Surviving Massive Disruption
To survive and thrive, successful organizations must focus on developing their greatest asset: information.
The rate of change in every industry that has an Internet-enabled component is exceeding Moore's law by 5x; yet organizations behave as if a "business as usual" approach will lead to future success. But to survive and thrive, businesses must take a radically different approach.
Moore's law was initially developed to predict rapid technology advances in semiconductors, but is often cited to describe expansion in other areas. The disruptive trends we are seeing are not linear, they're exponential. Every industry has been or is being disrupted. Every job function has the potential to be transformed. And the magnitude of disruption continues to accelerate.
Evidence of rapid pace, disruptive change is all around us. Consider the 3D printer as an example. In 2007, the cost of a 3D printer was around $40,000. Today, an inexpensive 3D printer can be purchased for $100. That's a 400x improvement in 7 years. Within a few more years, 3D printers will be within reach of most households. Imagine what the world will be like when many common household items can be printed at home. What does the retail landscape look like then?
Consider the field of human genetics... The cost of mapping the first genome in 2000 was $2.7 billion. In 2011, the cost was down to $1,000 dollars, and today, you can have 50 million of your own genetic endpoints analyzed for $399, including the genetic counseling that comes with it!
Take a look at the energy industry... In 1984, the cost of solar power was $30 per Kwh. In 2014, the cost is $0.16 per Kwh. How much longer will the electric grid exist as we know it?
And in medical technology...a 14 year old has developed an early detection test for pancreatic cancer that costs 3 cents. It is 26,000 times cheaper, 400 times more sensitive, and 126 times faster than the test marketed today by pharmaceutical companies.
These are just a few of the many thousand changes that are right at our doorstep. Yet companies continue to miss the signs, and use approaches that have worked for hundreds of years, rather than developing new strategies or innovating. A recent history lesson from our industry might provide some insight here:
In 2002, collective industry analysts predicted mobile phone growth of 16% annually. By 2004, actual growth in the mobile market was 100%. Thinking the expansion could not continue at such a rate, analysts reduced their growth predictions in 2004 down to 14%. By 2006, the industry was still growing at a 100% rate. Again thinking the trend could not continue, the collective analysts adjusted growth estimates downward to 12%. And as you've likely guessed by now, the actual growth by 2008 was also 100%. Sitting at your desk looking back in time, you are probably thinking "surely by 2008 they recognized the exponential trend and adjusted accordingly." In fact, in 2008 they predicted only 10% growth increase. And, by now, you know the rest of the story ... growth in the mobile market is still expanding today.
Experts an in all areas continue to make linear predictions in times of exponential change. The rules defining the nature of the marketplace have changed. Companies can no longer operate as they did in the past and still expect to be successful in the future.How Companies Evolved
Throughout history, individuals, companies and even governments have been organized around the concept of owning resources, be it real estate, information, goods, or human labor. Resources were managed and measured as linear relationships, meaning X amount of work takes Y amount of resources and produces Z amount of output.
Hierarchies were created to manage and share access to resources, with power consolidated through departments and management structures. Individuals and departments preserved the status quo at all costs. In a hierarchal, matrix-managed structure, departments are incented to say "no" and defend the core business, thus insulating it from change. In this type of structure, the typical development cycle is top down, sequential, and takes years to bring products to the market. Projections about the future trends and needs are extrapolated from past performance.
While traditional companies often see change as a necessary evil to be managed, successful companies in a disruptive environment welcome change and thrive on it. Simply put, in a rapidly changing environment, relying on past linear trends and traditional management structures will not produce desired results.So What Type of Company Will Survive in the New Economy?
To survive and thrive, rather than investing in extensive management structures, owned assets, or real estate, successful organizations must focus on developing their greatest asset: information. The more physical assets and the more substantial workforce a company has, the harder it is to switch strategies and business models. A company with a small core of employees and facilities can be more nimble than a large company with embedded processes that must be overcome to change.
As many fast-growing companies have learned, information doesn't need to be "owned" either. For example, popular traffic and navigation app Waze, takes advantage of community information to provide traffic data, rather than investing in building its own infrastructure to monitor traffic. In an information-based world, sharing data is more efficient than owning it.
The information-based economy lends itself to outsourcing. Following the shared resources model, both Uber and Airbnb have impressively expanded market share without owning a car or hotel and without having traditionally employed taxi drivers, housekeeping staff, or front desk agents. The resources that both of these companies leverage already exists in the community they serve. Visionary companies will continue to be comfortable outsourcing and accessing resources they don't own.
And it's not just consumer services that are being outsourced. Core business functions, such as Web hosting can also be easily outsourced. Most startups today use Amazon Web Services (AWS), again shifting focus from owning assets to an outsourced model. By leveraging infrastructure already in place, companies can minimize investment in physical assets and employees, and instead use core skills to strategically move forward. Other functions can be easily transferred outside of the organization as well. By removing boundaries between internal and external resources, organizations can scale quickly as market demands shift.
To be flexible and nimble, organizations must implement strategies based on the following key emerging principles:
- We are becoming an information-based world; everything is being turned into information
- Information is the greatest asset
- Assets and information can often be more efficiently shared than owned
- Physical assets are becoming obsolete
- Smaller is better
- Organizations must be positioned to scale at the same pace as technology
Expansion is exponential. Organizations that continue to behave as if the world is linear risk being left behind.
"SCTC Perspectives" is written by members of the Society of Communications Technology Consultants, an international organization of independent information and communications technology professionals serving clients in all business sectors and government worldwide.