Through the lens of the CXOs: Visualizing DAU (Disruption as Usual) as the new BAU (Business as Usual)
These days no one talks about the pace of technology being fast. It is given that the velocity of technology would continue to increase exponentially. During the pandemic we have witnessed unprecedented swiftness with which decades of technological advancements were crushed into months. This speed made previous disruptions look pathetically slow in comparison, and tomorrow we will think that, today we were merely crawling along.
The massive surge in computing power, with quantum computing becoming mainstream delivering speed which is 100 million times faster than any classical computer; with semiconductors becoming ever so thinner (3 nanometres or even less) having transistor density of nearly 300 million transistors per square mm defying the physical limitations of Moore’s Law; 5G reducing latency to nano seconds, network slicing creating multiple instances of parallel network functions running on the same chip, allowing billions of more devices to connect simultaneously; edge computing bringing computation and data storage closer to the location where it is needed, are going to usher in even greater disruption than ever before. These are just few of the trends that we notice, there are many more technologies in the horizon that boggles the mind such as mind-computer interfaces and conquering the race to beam connectivity from space with thousands of low-earth orbiting nano-satellites .
All these are going to make it even more challenging to maintain industry leadership. Every industry would be impacted by technology and by now we have understood that you are either digital or dead. It has become imperative for industry leaders to understand the business disruption that can be caused by scientific and technological advances.
There are three important factors: the speed at which technology transitions occur, the sector’s “winner-takes-most” effect, and a remarkably mobile work force. Thanks to abundant cloud-computing infrastructure and mobile connectivity worldwide, a technology platform can reach a massive audience at unprecedented rates. And of course, increasing scale digitally is nearly frictionless – it doesn’t require the time or costs involved in producing or distributing physical products.
Ultimately, scale accrues so quickly to the winners that once other companies miss a transition, it’s difficult for them to get in the game. Lastly, since these dynamics are well understood, the industry’s talent appears to be uniquely mobile – leading to irreversible declines in competitiveness after trailing for several years.
Still, leading technology companies have managed to stay ahead of the curve, both creating and maintaining value. Those success stories almost invariably involve one of two playbooks for accelerating growth: extending a platform’s capabilities into new domains or repositioning the core business platform during a technology transition.
Choosing the right playbook depends on where a technology company falls in its life cycle: disruptor or incumbent. When a company’s platforms are still growing, the formula for value creation more often involves extending them into new domains. When a company already has a mature platform-based business model, the formula for value creation typically involves repositioning the core platform as the technology transition occurs. This approach is particularly potent if the market has concluded such a repositioning is unlikely. Examples include Microsoft’s and Adobe’s repositioning around the cloud, and Nvidia’s repositioning from mobile devices to graphics and data centers as artificial intelligence growth exploded.
These transitions can be tricky. The new platform can pose conflicts for the old by cannibalizing the core business and alienating existing partners or customers. The better today’s business is performing, the greater the resistance to change. But waiting until growth slows is often too late. Many companies have missed the opportunity to refocus their businesses and ended up worse off. Nokia, for example, was unable to adapt its feature phone business for the smartphone era. In the years following the introduction of the Apple iPhone, Nokia lost billions of dollars in market value and ended up selling its handset unit.
Technology companies in a high-growth phase face a different set of challenges when trying to extend their capabilities to create new businesses. The trick is to find the sweet spot where the organization’s strengths match a promising new market opportunity. Examples include Amazon’s extension into cloud-computing services with Amazon Web Services; Apple’s extension into mobile media devices, smartphones, and media content; and Alibaba Group’s extension into payments, cloud computing, and digital transformation of businesses. These companies built on their core strengths to reach new customers, deepen their relationships with existing ones, or accomplish both.
Government regulation is an increasingly important variable to keep in mind when crafting a company’s value-creation strategy. Even before the recent antitrust efforts, scrutiny of technology mergers and acquisitions was intensifying — notably in Europe, but also in the U.S. and other regions. Regulatory oversight is evolving beyond issues of market concentration to include consumer data and privacy, national interest and security, and future competition. All of this places greater demands on technology executives to prepare for consultations with regulators and broader stakeholder communications during, for example, the diligence and negotiation phases of deal making.
Whether a company needs to reposition or extend its core business, the essential job of management is to deeply understand the transition occurring in its sector and create a plan built around the firm’s strengths. The next generation of technology leaders are hard at work doing that. The choice before us is either to disrupt or be disrupted. There’s no time to rest on your laurels, every organization has to be in a constant cycle of innovation – innovate, disrupt, innovate.
The future challenges, and some of those are happening right now, would not only be technology, but geopolitical and concerning climate change as well. To tackle urgent planetary challenges such as resource depletion and climate change, we need to fundamentally rethink the way we do business in industrialized systems. One model that holds great promise is the circular economy (CE) — instead of digging up materials, using them once, and then throwing them away, companies in a CE recapture the enormous volume of resources in their value chain in order to use them again and again.
New global supply chains will be drawn up, tech-nationalism will rise as nations will battle for supremacy over artificial intelligence, cyber security will become even more challenging as data becomes crucial to gain economic and business advantages. We are moving towards a new GDP (Gross Data Product) that will measure economic progress. Countries that are the top data producers will emerge as winners.
After all, with data-fuelled applications of artificial intelligence projected, by McKinsey, to generate $13 trillion in new global economic activity by 2030, this could determine the next world order, much like the role that oil production has played in creating economic power players in the preceding century. For organizations the ability to transform into a data-driven enterprise closing the loop between data to decision will determine the difference between success and failure.