The start up craze. 3-D printing. Uber, AirBNB and the unstoppable On Demand Economy. We first reported on these and other driving forces of change in the inaugural issue of InnovationTrends (May, 2014). In this month’s issue, we revisit these trends and reflect on how rapidly they are developing. Only a year ago, we were just hearing about the “sharing economy” (since renamed the On Demand Economy), today the mainstream media reports on these trends constantly. Check out these top five I-Trends:
1. The Start Up Trend Goes Global.
On recent swings thru the Middle East and Africa, I heard less about turmoil in the region, and often about the increasing number of startups sprouting. Today’s breed of entrepreneurs are discovering that funding is available, customers are receptive, technology is cheap and scalable, and many a market’s incumbent players are vulnerable to new business models that offer fresh solutions. The secret is to have a good idea, and the old adage “find a need and fill it” still applies. Winning entrepreneurs seek to solve problems people have that they aren’t solving particularly well, and are open to change. Serial entrepreneur Richard Barton, whose startups include Zillow, Expedia, Glassdoor and others, says he gets ideas by repeatedly asking a simple question: “what piece of marketplace information do people crave and don’t have?” In sum: the startup boom, and lower fuel costs, is providing much needed oxygen to the still-strained global economy and will likely spread (Iran’s startup culture may lead the growth). The impact on the corporate world is clear: better disrupt yourself or someone else will.
- Additive Manufacturing is Nearing a Tipping Point.
According to Gartner, a technology becomes mainstream when adoption levels reach 20 percent, which is approximately where this nascent industry is today. As predicted in InnovationTrends May 2014, practical uses of 3-D printing are exploding, as more and more creative people use the new devices to solve problems and create opportunities. NASA uses 3-DP to rapidly prototype at lower cost. Stage set designers on Broadway are using 3-DP to churn out sample sets overnight. Ships at sea are using 3-DP printers to make replacement parts, doing away with costly backup inventory. Charities worldwide are creating 3D-printed prosthetics for those who could never afford them otherwise. UPS is building on its existing third party logistics business to add 3-D printing mini-factories for just in time deliveries. But the real tipping point comes when failure to adapt to the Additive Trend starts becoming a necessity to survival. According to Dartmouth’s Richard D’Aveni, (Harvard Business Review, May, 2015), “The U.S. hearing aid industry converted to 100 percent additive manufacturing in less than 500 days, and not one company that stuck to traditional manufacturing methods survived.”
While 3-DP does not provide economies of scale achieved thru massive production runs, its differentiating factors are increased flexibility and the ability to customize. Because each unit is built independently, it can easily be modified to suit unique needs or, more broadly, to accommodate improvements or changing customer requirements. The larger impact on the entire manufacturing sector is also becoming clear. With wages in China rising and the cost of energy diminishing, Boston Consulting Group calculates the average cost of manufacturing in the U.S. is now only five percent higher than in China. By 2018, BCG sees U.S. manufacturing costs dropping below China’s.
- The On-Demand Economy is Unstoppable.
As I write this, the headline on this morning’s New York Times is “Uber Valued at $50 billion.” Meanwhile, Uber’s twin brother, AirBNB has overtaken Hilton and InterContinental Hotels to become the world’s largest lodging chain, without owning a single room. Since our inaugural issue, where we alerted readers to the “sharing economy” (since renamed the On-Demand Economy), the rise of app-based startups has become a huge global force of disruption and possibility, depending on where you sit. On the one hand, On-Demand businesses enable regular people to make money on their own terms, often with assets they already own. “Is the On Demand Economy taking workers for a ride,” as Time’s Katy Steinmetz asks, as hundreds of thousands of new drivers sign on every month. The ability of these new business models to disrupt incumbent businesses at the local level, has produced violent protests and new regulation from Portland to Paris. Thinking ahead, it’s easy to see how more and more traditional businesses will be upended by competitors from outside their industry, and outside their geographic area. TaskRabbit is a threat to the temporary staffing industry. RelayRides or Sidecar, which allow consumers to rent a car from a private citizen, pose a threat to Hertz and Avis. While regulators will need to establish new protections, the trend seems almost inexorable. Its cumulative effect will have a major impact on cities, product manufacturers and service providers.
- The Algorithmic Economy Approaches.
Ninety percent of the world’s data was created in just the last two years alone but here’s the rub: most of that data is still unstructured, meaning it’s not fully digitized and therefore not accessible. But this is changing – and fast! Big Data is the technology that allows organizations to analyze more information from more sources in more ways than ever before. Combine this access to mega-data with the ever-growing advancement of mathematical algorithms (and related software) and you get incredible new capabilities: Increased power to predict patterns in consumer behavior; the power to predict the maintenance requirements and operating lifetimes of industrial machinery; the ability of machines that notify you in advance that they need attention. Companies that embrace Big Data will be able to make sense of the information at their fingertips, and derive new strategic benefits. New ways to cut costs, increase sales, personalize product offerings, and enter new markets. Since 2005, IBM has invested $24 billion in their data analytics business, including $17 billion in 30 acquisitions. And they are hardly alone. Key question: what are you doing to exploit the Algorithmic Economy in your organization?
- The Crowd is the Future.
Crowdsourcing will continue to gain clout in large organizations. Denmark-based Lego Toys uses crowdsourcing to inspire ideas from fans that its own 180 designers might not have ever thought of. Submissions that receive 10,000 votes from site visitors are then vetted by Lego reviewers. And fans whose models are chosen for production receive one percent of their toy’s revenue. Thanks to the internet and social media, crowdsourcing is one of the hottest new methods of tapping customers (and the wider public’s) knowledge, creativity and insight to further your company’s goals. Other organizations are crowd-sourcing for solutions to vexing technical problems or to discover winning algorithms (Netflix), while snack giant Lay’s, a division of Frito Lay, asks the crowd to suggest new chip flavors or even whole snack categories via its crowdsourcing website. To see the front lines of this revolutionary trend visit Clorox Connects and you’ll see dozens of ideas submitted by Clorox consumers. Fact is, we’ve been crowdsourcing since the time of the Romans. What’s different today is the scale and scope of this new method of interacting with the wider world, and this dynamic will only grow in the years ahead.
Clearly, you can look at these five trends and conclude: they don’t apply to me. But that’s dangerous. The driving necessity is to continue to upgrade and refine the way you practice innovation, and this means looking for ways to ride the energy of emerging trends into a more prosperous future. Hopefully this recap of these five innovation trends will spur you to take action, and I wish you much success.