One thing that constantly strikes me is how quickly human imagination can become reality today. In many ways we’re already living in the world imagined in the sci-fi movies we grew up with. We see it in cutting-edge genome editing tools like CRISPR, in robotics technology developed by companies like Boston Dynamics, and in rapid developments in autonomous vehicles, voice recognition, and artificial intelligence.
It was a genuine pleasure to join a fascinating line up of speakers at the Wired Live 2017 festival in London and talk about how this amazing shift has come about—and what it means for businesses to succeed.
The key point: These changes are being driven by logarithmic cost reductions in technology. So, gene sequencing that once cost billions of dollars can now be done for a few hundred. And the cost of LIDAR components, the technology used by autonomous vehicles to sense their environments, has dropped from $30,000 to $80 in just five years. These extraordinary cost reductions are underpinning an unprecedented ability to turn imagination into innovation. And that’s at the heart of so many of the ground-breaking and positive stories showcased at Wired Live.
It’s also a core part of much of the disruption seen across industries today. People sometimes think about that disruption as an explosive change—whole industries disappearing overnight. But that’s not how it usually happens. In fact, industries are far more likely to see compressive disruption—where a series of innovations, macroeconomic factors, and other changes combine to squeeze profits over time.
Look at FinTech. This isn’t about suddenly replacing established banking giants with a single app. Instead, it’s about the cumulative effect of numerous innovations, each focused on a particular need. So, it might be an app for international currency transfers one day, 24-hour mortgages the next, and instant credit the day after. Each on their own takes a small amount of margin away from incumbents—but their combined effect is highly disruptive.
Spotting disruption is one thing, but responding in the right way is something else entirely. I’m often struck by how businesses that got disrupted saw what was coming. Kodak knew about digital photography. Blockbuster had a chance to invest in Netflix. But many companies get locked into the mindsets and revenues of their core businesses and are unable to respond in the right way.
So, how should a business deal with disruption? Much depends on the individual context. But one thing is clear. Successful organisations make a considered pivot out of the comfort zone of their core business to the innovative models that their new environment demands. They do so by freeing up enough capacity to invest in and scale the New—while continuing to grow the core.
What’s needed above all is courage and the willingness to make hard choices. That might mean, for example, saying “the scope of our business is too broad to innovate across the board, so we have to pick and choose where we’re really going to drive massive innovation.” It might mean exiting some businesses and doubling down on others. That’s undoubtedly a challenge for a company glued to their core business. But it’s the only way to really transform imagination into innovation and open up the opportunities of the New.