Dealing with Darwin. The Evolution of U.S. Technology Sector. Geoffrey Moore Managing Partner February 24, 2005

Transcription

1 Dealing with Darwin The Evolution of U.S. Technology Sector Geoffrey Moore Managing Partner February 24, 2005

2 New Book Natural selection never ends Competition for scarce resources (capital & customers) Survival-of-the-fittest outcomes no entitlements We are all caught up in the competition How do we innovate for competitive advantage? How do we overcome inertia that blocks change? Lack a good vocabulary Innovation requires a more detailed taxonomy Inertia simply needs to be rethought Dealing with Darwin Focusing Innovation and Overcoming Inertia In Established Enterprises Penguin, January,

3 Larger Forces at Work Evolution shapes life We all participate in larger fabrics They shape our strategic landscape Patterns are hard to discern Can t see the forest for the trees Consequences can be painful Need to step back every so often What do we think is going on? What is the big picture? Let s talk about the evolution of the U.S. Technology Sector 3

4 Evolution and the Paradox of Commoditization 4

5 How Categories Evolve Complex Systems Mainframes Chips Minicomputers Boards Publishing Systems Workstations Office Automation PCs Internet Laptops Wireless PDAs Time Volume Operations 5

6 Business Model Innovation at Category Transitions 1 Complex Systems Advantage B Linux Clusters C Mobile Workforce 3 Next-Gen Complex Systems Emerge A PCs PDAs 3 Volume Operations Advantage 2 Complex Systems Volume Operations Co-opetition 6

7 Cyclicality & Strategy Volume operations commoditize categories created by complex systems C 1 V 1 C 2 V 2 C 3 V 3 Volume Operations Complex Systems Complex systems respond by creating the next level of complexity 7

8 The Paradox of Commoditization 1. Complex systems open up markets for volume operations 2. Volume operations cost-reduce complex systems to extend their viability 3. Volume operations overthrow complex systems and displace them in the market 4. Volume operations supply the commodity elements that enable next generation of complex systems 8

9 Taking it to the Street Enterprise vs. Consumer 9

10 Two Design Centers for Commerce Enterprise Model Organized around the customer engagement Optimal for complex systems Few contracts in large amounts 10 3 times $10 6 = $1B Consumer Model Organized around the means of production Optimal for volume operations Many transactions in small amounts 10 7 times $10 2 = $1B Hypothesis: There is not a third 10

11 Organizing for the Enterprise Model Target Customers Solution Sales Business Application & Services Solution Architecture 3 rd party product Product #1 Product #2 Product #3 3 rd party product Platform Architecture Integration Platform & Services Legacy System Legacy System Legacy System Legacy System 11

12 Organizing for the Consumer Model Brand Consumers Consumers Consumers Offer Offer Consumers Offer Technology Offer Consumers Offer Offer Offer Offer Consumers Consumers Shared Infrastructure Distribution Channel Advertising Consumers 12

13 Examples of Each Model Enterprise: Complex Systems IBM, Cisco, SAP; Goldman Sachs, Swiss Re, the World Bank; Boeing, Tektronix, Honeywell; Bechtel, Accenture, IDEO; Apache, Halliburton, Burlington Consumer: Volume Operations Nestle, Procter & Gamble, Nike; Dell, Apple, Sony; Microsoft, Adobe, Electronic Arts; Hertz, Hilton, United Airlines; ebay, Google, Amazon Hybrids HP, Johnson & Johnson, Nokia, General Electric 13

14 Fundamental Strategy Resist Commoditization Embrace Commoditization Hedge 14

15 Inside a Company, Hedging is Hard Execution Dynamics Are Polar Opposites Complex Systems LEARN DESIGN MAKE MARKET SELL SERVICE Volume Operations 15

16 Summarizing the Differences Value Chain Element Complex Systems Volume Operations Research Qualitative Scenarios Quantitative Analytics Design Integrated Architectures Modular Architectures Build Adaptive Methodologies Deterministic Processes Market Value Chain Orchestration Branding & Promotion Sell High-Touch Persuasion Low-Touch Distribution Service Consultative Dialogs Closed-Loop Transactions You can mix & match. You must not blend 16

17 What Companies Must Do Adopting The Strategy of Handedness Left-handed Right-handed Productivity and synergy are maximized when organizations become single-handed 17

18 Implementing Handedness Declare a dominant hand Pick the model that best fits your economics Optimize for the dominant hand Invest in differentiation here Emphasize in-house capability Give relief to the other hand Invest in productivity here Partner and outsource whenever you can 18

19 Competitive Advantage for the U.S. Technology Sector in an Age of Commoditization 19

20 Making the Analogy to Economies China is playing a volume operations game They are like Dell, Wal-Mart, and Southwest Airlines Japan will migrate to complex systems China becomes their volume operations complementer and their major market Korea will play a hedged game for now Consumerization of the chaebols India will struggle with its opportunities Its culture is biased toward complex systems Its market and cost structure favor volume operations 20

21 Evolution of the U.S. Technology Sector Advantage Complex Systems Access to target customers Consultative sales and services Solution architectures Systems technologies Disadvantage Volume Operations Cost model forces outsourcing the middle Differentiation rests on technology and brand Low-cost economies, led by China, will attack both Formerly high barriers to entry are coming down 21

22 Wild Card Digital Goods & Services over the Internet Volume operations markets for Transaction services Entertainment Not sensitive to cost of living Lets U.S. Technology Sector back into the volume ops game Very sensitive to Intellectual property protections Cultural trends and consumer values Impact on U.S. Technology Sector is unclear 22

23 My Final Word Complex Systems Strategy for the U.S. Technology Sector Exploit complex systems advantage B C Capitulate and transcend: Build the next level system atop the new layer of commoditization A Resist commoditization Exploit volume operations cost reductions 23

24 Thank You 24