Why Large Enterprises Are Becoming The Center Of Innovation Once Again
Over the past few decades, we’ve come to glamorize the garage (or WeWork) startup. These days, parents take the same pride telling their neighbors that their progeny have gone to work for some fledgling enterprise that used to be reserved for a job at IBM or General Electric. Today’s celebrity CEOs tend to be founders.
We can expect that to change in the years to come. The end of Moore’s law will mean that the technologies of the future will be far more complex, less understood and more capital intensive. Large, well resourced organizations, including government entities, are much better positioned to develop these technologies than startups are.
However, this will be no return to the age of robber barons. One thing that past decades have taught us is that walled gardens are a fool’s errand and cloud computing has made them even less tenable. So it’s becoming increasingly important for large enterprises to partner with entrepreneurs and vice versa. Collaboration is quickly becoming a key competitive advantage.
A New Era Of Innovation
Over the past few decades, we’ve been in the midst of a digital revolution. Every few years, a new generation of chips would emerge, opening up new possibilities. Firms would scramble to leverage these new, more powerful technologies by creating new applications, identifying new markets and coming up with new business models.
This state of affairs favored small, agile firms that could move product ideas to market quickly, through a process of rapid iteration. Product cycles became incredibly short and, rather than spending a lot of time and effort optimizing before the product was even out the door, the policy of perpetual beta became the norm.
The myth of Silicon Valley is that this is the best, if not the only, way to develop technology. The truth is that the Silicon Valley model of venture funded entrepreneurship is particularly suited to certain kinds of technologies, such as software and consumer gadgets, that can be rapidly prototyped and iterated.
With Moore’s law ending, there will no longer be a consistent stream of more powerful chips to fuel the digital revolution. We’ll have to learn to use new computing architectures, such as quantum computing and neuromorphic chips and apply them to new technologies, such as genomics, materials and robotics (including AI).
Make no mistake, we are entering a new era of innovation and we will need to adapt. You simply can’t rapidly iterate a quantum computer, a lifesaving cure or a revolutionary new material. We’re going to have to learn to think more in terms of grand challenges and less in terms of hackathons.
Implementation On A Massive Scale
We often think of innovation as a single event, but the truth is that it’s a process of discovery, engineering and transformation. With respect to digital technologies, we have long past the major discovery phase and are nearing the end of the major engineering phase, yet we still have quite a bit of transformation in front of us, as existing technologies are implemented in the marketplace.
It is the scale of large organizations that makes them uniquely positioned for the transformative phase. To understand how, take a look at Walmart. In recent months, the company has announced two major technology initiatives. One, utilizes blockchain to improve food safety and another uses VR to train associates in stores.
Notice that neither of these initiatives entails much technological wizardry. In fact, Walmart isn’t developing technology at all, but using suppliers to implement it. However, both are immensely transformative. For Blockchain, Walmart is not only adopting the technology, but also pushing suppliers to do so as well. For VR, it is taking a futuristic technology mainstream.
I believe that many of the headlines we will see over the next year will be similar in nature. With advancement in digital technology slowing to a crawl, there is still great potential to implement emerging applications on a truly massive scale. That’s no small thing. It will have enormous impacts on how we live and work.
The API Economy
Cloud computing was initially a disruptive technology. Instead of incurring significant capital costs to buy servers and paying consultants high fees to install sophisticated software packages, anybody with an internet connection could access the computing resources of a major enterprise and compete on something like an even playing field.
Yet more recently, the big guys have learned how to leverage the cloud to improve their business as well. “We’ve learned that the elasticity of the cloud benefits large enterprises like Experian,” Barry Libenson, the company’s CIO told me. “We don’t want to build the church for Easter Sunday, so having nearly unlimited resources on-demand is a real advantage.”
“We’re also finding that our customers will pay for access to our data through APIs and that’s opening up new opportunities for us as a business,” he continues. “Large enterprises are uniquely positioned to capitalize off of this new API economy, because they’ve been building resources, in some cases for decades, and now they have the means to distribute these assets through the cloud and profit from them.”
There’s also a comprehensive cloud ecosystem that’s emerged that’s made it easier for large firms to adapt to the cloud. Firms like Apigee and Mulesoft help companies set up and manage APIs, while the rise of no-code platforms allow front-line managers with little or no technical expertise to design their own apps and unlock value in an organization’s data assets.
What’s interesting is that the cloud has not benefited large firms at the expense of small ones. In fact, just the opposite. The cloud allows small firms to market and distribute software to big customers more easily and access their data to build their own applications.
Moving From Disruption To Collaboration
The mantra of the digital age has been disruption. Because of the stability, low-cost and ubiquity of digital technology, a few guys in a garage or co-working space could invent a product or service that would challenge major multinational firms. With venture capital relatively cheap and accessible, they could scale their business quickly and become giants themselves.
The future will look different than the past, because the technologies that will power advancement will be far less understood, much more expensive to develop and not amenable to rapid prototyping or iteration. They will largely exist in physical, rather than virtual, environments and will be subject to all of the inherent messiness and regulation of the real world.
This new environment will be much more favorable to large enterprises than the digital revolution was, but also offers fantastic opportunities for entrepreneurs. However, these will involve collaborating with large enterprises to power new business models rather than seeking to disrupt them.
The next few decades are much more likely to look like the 1950s and ’60s than they will the 90s or the aughts. Technology will largely be driven by large enterprises who have the resources to spend years — and sometimes decades — to develop new technology. Small firms and entrepreneurs, for their part, will find great opportunities helping them along.
In all cases, we need to shift from a mindset of disruption to collaboration. The technologies of the future will be far too complex and interdependent for anyone to go it alone.
An earlier version of this article first appeared on Inc.com
Previously published at www.digitaltonto.com.