These 4 Paradigm Shifts Will Define The Next Decade

Photo by Kid Circus on Unsplash

The statistician George Box pointed out that “all models are wrong, but some are useful.” He meant that we create models as simplified representations of reality. They are merely tools and should never be mistaken for reality itself. Unfortunately, that’s much easier to say than it is to practice.

All too often, models take on the illusion of reality. We are trained, first at school and then on the job, to use models to make decisions. Most of the time the models are close enough to reality that we don’t really notice the discrepancy. Other times we notice that the model is off, but we dismiss it an unusual case or anomaly.

Yet the real world is always changing. So models tend to get more wrong — and hence less useful — over time. Eventually, the once-useful models become misleading and we undergo a paradigm shift. Today, as we experience a period of enormous change, we need to unlearn old models and replace them with new ones. They too will be wrong, but hopefully useful.

1. From Value Chains To Ecosystems

The dominant view of strategy in the 20th century was based on Michael Porter’s ideas about competitive advantage. In essence, he argued that the key to long-term success was to dominate the value chain by maximizing bargaining power among suppliers, customers, new market entrants and substitute goods.

Yet markets today are much faster, more interconnected and more complex than they were when Porter formulated his ideas about competitive advantage. In a fast moving information economy, firms increasingly depend on ecosystems to compete. That drastically changes the game.

Ecosystems are nonlinear and complex. Power emanates from the center instead of at the top of a value chain. You move to the center by connecting out. In a networked-driven world you need to continually widen and deepen links to other stakeholders within the ecosystem. That’s how you gain access to resources like talent, technology and information.

Consider the mobility revolution that is disrupting the auto industry. In an earlier age, the auto giants would have sought to use their market clout to dominate nascent players in an attempt to preserve their position. Now however, they are…