Wednesday, February 27, 2019

Where speed, innovation, technology and strategy collide

An old saying, often attributed to a Chinese philosopher, goes something like this:  may you live in interesting times.  Some people say that it isn't a "saying" so much as a subtle curse.  Interesting times - interesting to whom?  Interesting why?  I think we are all about to find out what interesting times look like, because those times are about to unfold, and no one can really interpret the repercussions.

Major shifts on the horizon

Why are times about to become more interesting?  There are a number of reasons, many of which I've listed in the title of the post.  Currently we have national and global economic tension, the rise of nationalism, large trading communities breaking apart (Brexit) and trade tensions between large trading partners - the US and China for example.  Old trading patterns and rules of engagement may be re-evaluated or may change entirely.  Digital transformation - a "third wave" of information technology that creates an entirely new way to capture real time data and perhaps make sense of that data on the fly, could radically change how businesses operate, how they make money and how they interact with customers, consumers and suppliers.  We aren't quite certain yet how IoT, Blockchain, cryptocurrencies, artificial intelligence, robotics and other technologies will change things.  All we can say for certain is that these technologies and the digital transformation they create will change things.

While these shifts are underway, other forces are at work.  The pace of change - a common refrain in my writing - seems to only accelerate.  Large companies, built over centuries, are brought low overnight.  Small companies formed in spare bedrooms in a very short period of time have the same valuation as large hospitality chains in operation for decades.  In a digital, asset-light or asset-less model, companies can scale exceptionally quickly, and larger firms with decades of development seem somewhat stuck with their legacy investments.  Data is becoming a new currency, more meaningful than the products we acquire or services we use.  As more people gain access to the internet and gain more education and more experience interacting and creating connections, more data is created and more interactions and business is transacted, leading to more interesting data and more connections - thus more value for the companies managing and tracking that data.

Impact on strategy and innovation

What does this mean for two concepts near and dear to my heart - strategy and innovation?  If strategy is a "plan of action designed to achieve a major aim" then what should our strategies look like as we encounter a competitive environment with little stability and a significant amount of change?  What should our "major aims" be?  I doubt Zuckerberg ever dreamed he'd have control of so much data, and that the data would be so valuable, when he set out to create a "facebook" of college classmates on line.  The Facebook of today wasn't his original strategy, any more than the Google of today was what Page and Brin where thinking when they started a search engine.

But businesses need clarity in their strategy in order to direct resources, to align people to key opportunities, to operate at peak efficiency.  We will need new strategy, and maybe even new strategic tools in order to operate under these new conditions. 

And where there is strategy, there should be innovation, and the reverse is almost always equally true.  Innovation is simply a method of achieving some portions of strategy - typically focused on growth or differentiation, or entry into new markets or segments.  Not everything that is strategic must be executed through innovation, and not all innovation is strategy.  Innovation should have an important place in the pantheon of strategic tools and methods, and when strategy is difficult or unclear, innovation becomes even more difficult to define and achieve.

What's next?

Thus it is with some concern that I look at the confluence of increasing speed, digital transformation, global trade unrest, increasing customer demands and think:  what are the new strategies that allow businesses to compete successfully in an environment with so much change and uncertainty?  If businesses cannot create reasonable strategic plans, then how can they effectively create new innovation programs and activities?

This lament is focused primarily on large corporations, which have deep experience and legacy investments.  There was probably never a better time to be an entrepreneur or startup, a company with one compelling innovative idea, because with new digital tools and technologies and ready access to large markets, we'll see more startups grow quickly and scale to compete with larger corporations, constantly slicing off valuable customer segments or markets or geographies much faster than ever before.  We may arrive at the juncture where large corporations request more oversight and protection from their regulators and government officials, just to make it more difficult for entrepreneurs to enter and compete.  Patriotism, after all, is the last refuge of a scoundrel, according to Samuel Johnson.  Increased oversight and regulation will sustain larger firms that cannot move quickly but will to some extent stymie innovation.  But not for long.  In some instances services will spring up that consumers demand, ahead of regulations - look no further than the regulations trying to catch up with electric scooters or AirBnb.

The reality is, we are going to need new strategic thinking, and new strategic models, to face all of the change that is about to unfold in the next 10-20 years.  It's entirely possible that
  • many jobs will disappear, with humans replaced by robots.
  • new trading partnerships will form, old ones disappear
  • new energy sources shift the focus of global economies
  • green thinking shifts where we place emphasis and resources
  • digital transformation shifts how we build companies
  • national and international politics and power shift dramatically
We'll need strategies that envision the future, that enable more speed, flexibility and agility in the business model and structure, and that work at the same speed, if not greater speed, than changes in the customer base and the market.  We'll need new tools and methods to understand what is going on and put it into context.  We'll need to get much closer to customers and consumers, engaged with them as we aren't today.  We'll need to rethink how we innovate - it could be that all we do is innovate, given how short product cycles are likely to be in the future.

We will definitely live in interesting times, very soon if not already.  How we as strategists and innovators begin to understand these times and create tools and frameworks to help companies understand and act much more proactively is going to matter a lot.
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posted by Jeffrey Phillips at 5:52 AM


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