Businesses struggle with pace of digital change
Incumbent businesses are struggling to adapt to the rapidly accelerating pace of digital change, a former US investment banker says.
“There are just a few companies that have really taken on the digital revolution and done something with it,” Larry Howell told Energy News.
A former Goldman Sachs investment banker, Howell founded his own investment firm - Howell Capital - to make investments in early- to late-stage innovation technologies and consumer-facing companies. He discussed the changing pace of technology in a presentation at the BusinessNZ Energy Council last week.
Howell dates the digital revolution from about 1975 when both Microsoft and Apple were founded.
During that era technology has changed at an accelerating pace, with new mediums being adopted far faster than previous advances.
Radio and television, took 38 and 13 years respectively to reach 50 million users. The internet reached that number in only four years and smart phone game Angry Birds just 35 days.
Howell says that rate of change is faster than incumbent businesses can react. Over time, the space between technology change and business change creates an “opportunity gap” for new models to exploit.
Disruption, consumer drive
Disruption often comes from outside an existing industry. Howell notes that the world’s largest taxi company – Uber – and the largest accommodation provider – Air BnB – respectively own no taxis or real estate.
Incumbent firms need to re-evaluate traditional models and react to changing technology environments.
Technology is transforming to become more consumer-facing and consumers - who do not care about the technology itself - will dictate how it will impact business models in the future, Howell says.
“They care about: does the product work? How much does it cost? And is it done better and cheaper and faster than what I have now?”
Howell was in Wellington to attend the D5 conference which brought together government representatives from New Zealand, Israel, Estonia, the United Kingdom, and South Korea. The group, which aims to improve participant nations' practices in digital services and digital economies, has been extended to the D7 with Canada and Uruguay signing its charter last week.
Howell was joined by former Procter and Gamble executive Steve Meller who was chief innovation catalyst at the multi-national firm from 2009 until 2012. He is a partner in investment firm BioPacific.
Meller told the BEC audience businesses should allocate 2 to 5 per cent of their resources to exploring how they could be disrupted.
“It’s about reinventing your business ten years from now. Because it’s going to get reinvented and if not by you, then by somebody else.”
He also said leaders must be aware of technology developments and businesses need to “leverage” what young people in their organisations know by creating forums to allow them to speak up.
“They come from a different basis of familiarity with technology.”
“You’ll also have much happier employees because they’ll feel like they’re being talked to and heard and listened to .”
Incumbent businesses should also be careful not to treat consultants' advice “as sort of the word of god”.
“You need to gather the information from a variety of places.”
Contact: Joshua Riddiford, Energynews