Tales of the
Re-configuring Businesses, Players, and Roles
The Story Is Just Beginning
These stories are about a changing world where legacy and incumbent organizations are being challenged by a new wave of providers who have compelling narratives that speak to our own changing experiences at work, at home, and in society at large. This examine the transition and restructuring of trust and expectations that are taking place in all sectors, public and private, personal and social. This restructuring is the compelling narrative of our time.
Three strategic shifts come through the analysis:
• Legacy ‘horizontal’ providers who seek to own a customer and service all their needs are being out-maneuvered by more agile, and focused ‘vertical’ providers who do one thing, in more places, at scale; we call the resulting competitive market dynamic compression.
• We are witnessing massive regime change, with legacy organizations leadership teams reaching limits of the horizontal model, while the new Founders of the Vertical are building out into market adjacencies due to a combination of long-term vision, canny de leveraging of risk, and aggressive real-time externalization of business processes to the ecosystem.
• These two trends ride the rails of changing usage patterns that are not restricted to ‘GenX’ or ‘users’ in the conventional sense. There’s a reason what so many incumbent companies are losing their way: they are focused on existing usage patterns that are being replaced every nine months. They miss the strong correlation between the rate of innovation/iteration, and scale.
The clear call to action for organizations who wish to flourish in this environment is to embrace the reality of multiple vertical resources in a fragmenting marketplace. These choices are being led by its employees, partners, and audiences in a push-button, on-demand world. The story is just beginning.
VP, Knowledge Transfer
Orange Silicon Valley
This publication exemplifies the spirit of externalization. Core to the ideas in it are the key frameworks of John Hagel’s thinking around ‘narratives’ and Haydn Shaughnessy’s work on ‘radical adjacency.’ We’d like to thank John Hagel and Haydn Shaughnessy for their insightful interviews. We are constantly inspired by their provocative rethinking of the evolution of the enterprise. There were several colleagues from Orange Silicon Valley who we would also like to thank for their contributions to this report: Subash Mandanapu, Jameson Buffmire, Asha Vellaikal, Elliott Chin, Santhana Krishnasamy, and Ashish Patel. In addition, our talented designers, Sean Murray and Cesar Sanchez, deserve recognition for their spot-on graphic interpretations. We’d like to acknowledge here the ongoing support and collaboration of all our colleagues at Orange Business services, who provide the most valuable support of all by bringing Orange’s leading enterprise customers and partners to our Center for briefings and exchanges — this kind of feedback is invaluable. The narratives for many companies have yet to be written. We hope that this report encourages them to actively think about their own narrative arc with the profound understanding of, as Haydn Shaughnessy puts it, “change is not only fast, it is wide ranging.”
Georges Nahon, Mark Plakias, & Natalie Quizon
More to Come:
Embracing the Combinatorial Enterprise
At the beginning of this collection of stories, we asked:
What kind of companies are gaining influence (and which are losing it)?
Another question we asked is closely related:
Where is market value being eroded or transferred to new players?
Every day, we see more examples of dramatic shifts in both influence and market value: to use the $1 trillion communications business as an example, just two companies Apple and Samsung, control virtually all of the operating income in the mobile handset business, just a few years after entering a market controlled by incumbents now either up for sale, sold, or waning in influence. Here we can define influence at the operating system level (iOS and Android), because the developer ecosystem of the device directly translates into market influence.
The core concept of externalization – making the business accessible to ecosystems and audiences via APIs, platforms, and services – creates nearly frictionless opportunities for new combinations. Companies who can embrace this model are what we are calling here the combinatorial enterprise.
Other examples of combinatorial enterprises have blossomed in recent years and scaled with amazing power:
• Kickstarter and Indiegogo: crowdfunding new product development
• Lyft: Over 1 million rides via this ride-sharing service
• Kaggle: Problem-solving via 1 million Data Scientists
As the interview with Haydn Shaughnessy tells us, there is a strong competitive advantage for the Combinatorial Enterprise. Leveraging ecosystems to drive functions previously viewed as ‘core’ processes (managed internally at great cost and slow speeds), liberates management to do what is really needed, which is find relevant adjacencies and move into these new market segments at speed, and with scale. This is critical, because as Shaughnessy reminds us: “executive mindshare is still the key component.”
Old (Horizontal) Combines vs New (Vertical) Combine
The old definition of ‘combine’ in business school class was the conglomerate. A corporate ‘combine’ was a horizontal mashup of disparate businesses to offset risk via a diversified portfolio. For CEOs trained in this model, the key skill-sets are: command-and-control, cost-reduction for margin improvement, and risk avoidance. The risk with this model is that over time, the management team is comprised of people that Box CEO Aaron Levie has described as: “insiders who know what is impossible.” The new definition of ‘combine’ is aggressive externalizers of business processes up and down the stack: think of Amazon opening its infrastructure and provisioning expertise to tens of thousands of startups as part of its hugely successful Amazon Web Services. How many traditional CIOs would have thought they could transform internal IT assets into a business now valued at $19 Billion? The answer, again according to Levie, is “outsiders who think anything is possible.”
“Industries are transformed by outsiders who think anything is possible, not by insiders who thinkthey know what is impossible.”
—Aaron Levie, Box.net Founder
By embracing the new model of continuously evolving and creative ecosystems, APIs, and other combinatorial techniques such as crowd funding, accelerators, and services in the cloud, tomorrow’s CEOs – who grew up with these models – will move beyond the current limitations of ‘open innovation’ and create the next wave of great companies, those who reconfigure their roles and combine external sources of competence and value creation with new players inside and outside their organizations.. We all need to be prepared for it.
Change is good. Change is the new stable. Stay tuned: There’s more to come…
CEO, Orange Silicon Valley