IBM, to a large degree, invented the information technology industry. For the first half of the 20th century, it dominated the market for tabulating machines. Then digital computing posed new challenges and, by the 1950s it had begun to cede ground to UNIVAC, which led to Thomas Watson Jr’s $5 billion gamble to build the System 360.
That effort was transformative, but by the 1980s the company had fallen behind again and it was only the crash development of the PC that saved it from irrelevance. Yet this time, it did not return to dominance, but was consistently outmaneuvered by smaller and nimbler competitors, like Microsoft and Intel.
Lessons from one era often cannot be applied to the next. In the 50s and 60s, IBM’s singular focus proved decisive. A generation later, agility and speed to market became key attributes. Today, we’re entering a new era of innovation in which the basis of competition will shift from disruptive to fundamental technologies. Here’s what you need to do to win:
It’s become conventional wisdom that the last 30 years have been a hotbed of innovation, but evidence suggests otherwise. As Robert Gordon explains in The Rise and Fall of American Growth, productivity growth peaked between 1920 and 1970 and has declined ever since. Economist Tyler Cowen calls this the Great Stagnation.
Part of the reason for the dissonance is that information and communication technologies, which have been advancing quickly, make up a relatively small share of the economy — about 6% of GDP in advanced countries. Manufacturing, which makes up 17% of the global economy, gets relatively short shrift.
While all of the news isn’t bad, Deloitte recently ranked the US second to China in its Manufacturing Competitiveness Index, the fact is that we’ve lost 5 million manufacturing jobs since 2000. Clearly, that’s a disturbing trend and one we need to reverse. More to the point, there are four things we need to do to ensure that we can compete in the 21st century.
One of the most common questions I get asked by senior managers is “How can we find more innovative people?” I know the type they have in mind. Someone energetic and dynamic, full of ideas and able to present them powerfully. It seems like everybody these days is looking for an early version of Steve Jobs.
Yet in researching my book, Mapping Innovation, I found that most great innovators were nothing like the mercurial stereotype. In fact, almost all of them were kind, generous and interested in what I was doing. Many were soft spoken and modest. You would notice very few of them in a crowded room.
So the simplest answer is that you need to start by empowering the people already in your organization. But to do that, you need to take responsibility for creating an environment in which your people can thrive. That’s no simple task and most managers have difficulty with it. Nevertheless, by following a few simple principles you can make a huge difference.
Ten years ago hardly anyone had a smartphone. Social media was in its infancy. Artificial intelligence was still science fiction. Yet today all of those things are mature technologies that have become an integral part of everyday life. Anywhere you go you see people using all of them as a matter of habit.
It’s become conventional wisdom to look at these developments and say that technology is accelerating. It certainly seems that way. Nevertheless, look a little closer and it becomes clear that’s not really true. Buy a computer or smartphone today and it has nearly identical technical specifications to one that came out five years ago.
The truth is that every major technology has a similar life cycle called an S-curve. It emerges weak, buggy and flawed. Adoption is slow. In time, it hits its stride and enters a period of rapid growth until it hits maturity and an inevitable slowdown. That’s what’s happening now with digital technology and we can expect many areas to slow down in the years to come.
In the early 1990s, established businesses were blindsided by the disruptive force of the Internet. Even those who invested heavily in IT infrastructure soon found that they had difficulty competing with nimble new upstarts who could deploy web based applications at blinding speed.
It was with this in mind that IBM launched its e-business initiative in 1996. Although considered by many at the time to be an aging dinosaur itself — the firm was close to bankruptcy three years earlier — it was able to leverage its expertise in legacy systems to transform business processes and prepare its customers for the Internet age.
Today a similar tidal wave of disruption is sweeping through the corporate world — artificial intelligence — and, once again, IBM sees a big opportunity. Much like in the early days of the Internet, there is huge value to be unlocked, but legacy systems are not set up to leverage it. It’s not enough to simply apply algorithms, you need to prepare your business for a new age.
In Eric Ries’s bestselling book, The Startup Way, the Silicon Valley entrepreneur explains how he helped lead General Electric’s transformation from a stodgy industrial era dinosaur into a lean, entrepreneurial enterprise. Yet strangely, as Steve Blank points out in Harvard Business Review, the effort ended up with the ousting of GE’s CEO for underperformance.
Why did such a seemingly promising initiative turn out to be such a tragic failure? To be honest, I have no idea. Maybe the cultural strain of “lean startup” thinking caused the company to take its eye off the ball. Or maybe it was simply a matter of short-term thinking by activist investors. Or maybe something else entirely.
On a deeper level, running a significant enterprise is incredibly complex and, to be successful, a lot of things need to go right. There are no silver bullets. Unfortunately, that doesn’t stop pundits and consultants from offering them. As Blank also points out in his article, Ries’s ideas weren’t the problem at GE, but neither did they address obvious issues.
By the early 20th century, the world’s great mathematicians knew they had a big problem. The very foundations of logic, held sacred since the time of Aristotle, were under siege after the discovery of troubling paradoxes by Cantor, Frege and Russell. It was unclear whether things could ever be set aright.
It was against this backdrop that David Hilbert, the most prominent mathematician of the age, created a program to get things back on track. Unfortunately, just the opposite happened. First came Kurt Gödel’s famous incompleteness theorems and then the work of Alan Turing. Logic, as everyone knew it, was dead.
Nevertheless, out of the ashes of Aristotle’s logic arose the foundations of modern computing. As it turns out, solving a fundamental problem, even if the solution isn’t what you thought you wanted, can unlock enormous value. What’s more, in every field and industry, there are countless problems just waiting to be solved. Here’s how to go about working them out.
In fact, in an article in Harvard Business Review, Accenture’s Mark Knickrehm describes five distinct schools of thought, ranging from both extremes to various shades of gray in between. He suggests that leaders need to reinvent operating models, redefine jobs and include employees in the process of transformation.
Yet that’s easier said than done. Smart leaders know that even small, subtle changes can sometimes result in a backlash. Preparing your organization to leverage artificial intelligence has can be especially problematic because the most profound problems are intensely human. Gandhi, although he was no tech enthusiast, can be a good guide on where to start.
Elon Musk is often hailed as a visionary, and rightly so. Tesla, not to mention his other ventures, has the mark of a business that can truly change the world. When he co-founded the company in 2003, electric cars seemed like a pipe dream. Today, however, just about every major carmaker is investing in the technology.
The Tesla narrative has become so well accepted that we rarely stop to think how easily it could have all gone wrong. In 2007, Shai Agassi founded Better Place with an even more expansive vision for electric cars. Yet as Brian Blum explains in his new book, Totaled, that vision led to a series of missteps that resulted in a billion dollar bankruptcy.
There are, of course, a number of reasons for a failure so colossal, including Agassi’s mercurial personality, but most of Better Place’s problems stemmed from a single mistake. To truly change the world, you need to build for the few, not the many. Find a customer that wants or needs your product so badly they almost literally have their hair on fire.
When Steve Jobs first came up with the idea for the iPod, it wasn’t actually a machine he had in mind, but “a thousand songs in my pocket.” It was, at the time, an impossible idea, because hard drives of that capacity and size just didn’t exist. In fairly short order though, the technology caught up to the vision.
That kind of singular focus and drive helps explain Jobs’ incredible success, but what about his failures? The Lisa, a precursor to the Macintosh, flopped. So did his first venture after Apple, NeXT Computer. Even at the height of Apple’s dominance, there were missteps such as iAds. Apple TV still hasn’t really gained traction.
“It’s not what you don’t know that kills you,” Mark Twain famously said, “it’s what you know for sure that ain’t true” and that’s the real innovator’s dilemma. Innovation, necessarily, is about the future, but all we can really know is about the past and some of the present. It’s always a balancing act of staying true to your vision and re-examining your assumptions.
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