The last time I attended a HYPE conference I made the claim that companies were suffering from a loss of oligopoly power – in other words they found themselves with less control over markets. I thought that was the biggest explanation of uncertainty.
In a strict sense it is true, but it needs elaborating so I am going to list out the sources of uncertainty and suggest a way of dealing with them. I really hope you will add to the list in the comments.
In many markets in the past companies have gradually aggregated their control through acquisitions. It’s a natural consequence of growth requirements and a desire to reduce uncertainty through reach. Large companies have also had access to mass communications and that gave a reasonably predictable return for any major investment – not a perfectly predictable return but a comfort zone.
Other features of business, like patenting, also added certainty. With a strong patent portfolio it was possible to ward off competition for years. So what changed?
- The rise of global markets with new niches, with highly differentiated customer needs
- The rise of new information requirements, at just the point when corporations were cutting back on information spending
- The erosion of innovation capability through outsourcing of manufacturing
- The acceleration of innovation as a consequence of more intense competition
- The exposition of start-up culture as business formation and development costs have trended down rapidly on the back of global low-cost communications
- The transformation of IP with the arrival of super-patenters, being granted thousands of new patents per year, developing highly astute patent revenue strategies
- The erosion of mass communications by social media
- The development of ecosystem and swarm-type business environments
The effect of these developments is to force companies not just to be better at innovation. They need to be better at business. For example they need to be much more astute with their patent and IP protection strategies. They need to master social media and other new forms of communications.
I have other things to say about that in future posts but for now let’s concentrate on uncertainty. There are other forces that will make life much less certain than it is now, factors like: the effects of nano-technologies going mainstream; ubiquitous sensors; programmable matter; printed electronics; bio-design and so on.
How do you go about creating some kind of map of the future? I know a passionate response to that would be – no way, you just can’t. And some companies respond by trying to buy back oligopoly status – Apple and Samsung are at it, trying to secure the next generation of smartphone and peripherals through their acquisition strategies. But it is still incumbent on us to know as much as we can, especially as, in innovation, we are making decisions about the future.
A couple of months back I got the chance to use a technique pioneered by the analyst firm GigaOm. It’s called a Vector Roadmap analysis. Here’s a visual view of the analysis – bearing in mind that about three weeks work lies behind this simple graphic:
What the graphic shows are 6 potential disruptors that make hardware design skills more or less effective as a competitive weapon. Those are the vectors across the top of the diagram. The numbers next to them are the weight of influence. So additive manufacturing has a 15% weight out of 100.
The analysis says that mass additive manufacturing influences hardware design in a tangible way. For example, if additive manufacturing machinery improves enough, then a modular design for, say, smartphones could be augmented by local printing of key components. It fits an overall trend towards modularisation. That could encourage other players into the smartphone space, to start mopping up fashion-conscious buyers who want a strong personal statement in device design. That probability is registered on the diagram by the term “radical adjacency”, or companies taking big bets and moving into entirely new markets.
Of course it will be helped too by new materials and by crowdfunding, both of which could bring new players into the market.
If you do that analysis and ask which companies are prepared for those types of changes, then the answers are not what you expect. Overall, Nike, Intel and Disney are better prepared than Amazon, Samsung and Google. All three have more experience of the disruptor techniques, than the current incumbents do. That’s not to say they want to enter that market or that they have all the capabilities needed. But they could. As an incumbent I would start to invest in those capabilities too. (I’ll write more in future about the need for options thinking in innovation investments).
So is there a “certainty” message in there? Yes, there is. There is every reason to extend and broaden disruption vector analysis to highlight areas where companies are vulnerable in uncertain environments. In this case above the disruptors are not at all intuitive. That will be the case in any disruption analysis. You can never say for certain where disruption will come from, but if your planning ignores it then the result will be fairly certain: trouble. If you factor disruption in, the result is also clear: you can create options.