3 scenarios for ‘reinventing’ your business for the digital age
- 01 September, 2014 05:00
Companies need to understand how their business models will change against this backdrop, said Manoj Menon, managing director, Asia Pacific at Frost & Sullivan.
Menon calls on companies to apply three concepts – disrupt, collapse and transform – as they work to reinvent their business.
The CIO has to be the chief innovation officer.
They should look at forces that will disrupt their business and feed ideas for growth of new businesses, as well as ways they can transform their existing organisations to compete with ‘disruptors,’ he said in an interview with CIO New Zealand.
Manoj Menon of Frost & Sullivan talks about how organisations can apply the ‘disrupt, collapse and transform’ framework.
Whatever option they chose, the role of the CIO is “super critical” as the organisation undergoes this assessment and change.
“The CIO has to be the chief innovation officer because at the heart of this is the digital economy,” he said. “[They need to ask] how do I leverage IT connectivity and internet of things to transform my business model in today’s times?”
Next: How to apply the ‘disrupt’, ‘collapse’ and ‘transform’ framework to your organisation, and the megatrends that will impact all businesses
Menon explained how to use each framework:
This means creating new markets or innovation. This is exemplified by Uber, which used idle cars to provide transport for users. It provides additional safety and security, a major concern in some areas in developing countries.
Another example is AirBNB which unlocks the capacity of houses and other accommodation that can be rented out. The company came “out of nowhere” and does not have a physical infrastructure but “created a huge disruption” in the hotel industry, Menon said.
This refers to shutting down of processes with radical new innovations. “It happens when everything goes digital, when new technology and old ones are made redundant,” said Menon.
“New consumer demands or preferences also required innovation, and cites companies like Kodak and Blockbuster that failed to see the challenges ahead,” he said.
Every industry will have a ‘pay as you go’ or ‘on demand' model.
Interestingly, the education sector is one of those impacted by this approach.
“The best education is now available for free” through organisations like Coursera and Khan Academy,” he said.
This entails “leveraging disruption to make incremental improvements to the business,” said Menon.
For example, German rail network Deutsche Bahn partnered with other companies that provide all modes of transport, including bike sharing, to launch QIXXIT, an app that provides integrated mobility services.
The best example of a company that transformed its business is Netflix, which started with digital rental. They transformed it into on demand video streaming and now also produces its own content.
Netflix now accounts for 25 per cent of internet traffic in the US but its infrastructure is on Amazon cloud.
The pace of cycle of each business model is different, said Menon.
“You have to weigh the importance of differentiation in your strategy, if you need to own your technology, or develop your own technology.”
The rise of connectivity is integrated into the top megatrends that Menon said will impact all organisations.
He said megatrends are “transformative, global forces that define the future world with their far-reaching sustainable impact on business, societies, economies, cultures and personal lives.”
He recommended organisations apply these megatrends to their respective businesses, and design their future product and technology plans around these.
This way the entire ecosystem of the megatrends can be understood and the most important segment of your value chain can be identified, which will redefine your business’ competitive position, he said.
Companies that have done this include GE, Samsung, Apple and Tata, while those that failed to harness them include Borders, Polaroid and General Motors.
Menon, who spoke at the first Frost & Sullivan’s GIL (Growth, Innovation and Leadership) 2014 conference in Auckland, outlined some of these megatrends.
Urbanisation and economic development are pushing the growth of megacities particularly in developing economies. The top 25 cities in the world today account for half of the world’s wealth. Over 60 per cent of the world’s population will live in cities that are networked and integrated, he said.
Smart is the new green, he said. “How do we embed information technology inside things so we more about utilisation or the product or service? As we do that, we automatically become green.”
These include population growth, and the implications of the growing number Gen Y or millennials. They are techno savvy and connected 24x7. “They don’t believe in email and have different values. They expect personalisation,” said Menon. “My eight year old daughter has her laptop completely personalised.”
Internet of things (IoT) and cloud
By 2020, there will be five connected devices for every user, 10 connected devices for every household, and 500 devices with unique digital IDs (Internet of things) per square kilometer.
This connectivity will have huge implications on the business model, he said.
For cloud services, people will use technology on “pay as you go model”.
“A startup with four employees will have the same server computing capability of a $50 billion dollar company. It changes the playing field completely and enables innovation at a much faster pace,” he said.
New business models will arise with the IoT and the cloud. Every industry will have a ‘pay as you go’ or ‘on demand' model, he said.
“Companies will ‘co-create’ products with customers. Personalisation of service” is another model and companies will use “the best of global capabilities to provide this.”
Emerging technologies will strive toward innovating to zero breaches of security, zero accidents, zero fatalities.
Innovating to zero
This a radical concept with social innovation at the forefront, said Menon. A ‘zero concept’ world will have cars with zero emissions, zero accidents and zero fatalities, said Menon.
“Cities and buildings will want to be carbon neutral, whilst emerging technologies will strive toward innovating to zero breaches of security, zero accidents, zero fatalities.”
Bricks and clicks
Bricks and clicks will change the face of the retail industry by compelling retailers to transition from having a single/multiple channel to an integrated cross-channel model. The latter merges digital, virtual and physical into a single model.
“This integrated channel will become the norm of the future, likely to be deployed by every retailer by 2025. Brick and mortar retailers are already enhancing IT infrastructure and logistics to widen their online presence to tap this growing market,” said Menon.
A mobility backbone
Mobility will see city planning, energy and ICT coming together, he stated.
“By 2020, over 90 per cent of cars sold will be connected, car sharing will have 26.2 million members globally and 44 million users will subscribe to telematics based insurance worldwide,” he said.
“A car company will state it is not in the automotive business but in a mobility business.”
Health and wellbeing
This is a vital mega trend as public health is becoming unaffordable.
“The definition of healthcare will change as economies struggle to afford healthcare costs, which will affect 20 percent of a nation’s GDP in a developed world. Focus will shift to mass prevention and diagnoses and to wellness aspects of the mind, body and soul,” he said.
“Private health insurance schemes will change to reward individuals who stay healthy, and the private sector will increasingly sell gadgets, drugs and services that help them do so.”
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