From virtual to post virtual: Leading through change

There is a stage among businesses termed the success trap. Companies, leading their fields for decades, have either died or come close to death.

They include GM, Lehman Brothers, AIG, Kodak, IBM, kmart and Pan Am. It is not always easy to understand how this happened. It was about far more than technology disruption. In 1993, when it nearly went under, IBM had the third largest R&D budget on the planet. Kodak actually invented the world's first digital camera.

After 30 years at the top of the game, the first suggestion from finance that a giant corporation may not make this quarter's figures provokes a small panic. Costs are cut, sales are maximized, which can work in the short term. Managers understand the current business and know how to meet near-term targets as long as the legacy business system delivers results. They do not thrive in uncertainty or in ambiguity. However, disruptive technologies do deliver ambiguity and uncertainty. These are what large corporations must confront.

Disruptive technologies are now hitting the insurance industry (see figure below). Part of that will come directly. Part of that will be change that invades your space, from ecosystems around you, such as patient-doctor relationships. One thing that is clear about digital technologies, be they distributed energy distribution, 3D printing or health wearables – they are pushing themselves into smaller and smaller locations within the economy. They create a dynamic, which shifts the production and provision of products and services ever closer to the point at which they are demanded. We call this dynamic proximity.

Exponential technologies relevant for insurance

By shifting this point of provision nearer the consumer, we can begin to imagine what industries might look at 20 or 30 years from now. Dynamic proximity will allow Amazon to anticipate your online behaviour. If it believes you are interested in a certain product, it will ship it to the nearest distribution centre, even if you were not to buy it. This is called anticipatory shipping. With 3D printing it will become possible to order single items that could be produced and printed at very little distance to the end consumer, rather than coming from China via a distributor. The model of large plants and manufacturing facilities operating to economies of scale in distant parts of the world where labour and land is cheap, will not become extinct, but will not be where the action is. Supply chains will become hybridized to include large-scale production facilities, mid-sized centers and even small in-home or clinic installations.”

One example of this disruption comes from the medical sector. A company in India has developed a black box that can undertake a variety of diagnostic tests on patients in rural locations, providing medical grade data even where there might be no medical professional present. This adds value in rural communities with thin healthcare coverage. However, that technology will soon be pushing its way soon into Switzerland, into the United States and other developed economies.

Or take the autonomous car - it was not on the radar a few years ago, but now all motor companies are developing autonomous driving models. Autonomous driving technology will be in place in coming decades and one result will almost certainly be that households own less cars. Driverless cars will respond on call, like Ubers or taxis. Maybe not all households will give up their cars, but some will, enough to make an impact on an industry, which has previously only paid attention to one metric, that being units sold. Automotive companies will continue to build cars; but they will have to change from just being manufacturers to also being service providers.

Another example of change being pulled through the system is electric cars. For over a century we have had electric cars, but until the last few years they have not been a commercial success. Yet they have not displaced the internal combustion engine. Why not? Range anxiety. With a charge of a few tens of kilometres, and only a partial network of charge stations, owners have anxiety of being stuck in the middle of nowhere out of juice. The answer, many entrepreneurs believe, is to recreate an electric charge network similar to that of petrol distribution. It is an old solution to a new problem. The focus should be increasing battery charge. Everyone can charge their battery at home, and within coming decades we are going to develop batteries that cover a thousand kilometres or more, rendering this infrastructure useless. Established industries need to be constantly challenged by outsiders, continually liaise with entrepreneurs, question their metrics and product development.

So what will be the next generation of technology pulling change through our ecosystems? We all know about virtual reality. Putting on the goggles can give you a profound and visceral sense of an alternate reality, be it jumping off a building or skiing down a mountain. However, when you pull off the goggles, you are back in the room. Over coming decades, those goggles are going to become smaller, more lightweight, more portable, until they become essentially invisible. Combine that with digital interfaces that will become increasingly responsive to prompts, and possibly even thoughts, rather than typing or instructing, and we will be in a state of hyper-transparency. This state of hyper-transparency will intercede with abundance of goods and services. It will bring humans into living in a new context and one for which we are currently unprepared. We have evolved to make sense of partial knowledge and scarcity.

Diabetes is an example of this. Confronted with an abundance of energy, and not fully understanding what it will do to us, we will eat ourselves sick. With comprehensive virtual reality, we will be able to synthesize the visceral experience of eating a chocolate cake— without any cake passing your lips. We could simulate any kind of cuisine. We would be decoupling the product from the experience. Imagine the implications for the global food industry.

For businesses making plans in the here and now, the key message is attention. As William James state, attention equals belief. How do companies gain your attention in a world of fractured experiences? And with every company vying for your attention, who do consumers believe in?

 

Summary of Robert Wolcott's presentation at the Centre's Health monitoring event in December 2017. Robert is Clinical Professor of Innovation & Entrepreneurship at the Kellogg School of Management. Summary by Simon Woodward.