Anticipating inflection points

“A strategic inflection point is a time in the life of a business when its fundamentals are about to change” - Andy Grove

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Some common triggers for an inflection point

• Technological change
• Regulatory change
• Social possibilities
• Demographic change
• New connections
• Political change

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Inflection points can take a lot of time to unfold. Then build gradually and change suddenly. Inflection points change the very assumptions on which the organization was founded.

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The progress of inflection points is not linear. They proceed in fits and starts, and while they are emerging, it is normal for reasonable people to disagree about their importance.

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There are four stages in the development of inflection points: hype, dismissive, emergent, and maturity.

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While logging on to a website, most of us think we are just logging on to that site. We don’t realize that third parties with whom we have no relationship at all are watching us.

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Most of us know that the internet is a bit of the Wild West when it comes to our privacy.

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According to The New York Times, no fewer than 50 governments have put measures in place to claw back access.

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My argument is that the basic inflection point has arrived for Facebook and other advertising-fueled data-gathering organizations.

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Giants have fallen before. The failure to see the storms coming led to the demise of Nokia. In 2007, Forbes ran a cover article which said “can anyone catch Nokia?”

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If snow melts at the edges, it behooves you to have mechanisms in place to see what’s going on there.

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There are 8 practices

• Create mechanisms that direct information flows from the corner office to the street corner
• Make sure you are leveraging diversity of thought
• Balance type 1 and type 2 decisions. Empower agility, but create balance
• Instrument the edges, foster little bets
• Get out of the building
• Create incentives to reveal awkward, useful information
• Avoid denial
• Talk to the future that is unfolding now

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The main point is that the future doesn’t happen at once. It begins to unfold evenly. If you can interview it when it is starting, you will be better placed.

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Fast broadband as we know it started around 2000 and took off around 2007. That’s when half the US population had access to laptops and broadband connections.

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It is easy to speculate what inflection points could become. However, in the early stages they are incomplete in many ways.

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In the Steve Ballmer era, Microsoft failed to see five things

• in search, losing to Google
• in smartphones, losing to Apple
• in operating system, losing to Google/Apple
• in media, losing to Apple/Netflix
• in cloud, losing to Amazon.

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If you can see the object far down the road, you need only a small turn to avoid it. However, if you don’t, you will crash headlong into it.

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There are three types of indicators: lagging, current, and leading.

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Most businesses are run on lagging indicators—profits, revenues, ROI, EPS

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Current indicators give you information about the current state of things. Entire systems like ERP have been built to answer the question, ‘what’s going on now?’

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Leading indicators represent things that are not facts in your business. They have potential to lead to facts later on.

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Today 63% of food from US restaurants is taken out, i.e. not consumed inside the restaurant. So, it’s a packaged business.

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One way to think about this is to ask, what if everything remained the same, but only one variable changed in my business?

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The university degree may well be the last barrier standing between traditional education models and a major disruption.

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60% of those surveyed on LinkedIn believe that employees will be hired on skills in future, rather than degree or pedigree. It is already happening in coding.

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Purdue University is trying a new disruption—the income sharing agreement (ISA) wherein the education is free and students pay a part of their salary as and when they start earning.

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Clayton Christensen said, in future, brands of colleges will give way to brands of college professors, i.e. who taught you.

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The growing mismatch between what made a company successful and the environment it finds itself in now eventually leads to underperformance.

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Apparel is going through product fatigue.

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Zara has made the creation and distribution of brands a non-stop cycle, giving rise to fast fashion.

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Customers cannot be hostages, i.e. hostages to some rule or method—like DVD rental firm Blockbuster had late fees.

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Netflix wasn't the first to enter into original content production. However, unlike others, it had 15 years of data of what consumers were watching and liked.

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If you sliced out only healthcare spending in America, that sum would be the fifth largest GDP in the world.

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The techniques described in the book are not about making predictions and being right. They are about generating possibilities and opening your mind to what might happen.

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Intel has employed science fiction writers, futurists and students to produce a narrative of the future. This helps them to open their minds to emerging possibilities.

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Having seen an inflection point coming, the real dilemma for a decision maker is still the uncertainty that prevails.

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The key is being discovery-driven and not think that you have all the answers.

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Digitization simply means replacing analog activity with connected activity with a technology layer.

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Digital is at its most disruptive when it changes the fundamentals of the business model. In insurance, digital models have the ability to alter distribution, pricing, and claims.

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The BBC saw the advent of digital media and appointed Siemens to study this. This was delegated to junior levels and flopped.

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Fall in love with the problem, not the solution.

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Habitual entrepreneurs have their own methods to see around corners. They have a good network for advice, resources and insights.

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Galvanizing the organization is important. Satya Nadella spoke of empathy in Microsoft which was used to turf wars and everyone shooting the other person.

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A classic tension in any organization is the tension between exploiting a repeatable business model and identifying a new one.

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Culture, strategy and incentives matter. In Microsoft, now incentives are not about selling software as much as how much of it is used by the enterprise.

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Inflection points challenge the assumptions of how you run your business and allocate resources.

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Leadership is about relentless alignment and collaboration.

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The key role of a CEO is to keep the team on the same page and keep working together.

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CEOs need to move from command-and-control to leading by seeking feedback.

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Build aligned and trusted teams that can move quickly.

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Alan Mullaly’s Ford ‘working together’ document

• People first
• Everyone is included
• Compelling vision
• Clear goals
• One plan
• Facts and data
• Emotional resilience, trust the process
• Have fun

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Turnaround CEOs need to follow SPARK:

• See it
• Plan it
• Action it
• Repeat it
• Keep the faith

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Negative or unexpected feedback can be a gift when you need to see around corners for your own career.

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According to a LinkedIn survey, those who reach the top have an ability to accumulate diverse skills and show an ability to learn about things they are initially uncomfortable about.

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