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Case study

Meet Otto, the autonomous heavy-load material transporter

The wheeled machine, which looks like an oversized floating computer scanner, is capable of moving up to 3,300 pounds around a warehouse without incident. It takes in its environment and learns, meaning that new obstacle somebody put in its way is now part of its programming. Otto receives orders, reports on its status, and notifies human operators of issues in real-time. And it has revolutionized warehouse management and logistics as we know it in just a decade: Otto’s maker, privately owned Clearpath Robotics, was founded in 2009 by a group of four University of Waterloo graduates.

“In many ways, Otto is the manifestation of the exponential growth of technologies and the disruption it’s causing across every sector of
the economy,” says Terry Stuart, Chief Innovation Officer for Deloitte Canada. “Where before we might have been talking about innovation sparked by robotic process automation or artificial intelligence or Internet of Things, now we’re talking about all three in one package. It’s the layering of all these technologies that is accelerating the pace of change, and it’s what makes this time so exciting and also so scary.”

Technology isn’t the only force disrupting businesses in this environment, but it has a hand in all of them. Increased globalization stems at least in part from the Internet-enabled free flow of information across borders. Digitalization is upending talent models across whole industries, leaving many workers dislocated and companies struggling to find replacements with new skills. Increased transparency aided by technology is putting downward pressure on pricing by empowering consumers and businesses to comparison shop and force concessions. Social media has promoted greater corporate social responsibility. And so on. And so on.

The power of the pivot
Companies that are succeeding in this environment not only recognize these forces are colliding, but are adapting to the emerging business landscape. “In today’s economy, those that are nimble and can pivot are ultimately going to win the day,” Stuart says.

Pivots can result in big payoffs. Slack, the immensely successful team messaging app, started out as a video game. Pinterest was a platform for people to browse and shop their favorite retailers before transitioning into an affinity app for housing people’s collections of their favorite items and ideas. Starbucks as we know it today might not exist if it hadn’t shifted its focus from selling espresso makers and coffee beans to opening coffeehouses.

Then there’s the case of China’s Pinduoduo. The company’s founder, Colin Huang, a Chinese entrepreneur who started his career in Silicon Valley, worked on early search algorithms for e-commerce, and returned to his native country to start his own company. His first company sold consumer electronics and mobile phones, but Huang realized it was too similar to other e-commerce sites. Eventually, he realized he could combine e-shopping with social networking to create a shopping app in which users earned discounts on purchases when friends joined them. Pinduoduo was founded in 2015 and recorded more than 100 billion RMD in merchandise sold just two years later.6 The company went public in July 2018, raising $1.6 billion.

“Pinduoduo caught the wave because it was able to use technology to take advantage of China’s slowing economy and the trend of consumers wanting to spend less,” says Roger Chung, a Technology, Media and Telecommunications industry researcher for Deloitte in Shanghai. “It’s a powerful example of how private companies can quickly capitalize on disruptive forces to leapfrog the competition virtually overnight.”

Many private companies have an inherent advantage in overhauling their business model, Stuart says. As a group, they tend to have more streamlined organizations with less bureaucracy and direct access to leadership. And they have less baggage in terms of legacy IT systems and other infrastructure, which means fewer sunk costs and fewer integration issues to inhibit new ideas. They also can maintain a long-term perspective because their shareholders aren’t pressuring them to meet revenue projections each quarter.

“Private companies have some inherent advantages in being able to deal with and drive disruption,” Stuart says. “And in a lot of cases, the ideas for new growth don’t have to be all that new.”

Stackable innovation
Private businesses can easily turn to opensource tech stack tools to lay the software foundation for their next e-venture.

“There really aren’t that many ‘aha’ moments,” Stuart said. “The real breakthrough innovations such as the smartphone were decades in the making. What companies are finding out is that what’s more important are the processes and people you put in place to take advantage of it and getting out to market.”

What is different are the approaches companies are taking to solve such problems. Some are hosting “hack-a-thons,” which bring a large number of people together over several days to collaborate on computer programming and scout next-generation talent. Another increasingly popular tactic is gamification, a process of taking something that already exists - a website, an enterprise application, an online community—and integrating game mechanics into it to motivate participation and encourage fresh insights. And then there are crowdsourced competitions in which companies challenge outside innovators to pitch solutions to problems they’re facing for a set amount of money. “You’re going to see the smaller companies definitely taking advantage of a wider range of disruptive brainstorming,” Stuart says.

Task orchestrators
One major constraint for any company these days is talent—where to find it, how to land it, and how to hold onto it. Tight global labor markets are intensifying the war on talent, and many smaller private companies don’t have the brand-name appeal of public, multinational corporations. Younger workers are doing some of the disrupting by changing jobs much more frequently than those from previous generations. And recent trade disputes and policy changes have slowed the flow of skilled workers across some borders.

Past talent management strategies relied on the education system structure. But recruiters and employers are discovering now that the same system isn’t keeping up with the pace of technological change. Artificial intelligence and blockchain are two examples where universities are struggling to catch up. “The best talent available isn’t necessarily coming from the go-to educational institutions of old,” Stuart says.

Talent shortages are raising the stakes for retaining top talent. Chung says a private commercial satellite launch company recently tried to recruit a scientist at a state-owned enterprise in China with a 1 million RMB salary. They were rebuffed when the enterprise formally complained to the government that it wouldn’t be able to solve critical problems without him. Few occupations are in such hot demand as those that can find and extrapolate data. For example, job postings for data scientists in the United States rose as much as 75 percent between 2015 and 2018 at some job-search sites, and data science PhDs now command starting salaries of $300,000 or more.

But even in the hunt for talent, technology is offering solutions. The rise of contingent workers means many private companies can scale up quickly without having to take on a lot of overhead. The gig economy has infiltrated almost every sector of the economy, from health care to manufacturing to finance. “Private companies are increasingly becoming task orchestrators rather than full-time employers,” Stuart said.

Preparing for quantum change
Even with the right talent on board, private company leaders must work harder to foster a culture of collaboration. Business ecosystems are extending well beyond companies’ own workforces, extending across organizations, sectors, and geographies. But the resources that make up those ecosystems don’t connect organically. In his book Where Good Ideas Come From: The Natural History of Innovation, author Steven Johnson argues that good ideas generally evolve over time as “slow hunches,” and that it’s only when you put people together to share their hunches that real innovation occurs.

If that’s true, then the increasing connectivity that governs business interactions today is both a source of disruption and an opportunity for companies to do some disrupting of their own. “The World Economic Forum is calling this the Fourth Industrial Revolution,” Stuart says. “Certainly this kind of quantum change doesn’t come around all that often. Every private company out there has to be thinking about how this exponential curve we’re on is going to affect them and how they’re going to prepare for it.”

“You’re going to see the smaller companies definitely taking advantage of a wider range of disruptive brainstorming.”

Terry Stuart
Chief Innovation Officer for Deloitte Canada

Private company issues and opportunities

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