Large corporations have perfected six sigmas, quarterly budget management, product & roadmap management, off-shoring, evolutionary ROI-based innovation, etc. The best executives are those that can bring a business from $10M to $1B. Sales is king. Accountants and lawyers are lords. Business developers are tolerated. Developers and designers are peasants.
Unfortunately large businesses no longer are as successful as they used to be. Fortune and Forbes are kicking top companies ever faster of their lists.
Why do large companies stop being successful?
The big reason is because corporations can no longer take risks. Wallstreet in its efforts to maximise short-term profits has weakened corporations to the point that is has never been easier for startups to disrupt them. Telecom is slowly disappearing from the list of most valuable companies. Energy and financial services have weakened. In contrast technology has become more important with Apple, Google and Microsoft taking number 1, 2 and 5 respectively. Observant analysts will say that market valuation is different from revenue and profit generation but stocks normally reflect the future, not the present. Most of the top companies are in legally protected markets, e.g. energy, healthcare, telecom, etc. or are in industries that have high barriers of entry due to high capital requirements, e.g. mining, industrial, car manufacturers, etc. This means that they will take some time to be impacted. However telecom is a good example of a market where disruptive innovation is fast eliminating market value and shortly revenues/profits. Market value is now being created by companies that have unfair technology advantages. For the moment those technology advantages have been used to compete with one another. This is about to change. Take Google as an example. It is heavily investing in self-driven cars, networking infrastructure, etc. The result will be that logistics and telecom will be heavily impacted. Apple and Google are competing every day more with telecom operators. Apple, Google and Amazon are taking on the entertainment industry. Google, Tesla, etc. are disrupting car companies.
Why is this important?
The rules of competition are changing. Your worst competitor is no longer the factory next door but a disruptive innovator that makes your industry irrelevant.
How is management impacted?
Management can be experts in producing stamps that customers want and according to highly optimised processes however this is all irrelevant if a competitor makes email servers. Substitute stamps by SMS/calls, carbon-driven cars, DVDs/Blueray, etc.
Chief Disruption/Innovation Officer
What companies need is to focus both on growing their existing business as well as making it irrelevant. Sooner than later somebody will do it so it better be your team than a previously unknown competitor. Also instead of just looking to cannibalising your business, you should look for the next big thing. This is why you need a chief disruption or innovation officer who’s task it is to build scalable new businesses that go from zero to $10M. Most existing executives have never started a new business. They have no idea what it involves. Six sigma and roadmaps are irrelevant as long as you haven’t found a scalable business. The good news is that scaling a new business from $10m to $1b goes a lot faster now than it used to be. Google, Amazon, etc. don’t need a whole army of salespeople and lots of capital investment to double their revenue. Software scales and more and more software is redefining everything.
When you read this blog in five years from now: Vodafone, Microsoft, HP, Oracle, Facebook, Google, Apple, etc. will probably remember you of Nokia phones and Kodak cameras. Large corporations that during some of their life time were dominating a market and due to disruptive technology lost their dominance. It is very likely that many of the above mentioned companies will be mere shadows of what they are today. PCs will be sharply reduced. Mobile phones as well. Browsers as well. Social networking. Databases.
There will be a new set of technologies that will be hot. A new set of companies that will be temporarily or permanently overvalued.
So is this how it is going to be? Giants come and go? For many unfortunately yes. Others will reinvent themselves better. The most likely companies to win will actually be the conglomerates that don’t get associated with one product family. Either they reinvent their product portfolio, e.g. IBM, GE & Cisco, or they use different brands and milk old products while buying/building new once, e.g. EMC/VMWare/Pivotal. One brand with many competiting businesses seems to be the better strategy for now. However having a disruptive innovator brand like GE appliances ‘ FirstBuild is my bet for long term success. No longer can marketing define better what customers want then the actual customers. So why not let customers innovate together with you. The only thing that FirstBuild is missing is a share of success scheme. Why would I contribute to building a successful product for GE if I am not getting better of it. Ideally “community karma points” for helping to build the next success could result in a revenue share when successful. Sort of like getting stock options but instead of owning a piece of a company, you own part of a product future success. You should not have to work for the company to benefit from helping it. I am calling the idea Crowd pRoduct stOck optIons or CROI. You give the crowd a return on investing in your product innovation…
Hardware is a volume business in which only a few can make real money. Either through royalties, e.g. ARM, or market dominance, e.g. Intel PCs. Samsung, HP, Dell, Lenovo, Huawei, Xiaomi, Asus, Acer, etc. ‘s hardware businesses are all in a very dangerous position. Their products no longer are differentiated through hardware features. Price reductions have become a race to the bottom in which there will be no winners. Google controls their key money maker.
IoT presents a new beginning in which hardware, software, services, cloud, data, etc. can become the secret ingredients that will make new billions for some. However I have had access to the IoT strategies of several and although I can not publicly share them, several big names are not doing great. In IoT you can do two things, you can try to become the new Apple or become a magnet for others to make money on top of your solution. Too many think they have Apple qualities but the truth is they don’t. If you are a senior executive at a big hardware empire that is starting to cripple, why don’t you reach out and discuss potential alternative strategies.
You only sell life insurance one time, right? Wrong.
What would happen if you made it possible for your life insurance to become cheaper every month and even turn it into an addictive habit?
At the moment insurance companies do a thorough check when you contract a life insurance but afterwards as long as you pay the premiums the insurance company does not want to bother you again.
What would happen if they did? If you would agree with them to share your habits in exchange for them lowering the price of your insurance with optional extra insurances for sales when you need them.
Let’s explain this with an example. The risk of dying increases because of risky behaviour, abusive usage of mind controlling products like drugs and alcohol, stress, bad eating habits, lack of sleep, lack of physical exercise, driving irresponsibly, travelling to hostile places like war zones or unsafe areas in cities, etc. What if you start with an average risk profile and every time you do exercise, sleep more than 8 hours, go to see friends, etc. you earn points and every time you drive too fast, you go to a fast food chain, you get stressed, you did not go and visit family or friends in some time, you go paragliding, etc. you loose points. Based on your monthly score, your insurance goes up or down. There will be moments of time when you are weak. Your insurance might want to make you an offer, e.g. if you leave this fast food chain now and go to the salad bar around the corner than they will give you a 5% discount or a free fruit salad for desert. Your insurance will also be able to help you out when you need to, e.g. you are in a car shop would you like to have some custom insurance offer based on your behaviour and pay based on how much and how you drive your car? Do you want to be covered for an accident while skiing? Since you hardly cook at home we suggest that your risk of fire is greatly reduced so your house insurance will be cheaper but since you are hardly at home we suggest to install one of the following alarm systems to lower your risk of burglary otherwise we need to adjust for this risk…
All this was not technologically possible but thanks to innovations in Internet of Things, mobile sensors, Big Data, Cloud, wearables, etc. these new models can be implemented or will at least shortly be possible.
Of course there are legal and ethical questions to resolve and questions about if consumers want to give away more privacy in exchange for cost reductions. However whoever makes the first addictive insurance is very likely to lead in the coming years. Especially if personal weaknesses and inside knowledge can be translated into extra revenues. Perhaps we will see the first free life insurance for healthy active people in exchange for real-time information about your life and opportunities for sales when you are weak or need some other insurance.
Every time there is a new technological trend, you get market researchers asking questions to CxOs about what they think about the trend and afterwards selling the results for lots of money to whomever wants to buy the report. However if you collect reports like this and start comparing them you will see a clear trend. To the question, do you fully understand the capabilities of the new trend, lots of people will say no. To the question, what part of your business will be impacted, you will see revenue, cost, efficiency and innovation being mentioned. To the question, where are you with projects regarding the new trend, the answer is planning or evaluating, prototyping at most.
If you see this pattern, then DON’T buy the report. CxOs are not magical people that automagically understand new trends and will tell the industry what to do. They actually have no clue.
In 2010, would you rather have had the Oracle CTO set your cloud strategy or the Amazon CTO? Would you rather have the Oracle CTO define your CRM strategy or Salesforce? Oracle vs Cloudera or Spark for Big Data? Oracle vs Docker? Oracle vs Golang? Your answer should be Oracle denied the existence of cloud, SaaS, Big Data, containers, more productive programming languages, etc. until the market obliged them to embrace them. So if Oracle, which is supposed to be a leader in enterprise software, does not understand the latest IT trends, why do you think that a CTO from a telecom, retailer, airline company, etc. would better understand these IT innovations and their impact on business? The truth is that none of them does. Not even Gartner does. Gartner and others make a summary of what is happening in the industry after the first battles have been fought. They depend on collective group thinking to make a “magic quadrant” or a summary of where the herd is moving. However the real innovators already know since one to three years ahead if something major is about to happen and they have prepared solutions for this new reality. By the time the majority has realized there is a problem or opportunity, the visionary innovators already have a solution in the market. If you want to know the future you need to follow the smart elite and read what they are very excited about.
Devops have been singing the songs of Docker since early to mid 2014. Smart engineers looked at what the problems the innovators were having and focused on solving them. The end result is that Docker orchestration started fast replacing PaaS before anybody in a corporate office heard about Docker in the first place.
Current trends are Hadoop being replaced by Spark being replaced by Flink. Java is uncool, Golang and Rust are the future. Bitcoin’s blockchain will replace lots of centrally managed markets.
So if a Gartner, Accenture or Siemens tell you what IoT will look like then be careful because you don’t know what you don’t know. You should look for visions from people that don’t focus on what “the industry thinks” but instead ask the smart elite how they would solve your industry’s main problems. Chances are they create a blue ocean strategy if you listen to them. Your competitors will instead all be focusing on what their regular supplier offers which is often the same solution as five years back after it has been cloud-washed, big-data-washed, IoT-washed, etc. Do you agree mister Oracle?
The oil price crashed. All of a sudden the industry needs to dramatically reduce costs if it wants to stay profitable. The oil and gas industry is one of the few industries that has created bespoke solutions for every well. Part of the explanation for this is that each oil and gas platform behaves differently. Drilling and pumping oil is not a predictable business. There can be bubbles, obstructions, lots of oil, variable pressure, etc.
However the bigger explanation is that in a highly profitable business, IT costs were just a drop in the ocean and it was a lot more profitable to focus on maximizing output then optimizing costs. This reality has changed with the oil prices falling extremely low and shale gas creating oversupply for the first time in history.
How can open source help the energy industry?
At this moment each IT solution in oil and gas is bespoke. By open sourcing a next-generation oil and gas management platform, adoption will be a lot higher than any proprietary solution. If the solution focuses on the communalities more than the differences and abstracts complexities then 80% of the average use cases can easily be covered. The remaining 20% will still be bespoke but if an automated change management solution is put in place then automatic upgrades and rollbacks will reduce costs of the bespoke parts substantially as well.
Looking for a name for this new platform? Let’s call it EnergyStack for the moment. Openstack is the open source private cloud technology that is currently revolutionizing the IT landscape. Although EnergyStack is probably going to get born and managed in a different way, Openstack is a good example of how an industry has been revolutionized and solutions of equal quality have been brought to market at a factor of a tenth of the price of the incumbent solution.
How to kickoff EnergyStack?
Incumbent IT players will be the once that get commoditized by an open source energy management platform, for which they are not the right players to push the idea. The ideal players are challengers that join a couple of early adopters. The main problem is finding financing because in an economically challenging moment investing to save costs is not the strength of a chief financial officer that manages capex on a quarterly basis. So anybody that has a good idea, don’t hesitate to share it.
Hacker news had the following article at the top of their list: the wolf of wall tweet. It talks about algorihms that used a rumor and the options market to make millions in seconds. This article refers to Flash Boys as well, a famous book about high frequency trading. However the big news is that whatever the article talks about as being magical is not magical at all, you can do a lot more and you will read about examples later on.
How does tweet option buying work?
Advances in neural networking have led to Deep Belief Networks (DBN). DBN in some cases are able to do natural language recognition and other types of recognition better than human beings, or at least a lot faster. So a DBN that is trained to read from the Twitter firehose and scan lots of news articles will beat humans in speed. Add an interface to options trading and you have what the article describes.
Taking it to the next level – knowing the future of the economy
What if you would know economical facts with a high degree of certainty before anybody else, and not sub seconds but hours, days, weeks, even months before anybody else. This is what Internet of Things combined with DBNs and automated trading can give you. How? Imagine you are into trading car stocks. Via computer vision you are able to count events. There are lots of public street cameras that stream in real-time data about what is happening on the roads. Humans look at them to see if there is a lot of traffic. Computers can use them to recognize and count events. So what would happen if strategically picked street cameras get hooked up to DBNs, you would be able to count how many trucks leave a factory with cars. You would be able to correlate these events month after month with the revenue figures of car manufacturers and then correlate with their stock value. The car manufacturers will at the end of a quarter announce their profits and a key aspect of their success depends on how many cars where sold. If you would know weeks or a month in advance that the volumes of cars coming out of a factory have picked up dramatically then you know the stock value will go up. If you would buy minutes before the figures come out a large quantity of car stocks then trading algorithms will pick up on this and will make you loose lots of the potential profit. However if you can spread purchase orders over weeks in small quantities then HFT can not detect your strategy.
Street cams is only the beginning
Using street cams would only be the beginning. Add weather sensors and lots of other sensors and you can do magic at large scale and would have a magical dashboard of the real economy before anybody else. If you are interested in this subject be sure to reach out on LinkedIn…