Leader in coming week´s Innovation Special Report published in the Swedish Business magazine Dagens Industri

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Posted On : 2015-03-22 / BY : / IN Blog, Uncategorized

What´s happening now will have a greater impact on us than the innovation of the railway!

When I talk about the ongoing globalization I talk about it as a series of waves, and right now, I´d say, we are in the midst of the third globalization wave.

This third globalization wave is powered by three distinct factors on the market; the low interest rate ever, the ever increasing pace of digitalization and the likewise increasing pace of automation in general.

Concretely this means, among others, that all jobs that can be digitalized will be digitalized and that will be a good deal. According to a study at Oxford University (quoted in The Economist 2014) at least 50 % of todays jobs will be digitalized and automated within 20 years! Our own measurements even show us that this is likely to happen faster than that! This is also the starting point for the Swedish governement and its future minister, Kristina Persson, when it comes to new ventures to protect the Swedish welfare and create the necessary new replacement jobs.

Very much in the same way as for digitalization, everything that can be automated will be automated, and that too will be a good deal. Investments in digitalization and automation will increase as there are a lot of capital available on the market and as the return on more traditional investments is low.

Due to the fact that companies nowadays can both buy and sell produts and services almost freely on many global markets, competence and technology supplies through smart digital solutions will further increase the pace of digitalization and automation and outperform the pace of development tah depends on local supplies of compentencies and technology only.

Another consequence of the three empowering factors is that many companies in the western world now move their asian/chineese production facilites back home again.

Understanding Red and Blue Oceans will become imperative to success

The increased competition means that it will become even harder to be unique on the market which in its turn will lead to consolidation to larger bodies in many markets.

We see today how small and midsize companies are taken over by industry giants that sell massproduced standardproducts, i.e. commodities. Working with such commodity businesses often means that the market becomes a ”Red Ocean”, i.e. a market where all competitors ”bleed” (hence its name). The Red Ocean i characterised by hypercompetition and tuff price press, which requires continuous rationalization of cost and also means a constant threat of being subjected to hostile overtake or closure/splitting.

The opposite to a Red Ocean is the ”Blue Ocean”. A Blue Ocean is something you create yourself by launching new innovative Business Models, with unique Value Propositions and that are tailor-made to match the needs of well understood and well defined target groups. On the Blue Ocean you create a whole new business logic, that leaves the competition behind as they can not easily copy your Value Propositions right off.

On the Blue Ocean you can apply value based premium pricing and thus increase both revenue and profit in your company (The notion of Red and Blue Oceans were first defined in the book ”Blue Ocean Strategy” by Kim & Mauborgne).

I argue that it is difficult but indeed possible to create innovative Blue Oceans on all markets today. It´s all about mobilizing your core capabilities, what is often referred to as you company´s DNA, in order to create a whole new business logic, at the same time as you reduce or completely eliminate the traditional business logic from the market.

Some examples of Blue Oceans are; Über, whose business model totally changed the groundrules for Taxi; Spotify, with its business model that totally changed the market for music distribution; and LEGO, that based on an old business model and operation were heading towards bankruptcy when they managed to create a Blue Ocean leading to a situation 10 years later where they had a market value equal to the Ericsson group!

To innovate your business model and create a Blue Ocean requires guts, knowledge and guidance of the whole organisation, that also needs to stand on its tiptoe to find power to change. Everything from budgeting, reward systems and career paths to recruiting, research and development processes are affected. But what is the alternative if you don´t want to close the business or sell it off cheaply to be closed down by a new owner?

So, what is Innovation? 

Well, a dear child has many names, but what innovation is really all about is to challenge your own thinking, see the market and the customers straight into their eyes, and do what you are absolutely best at in order to create new groundrules that provides competitive advantage at the same time as it eliminates the competitors value propositions. Innovation means that we realize new, unique and valuable ideas not only for new products and services, but also for all aspects of the company, such as finding a new business model or executing a new effective and repetitive innovation process that subsequently leads to new products, services and business models. A company´s innovation capability is heavily correlated with market leadership, growth and profit.

But can we measure and develop Innovation Capability?

Yes, this is quite possible today. You can measure, benchmark and evaluate your organizations innovation capability in order to step-by-step improve it; It´s not easy but possible and above all necessary to assure future success and counteract an as-is situation where you might be heading towards a Red Ocean. You can not simply sit still in the boat and hope that everything will stay the same. It will not happen, even the ancient chineese said that you cant step into the same river twice.

In other words, you havet to equip your company well in order to constantly challenge, sharpen and regularly change, both your products and services as well as your business model and your value propositions. It is the companies with the greatest innovation capability that will be the clear winners during the third vawe of globalization. 

So what´s happening now?

As i said in the beginning, -”what´s happening now will have a greater impact on us than the introduction of the railway”!

Just like then, existing power structures will be broken and replaced by new ones, jobs will dissapear and have to be replace by new ones and the welfare in general will be reallocated in our society. To thrive, we must be proactive and influence the development in order to assure that it leads to a positive and sustainable society.

As i see it, Sweden could become a world leader in Innovation and the famous ”swedish model” can thus continue to be a good role model for sustainable community development during the ongoing third wave of globilization and beyond.