Fifty years ago, Milton Friedman announced that the social responsibility of a business was to increase profits. So was born the shareholder value era. Friedman was pushing back on dominant movements of the day: the new deal and European models of social democracy. Global inequality issues trace back to this rise of shareholder value. A recent Article explores the topic and the resulting power of the stock market. The authors suggest that while the market and the wealthy soared, consideration of the interests of workers, the environment, and consumers declined.Continue reading
In a recent Article, author Greg Satell describes strategy in a post-Digital world. Michael Porter positioned Competitive Advantage and dominating value chains as the foundation of strategy. Like many of our institutions and ideas, multiple forces are pushing that view into the dustbin of history. Two key forces are the shift to horizontal ecosystems versus vertical value chains, and technology cycles outpacing planning cycles. I have written extensively about Ecosystems and their impact on the value equation. Maximizing bargaining power among suppliers, customers, and new market entrants gives way to value-sharing scenarios where all participants in an ecosystem win.Continue reading
I just finished another book and added it to my Book Library. Ecosystem Edge was written by Peter J. Williamson and Arnoud De Meyer. The move towards ecosystems as an organizing principle for market activity has been a foundational piece of my research on the future of business. You can find that research here. The book goes into depth on the what, why, and how of ecosystems. Anyone looking for detailed guidance on how to execute in this ecosystem world, this is the book for you. Supported by several real-world examples, the authors explore the different aspects of succeeding in the ecosystem world. I highly recommend the book. The abstract is included below.
As platform business models increasingly gain board-level attention, the ecosystem conversation intensifies. David Kish – a TCS colleague – recently worked with the broader team (Kevin Mulcahy, Rose Rodriguez, Bill Quinn, Bill Bosak) to author an article focused on shifting platform and ecosystem dynamics. I am sharing Dave’s article via this guest post.
Since the advent of the internet, the combinatorial effect of innovation in science and digital technologies has rapidly driven the world toward a platform economy where software, apps and APIs enable every human activity and radically change how people interact and create value. Companies like Google, Microsoft, Facebook, Amazon, Apple, Alibaba and Tencent, which represent seven of the top ten valued companies by market capitalization, are leading this transformation and have created an imperative for all companies: develop platform capabilities and adapt your strategy to survive and succeed in the platform economy.
Thoughts I shared at this years TCS Innovation Forum in New York City.
I recently authored an article on ecosystems and digital transformation along with leading platform strategist Simon Torrance. Here is a brief abstract of the article. You can read it Here on the TCS website – along with other perspectives on digital transformation.
As Frank Diana and Simon Torrance explain in “Defining Your Digital Ecosystem: The First Step in a Machine First™ Transformation,” many leaders are no longer looking at strategy and industry structure in the ways of a non-digital world. Instead, they’re analyzing how emerging ecosystems—networks of stakeholders, including business partners, suppliers, customers, and competitors that interact digitally to create value are supplanting traditional industries as the organizing construct. For example, in a mobility ecosystem, automakers no longer just make cars; they must redefine the very notion of automobile ownership and how people get around.
As the world continues its march towards platform-supported ecosystems, organizational readiness becomes a critical area of focus. Four facets of an organization contribute or detract from success in an ecosystem world:
- The mental models that drive an organization
- The lens in which an organization views value creation and capture
- The orientation of an organization – which in most cases is shareholder value
- The organization’s culture
The growth engine that ecosystems represent will serve as a forcing function, pushing Organizations to Mature across these key facets. For example, I firmly believe that over time, a transition occurs from shareholder value to stakeholder value. This transition places purpose at the center, with shared value at its core (Click on the Visual to expand).
The illiterate of the 21st century will not be those that can’t read or write, but those who cannot learn, unlearn, and relearn – Alvin Tofler, Rethinking the Future.
As we all become life long learners, unlearning could be our biggest challenge. Our mental models prevent us from seeing the need for change. We are creatures of the only world we have individually known. Even if you are one hundred years old, the mental models established after humanities second Tipping Point dominate your thinking. They form our intuitions and belief systems.
As horizontal ecosystems become the primary means of value creation and capture, organizations will embrace various monetization strategies. Given the proven growth potential of platforms (the foundation of ecosystems) and the increasing collapse of Industry boundaries, the urgency to understand ecosystem dynamics is growing. Ecosystems enable producers and consumers to interact in ways that create shared value. In many cases, stakeholders will play either role at any given time – a phenomenon some have called side switching.
In a recent book titled, Robot-Proof: Higher Education in the Age of Artificial Intelligence, Northeastern University president Joseph Aoun proposes a way to educate the next generation of college students, supporting society in ways that artificial intelligence cannot. His underlying premise is that the existing model of higher education has yet to adapt to the seismic shifts rattling the foundations of the global economy – I firmly agree. It was Alvin Tofler that said: The illiterate of the 21st century will not be those that can’t read or write, but those who cannot learn, unlearn, and relearn.
This conversation is broader than a focus on school-aged young adults. What Tofler pronounced applies to all of us. In his book, Mr. Aoun presents a new model of learning that enables us to understand the highly technological world around us, allowing us to transcend it by nurturing the mental and intellectual qualities that are unique to humans – namely, their capacity for creativity and mental flexibility. He calls this model Humanics. These Human Traits represent our future skills profile, including many of the right brain characteristics visualized below. We will want explorers, problem solvers, dot connectors, continuous learners, and those not afraid to challenge the status quo.
The evolution of business in the industrial age has mirrored the progression of three industrial revolutions; moving us from its first iteration to our current form. The emerging Fourth Industrial revolution ushers in another shift, culminating in something that likely looks much different than its predecessors. A brief look at this journey shows us the linkage:
Iteration One: The first industrial revolution introduced mechanization and had significant impacts on business and the labor force. Business in this period was transformed, as the steam engine enabled us to replace human and animal-based muscle with machines.
Iteration Two: Several forces converged during the second revolution to elevate our standard of living. The post-war period that followed was defined by a high level of consumption that drove business in the mass production era. Henry Ford famously said: “Any customer can have a car painted any color that he wants so long as it is black.”
Iteration Three: The third industrial revolution revolved around information technology, electronics, and communications, ushering in a period of computerization and automation. Businesses were once again transformed through significant gains in productivity and a shift away from Henry Ford era standard products to more customization.
To transform is to change in form, appearance, structure, condition, nature, or character. It is an overly used word that can be made to fit several narratives. Yet, given its definition, the dynamics of what is sure to be a volatile and complex future should compel us all to transform. I believe however, that the narrative must change. This is not a technology discussion, and it is not a digital discussion (although digital is the reason we are here). Rather, it is discussion of likely structural shifts that alter our beliefs and intuitions. These shifts will fundamentally change the way we think about organizations.
When I first launched my Blog in 2010, it was titled Blurring the Boundaries. It was growing ever clearer that the lines between physical and digital, industries, business and IT, you name it, the lines were blurring. It was evident that our growing digital world would drive significant structural change. These new era structures would fundamentally alter our belief in long standing institutions like management, policy, process, procedure, legal frameworks, accounting principles, organization structure, business and operating models, governance, regulations, institutions, and the core characteristics of new era organizations. In essence, The Collapse of Traditional Structures will lead to a Third Tipping Point in Human History.
One of the most profound changes will be the dissolving of industry boundaries and the emergence of ecosystems. Our industry construct – born during revolutions that set the standard of living in the western world – will give way to a finite set of horizontal ecosystems. This visual depicts a perspective on an ultimate finite set of nine ecosystems.
In segment four of my interview with Chunka Mui, we discussed the ultimate demise of our industry construct and the emergence of horizontal ecosystems that remove friction from our life experiences – one experience at a time. This platform-enabled transition can be witnessed in action today, as we watch the Mobility ecosystem form one piece at a time. We can no longer think of industries in isolation, as we witness the collision of various industries and a reconfiguration of the money flow – over $2.5 Trillion in car-related economic value. Chunka uses the example of the collision between the automotive and technology ecosystems to describe this phenomenon: the shift from cars with computers inside, to computers with wheels on them.
Chunka Mui is the managing director of the Devil’s Advocate Group, a consulting team that helps organizations design and stress test their innovation strategies. Mr. Mui published a popular book titled The New Killer Apps.
Segment four is a quick three minute video.
You can view segment one – Autonomous Vehicles: An Interview with Chunka Mui – here.
You can view segment two – Reimagining Our Driverless Future – here.
You can view segment three – The Ripple Effect – here.
Download A PDF Version of the transcript.
The convergence that is steering our emerging future manifests itself through a number of scenarios that drive multiple paradigm shifts. As the shifts themselves converge, they intensify the critical need for leaders to think differently about a world where the future arrives faster than people think. Some time ago, I had a great conversation with Chunka Mui regarding pace, the sheer number of shifts, and the need to think differently. We used the autonomous vehicle to explore the challenges of our emerging future. I will present the full discussion in five short segments, along with white board animation to visualize our dialog.
Chunka Mui is the managing director of the Devil’s Advocate Group, a consulting team that helps organizations design and stress test their innovation strategies. As a consultant on strategy and innovation, Mr. Mui has spent considerable time analyzing the autonomous vehicle scenario. He asked a question in his book The New Killer Apps about autonomous vehicles and what happens if traffic accidents are reduced by 90% as Google predicts. This simple question makes visible the broad and deep implications of these future scenarios. As society responds to their implications, new ecosystems emerge that alter our world. In this case, the vehicle is one of numerous components of an emerging mobility ecosystem that is defined by the responses that are playing out right now.
Here is the first of the five segments:
My ongoing work on emerging future scenarios has driven a renewed focus on experience. Several factors are converging to shift the experience end game; specifically, the evolution of Ecosystems and the transformation of Interaction. These two forces – themselves the result of combinatorial innovation – are converging. While the way we interact continues to shift, a parallel evolution towards ecosystems is occurring. This ecosystem evolution introduces systemic complexity and combines with a shifting interaction paradigm to alter the way we think about experience.
Figure 1: Phase One of a pending shift in interaction paradigms
In my previous post on the Transformation of Interaction, I mentioned the emergence of ecosystems and their likely impact on how we experience life. Together, the evolution of interaction and ecosystems plays a significant role in how we view experiences going forward. I referred to this in 2013 as the movement towards Next Generation Experiences. In the coming months, I will share a point of view that captures a finite set of future ecosystems. To position that discussion, it is helpful to look at how this evolution may ensue.
The future is arriving faster than most people think.
I invite you to rehearse along with me – enjoy this journey through the looking glass. Expand the window below to view via PowerPoint online.
When we look around us, we see a world in which digital is now woven into the fabric of our lives. Where convergence of paradigm shifts is now the new norm and the pace of change is accelerating exponentially. We are now living in a looking-glass world; where everything we think we know is being challenged, including our long-held notions of success and failure. At the same time it’s a world where we can imagine, create and enable like never before.
The road to future ecosystems is paved by stakeholder action in the coming decades. These ecosystems support life experiences and have no regard for industry boundaries. Over time, established peer-to-peer relationships lead to value creation and capture for all ecosystem participants. Along the way, value design gets complicated, as multi-stakeholder ecosystems introduce complexity. It is value design that I believe challenges traditional thinking, both in how we view relationships and how we share value. As traditional thinking gives way, the resulting ecosystems have the potential to move towards the collaborative commons described by Jeremy Rifkin.
According to Peter Diamandis of Singularity University, the most dramatic change in our global economy is about to occur between 2016 and 2020. He says that 3 to 5 billion new consumers, who have never purchased anything, never uploaded anything and never invented and sold anything, are about to come online and provide a mega-surge to the global economy. He calls this group the “Rising Billions.”
Technology giants like Google, Facebook, and SpaceX are all working to connect the world. Once connected, this exploding online community introduces new markets, creating a $30 trillion consumption opportunity by 2025 – and emerging markets will grow 75% more rapidly than developed markets. As discussed in a recent post on Changing Beliefs, this shift from developed to emerging markets requires a change in the approach used to win in these markets, as products and services from developed markets cannot simply be transplanted into emerging markets. But these rising billions are more than a market opportunity. They are a source of ideas, innovation, knowledge, skills, capacity, passion, learning, insight, and foresight.