After a semi sabbatical summer; semi in the fact that I continued to actively follow the industry, its business customers and attempt to understand implications; sabbatical in the sense that I didn’t try to react to each announcement or event individually; instead I was looking for a bigger picture to form. This is the first part of three posts breaking the picture down into the natural divisions of ‘causes’; ‘responses’; and ‘good practice’.
The big picture this far into 2015 is one of strategic change in the face of increasingly obvious disruption to ‘Business as usual’. Current IT industry leaders, together with major global enterprises in multiple sectors have, and are, announcing new goals with new enabling partnerships frequently of an unlikely nature. Everywhere, in every sector, are new startups creating the disruption in previously well-defined market sectors forcing established leaders to react. (see footnote 2).
Any successful competitive positioning has to understand what is the root causes enabling, and driving, this disruption, and how can my business successfully harness them. But can this question be answered in an understandable manner?
In aggregate the totality of these changes to cover is too much to absorb, and too ambitious for a single blog piece! But there is a relatively simple set of foundations forming the starting point to building a comprehensive understanding and that’s the starting point for this blog. Once again as with the blogging format used last winter to explain emerging IoT from simple concepts through to more complex issues and deployments there will be a linked series of blogs, alternating each week between the Technology enablers, and the Business drivers. But to start with a surprisingly clear big picture, or high level, summary of what is at the heart of this change; and in a word the answer is de-centralization.
De-centralization; The transfer of decision making power and assignment of accountability and responsibility for results. It is accompanied by delegation of commensurate authority to individuals or units at all levels of an organization even those far removed from headquarters or other centers of power.
Source; the business dictionary.
Every aspect of the world, including politics, is now showing increasing sign of de-centralization arising from the low cost technology empowerment of individuals to participate in powerful informed manner. There are two important core technology elements that have brought this about;
A redefinition of Moore’s Law in 2015 would state that every eighteen months the cost of a processor of the same power will halve; Similarly redefining the lesser known Metcalf’s Law from the 1980s LAN era would state that the number of devices that can interact with networked resources is the logarithmic value multiplier rather than the original Laws focus on connectivity for application transactions.
Combine those two elements; add simplicity in usability, the increasing technology awareness and capability of the population as a whole, and the result is to see the traditional barriers, (high levels of investment, substantial support costs, and expensive training) that have prevented de-centralization all start to dissolve. (It is worth noting that both laws in their original forms actually underpinned, and supported, the path of technology towards bigger, more expensive, centralized enterprise computing using client-server in support of the then business imperatives of Back Office transformation with IT and ERP).
This is a level of disruption in the ownership, and use, of, resources to both create, and satisfy, market demands akin to the scale, though exactly in the opposite direction, of the shift in the nineteen twenties and thirties into mass production that made many products affordable. However massive investment in expensive resources to create scale certainly limited the numbers of enterprises that could compete for, and remain in control of, the new markets. The resulting affordability of many items led to the creation, or enlargement, of many markets; a popular example is the automotive industry where reducing prices exploded the overall size of the market, both in numbers of buyers and in total revenues, but diminished the numbers of automotive manufacturers.
Nearly one hundred years later the basis for many business models arising from huge centralized investments that restrict market change and competitive entry is being destroyed. Today huge resources in computing, marketing, or any aspect of business are available as a hosted service allowing new players to enter almost any market with an innovative disruptive approach. De-centralization also allows a new competitor to assemble exactly the resources required…. with little capital investment.
The side effects of affordable mass manufacturing for consumers (buyers) is increased standardization in products usually with a reduction in number of suppliers; for the manufacturer the challenge is constant price/margin erosion as price/cost is the basis of the competitive element. Whilst it is true that many business models are built around business-to-business operations, as Economists are quick to point out the end point of all business lies in consumer purchases.
Affluent consumers are seeking individuality and are prepared to pay for it, suddenly making small and personal an important part of any new product, or markets. Competitive choice and differentiation becomes as, or even more, important than price; a welcome move in re-establishing margins for successful enterprises who master the new Digital Business game.
When consumer (buyer) choice is no longer limited to locality, or a handful of previously dominate large companies; and resources are no longer expensive constraints to new competitive entrants, or products; the result is disruption to the majority of business activities. Moreover this is a disruption on the same scale as the introduction of massive scale and resources that signaled the destruction of localized and craft production based markets one hundred years ago. The very revolution that created most of today’s successful global enterprises!
The realization that Digital Business is about adding a new online capability to your existing business model, but is the disruptive recreation of your industry sector is dawning rapidly in Boardrooms as sector news and financial results are the cause of serious evaluation.
- Part two of this blog will examine examples of how global Enterprises and startup businesses are creating new markets by using these change factors
- In judging the awards for Constellation Research Connected Enterprise annual Super Nova competition it was extremely noticeable that new hardly known startups dominated the entries submitted by their satisfied customers. In each case the change achieved could truly be described as both innovative and disruptive, whilst the outcomes for the enterprise and its business were remarkable and substantial. See Constellation Connected Enterprise for more details on awards.