We’re widely regarded as pre-eminent thought leaders on Agile Strategy – a business strategy designed for the C21st open and connected economy.
Regularly invited to speak to Government, Industry and Business Leaders, our Chairman is a classically trained marketeer, Martin previously worked his way up through the marketing hierarchy to Worldwide Head of Marketing at Diageo (with £12 billion in revenues) then as a Strategist at PricewaterhouseCoopers advising plc Clients on strategy, acquisitions & disposals.
He later went on to build his own multi-national multi-million group of over 50 businesses, before selling these to concentrate on the development of Agile Strategy and mentoring maverick Founders to disruptive plc CEO’s delivering business transformation.
A recent presentation by Dr Martin Stillman-Jones
Today I’m going to talk about some of the things which are about to start knocking on your door. Things that will change your lives. Things that are being referred to as the next “Industrial Revolution”. What’s sometimes referred to as “the internet of things” – the huge, inter-connected economy which is transforming the way we both live and work.
All too often when I give such presentations, I hear at least someone in the audience tutting and mumbling under their breath that the innovations of which I talk are “the stuff of pipe dreams” or “a future that will never happen”.
But I’m here to tell you that this change is real. ALL the technologies of which I talk are in an advanced stage of development. This is not so much guesswork – as a glimpse into what’s just around the corner.
And for businesses, a failure to recognise and act – dismissing this as “pipe dreams” – could be fatal. Catastrophically so. To understand what I mean by that, lets take a look at Kodak.
The company was formed in 1880, and quickly became a world leader in its field.
By the late 1990s, it had $5bn in assets, 13 manufacturing plants, 130 processing labs and 170,000 employees worldwide. Kodak printed 85% of all film-based photos printed to paper worldwide, had a huge “legacy investment” built up in things like chemical processing and the manufacture of photographic paper.
Then however, came the digital revolution. Suddenly everyone had cameras everywhere – on phones, tablets, computers and now even with drones – and could store and share photos without needing to print them.
In October 2010 Kevin Systrom and Mike Krieger launched Instagram onto an unsuspecting world. By the end of 2011 Kodak’s business model had collapsed, in January 2012 they filed for bankruptcy.
Instagram meanwhile, a company with only 13 software engineers, signed up its 100 millionth active user. By April 2012, Facebook bought it for $1.2bn. The Kodak moment was theirs!
The big irony here is that Kodak’s decline was entirely avoidable: digital cameras were invented by Kodak in 1975. The first only had 1,000 or so pixels not the 20,000+ of todays, but development followed Moore’s Law: doubling capacity and halving cost each year. A technology which was a disappointment at first, became superior, then mainstream a few years later.
For Kodak, the problem was that even though they had an early technological advantage, they failed to capitalise on it. Legacy investment meant they clung to an old business model even as world around them was changing.
Kodak is perhaps an extreme example – but it’s not unique.
In every sector, businesses are facing rapid change – and the pace of that change is itself accelerating. Companies which are slow to react risk being overwhelmed – but those who anticipate, adapt to and accelerate change will reap huge rewards.
One sector where we’ve already seen this happening is software.
It can be tempting to think of software as something nerdy and technical – a hidden mechanical issue like the plumbing in a house. But truth be told, software will disrupt most traditional industries over the course of the next 5-10 years. It will improve efficiencies and costs materially if in fact it doesn’t completely replace existing business models and working practices.
To see what I mean, look at Uber.
Like Instagram, Uber is a simple software tool. Simple to use that is….
They don’t own any cars but are now the biggest taxi company in the world. If I’d asked you ten years ago whether London cabbies could lose their jobs due to a piece of mobile phone software, you’d have laughed me out of the door. But it’s happening.
Likewise, Airbnb is now the largest “hotel” company in the world…..they too have little or no infrastructure, simply an App…..they don’t own properties, employ door men, reception staff, valets, house staff, chef’s…..but they do house 1 in 3 temporary pillows every night in New York and like locusts they’re spreading, consuming in their path!
This shift is happening partly because computers are becoming exponentially better at understanding the world, increasingly, through self-learning.
I remember journeying with senior executives at Google, on London’s Circle Line with the very first set of Google Glass’ no more than 5-7 years ago. At that time their (and others) primary concern was social acceptance……now, future featurersare using AR and AI daily.
The pace of change is even faster than we expected.
Last year, a computer beat the best “Go player” in the world, 10 years earlier than forecast. In the US, young lawyers already aren’t getting jobs because of IBM Watson. Watson software will provide legal advice within seconds, at 90% accuracy compared with 70% from humans. So far it’s for more or less basic stuff, but that’s changing daily.
Watson’s also already helping nurses diagnosing cancer, and doing it 4 times more accurately than humans.
For established operators, the rate at which software capability is evolving presents a major challenge.
For another good example of this, we need only look to the telecoms industry.
For years, the industry was dominated by a few big players, those capable of withstanding the immense infrastructure investments required, those who enjoyed huge market shares, those who as a result, felt unassailable .
But in business-to-business then internet is replacing physical networks and in person-to-person communication space, those big telecoms companies are now being crushed by Facebook.
In addition to “college to college” networking, Facebook now dominates “personal messaging”, with Facebook Messenger and WhatsApp – both of which they own. These in turn are now capable of making person-to-person phone calls without cost – completely undermining the original raison d’etra for BT’s formation out of the GPO.
BT, with all its resources, technical competence and focus though. didn’t come up with the concept of Facebook – a simple piece of software – they’ve seen their business get hollowed out as a result.
And the reason for this?
Well, telecoms companies – like Kodak – had huge legacy investments in existing infrastructures and embedded technology. BT frankly weren’t interested in changing – believing “it couldn’t happen to them”……there would always be a need for people to use a hardwired telephone infrastructure.
BT have belatedly reinvented themselves as an infrastructure provider, already at risk from newer technologies – with Cisco increasing dominance in net infrastructure and both Facebook and Google experimenting with drone based low orbiting satellites to provide web infrastructure to places such as Australia’s outback and deepest Africa – how long will BTs business model remain sound even now “I wonder? Maybe despite adapting relatively quickly to change, their business risks going the same way as Kodak anyway!
For an interesting counter-example, look at Facebook itself, and the speed with which they’ve invested in new areas like video.
Over one 3rd of Facebook’s 2015 revenue of $18bn came from video…..a revenue stream that didn’t exist for them as little as two years ago – $6bn of previously non-existent revenue.
A study from Business Insider currently estimates video advertising will trigger 41% of total desktop related spending in 2020 – I’m not talking about advertising spend – but the purchases that come as a result of it – which will be done online, and at the point of video presentation.
Facebook’s largest competitor in this space is YouTube; created in February 2005. In November 2006 – a mere 21 months later – it was sold to Google for US$1.65 billion. Revenues were $9bn last year.
This meant that Facebook had no choice but to reinvent its static networking offering into video provision…. in order to stay relevant, competitive, useful – in this rapidly changing world. Facebook reinvented itself a mere 10 years after launch!
They’re currently pouring millions into very advanced pattern recognition software that can already recognise faces better than humans. So good is it that the US military ceased developing their own system in favour of using Facebook – because it’s more accurate than the military system which had taken over 20 years to develop.
Soon you will walk into a room, Facebook sensors will recognise you, switch heating, lighting and television channels on to suit your mood, calculated as you walk in. The fridge will advise what’s available, re-ordering online automatically when used for home delivery. Placed in microwave ovens, food will be cooked according to labelling embedded on packaging, which will communicate with the microwave, telling you when it’s ready.
In short, Facebook have constantly anticipated and adapted to change, being unafraid to abandon even their biggest legacy investments. And as a result, they’re thriving.
Besides software, another area where we’re seeing rapid change is transportation.
In 2018 the first self-driving cars will appear for the public use without driving. Already cars will control their own speed, steer themselves, park themselves, recognise road signs, slow down for cars in front, recognise household activity and pre-warm themselves before you leave the house.
Traditional car companies are trying evolutionary approaches and are just building better cars.
Through its “i-Division” BMW are experimenting with alternative powertrains, alternative fuels, different material technologies and advanced manufacturing techniques. But will it be enough? Are they still thinking too much like a car company to survive reinvention?
Tech companies (like Tesla, Apple, and Google) are taking a revolutionary approach because they have no legacy investment in huge factories, dealer networks, and infrastructures employing millions of people around the globe. Their approach is fresh and with a clean sheet – they’re building computers on wheels.
These cars will also cause fewer accidents – yes, I’m aware of the Tesla and Google crashes but in the context of the miles driven – and those particular drivers behaviour – they’re immaterial…..one driver was busy reading, another wasn’t even at the wheel…..and the Google car was still in development, not released as a consumer product yet.
Yet around 2020, the whole industry will start to be disrupted. Some companies are ready, some are not. But what’s interesting is that it’s mostly tech companies building computers on wheels – companies who don’t have automotive legacy investments – who are rewriting the rules…..not the traditional car companies reinventing themselves.
A similar story is playing out in the transportation sector more broadly.
After all, who wants to even own a car anymore anyway? It depreciates more in the time you don’t drive it, than the total operating costs in the time that you do. Better to use a software app on your phone to call a car up only when you need it. Arriving at your location and driving you to your destination. No need to park, you’ll only pay for the driven distance and can be productive whilst sat working as it drives you to your destination. Our kids’ kids’ will never get a driver’s license and will most likely never own a car.
These developments will change cities, city planning and infrastructures too, because we’ll need 90-95% fewer cars simply by pooling. Using drones for product deliveries will save countless thousands of white van man deliveries every year. The car accident rate will fall from one accident every 100,000 km today, to one accident every 10 million km. That will save a million lives each year – but also cause big problems for insurance companies, whose revenues will collapse, forcing them to make insurance chargeable by the mile, and cheaper if the vehicle is autonomous.
Because it will be easier to work while you commute, people will be able to move further away to live. And as multiple job holding and home working increasingly become the norm, the need to be office based will be increasingly removed. We’ll need fewer commercial properties and so fewer property agencies, with their jobs largely done on line via Rightmove or Zoopla. Simplified machine-learnt legal services resulting in online property transactions making property purchase as simple as car buying today.
Cities will also become less noisy because all cars will run on electric / or hydrogen. For electric the point of pollution will be shifted to low cost, pollution-free alternative energies where electricity will become increasingly cheap and clean.
In the energy sector more broadly, solar will also keep following Moore’s Law: improving in efficiency and falling in price. Last year, more solar energy was installed worldwide than fossil. The price for solar will drop so much that ALL coal companies will be out of business by 2025.
Excuse the pun, but tidal energy will be the next wave… with the first tidal turbines already deployed in the Canadian Bay of Fundy and contracts in place for hundreds more. The UK apparently holds 42% of Europes tidal power….whoever calculated that number should perhaps visit some of those sites and get out more themselves.
Global fossil fuel consumption peaked in 2008 and has declined steadily since. With cheap electricity will come cheap desalination, making it possible for anyone to have as much clean water as she or he wants, for nearly no cost, and with minimal pollution.
For consumers the benefits are huge, and the environmental benefits will be enormous. Imagine the Saraha as a fruit and veg basket for the world, growing and exporting fruit and veg to the growing mega-cities.
Companies, too, can benefit from amazing opportunities if they’re willing to adapt and help accelerate these changes. But if they stand still, clinging to their legacies, they’ll be overwhelmed.
Another business sector where change is accelerating is medicine.
Computer companies which once focused on consumer goods are now busy building medical devices of many sorts too. It’s interesting to note that devices such as Fitbit, Withing and AppleWatch already sales peaked in 2015/6. These were though, in effect, simply a test bed for bigger and bolder technologies in preparation.
There’s already one handheld non-medical expert health monitor for example, that works with your phone. It takes a retinal scan, blood sample and breath sample as you breathe into it. Then it analyses 54 biomarkers and can identify nearly any disease through simple cloud networking back to machine learnt databases. Only last week, I was using a simple treated paper disk, suspended on a piece of string which at 25cents could do similar work to a $15,000 medical centrifuge. Imagine these two devices coming together in some remote African village…..
It will be cheap, so hand in hand with online remote surgical procedures, in a few years everyone on the planet will have access to world class medicine, almost for free.
If this sounds far-fetched, I’m living proof: in 2008 I had a heart-by-pass operation which was performed remotely, albeit with the Surgeon only a few steps away…. shortly after my operation (which was the sixth of its type in the world) my Surgeon performed heart surgery from London on a patient in Riyadh Saudi Arabia, connected on line, using robotically assisted minimal invasion techniques.
3D printing will also transform healthcare, enabling a heart surgeon in London to perform life saving operations anywhere there’s an Operating Theatre or 3D printer.
In fact, 3D printing is another classic example of Moore’s Law in action. The price of the cheapest 3D printer came down from $18,000 to $400 over the last 10 years. At the same time, it became 100 times faster.
ALL major shoe companies have now started 3D printing shoes. Wait till you can download a design from the net and print your own at home…..those Louboutins fresh off the printer just before the next Black Tie Dinner! That tech isn’t working yet…..but it is being worked on.
Did you know….spare airplane parts are already 3D printed in remote airports around the globe. And the space station has a printer that eliminates the need to carry large quantities of spare parts. They’re simply printed as and when required…..with designs regularly improved and performance updated.
Within a few months, new smart phones will have 3D scanning capability. You’ll then 3D scan your feet to make sure those Louboutins are a perfect fit! I’m working with a company who will shortly offer these technologies for ladies made to measure lingerie, with size and shape scanned by 3D phone, wireframe cloud uploaded and ordered on line, made to measure in China overnight and delivered by Couriers the next day. All you’ll have to decide is the design and colours.
In China they’ve already 3D printed a complete 6-storey office building. So what do you imagine is about to happen to the building industry? Intel estimates that by 2027, 10% of everything that’s produced will be 3D printed.
For businesses, these changes herald enormous opportunities for growth. Yet the pace of change can also be a little unnerving. So how can you ensure your business adapts to change, and becomes a Facebook rather than a Kodak?
Start by asking yourself this; If you think of a niche you want to go into, ask yourself: “in the future, we will have that?” – if the answer is yes, how can you make that happen sooner, better, faster, more individualised? Now; “can you make it for 10% of today’s price? And….if it doesn’t work with your phone, forget it.
The harsh truth is that pretty much any idea designed for success in the 20th century will be doomed to failure in the 21st. Only 71 of the original Fortune 500 list of companies from 1954 remain 60 years later…… The average age of those Fortune 500 companies was 75 years old. Today’s average is just 10 years old.
That may sound dispiriting, but I think this rate of turnover actually points to a huge opportunity. By taking a clean-sheet approach, thinking radically, and outside the box, being willing to sink your legacy investments and attitudes, each of you in this room could take on any major public company and beat them.
Remember Kodak was replaced by 13 people working at Instagram. And YouTube at 21
months old sold to Google for $1.6 billion…. The opportunities to reinvent are limitless – as are the fortunes that can be derived from them!
Whatever your sector, change will bring opportunity Agriculture, for example, might sound like a business area which is unlikely to be affected by high- tech innovation any time soon.
But there will soon be a $100 agricultural robot with AI built in. Farmers in 3rd world countries will then become managers of their fields, instead of working all day in them.
Agroponics will need much less water to produce. The first Petri dish produced veal is already available and will be cheaper than cow-produced veal by 2018 – in blind taste tests it scores more highly for flavour than traditionally produced veal and can be genetically modified to be low cholesterol. Right now, 30% of all agricultural surface area worldwide is used for cows – they produce 45% of the worlds CO2 emissions. Imagine if we don’t need that anymore.
London already has hydroponic farms in the disused underground tunnels under London’s streets…..supplying top restaurants with fresh fruit, vegetables, herbs and spices. All grown without soil and all with artificial light. This technology has been borrowed from our Nuclear Submarines ~ who have for some time, grown their own fresh vegetables on board.
And several Venture Capital-backed startups will bring insect protein to market quite shortly – a food source which can be grown cheaply, easily and quickly in remote or hostile environments such as war or disaster zones.
In other sectors, Bitcoin will become mainstream over the next three years, used in intra-company and market settlements. Smartphones will be owned by 70% of all people by 2020. Education services will be delivered remotely through drone based low orbiting satellite networks. Apps and AR headsets will judge from facial expressions whether people are lying. Just imagine a political debate where everyone can tell immediately if politicians are telling the truth – or not!
In short, whatever your sector, innovation is creating new opportunities for growth. The challenge is for you to exploit them effectively.
So how do you that?
Well…..Governments and businesses will need to take several steps, many of which are not easy:
–Prepare the next generation
Re-evaluate the type of knowledge and skills required for the future, and address the need for education and training. AI presents the opportunity to prepare an entirely new sort of skilled and trained workers that do not exist today. This training should be targeted to help those who are disproportionately affected by the coming changes in employment and incomes.
–Advocate for and develop a code of ethics for AI
Ethical debates, challenging as they will be, should be supplemented by tangible standards and best practices in the development and use of intelligent machines.
–Encourage AI-powered regulation
Update old laws and use AI itself to create adaptive, self-improving new ones to help close the gap between the pace of technological change and the pace of regulatory response. This will require government to think and act in new ways appropriate to the new landscape, and means more technologically-trained people must play an active role in government.
–Work to integrate human intelligence with machine intelligence
Businesses must begin reimagining business processes, and reconstructing work to take advantage of the respective strengths of people and machines.
My sense is we will each need a plan, a guiding principle so we can grasp the opportunities and not feel engulfed by them. I see a consistent seven key things which are important to do:-
First, select your markets:
The starting point for an agile strategy is for companies to continually renew their selection of granular market opportunities. They must continually review and understand the evolving customer groups, supplier ecosystems and dynamics of their granular markets.
To maximise their potential, companies must develop deep expertise in designing innovative business models that deliver tangible value to tightly-targeted customer groups and create net value for stakeholders.
Third, build a portfolio:
The fragmentation and volatility of today’s markets mean that companies (even small ones) must not rely on just one business model, but must build a continually evolving portfolio of businesses.
Fourth, develop platforms:
To build their portfolios effectively and efficiently, companies must develop shared product, process and resource platforms from which each business in the company’s portfolio draws and to which each contributes.
Fifth, shape ecosystems:
To thrive, companies should go beyond adaptation to the external world and work to proactively shape their markets’ ecosystems to maximise value for customers, fellow ecosystem members and themselves.
Sixth, re-imagine your organisation:
To enable, rather than inhibit, continual evolution in their markets, businesses, portfolios, platforms and ecosystems, companies must transform corporate hierarchies into flexible, network organisations.
And finally, design a strategy:
To succeed in an era of rapid change, companies must transform strategy from a periodic long-term planning effort to a continual design process that focuses equally on delivering short-term performance improvements and creating long-term value.
In short, to succeed, companies must think outside the box, doing what Steve Jobs from Apple used to describe as “thinking differently”.
They must be agile; dissecting markets and opportunities in different ways to find new ways to attract customers.
And they must be ruthless about discarding their own old habits and legacy investments, breaking with the past to embrace the future.
If they do that, they can survive and thrive in the next industrial revolution, and beyond.
If you’re interesting in disucssing your business need or booking a Speaker Session please, email: martin @ stillman . email