HYPE User Forum14/15th June 2012
Haydn Shaughnessy
Agenda
WE UNDERESTIMATE THE ACHIEVEMENTS OF THE ENTERPRISE – HUGELY SUCESSFUL WAY OF CREATING
WEALTH.
$36 trillion revenues$36 trillion revenues
Global 2000 companies 2012, Source: Forbes
$2.6 trillion profit
$2.6 trillion profit
$149 trillion assets$149 trillion assetsUp 8%Up 8%
Up 12%Up
12%
Up 11%Up
11%
BUT IT HAS HIT A LIMIT
Shareholder returns of larger
firms were 70% below those of smaller firms over a 10-year period in USA
Source Gregory V. Milano, “Too Big to Succeed?” CFO Magazine, April 29, 2011
THE OVERHEAD GROWS FASTER THAN THE BOTTOM LINE
1.The opportunity of the new globally connected middle class
Changes in the economy that bring pressures to innovate
2. The global innovation race
3. Digital – physical convergence (or-dematerialization)
4. Disruption in the value chain
5. The loss of oligopoly power
The new global middle class creates massively differentiated needs, and low cost, good enough goods
900 million – 2 billion people by 2030 = x 3 or x 7
The new middle class
The future is mass differentiation
ON THE OTHER HAND WE SEEM TO HAVE INVENTED A NEW FORM OF
ORGANIZATION TOO
Low overhead high scale businesses
Growth x8 in 2012 10,000 x Library of Congress photo library by 11.2011 – 14 billion images
Fastest growing social network, 13 employees
The new enterprise operating model
A simple ecosystem model of business
88,000 articles on pebble watch in 48 hours
Android 48 member open handset alliance
Platform
Developer network
50,000
Apps market
Information market A new hardware layer
Strong background in self management
1. A software platform has rules of the road
New leadership role? ATTRACTION, attracting resources
6. Possibly the reinvention of product around connectivity
2. A developer or production community signing up to T&Cs not contracts – low friction scaling – with strong background in self-management
3. (Semi-) automated ingest to a platform
4. Seamless highly scaled transaction management 5. Information ecosystem
ELEMENTS OF THE PLATFORM
7. EXTRAORDINARY SCALE
ECOSYSTEM 1 The Forbes’ StoryFeb 2011 to Feb 2012
Acquisition of True/Slant
Tapped into 800 ecosystems
Opens potential for hundreds of new revenue streams
MONTHLY UNIQUE VISITORS
Other examples
American ExpressGoogleAppleThe GuardianExpedia
ECOSYSTEM 2
3,600 API partners $137 million revenues in 12 months
$2 billion in sales.
Physical product ecosystems
multiple supplier and licensee partners in fragmented markets
vs
highly disciplined continuum from hardware to software in standardized environment
Competing ecosystem models
1. Ecosystems are closely related to mass differentiation
2. They gather around a platform – like iTunes, Android, quirky
3. Represent highly scaled interactions
4. Take place in OPEN environments among peers
5. Power dynamics are totally different from the large firm
Today’s ecosystems
AND MASS DIFFERENTATION IS?
The ability of large firms to serve many micro markets with relatively increases in overhead cost, usually through multiple ecosystem partners, providing exceptional strategic options management.
ServicesServices EmployeesEmployees The CEOThe CEO RiskRisk
1990-92 2007 - 102000-03 2004-06
A Semantic Analysis of 20 years of business writing in The Harvard Business Review, source Haydn Shaughnessy
Transition point
Why aren’t more companies adopting this model?
Transition point
INTERNALITIES EXTERNALITIES
The Three Worlds
Lab-based, driven by oligopolies that shape new markets
Attempts to interpret and adapt to the service economy
Ignores the rules and uses multiple strategies to invade new markets. Innovation comes from multiple, scaled partnerships
CLOSE UP
Most New Innovation Techniques Arise in Externalities
© 2011 Haydn Shaughnessy
.
Reverse innovation, new forms of
incubation, open innovation, social media, scouting, corporate venturing,
design thinking, service innovation,
consumerized innovation, data and
analytics, Challenge Driven Innovation, business model
Managing an extended knowledge pool
Strategic options building, as companies develop for what might happen as well as what they know will happen
Creating an innovation architecture that encapsulates all elements of innovation
THE INNOVATION ARCHITECTURE
Innovation pioneers are arriving at somewhat the same point as platform and ecosystem companies
THE STRATEGIC OPTIONS PORTFOLIO
DO MORE, PLAN FOR WHAT MIGHT NOT HAPPEN
Nokia Siemens Networks
We need to find a way to disrupt ourselves – in other words ways to transform.
STRATEGIC OPTIONS MANAGEMENT
2010 iPad Launched, iPhone 4, iTouch 4G, iPod Nano, 6G iPod Shuffle 4G, iPad iOS 4.0, iPad iOS 3.2 support, iBook App and iBookstore introduced, Ping social network added, AirPlay added, Wi-Fi printing support, iTunes Versions 9.0.3 thru 10.1.1 released. Apple TV, MacAir solid state
2011 iPhone 4s, iPad 2, iOS 4.3 and iOS 5 support, Siri voice recognition, Apple TV 2G support, Mac App Store launched, iTunes in the Cloud launched, Wi-Fi Syncing, iCloud services launched, iTunes Match introduced, iTunes Versions 10.1.2 thru 10.5.2 released
Apple’s Strategic options
Periodically the complexity paradigm wins out
In a period of change disruptive cultures are needed
Generative
Normative
Discretionary Non-discretionaryy
Facebok algorithms are highly adaptive, combining human and machine networks; the business model is opportunistic
RIM left itself with no concurrent options – all its options were stuck in the planning phase.
Hack thyself
Is it the product
Is it market position
Is it ideation
Is it the platform?
What gives you discretionary generative power
The business model and the human resource element is
ready for complexity – in IT dependent sectors
IT IS HUMAN CAPABILITY
WHAT SUPPORTS THIS CAPABILITY?
1. The Platform – innovators have this in platforms like HYPE
2. Ecosystems – still difficult for large companies to trust the external environment
3. Strategic options management – being able to serve differentiated markets and products
4. Belief in a new form of scale
Conclusions
The future lies with ecosystems supported by increasingly scaled and sophisticated platforms
These platforms enable companies to serve globally differentiated markets in an elastic fashion, holding overhead down during growth
THE END
HAYDN SHAUGHNESSYFellow Centre for Digital Transformation, UCI Irvine
Blogs/forbes.com/haydnshaughnessy