Jake

The Fourth Industrial Revolution

Jake Hsu, Symbio CEO on The Fourth Industrial Revolution. Enjoy!

“I believe the auto industry will change more in the next 5 to 10 years than it has in the last 50.”
– Mary Barra , Chief Executive Officer and Chairman of General Motors, USA 

Open the business section of your local newspaper, or peruse your bookstore’s business section or magazine rack and what you’ll find is a plethora of titles predicting a digital apocalypse. Disruption! Obsolescence! Revolution!  If you believe the headlines, it would seem Google, Apple, and Facebook are going to be competing in every industry. It would seem that every company that is an industry leader today is already a zombie/dinosaur/roadkill, and they are helpless to defend themselves against the onslaught of innovative startups run by people smarter and younger than you.

The reality is far from bleak. The binary “you’re either a hero or loser” hyperbole (or as startups like to call the “Winner Take All” economy) assumes that traditional companies are deer’s in headlights, frozen by the “Innovator’s Dilemma”, organizationally incapable of change or transformation. But the modern organization can change, and that is the focus of this article – how to thrive in the rise of the Fourth Industrial Revolution.

What’s Changed?
There have been many companies that have succeeded and thrived in previous industrial revolutions. Of course, it requires a change in mindset, technique, and talent composition across the entire organization. But before we can get to the prescription for success, we need to understand the underlying symptoms and root causes of the Fourth Industrial Revolution.

It is clear that the pace of change is speeding up everywhere in the world.  Uncertainty continues to increase and the outlook is only getting murkier.  This uncertainty has come about because complexity has increased across all business drivers.  In a world where all your products, services, value chain networks, and customer touchpoints are going to a multi-device, multi-form factor, multi-platform, and multi-lingual environment, the matrix of management activities can be bewildering.

Competition has also increased. It can come from anywhere in the world.  The competitive moats that companies and industries have spent decades building have suddenly dried up, and competition from new entrants you would have never considered, and from insurgents in your own value chain networks, only makes the business outlook darker.  What exactly are the drivers of change in this wave of digital disruption?

Perfect Information Online: At the end of 2015, YouTube reported that more than 500 hours of new video content is uploaded onto YouTube every minute.  We are nearing a state where all the world’s information and media is online.  And as a result, we are moving to a world where we have perfect information.  Those industries that have built their competitive moats based on hoarding and keeping data proprietary have seen those advantages melt away.  The rise of perfect information online has also shifted power away from companies to the consumer since virtually any competing product is only a click away, and products and services can be easily compared during online shopping.  Companies can’t keep making crappy products and use things like distribution channels to lock out competition anymore. Only companies with great products and services can win.

Hardware Revolution: There has been a revolution underway in hardware that is accelerating now. Driven by the rise of low-cost global manufacturing, plunging costs of standardized components, maturation of scaled production processes, and better understanding of hardware and software integration, the ability to quickly design, build, and launch creative, low-cost hardware devices is easier than ever before. Marry the hardware production capabilities with the rise of “sensorfication” and you have a potent cocktail for digital disruption. When we turn “hard things” into hardware by embedding sensors into them, we will be creating a whole new paradigm for computing where literally everything becomes a connected device.

Cloud Computing: The cloud is not really about infrastructure outsourcing, although some of the early wins were about on-demand, utility computing power.  The real power of the cloud is that it’s going to be where computing intelligence sits.  When people talk about Artificial Intelligence, they are talking about the cloud since that’s where the processing horsepower will reside.  Looking at the cloud from another perspective, it enables everyone to have a supercomputer in their pocket today.  Someday soon when all the hard things in the world become hardware, the cloud will be the intelligence powering all those connected devices.

Your Innovation Strategy
Most traditional organizations today are run to minimize risk.  They buy into the myth of certainty – that the future can be planned and road mapped.  The narrative of the omniscient executive leadership that can look into a crystal ball and navigate the future with precision is simply a fairy tale with the complexity and accelerating change of today’s business environment.  So how are the Googles, Apples, and Facebooks, and thousands of innovative startups of the world able to succeed in this environment while those traditional companies that are bigger, better resourced, and better capitalized are left standing on the sidelines?

The secret truth is that none of them know any better than the traditional industry what is going to happen.  What makes those companies better able to adapt is their ability to quickly synthesize ideas and information, organize quickly, experiment, and learn from their findings.  In the time that most traditional organizations have even completed a market research plan or a business requirements document, most modern technology companies have already run multiple “sprints” where they have tried some concepts and tested them out with actual users and learned and adapted from their findings.  It’s the difference between taking an “IT” approach versus an “R&D” approach.  An IT approach starts with a well documented, well deliberated plan, and then they go implement that plan.  An R&D approach starts with a set of hypotheses and concepts and they start building quick-and-dirty prototypes that can be tested in front of actual users with the assumption that they will adapt and evolve from their learnings.

For companies that want to adapt to this world of R&D, there are three prescriptions that every organization needs to master.

Agile Organization.  Agile has been a core methodology in the software development world for decades now.  But the key concepts of Agile are now being successfully applied to all facets of management, from strategy and planning, to design of products and services, and even into back office support operations. There are 10 key concepts of Agile that are now being applied across all functions of an organization:

  1. Active user involvement – build with your target audience in the process
  2. Empowered teams – let those closest to the process make decisions
  3. Requirements evolve but the timescale is fixed
  4. Capture requirements at a high-level
  5. Develop small, incremental releases and iterate
  6. Focus on frequent delivery of products and services
  7. Complete each feature before moving on to the next
  8. Apply the 80/20 rule
  9. Integrate testing throughout the project lifecycle – test early and often
  10. Collaboration and cooperation amongst all stakeholders is essential

Agile organizations are built around experiments.  They utilize iterative cycles built around a series of programs to build, measure, and learn from actual users.  In a world where users tastes continually change, it’s important to get new products, services, and customer experience touchpoints into the hands of actual targets users/consumers early and often.  As a result, Agile organizations don’t build-up huge overhead trying to read the tea leaves.  They build things to quickly get feedback from the market.  A key best practice of many Agile organizations is that they are “asset-light” teams, often using lots of external partners, suppliers, and even customers to execute on their learning loops.

Platformization.  A big difference between successful technology companies versus traditional companies is having a platform strategy.  Every technology company looks at its products and services as potential platforms on which they can create new products and services on top of.  More importantly, they try to find ways to make it easy for external partners and 3rd party developers to also build on top of their platforms.  These companies understand that having others companies products and services flow through their systems only makes their own systems more valuable.  Facebook is the biggest media company in the world now, yet it doesn’t create any of its own content.  Uber is the world’s largest taxi company, yet it owns no taxis.  Alibaba is the world’s largest retailer yet does not have any inventory.  These are companies with successful platforms.  Every executive should be thinking about possible computing platforms or user networks within their organizations that could potentially become a platform for others to build on top of.

Automation Mindset.  In a world where speed beats scale, cost advantages, and resourcing capacity, how does an organization speed up it’s project lifecycle?  Most companies mistakenly think to just try to hire a lot more people. And by the way, try to hire “smarter” people, say the executives.  However, the real sustainable speed accelerator comes from Automation.  Computers will always execute tasks faster than humans, and do it vastly cheaper.  One of the poorly understood secrets of successful digital companies is their ability to weave automation into every aspect of their organization.

Much like Agile, Automation began as a software development/testing strategy, but is now being adapted to all facets of an organization.  For example, a large global bank was able to cut their release cycles down from 6 months to just 9 days by moving to an automation-heavy QA process.  When most of their QA cycle was done manually, ti really didn’t matter that their crack development teams could crank out new features every two weeks since it would take the bank 6 months to manually regression test those features against existing systems.  By moving to an Automation strategy, they are now able to test early and test often with the press of a button.  When embarking on an Automation journey, organize your teams so that Automation is a dedicated, on-going core program, giving its members a seat at the planning table.  Automation is not a one-off activity and you should view it as a strategic enabler of success.  Start with routine processes, like test regression or business analytics and work your way up the organization stack from there.

Conclusion
The narrative of traditional companies being doomed has been vastly overplayed.  But success also requires forward-thinking organizations to embrace an “R&D” approach to developing new digital services.  Adopting many of the same mindsets and techniques from technology companies will enable traditional companies to surf each new wave of change that the Fourth Industrial Revolution will bring.  It’s not about having a bigger crystal ball than everyone else.  It’s about being able to quickly synthesize new information and ideas, mobilize smart teams, experiment, and quickly adapt and learn from the iterations.