Global 2000 companies 2012, Source: Forbes Up $149 trillion assets 8%Up $36 trillion revenues12% $2.6Up trillion11% profit WE UNDERESTIMATE THE ACHIEVEMENTS OF THE ENTERPRISE – HUGELY SUCESSFUL WAY OF CREATING WEALTH.
BUT IT HAS HIT A LIMITShareholder returns of largerfirms were 70% belowthose of smaller firms over a10-year period in USA Source Gregory V. Milano, “Too Big to Succeed?” CFO Magazine, April 29, 2011 THE OVERHEAD GROWS FASTER THAN THE BOTTOM LINE
Changes in the economy that bring pressures toinnovate 2.The opportunity of the new globally connected middle class 2. The global innovation race 3. Digital – physical convergence (or- dematerialization) 4. Disruption in the value chain 5. The loss of oligopoly power
The new middle classThe new global middle class createsmassively differentiated needs, and lowcost, good enough goods 900 million – 2 billion people by 2030 = x 3 or x 7 The future is mass differentiation
Growth x8 in 2012 Fastest growing social 10,000 x Library of network, 13 employees Congress photo library by 11.2011 – 14 billion images Low overhead high scale businesses ON THE OTHER HAND WE SEEM TO HAVE INVENTED A NEW FORM OF ORGANIZATION TOO
A simple ecosystem model ofbusiness Information market A new hardware layer Apps market Developer network Platform 50,000Android 48 member open 88,000handset alliance articles on pebble watch in 48 hours Strong background in self management
ELEMENTS OF THE PLATFORM1. A software platform has rules of the road 2. A developer or production community signing up to T&Cs not contracts – low friction scaling – with strong background in self- management 3. (Semi-) automated ingest to a platform4. Seamless highly scaled transaction management 5. Information ecosystem New leadership role? ATTRACTION, attracting resources 6. Possibly the reinvention of product around connectivity 7. EXTRAORDINARY SCALE
ECOSYSTEM 1 The Forbes’StoryFeb 2011 to Feb 2012 Opens potential for hundreds of new revenue Tapped into 800 streams ecosystems Acquisition of True/Slant MONTHLY UNIQUE VISITORS
ECOSYSTEM 2 Other examples American Express Google Apple The Guardian Expedia 3,600 API partners $137 million revenues in 12 months $2 billion in sales.
Competing ecosystem modelsmultiple supplier and licenseepartners in fragmented marketsvshighly disciplined continuum fromhardware to software in standardizedenvironment
Today’s ecosystems1. Ecosystems are closely related to mass differentiation2. They gather around a platform – like iTunes, Android, quirky3. Represent highly scaled interactions4. Take place in OPEN environments among peers5. Power dynamics are totally different from the large firm
AND MASS DIFFERENTATION IS?The ability of large firms to servemany micro markets withrelatively increases in overhead cost,usually through multiple ecosystempartners, providing exceptionalstrategic options management.
Why aren’t more companies adopting this model? 1990-92 2000-03 2004-06 2007 - 10 Services Employees The CEO Risk INTERNALITIES EXTERNALITIESTransition Transition point point A Semantic Analysis of 20 years of business writing in The Harvard Business Review, source Haydn Shaughnessy
CLOSE UPLab-based, driven by Attempts to interpret Ignores the rules andoligopolies that shape and adapt to the uses multiplenew markets service economy strategies to invade new markets. Innovation comes from multiple, scaled partnerships
Managing an extended knowledge pool Creating an innovation architecture that encapsulates all elements of innovation Strategic options building, as companies develop for what might happen as well as what they know will happen
Innovation pioneers arearriving at somewhat thesame point as platform andecosystem companies THE STRATEGIC OPTIONS PORTFOLIO DO MORE, PLAN FOR WHAT MIGHT NOT HAPPEN
STRATEGIC OPTIONS MANAGEMENT Nokia Siemens Networks We need to find a way to disrupt ourselves – in other words ways to transform.
Apple’s Strategic options2010 iPad Launched, iPhone 4, iTouch 4G, iPodNano, 6G iPod Shuffle 4G, iPad iOS 4.0, iPad iOS3.2 support, iBook App and iBookstore introduced,Ping social network added, AirPlay added, Wi-Fiprinting support, iTunes Versions 9.0.3 thru 10.1.1released. Apple TV, MacAir solid state2011 iPhone 4s, iPad 2, iOS 4.3 and iOS 5 support,Siri voice recognition, Apple TV 2G support, MacApp Store launched, iTunes in the Cloud launched,Wi-Fi Syncing, iCloud services launched, iTunesMatch introduced, iTunes Versions 10.1.2 thru10.5.2 released
In a period of change disruptive cultures are needed Periodically the complexity paradigm wins out
Hack thyselfFacebok algorithmsare highly adaptive,combining human Generativeand machinenetworks; thebusiness model isopportunistic Discretionary Non-discretionaryy Normative RIM left itself with no concurrent options – all its options were stuck in the planning phase.
What gives you discretionary generative powerIs it the productIs it market positionIs it ideationIs it the platform?
IT IS HUMAN CAPABILITY The business model and the human resource element is ready for complexity – in IT dependent sectors
WHAT SUPPORTS THIS CAPABILITY?1. The Platform – innovators have this inplatforms like HYPE2. Ecosystems – still difficult for largecompanies to trust the external environment3. Strategic options management – being ableto serve differentiated markets and products4. Belief in a new form of scale
ConclusionsThe future lies with ecosystems supported byincreasingly scaled and sophisticated platforms These platforms enable companies to serve globally differentiated markets in an elastic fashion, holding overhead down during growth
THE ENDHAYDN SHAUGHNESSYFellow Centre for Digital Transformation,UCI IrvineBlogsfirstname.lastname@example.org
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