Apple fruit

Throughout the year I will continue to blog about trends I see in innovation. Here’s a few of them I saw today in a Washington Post article, and how they’ll impact the business landscape in the months to come. Do you agree?

1. Strategy and entrepreneurship will have ever-greater interdependence. A trend I’ve been watching for some time is the tendency for what we used to put in the “strategy” bucket to converge with what we used to call “entrepreneurship.” With companies needing to continuously reinvent themselves and innovation becoming the watchword for success, practices formerly associated with entrepreneurship are going mainstream; companies will ignore the constant renewal of their advantages at their peril. This changes the nature of innovation. Many companies will maintain their competitiveness by acquiring small, entrepreneurial firms in new markets where building competencies themselves would simply take too long. Companies are finding that they need to be innovative just to keep their core businesses relevant. Berlitz is an interesting case in point. The company had a rather tired, inflexible business model and was being beaten by organizations such as Rosetta Stone at capturing the imagination (and money) of people who needed language training. The company’s new strategy is to become more innovative and more flexible, and to use new technologies to make possible services that never existed before. For instance, Berlitz can now cost-effectively offer Arabic lessons by electronically creating classes, where before classes weren’t practical, because not enough Arabic-seeking students were physically near one another.

2. Access to assets will be replacing ownership of assets. When times are uncertain, the last thing you want to do is make fixed-amount commitments to specific assets and capabilities. Moreover, often we don’t really need to own an asset to meet our needs. For example, most of us need a chainsaw very infrequently (let’s hope!). So why buy one, if you can borrow it just for one project? From the car-rental service Zipcar to couch-sharing sites like airbnb and the cloud services available from Amazon, we can have just-in-time access to the outputs that goods and services provide, rather than actually owning them. The same applies to people. More and more real work is being done by people on a freelance or part-time basis. The fundamental driver is that in uncertain times you preserve your flexibility by not owning a lot of assets. This will be a boon to companies like Amazon (which can provide computing power on demand) or Accenture (which can get you a change management team that will go away when its job is done). It will upend the business of organizations that depend on selling services and goods rather than leasing them.

3. The tradeoff between reach and richness will continually diminish. It is a classic truth of information technology that for a message to reach a lot of people, it has to be stripped of a great deal of rich contextual information. Thus a bond trader can connect instantly with a global network of other bond traders, but the information they exchange is very bare-bones. We will increasingly see companies develop technologies that can help re-enrich far-flung communications. Apple’s Siri voice-command personal assistant is an example. It’s still a computer talking, but it is helping to create a much fuller context for our interactions with our handheld technology. We’re going to see more advances in making remote communication feel more real, and that will change how businesses and virtual teams interact, adding in some of the texture and emotion that gets squeezed out. Technologies such as 3D imaging, the ability to use better voice recognition, and price drops for various kinds of telepresence may well make it much easier to work in virtual teams.

4. Mass markets will be micro-fragmenting. More and more, markets and market segments will shatter, making life very difficult for companies accustomed to dealing with mass or blockbuster markets. In health care, the rise of gene sequencing and more specific diagnostics means that smaller and smaller numbers of customers are likely to respond to a given therapy. That means, in turn, that companies must profit by serving niches rather than broad markets. In consumer products we see people looking for personalized offers just for themselves. is an on-demand publisher that appeals to authors with very small audiences, because they incur virtually no fixed costs and can therefore choose to publish books only when sales are assured. PC makers increasingly allow their customers to customize their devices. App developers can make enough money to pay off development costs even when their target markets are small. This fracturing of mass markets will favor companies that can sense customers’ particular desires and tailor production accordingly.

5. Oblique competition will become ubiquitous. Finally, the nature of competition has changed. Traditionally businesses competed within industries; today competition can come from nowhere and take over whole market segments. That is a seismic shift. A company’s most important competitors may not even be in the same industry. Who would have imagined that telecom companies would be competing with banks and credit card issuers for consumer payment streams? Moreover, customers judge across their entire set of experiences rather than just comparing your organization to others like it. We want our technology to be as intuitive and user-friendly as Apple products, the service we receive to be as thoughtful as we might get from Nordstrom, and personalization and ease of payment as good as Amazon’s. This expands the range of what a typical strategist will have to pay attention to.

What does all this mean for company leaders today? I think three overarching themes deserve time and attention. First, we must consciously and aggressively compare our existing assumptions with unfolding reality. Most of the time, today’s strategies are a response to constraints from the past. Relax the constraints, and all kinds of new possibilities become feasible. Second, regular time-outs from day-to-day concerns to pay attention to early warnings are crucial. All too many leaders stay so busy operationalizing today’s strategy that they miss the obvious. It isn’t usually the unthinkable that undoes companies; it’s the possible that nobody paid attention to. Finally, consider where leaders get most of the information they use to make decisions. If they aren’t tapping into different sources of data and insight, they are increasingly likely to overlook some crucial trend—until it’s too late.

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