Tuesday, February 27, 2018

When and Why new thinking overcomes old models

I've been watching the recent gun debate in the US with a lot of interest.  Clearly we have a safety and security issue, with far too many people losing their lives to gun violence, in "unsafe' neighborhoods but also in places that should be safe, like schools.  One of the side effects that is going to be very interesting to watch, and I'm not the first to comment on it, will be the new energy and passion young people who experienced the violence first hand in places like Stoneman Douglas will bring to the debate.  As I think is happening in many places and in many settings simultaneously, old, entrenched models are under attack by new ways of thinking and new dynamics in ways that we've not seen before.

Whether its the entrenched power of the NRA facing off against a new and younger population who are fed up with gun violence, or new ways of moving and managing money (digital and alternative currencies) versus traditional finance and banking, a lot of existing business models, thinking and infrastructure are under attack or up for debate.  The question becomes - which wins?  Does new innovative thinking, passion and new dynamics have the power to overcome deeply entrenched existing business models and policies?  Why should this time be different?

The Tipping Point

More importantly, in any setting where existing models and infrastructure confront new dynamics, opinions or innovation, what is the tipping point that eventually collapses the old order?  In many cases companies and industries will become bankrupt in the same way Hemingway described:  gradually and then suddenly.

Look no further than GE.  How does a company heralded for its financial strength and acumen, with leaders who are constantly feted as CEOs of the century suddenly become a pariah to the stock markets and have to shed entire businesses to stay afloat?  Welch created and Immelt perpetuated a company culture and structure that became too rigid, too inflexible and while often heralded as an innovator GE proved unable to scale innovations or create radical change because the company was too wedded to existing models.

Many people believe that the tipping points will originate from technology or capability.  Their arguments are based on the emergence of new technology and its capability to disrupt existing processes and models.  Bitcoin and alternative currencies are used as potential examples.  While these ideas may have some merit, I think they get it exactly backwards.

People and Policies

There are two tipping point signals that really matter and they are intertwined.  They are people and the policies, governance or regulation that they allow or endure.  Dramatic change in any setting - government, politics, gun enforcement, MP3 distribution, you name it - don't change dramatically because of new technologies, but because of shifts in people and policies.

People and their politics will be behind any new gun legislation.  People and their willingness to accept or their ability to understand alternative currencies will be behind the success or failure of Bitcoin.  People and their needs and demands will be behind whether or not GE can right itself.  People and their politics were behind GE Financial's downfall, and will be behind whether or not GE rights its ship.

We all recognize that driverless cars are the likely future.  What is slowing down adopting and rapid dissemination of this capability?  Not the technology, which promises a bright future.  Not funding - the VCs are eager to fund the rollout and to anoint winners and losers.  What slows driverless or autonomous vehicles is the ability of people to adapt to these ideas and the politics of regulation and safety.  People and politics will be the sticking point that slow adoption and use of these vehicles, just as they are in any new disruption or innovative adoption.

Old infrastructure is powerful

Old models and old infrastructure has a lot of staying power, because we tend to cling to existing investments and what appears safe and conventional, even after what is safe and conventional has changed.  We still think flying is dangerous, when you are at more risk driving to the airport than flying a much greater distance.  The old, existing infrastructure creates FUD, while the new ideas and solutions can only promise future benefits.

The tipping point occurs in every instance when people decide that the old infrastructure no longer satisfies their needs, and when politicians and regulators are moved by the momentum of the people to make changes that favor new ideas and no longer support old infrastructure.  This is why the kids from Stoneman Douglas may create change that other mass shootings never did, although there's enough investment in the old laws that unfortunately may lead to just tinkering around the edges.

The tipping point also usually emerges from an unlikely or unexpected source.  As I've discussed before, MP-3 distribution was in demand even when it was illegal.  Napster was doing it long before Apple got involved, and Sony should have dominated this market because it had both a catalogue of music and a player.  It took Apple to recognize the demand from the people and to create the regulation or "politics" (licensing) in the situation to realize the opportunity.

Looking for the tipping point

When you are looking for change, anticipating a shift or wondering when a new technology could reach critical mass, look for the critical shifts in people and their opinions or demands and the concurrent shifts in politics, regulation and policy.  When we look at trends, we constantly look at four criteria:  Political, Economic, Societal and Technological or PEST (an acronym from the first letters of each word).  People are inherently behind the Political and Societal issues, and often have more impact than the technology.  Look at what's happening with people, markets and consumers and the impact or influence they have on regulations and policies to understand when new thinking will overcome old, embedded models or infrastructure.
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posted by Jeffrey Phillips at 10:41 AM


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