This is the first of a multi-part series on the impact key trends are having on the business landscape. These impacts are so significant it’s possible we are in the midst of a ‘new industrial revolution.’ If this is true, every organization is at risk by not adapting to these trends and significantly transforming the way they view the value they deliver. If we read the press or industry blogs we find there is a tremendous amount of air time being given to the trends euphemistically called SMAC (social, mobile, analytics, and cloud). These trends combined with the Internet of Things (or as Cisco is calling it, the Internet of Everything) have already begun to cause serious disruptions to the way we live, learn, and work.
The Short Story
Just a few short years ago we used to talk about how the rate of change had already eclipsed an organization’s ability to adapt. We characterized the rate of change as accelerating or exponential change. That situation created an innovation gap that is now being exacerbated by the trends mentioned above: social, mobile, analytics, cloud, and the internet of things. The environment we now find ourselves in, as a result of these trends interacting with each other, can be characterized as
Always On, Real Time, Anywhere
Why Are Organizations At Risk?
The reason I feel organizations are at risk is because almost every organization that has been operating for any length of time has been set up to respond to a completely different type of environment (one that could be characterized by many factors including the company/customer relationship as transaction based as well as the expectation that change in the external environment would be at a pace the company could easily manage). The business models, organizational structures, operating models and ways of working (as well as the infrastructure to support them) that these organizations have been built upon are NOT designed to thrive in an ‘always on, real time, anywhere’ environment.
The implication of all of that puts them at risk. No matter what changes an organization begins to implement now, by the time those changes are in place the world will have changed again and the organization will be behind. Not only will they be behind but new competition can and will come from places not even on the company’s radar.
Just one of the implications of the forces mentioned above is the lowering of barriers to entry. The cost and time it takes to create an enterprise with the capabilities of a mature organization for many industries is shrinking significantly. Mark Andreesen, Silicon Valley legend, suggested “software is eating the world.” in a Wall Street Journal article he published. Organizations ‘born in the cloud’ can be designed from scratch with completely different structures and operating principles from traditional legacy organizations.
So what is the solution? New business models, new organizational structures, new operating models, and new ways of working are required. And each these new models requires an infrastructure to support them that is completely different than the information systems and infrastructures we’ve known to date. Organizations have to be ‘re-conceived’ in a manner that enables them to operate in this new environment. They have to be nimble (agile) and built upon a principles of creating great experiences and not just great transactions. From a recent article by Booz & Co. entitled, Don’t Reengineer, Reimagine:
They need to conceive of their business freshly, in line with the capabilities that digital and business technologies can give them, connecting to customers in ways that have not been possible before. Reimagining your business means creating many of the conditions of a startup—the sense of freedom, flexibility, and creativity—but at the scale and with the discipline of a large enterprise. You bring together cross-functional teams who can ideate, bring to life, and execute a truly digital user experience. You take a customer-centric approach to everything your company does—including innovation, user experience (UX) design, marketing, promotions, sales, operations, and customer service. You convey a distinctive brand identity and emotional connection that’s present in storefronts, websites, smartphones, connected devices such as high-tech fitness wristbands—and forms of interaction still being conceived. You use big data and analytics in all their forms to deploy insights from customers in real time, designing and marketing products and services that respond instantly after sensing and analyzing what people do online (and off). Reimagining your business also means continually measuring and testing the impact of these products and services, and learning from the results.
The following are just a few of the types of changes an organization has to make in order to be successful in an always on, real time, anywhere environment.
- Cultural - from compliance culture to a creative culture
- Structural – from hierarchy to flattened
- Processes – from serial to parallel; from long slow design/build cycles to rapid, iterative cycles
- Technology – from Capex to Opex; from on-premise to virtual (hybrid solutions); from specific hardware and software to managed services
- Organizational – shifting to new definitions of workforce productivity (of people and machines)
and, the following customer oriented changes
- from transactions to experiences
- from selling TO customers to creating outcomes FOR customers
- from one size fits all to mass customization
- from push to pull through
Just one of the above changes could be extremely significant to large enterprises but I believe they will have to make most, if not all, of these changes in order to succeed moving forward.
Before diving deeper into the ways organizations can pursue a path of re-designing themselves, the next few posts will explore specific aspects of the trends listed above — as a way to more fully understand the nature of the changes taking place and what appropriate responses might be required in order to survive and thrive in this new environment. After that, to truly understand the level of disruption taking place we need to look at the characteristics of a number of industries and identify the profit drivers as well as the business models the key players use to capture those profits. We need to understand the customers’ needs, how the largest players are meeting them, and why those players dominate their competition.
What are the most radical disruptions you see coming from the forces of Social, Mobile, Analytics, Cloud and The Internet of Things?
If you would like to discuss these concepts with me directly please contact Michael Kaufman, Director with PwC at michael dot kaufman at us dot pwc dot com.