20170926 lehmkuhl lecture final - nhh · this power comes profit margins that the actual physical...
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LEHMKUHLLECTURESEPTEMBER26,2017
ThefutureofNorway:Acommodity-basedlaggardoradigitalpioneer?
0.INTRODUCTIONLadiesandGentlemen,esteemedLeaders,presentandfuture,Itiswithhonor,humilityandgreatpleasurethatIacceptandthankyouallfortheinvitationtoholdthisyear’sLehmkuhllecturehereattheNorwegianSchoolofEconomics.Weliveinatimeofgreatchange–fortheworldingeneral,andforNorwayinparticular.Wearefacedwithaglobaltechnologyshiftthatlacksanyhistoricalprecedent.Wearefacedwithseriousglobalchallenges.WearefacedwithaparticularlychallengingsetofcircumstanceshereinNorwayinshiftingfromanaturalresourcebasedeconomytoaknowledgeintensiveeconomy.Andwearefacedwithchangeatwarpspeed.Simplyput,therehasneverbeenagreaterneedforcompetent,capable,andvisionaryleadership.TherehasneverbeenagreaterneedforaninstitutionlikeNHHthatpreparestomorrow’sleaders.Whichiswhythereisnobetterplaceformetosharemyperspectivesaroundthechallenges–andsplendidopportunities!–thatthecurrentdevelopmentsposeforNorway’sprivateandpublicsector,andforusall.Inthecoming45minutes,Iwillfocuson3things.
• WHATthecurrentdigitaltechnologyshiftisallabout–de-mystifythebuzzwords,showhowthemanytrendsrelatetooneanother,andexplainwhatthisshiftmeansingeneral,whyit’sareallybigdeal;
• WHYthisshiftposesparticularlysignificantchallengesandthreatsforNorway;andmostimportant
• WHATwecando–shedlightonthemanyexcitingopportunitiesthisshiftpresentsuswithhereinNorway;offerpracticaladviceandreflectionsbasedonmycareerspentarounddisruptivetechnology,andwhateachindividualleadercandotosuccessfullyfacethesedigitaltechnologychanges.
1.CONTEXTLetmestartourdigitaljourneybytalkingabout3companies.Ihavespentmycareersincetheturnofthemillenniumattheintersectionofdigitaltechnology,businessandsociety.IstartedworkingasaventurecapitalistintheUSinthemiddleofthedot-combubblein2000.Duringthistime,Ibothcreatedandinvestedintechnologystartups.
Tripadvisor–utilizingthelimitlesspotentialofdigitalizationThefirstsummerweincubatedasmalltravelcompanythattriedtoexploitthedigitizationofthetravelindustry.Andinthe17yearssinceitsfounding,Tripadvisorhasbecometheworld’sleadingdigitaltravelplatform.Todayithasenormouspowerovernationsandindustries,affectingnationaleconomiesaroundtheworld.Itsrecommendationsinfluencewheretouristsdecidetoleavetheirmoney.Andwiththispowercomesprofitmarginsthattheactualphysicalassetowners,thehotelchains,canonlydreamof.
CeleraGenomics–usingadvancedcomputingtomapthehumangenomeAtthesametimeasTripwasstarted,theresultsofanothercompanyco-foundedbymyventurecapitalcolleagueonthebiotechside,NoubarAfeyan,werepublishedworldwide.Thecompany–CeleraGenomics–hadusedanovel,advanceddigitalcomputertomapthehumangenecodeinrecordtime.Theresultsbecamethestartforthee-healthandbioinformaticsrevolutionwhichnow15+yearslateristurningmedicineandhealthcareupsidedown.Asthese2companiesshow,digitizationcreatesunprecedentedopportunitiesforinnovation-drivenchange,growthandprosperity–andasaventurecapitalistandlaterasanentrepreneurandstartupCEOinBoston,Ivigorouslypursuedthoseopportunitiesviaup-and-comingstartupstryingtochangetheworld.However,italsointroduceschallengesforbothsocietyandestablishedbusiness,somethingIhaveseenlaterinmycareer-asamanagementconsultantandmostrecentlyasaseniorexecutiveinaglobalcorporation-Schibsted.
Facebook–theworld’snewspublisherWhichbringsmetothethirdcompany,vastlymorefamiliartoallofyou.Facebook.FromitshumblebeginningsinaHarvarddormroomin2004,Facebookistodaynotonlytheworld’slargestsocialnetwork,butalsothechiefsourceofinformation,newsandopinionontheweb–inotherwords,theworld’sdominantpublisher.Inlittlemorethan10years,Facebookhasbecomesopowerfulthatitscensorshipguidelinesanddecisions–ofeditorssuchasAftenposten’sEspenEgilHansenorevenourPrimeMinisterErnaSolberg–defactosetsthestandardforfreedomofspeechinNorway,regardlessofwhatourConstitution,SupremeCourt,ParliamentorPrimeMinisterweretosayaboutthematter.
PoweredbydataandIT,pursuingbigopportunitiesatbreakneckspeedWhatdothesecompanieshaveincommon?
Firstofall,theyarepoweredbydigitaltechnology-ITanddata.Theirimpactisfeltwithinthepublicsectorandwithinassetandcapital-intensiveindustries.Secondofall,theyillustratetheenormoustempooftechnologyshifts–theyallwentfrominceptiontoworlddominanceinlessthanadecade.Third,theyspeakofbigopportunities.Everythingbighasamodestbeginning-smallteamscanchangeandconquertheworld.Andlastly,theypresentbigchallengesforestablishedbusinessesandevennation-states.Changeisusheredinbypeoplefromtheoutside–outsideanindustry,farawaygeographically–unaffectedbyhistoricalbarrierssuchasgeography,languageorlocalregulation–threateningtoshiftpoliticalandeconomicpowerawayfromnationstates,andconcentrateitintothehandsofafewglobalplatformplayers.
2.WHAT’SGOINGON?Ifwelookthroughouthistoryatthevarioustechnologyshifts,wecanclustertheminto3industrialrevolutions.
IndustrialrevolutionsThefirstindustrialrevolutionwasdrivenbythecottonspinningmachineandrailroads;thesecondindustrialrevolutionbysteelandmassproduction;andthethirdindustrialrevolution–theso-calledITrevolution–hasbeendrivenbythetransistor,bysilicon.Eachoftheserevolutionswerecharacterizedbytwoperiods.Firstanestablishmentperiodwherethetechnologywasbeingimproved,frominitialbreakthroughtothepointwhereitwasadvancedenough,andreliableenough,tobeusefulatscale.Thenfollowedbyaninstallmentperiod,wherethetechnologyshiftspreadstoallsectorsofsocietyandbusiness,changingthenatureofeverydaylife.Itisthisphasethatweoftencalldisruptive.Valuechainsareturnedupsidedown,titansofyearspastgounder,andnewlocomotivesarebornagain.Rightnow,wearejustatthebeginningoftheinstallmentphaseofthethirdindustrialrevolution.Thisiswhythesepastcoupleofyearshaveseenthetalkofdigitaltransformationreachacrescendo.ITisnowbecominganessentialpartofbusiness.Gonearethedayswhereonecouldrelyon“ITspecialists”tosolvetheproblem,beforebeingtuckedbackintothecloset,sothatlawyers,economistsandbusiness-trainedleaderscouldcarryonwithrunningtheshow.Today,theunderstandingoftechnologyneedstobepartofeveryleader’scorecompetence,bothtacticallyandstrategically.Tacticallytooptimallyincorporateanduseitindailyworkasindividualsandasorganization.Strategicallytounderstandandanticipatehowtechnologywillevolve,inordertobeproactive.
The4thindustrialrevolutionHalfwayintothethirdindustrialrevolution,weseeanadditionaldevelopment–anothershift–takingplacerightnow,thatKlausSchwaboftheWorldEconomicForumhastermedtheFourthIndustrialRevolution.
OvercomingourcognitivelimitationsThisrevolutioniscompletelydifferentfromthepreviousshifts:Whereasthefirstthreerevolutionswerefocusedonovercomingourhumanphysicallimitations–producingphysicalobjects,liftingandmovingthings,transportinggoods–thefourthindustrialrevolutionisallaboutovercomingourhumancognitivelimitations.Itischaracterizedbyexponentialchange–inotherwords,ithitshardandfast,andithasacompletelydifferentdynamicandasetofrulesofplay.Thismeansthatyesterday'ssuccessrecipe–theoreticalframeworks,mentalmodels,provenmethodsandexperience–haslimitedvalueandrelevancetoensuretransformation,adaptationandsuccessinthefuture.Morespecifically,itmeansadifferentTypeofChange,PaceofChange,andwhencombiningthetwo,adifferentForceofChange.
ExponentialTypeofChangeThechallengewithaTypeofChangethatisexponentialisthatthehumanmindisorientedtowardslinearthinking.Itishowwearebroughtup,howwearetaughtinschool,beitbusinessorscience,weusepreviousresultstopredictfuturedevelopment.Wehaveamuchhardertimecopingwithexponentialchange:Justlookatanexponentialcurve.Inthebeginningitsdevelopmentisfarslower,anditistemptingandeasytoeitherignoreitandwriteitoffasahype;“AIisoverhyped”,“self-drivingcarsisnevergoingtohappen”.Then,whensomethingreachesaninflectionpointandtheexponentialgrowthexplodes,thingsgosofastthatitisnotonlyhardforthehumanmindtokeepup,butitisusuallytoolateforabusiness,foranorganization,torespond.
Utrullingsperiode
Etableringsperiode
1771Spinnemaskin
1829Dampmaskin og jernbane
1875Stål og tungt
maskineri
1908Olje, biler og
masseproduksjon
1971IT- revolusjonen
1 2 3
DISRUPSJON
4. INDUSTRIELLE REVOLUSJON
VI ER HER
HUMAN BRAIN VS EXPONENTIAL…
AgoodillustrationofthefallacyoflinearthinkingappliedtoexponentialchangeofthefourthindustrialrevolutioncanbefoundattheUSEnergyDepartment,intheirprojectionofelectricvehiclesales1.TheirprojectionsinJanuary2015werenegligible,at5-10thousandvehiclessoldperyearinallforeseeablefuture.Ayearlater,inJanuary2016,theforecastwasmuchmoreaggressive,projectingalineargrowthtowards2025,plateauingoutathalfamillionvehicles.Thereasonwasthatthecostsofproducinganelectriccarhadgonedownfarfasterthanonelinearlyhadanticipated.TheninJanuarythisyear(2017),theanalystsattheEnergyDepartmenthadonceagainunderestimatedtherapidcostdecreaseofthevehicle’scomponents,suchasbatteries.Andyet,eventhoughthisforecastnearlydoubleditsestimatesinthespanofayear,eventhisnumberlooksquiteoffbaseconsideringthatTeslaandElonMuskhasgoneonrecordandstatedthattheywillproduce(andsell!)thisnumberofvehiclesby2020!
Now,Iamnottryingtoimplythattheverysmart,competent,conscientiousmathematicians,statisticiansandeconomistsoftheEnergyDepartmentareidiots.Farfromit.Iammerelytryingtoillustratehowincrediblyharditisforushumanstopredictexponentialchange.Inthiscase,theresultofsuchlinearthinkinginanexponentialageisthatoneendsupbeingpreciselywrongbecausetheunderlyingmodelsandassumptionsremainlinear!
RapidPaceofChange–S-curvesandnon-linearcostcurvesLet’sstartwiththerevenuesideofanincomestatement,pertainingtomarketchanges,useradoptionandresultingtoplinegrowth.ExponentialdynamicmeansthatchangesincustomerdemandanduseradoptionintheformofS-curves,aretakingplaceatanacceleratingpace.Whileittookthetelephone75yearstoreach50millionusers,ittookTelevision13years,Facebook3years,Instagram1.5years…andAngryBirds35daysin2009.Anditjustcontinues,asPokemonGo!neededonly10daystogetthesamenumberofusers.
1Kilde:https://www.eia.gov/outlooks/aeo/index.cfm
2015 2020 2025 2030 2035 2040
1200
1000
800
600
400
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Tu
sen
kjø
retø
y so
lgt
2017 EIA forecast
2016 EIA forecast
2015 EIA forecast
1 millioncars per year
Totranslate:ifittakes50millionpeoplejust10daystofundamentallychangetheirbrandloyaltyanduserhabits,thenhowareyouandyourorganizationgoingtobeabletoreact,changeandadaptintime?Currentstrategy,budgetandresourceallocationprocessesarenotsetuptodealwiththecurrenttechnologydrivenPaceofChange.Andthesamegoesforcosts,whereacombinationofiterationspeedandtechnologydriveninnovationresultsinlearningcurvesandcostreductionsfarfasterthanhistoricalnorms.Letmeillustratethisinoneofthemostassetandcapital-intensiveindustriesintheworld,theenergybusiness.5yearsago,unconventionalgaswasstillconsideredsomewhatexpensiveanduncompetitive.Whenitcosts10xlesstodrillanewwellinTexasvsaintheNorthSea,youendupwith10-100xthenumberofwellsdrilled,andacompletelydifferentiterationpace.Nosurprise,thenumberofinnovations,andtherapidlearningcurve,resultsinfarfasterandsteepercostreductions.Thisiseventruerforrenewableenergyformssuchassolarandwindpower,aswellasbatterytechnology.Withmuchofthecostandperformancedrivenbysilicon,dataandinformationtechnology,costshavedroppedfarfasterthanlinearforecastspredicted–78%forsolar,58%forwind.
Tid fra lansering til 50 millioner brukere
75 years
35 years
13 years
4 years
3 years
½ years
35 days 10 days
TIME FROM LAUNCH TO 50 MILLION USERS
Coal%Henry%Hub%(Natural%Gas)%Brent%(Crude%Oil)%Solar%PV%
Prise
r&($/mmBT
U)&
Kilde: https://www.eia.gov/outlooks/aeo/index.cfm
COST CURVES FOR OIL/GAS VS SOLAR
ResultingForcesofChangeareunprecedentedWhenyoucombinetheTypeofChangeandPaceofChange,theresultingForceofexponentialchangeisstaggering.Inthepastdecade,52%ofallFortune500companieshavebeenreplaced.TheaveragelifespanofacompanyontheS&P500index–agoodindicationofhowlongacompanyisontopandenjoyslargemarketsharesandhighprofitmargin–isdowntolessthan15years.Thatdevelopmentreallysumsuphowpowerfultheforcesofdisruptionis.Noindustryorsocietysectorisprotected.Andtheformulasandexperiencesofthepastarenotveryrelevantorapplicable.Thinking“wehavealwaysbeenveryadaptableandsuccessfullymadeitthroughearliershifts,sowe’llbefinethistime,too”isaperilousapproachtothisexponentialshift.
Whatiscausingthecurrenttechnologyshift?Manyfuturistsand“thoughtleaders”tendtotalkabouttrends,usinglotsofbuzzwordsandconvolutedexplanationsthatmoreoftenspreadconfusionratherthanclarity.Butitreallyisn’tthatcomplicatedwhenyoustripawaythejargonandlookatthetrends,notinisolation,butincombination.
Sensors,computingpowerandnetworkscombinestogiveusArtificalIntelligenceFirstofall,anexplosioninsensorshasledtothemarketingterm“InternetofThings”,whichinturniscausinganexplosionindataaboutthingsandpeople,so-called“BigData”.Andthecontinuedexponentialdevelopment(Moore’sLaw)ofcomputingpowerhasnowgivenusthemicroprocessorscapableofanalyzingthisdatainreal-time.Thischangesthevalueofdatafromafter-the-factreportingandcompliance,toastrategicassetusedforreal-timedecisionmakingandintelligentautomation.Andthirdly,whenthedevelopmentoftheworld’sdatacommunicationsnetworkintoapervasive“cloud”,itmeansthatthisdataandanalysisisavailabletoanyone,anywhere,allthetime.ItisthesumofthesethreedevelopmentsthathascausedArtificialIntelligence(AI)toseeminglyexplodeinthepast3-5years.Theunderlyingmathematicalapproachofsimulatingthebrainanditsneuron-basedwayoflearninganddevelopingintelligence,waspioneeredatBellLabsmorethan20yearsago.However,justlikeasmallchildneedsexperiencestolearn,developandmature–toget“smart”–aneuralnetworkbasedAIsystemalsoneedsenormousamountsofdata–experiencesandoutcomes–inordertobecomesomethingintelligent.AndthefactthatwecanapplysuchAIsystemsreal-time,anywhereintheworld,iswhattrulyismakingAIuseful.Thinkself-drivingcars.Thinkfinancialsystems.AndbecauseAIsystemsbuildsonandcanincorporateallpriorAIdevelopmentsandresults,itsdevelopmentisexponential.
NetworkseffectsmakesinnovationfastandcheapDatacommunicationshasnotonlygivenus“thecloud”,butalsorisetonetworkeffects.WhichmeansenormousTEMPO,enormouspaceofchangeasnewdevelopmentsandtrendsspreadatlightningpaceduetothecombinatorialnature(thinkMetcalf’sLaw)ofnetworks.ThinkS-curvesofconsumeradoptionandPokemonGo.Butequallymuch,thinkfinancialcrisis.Withouttheconnectednessoftheworld,thefinancialcrisiswouldhavedevelopedfarslowerandwithfarlessrisktotheworld’sfinancialsystem.Networkeffectsalsoenablethecrowdeconomy,notjustsocialmediaorridesharing,butratheropensource.Opensourcemeansthateveryone–anyentrepreneurandstartup–cantakeadvantageofthe
aggregatewisdom,workandintellectualpropertyofmillionsofpeople.Translation–opensourcemakesitCHEAPtostartanewbusinessanddevelopanewproductandservice.Insteadof50millionUSdollarstobuildaneCommercesitebackin2000,youandIcandothesameusingopensourcetoolsandAmazonWebServices–inanhour,forlessthan50USdollars!
3Dprinting,meaningdecentralizedproduction,makesitfasterandcheapertoinnovate.Whilemostpeoplethinkof3Dprintingasmeaningtheprintingofsmallplasticobjects,that’snotwhat3Dprintingisallabout.Rather,withrecentadvancesinnanotechandmaterialstechnology,3Dprintingmeanslargescale,decentralizedindustrialproduction.TaketherobotMX3D,forexample,whichearlierthisyearprintedabridgeoveracanalinAmsterdam.SuchdecentralizedproductionmakesitmuchFASTERandCHEAPERtoprototypeanditerateandimprove:InsteadofsendingaproductionordertoChinaandgettheresultbackafewweekslater,youcangototheroomnextdoorandpickuptheproducedresultwithinminutes.Andatscale,theimpactthiswillhaveontheworld’slogistics,transportationandshippingindustriescannotbeoverstated.Itisthesumofthesethreemeta-trends–ArtificialIntelligence,NetworkEffectsandOpenSource,andDecentralizedProduction–thathasgivenrisetothecurrentexponential4thindustrialrevolution.Ithasneverbeeneasierandcheapertokillestablishedbusiness.Andithasnevergonefaster!
MACROPERSPECTIVE–WHATDOESTHISTECHNOLOGYSHIFTMEAN?
TechnologyiseatingtheworldTechnologyandthesophisticateduseofadvanceddataanalytics,includingArtificialIntelligenceisbecomingmoreimportantthandomainknowledge.The4thIndustrialRevolutionputsdigitaltechnology
Sensors Internet of Things ”Big Data”
Network ”Cloud” Everywhere/ All the time
Processing power Real timeComputing AI
www Things connected
People connected
Network-effects
Tempo! (S-curves)
Crowd Economy
Open source
Hardware
Software
Distribuert
Materials tech
Nanotech 3D Printing
inthedriver'sseat,increasinglyprovidingcompanieswithsophisticatedtechnologicalskillsandcompetencewithacompetitiveadvantageoverthosecompanieswithdeepindustryknowledge.EverybodyisusingTeslaasanexample,butthisisnotastoryofelectricvsgasolinevehicles.Therealstoryisthataperson(admittedly,wellaboveaverageintelligentanddriven!)fromPayPalonedaydecidedtomakeacar,intheprocessreinventingtheautomotivebusiness.Thinkaboutit.Heknewabsolutelynothingaboutthecarindustryoritsimmenselycomplexsupplychain.Buthequicklylearned.AndnowTeslaisrewritingtherulesfordesigning,developing,sellingandproducingacar,makingsoftwareanddatacompetencemoreimportantthantraditionalhardwaredesignormanufacturingknow-how.Andsofar,ElonMuskiswinning.Andthisisnotanisolatedincident.Hehasgoneontodothesameinspace,withSpaceX.Andmorebroadly,thisisthemindsetthatsurroundedmewhenIwasaventurecapitalistandentrepreneurintheUS.Smartpeopleneed6monthstolearnanewindustrybeforetheyarereadytousetopnotchsoftwareanddataskillstodisruptit.TakeAirBnBandUber.Atheart,theyarequiteidentical:SiliconValleybased,venturecapitalfundedstartupswhosecorecompetenceissoftwareanddata,andwhojusthappenedtopicktwodifferentindustriestoapplytheircompetencein.Theycouldjustaswellhaveswitchedroles.OrifwemoveclosertoScandinavia,justlookatSpotifyorKlarna.These,too,aretechnologycompaniesthatdecidedtoenter,learn,andthendisruptanindustryfromtheoutside.Wecansimilarlyzoomoutandseethesamehappeningwithinenergy,logistics,bankingorhealthcare.Itissilicone,digitaltechnology,andbigdatathatdrivedevelopment,anditistheplayerswhomastertheseareasbestthatleadtheway,nottheestablishedcompaniesandindustryleaderswhoareweakinITanddata,butstrongonverticalknowledge.
AIiseatingtheworldAnotherconsequenceofthisdatadriventechnologyrevolutionistheemergenceofArtificialIntelligence.Itwillcompletelychangeproductsandevenmoreso,services.Anditwillcompletelychangethejobmarket.Adetailed,year-longMcKinseystudyconcludedthat60%oftoday'staskswillbetakenoverbyArtificialIntelligence,justbasedonwhereAItechnologyistoday.Andwearenotjusttalkingaboutunskilledjobs,butalsoaboutmiddle-classprofessionslikedoctors,lawyers...andyes,finance,audit,economicsanalystsandotherprofessionals.AIrobotsarefarbetteratgoingthroughenormousamountsofinformationanddata,andinstantlydetectingpatternsandirregularitiesthanthesmartest,mosteducatedpersonintheworld.AsasidecommentforNHHstudents:Lestyouleavethislecturethinkingyouhavenofuture(!),restassured,therewillstillbeajobforyou.However,thetasksandcontentofyourrole,willchange.Justlikedoctorswillspendlesstimeandeffortondiagnosis,insteadrelyingonanAImachinewithinstantaccesstoandmemoryofalltheworld'sdiseaserecordsandallresearchliterature.Youtoowillspendlesstimeonthepurelymechanicalaspectsoffinance,auditingorfinancialmanagement.Insteadyouwillfocusontaskslikeproperframingofissues,askingtherightquestions,ensuringtherightinputsbeforeprocessingbyAI.Andpost-AI,youwillensureholisticinterpretationandassessmentofanalyzedresults,puttingAIbasedfindingsintoabroaderhuman,organizationalcontexts,andsocietalcontext.Giventhis,
myadvicetoallofyoustudentshereatNHHisto:First,investinsecuringastrongunderstandingofhowAIworksanditsunderlyingpossibilitiesandlimitations,andsecond,gaincompetenceandknowledgeinsubjectsthathelpapplyyourspecializationhereatNHHintoamoreholisticcontext,suchasstrategy,organizationandleadership,and/orsocialandbehavioralpsychology.
Badnewsforincumbents-allfuturegrowthwillcomefromdisruptivetechnologiesMcKinsey’sglobalreportonexaminingthesourcesofeconomicgrowththecoming10years,estimatesthattheworldeconomywillgrowfromabout70trillionUSdollarsin2015toabout100trilliondollarsin2025.99%ofallthisgrowthwillcomefromdisruptivetechnologyinnovation–radical,gamechanginginnovationthatcompletelyredefinesproductcategoriesandvaluechains–greatlyhelpedbythetechnologyrevolution’sdizzyingnumberofsimultaneoustechnologychangesandbreakthroughs.
"Creativedestruction"withoutprecedent–andestablishedbusinesseswillstruggletotransformWhileallthischangerepresentsexcitingdevelopmentsforusasindividuals,forestablishedbusinessthisisprettybadnews.Why?Becauseifthere’sonethinghistoryhasshown,it’sthatestablishedcompaniesarereallybadatdisruptiveinnovationandradicaltransformation.IwasaresearchassistantforProfessorClayChristensen–whocameupwiththephrase"disruptiveinnovation"–atHarvardBusinessSchool,soIhavefirst-handknowledgeofthehistorical-empiricalevidence:Itisexceptionallyrarethatestablishedbusinessesmanagetogetthroughsuchmajorshiftssuchastheonewearecurrentlyfacedwith.AndIamnotjusttalkingfromacademictheory,butfromdirectoperationalexecutiveexperience:Recently,between2013and2016,IledthedigitaltransformationofSchibsted-Europe'slargestinternetcompanywithits250millionusers-fromaholdingcompanyof100+brandstoadigital,technology-drivenintegratedcompany.Ithereforeknowfirsthandhowenormouslydemandingitisforestablishedorganizationsandculturestosucceedinsuchradicaltransformation,howharditisforestablishedmanagementteamstochangetheirsuccessrecipeandmentalmodelsoforganizationandleadership.Youareattackedfromtwofronts.BothfromplatformcompanieslikeGoogleandFacebook,butalsofromheavilycapitalized,globallyambitiousstart-ups.Andnomatterhowfastyoumaythinkthatyouarecarryingoutchange,nomatterhowproactiveandtimelyyoumaythinkthatyouareinyourtransformation,youwillneverthelessstruggletochangeasfastastheexternalmarketandcompetitivesituationrequiresyoutodo.So,IcanhonestlysaythatifitisdemandingforsuchadigitallymaturecompanyasSchibsted,withsomanysmartandcapablepeople,thenthereislittledoubtthatmostestablishedbusinesses(includingthepublicsector)willfindthetaskofgoingthroughasuccessfuldigitaltransformationtobeextremelydemanding.
HugeconcentrationofmoneyandpowerintothehandsofafewtechnologytitansThe4thindustrialrevolutionanditsaccompanyingknowledgeeconomyisalsocreatinganewdynamicwherebyvaluecreation,valuecapture,andtheresultingwealthandpowerincreasinglyaccruestoafew,privileged,privateentities.Therearethreeprimaryreasonsforthis.
1.“Winnertakesitall”dynamicinadigitaleconomyFragmentationforcesarenullifiedonline:Thereisamuchhigherconcentrationofmarketsharesandprofitsinadigitaleconomywithtechnology-scalablebusinessmodelsandvirtualvaluechains.Physicalproximitydoesn’tmatterwhenyouorderonline,norarelanguageorlocalregulationmuchofabarrier.Whatinsteadmattersisfrictionfreeconvenience–asuperbcustomerexperiencewithindividuallytailoredfunctionality,lowpricesANDgreatselection(botharepossibleonline),effortlessuserfriendlinessandattentivecustomerservice.Therefore,inonlinemarkets,weoftenseeoneortwodominantproductorserviceprovidersforthevastmajorityofapopulation.Agoodillustrationofthisistheretailgrocerybusiness.Thelargeranonlinesiteis,thelargeritsgroceryselectioncanbe,theloweritsprices,andthefasteritsdelivery.That’swhy,forexample,itisaveryriskycalculusbytheNorwegiangrocerygiantstoassumethatthedominantonlinegrocerysite,Kolonial.no,willremainanichesiteasthegrocerymarketshiftsonline.Thatwouldgoagainstallhistoryandlogicofadigitalmarketplace.Rather,itismorelikelythatKolonial,onceitreachescriticalmass,willbenearlyimpossibletocatchandinsteadwillcontinuetotakealmostallmarketshareofagrowingonlinegrocerymarket.Adigitalworldyieldsanaddressablemarketthatcovertheentireplanet.Theworldisflat.Thebestcompaniescanoffertheirgreatdigitalproductsandservicescheaplyfromacrosstheentireworld.Theycanreachusersandcustomerswithminimalsalesandmarketingcosts.Whichmeansthatthewinnersinonemarketarelikelytobewinnersinmostmarkets.ExampleofthisincludeAirBnBvslocaltravelagentsandhotels,Übervslocaltaxibusiness,Spotifyvslabels,Netflixvslocalmoviedistributors,Facebookvslocalnewspapers,Amazonvsbrick‘nmortarstores,andGooglevslocaladvertisingnetworks.
2.ScaleandskilladvantagesinadigitaleconomySecondofall,therearedefinitescaleadvantagesandmoreimportant,skilladvantages,inatechnologydrivenbusiness.However,farmoreimportantarethescaleadvantageswithregardstovolumesofdataandtheskilladvantagesofbeingabletoattractthebrightestmindsintheworld.Greatdataandbrightpeopleiswhatallowsacompanytodevelopsupremelygoodproductsandservices,betterthanthecompetition.Remember,FacebookandGooglebuilttheirempirefromprototypetoIPOwithlessthan500softwareengineerseach.Comparedtomostlargecompany’sworkforces,thatisaverysmallnumber.Googleand
Facebookstilldon’thavethatmanyengineers,butthosethattheyattractaretopnotch–andwhencoupledwithscaleadvantagesofbothdatavolumesandlow-cost,massiveITinfrastructure,theirmarketdominancebecomesalmostunassailable.
3.WideningproductivitygapinaknowledgeeconomyLastly,inaknowledgeeconomy,thefactthattheproductivitygapandvaluecreationdifferencebetweentheverybestandtheaverageisnot2-to-1,but100s-to-1,makesiteasierforafeworganizationswithrelativelyfewpeopletoaccountforandcapturemostofthevaluecreationinavaluechainorindustry.
Illustrationof“winnertakesitall”–mostvaluablecompaniestodayandBig3ofSiliconValleyJustlookatthemostvaluablecompaniesintheworld.In2006,the5mostvaluablecompaniesintheworldweretwooilcompanies,anindustrialgroup,abankandatechnologycompany.Fastforward10years,andthe5mostvaluablecompaniesintheworldarealltechcompanies.Apple,Alphabet(Google),Microsoft,AmazonandFacebook.Notonlydoesitmeanthatthesecompaniesenjoylargemarketsharesinthesectorstheyoperate,theyalsotakemostoftheprofitsofanyvaluechaintheyarein.Orlet’slookatthe“Big3”ofDetroitin1990andcomparewiththe“Big3”ofSiliconValleyin2017.Theyhaveaboutthesameturnover,$250billionvs$336billion.However,theiraggregatemarketcapspokeadifferentstory,$26billionvs$1,500billion.Inotherwords,theenterprisevalue(andhencealsotheprofitmargins)oftheSiliconValley“Big3”wasnearly60timeshigher!Whatbetterillustrationofhowmuchpowerandwealthisincreasinglyconcentratedintothehandsofthosemasteringdigitaltechnologiesthebest.Andlastly,worthnotingisthefactthatwhileDetroitneeded1.2millionworkerstocreatethisamountofrevenuesandprofits,SiliconValleyonlyneeded200,000–andthisnumberisonlysohighbecauseofApple’sretailstorestaffaroundtheworld.Inotherwords,notonlyisSiliconValleytaking60timesmoreprofitperunitofrevenue,buttheydothiswithonly1/6oftheworkforceofDetroit–meaningeachSiliconValleyworkerrepresentsalmost350timesthevaluecreationofaDetroitworker.
Leaderswillbechallenged–leadershipneedstobestrongandcompetentThisdevelopmentrequiresverystrongpoliticalandbusinessleadership,bothtocounterthetransferofwealthandpowerfromnationstatestoafewglobalcorporations,andtoensurethatthewealthcreatedandcapturedissufficientlydistributedsoastoensurestablesocieties.Ifnot,theresultislossofcontrolandpowerfornationstates,andunsustainablygreatdifferencesbetweenthosewhohavealotandthemanywhohaveless.Theresultisnotonlyreducedstandardoflivingforthemany,butmostlikelyaflawed,sociallyunstablesociety.
MACROPERSPECTIVE–WHATDOESTHISMEANFORNORWAYWRTCHALLENGES?So,the4thindustrialrevolutionanditstechnologyanddataprimacywillchallengetheworldatlarge.AnditwillchallengeNorwayinuniqueandparticularways–privatesector,publicsector,andtheoverallNorwegianeconomy.
WeneedrenewalandgrowthinNorway’sprivatesectorInNorway’sprivatesector,thebestillustrationofthisimpendingchallengecanbefoundinthepublicstatementsfromtheChiefExecutivesofour3mostvaluablecompaniesontheOsloStockExchange.SigveBrekkeofTelenorisopenlywonderingifTelenorwillhaveabusinessin10years(andheisrightto),EldarSætreofStatoilisopenlyadmittingtheenergyshiftanditsprofoundconsequencesforStatoil(andNorway).AndRuneBjerkeofDNBisopenlysignalingthetechnologyrevolution’simpact–AIandautomation–onDNB’scurrentjobs.
Noneofthisisparticularlysurprising,inlightofthenatureofthecurrenttechnologyshift.Whatissurprisingandworrisomeishowlittleattentionthesestatementshavegottenfrombothpoliticiansandthemedia.Dotheytrulynotunderstandthesematters?Dotheynotrealizewhatwillhappen?Ordotheysimplynotcare,eitherbecauseitdoesn’tgenerateaudienceinterest(media)orbecauseitwillnotwinelectionsthewaythatmorepopulistissueswill?
WeneedmoreprivatejobcreationPerhapsthebestindicatorofourchallengingsituationisthelackofjobcreationinprivatesector.For10years,therehasnotbeenanynetjobcreationinprivatesector,andespeciallynotinexport-oriented,competitivebusinesses.In2007,beforethefinancialcrisis,therewere711,567jobsinpublicsectorand1,772,433inprivatesector.Almost10yearslater,in2016,thesamenumbersare814,020and1,773,684,respectively.Inotherwords,publicsectorhasaddedmorethan100,000jobs,andprivatesectorslittlemorethanathousand.Thenetadditionisnotimpressive,consideringthepopulationincreaseinthesameperiod.Combinethiswithanageingpopulation,andanincreasingshareofthe
potentialworkforceoutofworkandsupportedbythegovernment,andwehaveanunsustainabledevelopment:Somebody’staxesandexportcurrencyhastopayforthegovernmentjobs,ourretiredelders,andthoseunabletowork,namelyprivatesectorjobs.Thechallengeisjustthattheseprivatesectorjobsandbusinessesareunderpressurebecauseofthecurrenttechnologyshift.Moreover,forNorway’sprivatesectorthesituationisparticularlydemandingbecauseoftheageandstructureofthecurrentNorwegianindustry.
WeneedrenewalofprivatesectorlocomotivesAnalyzingour20mostvaluablecompaniesontheOsloStockExchangeshowsthatNorway’sbusinessandindustrylocomotivesarerathergeriatric:Inanagewheretheaveragetimeontopisshrinkingwitheveryyear,theyoungestNorwegiancompanyamongthetop20ontheOsloStockExchange-MarineHarvest(ifyoucountPanFishastheorigin)-is25yearsold.Inotherwords,Norwayanditsindustrialpolicieshavefailedtobringforthevenasinglelargeenterprisethelast25years.ContrastthisageoftheyoungestNorwegianlocomotivewiththeaveragelifespanof15yearsfortheS&P500companies,itiseasytoseethatweareparticularlyvulnerabletobothdestructionofvalueandlossofjobs.Whenourbusinessengineisexclusivelymadeupofsucholdbusinessmodelsandestablishedorganizations,thenrenewalanddigitaltransformationbecomesevenmorechallenging.
Itisfuturelargeenterprises,notthecurrentlocomotives,thatwillcreatenewjobsTheratheroldageofourbusinesslocomotivesalsomeansthattheyarewellpasttheageofgrowth,whichmeansthatourlocomotivesalsodonotcreatenewjobs.Lookingatthesame20largestcompaniesontheOsloStockExchange,theyhavelostthousandsofNorwegianjobssince2000.Infact,only3companieshavehadnetjobgrowth.Theremaining17allemployfewerpeopletodaythantheydidin2000–lostduetodecliningmarketshares,orduetoefficiencygains,taskautomation,and/orjobsoutsourcing. Althoughthe20largestcompaniesallhavethousandsofemployeestoday,wemustdoeverythinginourpowertotryandhelpthesecompaniesthroughtheupcomingdigitaltechnologyshift.Tosaveasmanyofthesejobsandasmuchofthevaluescreatedoverthepastdecades,aspossible.But,wemustacknowledgethatfuturejobswillnotcomefromthesecompanies.
Wehaveaparticularlylongwaytogotobuildaknowledge-basedeconomyAstheProductivityCommission’sreport“Atacrossroads–fromaresourceeconomytoaknowledgeeconomy”demonstrates,theNorwegianindustrysectorisnotjustold,ithasbeenuniquelyblessedwithaplethoraofnaturalresources,anditisthesenaturalresourcesthathavebeenthesourceofaprivilegedwealthandstrongfinancialandeconomicpositiontoday!However,itdoesunfortunatelyalsomeanthatNorwayisstartingfromaparticularlydisadvantagedpositionaswetrytoshifttheeconomyandprivatesectortoadigitallytransformed,knowledgebasedeconomy.
WhatthismeansisthatmostofNorway’sbusinessknow-howisnotentirelyreadyforinternationalcompetitionorbusinessexecutionandcompanybuildingbasedonknowledge,technologyandbusinessmodelinnovation:
• Cost,notrevenuefocus:Wearegoodatcostefficiencyandinnovationsupportingcostreduction,suchasprocesstechnology.Inacommoditybusiness,thepriceissettobeacost-efficientstewardofnaturalresources–water,lumber,aluminum,fish,oilandgas.Butwehavelittleexperiencewithbusinessmodeloptimizationorpricingexecutioninaknowledgeeconomywherethebasisofcompetitionisonserviceinnovationenabledbyadvanceddigitaltechnology.
• Wearegoodatprojectfinanceandprivateequity,thatisfinancingresourceintensivebusinessesusingeithercashflowordebt-financingwithnaturalresources,steelorconcreteascollateral.Butwehavelittleexperienceorunderstandingofventurecapital,themaintoolforfinancingthebuild-upofknowledge-intensivebusinesses.Wheregrowthhappensaheadofcashflowandwheretherearelittletangibleassets(onlyintangibleknowledge)touseascollateral.
• Wearegoodatindustrialorganizationandleadership–hierarchical,processfocused,managedviareportingandcompliancecontrol.Butwearefarlessgoodatknowledgeeconomyorganizationandleadership–distributedandflat,aidedbysophisticatedvirtualcollaborationandinformationsharing,withreal-timedata-drivendecisionmaking.
• Weareverymethodical,linearandincrementalindustrystewardsinapproachandexecutionasleaders,ratherthanboundarypushing,exponentialandgamechangingtrailblazers.
Withoutnewknowledge-intensivecornerstoneenterprisesdevelopingandmasteringthetechnologiesofthecurrentindustrialrevolution,dreamsoffertileecosystemsandinnovationclusterthatareinternationallycompetitive,ringhollow.Withoutthese“anchortenants”itishardtoachievethecriticalmassofcompetencesufficienttosustainaworld-leadingcluster–R&D,innovation,newstartups,andnewjobs.ThisisaburningplatformandNorwayisatacrossroads.Ourprivatesectorwilleitherremainacommoditybasedprovideringradualdecline,orseeacollectiveconsciouseffort–a“dugnad”!–acrossbusinessandpoliticstoseedandthengrowanewgenerationoftechnology-drivenindustrylocomotives.
PublicsectorissubjecttodisruptionWhileNorway’sprivatesectorundoubtedlyisgoingtobechallenged,itisthetechnologyshift’simpactonpublicsectorthatwillmostchallengeNorwayandallotherliberal-democraticnationstateswithasignificantpublicsectorandwelfarestate.Bothlargeplatformplayersandnimblestartupsareincreasinglyabletodeliveranewgenerationofsuperiorproductsandservicesthatcoveryourandmyneedsfarbetter,faster,andcheaperthanthoseofadigitallylaggingpublicsector.Theconsequencesarepotentiallyveryserious–lossoftaxrevenuestofundthewelfarestate,lossofgeneralsupportforapublicsectorthatfailstomeetcitizens’needsincompetitionwithprivatealternatives,andlossofpoliticaldomesticcontroloverdirection,prioritiesandfeaturesofkeysectorsofthewelfarestate,suchashealthcare,education,energy,andtransportation.
LossoftaxrevenuetofundthewelfarestateWithprofitsandvaluablejobsconcentratedintothehandsofnewplatformplayers,theimplicationsaresignificantforthosenationswithouttheselargetechnologyanddatasavvyplatformcompanies–meaningallofEuropewhenonelooksatthefirst25yearsoftheWorldWideWeb,whichisthestoryofhowUS(andincreasinglyChinese)companieshavewonandEuropeancompanieshavelost.Thechallengecomesfromthelossofbusinessandindividualtaxrevenues.Lookatdigitaladvertising–thebusinessmodelofmedia–amarketofmorethan7billionNOK.Inafewyears,GoogleandFacebookhavetakenmorethantwothirdsofthismarket,ontheirwaytoanalmostcompleteduopoly.Facebook,forexamples,nowgeneratecloseto2billionNOKfromdigitaladvertisingrevenuesfromNorwegianadvertisers.Andyet,Facebookpayslessthan500,000NOKintaxestoNorway–about700timeslessthanestimatesindicatethattheyshouldpay2.Thesamegoesforindividualincometaxation.2billionofrevenueshavegonefromNorwegianmediacompaniestoFacebook.HundredsofNorwegianjobs–andassociatedtaxrevenues–losttoacompanythathaslessthanadozenemployeesinNorway.Thisisanotanormalstoryofhealthycompetitionandglobalization.Itisamanifestationwherethevaluecreatingjobsandresultingprofitsaccrueintothehandsofafewsoftwareanddata-savvycompaniesabletoproduceanddelivertheirvaluefromafar.WhenthisdynamicstartimpactingthebiggestsectorsmakingupNorway’sGDP,thenourpublicsectorhasamajorfinancingproblem.
LossofrelevanceandvaluetocitizensEverydaythegapbetweentheuser-friendly,personalized,friction-freedigitalservicesofferedtousbyglobalappprovidersincreasesversusthosewegetfromthepublicsector.Thegapisattimesirritating,butwetolerateitaslongaswedon’thaveanyalternatives.However,asalternativestopublicsectorservicesincreasinglyaremadeavailablewithbetterqualityandfunctionalityatafractionofthepriceofcomparablepublicservices,thenourwelfarestateisinimminentdangeroflosingitsrelevance.Whenpeople–atleastthosewhocanaffordto–covertheirneedsthroughtheconsumptionofsuchservicesfrominternationalplayers,thenthecollectivesupportforpayingtaxestofundsuchpublicsectorservicesquicklyerodes.Afterall,whypayforservicesthatarenotmeetingtheneeds,whenthereareprivatesectoralternativesusingsophisticatedtechnology,softwareanddatatodelivertoaddressmyneedsbetterandcheaper?
Lossofpoliticalpowerandcontrol–traditionalpoliticalapproacheswillnotworkWhileapolitician’sinstinctualresponsewillbetoreachintothetraditionaltoolboxandapplytriedandtestedapproachestoregulateawaysuchunwanteddevelopments,Iamsorrytoreportthatsuchapproacheswon’twork.It’sabitlikethemediaindustrytryingcostsavingasthewaytocompetewith
2https://www.aftenposten.no/okonomi/i/jqOAA/Facebook-har-trolig-milliardoverskudd-i-Norge---betalte-under-500000-kroner-i-skatt
Facebook’sinnovation-lednewsproducts–itsimplywon’tworkinasoftwareanddataledglobalworldorder–notregulatorymoves,notcompetitionstimulatingmoves,normarketshapingmoves:
• Regulation:IfNorwegianpoliticianstrytoregulateawayinnovation,theonlythingoneachievesisthattheinnovationtakesplaceelsewhere.Thetechnologyisdevelopedthere,competencebuiltthere,thejobsandbusinessesarecreatedthere,andtheresultingdigitalservicescanreliablyandeasilybedeliveredtoNorwayfromthere.UnlesswewanttocensortheInternet,wecannotpreventthisfromhappening.
• Competitionstimulation:InaworldwherevastamountsofdataareneededtodevelopsophisticatedAI,localgovernmentorbusinessescannot,forexample,easilyformaneffectiveco-optocompetewithTesla,becauseacertaincriticalscaleisrequiredtocompetewithsufficientinfrastructure,amountsofdata,andaccesstothebestheads,thebestcompetenceintheworld.
• Marketshaping:Onecannotbreakup,forexample,Googleinto10,000piecesandgetaself-drivingvehicle-it'stheAIbrainitselfandtheownershipofit(andthecriticalmassofdatathathascreatedit)that'sthecountanditcannotbebrokenupintomanypieces,asit’savirtualentitythatfunctionsasonesystem.
Examples-health,education,transportationLetmemakethesepointsmorerealthroughafewexamplesbeyondlastyear’sfreedomofspeechincidentinvolvingFacebookandAftenpostenandaniconicVietnamwarphoto.Healthcare:Let´sjustpointtothecontrastbetweenayet-to-be-builtcommonNorwegiandigitalpatientrecord(orthelackofsuch...)thatanywaywouldcontainverylittlevaluablehealthinformationaboutusincomparisonwiththehealthinformationderivedfrommobiledevices,bracelets,andwatches.Thisdatastreamaboutourlifestyle,diet,andworkoutsiscollectedandstreamedtoadatacenterabroadbelongingtooneofthemajorinternetplatformcompanies(basedinCaliforniaorChina)foradvancedanalysis(=AI).Thisemerging,digitaladvancedhealthinfrastructureiscapableofdetectingandrecognizingwarningsignalsaheadofserioushealthincidents,abletodiagnosethediseasefarquickerandmorepreciselywhenweareill.Addtothisthefactthatyourightnowcanorderafullgeneticmappingofyourselffor5,000NOK(goingbelow1,000by2020),whichwillformthefoundationforanincreasingdegreeofhighlygenespecific,individualspecificmedicaltreatment,andyouhavethebroadstructureofaglobalhealthcaresystemthatforallmostnon-surgicalareas,candeliverhealthservicesbetter,cheaper,simpler,andmorerelevantforyouandmethanNorway’spublichealthcaresystem3.Education:AdeepdiveintothesyllabusofonlinecoursesandeLearningtoolsofthemostpopularso-calledMOOCs4isquiteinsightful.EliteuniversitieslikeHarvard,MITandStanfordofferfreelyavailableonlineclasses,andtheywillsoonofferabettereducation(forafractionofthecost)thanalmostallof
3https://docs.google.com/document/d/1xxY4t07QhjhbtJYJmBL_7c4iKID1OBBdL4PUa_Izjb8/edit?usp=sharing
4MOOC=MassiveOpenOnlineCourse.TheleadingMOOCprovidersareCoursera,EdX,UdemyandKhanAcademy
Norway´slearninginstitutionsfromhighschoolandup.JustlikeWikipediahasbecomethechannelfortheworld'sencyclopedicinformation,soeducationwillalsobechanneledthroughMOOCs,withsyllabus,learningtoolsandresources,tutoringandinstruction,exams,andcertificationsanddegreesdefinedbypeopleandprivateenterprisescompletelyindependentoftheRoyalNorwegianMinistryofEducation.Today,languageisasmallbarrierslowingdownthespreadofthisdisruptivedevelopmenttoNorway,butjustaswasthecasewithWikipedia,thisobstaclewillbeovercomeinafewyears.Transportation:Über'simpactonthetaxiindustryisawarning,aharbingerofwhat'scoming.TransportsolutionscanandwillbedeliveredindependentofNorwegianauthorities.Autonomoustransportcouplewithasharingeconomywillnotonlychangetheentireautomotiveindustryoverthenext10years,butwillalsoresultinthedistinctionbetweenpublictransport,privatetransport,andco-optransportsolutionsbeingwipedout.GlobalplayersareusingsophisticatedsoftwareandadvanceddataanalyticsandAItodeveloptransportsolutionsatalarge-scalecityandcountryinfrastructurelevel.Withoutcompetentandproactivepublicleadershiptowardstheseplayersandthisdevelopment,weriskafutureof"twoworlds"intransport,abitlikethetaxiindustryvs.Über–oneworldthatconsistsofhighlyefficient,cheap,transportation-as-a-service,andtheotherapubliclyfunded,inefficientsystemthatfewcaresaboutoruse.Andifit’sonethinghistoryhasshown,itisthatforcecreatedattheintersectionoftechnologyshiftsandconsumerneeds,hasexplosivepower.Itneithercannorshouldbestopped.
Norway’soveralleconomyisparticularlychallengedAsiftheprivateandpublicsectorchallengesarenotenough,theoveralleconomyalsohasafewparticularchallengesthatcontributetoNorway’sburningplatform.Thisrangesfromaneedtocompensateforthefuturelossofoilexportrevenues,tohowweightedourstatefinancesisinlegacybusiness,tohowNorwaycurrentlylacksthetoolstocreatenewtechnology-drivenindustrylocomotives.
WemustcompensateforthelossofoilrevenuesThemostsignificantchallengeintheNorwegianeconomyistheneedfornewgrowth,jobsandexportrevenuesjusttocompensateforthestructuralenergyshiftawayfromoilandgas.ThisstructuralshiftisstillveryunderestimatedintheNorwegiancollectivepsyche,becauseitsimpactisnotyetfelt.Absolutelyallcalculationsshowthatthisshiftisnecessaryfortheworld–andNorway–toreachtheclimatetargetsundertheParisTreaty.However,itisnotonlynecessary,itisinevitablebecauseoftherapidlydecliningcostsofalternative,renewableenergy.AsformergloballeaderoftechnologyintheenergysectorforMcKinsey,Ihavedeep,first-handexperienceandknowledgeofhowenergysourceslikesunandwind(incombinationwithbatteryandsmartgridsolutions),inaveryshorttimehasbecomecost-competitivewithoilandgas.Inafewyears,hydrocarbon-basedenergysolutionswillbeuneconomicalandunneededinmostapplicationareas.
Atthesametime,itmeansthattheoilandgas-dependentNorwegianeconomyfacesanequallynecessaryshift.Lossofjobsandexportsduetooilrequiresdoublingofmainlandexports.AnalysisbyNorway’sBureauofStatisticsshowsthatevenwithanoilpricestabilizedbetween60and94dollars–notverylikelytobethecase,givencurrentsupply/demanddevelopments,Norwayisfacingamassivefallintotalexports.Inordertocompensateforthisexportdeficit,theremainingexporteconomicactivitieswillhavetomorethandoubledinordertocompensatefortheloss.ThisgapcanonlybecoveredifNorway’sremainingexportsincreasesitsannualgrowthrate2.5percentto3.5percenteveryyearbetweennowand2040.
Norway’sstatefinancesareover-allocatedintomorrow’slosersInanOECDcontext,theNorwegiancapitalstructureisunique,bothduetooursovereignwealthfundworthalmost7800billionNOK,butalsoduetotheuniquelyhighstateandlowinstitutionalownershipsharewithinNorway.Insum,itmeansthatthepublicsector–thestate–assetsandsavingsdominateswithtotalassetsof8500billionvs.800billionNOKworthofprivateownershiponOsloStockExchange.Inandofitselfnothingwrongwiththis.However,almost99%oftheseassetsareallocatedinpubliclylistedstock,debtobligations,andsomerealestate,andtherestinunlistedstateenterprisessuchastheNorwegianPostalService,NorskTipping,etc.Thismeansthatallofoursavingsallocatedtocompanyownership–inNorwayandabroad–areexclusivelyallocatedinmature,established,oldcompanies.Inotherwords,unlikemostotherlargefundmanagersaroundtheworld-privateandgovernment-wedonothaveanyofoursavingsinfuturegrowthwinners,eitherinNorwayorabroad.AndwhenwedoubleclickonthelistoflistedcompaniesthattheOilFundownssharesin,itgetsevenworse:Weareveryheavilyweightedtowardsyesterday'swinners.Forexample:
• Weown2.33%ofShell,whichisalargerownershipsharethanour2.2$%ownershipinVestas,theworld’sleadingwindpowerproducer
• Weown2.58%ofBMW,whichismorethan10xourownershipinTesla(0.23%)• Weown1.02%ofthenewspapercompanyAxelSpringer,butonly0.57%ofFacebook• Weown5.51%ofretailerTesco,butonly0.72%ofAmazon.
Welackthetoolstofundandbuildnewknowledge-basedbusinesslocomotivesWehavefailedtobuildnewtechnology-driven,knowledge-intensiveindustrylocomotivesthepast25years,andoneofthekeyreasonsforthisisthatNorway’stoolboxforthisisunderdevelopedwhencomparingwiththecountry’smostsuccessfulinrenewingtheirindustrybase.Firstofall,wearebehindothercountriesaccordingtomostobjectivemeasurementcriteriaintermsofknowledge-intensiveinnovation,newventurecreationandexport-orientedbusinesses,astheProductivityCommission’sreportdocumented.Thismeansthatthesourcesofknowledge-based,globallycompetitiveenterprisesareweaktobeginwith.
Second,Norwayalmostcompletelylacksinstitutionalventurecapital,themainfinancingtoolforfundingandscalingtechnology-basedventures.Ifwearetosucceedincreatingnewbusinesslocomotives,wehavetocorrectthissituation.DatafromtheUnitedStatesshowwhy:In1979pensionfundswereallowedtoinvestinventurecapitalfundsintheUS,whichledtoa50xincreaseinavailableventurecapitalfunds.Ofthe1330UScompaniesfoundedafterthatandthathavegonepubliconthestockexchange,43%werefundedbyventurecapital.Thesecompaniesrepresent57%oftheUSstockexchangeenterprisevalueandemploy38%oftheworkplaces.Andveryimportantinlightoftheshifttoaknowledgeeconomy,thesecompaniesaccountfor82%ofR&Dinvestments.Andthesenumbersdon’tfactorinthecontributionofalltheventurecapital-backedcompaniesthatarenotlistedonthestockexchange,butinsteadwereboughtbyestablishedcompanieswhoseproductsandservicescontributetovaluecreationandjobswithintheseestablishedcompanies.Norway,incontrast,hasforalongtimehadlessavailableventurecapitalthantheleadinginnovationcountries(whicharetheonesweneedtocompareourselveswith).TheamountofventurecapitalinvestedinNorwaylastyear–915millionNOK–is2%oftheamountinvestedinIsrael,despitethefactthatIsraelonlyhas8millionpeople.Ourinvestmentlevelis4timessmallerthanthecityofAustin,Texas–acitythesizeofOslo.AndintheUS,$58.3billionofventurecapitalwasinvestedinnewventureslastyear.WithNorway'spopulationof5.1million,andtheUS's318.9million,thisamountcorrespondstoaNorwegianinvestmentlevelof$929million,7.25billionNOK–almost8timestheNorwegianpercapitallevel.BothSchibstedandTelenor,twoICTdrivencompanies,neededbetween10and20billionNOKtogrowoutofNorwaytobecomeoneoftheglobalgiantsintheirrespectiveonlineclassifiedandtelcoservicesmarkets.TothinkthenthatwewillbeabletobuildnewglobalgiantsbasedinNorwaywithlessthan1billionofannuallyavailablecapital,isnotrealistic.Thus,ifwearetohaveanyhopeofnavigatingthroughthedeclineofoilandthedisruptivetechnologyshiftaheadofus,thenweneedtomakesureweareproperlyallocatingtheresourcesneededtocreatenewjobsandbuildnewtechnologyventures.
Norway’sburningplatformAtechnologyshiftwithoutprecedent,whichplacesuniquepowerandcontroltothosewhomasterdataanddigitaltechnologies.Aprivatesectorthatisuniquelyresourceorientedandold,andillequippedtohandlethedisruptiveforcesofthe4thindustrialrevolution.Apublicsectorthatrisksbeingunderfundedandignoredbyitscitizens.Anoveralleconomythaturgentlyneedsnewgrowthandjobcreation,justtodealwiththedeclineofoil.Incombination,thisisaburningplatformforNorway.
ItiswhyNorwayhastoputdigitalizationandinnovativenewventurecreationasitstoppriority.Aheadofunemployment,aheadofhealthcare,aheadofclimate,aheadofeducation.Becauseweasanationwillnotbeabletoachievethegoalswehavesetwithinthesepoliticalandindustrialfocusareas,iftheyfalloutsideadigitalfuture.Politics-bothwelfareandindustry-simplywillnotwork.
NORWAY’SOPPORTUNITIESBynow,anyreaderislikelytobeatbestquiteconcerned,atworstrightoutdepressed.Havenofear.IhavechosentooutlinethechallengesherenotbecauseIamnegativeaboutthefuture.Farfromit.Idon’tchoosetospendthemajorityofmycareerinandaroundstartupsandinnovation,ifIdidn’tfundamentallyviewtheglassashalffullratherthanhalfempty,ifIdidn’tbelievethefutureholdsboundlessopportunities!However,abrightfuturedoesnotjusthappen.Itrequireshardworktoturnopportunityintofabulousreality.Anditrequiresacorrect,fact-basedunderstandingofthenow-situationinorderforthemeasurestaken,thesolutionsdeveloped,toworkproperly.Orputdifferently,therearefewthingsmorecertaintoleadtoabadoutcomethantodiagnoseatreatablebutveryseriousdisease,asasimpleflu!
ThegoodnewsisthatNorwayiswellpositionedtotacklethebigchallengesandtakeadvantageoftheopportunitiesthatthisfourthindustrialrevolutionbringswithit.Whilethethreatisserious,therearealsoopportunitiesfordigitallyadvancedsocieties,suchasNorway,toleadthewayandbearolemodelforothersincreatingnewgrowthandnewjobs.BothBCG'span-EuropeanreportshowingNorway'srelativestrengthinrelationtomanyothercountries,aswellasInnovationNorway'sDrømmeløftetreport,highlightNorway’sadvantageousmixofnaturalresources,higheducationallevels,andimpressiveengineeringcompetenceinNorway.Wearealsoblessedwithgreatfinancialwealththankstotheoil,whichmeanswecanaffordtomakelong-terminvestmentsinnewinfrastructureandcapabilities.Intotal,itmeanswehaveknowledge,experienceandresourcesneededtoeffectchangeandbuildanewfoundation.AddtothistheunusuallyhighdegreeoftrustwithintheNorwegiansociety.Forinstance,thecloseproximitybetweensubjectsanddecisionmakersandbetweendecisionmakersacrosstraditionalsilossuchasindustries,privateandpublicsector.Orthedifferentstakeholdersinthelabormarket,andhowitmakesusbetterablethanjustaboutanyothernationtopursueasetofuniqueopportunities.ImagineNorwayasaprototypefortheworld’s“problemsworthsolving”,forsolutionsrequiringindustrywidecollaboration,orasatestmarketforconsumerservices.
Prototypelaboratoryfortheworld's"problemsworthsolving"Norwayasacountryisalsoaperfecttestinglaboratoryfordeveloping,testingandrefiningsolutionstotheworld'smostinterestingchallenges.Inmostoftheseareas–e.g.health,education,transportationandenvironment,theNorwegianstateisstrongandcanplayaninvaluableroleasaparticipantandfacilitatortoenableandensurevaluecreation.Forexample,thegovernmentisessentialintermsofregulationandregulatoryinnovationneededtoenableradicallynewtechnology-drivenapproaches.Itcanandmustalsoplayanactiveroletoenablethesafeandsecureaggregationofandaccesstonecessarydatafromawiderangeofpublicandprivatesources.Suchashealthrelateddatathatcanbeused(subjecttouserconsent)forthepurposesofserviceinnovation,newcapabilitydevelopment,andtailoredtaskautomation.Andlastbutnotleast,thegovernmentisthegatekeeperto–andgreatenabler!–fordistributiontoandadoptionofnewservicesbytheNorwegianpopulationatlarge.Forexample:Norwayhasagreatneedforwelfareservicesthatthroughtheinnovativeandadvanceduseoftechnologyanddatacancovertheneedsofanageingpopulationbetterandcheaper.Likeeveryotherdevelopednationwithanageingpopulation,thisneedmustbeaddressedtoavoidruiningthestate’sfinances.WhatbetterplacethanNorwaytodevelopandtestsuchonadigitallysophisticatedconsumerpopulationwithhighdegreeoftrustandfaithinthegovernment?Andifproducts,services,andsolutionsaredevelopedandproveninNorway,thatprovidesacompellingcaseforscalingthoseservicesouttoothercountries,othermarkets,withpopulationsandgovernmentshavingsimilarneeds.Norwayhasacompetitiveadvantagebecausewehaveasmall,homogenousanddigitallycompetentpopulationwhohasgreatconfidenceinthestateandgreatwillingnessandabilitytoadoptnewproductsandservices.Inaggregate,itmeansthatwehaveeverydevelopnovelsolutionfasterthanotherlargerandmorecomplexsocieties,andtestthemonapopulationwhosedigitalmaturityisfaraheadofmostothermarkets’digitalmaturity.Forexample,Norway'sleadershipinthedevelopmentofmobiletelephonyinthe1980sand90sgreatlycontributedtoTelenor'stravel:TelenorfoundoutinNorway,whichmadeTelenorverywellpositionedtogrowinternationally.
TestMarketforConsumerServicesNorwayisalsotheperfecttestmarketforservicesandsolutionsthatrequirecriticalmassanddensityofuseradoption,forexampleduetothedynamicsofmarketplacesorsocialnetworkingeffects.Thisusuallyrequires"criticalmass"ofuserswithinagivenmarket(suchasacountry),whichissignificantlyeasiertoachieveinacountrywith5millionpeoplethaninacountryof320millionpeople.Norwayhasadigitallyadvancedpopulation,awealthysociety,advanceduserpatterns,andhightrustinbothsocietyatlargeandinthebusinessworld.Thesetraitsmakeiteasy,fastandcheaptodevelopandtestnewservices,andobservetheirefficacyoncetheyhavereachedso-calledcriticalmass.AgoodexampleofthisisFINN.no,which“crackedthecode"ondigitalclassifiedadsinNorway5-10yearsbeforemostothercountries.ThisenabledSchibstedtoexportthesolutionsfromScandinaviaintotheworldbeforeanyoneelse,therebybecomingagloballeaderinthefield.
Tosucceedandseizetheseopportunities,Norwaymustmakedigitizationitstoppriority-andtakeforcefulstepstoensureafuturegrowthengineofsufficientspeed,competentqualityandimpact.Weneedtomakeastepchange,forcefullyembraceanation-widedigitaltransformationandinvestindisruptivetechnologyinnovation.WeareinthemidstofatechnologicalparadigmshiftthatpresentsNorwayanditspoliticalleaderswithanopportunitytotakeagloballeadershippositioninthedigitalcommunitybystronglyembracingandenablingdisruptivetechnologyinnovationandstartups.ThisopportunityisatthesametimeourbestdefensetoensurefuturegrowthandnewopportunitiesandjobsinareaswhereNorwayhasaparticularlygoodstartingpoint,andtosecurethefuturefundingandrelevanceoftheNorwegiansocietalmodelandwelfarestate.Itrequiresleaderswhocanthinkinnovelwaysandactwithcourageandurgency.Thisisnotaboutrightorleftideologyandpolicies-thiscrossandtranscendspolitics,thisissimplytooimportantforpolitics.EveryoneinNorway,regardlessofpoliticalaffiliation,isdependentonastrongbusinesscommunity,wantsagoodandfairwelfarestate,withrichandequalopportunitiesforall.Andthegovernment'sabsolutelyvitalroleisalsoquiteindisputable-itisnotwithoutreasonthatthearguablythreemostsuccessfulcountrieswithregardstodigitaltechnologyinnovation-theUnitedStates,ChinaandIsrael–alsohavesomeofthemostactivistgovernmentsandindustrialpolicies.Inotherwords,thegovernmentisabsolutelynecessaryintherealworld,regardlessofwhethertheprevailingideologyiscapitalism,communism,orpragmatism.
Foragrowthenginetobecomereality,itisparticularlyimportantandrelevantforNorwegianpoliticiansneedtostrategicallyaddressthreeareas.Firstofall,weneedtoenablethegovernmentasanengineforgrowthandinnovation.Specifically,weneedtoexplicitlyuseamuchlargershareofthegovernment’ssignificantprocurementbudgets–totaling462billionNOK–toactuallysupportinnovationandstart-ups.Bygivinglargeprocurementcontractstostartups,notonlyisthegovernmentbeingasourceoffundsforstartups,butitalsogetshelpwithexecutingambitiouslyonadigitaltransformation.Toradicallyupgradeandmaximallydigitizepublicservicesandasacompetentpartneraccessingamuchlargerdigitalecosystem(alawhatEstoniahasdonethroughwww.e-estonia.com).Secondly,wemustreviseourinnovationanddigitalizationpoliciesandregulations,therebymakingitaseasyandattractiveaspossibletocreateandbuildnewbusiness.Thisrangesfromtacticallyeliminatingfrictionintheactualstart-upphase,directlybymakingiteasyforentrepreneurstoensurestrong,legitimateownershipforthemselvesandtheiremployeesthroughtheuseofoptionsandtaxincentives.ThistoattractthebestmindsgloballyandforcompaniestoinvestinR&DinNorway,andindirectlybymakingitattractiveforinvestorstoinvestintechnologystartupsinstead,forexample,inrealestateorpubliclylistedcompanies.
Andlastly,thegovernmentmustputinplaceanewsetofambitiousandtimelymeasurestoaddressthelackofventurecapitalfundsbycommittingandsmartlyallocatingthecapitalneededforNorwegianstart-upcompaniestoscaleintogloballycompetitive,successfulbusinesslocomotives.Ifwesolveourcommonchallengesatthemacrolevel,thenNorwayandtheNorwegianbusinesscommunityhaveeveryopportunitygoingforwardtogrowandprosper.Buttimeisoftheessence,thesituationistrulyurgentbecausebythetimetheeffectsoftheexponentialtechnologyshift’sdisruptiveforceisfelt,thenitistoolate.ForNorwaytopro-actintime,weneedcompetenceinthepoliticalenvironment.Weneedcourageous,digitallycompetentanddeterminedpoliticalleadership.
WHATCANEACHINDIVIDUALBUSINESSDO?So,whatcanwedo,asestablishedbusinessesandorganizations,asleaders?Inthecourseofmycareerasaninvestor,managementconsultant,entrepreneurandcorporateexecutiveIhavemadeanumberofmistakes,triedandfailed,inthedefenseagainstoractivepursuitofdisruptivetechnologyinnovationanddigitalization.Ihavealsowitnessedmanyothers–friends,colleagues,competitors,mentorsandprotégés,maketheirownbatchmistakes.AndoccasionallyIhavedonesomethingsreallyreallyright.So,letmefinishthisyear’sLehmkuhllecturebyofferingsomepersonalreflectionsbasedonmyownexperiences,mistakes,failures,successesandachievements.Whatspecificallycaneachandeveryoneofusdotobestnavigateourselvesandourorganizationthroughadisruptivetechnologyshift?Mystartingpointisthis:Digitaltransformationisnotcomplicated.Everymajoremergingtrendofthepast20yearshasbeenrelativelyeasytodetectandpredicttheconsequencesof–boththreatsandopportunities.Thebusinessstrategyacompanyshouldpursue–todefendcurrentrevenues,togrownewones–israrelydifficulttoidentifyandagreeon.Andthetheoryofwhatacompanyshoulddotoexecuteonsuchastrategyisalsoquitesimple–organizeacannibalizingeffortseparately,allocatededicatedfunds,supportfromthetop,bringinnewcompetence,workinadifferentway.However,inpractice,digitaltransformationanddisruptivechangeisincrediblydifficultandhardtodo.Ithastodowithcultureandorganization,ithastodowithfinancialmarketpressures,andithastodowithindividualleadership.
Cultureandorganization
TransformationalchangemeansyouhavetochangeyourcultureIfyouhavetochange,youmustalsobepreparedtochangetheculture–yourvalues,thewayyouwork,thewayyouprioritize,shareinformation,makedecisions.Otherwiseit’snotachange,it’snotatransformation.Andyet,mostcompaniesconsistentlyfailtodothis.Infact,theyrarelyevenseemtotry.Thisisalsowhymostcompaniestryingtodigitalizeanddigitallytransformthemselves,failinholdingontonewtalentwiththebackground,experienceandcompetencealegacyorganizationneeds.Afterall,tellingnewhiresthattheyhavetoadapttoyesterday'sculturewillresultinthenewheadsquicklyresigning.Torenewculturemoretowardsadigitallyorientedcompany,Iwouldrecommendaskingsomecontrolquestions:
• Areyoumissioneddriven?Doyouhavehighambitionsforthefuture?Doyouincrementallycalculatethefuturebasedonwhereyouarenow,ordoyouarticulatetheambitionandthentrytounderstandwhatitwilltaketogettherefromhere?
• Doyouhaveatryandfailculture?Ifyousayhave,howdoyouencouragetrialanderror?Howdoyourewardit?
• Howtransparentisyourculture?Doyoufreelyshareinformationacrossthecompany?Doyouhaveabiastowardssecrecyortransparency?Doemployeeshavedirectbottom-to-topaccesstoexecutivemanagement,ordoesinformation“followtheline”?
• Doyoumakedecisionsbasedondataandanalysis?Doyoumakedecisionsbasedonreal-timeoperationaldata,orbasedonafter-the-factfinancialreports?
• Doyouhavethedigitalcommunicationsinfrastructuretosupportactive,cross-silocooperationandinformationsharing?DoyouusetraditionalenterpriseIT(thinkMicrosoftSharepoint)ortoolsoftheinternetera(thinkSlack)?
OrganizationalrenewalisessentialinordertosucceedwithtransformationalchangeIwillmakethefollowingstatementunequivocally:Youcannotsucceedwithtransformationalchangewithoutreplacingpartsoftheseniormanagementteams.Thisdoesnotmeanthatsmart,experienced,accomplishedveteransofanexistingparadigmdon’thaveavitalroletoplayalsoinfuture.However,itdoesmeanthatnobodycantransformintoafuturestatewithoutlearningfromothershowthefutureoperates,withoutknowingwhatgreatlookslike.Ifyouneedtobecomedigitalandtechnology-literate,ifyouneedtobecomeentrepreneurial,howareyougoingtoaccomplishthatiftheseniormanagementgroupsdon’tcontainasufficientnumberofpeoplethathaveexperienceandcompetencefromsuchenvironments.Thisisnottosubstituteanorganization’sexistingcompetence,buttocriticallycomplementit,alsoamongexecutives.
Leadershipteamsalsoneedtochangehowtheyoperate,fromtimespentreportingtoagroup,totimespentengagingin,discussingandunderstandingsubstance–strategy,content,technology.Thisrequiresaleadershipgrouptobecomeateam,ratherthanacollectionofindividualseachresponsiblefortheirownsilo,whoeveryweekcometogetherand“report”fromtheirsilo.Andaspartoforganizationalrenewal,peopleoperations(“HR”)willbeessentialinrecruitinganddevelopinganewtypeofmanagersandleadershipprofilesmoreinlinewiththosefoundatall-digitalcompetitors.
InvestheavilyinpredictivecapabilitiesWhenchangehappensquickly,itisvitaltorecognizeitandunderstandit,tobuyyourselfandyourorganizationasmuchtimeaspossibletoadapt.Forthatreason,someofthewisestinvestmentsonecanmakeasanorganization,isinpredictingthefuture.Specifically,myadvicewouldbetomimictheapproachoftheworld’sleadingventurecapitalfirms:
• Investheavilyintrendanalysis–gatherinformationabouttrends,analyzingandinternalizingtrends,andhavingmentalmodels–hypothesesandscenarios–forhowthefutureisgoingtoplayoutaccordingtoyourunderstandingofallthetrends.
• Buildrelationshipstowardsinnovationcommunities.Insightaboutcuttingedgebestpracticewillcomefromthere,notfromconsultingfirms,
• Daretobethefirsttodefinethefuturebasedonyourunderstandingofwhatisgoingon-opportunities,needs,threats-andassumethatthingswillgosignificantlyfasterthantoday'sforecastsindicate:it’sbettertobetooearlythantoolatewhenfacedwithexponentialchange.
• Thinknationallyandpreferablygloballyinyourapproachtotrendanalysis,toinnovationnetworks–whichwillrequirescaleinyourefforts.Ifyoudon’thavesuchscale,maybeit’sworthconsideringteamingupwithothercompaniesforthiseffort?
InvestindisruptiveinnovationeffortsandorganizetheseoutsideyourcorebusinessYoucannotsucceedwithdisruptiveinnovationinsidethesameorganizationthatistaskedwithincrementalinnovation.Therefore,organizethiseffortwithseparatebudgets.Iftrueentrepreneurialskillsetsarelacking,seekexternalhelpandpartnersfromtheentrepreneurialcommunity.Anydisruptiveinnovation–gamechanging,radical,andlikelycannibalizingtowardsyourexistingcorebusiness–mustbeshieldedandprotectedfrominternalpolitics.Thiscanonlyhappenfromtheverytopoftheorganization.Andensurethatanyambitiousinnovationeffortsaresetupforsuccess:
• Fundtheeffortformultipleyears,toensuretherequisitecorporatepatiencewithfledglingnewventures.
• Planformany,manypilots/prototypes...andexpect95%failure• Focusontheenduser,alsoanalytically.Thiswillrequireyoutoinvestinbuildingarobustcore
techplatformtogatherdataaboutyourusersandcustomersandusingadvanceddataanalysistounderstanduserneedsandbehavioranddelivertailoredsolutions
FinancialconsiderationsinthefaceofmarketpressuresInordertodigitalize,therewillbeactivitiesthatthefinancialmarketsmayquestionandfroma“currentfiscalyear”perspective,maydeemtobewastefulandcostinefficient.Itisreallyimportantforanorganizationtobelong-termandfirmintheirapproachtodigitalizationandinnovationandmakeroomforexperimentationandfailures.
ExperimentationSimplyput,youcannotaffordnottoexperiment.Thereasonisthatinnovationandnewgrowthtoacertainextentchaostheoryand,tosomeextent,impossibletodeterministicallypredict,nomatterhowstrategicallyhypothesisanddatadriven,ambitious,andmethodicalanorganization’sinnovationeffortsare.
FailureFailureispartofinnovationsuccess.Peopleinanorganizationhavetodaretotakechances,andtheorganizationhastoallowformistakestobemade,forfailuretooccur.Afterall,failuresrepresentsomeofthemostknowledge-generatingactivitiesanorganizationonecanpursue.
Performbutdon’tmilkIntheory,thisiseasy,butasanyonewhohasbeenpartofthemanagementofapubliclytradedcompanyknows,itisnoteasyinthefaceofnear-termquarterlypressures.Nevertheless,anorganizationcanneverletnear-termgoalsunderminetheresourceallocationtothelong-termgame.Ifthemoneyisnottheretomakethelong-terminvestments,don’tautomaticallycuttheinvestmentsthatensuresthelong-termfuturevaluecreation.Instead,attempttofocuscostcontrolonsimplificationandonidentifyingareasofthecurrentbusinesswheretheambitionlevelcanbereducedto“goodenough”,therebyreducingcosts.Also,beexplicitaboutwhatisnotapriority–andthiswayfreetimeandresourceswithouthurtingacompany’scoreperformance.
WHATCANEACHINDIVIDUALLEADERDO?Thereismuchanorganizationcanandmustdo.However,itallcomesbacktotheindividualleader.Thegoodnews–andthebadnews–isthatwhetherdigitaltransformationwillsucceedornot,isentirelyuptoyouasaleaderandasaleadershipteam.Itrequiresabilityandwill,itrequiresproperunderstandingoftherisksinvolved,anditrequirestheproperawarenessandapproachtothefuture.
Leadership:AbilityandWillEveryleaderhastheabilitytoeffectchange.Theircurrentabilitiesandmentalmodels,thathavegivengreatsuccessinthepastandthepresent,willneedtobechanged.ButeveryleaderIhavemethastheabilitytochange.Butchangeisveryhard.Toaskaseniorexecutivetoscrapasuccessrecipethathasyieldedenormousindividualandcollectiveprofessionalsuccess,itnearimpossible.Notbecauseofalackofability,butbecauseofalackofwill.It’snotthatpeopledon’twantto,orthattheydon’tintellectuallyunderstand.It’sthattheydon’thavetheenergy,thewill,tomakeachangebecausetheeffortrequiredisconsideredtoomuch.SohavetheWill–andallelsefollows,inmyexperience.
Properriskassessment:Theriskofdoingtoolittle,toolateInanexponentialworld,therisk-andthecost–ofbeingtooearly,ofactingtoosoon–isfarlessthantheriskandcostofactingtoolate.Ifyouacttooearly,youmayhaveincurredsomeunnecessarycosts;however,ifyoumovetoolate,youmaybeoutofbusiness.Mostriskassessmentsdoneattheboardlevel,inmyviewfailtoassesstheriskofdoingnothing,whichinthesechangingtimesisperhapsthegreatestriskofany.
Vision:Understandingvsanticipating/shapingthefutureandwhatishappeningLastly,thereisahugedifferencebetweenunderstandingvsanticipatingandshapingthefuture.Andeventhoughit’sbecomingmoreandmoreimportanttobeaheadofdevelopments,bothapproachescanworkaslongasonetakestheconsequenceofthem.Ifyouandyourorganizationprefertounderstand,butnotshapethefuture,yourstrategyoffollowingrequiresyoutoberiggedorexplosivechangeexecutiononceexponentialchangestartshappening.Fewestablishedorganizationsare!
Andregardlessofwhichpostureyoufeelmostcomfortablewith,mylastandstrongestadviceisthatyoueveryday,everyweek,investinincreasingyourdigitalknowledge–intellectuallyaswellasviscerally.Becomea“digitalnative”–buygadgets,downloadapps,playaroundwithservices.Allocatetimetoreadaboutandlearnnewtrends.Itwillenableyoutoanticipate,topro-act,tobeatrueleaderandnotjustsomeonebeingcaughtoff-guardandforcedtoreact!AsIstartedthislecturestating,weliveinatimeofgreatchange.Wearefacedwithaglobaltechnologyshiftandseriouschallengesfortheworld,forNorway,forourbusinesses.That’swhytherehasneverbeenagreaterneedforcompetent,capable,andvisionaryleadership.Theworldneedsit.Theworldneedsyou.