Evolution of Change: Signs for the Future of Business
I like taking the time once in a while to tie different trends together, it just helps me focus on what’s really happening now and helps me understand where things might be going. Taken individually there are some very interesting things happening in technology and business but when you link them together a picture starts to emerge that is almost staggering in depth and breadth of change potential.
I like taking the time once in a while to tie different trends together, it just helps me focus on what’s really happening now and helps me understand where things might be going. Taken individually there are some very interesting things happening in technology and business but when you link them together a picture starts to emerge that is almost staggering in depth and breadth of change potential. I was reading “The Singularity is Near” by Ray Kurzweil the other day and a point jumped out at me that I think is extremely important when looking at change, whether you agree with Kurzweil’s ideas on singularity or not. That concept is that technology growth or the growth of any evolutionary process is exponential, and is not linear or does not simply continue at current growth rates over time. In fact many evolutionary processes see double exponential growth, so in fact the growth of the exponent is exponential. It’s easy to see how people might mistake the growth rate of an evolutionary process when looking at change and it’s impact on the future, what you see is the rate of current change and you extrapolate that rate into the future. To actually project the change into the future you must account for the exponential nature of the change, which is very hard for most of us. It’s an increasing rate of advancement over the time period examined. Kurzweil also points out that not only do we often underestimate the rate of change but we also tend to look at the change in isolation rather than as a part of a set of related changes. This is an important point, if you look at an individual change in isolation you can fool yourself by thinking that the isolated change projection is too radical when in fact the interrelated trends make allowances or compensate for each other. Ok, enough mind numbing change theory, what I wanted to do is try to link the changing factors together and see if there is a pattern of evolution that is signaling dramatic and fundamental change for business.
So what are the individual changes or shifts that we are seeing? Here are the ones that I believe signal the future of changed business and business models as well as changed models of work and personal interaction:
You can’t listen to any technology discussion these days where the word cloud doesn’t ring out in almost every sentence. While some vendors would have you believe that cloud is nothing new or different I do not agree. Computing power as a utility that can scale up or down as needed (along with the accompanying pricing) is a powerful concept. The business model behind it, that pricing is granular and based on consumption, is also very powerful and opens up all sorts of possibilities for businesses. Moving IT from thinking about, purchasing and managing stacks to thinking about workloads, opens up a new level of strategic involvement for IT organizations and raises their importance to the overall business. Cloud computing may not be cheaper over the long run but it is significantly more flexible and scalable. Businesses require strategic flexibility and the cloud is a key part of delivering that flexibility for the hyper-networked global enterprise. The cloud is essential as an enabler of the change, providing the means for aggregating data and creating high value information across the new business networks. Value and the creation of value is changing and shifting out through the business (and people) network. Cloud facilitates linking the nodes of network easily and flexibly.
Everything as a service
The cloud plays a big part in this concept but it’s only part of the enabling infrastructure. The ability for computers to monitor, measure and bill at extreme levels of granularity for the use of any asset has opened up a world of business possibilities. The recent economic crisis accelerated and increased the enterprise’s awareness to the potential of consuming and operationalizing the consumption of “things” as a service over purchasing those same “things”. From a budgetary and operating standpoint the idea of this operational approach and it’s virtually limitless ability to scale and flex as needed over spending scarce capital for less flexibility, is changing the way business thinks about supporting work and getting things done. Software and other IT services consumed as a service is mainstream in the enterprise. Other business areas have also moved into the “as a service” model, shipping as a service (UPS and FedEx), payroll as a service (ADP), car use as a service (Zipcar and Citycarshare) and even labor as a service (Amazon.com Mechanical Turk).
I read an interesting article the other day about a service that enables individuals to rent out their own goods in their local community. Think about the possibilities this business model opens up and in this case builds on hyper-connectivity, a hyper-local community (or network) and the computing power to enable the scaling of the model. You buy an expensive device and use the model to recoup your investment or perhaps make a profit from something that you also needed / wanted / enjoy. It changes or moves the point of value.
Networked business (customers, employees, partners)
I started talking about this concept here. This transition is the most fundamental shift in the way business works and the signal of moving away from our industrial model of the past. Information driven businesses are interconnected and interdependent even if they don’t yet realize it. Hierarchies are inherently inflexible and tend to stall information flow at control points. Information is the new lifeblood of the networked business and thus cannot be hoarded. The networked business can exist across boundaries, whether they are organizational, company or geographic. The Internet creates hyper-connectivity and opened up the flow of information around barriers. The social web changed interaction models and redefined community. This new community concept leads into the networked business model (or models). Network synergy is the key to the new and enhanced value pools that start to exist in the networked business environment. I think this new networked model is not a choice but an imperative that is being fueled by the existence of the social customer and social employee and the new interaction models that those groups are driving. Networking the business also enables co-creation of value, another concept that is gaining momentum for redefining value points in the enterprise.
The power of community
I suppose this is related to the networked business discussion above, since networks are just a type of community but the power of community is somewhat more broad than the idea of networked business. For example companies have found that sourcing new product or service ideas from a customer community or ideasourcing (which is just crowdsourcing ideas) can produce great new ideas AND increase customer loyalty and engagement (MyStarbucks Ideas, Dell Ideastorm, etc.). Customer support communities can help companies lower support costs while providing peer to peer support in ways that are more comfortable for customers and with the by product again being increased customer loyalty and engagement. Community also relates directly to the idea of co-creation of value, that is the company and the engaged customer (or partner, supplier, etc.) generating value together.
Internet of things
The Internet is the plumbing that connects, or maybe I should say it’s the “great connector’. At first this connectivity was person to person or person to business but as the net has evolved we have developed smart devices and sensors that can be embedded in almost anything and can leverage the connectivity. The bounds of hyper-connectivity are not stretching but in fact disappearing as the network extends to nearly everything. For example RFID technology connects goods to the grid and makes them one more node in the information network. The ability to connect, capture, communicate and analyze is extended outward and adds to the available information. There’s more though, as the “thing” becomes smart the ability to take action is also moved to new nodes on the network. A simple example is the creation of smart automobiles. The auto knows where it is, where it’s been, it could know who is in it, it’s current state (running, driving, speed, damaged, malfunctioning, in an accident), etc. The auto is on the network and let’s say that it is involved in an accident. The auto reports the accident, opens a communication channel between the driver / passengers and a central monitoring facility and communicates its state automatically (for now a person with a connected computer but in the not distant future the computer itself) who can assess the situation and extend the network to law enforcement and / or emergency personnel if needed.
Expand the Internet of things concepts another step and it’s not hard to see that connectivity empowered with smart devices could make a significant difference in our current sustainability issues. Other technology initiatives will certainly address new ways of green living but in the short term creating smart networks of buildings could help reduce consumption. Creating smart water distribution systems could ensure safe water supplies. Better logistics networks could reduce fuel consumption while optimizing the delivery of goods. Smart datacenters can reduce power consumption while optimizing computing power. I can go on but you get the idea I think.
Currently the amount of data created doubles about every 18 months. If you apply the concept of exponential growth however we should see this time compress at a rapid pace. Data sources are exploding, social web data, smart devices, enterprise systems, user generated content, etc. all fuel this accelerated growth. The opportunity to gain insight, business value and competitive advantage from this data is huge but only if the data is managed, analyzed and used effectively and efficiently. The data gets more useful the more it can be combined and processed. This will require increasingly more resources to accomplish and is a major driver in the move to the cloud for storage and analytics.
Taking the big data concept one step more, there is the real potential to use the key intersections of the data to develop and support predictions on all sorts of behaviors. I wrote about it here so I won’t go through it in great detail but I will reiterate the idea that the intersection of social data and enterprise data is a value point that businesses need to leverage. Using this information will lead to predictive selling, predicting loyalty and advocacy, predicting problems and issues…all sorts of useful business information and actions.
The nature of productivity
Work is changing, enabled by hyper-connectivity, mobility, new business models and the increasing number of tools available to increase effectiveness. The computer (and it’s software) is a great labor saving (and maybe in some cases labor creating, but that’s for a different post) device. Connecting it to the Internet made it even more productive. Slate devices and mobile platforms take that one more step. New tools like enterprise video, blogging, microblogging, wiki’s, virtual conferencing platforms, etc. continue to evolve and change work patterns. The shift from file based collaboration to people based collaboration is starting to have it’s impact on productivity. The availability of content / media distributed on the Internet to these new devices not only makes managing media consumption easier but also fundamentally changes the way the media is used. Mobility extends productivity to a new level (and to new places).
Multifaceted business models
Connectivity creates the ability to separate value points in a business model. Historically business exchange for value was very straight forward, you had a product of value and you sold that product to someone for something else of value, it was generally one to one. Through the Internet this is changing and getting more complex. A simple example, you could product a good and offer it up to customers for free, instead getting your value through a relationship with another business that pays you for displaying its ads along with your product. The customer gets value from you, you get value from another source for providing value to the customer. Hyper-connectivity opens this up to ever increasing complex possibilities and the value moves around in the network to different nodes. Freemium business models operate a multifaceted business model, the free product from vendor 1 has value to a customer but vendor 1 gets it’s value from vendor 2 (ads) and vendor 1 also gets value from converted premium customers in a more traditional 1:1 model.
Necessity driven innovation
This is a fairly simple concept, innovations happen to overcome hardships or problems. If you have more hardship in theory it should drive more innovation, in fact it should drive disruptive innovation (see this post for a definition of disruptive versus continuous innovation) since the need is great and overcoming the problem is hard. In the past though, most disruptive innovation occurred in the most developed places, they simply had better and more available resources to apply to the problem. Today though the Internet among other things is starting to change that. If necessity does drive disruptive innovation and the resources to overcome adversity is available then wouldn’t it be more likely that innovation would come from the places that need the solution the most? It follows then that there should be a shift and that more disruptive innovation should come from developing countries where there is a greater need for the innovation. In fact technology, which is available in increasing quantities to emerging nations, would combine with their extreme market pressures to accelerate the rate of innovation. Hyper-connectivity opens up the global marketplace to these disruptions as well. And business model innovations, product / service innovations started in emerging nations would spread rapidly to developed countries thanks to the network effect.
I’ve written quite a lot on enterprise mobility and the fact that workers are leveraging the explosion of new technologies to work whenever and wherever they choose. Real time ubiquitous connectivity is changing how people work and how businesses get things done. Take a look at the other mobile posts for more background on this trend.
Other radical advances:
There are a few other technology developments that support the trends above but are not standalone trends themselves, nanotechnology and artificial intelligence (AI) for example. The number and type of these technologies will accelerate and grow as the key trends effect their changes on business.
Take these trends together and I believe you start to see a picture of the post-industrial enterprise. This enterprise will have new leadership models, new ways of creating value, new work models, apply and consume technology in new and innovative ways, and operate in a highly connected, networked world. These trends themselves are evolving and will continue to change at accelerating rates. Over the next few months I’ll try to take a deeper look at them and the output that we’re likely to see as businesses and technology continue to evolve.
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