Issue 15 reprint
Designing your
fiercest competitor
Mastering change by
making it real
Strategy and innovation
Legend has it that in 1994, Bill Gates’ ran on the PC, but also the capabilities of the 2003.3 Even the deepest experts did not
assistant, Steve Sonofsky, was visiting Internet and the tools (the Internet Explorer understand how “the law of accelerating
his alma mater, Cornell University. While browser, for example) needed to fully exploit returns” (a phrase coined by Ray Kurzweil),
there, he noted that Cornell was “taking them. He was not going to let a new, fierce which posits that “technological change is
full advantage of the fledgling Internet— competitor take advantage of this technologi- exponential,”4 works. They could not see
email, course listings, international faculty cal and social trend—the Internet—and use how a combination of computer power,
collaborations, etc.—and fired off an email it to beat his company. increased understanding, competitive
to his boss.”1 As a result, Gates became con- access, and the knowledge network across
vinced that he needed to shift Microsoft’s At the time, Gates demonstrated vision, the Internet could make things happen
focus toward the Internet—and fast. He tenacity, and, ultimately, the ability to much faster than expected.
sent out a long memo2 that stated that the organize and execute—qualities that are
Internet was taking off and that Microsoft even more important today. The world is In our view, in this world of faster change,
would be a part of it. more complex now than it was a decade it is time to examine the interlocking factors
ago. Things are changing faster because of social, technological, environmental,
Moreover, he wove this fundamental change science is expanding and, most important, economic, and political change: STEEP
into his story about the company. In particu- because feedback loops in technology, drivers. Making these real is an exercise in
lar, he noted that the Internet was a natural knowledge, and networks amplify learning. creative destruction that involves a manage-
extension of the desktop and part of the per- For example, in 1990, the Human ment team’s designing a fiercest competitor
sonal computer domain. In other words, he Genome Project was expected to last 15 that could take advantage of these fast-
changed the mental model of the company: years. However, because of advances in moving trends for competitive gain.
It would from now on be not only about what technology, the task was completed by
1 http://www.cornell.edu/about/wired/.
2 This memo can be found at http://www.lettersofnote.com/2011/07/internet-tidal-wave.html.
3 http://www.ornl.gov/sci/techresources/Human_Genome/faq/faqs1.shtml.
4 http://www.kurzweilai.net/the-law-of-accelerating-returns.
5 Dan Fletcher, “How Facebook Is Redefining Privacy,” May 20, 2010, at http://www.time.com/time/magazine/article/0,9171,1990798,00.html.
6 PwC, Customers take control: How the multi-channel shopper is changing the global retail landscape, December 2011.
2 09:22:31
3 12:08:32
4 16:43:05
5 24:34:43
6 30:23:15
7 36:12:56
How are companies taking advantage of funds, and take action has become much phones worldwide. Almost all new cars are
these new social developments? The savvy easier. More than ever, businesses need to connected to the Internet. The Internet of
ones are co-creating products and services understand who is shaping the agenda for Things is adding everything from insulin
with their customers. Sports apparel manu- their companies and industries. pumps to light switches onto the grid. Big
facturer Nike offers one example. With the Data allow for the decoding of human ge-
Nike+ system, a small, removable elec- Part of the reason that social media has nomes and the ability of computers to beat
tronic pod is a part of the insole of the shoe. grown so quickly is the result of positive humans at chess. And these examples are in
This pod, which is the size of a quarter, feedback. That is, the more that people use no way comprehensive.8
sends results to a smart device and allows the medium, add reviews, or watch online
runners to track their own training, includ- videos, the more likely they are to find some- Connecting everything means that firms
ing distance and pace. This information is thing useful and come back. Coming back increasingly need to compete not just on
automatically uploaded to a website and for something useful is not different. What is the quality of their physical value chain,
runners can share their routes, routines, new is the permanency of the network and but also on their ability to manage their
and comments easily and quickly. This the increasing returns it creates in terms of information value chain. 7-Eleven® in Japan
innovative product system, with its social its value. In a network, positive feedback has such great control over its informa-
overlay, differentiates the shoe. drives rapid adoption, a phenomenon that tion value chain that it tells store managers
we expect to continue to grow. how to restock to meet the demand of
Affecting the macro domain the breakfast crowd, the lunch rush, the
Since the commercialization of the Internet, Driver 2: Technological afternoon snacker, the evening shopper, and
the number of registered non-governmental We live in a wondrous and disconcerting the late-night eater. The company is able
organizations has grown from 1,250 to more age. Chances are your briefcase or pocket to drive more sales because its information
than 45,000,7 and today, many of these ride holds one of the latest waves of technologi- value chain allows it to slice the store in time
atop the Internet. This means that the ability cal change. Based on cellular subscriptions, increments, thereby creating more virtual
of special interest groups to organize, raise there are now more than 5 billion cell square footage through information.
7 http://www.apa.org/international/united-nations/publications.aspx.
8 The Internet of Things is “a new kind of network that will allow sensor-enabled physical objects—appliances in your home, products in a factory, cars in a city—to talk to one another, the same way
people communicate over the Internet.” See Time’s “Best Inventions of 2008” at http://www.time.com/time/specials/packages/article/0,28804,1852747_1854195_1854158,00.html.
“Big Data” refers to “massive amounts of data” that “are analyzed with massively parallel computers.”
Read the full definition at http://www.pcmag.com/encyclopedia_term/0,2542,t=Big+Data&i=62849,00.asp.
4%
Driver 5: Political US
While politics have always affected business, Germany
UK
the current political environment is changing 2%
France
on many dimensions simultaneously. Three
trends are worth noting. First is the rise Spain
special interest groups has been dramatic. Company Africa Asia Austral- Eastern Latin Middle North Western
At least part of the reason that political headquarters asia Europe America East America Europe
institutions are more indecisive than they Africa 93% 89% 33% 100% 100% 75% 29% 36%
have been in the past is that the Internet
Asia-Pacific 73% 88% 77% 40% 80% 70% 40% 32%
has enabled greater numbers of people to
self-organize around their cause. The more CEE* 80% 87% 83% 73% 80% 55% 71% 69%
than 45,000 groups can exert many pres-
Latin America 67% 86% 18% 59% 86% 47% 48% 31%
sures on the powers that be.
Middle East 70% 100% 50% 0% 0% 85% 25% 0%
Clearly, social, technological, environmen-
North America 64% 94% 71% 67% 80% 73% 67% 51%
tal, economic, and political drivers are
moving in more accelerated and interactive Western Europe 72% 92% 57% 75% 86% 75% 55% 48%
ways than ever before.
*Central and Eastern Europe
0% 100%
9 PwC, 14th Annual Global CEO Survey, 2011. Source: PwC, 14th Annual Global CEO Survey, 2011
Alter your mental model Imagine scenarios involving Apply insights gained
disruptive, greenfield competitors
Hartley refers to individuals who drive the ideas they are judging. The key is to Finally, when launching a global hit product,
innovation as producers. “A producer,” avoid the tyranny of the check mark—the it’s important that assets equal opportuni-
he says, “takes an idea and rams it through naysayers who insist, ‘Yeah, we tried that, ties. Says Hartley, “If you have a vision of a
until it exists in the physical world. Produc- it didn’t work.’” Often, when new products global hit product, your assets—human and
ers are change agents who never give up. founder, the blame rests with the internal financial—must be appropriately sized to the
Rather, they take decision makers through adjudicators. Because they’re judging new opportunity. If you’re not going to do that,
the processes needed to make great new products, they may lack adequate knowl- you should just forget about innovation.”
products real. They lay the groundwork edge of the customer or the market. Big
for infrastructures that enable creation.” ideas can get so diluted prior to execution The team at Green Mountain Coffee
that they barely resemble the original con- practices what they preach. But they are
When it comes to launching new hit prod- cept. As Hartley points out, “If you want to not resting on their laurels. According to
ucts, every large organization has internal set an infrastructure for launching hit prod- Hartley, they intend to apply these principles
adjudicators or gatekeepers who can prevent ucts, the purity and power of the idea has to to achieving their ultimate objective: “We
an idea from reaching its potential. “The be exposed to the consumer.” Anything less want to be the world’s largest single-serve
solution,” says Hartley, “is to use world-class will result in failure. beverage company,” he says. “And new
adjudicators, preferably from outside the global hit products will help us get there.”
organization, who are knowledgeable about
John J. Sviokla
One North Wacker
Chicago, IL 60606
+1 312 298 3920
john.sviokla@us.pwc.com
Adam J. Gutstein
One National Life Drive
Fourth Floor
Montpelier, VT 05604
+1 312 298 6888
adam.j.gutstein@us.pwc.com
For more insights on business issues you care about, visit View magazine at:
www.pwc.com/view
PwC firms help organisations and individuals create the value they’re looking for. We’re a network of firms
with 169,000 people in more than 158 countries who are committed to deliver quality in assurance, tax and
advisory services. Tell us what matters to you and find out more by visiting us at http://www.pwc.com/.
© 2012 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms,
each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This con-
tent is for general information purposes only, and should not be used as a substitute for consultation with
professional advisors.
The information contained in this document is for general guidance on matters of interest only. The
application and impact of laws can vary widely based on the specific facts involved. Given the changing
nature of laws, rules, and regulations, there may be omissions or inaccuracies in information contained
in this document. Before making any decision or taking any action, you should consult a competent
professional adviser. Although we believe that the information contained in this document has been
obtained from reliable sources, PricewaterhouseCoopers is not responsible for any errors or omissions
contained herein or for the results obtained from the use of this information.