We Need To Rethink Innovation For The 21st Century
One of the most interesting things I discuss in my book Mapping Innovation is what I call the new era of innovation, which will create profoundly new technologies, classes of data and business models. It is likely to be the most important shift we’ve seen in at least 50 years and perhaps in a century.
To understand the size of the shift, imagine yourself as the CEO of a Dow component company in 1918. The impacts of the major technological forces that will shape the 20th century are not yet clear, but their capacity for disruption will be so great that your company has only roughly 50% chance of surviving the next decade.
The nascent forces at work today may be just as profound and it’s critically important to begin to explore and understand them because they will shape business models for decades to come. Much like a century ago, it will not be enough to simply wait to see their impact and adapt. If you want to win the future, you have to prepare to shape it — or someone else will.
The New Technologies
The 20th century saw two major waves of innovation. The first, dominated by electricity and internal combustion, revolutionized how we could manipulate the physical world. The second, driven by quantum physics, microbial science and computing, transformed how we could work with the microscopic and the virtual.
The past few decades have been dominated by the digital revolution and it seems like things have been moving very fast, but looks can be deceiving. If you walked into an average 1950s era household, you would see much that you would recognize, including home appliances, a TV and an automobile. On the other hand, if you had to live in a 1900’s era home, with no running water or electricity, you would struggle to survive.
Now we’re entering a new era of innovation that is likely to be far more impactful than the second wave, but perhaps not as much as the first. Much like the computer revolution was built on top of electricity, the new era will use computing to drive advancement in other fields, such as genomics, nanotechnology and robotics to spur innovation in industries like energy, manufacturing and medicine.
This new era has already begun. We are learning to manipulate individual atoms and molecules as well as to work with massive amounts of data and create machines that can do jobs previously thought to be uniquely human. Still, much like our predecessors in 1918, we are unable to fully grasp what the impact will be.
The New Data
In a recent conversation I had with Bernie Meyerson, IBM’s Chief Innovation Officer, I asked him what he was most excited about. Thinking he would talk about the Watson program or quantum computing, I was somewhat surprised that the first thing he mentioned was his company’s joint venture with Maersk to develop a blockchain infrastructure for global trade.
Data used to be backward looking. We would input critical information in a ledger or file, store it in a shelf or a cabinet and take it out when the need arose. Computers allowed us to move data into virtual folders, which helped us clean up our desks considerably, but for the most part we used information in the same way.
Today’s technologies allow us to collect data in real time and apply it to the real world through the use of advanced analytics and predictive modeling. Open data for science is beginning to transform how new discoveries are made, in some cases altering traditional notions of scientific method. This is not just a difference in scale, but a fundamental difference in kind.
These are important developments in and of themselves, but what’s really exciting is the potential to apply new technologies and new data to the creation of completely new business models.
The New Business Models
In 1980, Harvard Professor Michael Porter published Competitive Strategy, which advised firms to drive efficiency by dominating the value chain through maximizing bargaining power with buyers and suppliers, while at the same time minimizing threats from new market entrants and substitute goods. It drove how managers thought about strategy for a generation.
Today, however, we need to compete in a networked world in which the key to competitive advantage is no longer the sum of all efficiencies, but the sum of all connections. Strategy, therefore, must be focused on widening and deepening linkages to access ecosystems of technology, talent and information.
For example, the data services giant Experian traditionally has thrived as a choke point for information, providing valuable analytics and insights about data it collected. Today’s technology, however, is opening up new opportunities for providing customers greater access, control and transparency.
“While complying with data protection laws, we’ve collected data, added value to it through our analytical models and packaged it as a proprietary product,” Barry Libenson, Experian’s Global Chief Information Officer told me. “We are increasingly delivering our data on a more granular level through APIs. That allows our customers to get more use out of the data and opens up new revenue opportunities for us.”
One of the initiatives expands services to everyday consumers, such as an online dispute center and the ability to lock and unlock their credit from their mobile phones, which in today’s online security environment, adds a much needed element of trust. “Anytime we can automate a service for customers, we can improve quality and decrease costs,” Libenson says.
Competing For A World You Can’t See Yet
Let’s return to 1918 and think about what the world looked like then. Electricity and the automobile were gaining ground, but the first major impacts wouldn’t hit till the next decade. Later, secondary technologies, like household appliances, radio communications, highways and shopping malls created further revolutions. Quantum theory was still a decade away.
To the typical executive in 1918, none of this would have made any sense, but these things would unleash a completely different business environment that most firms were ill-equipped to handle. The only Dow components that survive today in any recognizable form are AT&T, B.F. Goodrich, Western Union and Westinghouse — all firms that benefited from the new technology.
Today we can only see a small slice of what the future holds for us. We know that computer architecture, energy sources and manufacturing practices will change dramatically and we can see rough outlines of the shift already. What we can’t see is the secondary effects — the technologies and business models that will built on top of base technologies — that will impact today’s industries.
No newspaperman looked at a mainframe computer and saw social media or a website, just like no shop owner looked at a “horseless carriage” and saw a supermarket. They were too busy trying to serve their customers and beat their competitors, so missed the growing threat that would disrupt their businesses.
That’s why today it is crucially important to set aside resources to explore, experiment and to tackle grand challenges so that you can begin to understand and ultimately harness the forces that will shape your industry. It’s better to prepare than adapt because, by the time you see the need to adapt, it may already be too late.
An earlier version of this article first appeared in Inc.com