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Exponentially advancing digital technologies have led to exponentially accelerating innovation, making the environment increasingly difficult to navigate—but also opening the door to opportunity.
We developed the Shift Index to help executives understand and take advantage of the long-term forces of change shaping the US economy. Exponential innovations are rapidly moving across boundaries, causing traditional definitions to blur and blend. The changes wrought by exponential innovation are increasing the pressure on companies to perform.
The continuing exponential cost-performance improvement of core digital technologies is unprecedented in history. To achieve this feat, Tesla made many technical and operational advancements: production lines designed from scratch, new in-vehicle software that can be automatically updated, a new sales process to profitably generate demand in target segments. We cannot grasp the full potential of exponential technologies until we explore the interactions across them.
The impact of exponential technologies is further amplified when they coalesce into open platforms and ecosystems.
Through a virtuous cycle—technological improvement enabling innovation, which in turn serves as a platform for further technological improvement and innovation—exponentially advancing technologies lead to exponentially accelerating innovation. The cost of three core digital technology capabilities—computing power, data storage, and bandwidth—relative to their performance has been decreasing exponentially and at a faster rate than that of previous technological advances such as electricity and telephones. The cost of computing power has decreased significantly, from $222 per million transistors in 1992 to $0.06 per million transistors in 2012. Similarly, the cost of data storage has decreased considerably, from $569 per gigabyte of storage in 1992 to $0.03 per gigabyte in 2012. The cost of Internet bandwidth has also steadily decreased, from $1,245 per 1000 megabits per second (Mbps) in 1999 to $23 per 1000 Mbps in 2012. The continuing development of these foundational elements magnifies exponential innovation, offering opportunities for organizations that are able to tap into these trends. With the Model S, Tesla proved that it could produce a technologically advanced product that could compete with even its most established competitors. As dependable, ubiquitous Internet access spreads across the globe, increasing disruption and innovation will surely follow. In Africa, among the regions that have the lowest Internet penetration, telecom operators provide mobile payment services to millions of people who previously had no banking account but do have a mobile phone. In addition, open collaboration platforms are providing freelancers, entrepreneurs, students, and corporate institutions global reach. In fact, most of the tools we use in industry and in everyday life are powered by the foundational forces of computing power, storage, and bandwidth. The rapid advance in core digital technologies is even reshaping the nature of competition itself—in ways that encourage disruptive innovation. As tempting as it may be to address surface disruptions in the short term, more lasting value can come from understanding and harnessing the forces underlying them. Developments in the telecommunications industry over the past decade highlight the marketplace challenges of keeping up with exponentially improving technology within an industry.
For some companies, computing power and bandwidth themselves have become a source of competitive advantage.
Now more than ever, lower risks and cost exposures allow competitors to take advantage of open flanks, especially of large enterprises encumbered by legacy practices.
Many believe that a new wave of innovation and disruption will be unleashed when 3D microchips become cost-competitive. The potential benefits of 3D microchips over conventional microchips include higher performance with greater energy efficiency.
3D microchips could be used to spur an age of cognitive computing, exemplifying the potential exponential progress of artificial intelligence.
High production costs and process technology limitations remain crucial challenges for 3D chip manufacturers. Advances in information technologies have also fundamentally changed the way products and services are conceived and created. Rather than create proprietary products, some companies are developing and deploying platforms that others can build upon. With an open platform, although the platform creator incurs the expense of building the core infrastructure, third-party innovators become stakeholders in its success. As an example of a platform-based dynamic ecosystem, consider the recent proliferation in the number of start-ups innovating in the personal transportation industry (figure 6). Today, however, car-seeking consumers can select from a wide variety of options, from outright ownership and traditional renting to “we’ll pick you up” rental service, renting by the hour, and ridesharing.
Much of this disruption in the personal transportation space has occurred within the last five years, perhaps providing a glimpse of the increasing pace of change and instability in that industry’s future.
The core digital technologies of computing power, storage, and bandwidth have penetrated most sectors of the modern world, dissolving many of the traditional boundaries between people, organizations, and domains. This is why the nature of exponential innovation cannot be fully described by examining any single technology or sector. Focusing on only one technology or sector can miss the broader impacts and opportunities driven by these converging technologies. Autodesk recently extended the Project Cyborg ecosystem by partnering with Organovo, a young 3D printing company specializing in printing biological tissues.
Such a platform will be advanced by the acceleration of computing power, storage, and bandwidth performance. One explanation for this could be that, while digital technology continues to advance, the ability of people and organizations to fully use its capabilities have not kept pace.
Labor productivity in the United States grew at a 2 percent compound annual growth rate (CAGR) between 1999 and 2011, and is currently at its highest level since measurement by the Bureau of Labor Statistics began. While the gap between technology and labor productivity is worrisome, technology can also help people to become more effective. Where once management might have dismissed the latest technology, such as social or mobile, as a passing fad, such technologies are now deeply engrained in how people live and work. Refocusing technology decisions to empower and inform the individual worker may challenge traditional hierarchical organizations. As product portfolios become more dependent upon the information economy’s prevailing platforms, the playing field is leveling.
It is clear that the foundational forces enabling exponential innovation will continue to exert themselves in both expected and unexpected ways for the foreseeable future.
The Deloitte Center for the Edge conducts original research and develops substantive points of view for new corporate growth. Below the surface of current events, buried amid the latest headlines and competitive moves, executives are beginning to see the outlines of a new business landscape. Decoding the deep structure of this economic shift will allow executives to thrive in the face of intensifying competition and growing economic pressure.
Within the Deloitte Center for the Edge’s Shift Index, the Foundation Index describes the fast-moving, relentless evolution and penetration of a new digital infrastructure that has reduced barriers to entry, enhancing movement and enabling vastly greater productivity, transparency, and connectivity.
John Hagel III, John Seeley Brown, Lang Davison, “The Big Shift: Measuring the Forces of Change,” Harvard Business Review, July-August 2009. John Hagel (co-chairman, Deloitte Center for the Edge) has nearly 30 years of experience as a management consultant, author, speaker, and entrepreneur who has helped companies improve performance by applying IT to reshape business strategies. John Seely Brown (JSB) (independent co-chairman, Deloitte Center for the Edge) is a prolific writer, speaker, and educator.
Tamara Samoylova (head of research, Deloitte Center for the Edge) leads the Center’s research agenda and manages rotating teams of Edge fellows. Michael Lui (research fellow, Deloitte Center for the Edge) focuses on research into company performance and challenges as a result of the shifting technological landscape. Chris Arkenberg (research fellow, Deloitte Center for the Edge) is interested in exploring the dynamic interface between technology and humanity. Andrew Trabulsi (research fellow, Deloitte Center for the Edge) conducts original research on macro- and micro-level trends that are shaping the future of business and policy. The authors would like to thank Wassili Bertoen and Daan Witteveen of Deloitte Netherlands for the sidebar on global Internet adoption. The Center would also like to acknowledge our close collaboration with Singularity University, whose ongoing efforts around the interplay of exponential technologies is instrumental to our understanding. Additionally, we would like to thank Duleesha Kulasooriya, head of impact strategy at the Center for the Edge, and Maggie Wooll, the Center’s senior editor.
Deloitte’s integrated performance management (IPM) approach combines the key processes, systems and tools that drive value throughout your organization. Today’s businesses face a common set of challenges in three critical areas of performance management. First, despite requiring substantial resources, planning, budgeting and forecasting, processes are often not strategically aligned. Companies have tried to overcome these challenges with heavy investments in enterprise resource planning software and best-of-breed software applications, and these have helped in certain areas.
Deloitte’s Integrated performance management (IPM) approach does just what it says: it integrates the key processes, systems and tools required to plan, manage and measure performance while providing your business with end-to-end insight into what you’re doing, how you’re doing and what you should plan to do in the future. Corporate plans and budgets are often too unrealistic to engage business managers and too high-level to guide investors. Despite ongoing efforts, most organizations continue to be saddled with inflexible reporting processes, over reliance on manual processes, and an inability to effectively leverage their data. With Deloitte’s proven methodologies, our proprietary value creation toolset and extensive cross-industry experience, we can help you implement a performance management framework that will not only improve performance, but make it measureable, sustainable and visible to investors and other key stakeholders. Beyond building value, companies often neglect to communicate value – the processes that drive it and the metrics that define it – to shareholders or to the enterprise at large.
These capabilities allow you to integrate data capture, processing, analysis and information with key finance process requirements. No matter how in-tune your executives are with the overall goals of the business, they may have difficulty understanding, measuring, forecasting or communicating the effects of their strategies on shareholder value. Enterprise Value Map™ (EVM) provides a visual framework for linking your strategies, initiatives and operations to shareholder value. ValueAnalytics™ analyzes your company’s operational and financial performance history to determine whether your business is creating or eroding value.
ValuePrint™ helps you measure the business value of investments and to develop rigorous business cases. Portfolio value optimization helps you see beyond the costs and benefits of individual projects to better understand and manage your entire project portfolio and its effect on business performance. To create and protect value over time, you must make value creation a vital part of enterprise life.
The responsibility for meeting these challenges typically falls on the finance department and the CFO.
Our approach to cost management identifies hidden business costs and provides an organizational structure to effectively manage and where possible reduce costs – all without diminishing value.
The goal of strategic cost management is to build a structured approach to sustaining value over time.
Once your cost model is in place and you identify critical cost drivers, you can undertake cost-cutting measures that support your business objectives and preserve existing value. This methodology can be applied to virtually every aspect of your organization, including your business configuration, processes, organizational models, approach to governance and tax structure. CFOs are under enormous pressure to provide organizations with balanced, strategic financial guidance and cost controls, all the while fulfilling performance, compliance and investor mandates.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. Faced with these pressures, investors, stakeholders, and executives all agree that something needs to be done.
This paper seeks to show how organizations can achieve large-scale transformations in a series of smaller, pragmatic steps.
Metrics that matter is a pathway to focus deployment of a disruptive tool or practice in order to trigger cascades of adoption and rapid performance improvement.
Scaling edges is a pathway to transform the core of the business by focusing on low-investment, high-growth-potential opportunities—“edges”—with fundamentally different business practices. Shaping strategies is a pathway to restructure markets and industries using platforms to bring people together and mobilize large ecosystems with positive incentives by creating a compelling view of the future. Before discussing Pragmatic Pathways in greater detail, it may be helpful to reflect on the two common change paradigms we touched upon before.
Although the reasons for these failures are complex and unique to each effort, at their simplest level, they all share three factors: 1) large financial outlays, 2) lengthy lead times, and 3) the uncertainty of success.
Inevitably, as more and more organizations face the imperative for transformational change, they have started to look for alternatives to the incremental and “big bang” change approaches we have described. Circumvent internal resistance: Often, the most significant obstacles for change occur internally, either in the form of the slow pace of approvals and adoption or outright refusal to change. Leverage your ecosystem: Another important component of the Pragmatic Pathways approach is to help your organization establish its place in its broader ecosystem (your ecosystem consists not only of your suppliers and customers, but also your consumers’ influencers as well as groups in adjacent businesses). Employ disruptive tools: All three approaches prescribe the use of new tools to help in the change process. Aim for immediate impact: Each pathway is designed to help organizations realize the benefits of their change efforts as soon as possible. Achieve long-term transformation: While these approaches are designed for short-term impact, they will also help create and reinforce the collaborative behaviors and transparent organizational cultures that make future change initiatives easier. Understand the financial and operational metrics that matter most and figure out how to connect these levers to the deployment of new tools or practices in order to stay abreast of technological and organizational developments that can improve internal efficiency. Continually test and refine new edges outside the core of the organization, using its business ecosystem to help hone fundamentally different skills, practices, and business models while connecting and mobilizing third-party resources to minimize the cost of scaling these edges.
With the right alignment and vision at the executive level, companies could shape entire markets or industries through orchestrating these broader ecosystems with a shaping strategy. The Pragmatic Pathways framework (see figure 1) can be interpreted as a spiraling maturity model of sorts, with the starting point at metrics that matter and moving clockwise to scaling edges and then shaping strategies.
Many companies will deploy a new tool or practice with a hammer; that is to say, they roll it out and hammer it in with no strategic plan.
When Pfizer was considering increasing the usage of cloud technologies in its organization, the natural place to deploy it was in R&D, the core engine that drives success for pharmaceutical companies. Pfizer’s use of AWS is an example of how organizations can effectively launch a new tool or practice by aligning it with business metrics that matter to employees.
This metrics that matter approach is very different from a traditional firm-wide IT implementation; it is a targeted insertion of a new tool or practice to drive business performance. Exception metrics: For line employees, it is critical that they improve productivity and performance, whether through improving collaboration and communication or making exceptions to daily processes easier to handle. Operating metrics: Managers aim to drive improvements on operating metrics—near-term indicators of an organization’s performance and success. Financial metrics: Finally, executives are focused on improving financial metrics to please shareholders, often in lockstep with quarterly reports.
In an industry characterized by “eureka” moments, Pfizer’s choice to use cloud has afforded the company greater flexibility and capability to scale its operations as needed for critical research. Not only has the targeted deployment of cloud led to adoption and behavioral changes across the R&D group, but it has also changed Pfizer’s competitive advantage. This pragmatic approach may start with an executive spotting a strategic challenge that impedes an important financial metric. When AWS was launched in 2002, many thought it was simply a way for Amazon to sell off excess storage and computing capacity. One of the most interesting aspects of AWS is that while cloud services seem fundamentally different from the online marketplace that Amazon is known for, cloud services are actually part of the same broad vision. The move into cloud computing may be pivotal for Amazon, not only because it gives the company access to new markets, but because the market can also potentially bear higher margins for services than commoditized retail products.
Amazon’s AWS is an example of what we call scaling edges, which is a framework and a set of design principles focused on large-scale institutional transformation.
Often, the organizations that need change the most are those that are the most resistant to it. Align with fundamental market forces and the long-term vision of the business and market: For Amazon, this came with understanding the strong growth potential and high margins of cloud-based services.
Require minimal investment to initiate: In addition to its excess capacity, Amazon had already developed many key technologies and internal capabilities (particularly around distributed computing) that could be leveraged for AWS.
Have the ability to “grow the pie,” or create revenue in the short term, which does not conflict with the core of your business: The revenue streams from AWS were almost immediate and did not cannibalize any of Amazon’s core business on its online marketplace. Leverage—Edge initiatives should leverage low-cost, disruptive technologies and external resources to overcome obstacles to scaling: Many of AWS’s services are designed to easily integrate with and build on other software and web services. As a result of the integrated design, a wide range of customers have quickly adopted the product because it meshes with tools they already use. One of the powerful elements of leverage is that AWS overcomes a zero-sum business mind-set. Accelerate—The third key component to the framework is the speed at which one can take a new product to market. In order for the edge vision to have the most impact, it has to be in line with fundamental shifts in the broader marketplace.
These concepts are built for change agents to help others in their companies develop the courage and conviction required to start the change process.
As Amazon continues to scale the edge of AWS, it has the potential to not only transform the core of its own business, but to also fundamentally change its market and ecosystem.
Napster broke the music industry by removing content from its traditional wrapper, the album, and the industry has not been the same since. After Spotify’s launch, Sweden’s music industry experienced growth for the first time in 2011, with Spotify accounting for approximately half of the music revenue.
Shaping strategies are an effort to transform an industry or market by creating incentives for external participants, demonstrating that all participants can benefit from this new vision, and providing a platform for these participants to interact on. Shaping view: First, the orchestrator must articulate a shaping view, a long-term vision of where the market is heading, which identifies where the opportunities and economic incentives lie for participants, yet is big-picture enough to leave considerable room for refinement. Shaping platform: Second, the orchestrator must provide a shaping platform, or a set of clearly defined standards and practices, that organize the activities of the participants and also provide them with leverage by reducing initial investment and lowering the cost of interactions between participants. Shaping view: Spotify’s actions to date demonstrate a very specific vision of where the music industry will evolve—to an industry that is thriving on, rather than suffering from, the new digital platforms. As this “operating system,” or music platform, Spotify intends to deliver music and interactive experiences through third-party applications to its consumers.
Spotify differs from Apple, Pandora, and other prominent digital music aggregators through the integration of social graphs into the music listening experience. This is a crucial differentiator that enables Spotify to deliver music anywhere, anytime, while still fostering a healthy ecosystem and growing the music industry.
Shaping platform: Spotify has created a platform and a set of clearly defined standards and practices that organize and support the activities of its many participants. Acts and assets: To date, Spotify has demonstrated that it has both the conviction and the assets to help realize this vision.
Spotify has demonstrated the potential to shape the music industry by describing a compelling vision of the future of music, introducing a platform to help realize this, and signaling its commitment to developing this vision in tandem with its broader ecosystem. Although we have suggested a maturity model-type approach to identify where to start with Pragmatic Pathways, this is only a loose guide to how they can be deployed. Let us take a hypothetical example to demonstrate how the Pragmatic Pathways approaches can build upon each other. At the same time, the team in question might identify a new technology or practice to increase the efficiency of operations for the identified edge of these media companies. After scaling its edge vision and pulling the core out to meet that edge, the cable company could realize it has the potential to disrupt and shape its entire industry.
Throughout this example, you can see how the Pragmatic Pathways frameworks are complementary and self-reinforcing; moreover, they are an iterative cycle in which the principles of each approach can be repeatedly applied to empower companies to evolve and match the rate of change of our world.
As a change agent reading this article, you are no doubt wondering which of these change approaches is most suitable for your specific company and situation. Is your company considering the deployment of a new, disruptive technology or practice, but unsure how to best drive adoption?
Does your company have a metric-driven culture with clear key operating and financial metrics? Are there specific pain points (e.g., exceptions to daily processes, bureaucracies restricting external collaboration) in day-to-day operations that can be improved by adopting new technologies or deploying new practices?
Are you a change agent who is willing to test boundaries and work outside of the core organization? Do you have a long-term vision of how fundamental shifts are affecting your industry or market? Do you see an opportunity in leveraging a broader ecosystem within your industry or market to accelerate internal initiatives?
Are the core operations of your organization surviving but not thriving in a competitive industry? Can you identify a high-growth potential “edge” for your company, which is aligned with changes in your business’s landscape and has the potential to eventually transform your entire organization? Do you have alignment around your organization’s strategy from the CEO through the entire executive team on a vision that could change your industry?
Can you clearly identify and articulate attractive opportunities for a wide range of participants in your vision for your industry? Are you an industry leader or disruptor with the conviction and capability to influence the direction of the industry?
Does your view of the industry express a perspective on its long-term direction and highlight how it could change?
Can you create or provide a platform that can support a diverse set of participants and offer opportunities to create value in many distinct niches? Large-scale transformation is not an easy process for an organization, but it is becoming increasingly necessary if companies are to escape today’s mounting pressures. Megan Miller, Aliza Marks, and Marcelus DeCoulode, “Social Software for Business Performance,” Deloitte Development LLC, 2011.
John Hagel III, a director with Deloitte Consulting LLP, is the co-chairman of the Deloitte Center for the Edge.
John Seely Brown (JSB), co-chairman of the Deloitte Center for the Edge, is a prolific writer, speaker, and educator. Christopher Gong of Deloitte Services LP, a member of the core research team for this report, is the senior editor for the Center for the Edge.
Stacey Wang, a member of the core research team for this report, is a senior consultant at Deloitte Consulting LLP who focuses on strategy, growth, and innovation within the technology space. Travis Lehman, a member of the core research team for this report, is a consultant in Deloitte Consulting LLP’s Strategy and Operations practice, focusing on Technology, Media and Telecommunications industry clients. The Center focuses on the boundary, or edge, of the global business environment where strategic opportunity is the highest. While individuals are eagerly embracing new knowledge-sharing technologies, our research suggests that outdated institutional structures continue to inhibit organizational knowledge flows. That’s the critical question raised by the 2013 Shift Index (see sidebar “The Shift Index”), a set of measurements designed to complement the numerous indices tracking the short-term facts and figures of a rolling business cycle. The Foundation index involves changes to the fundamentals of the business landscape catalyzed by advances in the digital technology infrastructure and reinforced by liberalizing public policy. The Flow index looks at the flows of knowledge, capital, and talent—the key drivers of performance enabled by the foundational advances—as well as the amplifiers of these flows.
The Impact index captures the consequences of long-term trends on competition, volatility, and performance across industries. Driving these changes is the continuing exponential improvement in the cost performance of three core digital technologies: computing power, storage, and bandwidth. In this fluid, competitive environment, a few institutions and ecosystems are creating new sources of value and discovering new ways to thrive. This focus on efficiency and predictability, however appropriate it may be in a relatively stable business environment, is no longer a virtue. Fortunately, thanks to the unprecedented cost-performance improvement in computing power, storage, and bandwidth, the communications tools that can enable rapid learning and effective knowledge-sharing are widely available and improving every day.
By and large, people are proving to be highly proactive in adopting newer and better communication tools, willing to change as soon as a lower-cost, higher-value solution appears. Yet our data also indicate that the ways we connect and share in our personal lives have not carried over to how we connect, innovate, and learn from each other professionally. Given the increased availability of knowledge-sharing tools and many companies’ expressed intent to deploy them, these results seem surprising. The increasing turnover rate among executives (figure 28) also hurts businesses by undermining the ability of a given leadership team to develop long-term, trust-based relationships on behalf of the organization.
Nor, in the era before the technologically driven, widespread cross-pollination of ideas, was sharing information necessarily an advantage. What happens when companies continue to try to fit new technologies and practices into old business models and rationales?
Our worker passion analysis shows that the widespread belief that passion pertains only to the select few in our workforce can become a self-fulfilling prophecy.
It is true that one group of workers—the segment sometimes known as “creative talent”—continues to reap a disproportionate share of the value created by the Big Shift. Simply put, there is a growing mismatch between the old frameworks and practices that many companies use and the structures and capabilities required to be successful in a rapidly changing environment. As long as our institutions continue to resist the Big Shift, the journey ahead will remain stressful and pressure-packed. In the context of the Big Shift, what is the rationale for the corporation, and how will the future corporation operate? The Shift Index consists of three sub-indices that measure the rate of change in today’s business environment: the Foundation index, the Flow index, and the Impact index. The Foundation index measures changes that are fundamental to the business landscape and are catalyzed by the emergence and spread of digital technology infrastructure and reinforced by long-term public policy shifts toward economic liberalization. The cost of computing power has decreased from $222 per million transistors in 1992 to $0.06 per million transistors in 2012. The cost of data storage has decreased from $569 per gigabyte of storage in 1992 to $0.03 per gigabyte in 2012. The cost of Internet bandwidth has decreased from $1,245 per 1,000 Mbps in 1999 to $23 per 1000 Mbps in 2012.
The Index of Economic Freedom, a compilation of 10 indicators measured by the Heritage Foundation, is a proxy for public policies that promote open markets and the movement of capital, labor, product, and resources. The Flow index measures the key performance drivers—flows of knowledge, capital, and talent—unleashed by the forces measured in the Foundation index.
Although overall participation in knowledge-sharing activities that extend beyond organizational boundaries has not changed significantly between 2009 and 2012, workers are slowly changing the types of activities they participate in.
Internet traffic for the top 20 highest-capacity US routes has grown exponentially since 1993. Migration to the 10 cities ranked as most creative (based on the methodology developed by Richard Florida in his book The Rise of the Creative Class – Revisited) has increased faster than to the least creative cities.
Despite better tools to connect digitally, people continue to seek face-to-face interactions.
The absolute amount of capital moving between countries has trended upward for the past 30 years. In a 2012 survey of 3,008 full-time US workers, only 11 percent of respondents exhibited all three attributes of worker passion—commitment to domain, questing, and connecting dispositions.
The Impact index demonstrates the consequences of the Big Shift; thus, it is a lagging indicator.
Competitive intensity is inversely related to industry concentration (as measured by the Herfindahl-Hirschman Index or HHI).
Over the long term, the upper quartile of firms—the “winners”—have only slightly increased the rate of return to shareholders. Workers in the creative class, as defined by Richard Florida, are reaping relatively more rewards (in the form of compensation) than the rest of the US labor force. Over the long term, executives are leaving their positions (resigning, retiring, or joining different companies) at an increasing rate. Ari Gesher (senior software engineer, Palantir), interview with Deloitte Center for the Edge, September 2013.
Peter Lockett (senior engineer, DPR Construction), interview with Deloitte Center for the Edge, January 2013. Deloitte analysis using data provided by Standard & Poor’s Compustat on over 20,000 publicly traded US firms (and foreign companies trading in American Depository Receipts). John Hagel (co-chairman, Deloitte Center for the Edge) has nearly 30 years of experience as a management consultant, author, speaker, and entrepreneur, and has helped companies improve performance by applying IT to reshape business strategies.
Matt Frost (research fellow, Deloitte Center for the Edge) works with clients to align talent strategies and initiatives with overall business priorities. Ankur Damani (Research Fellow, Deloitte Center for the Edge) is interested in the dynamics of new business models and growth strategies enabled by technology in both mature and emerging sectors.
Jonathan Salzberg (research fellow, Deloitte Center for the Edge) is a consultant in Deloitte Consulting LLP’s Strategy & Operations practice. Recently, Altimeter Group published an infographic on the state of social business (see below), meant to promote their research on that same state of social business (in 2013), released in October.
The infographic mainly focuses on the use of social media in the enterprise, just a piece of what social business in the broader sense is really about. Planning (no significant presence in social media channels, listen and learn to ensure a strong foundation of strategy and resource development,…). Engagement (social as a critical component in the relationship-building along the entire customer lifecycle, so we’re in the use of “social” for external reasons here).

What’s important in the latter study is the self-reported perspective of the organization on the future impact of social business on the business of respondents. While the majority of the attention regarding social business still seems to go to social media and marketing, changes in the way we work in the broadest sense possible are fundamentally more important for the near future, with a less siloed view as a key challenge. Breaking down silos (let’s start with working through them, collaboration and more efficiency indeed). So, I think it’s time to look less at traditional social business maturity stages as they often start from the adoption of social media for whatever reason (and the same goes for other maturity models, for instance regarding content marketing). On top of that, in a connected digital business reality, these different strategies can’t be siloed either. A people-oriented and collaborative mindset, that’s your real social business challenge.
Or even simpler and as I wrote at the end of a previous post: have a strategy – that works – for everyone and everything. So, what if we looked even less at social media adoption across the organization as some kind of parameter and how exactly we define social business from our own angle and started looking more at good business and how we can do it better using social technologies and other ways of working taking into account that amazing mix of changing ‘behavior’, technology and so much more?
The cost-performance of three core digital technology building blocks—computing power, storage, and bandwidth—has been improving at an exponential rate for many years. The disruptive potential of exponential technologies is amplified when they interact and combine in innovative ways. They are combining with entirely new categories of technology such as molecular biology and materials science, enabling advances and causing disruptions across an ever-expanding range of industries, functions, and disciplines.
Yet the same platforms and ecosystems that amplify exponential innovations can also help institutions and individuals connect with each other, empowering them to combine technologies, practices, and business models in interesting ways to create a seemingly endless array of new products, services, businesses, and new technologies. The 100-year-old industry, born of another series of disruptions—the assembly line and electricity—faces change on an unprecedented scale. Tesla developed a suite of innovations to better align with customer needs and disrupt incumbent automakers.
Moreover, the implications of exponential technologies cannot be understood by looking at the individual parts.
These reduce the investment and lead time required to drive the next wave of innovation into markets by enabling people and technologies to rapidly build on previous waves of innovation.
They are combining with entirely new categories of technology such as molecular biology and materials science, enabling advances and causing disruptions across an ever-expanding array of industries, functions, and disciplines. For companies, this accumulation of technological advances, and the consequent layering of innovation upon innovation, can pose the threat of disruption—but can also open the door to great opportunity. The increasing affordability of digital technology, coupled with wireless networks and powerful mobile devices such as smartphones and tablets, has created an increasingly broad platform for users to connect and communicate anywhere and at any time. The decreasing cost-performance curve enables the computational power at the core of the digital infrastructure. The decreasing cost-performance of digital storage enables the creation of more and richer digital information. The declining cost-performance of bandwidth enables faster collection and transfer of data, facilitating richer connections and interactions. From 1990 to 2012, the percent of the US population accessing the Internet at least once a month grew from near 0 percent to 71 percent.
From 1985 to 2012, the number of active wireless subscriptions relative to the US population grew from 0 to 100 percent (reflecting the fact that the same household can have multiple wireless subscriptions). The cost-performance improvement in core digital technologies shows no signs of slowing down, at least in the foreseeable future.
Underlying the finished vehicle, a series of innovations on everything from how the cars are assembled to how they are maintained helped Tesla gain traction in a difficult industry. According to a report by Cisco Systems, Internet traffic worldwide will grow threefold by 2017, with non-PC devices like smartphones and tablets predicted to drive the traffic.13 Internet access through mobile phones will be especially prevalent in developing economies. The widespread acceptance of mobile payments in Africa is spurring entrepreneurship, exponential innovation, and business opportunities. These collaboration platforms create unseen opportunities on a scale that was previously only achievable by multinational corporations.
As more innovators and organizations experiment with these technologies, individually and in combination, the pace of innovation and disruption may increase across all industries. Just as the speed and direction of the wind in any given hour is highly variable and not particularly useful for charting a course across the ocean, the deeper trends shaping the environment are more useful for navigating the long-term future than are the surface disruptions. New solutions that sidestepped the constraints imposed by pre-Internet, pre-personal computing services ravaged stable revenue models.
The New York Stock Exchange (NYSE) has operated since 1817, but more and more, the actual trading of stocks occurs not on the floor of the exchange but on virtual exchanges powered by huge server farms and data warehouses. The combination of nearly instantaneous information flows and the ability to share and collaborate globally with minimal difficulty or transaction costs is lowering the barriers to market entry. When portfolio performance slows and expenditures must rise just to cover the costs of defending legacy revenue streams against the tides of change, it can be easy to lose sight of smaller and nascent competitors. Equipped with cognitive computing capabilities, computers could potentially “learn” and “think”; they may also be able to recognize patterns, query back, and request additional information.
In addition, Moore’s Law has proved durable with conventional microchips, reducing the immediate demand for additional processing power.24 Still, if and when the cost-performance curve for conventional microchips flattens out, 3D microchips will be waiting in the wings, ready to power future waves of innovation. Both driven and empowered by rapidly developing technological tools, companies are developing new practices and models that seek to decentralize innovation and invite participation from beyond the organization’s walls.
The result has been to increase the speed and decrease the cost of innovation, since the standardized interfaces and plug-in architectures that such development platforms establish can be extended by third-party innovators to meet more specialized needs. Hence, platforms allow an organization to leverage the efforts of others participating in its growth. Static ecosystems, such as an automotive supply chain, aggregate and coordinate a fixed set of resources, typically delivering the greatest benefit to the ecosystem organizer.
For instance, by integrating both enterprises and customers into development, platforms and ecosystems enable shorter product release cycles. For years, most consumers who wanted to use an automobile for personal transportation had three basic choices.
Similarly, in any given industry, reduced barriers to entry likely mean that, if new entrants and competitors are not yet encroaching on your space, they soon will be. Technologies built on these core capabilities have rapidly shifted the landscape, laying a common foundation beneath all industries.
By using the methodologies of procedural modeling, prototyping, and simulation and applying them to micro-, nano-, and human-scale domains like biotechnology, pharmacology, and materials engineering, the team is reframing the science of living systems as a design and engineering challenge. Using Project Cyborg’s data, the Organovo team has successfully designed and printed a liver tissue model for testing response to injury, pathogens, and treatments. It hopes to grow the platform and its ecosystem of contributors to radically alter the way we engage with biological systems. For example, since the advent of the microchip, the topple rate—the rate at which companies switch leadership positions in a sector—has increased 39 percent.28 A higher topple rate means that companies are finding it more difficult to maintain their competitive advantage and stay in the top tier of performance. The rapidly widening gap between the exponential improvement in core digital technologies and the rate of labor productivity improvement (figure 7) presents opportunities to innovate in many aspects of business.
At the same time, the combined cost-performance of three core digital technologies (computing power, storage, and bandwidth) grew at a 49 percent CAGR. If companies are complacent about closing the gap, they can be vulnerable to competition from unexpected directions as new entrants harness digital technology to unseat incumbents. Workers may use technology to more rapidly respond to problems, collect valuable insights and customer feedback, and self-organize with distributed collaborators to pursue shared outcomes. In line with this broader cultural shift, businesses should use technology better to help increase employee learning and performance. However, in a time of such rapid change, structuring around organizational efficiency can introduce rigidity and emphasize defending past performance over accelerating new innovation. The leadership perspective should expand to encompass not just the organization but the entire ecosystem. Competitors can use common platforms and draw upon easily accessible best practices to quickly bootstrap their operations to scale.
Yet the same platforms and ecosystems that enable and amplify exponential innovations can also help institutions and individuals connect with each other, empowering them to combine technologies, practices, and business models to create a seemingly endless array of new products, services, businesses, and new technologies.
The center, anchored in the Silicon Valley with teams in Europe and Australia, helps senior executives make sense of and profit from emerging opportunities on the edge of business and technology. The good news is that the actions needed to address short-term economic conditions are also the best long-term measures to take advantage of the opportunities these challenges create. The Foundation Index comprises six metrics, including computing, digital storage, and bandwidth. In addition to holding significant positions at leading consulting firms and companies throughout his career, Hagel is the author of bestselling business books such as Net Gain, Net Worth, Out of the Box, The Only Sustainable Edge, and The Power of Pull. In addition to his work with the Center for the Edge, JSB is adviser to the provost and a visiting scholar at the University of Southern California.
Prior to joining the Center, Samoylova served as a senior manager in Deloitte Consulting LLP’s Growth and Innovation practice, helping mature companies find new areas of growth by better understanding unmet customer needs, industry dynamics, and competitive moves. Lui is a manager in Deloitte Consulting LLP’s Strategy & Operations practice with experience in growth, innovation, and operating model redesign. He was a visiting researcher at the Institute for the Future, worked in engineering at Western Digital, and spent over 10 years at Adobe Systems, Inc.
Prior to joining the Center, Trabulsi spent four years working on large, multinational projects with government, NGO, and private sector clients. Second, performance reporting processes are often fragmented and inflexible, and frequently produce irrelevant results.
Yet many businesses still do not make decisions based on a fully integrated view of performance which includes the drivers, the measurements and the overall shareholder value they create.
These issues are the result of an incomplete view of a company’s overall financial strategy, and can prevent plans, budgets and forecasts from being strategically applied to drive the business and improve performance. This makes it increasingly difficult to fulfill growing compliance-reporting requirements and provide internal decision makers with accurate, current, and relevant information. By using value drivers, we can help align your measurement processes with the key activities that make your business work. But creating, maintaining and communicating shareholder value is an increasingly complex process. If value isn’t both fixed in corporate culture and disseminated clearly to shareholders, confidence and future investments can be imperilled and growth initiatives put at risk. To stay ahead of the competition, you need the tools and methodologies that make shareholder value understandable, achievable, and demonstrable as a key driver of financial performance. Deloitte provides a suite of tools designed to disseminate value creation throughout the organization as a principle and an outcome, from high-level decision-making, to investor behaviour, to day-to-day operations.
The EVM is based on four key drivers of value: revenue growth, operating margin, asset efficiency and expectations, with each driver broken down into specific levers you can use to improve your operations and increase shareholder value. In addition to quickly generating a customized and detailed analysis of your company’s internal performance, ValueAnalytics™ offers a point-by-point comparison to your peers. It’s designed to align your project portfolio with overall business objectives, support resource-allocation decisions and help stakeholders understand how each project contributes to the value creation process.
Deloitte value creation services provide a consistent framework for evaluating projects, aligning them with strategic goals and making end results understandable to, and actionable for, all stakeholders. Ironically, success can exacerbate these problems and growing organizations face a range of potential issues. But if you don’t have the right cost structure for managing unforeseen costs, for aligning cost management with strategic priorities, or for cutting costs without endangering compliance and diminishing performance, it can be an uphill battle. By determining which activities contribute the most to long-term shareholder value, you can identify areas that provide the best opportunities for strategic cost reduction.
Beyond that, we can help you streamline your technology, human resources and sourcing processes to free up resources you can re-apply to strategic priorities. Deloitte can help you build a cost model that identifies your true cost drivers and helps you manage them with strategic insight, sustainable results and organization-wide transparency.
One way to make success more likely is through a series of small moves, smartly made—following Pragmatic Pathways to long-term change. In the past few decades, we have seen an unparalleled and exponential rate of technological progress that has created opportunities to run businesses better, faster, and more cost effectively. Through new technologies, practices, and other parties in their business ecosystem, organizations can make success more likely by decreasing initial investments and increasing their initiatives’ velocity.
The first is the pursuit of incremental change, often consisting of either cost-cutting initiatives or marginal product improvement. These approaches are typified by high-profile projects with multimillion-dollar budgets, large implementation teams, and complex multiyear implementation plans. The combination of these factors invariably arouses financial and political resistance from the organization’s core. Fortunately, the disruptions that necessitate change (such as new digital infrastructures, technologies, and communication patterns) also provide the building blocks for better ways of transforming an organization.
The Pragmatic Pathways methodology is designed to help maximize a change initiative’s chance of success by increasing the velocity of the initiative, decreasing the initial investment, and minimizing uncertainty wherever possible. Members of your ecosystem have deep insights about your industry and consumers, and they can be powerful allies and partners, providing insights and ideas. The purpose is to increase the speed of information flow and transparency, which leads to better decision making.
This fast-to-market mentality not only lets organizations realize their short-term goals, but also tests the feasibility of their initiative as soon as possible.
The changes outlined in Pragmatic Pathways will not only help move organizations from one stable state to another, but will also help them create more flexible and fluid organizations that will be able to respond to future disruptions. But when people are told to adopt something and they have no incentive to do so, the outcome is typically a lack of adoption. Pfizer R&D needed to quickly analyze, organize, and compute large amounts of very complex data and provide results back to scientists so they could make actionable decisions about a drug.
By focusing on improving operational needs rather than on adoption, Pfizer created incentives for employees, particularly those with the strongest need for it, to adopt the tool. If you look at social software specifically, two-thirds of companies are interested in social platforms and approach them by deploying them agnostically across the enterprise; this, more often than not, fails to drive adoption and usage. Accessing offsite servers for the necessary computing not only decreases computing time, but also reinforces informal collaboration, accelerates time to decisions, and lowers the costs of new investments.
Or perhaps a business unit manager finds a key exception that needs to be addressed in order to improve operating performance. However, within two months of its inception, Amazon had burned through all of its extra capacity. AWS serves as a nonobvious adjacency that has allowed Amazon to leverage many of its existing capabilities from its retail arm. It requires focusing on promising high-growth areas, or edges, that have the potential to change the core of the business in the long run. The scaling edges framework helps to circumvent the political and financial resistance that usually arises with any change effort. In addition to growing revenue, the move to services also represents a new approach for the company and a fundamental transformation of the company’s focus.
AWS’s fastest growing service, DynamoDB (a fast and scalable database service), was designed to seamlessly integrate with Elastic MapReduce (EMR), another web service. By creating products that interact with the existing ecosystem of online solutions, AWS is able to leverage the capabilities and products that have been established in the market. Compressing lead times and driving revenue quickly will allow the edge to overcome the financial and political obstacles that are the downfall of most strategic and change initiatives. We have seen rapid gains in technological performance, digital infrastructure penetration, and global liberalization of economic policy, and all of these macro shifts are fundamentally changing the way consumers interact with organizations.
Often, companies will have a vision for where their company and industry need to head (conviction), but lack the courage to act on that vision. When companies, particularly those that are growing, begin to adopt cloud-based services, there will be a profound impact on how business is conducted.
Swedish company Spotify has single-handedly reversed this trend in its home country, and its digital streaming and social sharing platform may just be able to save the international market. The orchestrator needs to be a compelling evangelist, able to clearly articulate the vision of the direction of the new market and the value creation opportunities for all participants in the industry.
By broadcasting this vision and directly engaging and orchestrating key ecosystem participants, such as major music labels, artists, music industry media, third-party developers, and consumers, Spotify has multiplied the depth and complexity of the listening experience on its platform. Spotify’s launch in the United States reflected this strategy, as the service was deeply integrated with Facebook Connect from the start.
Spotify is also aggressively targeting partnerships with new media channels to increase its user base—for example, it recently signed a distribution deal with Yahoo that will highlight the music service as the preferred service for all of Yahoo’s 700 million unique monthly visitors. Since launching as a platform in December 2011, Spotify has actively engaged the ecosystem of third-party developers by providing best practices and coaching to ensure all applications hosted on Spotify meet a minimum quality standard before going live on the platform. The ability to stream music anywhere requires a sophisticated infrastructure and would not have been possible even five years ago.
By opening up an application program interface to its catalog of more than 15 million songs to any third-party developer for free, it has committed to creating a much richer, deeper music ecosystem than what currently exists.
As it continues to grow as a company, Spotify might find it useful to adopt a metrics that matter strategy in order to drive adoption of technologies or practices necessary to transition into a publicly traded company. Firms may begin in different places in the cycle, and there is no strict order in which Pragmatic Pathways should be undertaken—in fact, they are mutually reinforcing. Imagine if a cable provider were looking to update its traditional delivery methods to be more aligned with the Big Shift. For example, the cable provider could adopt a rapid development approach, such as the Agile methodology, to develop and test new capabilities. At this stage, if the change agents have gained sufficient influence to align the entire organization, the company could begin pursuing a shaping strategy to orchestrate the wider ecosystem of participants to shape the evolution of that specific industry. The right approach depends on what type of change your company is aiming to achieve—whether it be broad versus narrow change or internal versus external change. The Pragmatic Pathways framework provides companies with new approaches to change that and take advantage of the fundamental shifts occurring across markets and industries. He has nearly 30 years’ experience as a management consultant, author, speaker, and entrepreneur, and has helped companies improve their performance by effectively applying information technology to reshape business strategies. In addition to his work with the Center for the Edge, JSB is advisor to the provost and a visiting scholar at the University of Southern California.
He is focused on understanding the deep, fundamental shifts in the economy driven by technological progress. She is interested in building ecosystems within different industries, especially education, to create new solutions for today’s challenges. He is extremely interested in new approaches to organizational change, and his passions include emerging technologies (particularly social media), New Zealand, and rugby. The Silicon Valley-based Center helps senior executives make sense of and profit from emerging opportunities on the edge of business and technology.
The good news is that the actions needed to address near-term economic conditions are also the best long-term measures to take advantage of the opportunities these challenges create. In the case of the 2013 Shift Index, the story centers on the puzzling discrepancy in technology adoption between individuals and organizations.
Collectively, these metrics clearly show that we are in the early stages of an enormous transformation that we call the Big Shift. First released in 2009 and updated annually, the Shift Index tracks 25 metrics across more than 40 years, providing a comprehensive view of underlying trends not captured by short-term economic indicators. Changes in the Foundation metrics have systematically reduced barriers to entry and movement. Flow metrics tend to lag Foundation metrics because of the time required to understand and develop new practices consistent with foundational changes. Impact metrics will change as firms begin to figure out how to participate in the knowledge, capital, and talent flows across institutional and geographic boundaries.
Rapid technological advances and new competition from unexpected quarters make forecasts less accurate—and less valuable. And on an individual level, it hasn’t taken long for us to adjust our habits and adopt a myriad of tools that make communication easier, faster, and cheaper. This is in spite of the fact that the Internet and Web 2.0 tools are driving a convergence of the personal and the professional. After all, in a July 2013 Deloitte and MIT Sloan Management Review report, executives across all industries indicated that they considered social business to be important.7 Numerous organizations have demonstrated how social media can help workers resolve exceptions, share practices, crowdsource solutions, and discover expertise wherever it resides.
Whether executives are using their increased bargaining power to find better opportunities elsewhere or simply buckling under mounting performance pressure, the shortening of their average tenure at any particular organization compromises the organization’s ability to make a lasting impact on its chosen industrial or functional domain.In a world where change was relatively slow and steady, leaders felt confident that they could predict the future with a fair degree of accuracy. Guarding knowledge, rather than sharing it to pursue potential mutual gain, was seen as central to creating value.  Workers were trained to protect company information, and any collaboration with those outside of the organization was closely monitored or even discouraged, as such connections could be deemed risky.
Passion, as the Shift Index measures it, remains low: Only 11 percent of the US workforce is passionate about their work (figure 15). The skills of these individuals, who include scientists, designers, and management executives, are in high demand, and companies are fighting to acquire and retain them.
Legacy corporate practices are holding businesses back from fully participating in new opportunities. As workers and as leaders, our lives will not get easier unless we decide to shape, rather than simply adapt to, the future. What would an institution redefined from the bottom up, with the goal of scalable learning, look like? The metrics in the Foundation index provide leading indicators for potential change in other areas.
From 1990 to 2012, the percentage of the US population accessing the Internet at least once a month grew from near 0 percent to 71 percent. From 1989 to 2012, the percentage of active wireless subscriptions compared to the US population grew from 1 percent to 100 percent, meaning there are now as many wireless subscriptions as there are people (although this does not mean each individual has a subscription). Since 1995, the upward trend for the United States has been driven primarily by gains in investment freedom, financial freedom, trade freedom, and business freedom (4 of the index’s 10 components).
These flows are enabled by the rapidly advancing digital infrastructure and the general trend toward policy liberalization.
While conferences are still common, the percentage of Deloitte survey respondents who use email alerts grew fastest, from 10 percent in 2009 to 45 percent in 2012. Growth in SMS volume (158 percent compound annual growth rate [CAGR]) far exceeds that of wireless minutes (32 percent CAGR). The gap between migration rates for these cities is increasing as people seek productive and enriching interactions in the physical world. Over the past two decades, passenger travel volume has increased 63 percent and continues to rise.
However, foreign direct investment (FDI) is impacted by many factors, including relative tax rates, interest rates, inflation, and protectionist policies—all of which can be quite volatile year to year. Individuals, able to quickly adopt new technologies and knowledge flows, are benefiting from the forces of the Big Shift as both consumers and creative talent.
Before 1995, industry concentration had trended downward for 30 years, indicating a steady increase in competitive intensity. This volatility can be seen as a reflection of investors’ reactions to increasingly volatile global events and greater uncertainty about the future. To increase—or even maintain—asset profitability, firms must find new ways to generate value from their assets. Between 1965 and 2012, the topple rate (the rate at which companies change ranks) for all companies with more than $100 million in net sales increased as competition exposed low performers and ate away at returns. The compensation gap between the creative class and the rest of the workforce has steadily widened over the past 10 years.
Since 2010, however, the executive turnover rate has accelerated, especially for banking and financial institutions. Frost is a consultant in Deloitte Consulting LLP’s Human Capital practice and works with leaders within the HR, Talent, and Recruiting functions. As a consultant in Deloitte Consulting LLP’s Strategy and Operations practice, he has helped clients across a range of industries, including health care, technology, and consumer products. He has spent his three years with Deloitte Consulting working on organizational transformation projects for technology clients in Silicon Valley. Yet, the main findings (the lack of a holistic and cross-enterprise level strategy) can be applied to other social business domains such as social collaboration, to name just one of many more, as well.
The main challenge of social business, a lack of a decent cross-departmental strategy, is not just that of social business.
The irony is that in the broader perspective, social business enables organizations to rise above the limits of siloed strategies and work towards a more holistic and integrated view leading to better, more efficient and more integrated strategies, regardless of business function. Not strategy for the sake of it but strategy as the simple mindset and (often collaborative) must of understanding that 1) you need a goal, 2) you need a path to achieve that goal, 3) it requires collaboration to get there and 4) each strategy is worthless if you don’t start by looking at the human dimension of what will work and why (again enablement, involvement, motivation, management,…). Content marketing doesn’t work if you have no clue what content matters for your key audiences.
The best companies I have known always had a culture of collaboration, people-centricity, listening to internal and external stakeholders and acting upon it. With this small but crucial extra: everyone really means everyone, internal and external stakeholders. He's a digital marketing and business consultant with hands-on international experience, proven results and a 100% customer-centric view.
These metrics fall into three areas: 1) the developments in the technological and political foundations underlying market changes, 2) the flows of capital, information, and talent changing the business landscape, and 3) the impacts of these changes on competition, volatility, and performance across industries.
As the rate of improvement accelerates, we are experiencing rapid advances in the innovations built on top of these core “exponential” technologies. The impact is further amplified when technologies coalesce into open platforms and ecosystems. This ability to combine and recombine technologies and people and build on existing innovations is the core of exponential innovation. Powerful onboard computers process the complex software that runs each vehicle management system.
Too many research reports focus on advances in the individual technologies but tend to miss a deeper and more powerful development: the increasing ability of these technologies to amplify the performance of each other in unexpected ways that disrupt traditional boundaries.
Widespread use of the Internet enables more widespread sharing of information and resources. On the factory floor, for instance, the latest automation and sensor technologies ensure a flexible, cost-effective production system.
Africa exemplifies this trend: Google reports that more people have access to mobile phones in Africa than to electricity.
Safaricom, the Kenyan mobile phone operator that successfully introduced the mobile payments service M-Pesa, now offers mobile payments-based savings and loans.
These disruptions are occurring even as Internet penetration remains low in many regions of the world. Though any given disruption may look like mere surface turbulence or yet another market adjustment, each disruption is actually a symptom of how technology’s accelerating cost-performance improvement is rewiring the nature of collaboration and innovation. Shifts to mobile telephony and VoIP forced service providers to continually invest in network upgrades while also developing new revenue streams. High-frequency trading algorithms (HFTs) process huge numbers of transactions in incredibly short periods of time, largely without human supervision or control. New media and digital marketplaces allow buyers and sellers to find each other more and more easily. Furthermore, older institutions accustomed to analyzing threats and opportunities within narrow silos can miss the broader opportunities that emerge from the cross-domain flows of knowledge enabled by dynamic information ecosystems. New functionality can be added to the periphery at little additional expense, extending the platform’s value and surfacing new revenue opportunities. This shared interest in the platform’s performance becomes increasingly important as the complete set of capabilities and knowledge to sense and act becomes less likely to reside entirely in one organization. In contrast, dynamic ecosystems, such as the Linux open-source development community, explicitly seek to create environments and relationships where diverse participants can learn and advance more rapidly by collaborating.
The ability to engage in rapid prototyping informed by constant user testing and feedback also gives organizations the means to pursue exponential innovation without incurring exponential costs. First, the mass adoption of smartphones established an accessible and manageable ecosystem in which a diverse set of participants could collaborate and innovate. The tools for innovation have become so open and ubiquitous that even non-tech sectors now use them to improve, innovate, and stay competitive, creating their own breakthroughs and disruptions. Project Cyborg helps researchers innovate at the atomic, molecular, and cellular scale, relying on cloud-based environments for the heavy lifting needed to simulate the complexity of living systems. Soon they hope to be able to print an entire liver, leading the way for a new generation of personalized transplants. For example, Project Cyborg could allow a sick organ to be compared with a baseline model of the healthy organ composed of layers of information contributed from numerous teams of researchers, from tissue structures down to metabolic pathways and molecules.
Besides innovations in products and services that might unleash new revenue streams, such innovations may also include ways to improve human productivity through work environment redesign and finding new ways to tap into ecosystems.
The figure shows how, indexed to 1999, the divergence in growth rates for labor productivity and the core technologies creates an innovation gap. The good news is that the same forces that bring disruption also yield opportunities for renewal and value creation.
A technologically empowered workplace allows workgroups to be more informed and more responsive. By reorganizing around learning and performance improvement, leaders can adopt a forward-looking posture that embraces the rapidly changing landscape as an opportunity for long-term growth. Ecosystem participants—customers, suppliers, and partners—often offer untapped knowledge and have capabilities that may not exist within the corporation.

Deploying a cloud-based service business, for example, takes little more than hiring a team of developers and renting space on a cloud server. This ability to combine and recombine technologies and people as well as to build on existing innovations is at the heart of exponential innovation. Center leaders believe that what is created on the edge of the competitive landscape—in terms of technology, geography, demographics, markets—inevitably strikes at the very heart of a business. The Computing metric measures the vendor cost associated with putting one million transistors on a semiconductor. This position followed a lengthy tenure at Xerox Corporation where JSB was chief scientist and director of the Xerox Palo Alto Research Center. His specialties include domain research and analysis, strategic foresight, communications, and product design and delivery. He specializes in technology forecasting, organizational behavior, change management strategies, and ethnographic research.
Third, performance measurement fails to effectively measure and incent the most valuable metrics. In a post-financial crisis economy with markets in flux and investors still tentative, creating shareholder value is a bigger challenge than it’s ever been. Our range of value creation services, from benchmarking to resource allocation to investor-focused analysis, helps you increase financial performance and build investor confidence. For example, expanded offerings and successful product lines can create unforeseen expenses. Deloitte’s highly experienced cost management professionals have refined this process, as well as developed a suite of methodologies, tools and resources, that have been used on numerous global projects across all industries.
However, the increasing pace of progress has also led to unprecedented levels of disruption and uncertainty. When confronted with the imperative for change in times of uncertainty, many companies fall victim to either the paralysis of short-term, incremental improvements or the hubris of risky, bet-the-farm strategies that have no guarantees of success. We propose that through small moves smartly made, organizations can address their short-term tactical needs as well as create the fundamental, long-term changes needed to survive in a world of constant disruption.
This mentality is common in organizations without a clear vision or alignment on how to “steer the ship.” While incremental improvements are absolutely critical to maintaining and improving a healthy business, they are incapable of protecting organizations from disruption.
They include large-scale M&A deals, technology deployments, and business strategy overhauls.
This resistance can manifest in a multitude of ways: from direct resistance, such as pulling budget, to more subtle or passive forms of resistance, such as the refusal of employees and managers to adopt new practices. The companies that deploy these new change approaches before their competitors will be able to create and hold a significant advantage in their industries. By doing so, the change agents leading the initiative decrease the ability of detractors to mount resistance against it. However, when alignment is not feasible, the Pragmatic Pathways philosophy is to circumvent conflict rather than face it head-on. By partnering with companies with complementary skill sets and expertise, you will be able to offer better solutions faster and with less initial investment than you could on your own. In addition to these benefits, these tools help flatten organizational hierarchies and circumvent bottlenecks that block initiatives.
Through the natural process of trial and error that comes from quickly developing and testing ideas, change agents can simultaneously gain traction by showing the benefits of their initiative while also adjusting and correcting areas of failure. By positioning themselves to work with growing networks internally and externally, companies access flows of knowledge and capital and enable scalable learning, allowing them not only to respond to change but also to preempt it. Companies that have identified the fundamental shifts in their markets and have a vision of how they can capitalize on these, but lack the broad executive support or wherewithal to pursue large-scale organizational change, can consider scaling edges. Imagine if the same company first understood why people needed the tool, and then deployed it systematically to the people who would eagerly adopt it.
But Pfizer lacked the enormous amount of computing power required to process the information quickly and affordably—two key metrics that determined the company’s profitability and success.
As employees adapted to and created new behaviors, they saw improvements in their own performance, which drove further adoption in vertical and horizontal cascades. As these companies have learned, adoption cannot be the primary aim of deploying a new tool or technology. The company benefits handsomely from this, but this benefit is actually driven by individuals finding value in the new tool.
A scaling edges strategy could allow Pfizer to adapt to the rapidly shifting health care markets by finding the right “edge” opportunity. Skepticism from employees, who are used to and comfortable with the status quo, is understandable, but positioning a new tool or practice as a means to affect key performance metrics can overcome skepticism and align the entire organization to adopt something new to drive change. Amazon had developed expertise in distributed computing within the company, which has lent itself to providing AWS as a service.
To ensure the best chance at this, the edge must avoid direct conflict with the core of the business by playing in a different space in the short run.
While this resistance may not have surfaced within Amazon, as AWS was driven by the founder, it is a common problem in many firms that are less open to change. Additionally, Amazon fosters and creates online forums for new users who are just learning to use AWS tools.
Examples of these obstacles range from the explicit, such as choosing not to allocate budget to an initiative, to the passive, such as agreeing to an action item and then not following through. Any change initiatives that do not take these trends into consideration will have a reduced chance of long-term success. At the same time, much of the financial and political resistance to change comes from the core of the business.
By providing cheap, scalable services, products like AWS enable companies to focus on core competencies, new or existing.
After Napster was litigated out of the picture, Apple’s iTunes legally continued the digital trend of separating the single from the CD. More importantly, Spotify is pursuing a shaping strategy, mobilizing and orchestrating global ecosystems around its vision to transform the music industry. Users’ playlists are highlighted to their Facebook friends in real time, and users are able to “send” tracks to each other in order to recommend a new artist.
Such distribution partnerships are crucial to Spotify’s long-term success in realizing its vision, as the addition of each new user increases the value for other participants in the music ecosystem. By having an open-admit policy for third-party developers and providing them with the tools and training to deliver quality applications, Spotify is fostering specialization on its platform and increasing the odds consumers will be able to find the specific features they want to engage with. When envisioning the company, Ek presupposed the existence of this architecture and was one of the early music streaming services to capitalize on its existence.
By demonstrating it is willing to invest a significant amount of money on its platform and making these assets available for free, it is creating powerful incentives for third-party developers to adopt its platform. Rather than seeking a “big bang” change approach, such as a large-scale acquisition, the firm could test its ability to leverage its massive cable networks to deliver broadband Internet independently or through partnerships with several smaller companies. It could then pursue a metrics that matter approach to strategically reinforce the adoption of that methodology and catalyze cascading adoption across the company. One potential shaping view could be to create audience-focused media channels, informed by a deep understanding of its customer segments.
Instead of implementing transformation efforts toward reaching a new state of being, firms must worry about reaching a state of always becoming, where they are able to meet new challenges with conviction and courage rather than fear, and continuously evolve to overcome these challenges. Hacker, “Why change fails: Knowledge counts,” Leadership and Organizational Development Journal 26, no. This position followed a lengthy tenure at Xerox Corporation, where he served as chief scientist and director of the Xerox Palo Alto Research Center (PARC). With a background in strategy consulting, he is also interested in the creation of organizational structures that maximize learning and innovation. In their personal lives, individuals are enthusiastically harnessing the power of rapid technological advances and the information flows they unleash to create more value.
The business environment is changing in a more fundamental way than short-term, boom-and-gloom market and employment numbers show. These metrics and the relative rates of change between them highlight the evolution and impact of important long-term developments in technology and public policy. Individuals who adopt these products and use them in unexpected ways then generate more products and services, creating a virtuous cycle of innovation. Traditional rank-and-file firms, where the bulk of the world’s human and material resources still reside, lag behind in many areas. Thus, the world of the Big Shift demands resilience and learning over routine and the status quo.
At home and in transit, we use the Internet to find information, entertain ourselves, and create new content. More and more people are using technology to work anytime, anywhere; the traditional boundary between “work” and “life” is rapidly dissolving.
Goals were framed well in advance, and their achievement was viewed as virtually certain—as long as everyone did his or her job.
Most innovation was driven from within the company’s four walls, often without customer feedback or interaction. Economy-wide ROA has fallen to a quarter of its 1965 level, stock prices are increasingly volatile, and firms continue to lose their leadership positions at an increasing rate (figures 20–23).
This is not a promising sign, as worker passion is one of the major factors that lead to accelerated learning and performance improvement. Their scarcity and importance are reflected in the increasing relative compensation of this group (figure 27). Perhaps even more importantly, companies are becoming significant bottlenecks to the efforts of all of us to harness more of the power of pull—the ability to get better faster as more and more people participate in pull platforms that help us to draw out people and resources when we need them and where we need them. By working together to reengineer our institutions, we have an opportunity to unleash more of our potential and tap into the increasing returns made possible by ever-expanding flows of knowledge. Our future institutions may look very different from today’s, with faster learning and a renewed focus on our customers and ecosystems, all interacting to seize the opportunities created by the Big Shift. We are currently in the first wave of the shift (measured by the Foundation index) and are struggling to fully embrace the second wave (captured in the Flow index). Smartphones made up 41 percent of the subscriptions in 2012.9 Widespread connectivity enables the sharing of data, information, and knowledge from nearly any geographic location. In recent years, however, SMS volume has declined as a result of cheaper over-the-top (OTT) messaging applications (WhatsApp, MessageMe, Google Talk, Viber) and social media-based chat. Physical interactions facilitate the transfer of tacit knowledge more readily than other means.
This decrease might reflect the use of mobile devices, rather than personal computers (PCs), for social media; non-PC use is not captured in the metric. Companies, on the other hand, are struggling to evolve their efficiency-based legacy processes and practices to turn the challenges into opportunities. Despite ticking upward in recent years, industry concentration is still less than half of what it was in 1965. Among the categories surveyed, brand disloyalty was highest in airlines, hotels, and home entertainment.
This acceleration may be caused by increasing performance pressures as the financial industry recovers from the recession. This position followed a lengthy tenure at Xerox Corporation, where JSB was chief scientist and director of the Xerox Palo Alto Research Center.
At the Center for the Edge, Frost’s research focuses on how institutions can accelerate performance improvement in the 21st century by redesigning work environments to amplify worker passion.
At the Center, Damani has focused on conducting analytics and primary and secondary financial research to model the changing dynamics of firm performance.
Understanding the technology landscape and organizational structures at each of those companies proved invaluable when he conducted his research during his time at the Center. Learn what respondents think in results from a 2013 MIT Sloan Management Review and Deloitte social business study.
We still focus too much on social media and not enough on strategy, business and the bigger reality of social business. It’s the challenge of our organizations as a whole and of virtually all forms of business and marketing on the micro-level.
J-P is active on the crossroads of marketing, management, customer service, publishing, digital technologies, psychology, media and IT since 1992.
Combined, these factors reflect what we call the Big Shift in the global business environment. The current pace of technological advance is unprecedented in history and shows no signs of stabilizing as other historical technological innovations, such as electricity, eventually did. The vehicle management system is scalable and was designed entirely in-house to provide a unique ownership experience for each vehicle owner.7 None of this would have been possible without exponentially improving capabilities in computing power, storage, and bandwidth.
In South Africa, 25 percent of weekly online searches are via mobile devices, rising to 65 percent on weekends.
As more of the developing world comes online, the impact of its productive capacity will further amplify the pace of exponential innovation. One major telecommunications company undertook six major cellular technology deployments (TDMA, EDGE, UMTS, HSDPA, HSPA, and LTE) in the last 10 years at a cost of several billion dollars per year.17 Today, social media and other new communications models create substitutes and put further pressure on telecommunications companies’ revenue streams. Large investment firms lease space as close to the NYSE’s servers as possible in order to gain a millisecond’s advantage over competitors’ algorithms. While some businesses, like automotive manufacturing, will continue to be capital-intensive, new production technologies and greater volumes of digital information transmission are decreasing the minimum efficient scale for entry. This stacking creates multiple pathways for digital information to move, while also reducing the distance traveled. Costs that might prohibit smaller entrants are already embedded in the infrastructure, making it easier for platform-based innovators to scale up quickly to seize niche or emerging opportunities, or simply to better serve the core market segment.
Platforms thus become fertile breeding grounds for “business ecosystems,” a concept that is becoming more important than ever. They could rent one from an auto rental agency—if they could arrange to get to one of its locations.
Second, the spread of mobile geographic positioning systems (GPSs) permitted location-based applications.
Innovations in advanced materials, remote medicine, and transportation, among others, are made possible because of innovations in cloud computing, data collection, analytics, and processing techniques.
Researchers can build libraries and templates based on their experiments, creating a foundation of knowledge that others can draw upon.
Project Cyborg helps enable this effort by providing a sophisticated model of a liver running on the Autodesk cloud. This level of complexity can make it possible to isolate problems and then simulate, for example, changes in a particular protein structure that would treat a malady in a sick organ. The opportunities range from incremental changes in products or services, to groundbreaking innovations in diverse fields, to new organizational processes and behaviors.
This posture also conditions the workforce to more readily integrate new tools and processes that aid productivity in the future. Yet bringing new technology solutions into the workplace alone will not make productivity increase. As the network effects from established ecosystems grow, technology can facilitate tapping into the learning potential and capabilities of the ecosystem to improve an organization’s performance. Even small manufacturing start-ups can use well-established, on-demand global supply networks to test their innovations with less risk. The Center for the Edge’s mission is to identify and explore emerging opportunities related to big shifts that are not yet on the senior management agenda, but ought to be.
Companies are having harder time making money—and increasingly, their very survival is challenged. The Digital Storage metric measures the vendor cost associated with producing 1 GB of digital storage. JSB has published more than 100 papers in scientific journals and authored or co-authored seven books, including The Social Life of Information, The Only Sustainable Edge, The Power of Pull, and A New Culture of Learning. His interest areas include commercializing new technologies and developing partnerships around them. And as companies compete for available dollars, it’s difficult to identify an opportunity and know how to take advantage of it.
Sales, promotional and distribution costs may have to be adjusted to accommodate an increasingly diverse customer base.
For example, we can help you understand how to build a strategic business case by conducting a short pilot project focused on a specific cost challenge. Squeezed between increasingly powerful consumers and employees, companies face all-time high levels of competitive pressure. To make matters worse, companies struggling most face what we call the Change Paradox: The companies in most dire circumstances often have the fewest resources to make requisite changes.
In fact, in the long run, focusing only on efficiency and incremental growth is the most tried-and-true path to irrelevancy. Battling detractors is risky; should you lose, it could mean the end of your initiative, and even if you win, it wastes your time and energy. This approach allows the company to begin transforming on the periphery, rather than the core, of its business and eventually scale the new idea to become the new core. To solve this problem, Pfizer partnered with Amazon Web Services (AWS) to design a tailored solution—specifically, a private cloud solution, so that Pfizer could offload mundane tasks and free up its internal high-performance computing (HPC) platform to process critical, yet sporadic projects. Instead, adoption should occur naturally as employees willingly use the new tool or practice for their own personal benefit (and the benefit of the company). For example, the R&D HPC team is now able to expose resource costs very transparently back to the researchers in real time so users can make intelligent decisions on costs versus priorities. Pfizer could even think about how it could shape the way the entire industry pursues R&D and consider how collaboration could potentially occur beyond its own organization and extend to the entire pharmaceutical ecosystem. Today, that number has grown to 82, and the number of objects stored in Amazon’s cloud continues to grow exponentially. This expertise has led Amazon to transform the adjacency into an industry-leading business.
This will allow the edge to grow and become an established, proven, and viable model before encountering the full range of financial and political obstacles that come from directly challenging to change the core business.
The result is that both products add value to each other and create a symbiotic relationship where companies and users both benefit. Edge initiatives should accelerate the pace of innovation to compress the time between investment and return wherever possible. Also, as data storage and processing needs become variable rather than fixed costs with cloud, companies will be able to more efficiently provide current product and service offerings with less risk and a litany of new services will follow suit.
Although the revolutionary distribution method appealed to consumers, it undeniably eroded profit margins for music labels, artists, and other participants in the industry.
Social recommendations are a crucial factor in increasing engagement with new and established artists alike. He had a bold vision for Spotify and moved on it before people realized it was even possible. Spotify has also signaled a long-term commitment to improving the music industry by actively engaging the four major music labels (each of whom is a minority shareholder in Spotify) throughout the evolution of its platform. The company could rapidly prototype and test the viability of this edge with its employees and customers in a manner that limits up-front financial outlay while still maintaining large potential benefits. By doing so, it would not only improve the efficiency of the organization, but also refine usage of the technology or practice through a deeper understanding of incentives for adoption. In this scenario, the firm could potentially orchestrate a broad range of third-party participants to provide its consumers with access to content from a wide range of sources beyond the firm’s traditional brands and partnerships. In that pursuit, the reinforcing nature of Pragmatic Pathways will help firms develop the capabilities and practices to succeed on their path to change.
The Center’s mission is to identify and explore emerging opportunities related to big shifts that aren’t yet on the senior management agenda, but ought to be. Companies are having a harder time making money—and increasingly, their very survival is challenged.
Why then do so many corporations and institutions seem unable to effectively embrace technological advances that speed up the flow of knowledge? Coupled with public policies driving economic liberalization, the advances in and adoption of new technologies have resulted in fierce competition and a shift of power from institutions to individuals. The continued downward trend in return on assets (ROA) among US public companies—which has declined to one-quarter of its level in 19655 (a few years before the invention of the microprocessor)—is one indication of this lag.
Scalable learning trumps scalable efficiency, and participating effectively in knowledge flows within and across organizational boundaries becomes a critical skill. One might expect social media and other knowledge-sharing tools to be as widely used within as well as outside the workplace. Jobs, in turn, were well defined and organized to support processes engineered to deliver precise outcomes. But this phenomenon comes at an obvious cost to employers, who are paying more and more to retain skills that are getting harder and harder to find. We can choose to participate in flows of knowledge rather than hold tightly to static stocks of information whose value is rapidly diminishing.
In recent years, economic freedom has dropped significantly, in part due to increases in the size of the government. In the Big Shift, stocks of knowledge are less valuable and knowledge flows more important. This type of multi-way communication opens up opportunities to share knowledge and collaborate. The increased turnover may also reflect the effects of pent-up demand as executives changed companies in a recovering job market.
And, finally, note that the definition of social business in reality depends on who uses it. The technologies combine to create a seamless and compelling driver experience that is difficult for other automakers to imitate. M-Pesa is already being used by almost 15 million people out of a population of 19 million adults.
Rather than just moving across a single plane as with traditional microchips, digital information can also move vertically within a 3D chip. Cloud computing capabilities further extend the capacity for innovation by turning core technological capabilities into rentable shares that easily interconnect with existing business systems. These two technologies spurred the creation of new business models serving the personal transportation market that are being expanded and refined by a number of startups. Instead of writing complex scripts to manually build tissues, Organovo can just recall the liver model from the cloud, modify it in the Project Cyborg software, and then print the result. The results could be put back into the shared model, adding to the public knowledge, and then used to drive a print for gene therapy treatments or an entirely new transplant. And the tools themselves can help educate the users; instructional on-boarding and predefined discovery pathways, for example, ease the learning curve and broaden access for the workforce. Instead, employees themselves should be engaged to rethink how work gets done and understand how technology can enhance, rather than threaten, their capabilities. While Center leaders are focused on long-term trends and opportunities, they are equally focused on implications for near-term action, the day-to-day environment of executives. Executives must learn ways not only to do their jobs differently, but also to do them better.
And many companies’ cost models don’t provide enough insight into which enterprise activities actually drive costs: they’re simply not sophisticated enough to account for those variables. With our approach to strategic cost management, you can build your cost model into your organizational structure, informing strategic decisions at every level and in every department and function.
In the Deloitte Center for the Edge’s annual Shift Index report, we show that since 1965, return on assets across all publicly held US companies has declined by 75 percent, indicating these pressures are not part of a short-term recession, but are permanent fixtures in the business landscape. Reflect on large-scale change initiatives attempted by organizations in your own industry, or perhaps even by your own company, and consider the various sources of resistance that were encountered. Instead, change leaders need to seek ways around detractors and lengthy approval processes by minimizing initial investments wherever possible, shortening timelines to gain traction quickly, and seeking out those in the organization most willing to embrace the change, both at the executive and tactical level.
Finally, companies that have complete alignment on their vision—from the CEO to line employees—and the conviction to see this vision through can influence the entire face of their industry by orchestrating an ecosystem of active participants through a shaping strategy. Cloud could also enable Pfizer to create a flexible platform upon which scientists, quality controllers, customers, regulators, and others in pharma connect and collaborate to quickly design, test, and bring new drugs to market. In the case of the AWS edge, the cloud services space is adjacent to rather than in direct conflict with Amazon’s core online retail business. Deploying an edge model requires some change agents to detach from promising core activities to build on the periphery where there is less resistance, particularly in the initial phases when momentum is still building. Amazon will have the opportunity to create new uniform standards and protocols for interactions across a series of products that have the opportunity to become new industry-wide standards.
It affected regional music industries around the world, which have likewise been in steady decline since the peak in 1999. This, in turn, increases the value for application developers, musicians, and labels as a whole. It has identified opportunities for creating value in many distinct niches for the labels, artists, publications, live promoters, third-party developers, and any number of other participants within the music industry.
Additionally, the benefits that are activated on the edge would pull individuals and functions in the core out to the edge when the company recognizes the benefits from this new practice. The 2013 Shift Index finds executive turnover at an all-time high, brand disloyalty and consumer power continuing to rise, and the compensation gap between “creative talent”1 and other workers widening (figures 25–28).
Companies are working harder than in the past, only to generate lower returns from their assets. But rather than increasing, the integration of such tools into the work environment is actually declining.
In such a world, efficiency and repeatability are virtues, and flexibility can be seen as wasteful and irrelevant.
In addition, increased visibility into job opportunities via LinkedIn and other sites may also contribute to greater turnover. And strategies simply work better when there’s a people-centric and collaborative mindset and culture. The pace and voracity of this competition is leading to the construction of even faster server farms and information channels.
Extensible technology frameworks make it possible to bring together ever larger networks of contributors, facilitating exponential innovation and amplifying the impact of improvements in technological cost-performance. Uber, for instance, was one of the first to use the mobile GPS on smartphones to allow consumers to hail a car on demand to their exact location. The collaboration has resulted in a holistic approach, from design and simulation to rapid prototyping of organic components and living structures.
By leveraging platforms and ecosystems, small moves, smartly made, can provide the impetus for large changes. Leaders, too, should rethink work itself in ways that better empower employees, aided by technology, to improve their own performance. AWS itself was built to be quickly scalable with a portfolio of integrated products that were released as they were completed; this approach allowed Amazon to quickly test both the concept of moving into services as well as each individual application concurrently, and to make adjustments in real time to meet market demands. Operating on the periphery is particularly important, as efforts that challenge the core directly tend to mobilize institutional “antibodies” that cause these efforts to fail. Amazon, as a result, will then have the chance to rally its ecosystem around its vision for the future of the technology industry. For example, Ken Parks, Spotify’s chief content officer, has worked with music labels and other parties to develop new metrics to measure customer engagement with artists and applications on the Spotify platform. Still pursuing goals of greater efficiency and predictability, the value they create diminishes as they strive to squeeze every last bit of variance out of operations. In 2012, participation in work-related online forums, professional and community organizations, and social media networks decreased from their 2011 levels.
For institutions designed to maximize efficiency and execute tightly scripted processes at scale, cultivating flows of knowledge may seem like a distraction.
In fact, there’s still too much focus on social media, not enough on business, the human dimension, collaboration and so much more. Even so, the advantage these firms gain from hypercompetitive technology adoption is fleeting. Legacy processes will need to evolve in order to adapt to new tools that can grow productivity across the organization.
By nature of their diversity and specialization, the applications created by third-party developers help expose niche artists who might not otherwise have a platform for their music. Corporate social media usage, in fact, is lower in 2012 than it was in 2009, with participation rates in social media below 20 percent across most levels of the organization (figure 9)—including middle management (18 percent), lower-level management (13 percent), and non-management (9 percent). Just ask customer experience and conversion experts who have always known that the best strategies involved the people that mattered (including customers) instead of relying on the famous HiPPO (Highest Paid Person’s Opinion ) and the ivory towers of the self-absorbed organization.
These types of actions demonstrate that the shaper is committed to creating value for the entire ecosystem, rather than exploiting the other participants for its own gain. Another startup, Lyft, has also adopted mobile GPS technology platforms on smartphones, but has tried to differentiate itself through establishing a more casual, quirky personal transportation experience. Other companies, such as Sidecar and Instacar, have also adapted the business model that Uber demonstrated by using smartphone and GPS platforms to facilitate and expedite transportation.

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