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Singularity University - Strategy in the Age of Disruption


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0 Jaime Rodriguez-Ramos 30 de enero de 2017


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This is the second part of a series on my visit to Singularity University. In the first part we took a
look at how Exponential Technologies change everything and the 5 technologies in the iPhone
moment. In this article we will look at how this continuous technological change leads to disruption
in all industries, and how can we strategically anticipate disruption to catch the wave.

Industrial-age strategy seems useless in the age of disruption. Long range planning appears
unworkable in the face of continuous change. Strategic plans are outdated almost before they are
completed, and any resemblance of strategic plans and the future is pure coincidence. Investing
significant effort into planning goes against the agile principles of learning by doing.

At the same time strategy is more important than ever. With tremendous change coming our
way those who are able to anticipate the change and position themselves are in for amazing value
creation. This happens over and over again, as small startups and some insightful large corporates
are swept to greatness by catching a wave that is obvious in hindsight. Apple with the iPod, iPhone
and iPad. Google with search, Android and autonomous cars. Amazon with online retailing,
marketplaces and cloud computing. Show that this can be done with some consistency

There is a new kind of strategy that allows to respond with foresight and agility in the Age of
Disruption. It is what digital powerhouses like Google and Amazon use to plan. Contrary to
traditional strategy it focuses on the very long term and the very short term, leaving the 3-5 year
period of the traditional industrial strategic plan out of focus.

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The Age of Disruption


Disruption happens when a established and powerful way of doing things is suddenly swept
aside by another one. Disruption has always happened, the dinosaurs were hit by an asteroid,
Neanderthals were eliminated by Homo Sapiens, and the French Revolution beheaded a great
number of the rich and powerful. The difference is that today accelerating technological change is
creating continuous waves of disruption. We live in an age of continuous dinosaur-extinction size
meteors hitting industries and institutions every year. Stressful but fun to watch.

An industry ripe for disruption has complex experiences, broken trust, redundant intermediaries and
limited access. The current paradigm is spent with incremental improvement that don't add value
for the customer (e.g. the last ever smaller feature phones). In effect it is waiting for something that
will make it obsolete. In the past, industries could be like that for decades or even centuries. Today
they are made obsolete and irrelevant in years.

In technology this has been a constant with each new generation of computing systems
(mainframes, minicomputers, workstations, PCs, smartphones) disrupting previous ones. We have
seen tons of examples of disruption lately in other industries to as they are infected by
digitalization. The printed media industry was disrupted in less than a decade by online classifieds
and news. P2P downloads and subscription services took over the music industry killing CDs in the
blink of an eye. Blockbuster and other video rental services were busted by Netflix and online video.
Traditional photography was swept away by digital photography in a truly Kodak moment.
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Now we are starting to see it in larger more core industries too. Physical retailers are starting to
keenly feel the pain of eCommerce substitution. Telcos have been disrupted by online voice like
Skype, and have only survived by turning to data-only. Energy companies are going to face a total
reversal of the model with solar and storage. Banks are being eaten away by online payments and a
host of other Fintech solutions. The hotel industry is being transformed by AirBNB and other
sharing economy solutions. The automotive, logistics and real estate businesses are going to be
completely upended by autonomous cars and trucks.

Can this meteor impacts be anticipated and responded to? They can, but it requires a completely
new way of thinking about strategy.

Exponential Strategy: Looking far out and looking close by


Industrial age strategy was based on forecasting and long term planning to avoid mistakes. You
analyzed how the world was going to be five years from now, which was usually an slightly updated
version of the present. Then you decided where your wanted your company to be five years from
now, and what initiatives were necessary to get there. It was a safe and predictable way to put your
resources to your biggest priorities. You might sometimes be overoptimistic but you weren't usually
wrong.

This process is completely broken when applied to exponential rate changes and disruption. The
first challenge is that the world is going to change radically, so the slightly updated present
doesn't cut it. However, the human mind finds it very difficult to believe radical change in the short
term. It is also practically impossible to predict a disruptive scenario accurately. So to picture
yourself in radical change you need to look far out to the 10-20 year horizon, and try to predict
a high level picture of what will be important then. Don't do market sizes or growth rates. Do
key elements of customer value and potential impacts of technological change on them.

This is what Jeff Bezos from Amazon does as he explained in his recent Recode interview. He
doesn't have the crystal ball to know if it will be drones, ubers, virtual reality or 3D printers bringing
the product to your home 10 years from now. However, he does know what customers will continue
to value, what he calls the "invariants" of retail: price, selection, delivery and discovery. So he works
on those.
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The second challenge is that change is so quick that you need to learn by doing. Planning and
waterfall initiatives no longer works, you need to apply agile thinking to move at digital speed. If
you are not able to predict three years out you cannot launch three year initiatives that avoid
mistakes. You have to embrace quick mistakes that bring learning and allow you to converge as the
future emerges. This means looking close by to initiatives for the next 6-12 months. These
initiatives will allow you to both learn and make progress, without reducing your flexibility as
change emerges.

Ignoring the 2-10 year horizon might seem scary at first, especially for those used to the false
confort of 3-5 year strategic plans. However, it makes sense for three important reasons:

With your 10-20 year vision you will get foresight. You will be considering the impact of
technology and competition strategically in your business. This is the only way to anticipate
effectively potential waves of disruption.
With the 6-12 months initiatives you will get action and learning. As startup CEOs often say,
your initial plan is always wrong in every way, but you can only fix it by start executing it and
learning on the way. The same applies for large corporations, however, they often prefer
planning paralysis that avoids mistakes.
Ignoring the 2-10 year horizon will protect you from the false security it generates. Executives
often use their strategic plans as a safety blanket against the stress of uncertainty, even if
they know they are usually as good as made up numbers. Forcing yourself to face uncertainty
will make you more aware of what is happening and bolder in terms of your actions.

Go for it
So go for it, no excuses. Create the picture of what your industry or function might be 10-20 years
from now, what will be still important then. Select the 2-3 initiatives that will allow you to move and
learn in that direction in the short term and launch them straight away, fully expecting some
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mistakes to be made. Then as you learn by doing update your picture of the future and adapt your
initiatives on a continuous basis.

You don't need your company to be working like this to do it yourself. The picture of the future will
be typically appreciated in any organization, if positioned as a "long term" view. Short term
initiatives that achieve learning and results are also appreciated. Both of them will allow you to craft
a convincing 3-5 year made up strategic plan if you need to.

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