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

haydn@cogenuity.com