Published

1

Dec

2014

Report

Of Wonders & Disruption

The Internet did not catastrophically collapse in 1996 as Robert Metcalfe (co-inventor of the Ethernet) predicted. Apple was not ‘dead’ by 1997 as Fortune, Business Week and the New York Times told us. Neither wireless transmission nor airplanes made war impossible – both Marconi and the Wright brothers got this wrong.

Of Wonders & Disruption

Edison’s claim that gold would become worthless never came true. The jet packs and flying vehicles we were promised never turned up. Without these getaway vehicles, it’s fortunate that Donald Michael’s warning that by the 1980s we would be replaced by intelligent machines never actually happened. Of course, we could have escaped to the 2014 underwater cities of Isaac Asimov … except they’re not there.

Prognostication is often a very humbling business.

With full knowledge of the history above, this research paper attempts to predict the nature of technological and business change over the next 20 years. Given that there are so many scientific, economic, political, social and commercial uncertainties, this is inevitably a daunting – many would say hopeless – task. Why do it?

While we don’t pretend to be able to see the future in detail, we believe that the overall pattern of business and technology change is more predictable than many people think. Our research has shown that business competition tends to go through three distinct phases – peace, war and finally wonder. Consider the way the war between Edison and Tesla ultimately led to utility electricity, which then enabled wonders such as air conditioning, home appliances, radio and motion pictures. We are on the verge of many such wars and wonders now.

Our paper provides a strategic framework for envisioning how areas as diverse as cloud computing, 3D printing, robotics, artificial intelligence, the internet of things and the IT industry itself might change in the years ahead, as they evolve through the peace, war and wonder cycle. While we believe the work we have done in these areas is pioneering, we also recognize that it can be quite complex, and often makes for a more demanding read than the typical LEF report. This Executive Summary seeks to provide an easily accessible starting point.

We recommend that clients try to absorb our overall thinking because it provides a useful lens with which to view and interpret the nature of 21st-century innovation and competition. Certain patterns of history do repeat themselves. Understanding these patterns and applying them to the great technology questions of our time is an instructive and provocative exercise.

The peace, war and wonder cycle

We believe that our peace, war and wonder cycle is the most useful and reliable tool for predicting major technological shifts. The basic cycle is introduced below:

  • Many markets stay in a state of relative peace for extended periods. Driven by competition, established activities evolve, with large incumbent vendors steadily building inertia to change due to their past success. This is a time of expansion, refinements and seeming stability.
  • But inevitably this peace gives way to a period of ‘war’ as new entrants challenge prevailing orthodoxies, typically by industrializing existing activities into commodity components and/or utility services. This is when new business models and organizational forms appear, and market disruptions are greatest.
  • As the winners of the ‘war’ emerge, a period of wonder begins as new activities are built upon recently industrialized components. This is a time of surprises and frenzy, with much economic investment in new activities. However, while we know this period will follow the ‘war’ phase, we can’t know exactly what will be created and/or successful. 

Thus, from our experience, anticipating the ‘war’ stage of the cycle is the most likely path to strategic success. It offers the following important advantages:

  1. It is the most decisive and predictable of the three phases
  2. ‘Weak signalling’ such as media coverage can be used to determine its onset
  3. Knowledge of the cycle is not evenly distributed, and is therefore exploitable
  4. ‘War’ enables disruption of competitors stuck behind their inertia barriers
  5. It initiates wonder, and thus major new forms of wealth generation

The ‘wars’ of the future

The IT industry has seen a number of major ‘wars’ in its history – personal computers vs minicomputers, packet vs circuit switching, smart phones vs telephones, and of course, cloud computing vs in-house servers today. While each has triggered many new wonders and sources of wealth, this is really just the beginning. In the report we identify some 20 wars of the future, including:

  1. The industrialization and standardization of the internet of things
  2. The emergence of Sensors-as-a-Service as a platform for Big Data
  3. The integration of physical and electronic 3D printing
  4. Cross-industry forms of software agents and artificial intelligence
  5. The global battle between Silicon Valley and China

The full range of changes and their expected peace/war/wonder cycles are shown in the figure below. Each company should think about which technological and societal shifts are of greatest importance to its future.

Figure 1 - Peace/war/wonder cycles

Figure 1 Peace/war/wonder cycles

Industry impact will vary widely

Although we think we can identify the major points of change and the likely time when a ‘war’ will occur, such changes do not necessarily have the same impact on all industries. Their actual impact will depend upon the industry itself and the component that is changing. Consider robotics and intelligent software agents. As shown above, both have different times of ‘war’ (the formation of industrialized components) – commodity forms of intelligent software agents are likely to occur much later than industrialized robotic platforms.

But the impact of these changes will vary widely by industry. Hence, the introduction of standard robotic platforms is likely to have minimal impact in the financial industry, but will be a sustaining change (requiring merely adaptation) in the automotive, transport and healthcare industries.

In contrast, the introduction of intelligent agents is likely to provide a beneficial opportunity in the finance industry (allowing more advanced mechanisms of automated trading), a sustaining impact in healthcare (requiring adaption to the introduction of robotic medical assistants) but a disruptive impact in automotive and transport (as existing labour-intensive human activity – driving – is replaced and vehicles commoditized).

Thus it is important that each peace/war/wonder cycle be assessed against a map of the industry under examination.

General patterns of change

Given the many exciting technological and market shifts to come, what can we say about the overall shape of the future? We emphasize the following four general expectations:

  1. As shown in the figure, the number of expected ‘wars’ increases sharply after 2020. In other words, despite the heavy focus in the media today, the 2015-2020 period will be generally peaceful outside of the IT industry, where the cloud ‘wars’ will continue to rage. True disruption often takes longer than most people think.
  2. Different industries will be affected in very different ways. We recommend that companies view the full range of emerging technologies in their industry’s context to gauge the likely nature of disruptive vs sustaining change in their marketplace.
  3. The wide range of future battlegrounds suggests the possibility of shifts in global economic leadership. China is, of course, the most likely nation to challenge US/Silicon Valley dominance in many high-tech areas. This competition will be an increasingly important area of LEF research.
  4. Changes in media coverage are a useful ‘weak signal’ for anticipating the future. The recent increase in technology coverage within mainstream media such as The New Yorker, The Economist and others reflects the growing societal impact of IT in areas such as income inequality, employment, skills, privacy, security, and even our sense of ourselves as a species. These issues will increasingly shape the digital society context going forward.

Looking ahead, we will continue to watch all of the areas covered in this paper to see if they follow our peace, war and wonder expectations. We will also watch the important manifestations of these changes in areas such as the emergence of higher-order systems, the co-evolution of practices, the major forms of inertia/resistance, and the disruption of incumbent vendors. Gauging the pace of these changes should give us a good sense of how closely the patterns of the past resemble those of today.

We encourage clients to develop their own mapping and situational awareness skills so that they can better apply these tools, models and concepts to their own organizations and strategies. As always, we are available to help in this regard through our reports, presentations, workshops, individual advisory engagements, and the new LEF web-based mapping tool. It’s never too early to think about the future, and the many wonders and challenges to come.


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