Whether for countries or companies, innovation has been hailed as critical to both competitiveness and survival.
During the recent Singapore Institute of Directors’ (SID) sixth annual conference, Boards and Innovation, a panel discussion that I chaired threw up example after example of organizations that were doing it right— and just as many that were being left behind.
The writing is on the wall. Digital technology is transforming markets and creating enormous value for the companies that master them. By that same stroke, traditional tools and expertise are becoming obsolete, as are those too slow to adapt. It is a high stakes game and the pace is rapid—in the same amount of time it took for Kodak to go from a market capitalization of $28 billion to bankruptcy, Chinese e-commerce giant Alibaba created a market worth $300 billion.
Where the key difference is made is at the top – at the boardroom table – where discussions on disruptive technologies should be leading decisions on strategy. It is also there that the reconciliation that must take place between the need to invest in innovation now and the fact that payoff only comes in the longer term.
But are these conversations happening? Apparently, not yet.
Towards the end of last year, 50 board members from leading Asian companies came together to address technology-related opportunities and risks during the TMS Academy’s Directors-in-Dialogue session “Boards and Technology: The Competitive Risk and Promise of Exponential Technologies”. They discussed Accenture’s Technology Vision 2014 which outlines the key mega trends in the market, including the Internet of Things, wearable technology, social media and artificial intelligence. While two-third of the 50 participants viewed the impact of exponential technologies as game-changing, less than one in ten executives felt that companies were well-positioned to handle.
It is worrying. For a company to be a digital disruptor, those with the power to make strategic decisions need to first notice and protect their enterprises from being disrupted, then enable them to gain from it. The ability to see these mega trends coming can be translated into significant opportunities. Missing them can result in dire consequences, as witnessed in the beleaguered camera industry.
With cheaper storage and growing computing power, the stage was set for in-built smart phone cameras to grow exponentially. But while the number of photos taken has increased by 1,000 times, legacy industry players, from camera makers to local reprint stores, have been edged out of business.
Contrast that with companies like tire manufacturer Michelin, which has drawn on exponential technologies to generate significant value for fleet operators. Its EFFIFUEL product-service hybrid combines product sensors and analytics to help fleet operators cut costs. The sensors, located in the vehicles’ engines and tyres, collect data on fuel consumption, tire pressure, temperature, speed and location. Michelin’s experts then analyse fuel consumption patterns and advise fleet operators on how to reduce fuel consumption.
Leaders need to stay current with technological trends, and be armed with the right information and tools to recognize the tipping points—or they run the risk of being disrupted. Stanford University’s Rock Centre suggests they contemplate several questions, including what is new and upcoming, how technology will change the way the game is played, and the weirdest thing that could happen as a result.
What’s important is not so much the specific technology itself, but the governance, strategy, and pace of companies in this age of disruption. There is also the need to break away from simply drawing on intuition and experience. These aren’t the kinds of changes one can predict by common extrapolation, which means turning to models.
There is unprecedented opportunity right now to recreate and redefine companies and industries, and to create a lasting competitive advantage with significant enterprise value. But boards need to move quickly, be open to experimentation, and pivot decisively once they have identified a tipping point and the actions that will allow them to be disruptors—instead of the disrupted.