samsung, Xiaomi,…. ) dematerialized more than 60 % of the Consumer Electronics Industry . Physical Products became digitized and are distributed as ‘bits/bytes’. Previously separate functions/products like Camera, Video, Navigation system, Audio set became a software function within a smartphone.
- Hyper-Connectivity: The quality of Connectivity is improving and the coming 5-7 years it is expected that 2 billion people will be added to the connected world. This means more innovation, more consumers, more entrepreneurship and more competition.
- Urbanization: It is well known that with the growth of Urbanization the Innovation rate is increasing due to concentration of talent in close proximity.
- Crowdsourcing: You can now hire an ‘expert on demand’ or find resources for almost everything
- Concept Design, Product design, go to market
- Concept Validation (Reward Crowdfunding e g Indiegogo)
- Computational resources (Amazon, Rackspace,… )
- On demand workforce (Freelancer, Mechanical Turk)
- Demonetization: Reduces the value of a market segment (especially services but not only) by introducing a new Business Model
- Skype >> Long Distance calls
- iTunes >> Record stores
- Amazon >> Book Stores
- AirBnB >> On line booking, Hotel Chains
- Uber >> Taxi Fleetsand beyond
- New Exponentially Growing Technologies: Enable companies to expand their reach to other industries (e g Google and Apple so the business become more and more competitive) and speed up exponentially the introduction of new innovations. Everything becomes faster, smaller, cheaper,... For Individuals it means they have with a smartphone unbelievable power comparing with only 10 years ago. Consequently we can expect more and more entrepreneurship.
Although there are more reasons for the perfect storm, I believe the key reasons have been mentioned. Now the question is what should be the response of companies (CEO and Management Team) in order to be able to ride successfully the Tsunami of Digitalization and necessary Innovation? This is not any easy question and please find attached the top 10. Here I will focus on the WHAT not the HOW.
- People:Have the right people for the right job, people that are comfortable with uncertainty, chaos and change. Adjust your HR policies to treat millennials as they expect to be treated (offer flexibility, reward performance, offer opportunities for learning,….). Establish a suitable new company Purpose that all stakeholders resonate with.
- Establish a culture that rewards risk taking, transparency, speed, adaptability and accountability. Stimulate and reward Open Mindedness and High Performance.
- Manage the communities and crowd as an integral element of your company’s success.In the era of connected, shared, crowdsourced and on demand almost for everything innovating through crowd is a wise option.
- Create the conditions to be comfortable to compete not with 20 % improvement but with 10 -100 X better, faster, cheaper, smaller….
- Design iterative experiments using prototypes with customers and community to validate various concepts as well as improve and expand the User Experience.
- Leverage as much as possible 3rd party assets.
- 7. As the business environment is accelerating create the conditions for faster decision makingthrough modern internal collaboration/social networking tools (e.g Dropbox , Google drive,…. ), automate through algorithms and interfaces with the external world and allow for much more autonomy especially at the organizational edges closer to the customer. Here culture will play a vital role
- Embrace the appropriate new technologies to be able to increase speed, quality of customer insights to be able to deliver superb customer experience
- Devote more resources for business model innovation and change your business model accordingly as the Business model becomes the product.
- Invest in relevant accelerators/start-ups to Innovate autonomously outside of your core business
For an incumbent company this is easier said than done and as we are dealing with a massive change the companies that will be able to ride the waves of digitalization and Innovation will be able to succeed. It is my conviction that the great majority of the companies are not prepared for the Digitalization Tsunami and I welcome remarks or questions.
What do you think? Does this make sense to you? Thank you
Mike Mastroyiannis is an Executive Coach and Consultant for among others Exponentially Disruptive Innovations. He has served as CEO of business units in Multinationals, founded or lead start-ups and serves in advisory boards. He can be reached through LinkedIn or email at tenx2.com