Great case: Transforming Korea Telecom

We’re big fans of the Mix – Management Innovation Exchange. It’s a fantastic platform for sharing and developing ideas around management innovation, HR, strategy and innovation.

KT

Recently, our friends at Strategos was featured in a transformation case they worked on with Korea Telecom.
This is a great case and a wonderful example of the holistic perspective required to succesfully lead large-scale transformations.

For special interest, we invite you to read the in-depth case by Julian Birkinshaw and Ken Mark.

Great case: Transforming Korea Telecom

Strategic innovation: Six articles worth catching

Every now and then we’re asked to provide some “good, quick easy reads” on strategy and innovation. These six stories all offer valuable insight for the curious reader. Amazon’s innovation strategy, innovation lessons from Pixar, reinventing Best Buy, creating digital business models at EA and management innovation; these six serve as brain food for any aspiring innovator.

 

Your Innovation Problem Is Really a Leadership Problem

Scott D. Anthony at Innosight runs a superb blog on HBR.
Here, he puts the spotlight on the crucial role of leadership to make innovation happen. We particularly like “…and, in candid moments, their own discomfort with the different mental frames required to lead innovation.

Enjoy the full blogpost here.

Amazon’s Smart Innovation Strategy

We find ourselves coming back to Amazon over and over again. The company is morphing into one of the world’s most successful, most innovative firms. Today Amazon is on track to become the world’s largest retailer, bypassing Wal-Mart. Not bad for a company founded in 1995 as an Internet bookstore…

Learn from Amazon. The company is a serial business model innovator. It has developed its capacity for strategic innovation like few others. Amazon is a frequent case when we teach the Strategic Innovation Canvas (upcoming blogpost).

 For now, read more at Amazon’s Smart Innovation Strategy and this extra note from Geekwire.

Innovation lessons from Pixar

‘’The first step in achieving the impossible is believing that the impossible can be achieved’’ – Brad Bird, Pixar

Pixar, Steve jobs’ creative playground between his stints at Apple, is recognized as one of the most creative, innovative organizations in the world. Oscar-winning Director Brad Bird discusses the people-side of innovation “You want people to be involved and engaged”, says Bird.

Read more at Innovation lessons from Pixar

Death by a billion clicks

Blockbuster, once the world’s largest chain of video stores, got out-innovated by Netflix. Bankrupt.
Borders, once the world’s largest chain of bookstores found itself out-innovated by Amazon. Bankrupt.
Can Best Buy, America’s largest electronics retailer, avoid the same fate? Can Best Buy pick up its own innovation pace? Stuck in an industry that seems to be dying, can Best Buy find its comeback?
For any company struggling to reinvent itself, this Wired article, is a great case study of an ongoing strategic transformation.

Read more at Death by a billion clicks.

Getting into your customers’ heads

Today every industry and every company are facing digital disruptions. Few industries experience this as much as gaming. Only a handful of years ago, new computer games were sold on CD or DVD-roms. The main business model was retail. Games were shipped and sold over the counter. Well, not anymore. Today, consumers are always on, always near their machine(s) of choice. Rovio (Angry Birds), Zynga (Farmville) and Playfish are some of the new players, developing social gaming for mobile devices. How does a large, established player like Electronic Arts move from a retail model to a social, online model? This interview sheds light on a strategic transformation most firms could learn from.

Read more at Getting into your customers’ heads


Innovative management: A conversation with Gary Hamel and Lowell Bryan

“Sometime over the next decade, your company will be challenged to change in a way for which it has no precedent.”, those are the opening words of strategy Professor Gary Hamel.

The question is really, are you shaping the future or are you busy cutting costs? Are you innovating or are you reacting?

This excellent discussion between some of the leading MIX Mavericks sums up decades of work on management innovation and strategic thinking.

Read more at Innovative management

Looking for more recommended reading, enjoy some of our recommendations  here.

Strategic innovation: Six articles worth catching

Why Software Is Eating The World

Why Software Is Eating The World

ESSAY, By MARC ANDREESSEN
Featured in the Wall Street Journal . Posted here, as WSJ has recently put a paywall on this essay.  
AUGUST 20, 2011

This week, Hewlett-Packard (where I am on the board) announced that it is exploring jettisoning its struggling PC business in favor of investing more heavily in software, where it sees better potential for growth. Meanwhile, Google plans to buy up the cellphone handset maker Motorola Mobility. Both moves surprised the tech world. But both moves are also in line with a trend I’ve observed, one that makes me optimistic about the future growth of the American and world economies, despite the recent turmoil in the stock market.

In an interview with WSJ’s Kevin Delaney, Groupon and LinkedIn investor Marc Andreessen insists that the recent popularity of tech companies does not constitute a bubble. He also stressed that both Apple and Google are undervalued and that “the market doesn’t like tech.”

In short, software is eating the world.

More than 10 years after the peak of the 1990s dot-com bubble, a dozen or so new Internet companies like Facebook and Twitter are sparking controversy in Silicon Valley, due to their rapidly growing private market valuations, and even the occasional successful IPO. With scars from the heyday of Webvan and Pets.com still fresh in the investor psyche, people are asking, “Isn’t this just a dangerous new bubble?”

I, along with others, have been arguing the other side of the case. (I am co-founder and general partner of venture capital firm Andreessen-Horowitz, which has invested in Facebook, Groupon, Skype, Twitter, Zynga, and Foursquare, among others. I am also personally an investor in LinkedIn.) We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses.

Today’s stock market actually hates technology, as shown by all-time low price/earnings ratios for major public technology companies. Apple, for example, has a P/E ratio of around 15.2—about the same as the broader stock market, despite Apple’s immense profitability and dominant market position (Apple in the last couple weeks became the biggest company in America, judged by market capitalization, surpassing Exxon Mobil). And, perhaps most telling, you can’t have a bubble when people are constantly screaming “Bubble!”

But too much of the debate is still around financial valuation, as opposed to the underlying intrinsic value of the best of Silicon Valley’s new companies. My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.

More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

Why is this happening now?

Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.

Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day.

On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries—without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.

With lower start-up costs and a vastly expanded market for online services, the result is a global economy that for the first time will be fully digitally wired—the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later.

Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant.

Oops.

Today, the world’s largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.

Today’s largest video service by number of subscribers is a software company: Netflix. How Netflix eviscerated Blockbuster is an old story, but now other traditional entertainment providers are facing the same threat. Comcast, Time Warner and others are responding by transforming themselves into software companies with efforts such as TV Everywhere, which liberates content from the physical cable and connects it to smartphones and tablets.

Today’s dominant music companies are software companies, too: Apple’s iTunes, Spotify and Pandora. Traditional record labels increasingly exist only to provide those software companies with content. Industry revenue from digital channels totaled $4.6 billion in 2010, growing to 29% of total revenue from 2% in 2004.

Today’s fastest growing entertainment companies are videogame makers—again, software—with the industry growing to $60 billion from $30 billion five years ago. And the fastest growing major videogame company is Zynga (maker of games including FarmVille), which delivers its games entirely online. Zynga’s first-quarter revenues grew to $235 million this year, more than double revenues from a year earlier. Rovio, maker of Angry Birds, is expected to clear $100 million in revenue this year (the company was nearly bankrupt when it debuted the popular game on the iPhone in late 2009). Meanwhile, traditional videogame powerhouses like Electronic Arts and Nintendo have seen revenues stagnate and fall.

The best new movie production company in many decades, Pixar, was a software company. Disney—Disney!—had to buy Pixar, a software company, to remain relevant in animated movies.

Photography, of course, was eaten by software long ago. It’s virtually impossible to buy a mobile phone that doesn’t include a software-powered camera, and photos are uploaded automatically to the Internet for permanent archiving and global sharing. Companies like Shutterfly, Snapfish and Flickr have stepped into Kodak’s place.

Today’s largest direct marketing platform is a software company—Google. Now it’s been joined by Groupon, Living Social, Foursquare and others, which are using software to eat the retail marketing industry. Groupon generated over $700 million in revenue in 2010, after being in business for only two years.

Today’s fastest growing telecom company is Skype, a software company that was just bought by Microsoft for $8.5 billion. CenturyLink, the third largest telecom company in the U.S., with a $20 billion market cap, had 15 million access lines at the end of June 30—declining at an annual rate of about 7%. Excluding the revenue from its Qwest acquisition, CenturyLink’s revenue from these legacy services declined by more than 11%. Meanwhile, the two biggest telecom companies, AT&T and Verizon, have survived by transforming themselves into software companies, partnering with Apple and other smartphone makers.

LinkedIn is today’s fastest growing recruiting company. For the first time ever, on LinkedIn, employees can maintain their own resumes for recruiters to search in real time—giving LinkedIn the opportunity to eat the lucrative $400 billion recruiting industry.

Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. In today’s cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. The days when a car aficionado could repair his or her own car are long past, due primarily to the high software content. The trend toward hybrid and electric vehicles will only accelerate the software shift—electric cars are completely computer controlled. And the creation of software-powered driverless cars is already under way at Google and the major car companies.

Today’s leading real-world retailer, Wal-Mart, uses software to power its logistics and distribution capabilities, which it has used to crush its competition. Likewise for FedEx, which is best thought of as a software network that happens to have trucks, planes and distribution hubs attached. And the success or failure of airlines today and in the future hinges on their ability to price tickets and optimize routes and yields correctly—with software.

Oil and gas companies were early innovators in supercomputing and data visualization and analysis, which are crucial to today’s oil and gas exploration efforts. Agriculture is increasingly powered by software as well, including satellite analysis of soils linked to per-acre seed selection software algorithms.

The financial services industry has been visibly transformed by software over the last 30 years. Practically every financial transaction, from someone buying a cup of coffee to someone trading a trillion dollars of credit default derivatives, is done in software. And many of the leading innovators in financial services are software companies, such as Square, which allows anyone to accept credit card payments with a mobile phone, and PayPal, which generated more than $1 billion in revenue in the second quarter of this year, up 31% over the previous year.

Health care and education, in my view, are next up for fundamental software-based transformation. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries. We believe both of these industries, which historically have been highly resistant to entrepreneurial change, are primed for tipping by great new software-centric entrepreneurs.

Even national defense is increasingly software-based. The modern combat soldier is embedded in a web of software that provides intelligence, communications, logistics and weapons guidance. Software-powered drones launch airstrikes without putting human pilots at risk. Intelligence agencies do large-scale data mining with software to uncover and track potential terrorist plots.

Companies in every industry need to assume that a software revolution is coming. This includes even industries that are software-based today. Great incumbent software companies like Oracle and Microsoft are increasingly threatened with irrelevance by new software offerings like Salesforce.com and Android (especially in a world where Google owns a major handset maker).

In some industries, particularly those with a heavy real-world component such as oil and gas, the software revolution is primarily an opportunity for incumbents. But in many industries, new software ideas will result in the rise of new Silicon Valley-style start-ups that invade existing industries with impunity. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. Joseph Schumpeter, the economist who coined the term “creative destruction,” would be proud.

And while people watching the values of their 401(k)s bounce up and down the last few weeks might doubt it, this is a profoundly positive story for the American economy, in particular. It’s not an accident that many of the biggest recent technology companies—including Google, Amazon, eBay and more—are American companies. Our combination of great research universities, a pro-risk business culture, deep pools of innovation-seeking equity capital and reliable business and contract law is unprecedented and unparalleled in the world.

Still, we face several challenges.

First of all, every new company today is being built in the face of massive economic headwinds, making the challenge far greater than it was in the relatively benign ’90s. The good news about building a company during times like this is that the companies that do succeed are going to be extremely strong and resilient. And when the economy finally stabilizes, look out—the best of the new companies will grow even faster.

Secondly, many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. This is a tragedy since every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high. This problem is even worse than it looks because many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again. There’s no way through this problem other than education, and we have a long way to go.

Finally, the new companies need to prove their worth. They need to build strong cultures, delight their customers, establish their own competitive advantages and, yes, justify their rising valuations. No one should expect building a new high-growth, software-powered company in an established industry to be easy. It’s brutally difficult.

I’m privileged to work with some of the best of the new breed of software companies, and I can tell you they’re really good at what they do. If they perform to my and others’ expectations, they are going to be highly valuable cornerstone companies in the global economy, eating markets far larger than the technology industry has historically been able to pursue.

Instead of constantly questioning their valuations, let’s seek to understand how the new generation of technology companies are doing what they do, what the broader consequences are for businesses and the economy and what we can collectively do to expand the number of innovative new software companies created in the U.S. and around the world.

That’s the big opportunity. I know where I’m putting my money.

—Mr. Andreessen is co-founder and general partner of the venture capital firm Andreessen-Horowitz.

Read the essay at WSJ and join the debate.

 

Why Software Is Eating The World

Social Media reading list

Digital

This spring I start teaching “Social Media” at BI – Norwegian Business School (Stavanger). here’s a happy reading list for anyone venturing into the field. 

Social media and digital are increasingly popping up as ‘items’ in several of our executive education programs. An increasing number of managers are happily using Facebook on their own time, but realize that their firm is nowhere to be found in the social media space. A larger number still have come to realize their company is simply not prepared for some of the digital challenges that are coming their way. While some (mostly the attackers) see great opportunity, many of today’s established firms are unsure how to deal with social, digital and disruptions.

For my students, for my executives and for anyone looking to understand more in this space, this reading list is for you.
I’ve added a selection of sources. Don’t hesitate in telling me if you believe something crucial is missing.

The Quick Read
If you only have a few hours or a few days to spare, this list is for you. It’ll give you the basics (and hopefully tickle your brain enough to make you keep reading down this list).

Groundswell
Groundswell: Winning in a World Transformed by Social Technologies (Li and Bernhoff)
This 2008 classic should be the starting point for anyone venturing into the field. It’s packed with examples, cases and useful tools like the POST method ,Social profile and more.

Open leadership

Open Leadership: How Social Technology Can Transform the Way You Lead (Charlene Li) 

Li’s second book, this one looks at social technolgies and what it means for your leadership role. It’s really the first book to take this view, and does a great job at it. Powerful work, this should be included into every executive’s reading list.
Leading Through Connections: IBM Global CEO Study
(IBM, 2012)

IBM2012

“In less than 5 years, your social channels will eclipse your website as a customer touchpoint”. That’s the conclusion of IBM’s CEO Study. The findings are remarkable in the growth rate of social technologies in the 1700 firms IBM interview. Read it.

Why Software is Eating the World
(Andressen, 2011)
Marc Andressen’s Wall Street Journal Essay lays out the most clear and coherent business case for all things digital. A must.

In-depth readings: Seek to understand digital 

Those four are the quick and easy reads. A great place to start.
But to truly understand the massive implications, opportunities and disruptions coming from the increasing level of digital, I recommend digging into these. These are the classics. In terms of the Internet age, they are old. But their implied age gives them perspective and insight in an industry that is moving faster than most.

Blown to Bits: how the new economics of information transforms strategy
Blown to bits(Evans and Wurster, 1999)
A personal favorite.

To prepare corporate executives and entrepreneurs alike for a fundamental change in business competition, warns the book.

“The authors think that the Internet can blow away practically any business, and examine how the new economy is “deconstructing” industries such as newspapers, auto retailing, and banking while creating new opportunities for others. …even “the most stable of industries, the most focused of business models and the strongest of brands can be blown to bits by new information technology.”, writes Amazon.

Truth is, Evans and Wurster foresaw the last 12 years of digital disruption, brought on industries like news, stocks, travel and retail. Reading this book 14 years later, and realizing most industries are just starting their digital disruption phase is an eye-opener.

Cluetrain Manifesto: the end of business as usual 
(Levine, Locke, Searls and Weinberger, 1999)
With the Internet just taking hold, these 95 theses were brought forward to help understand and examine the effects of this “newly-connected marketplace”

Summarizing, the authors write “A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter—and getting smarter faster than most companies”.

Digital Darwinism: 7 Breakthrough Business Strategies for Surviving in the Cutthroat Web Economy
(Schwarz, 2001)
One author’s early attempts to understand how e-business (as it was called at the time, now it’s just business…), could succeed. The conclusion from his 7 case studies:  integrate the Web into every part of your business.

Here Comes Everybody: the power of organizing without organizations
(Shirky, 2009)
Great read on how social technologies drive new organizing principles. Very wide selection of interesting case studies.

Socialnomics: how social media transforms the way we live and do business
(Qualman, 2009)
A wide look at how social media has, is and will affect businesses around the world. Qualman’s focus is marketing and how digital ans social is driving change in society.


The Ultimate Question 2.0
(Reichheld and Markey, 2011)
“Would you recommend us to a friend?” That simple question, now well-documented as the most powerful question in all of marketing, fits perfectlywith the ideas and culture of digital and social. While orginally a marketing book, the Ultimate Question, is truly worth reading for anyone looking to generate connections, relationships and recommendations in the digital space.

Onwards, to the mix and merry of Social Media 

The field of what is today called social media is still developing and unfolding. Any reader will find a good stack of books claiming to be “The Bible” to Social Media. They are not.
But, some of them are truly useful, insightful and absolutely worth reading. Here’s my stack of recommendations.

SheepThrowing Sheep in the Boardroom: How Online Social Networking Will Transform Your Life, Work and World
(Dutta and Fraser, 2008)

The Connected Company
(Gray and Wal, 2012)

Socialized!: How the Most Successful Businesses Harness the Power of Social
(Fidelman, 2012)

11 Rules for Creating Value in the Social Era
Merchant, 2011

The Dragonfly Effect: Quick, Effective, and Powerful Ways To Use Social Media to Drive Social Change
(Aaker, Heath and Ariely, 2010)

The Social Media MBA: Your Competitive Edge in Social Media Strategy Development and Delivery
(Holloman, 2011)

Den Perfekte Storm (in Danish, for now)
(Svarre, 2012)

The Social Organization: How to Use Social Media to Tap the Collective Genius of Your Customers and Employees
(Bradley and McDonald, 2011)

Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges
(McAfee, 2009)

The Facebook Effect: The Inside Story of the Company That Is Connecting the World
(Kirkpatrick, 2010)

 

This mix of readings should provide a good insight to most readers. It should be enough to get you and your team started on the one question that matters: how do we become a ‘social business’?

Join us for the upcoming six day course at BI or contact Christian Rangen directly to see how you can develop innovative digital strategies.

See Christian’s recent keynote talk on “Digital Business Models: the future is already here”

Social Media reading list

Educating our future innovators

Education and innovation rarely go hand in hand. In fact, the educational industry is generally considered to be low and slow when it comes to innovation. Young people “learn how to innovate most often despite their schooling—not because of it”, writes Tony Wagner. Wagner, a former high school teacher, now Professor at Harvard Business School on education and innovation has researched innovation in education for a number of years. Now, he’s publishing his work. It is a must read for everyone and everyone concerned with educating our future innovators.

Educating the Next Steve Jobs
– How can schools teach students to be more innovative? Offer hands-on classes and don’t penalize failure
is the title of his Wall Street Journal essay. It is a brilliant piece on what we need to do to change our educational strucutures to build future innovators.

Wagner’s book “Creating Innovators: The Making of Young People Who Will Change the World” is coming out April 24th. It should be on everyone’s reading list this spring.

You can also check out the website, Future Innovators.

a href=”https://engageinnovate.files.wordpress.com/2012/04/tony-wagner.jpg”>

note:
I’m writing this, reflecting, during the StartUp Weekend Finals in Stavanger. I’ll be posting several blogs around StartUp Weekend and learnings from it. Thanks.

Educating our future innovators

Scary reading for today’s executives; creative destruction

Joseph Schumpeter , is considered the father of the term “creative destruction”. His work stands as a pillar in today’s innovation and economics education. But what Schumpeter didn’t account for in his work was the increasing pace of this creative destruction. Innosight director Richard N. Foster, co-author of the book Creative Destruction recently published a new report, “Creative
Destruction Whips through Corporate America
“. Foster’s conclusion, the pace of disruptive innovation is only quickening and the life-span of leading companies are getting shorter. Writes Foster “a warning to execs: At current churn rate, 75% of the S&P 500 will be replaced by 2027”.

The essence of Foster’s findings, as the pace of innovation accelerates, large companies will increasingly find themselves being out-innovated and out-competed. With the existing rates,three out of four large companies will be out-innovated and passed over by start-ups and more innovative companies in the next 15 years.

This report and its implications should be scary reading for today’s executives. Yet, for the next generation of entreprenurs, start-ups and young Pirates, this means the future looks even brighter. Read the full report.

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