Seeing Around Corners

by Rita McGrath

  Inflection points create dramatic shifts in the competitive dynamics of a functioning system. They have the power to bring about exponential change. Perhaps 10X larger, 10X cheaper, 10X more convenient, and so on. The sources are seemingly endless. Some common triggers for an inflection point can be found in:

  Technological change

  Regulatory change

  Social possibilities

  Demographic change

  New connections (among formerly isolated elements, common to digital disruption)

  Political change

  And many others

  Inflection points have the power to change the very assumptions on which organizations were founded. Changes in the environment in or around organizations can create new, entrepreneurial opportunities—and result in potentially devastating consequences for those still operating under the old model or assumptions. The effects are often compounded because institutional rules typically lag what is possible.

  For example, if you look at companies that have navigated inflection points superbly in recent years (Amazon, Aetna, Cognizant, Adobe, Fujifilm, DSM, Gore), you don’t see huge, wrenching reorganization for the most part. That takes place in companies that recognized the changing circumstances too late (IBM, A&P, Sears, Hewlett-Packard, Dell). And when an inflection point goes the wrong way, the entire organization can crumble or become irrelevant (Toys “R” Us, Blockbuster, RadioShack).

  The progress of inflection points, moreover, is not linear. They proceed in fits and starts, and while they are emerging, it is normal for reasonable people to disagree about their importance and likely impact.

  The great entrepreneurs and innovators, however, don’t just allow an inflection point to happen to them. They connect emerging possibilities, deepen customer insights, and explore new technologies to spark the changes that can get them—and keep them—on top.

  The Four Key Stages of How Inflection Points Unfold

  There are four basic stages in the development of inflection points: hype, dismissive, emergent, and maturity. These are similar to the phases in the Gartner Hype Cycle methodology used to understand how technologies are commercialized.

  In the earliest stage of a likely inflection point, the most productive thing you can do is to identify early warnings of what might be important and to pay attention. It is still too early to make big bets.

  As things progress, the early stage gives way to the hype stage. At this point, pundits will start proclaiming that the entire world order is likely to be completely overturned. The result is often a bubble—believers invest heavily and a “land grab” mentality takes hold. The 2013–2016 run on blockchain currency like Bitcoin is a good example. Everybody charges into an emerging arena, each hoping for a small share of what they assume will be massive growth.

  Academics who have studied this stage call it “capital market myopia.” In a famous 1987 case study, William Sahlman and Howard Stevenson showed how dozens of entrants into the then emerging Winchester disk drive industry blew through a mountain of investment, each hoping for a small share of a vast market. Such phenomena occur when players make decisions that are individually sensible but fail to take into account the collective consequences of everybody making the same decision.

  Like a Greek tragedy, the hype stage almost always ends in disaster—sometimes dramatically. This brings us to the dismissive stage in the life cycle, in which those who sat out the hype take an “I told you so” perspective, saying, “That’s never going to happen.” This stage, however, is often where the real opportunities lie. In the dismissive stage, a few of the initial entrants will have survived the shakeout and begun to set the foundation for major growth. They will be building viable business models, finding new customer needs to address, and potentially even beginning to make money. At this point, you should be thinking about some toehold investments, exploring where there might be opportunities, and giving the inflection point some emergent attention.

  Dismissal is often followed by the much quieter but more “concrete” emergent stage. In this stage, those who are paying attention can clearly see how the inflection might change things. This is the point at which you need to generate lots of options that position you for whichever model will eventually emerge.

  Finally, the inflection point comes into its own in the maturity stage. It is now obvious to everyone how it will change the world. Those who are not prepared will see their businesses go into decline. Hopefully, your organization will be well positioned to take advantage of the growth opportunities this stage represents.

  Post-inflection, the change is incorporated into everyday life assumptions. Indeed, by this point there are plenty of people who have completely forgotten what things were like before the inflection took place. Your agenda now is to make sure you jettison resources that are no longer relevant and enjoy the growth that successfully transitioning through an inflection point can yield.

  How This Book Is Organized

  The first part of the book is about “seeing” inflection points coming. It describes how organizations can create the early warnings of a pending inflection point and then organize to take action on those insights. Chapter 1 builds on Andy Grove’s observation that “snow melts first at the periphery” to describe how agile, responsive organizations create fast, horizontal flows of information so that decisions can be made quickly and responses to environmental challenges can be processed in real time. Chapter 2 describes how you can create your own early-warning system, which can help you not only spot a pending moment of inflection but also decide when the right time to act is, a key strategic decision.

  Chapter 3 offers a point of view about the elements of strategy creation and its integration with the innovation agenda of an organization. It also shows how people at every level in the hierarchy can provide value to the creation and execution of a strategy. Given the pace and speed of change, strategy creation is no longer an activity that is confined to the executive team. Rather, it is an effort to galvanize the entire organization to act around a common point of view about the future.

  The second part of the book explores how organizations can create opportunity in the face of a major inflection. Chapter 4 describes mechanisms to home in on customer arenas, which are often invisible to those hemmed in by traditional industry-focused logic. An arena consists of a customer’s “job to be done” at a specific time and location and shows how you can become the provider of choice to help customers succeed, and do so at a profit.

  Chapter 5 shows how you can release constraints on customers that keep them stuck in an unsatisfying experience, allowing them to flee previous solutions and flock to yours. Chapter 6 illustrates a way to plan ahead to the capture of opportunities by generating many hypotheses and dismissing many of them quickly. In this chapter, you will learn the critical importance of falling in love with a problem faced by your customers, rather than settling on a particular solution. In design terms, this is the difference between helping people who are tired of standing and designing a chair. The first concept allows far greater room for your imagination.

  The third part of the book is a general guide to personally managing in high-velocity, high-uncertainty environments full of potential inflection points. The challenge is often not seeing a change coming. (Fortune called out the potential of Amazon in 1996!) The challenge is doing the transformational work required to rewire the organization. This is equivalent to the “innovator’s dilemma”—the very systems and processes that served you well pre–inflection point can be the biggest barriers when you need to transform.

  Chapter 7 describes the way in which organizational systems resist responding to a nascent inflection point and what levers change agents can use to shift them. This chapter also examines how imminent failure, or actual failure, can coax an otherwise unwilling organization to make the changes needed for its own self-preservation. Chapter 8 focuses on the behaviors of leaders in ambiguous and uncertain environments and offers examples of ho
w you need to get beyond the “command-and-control” mindset and move toward a very different kind of leadership behavior.

  Finally, Chapter 9 ties the idea of organizational and systems inflection points to how you can leverage them for your benefit in your personal life. It makes the point that an inflection at the level of society or a large organization has ripple effects that touch your personal life in meaningful ways.

  Although it is quite normal to be apprehensive about a strategic inflection that changes major aspects of our lives, my hope is that as you proceed through this book, the excitement and opportunity of a major inflection point will also shine through.

  Onward!

  1

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  Snow Melts from the Edges

  Christ, this guy has the fate of European democracy in his hands and he doesn’t know what to do.

  —Molly Scott Cato, British member of Parliament,

  on Facebook CEO Mark Zuckerberg’s testimony

  before European lawmakers, May 23, 2018

  If ever there was an inflection point worth anticipating, it would surely be the change in business assumptions spawned by the dominance of social media platforms. In short order, “social” has upended marketing, turned company and customer interactions into two-way streets, given previously obscure voices a platform, and connected databases that used to be safely separated, with outcomes that nobody anticipated.

  Social media—whether it be Facebook, Google, Twitter, or others—had a difficult 2018. It included the spread of “fake news,” false accounts, election and voter manipulation, the hijacking of online accounts, selling individuals’ most personal information to third parties, racial profiling, allowing the impersonation of celebrities, and targeting vulnerable populations. Google, which failed to even send an executive to represent the company at congressional hearings, is facing all kinds of regulatory and business model pushback.

  As a society, we are now collectively scratching our heads at how this all came to pass.

  This chapter uses the rise and ongoing struggles of Facebook and other social media platforms to illustrate the dilemma of “seeing” the real implications of unfolding inflection points. Whether you are a powerful CEO or someone far lower down the food chain, blind spots are dangerous. Toward the end of the chapter, there is a discussion of practices that facilitate, as opposed to block, the early detection of such important signals. The central idea here comes from Andy Grove’s prescient observation “When spring comes, snow melts first at the periphery, because that is where it is most exposed.”

  Evidence of an emerging inflection point doesn’t present itself neatly on the conference table in the corporate boardroom. It is the people who are directly in contact with the phenomenon who usually notice changes early. It is the scientists who see where a technology is going and when it might shift. The salespeople who are talking to customers each and every day. The people on the customer service calls who are learning firsthand what’s on customers’ minds. The people who sound the alarm about something that is broken in a system. The people who have an uneasy feeling about the implications of an impending decision down the road.

  These are the people—maybe you are one of them—who see it first and most clearly.

  The Rise of Surveillance Capitalism

  When I was young, the go-to source for important information was a reference book, like the Encyclopaedia Britannica. It kept its secrets about what I read in it, which sections got my attention and which didn’t, and even who I was. Those who watch over reference books, librarians, are the custodians of human knowledge embedded in the materials in their care. They have long been admonished to maintain an ethic of “facilitating, not monitoring, access to information.” Indeed, the right to privacy with regard to my utilization of library resources has been affirmed again and again in myriad court cases throughout the years. The risk of librarians being able to tell others about my personal interests was considered so great that it was actually addressed in their code of ethics.

  Today, that perspective on privacy seems almost quaint. Indeed, the digital advertising business, in which firms such as Facebook and Google use what they know about their users to finely target advertisements, is huge. One estimate put the value of advertising channeled through these platforms at $88 billion in 2017. The business model underlying this vast revenue source is completely opaque to many who, data brokers argue, willingly give up their information to obtain the benefits of using these platforms for free. Most of us, however, are oblivious to the specifics of how our most personal data is being used in ways that were not economically or physically feasible before the digital revolution.

  Unlocking the Secrets of Formerly Private Databases

  Back in the days of before the digital revolution, information about people was stored in all kinds of places. The credit-scoring people knew about your financial transactions. The motor vehicles department knew about your driver’s license and car ownership information. The criminal justice system knew about your arrest record, were you unfortunate enough to have one. Your doctors and medical providers knew about your health, medications, and any procedures you might have had. And so forth. But imagine if some kind of über-database could know and combine all this information to create a comprehensive picture including everything about you? Guess what? Not only does that capability exist, but hundreds of organizations are actively profiting from it.

  In the pre-digital era, information about where you lived, how you drove, what diseases you had, what run-ins with the law you may have had, what you liked to spend your money on, and your political leanings were to some extent available to third parties with an interest in finding out. It was effortful and expensive, though, and the depth and quality of the information were often questionable. In contrast, today’s data brokers can compare multiple databases against one another cheaply and at lightning speed. Further, as formerly manual databases are digitized, the cost of accessing these records drops dramatically.

  Tim Sparapani, an expert on the data broker industry, says that most of us would be stunned to discover the amount of personally identifiable information about many of our most intimate behaviors that is freely available to anyone with the budget to buy it. And you don’t even have to get to Facebook scale to benefit from people volunteering to share their information with you. A 60 Minutes investigative broadcast in 2014 found that data brokers are perfectly happy to set up websites such as GoodParentingToday.com, whose “community” members offer specific details about their lives in response to questions such as “Are you expecting?,” “Do you have adequate life insurance?,” and “Do you have pets?”

  What Take5 Solutions, the company behind this site and a whole bunch of others, doesn’t tell you is that once you’ve told them something about yourself, they can cross-match the clues you’ve given them against other, massive databases that can fill out the picture in much more granular detail. Scarily, there is no particular protective consumer oversight about what information these organizations store or whom they are prepared to provide it to.

  Individual databases on their own may contain innocuous information. But harness the power to combine them, and entirely unanticipated outcomes can occur. And we’ve known this for a long time. For instance, in 2009 researchers were able to predict individual Social Security numbers by combining data from different subsets—without a data breach and without accessing any privileged information. In a particularly sleazy new business model, websites such as Mugshots.com make people’s arrest photos available online, without regard to whether the person was ultimately found guilty or convicted, and then charge these people hundreds of dollars to have the photos removed from the site. Thousands of people have reported having their job prospects and personal lives disrupted by such disclosures. Law enforcement has found it extremely difficult to prosecute the operators of these businesses, which are essentially accountable to no one.

  Traveling Amidst the Throng

 
; When logging on to a website, most of us think we’re just, well, logging on to that website. What we don’t realize is that third parties with whom we may not have any relationship at all are watching us, tracking our movements and capturing that information in their own databases. They know how we move through the site, what we click on, what we read, what we skip over, and combining this information with what is already in our dossiers, they can create a much richer view of who we are.

  And while this is pretty much an open secret, the average person seems to have no idea that telling any website anything may put that information out there in the public domain.

  Moreover, just logging on to the Internet creates a digital footprint that tells interested parties about your online behavior. While users are dimly aware that websites track them using cookies, what many are not aware of is what are called “third-party cookies.” For instance, if you log on to a news site and that site has a Facebook “like” button on it, a cookie is placed on your computer that Facebook can access. So even if you have never visited Facebook or don’t have an account, the social network still receives information about what you’ve been doing on the web. So much for all those folks who say, I don’t have a Facebook account, why should I worry about the network having my data?