How to prepare for technological revolution

Corporate Strategy in Uncertain Times

Over the last 40 years we have been in the midst of a technological revolution. Information Technology and Telecommunications innovations have fundamentally altered how we live, created new industries and destroyed old ones. Existing industries are now at threat of disruption like never before. Corporate strategy and organisation is in the midst of great change. This isn’t a new phenomenon. Economist Carlota Perez has recognised there is a pattern to when paradigm shifting innovation occurs and how it evolves. It helps us learn how organisations have responded, and teaches us how corporations should structure themselves for innovation.

Technology Cycles & Evolution

Technological innovations seem to occur in roughly 50 year cycles. Perez documents them as follows:

• 1771 — Industrial revolution (factories, machines, canals)
• 1829 — Age of Steam, Coal, Iron and Railways
• 1875 — Age of Steel and Heavy Engineering (electrical, chemical, civil, naval)
• 1908 — Age of the Automobile, Oil and Mass production
• 1971- Age of IT and telecommunications
• 20??- ???

Each technology revolution evolves in the same way.

Installation Period

The big bang. When a new technology erupts it appears seemingly out of nowhere. Entrepreneurs, engineers and investors scramble to identify the most lucrative opportunities. Capital and resources pour into the technology with little discrimination. This is the gilded age and a bubble emerges.

Deployment Period

A less exciting period. The key applications have been identified. Now their effects are felt in the real economy. The emphasis changes from what the technology is, to how it can be made easy to use, reliable and secure. This is the golden age of the technology as it permeates all of society.

Institutional Adjustment

Between the installation and deployment period is a time of institutional adjustment. During this time established companies make a choice as to how they will operate under this new paradigm. Decisions will effect whether they will be left behind, or participate in the growth and prosperity new technology brings.

Lessons from this technology cycle

Corporate decisions in the IT and telecommunications revolution are illuminating. As the technology emerged and went into the frenzy state, existing corporates went in the other direction. They cut back their investment in innovation. They failed to learn and build their business with the the internet and phone technology. They focussed on sustaining innovation and incrementally adding value to their products and services. They didn’t explore new, potentially higher growth business models.

Innovation was now happening externally. Despite their vast resources companies were outcompeted and saw their dominance fall by the wayside to make way for new, globally connected internet businesses.

Lessons

Corporates have realised they need to be at the forefront of R&D to make sure they don’t miss the next revolution. This one is over. Engaging with startups seems to be the go-to strategy at the moment. Strategies range from corporate venturing, starting an internal accelerator program or creating their version skunkworks. What is being missed is what all these initiatives have in common. Companies want to learn how to run certain elements of their business as a startup. They want the process and capability to take new technologies and experiment with them. They want to figure out how they can fail effectively with the goal of being able to be at the forefront of the next frenzy. Whether thats nanotechnology, biotechnology it is rather immaterial. What matters is if they are ready.