This piece was originally published in the September 2017 issue of electroindustry.
Mike Grandinetti, Global Professor of Innovation, Entrepreneurship, and Digital Marketing, Hult International Business School
Mr. Grandinetti is the chief marketing and corporate strategy officer at Reduxio.
Business disruption is not new. With the introduction of electricity in the 1880s, society moved from steam and mechanically powered systems to electrical power. Manufacturers were forced to face an industrial revolution. Despite clearly superior benefits, including 20 to 60 percent savings on coal, debate still raged among experts until the end of the 1920s as to whether it was prudent to convert.
Human nature resists change, and the leaders of the foremost industrial trusts were fully human. Key reasons for their resistance included complacency, the costs involved, and the lack of specialized knowledge.
Those who delayed or resisted the adoption of superior new technologies were disrupted. Of the thousands of industrial trusts that were formed between 1888 and 1901, more than 40 percent failed outright, and another 10 percent were badly wounded, effectively wiping out half of the industry. The 40 most dominant businesses of that era saw market share declines on the average of 33 percent.
With the introduction of the personal computer and the client server era pioneered by Steve Jobs and Bill Gates and the rapid global adoption of mobile phones and the interactive digital and social web, the current digitally based industrial revolution has been even more disruptive than that of the shift from mechanical to electrical power.
“Economic progress, in a capitalist society, means turmoil.”—Joseph Schumpeter, economist who coined the term “creative destruction”
Digital technologies have removed countless inconveniences in our daily lives, such as memorizing phone numbers, getting lost, going to the supermarket for groceries, and waiting forever in the rain for a taxi. As consumers, we have the benefit of far more satisfying and pleasant experiences in our lives as a result of the ubiquitous use of well-designed technology-based solutions.
The Era of Accelerated Disruption, beginning in 2005, represents a major economic inflection point. The introduction of the iPhone—the most successful product in history, with 1.3 billion sold globally in 10 years—along with its high-definition camera and video capabilities ushered in planet-scale platforms such as Facebook, Twitter, and Instagram. The same period also saw highly destructive platforms such as the short-lived but brutally disruptive Napster, the ugly but equally effective Craigslist, and Netflix, Amazon, and others. As a result, we have witnessed the decimation of the newspaper, magazine, brick and mortar retail, music, video rental, and film industries, as their revenues declined 50 to 80 percent or more in a very compressed time span.
“Companies rarely die from moving too fast, and they frequently die from moving too slowly.”—Netflix Co-Founder & CEO Reed Hastings
Similar to the transition to electrical power in the 19th century, we have seen more than 50 percent of the Fortune 500 and Global 1000 decline or simply disappear between 2000 and 2015. One major difference is that each successive era is compressed. For example, the glory days of the manufacturing era, driven by electrical power, lasted for more than 60 years, while the glory days of the PC lasted for roughly 20 years.
Since we entered the Era of Accelerated Disruption, executives understand just how powerful and relentless this trend has become. With the introduction of social coding platform GitHub and big data platforms Palantir and Hadoop, we reached an inflection point within a two-year period, driving an accelerated rate of change. Each of these technologies has had massive disruptive power. As a result, countless B2B companies will appear in the financial obituaries. It’s the issue that keeps executives awake at night.
Today, we stand at the precipice of the next major industrial revolution, Industry 4.0, an even more significant inflection point. Additive manufacturing, robotics, virtual and augmented reality, drones, and driverless vehicles capture the public imagination, but their disruptive power is poorly understood. As the fourth industrial revolution spreads globally, we’ll see business disruption accelerate faster than can be imagined. Reliant on cloud computing, it is certain to be the most disruptive period in the history of business.
Disrupt or Be Disrupted
Business leaders must take a comprehensive, adaptive, and courageous approach in order to thrive in the Industry 4.0 era, especially when it comes to harnessing the pervasive presence and power of the cloud and the escalating challenges and threats around cybersecurity. They must realize that:
- The cloud connects everything, from traditional devices such as phones, tablets, and servers to sensors, robots, and smart cars.
- The intelligence of hyper-connected devices has driven a shift from programmable computers to cognitive, connected devices.
- The value of this hyper-connected cloud grows at a rate proportional to the square of the number of connected devices, dramatically amplifying the power of each connected device individually and the entire cloud collectively.
- Business models that leverage the flow of real-time intelligence through the cloud will dominate. Similar to the war on terror, the cyberwar to control the cloud will be ongoing. It’s the cost of living in a hyper-connected, always-on world.
According to Darwin’s Origin of Species, it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.—Leon C. Megginson, Professor of Management and Marketing, Louisiana State University
Industry 4.0 relies on machine learning and data mining. According to Amazon Founder and CEO Jeff Bezos, a great deal of machine learning is hidden from view. “Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more,” he said.
Disrupt or be disrupted.