Tag Archives: management

Emerging technological trends for businesses

 

 

 

  

 

What are some emerging technology trends that will change and reform businesses and the economy?

 

 

This article from McKinsey Quarterly discusses eight trends can be categorized into three subcategories: Managing Business Relationships; Managing Capital and Assets; and Leveraging information in new ways. 

 

 

The next four trends are categorized under the “Managing Business Relationships” heading.

  

 

The first is Distributing Cocreation – This is when suppliers, customers and contractors can aid in product/service development.  By shifting more power and ultimately more autonomy to outsiders that work together, costs and lead times can be reduced by getting different insights during the development process and forgoing some of the bottlenecks associated with having total control of the innovation process.  The notion of a open-source innovation was discussed in this earlier post. 

 

 

Companies will need to compete with each other in order to attract the best and most innovative contributors.

 

 

The second trend is “Using Consumers as Innovators,” and is facilitated by the growth of the web 2.0.  Customers are looking to be engaged with one another or with an organization.  Customers are increasingly being engaged by the their involvement in the development, testing and marketing (viral marketing) of products or services.  An example of is Wikipedia.  The accuracy of this online encyclopedia is almost as accurate as Britannica’s. 

 

 

With this trend, development cycles and costs can be reduced, while understanding the customer’s behavior and wants can be easier.  The cost to attract customers is lower, and retaining customer loyalty becomes easier. Companies also need to be aware that the customers that would be involved in the development of their product or service is a small segment of the overall market, therefore, the developers’ needs and wants maybe different than the overall market.  Often customers’ needs and wants are immediate and not long term. 

    

 

The third trend is “Tapping into a world of talent”, as the internet is becoming more interactive with new communication and collaborative tools, outsourcing some functions of a business to specialists, talent networks, and freelancers is increasingly more viable from a cost and functional aspect.  As I had alluded to in yesterday’s post, some advertising agencies have outsourced their creative, account management and media buying departments.  Many companies would focus on their core competencies and not have the burden of being tied down to those other functions. 

 

 

The main task is being able to harness the global talent pool, managing the existing workforce and being able to integrate the work in a cohesive manner. 

 

 

The fourth trend is “Extracting more value from interactions”, that is interactions between different types of work and enabling the workforce to function more effectively and efficiently. 

 

 

The first type of work is Transformational, usually work that is involved in the production of goods or in the extraction of raw materials; the second type of work is Transactional, usually work that is clerical or simple-rule based such as a call center operations or someone involved with data entry; finally, the last type of work is Tacit, which primarily deals with knowledge, judgment and collaboration with multiple interactions with multiple stakeholders.  For example, a sales person would engage in tacit work, by interacting with the marketing, product development, H/R, logistics and after sales departments to maximize sales, while engaging and interacting with multiple parties through collaboration. 

 

 

There are systems that can maximize the efficiency of both transformational and transactional work such as assembly line work.  However, with tacit work, there is no such a rule or process.  Maximizing the effectiveness of this work is accomplished by focusing them on interactions that create value.  Companies must enable these workers with greater decision making ability, bring down barriers, increase the availability of resources/information and facilitate collaboration.  New and current technology is facilitating this trend and enabling tacit workers to become more effective by having wikis, blogs, emails, text messages, and feeds to make communication and collaboration easier.

 

 

The next two trends are categorized under the “Managing Capital and Assets” heading.

 

 

The fifth trend is “Expanding the Frontiers of Automation,” companies will continue and expand their automation ability for tasks and processes that are repetitive.  For example, Fed-Ex and UPS have enabled users to track their packages online.  A major benefit would be to lower costs and help users get the information they need effortlessly in a timely manner.

 

 

The sixth trend is “Unbundling Production from Delivery,” uses existing business structures of large businesses (e.g. supply chain management, computing power, etc.) and rents this to other businesses.  From a supply side, this technology would attract asset-intensive businesses (e.g. factories, office buildings, etc.) to raise their utilization rates and therefore, their return on invested capital.  From a demand side, this technology would attract businesses that do not possess the economies of scale and scope to achieve competitive marginal costs. 

 

 

Unbundling also offers businesses quick and easy access to assets; that minimizes impact on their balance sheets; and makes their income statements more favorable.  For the businesses that offer unbundling, it decreases their marginal operational costs because of greater utilization of resources, and greater economies of scale and scope.  Companies need to manage possible supply and demand conflicts.  Examples have included the mobile phone networks and Amazon.com. 

 

 

Here is another example in this article that discusses the growth of APIs across many existing web platforms using existing computing power of large companies. (e.g. eBay, Amazon, etc.)

 

 

The last two trends are categorized under the “Leveraging information in new ways” heading. 

 

 

The seventh trend is “Putting more science into management,” companies are using statistics and other data to use internally and externally.  For an internal example, automotive companies will typically spend more on sales incentives and on advertising campaigns based on seasonality of sales and possible product lifecycle changes. For an external example, Listen.fm and Amazon.com both use customer segmentation systems that utilize recommendation engines that suggest certain items based on the user’s past history, and on other users’ preferences.

 

 

As mentioned in an earlier post, the costs for computing power and storage capacity will continue to fall; and the quality and quantity of information that will become available will rise. The increase in information will empower organizations, as it becomes becomes transparent to employees and suppliers, and the access to it becomes broadened. 

   

 

The eighth and final trend is “Making Business from information,” as now increasingly more data is captured by businesses and from varieties of sources; this could be beneficial for an information-based business opportunity.  Intermediary businesses that have access to greater quality and quantity of information can charge a premium for the aggregation and analysis of this data.  An example of this could be a security firm selling its video footage of a retail store to a market research firm studying retail consumer buying behavior. 

 

 

These aggregators need to be cautious, because they could be aggregated themselves. Their business model can continue to flourish in business to consumer shopping sites and business to business directories.

 

 

Companies need to be cognizant of these eight emerging trends.  Rather than reacting to it, companies can now use these trends to catalyze change and create opportunities as a result of this.

 

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Designing a business model that fosters innovation

 

 

 

 

Pixar has been successful in producing computer animated movies that melds technology with art, and has high quality animation and unpredictable storylines.  The CEO of the company discusses in this article how he was able to create and facilitate an organization culture that supports and fosters creativity.

 

 

There are constantly many new creative ideas that are incorporated into a movie.  The plot, camera shots, animation of the characters, lighting, animation of action shots and the sound all have specialists that have their own creative inputs.  It is the job of the director and producer to foster, incorporate and implement creative ideas. 

 

 

At Pixar, the business model is centered around incorporating everyone’s creative feedback.  Steve Jobs, the founder of Pixar wanted interaction between people, and he ensured the layout of the building was designed so people would have a better chance to encounter each other.  The location of many gathering places such as: meeting rooms, cafeteria, restrooms, etc. were all in a central location.  This certainly bucks the trend of many companies that have comparmentalized departments.

 

 

 

 

Usually most films are made by having the director form the main idea and theme, and then, the creative teams would build more ideas around this.  At Pixar, there are small functional teams that consist of the director, writer, animator and editor that would incubate new ideas.  Films would be produced from the best team’s idea.  The formation of the small groups enabled senior management to understand the group dynamics as well as enabled the creative participation of everyone.

 

 

 

Peer reviews and post mortems were methods to combat complacency and to improve focus. There was a board of advisors that consisted of eight directors.  They had an advisory role witthout decision making authority.  If the director of the film were to experience some problems, he/she could consult the board.  In the end, the director had the decision making authority.  This ensured the director maintained his/her creative integrity.  Therefore, this model encouraged peer review.  At the end of each day, different teams with different projects (all work in progress) showed their work to each other.  People from different functional areas were encouraged to have input.

  

 

 

The company believes strongly in learning.  As a result, Pixar University was formed.  This made employees well-rounded, and appreciated the tasks that other functional teams performed.  For example, the creative teams would take a business courses, and the business analysts would take some animation courses. 

 

 

By breaking down the traditional organizational hierarchy, and empowering and forming smaller functional teams, creativity in incubating and implementation of ideas is faciliated.  Having varying functional teams to conduct peer-review and post mortem sessions enables everyone in the organization to have a voice in the film making process.  Hiring people of different backgrounds, and having an organization that fosters and encourages learning ensures there are different viewpoints and minimizes groupthink.

Innovation at Google

This blog post summarized a very insightful presentation made by Jonathan Rosenberg, SVP of Product Management and Marketing at Google.  He discussed sixteen principles, some of them go against mainstream thinking.  He mentioned that there were three books which he based the sixteen principles. 

1) “The Long Tail” by Chris Anderson.  The theory was discussed at length in this previous post 

2) “Wikinomics” by Don Tapscott.  Some of the main themes regarding open innovation can be found in this previous post

3) “The Wisdom of Crowds” by James Surowiecki.  This book discusses how under certain conditions and environments, a crowd can actually be smarter than the smartest people in that group. 

The presentation was quite thought-provoking, which makes people question the traditional manner of thinking.

Are companies built to “flip” versus built to last?

 

 

The above link is a concept that defies regular managment practices.

 

The article discusses how companies are increasingly built to sell based on potential to generate instant returns instead of the traditional practice of building sustainable businesses.  The “traditional” business mantra extends to a reason/purpose for the business to exist beyond profit motives.  These core values are embedded as an organizational culture.  According to the author, the traditional business model generates higher long-term returns.   

 

The main catalyst for this new model of businesses being built to “flip” instead of being built to “last” was from Venture Capitalists and from Wall Street.  In fact, the number of VC-backed start-ups more than doubled in the late 90s versus in the 80s.  The author included multiple examples of businesses that were being “flipped” and turned out that these businesses were not sustainable and did not generate the expected returns.  Some examples were during the late 1990’s technology bubble, when technology firms announced their IPOs, valuation of these firms generated unprecendented values.

 

The author mentioned that there were two cases that this model is viable:

 

1)   Leverage creative insight of one individual – e.g. Thomas Edison.  After this person/people created their invention(s), the company’s raison-d’etre waned. If the inventor/inventor(s) decides to leave the firm, their company’s raison-d’etre is history.

 

2) Sell technology to a larger company.  This small company does not need to have either the economy of scope or scale to develop a niche product.  They focus only on their core competency – their product/service.  Other business functions that are essential to the sale of the product/service such as distribution can be adopted by the larger company.

 

The author states that this “Built to flip” model is not sustainable. It devalues the tenet of a business’s raison-d’etre which is to contribute in a sustainable method to the economy. To simply dump a company based only on potential rather than sound financials cannot be sustainable. Markets are self-adjusting and would recognize the lack of substance.

 

Does the selected company built to work? Does it contribute? Is it meaningful – the sense of purpose beyond money?