In my last future of business series post, I focused on a recent book titled No Ordinary disruption. That post explored the author’s belief that our intuitions must be reset. In that same book, the authors explore what they call “trend breaks”, or shifts away from the trends of the recent past. This post will look at these breaks and their impact on 21st century organizations – and it starts with value. In the rapidly growing world of ecosystems, the way value is created and captured is changing. But, more fundamentally, even our traditional views of value are being challenged. The authors use GDP as a way to underscore this point. They estimate that digital capital is now the source of roughly one-third of total global GDP growth, with value delivered via intangible assets like Google’s search algorithm or Amazon’s recommendation engine. Even our long standing view of capital itself is shifting, as human creative capital becomes a critical source of value.
Additionally, future value increasingly accrues to consumers. In a recent article titled Why Every Aspect of Your Business is about to Change, the author talks about the destruction of value for incumbents and the creation of value for consumers in the form of consumer surplus. They use a powerful example to make their point: Skype brought in $2 billion in 2013, but McKinsey calculates that at the same time, they transferred $37 billion away from telecom firms to consumers via free or low-cost calls. Even the innovative new company only gets a fraction of the value created (Skype: $2 Billion, Consumers $37 Billion). So back to value and GDP: consumer surplus is not accounted for in the way we measure GDP. This creates two challenges: First, do we need to change the way we measure value? Second, how do companies monetize the newly created consumer surplus?
So what does this mean for the future of business? Let’s start with something right from the aforementioned book: On the first day of classes at Ivy League colleges, it was common for the dean to warn students: “Look to the left, look to the right. One of you won’t be here next year.” That seems very appropriate when looking through the lens of company viability. This real phenomenon unfolds over the next decade, driven in part by several trend breaks as identified by the authors: