The internet of things is disrupting every single industry. Information that was once trapped in products is now being unleashed, and it’s creating a flow of new services and business models and ecosystems. That means the old way of doing things that organizations have depended on for years could become obsolete.
Businesses that fail to change will not survive, and that’s where Gregg Garrett and Warren Ritchie, coauthors of Competing in the Connecting World, come in. They’ve spent their career strategically transforming organizations. They believe that there are strategies that will help you survive in periods of disruption.
Greg and Warren have both worked with C-level executives in fortune 500 product and services companies and as strategic business consultants with large and small firms.They’ve gained a unique perspective over the course of the past 15 years working and teaching together which has given them a lot of experience in helping corporate leaders, guiding their firms to compete in the connected world.
Gregg Garrett: When I was still with Volkswagen in North America, my job was basically looking for disruptive ways that technology is going to reshape our business. I was with some of the senior members of the leadership team at the otter show in New York, and I would distinctly remember sitting on this couch at a hotel lobby, with about 45 minutes to brief them before they were going in to do a major meeting.
I had a big, normal corporate deck, a bunch of slides, I got maybe 20% of the way through. The deck was labeled “IT Strategy: Technology Strategy for the Company.”
This one particular senior leader, he was very large in stature, was leaning over me and reviewing this, and he stopped me about ten minutes into it and turned to me and looked me straight in the eyes and said: “This is not IT strategy.”
I thought to myself, “This is tough for a guy whose job is IT strategy,” and I asked him, “Well, should I wrap up the resume?”
He said “No. This is not IT strategy for us; this is the way that technology is going to completely transform our industry and what you think that we need to do to be able to get there.”
That was a crystallizing moment for me. People that have been so successful in their careers, sometimes need a little bit of light to look at things differently.
“My entire career has been about change, but successfully operating companies sometimes can’t get there.”
I didn’t go on to write a book after that, but I heard the challenge in a much different way than I ever had before.
More recently, in the classroom after we had been through some of these experiences with Warren and I together, I would ask students if they had a basic understanding of the connected world of the internet side of things, of the digitizing world. I would ask them a simple question:
“Can you imagine anything that wouldn’t be affected by this? Any business or any product that wouldn’t be eventually digitized or be effected?”
The list used to be thousands of examples, and just in the last 12 months, it was the first classroom that someone said, “I can’t imagine a single thing that won’t be effected.”
Those two moments, I think probably contribute the most to this book to drive out the need for this kind of conversation to continue to be had.
It’s In Everything
Charlie Hoehn: What are some of the more surprising things that maybe a few years ago we didn’t expect to be affected?
Gregg Garrett: I think there’s a lot of mundane things. I don’t know if they’re surprising. If you look at the stats out there, there are different figures around internet of things at least, of the things that will be connected to the internet.
There’s some that argue in just the next couple of years, by 2020, there will be 25 billion or there will be 50 billion—I’ve seen some projections as high as a hundred billion—things of the world that are connected.
These range from the phones that everybody carries in their pocket that are absolutely connected all the way to clothing. There’s the mundane like appliances and there is very interesting, like a secondary skin. Skin that is now connected and is actually taking the energy from your body.
Much like the potato that you were when you were kid and stuck the probes in and made a clock—they can take the energy from your sweat basically and power this microprocessors that are being able to be put on and measure the way that your body is functioning.
“It truly is everything.”
I haven’t been able to find an industry yet that we weren’t able to either imagine how it would be done or research that it would be done.
Basically, think of really small computers. Think of those really small computers being put on anything, and then understanding if the information’s able to be measured from them, what they can deduce. Seating, lighting, floor boards, everything.
Preparation vs Predictions
Charlie Hoehn: You have a section in your book called Prepare, Don’t Predict. I understand the importance of preparation, why not try to predict where things are going? And what is the best way to prepare?
Warren Ritchie: Well, the notion of preparation is in terms of forecasting and identifying that our industry will be affected in this way. The ecosystems are just not formed well enough to be able to have that degree of certainty in it.
Who are going to be the dominant players, how they’re going to go to market, what the emergent or dominant business models are going to be—these things are just still a little bit too early to determine for any individual industry. The notion is that industries are going to have to build their own internal capabilities to individual firms or they’ll have to build their own internal capabilities.
And then they’re going to have to collaborate on how they’re going to work together to be able to take advantage of this.
Our point in this is waiting for it to occur and then getting involved and determining what capabilities you need is a sure way to be very late to the game.
“It’s going to put you in a very difficult position with the rest of the industry.”
From our perspective, preparing is starting to do some review of your internal capabilities to find what capabilities you’re going to need in the future and starting to work towards those now, without knowing exactly how things will be configured in the future. This is the challenge.
We also talk about fortune favoring the prepared.
All though the industry maybe a little bit ambiguous in terms of how it’s going to eventually turn out, the preparation that is directional is going to be well served in the long term.
Gregg Garrett: I like to think about it as the leaders out there don’t know all the rules of the game yet. The game’s rules haven’t all been written. There are some themes that will remind the readers and the leaders out there that are probably ever-greening that they have lived between many different industries.
But the reality is, in order to predict accurately, you kind of have to understand the boundaries of what you’re predicting them in.
The bottom line is, why not predict? Because you can’t accurately.
Either prepare for the future on the few things that you do know but accept you may not be accurate. Or wait. And waiting may be the most deadly sin when it comes to leadership in a business.
You’re Worth More
Charlie Hoehn: So what if you work for an organization that’s steady as she goes, things are going well, keep this ship afloat?
Gregg Garrett: It depends on if you were just working there or if you’re leading there. If you’re a leader or you intend to be a leader, potentially take some of the lessons that we’re trying to lay out in the book and apply them to start the change.
Everybody uses the metaphor, it takes a long time to turn the big ship, right? To right the ship.
You’ve got to assume that it’s going to still take a long time in the future.
“Why not start making the movement?”
Early in my career, there used to be this graphic that we would use with an X and Y axis and two bullseyes on it. One was up into the right, and the other one was up into the right even further but not on a linear path.
The point we would make with leaders is the distance between the two bullseyes is a lot shorter than from zero to the second bullseye, so why don’t you get your journey started? If you think there’s a chance of you moving entirely the wrong direction, that could be an issue. Maybe pause a little bit.
But if you’re pretty certain that you’re moving generally in the right direction, get going, get towards that first bullseye. When you course correct, it’s going to be a lot easier.
My advice to those employers would be, start changing their functions. Start changing their span of control in that direction, and they’re going to be a lot better off once the world starts opening up.
“If they can’t, unfortunately, maybe they need to find a place that they can.”
Warren Ritchie: I think you owe it yourself to think about where are you going to be in terms of your career in this.
Those who can see themselves being immersed in this in the next 20 or 30 years would serve themselves well to start to think through what personal capabilities they need in order to be able to really be an effective manager and to move forward, independent of what their current firm may be thinking about.
How to Embrace the New
Charlie Hoehn: In the book, you talk about embracing new perspectives. Walk us through how we can do that?
Gregg Garrett: It’s getting the reader, the leader, starting to imagine the art of possible. Fortunately, for all the leaders out there today, this isn’t the first disruption. It’s not even the first technologically driven disruption that’s happened to an industry.
We can learn a lot of what happened when steam power first came out, or when electrical generation and distribution became the norm.
They can look to the recent past of what’s happened, even when the internet came versus the internet of things, and appreciate the world that they live in right now towards that and then really maybe surrounding themselves with some folks that do have that perspective, no matter if it’s futurists, or if it’s strategists, or just technologists.
That can help them apply how things like Alexa maybe are affecting the way people interact with your business in a business to business setting. Or how the stories of autonomous vehicles, even though you’re not a car company, how that might affect you if you’re a hospitality company. That maybe today’s car could be tomorrow’s hotel room.
“It’s really just opening your mind and spending time with it.”
We do lot of work in innovation, and a lot of people ask me over and over again especially in the last few years, “What do you think about the 20% innovation time that Google made famous last decade?”
I usually turn the question around and say, “Well, I think the 20% is actually more important for the top leadership and the mid to top leadership of the company than it is for the standard employee, because that’s the space that the constraints actually occur so often.”
If you buy in to spending time to be innovative, time to think about the future, really get outside of your own industry and see how others are doing it. Then imagine how that might be applied to you.
Warren Ritchie: I think people are really going to have to start to zoom way out to look beyond the discreet products or services they currently provide. Start to think about and talk internally about how the discreet products that we currently offer in the marketplace are involved with people’s lives.
What are people doing immediately before and immediately after using your product or services?
Zooming out to see exactly how your product fits in to an individual’s life is what we’re seeing as being a necessary step.
The Real Promise of Disruption
Warren Ritchie: If you’re a manufacturer of vehicles and you use your vehicles for certain use on a regular basis to take a trip, to go to a hotel, to eventually be at a restaurant, to eventually do something later in the day. Those patterns are established.
When you start to think about your trip and start to put in nav system, it starts to then decide or ask you, “Do you want the reservation? Do you want this table at the restaurant? Do you want this certain thing in your room? Do you want the channels preset?” These things can all be sort of anticipated and offered as options upfront by one product as it integrates with other subsequent services.
That’s kind of a simple example on how it might work. What you start to see in order to enable a a vehicle industry to start to build a way to communicate with hospitality, whether that be a hotel or whether it be restaurant? Then actually get down into the specifics of it.
Pull the lens back that way and walk through a customer’s journey on how they use your product, how they use other products and services that are related or adjacent. That’s really what we’re talking about. Enabling it means that your industry has to start to understand what other products it serves too, in a sequence, and then start to build those connections with those parts.
Gregg Garrett: We’ve been trained that integration is really a big piece of the currency of the future. I don’t only mean data integration, but the perspective integration of being able to truly put your customer in the center of the picture.
Really understand how that customer is consuming your pieces and probably build business relationships with those industries, or those firms that are producing the products and services that are adjacent to your industry.
From pretty much all of history, it’s been up to them to take your product and the next company’s product, or your product and that company’s service experience, and integrate them at the point of use.
“What the connected world promises is to simplify individuals’ lives.”
The challenge of the world of IOT is the mass integration that’s going to fall on the responsibility of the consumer.
I mean, just imagine, your life right now or your listener’s lives of how many passwords and usernames and presets and all of the digital interactions that they need. So many of them. If they’re not well integrated in the background, they become a distraction to the real experience that they want.
The ones that are sophisticated, the ones that are beautiful, are actually kind of orchestrated into an overall landscape.
Now, just zoom back and think of everything that you touch in a day, everything that you walk by a day, and every experience of your day, consuming and spinning of information. They all are going to need to be architected together.
That’s kind of that beautiful perspective that you need to have to pull back and say, “Where are the most critical ones? Where can I start doing some of that integration early on, that will be relevant to my consumer, to my customer, that will allow me to be differentiated in the market?”
Advantages in the Market
Charlie Hoehn: What are some of your favorite companies that are doing a really great job on these integrations right now?
Gregg Garrett: I’d start to say that I am not sure there’s any of them that are doing really great but there are certainly ones that are making an effort to it, and that’s really a good first step.
We talk in the book a little bit about the commander term, and we think that there are a few brands and few firms out there that are looking at the world more broadly than maybe their competitors.
So a lot of these happened to be companies that grew up in the digital space.
If you think of the Amazons and you think of the Microsofts and you think of the Googles/Alphabets and you think of the Apples—many of them have the luxury in that they started in the consumer electronics or consumer software side of things.
“Because they were there, they had a far reach.”
Their consumer started to bastardize them for uses beyond. And they started saying, “Well I am already touching them at their personal computer, I can now touch them at their phone and because of touching them at those both of places I can go to the television screen or because I know they’re shopping behavior, I can integrate into different space.”
Because of where they were at the time, they have a real commander kind of view of the world, meaning that they touched many different touch points in a consumer’s life.
So they are doing it as well as anybody. The question is are there some of the product companies out there that maybe have been non-digital who also have significant touches in people’s lives?
I know in the automotive industry, there’s lots of projections out there, but upwards of 20% of people’s lives during any given week are being spent inside of a car. Those are also significant touch points. The same thing with the desk.
You know certain desks that people go to, those are significant points in life. So these other places have the potential, but I would say that those brands I spoke about before might be a little bit further along because of the nature of how they grew up.
Charlie Hoehn: What strategy advice do you two have? What are the options for let’s just say an automotive company to prepare themselves for this changing world?
Warren Ritchie: Well I think the first thing is the realization that they’ve come up with this product. A company’s selling a discreet product that is used by consumers for their transportation needs but they’re rapidly going to be in both the product and service business. Or they have a choice to be in the products and service business, where sensors are embedded in cars, sensors embedded in transportation, sensors embedded in services.
Automobile usage is becoming as much as a service as actually the ownership of the product.
From a strategy perspective, what we have said in the book is that the industrial economics of manufacturing are meeting the economics of information.
They don’t decline in value over time. They can add users with a near zero variable cost. And the convergence of those two forms of economics—product or industrial economics and information economics—is leading to a reconsideration of the business model for product companies.
So as you drive, a product itself is streaming data off about how you are using it but also how the product is performing. That has value to the consumer once it can be classified, generalized, and determined how in fact the consumer might be able to realize some value for it.
“The main point is that products are no longer discreet.”
Products with sensors start to become information-generating devices, and that information, product, and used data can actually be the basis for services.
So, one of our main premises of the book is that executives who achieved a high level of success in the companies as product companies are starting to be faced with business models that involve the economics and information. Network effects and are starting to have to consider or think about two sided platform business models where you are selling a product.
But you are also then potentially collecting information from that product and being able to bundle that into information-based services for the user and also for the other consumers of information.
Where the Rubber Meets the Road
Gregg Garrett: We lay this out in the text, but some of that Warren actually taught me early on when I first met him that simplified—the term strategy is used so often. I can’t even say that it’s misused. He can; he has a PHD in it. But I can’t even say that it’s misused.
I can tell you that that it was a very loose common definition walking around most offices spaces.
So we’ve managed to pull out first thing to say, “Which strategy are you talking about? Pick a strategy. Is it the corporate strategy? What business are you choosing to be in? Is it the business strategy? How are you going to choose to differentiate and compete in that business? Or is it the functional strategy, which is really how you’re deploying the resources properly to be able to compete in that business that way?” and that seems to help.
So if you take that connective piece in there, people are talking about connected strategy, which one are you talking about?
Are you really going to allow your company to look at being in a different business, or are you not? If you are in that business or at a different business, are you really looking to compete in that differently because of all the sensor information and this product and used data that we talked about it in the book?
Are you really talking about the role or your capability? So that whole kind of script is something that, for me at least, simplified the message.
“What is it that we’re really talking about?”
The second piece is that coming up with a strategy and implementing a strategy are two entirely different things.
It is our belief that the formulation is challenging but not anywhere near as challenging as trying to actually do it and being realistic about doing it and having a real plan.
We talk about this first mile journey of what leaders need to do as they are considering these things and the roles that that implementation planning really has.
To all the listeners that are leaders or wanting to be leaders in their firm: they have a real big role in this. And as these business models are decided, so much of it comes down to the inertia that they set. That is really on their backs of either their use and what they have been trained and talked to do for all these years, or the structure that they’ve put in place and allowed to constrain the future.
It is really those components that I think need to be leaned into or dug deeper on for people that read this book.
Warren Ritchie: Our main premise is that, in the connecting world, you are not in the same business as you are currently.
“You will be in a fundamentally different business.”
If you are a service company or if you come from the world of digital or information economics or that type of company and you are considering getting into the product business, that’s different. If you are in the product business and you are looking to embed sensors in your product and add information services it’s fundamentally different than what you are currently in.
You’re going to have to rethink whether you want to be in that business.
When you get into the business layer of strategy, how are we competing? You’re going to have different options to consider as you determine how you differentiate yourself from others.
And as Gregg eluded to, how do you deploy your resources functionally? The functional strategy really comes down to what capabilities are you going to have to either acquire or adjust or potentially even divest from in order to deliver on that differentiation strategy to be in the business you choose to be in.
These are fundamental identity issues for organizations that they are going to wrestle with.
Starting to Shift
Charlie Hoehn: What have been the most promising or exciting transformations you have witnessed in those folks?
Gregg Garrett: I could start off with a couple of them. Some of them I could speak about, some that are maybe minor, and other ones need to be a little more general to protect the innocent if you will. But people are doing this, companies are doing this, leaders are doing this. Some of it is just as easy as looking at the title.
I’ll pick a classic example.
I don’t know if many MBA programs do this, but I forced all of the students to introduce themselves to one another and really become a cohort in that class alone. I make them talk about their name and their title and why they took the class and whatnot. Seven years ago, there wasn’t a single title that was anywhere near connected. This was all brand new concepts.
In the past two years, two semesters ago, I had a student raised their hand and said, “The reason that I have taken this class is I read the syllabus for the class and I compared it to my role description, and it is almost a one to one.”
He was the head of strategy for a connective division of an automotive company. Interesting.
But he said, “I figured if I take the class I would figure out what am I supposed to do with this job, because no one has ever told me before.”
So that little incremental pieces that says companies are trying to put resources towards those things is quite interesting.
The secondary piece is that I was in a conversation just as recently as yesterday at more of the industry level, and they were making the comparison to the Wright Brothers.
They said, “These are two farmers and bicycle makers basically—people that made bicycles in their garage that made airplanes fly.”
“The first airplanes came from two individuals in a garage with bicycles.”
If you think about the autonomous industry, which is one small example to connect the world, you have major multinational corporations with an incredible balance sheets and some of the brightest minds in the world all getting aligned and in lock step saying, “This will happen.”
Five years ago, people were still arguing about it, now under a five-year period, fully autonomous vehicles will be rolling on the road.
So I think the biggest piece for me is that companies are really spending the resources towards it. Startups all over the world are getting well-funded by venture money that’s appreciating it, and industries are believing in it, and Wall Street in some sense is standing behind it.
There are tons of indicators that this is coming.
I think that it is actually interesting that there is no particular script that says, “This is exactly how it is going to happen,” which makes it exciting.
Warren Ritchie: A few years ago, someone who is influential in my life more from quips and comments and things said to me that, “You know, a lot of people want to be different, but far fewer are really are willing to change.”
I think that is the same for corporations in aggregate. A lot of executives would like to be different or lead a corporation in a different direction, but fewer are willing to make the change.
To continue in this connected world, a lot of existing or legacy companies really need to start rethinking, invoking much more entrepreneurial things. Starting new things that are different without really knowing or believing that this is exactly the right thing to do, but we have to do something different.
“We have to start to change.”
Those are the companies that I find actually quite refreshing. They are starting to embrace a little bit of the entrepreneurial things as we are going to have to dedicate a certain portion of the rewards and the current legacy business we are in towards being a different business and a new business.
We accept that we are going to make mistakes, which is really very much the entrepreneurial model. But we need to try a lot of different things.
Without naming specific firms, but you see them in the press or you hear about these firms that are making acquisitions, that are trying to start something that is different. You have to wonder from the outside, “What’s going on in the inside of that firm?”
They are adding capabilities to their firm, suggesting that they want to change, because they somehow think they need to be different in the future.
There are models; it is essentially not prescriptive. We don’t say, “This is what you must do to be successful and learning to compete in the connective world.”
What we are saying is, “The capabilities that have made you successful in the past are not the capabilities that you can rely on to keep you successful in the connected world.”
“You need to invest in things without actually knowing what the ROI may be.”
Start to prepare yourself, as opposed to predicting the ROI sort of stuff.
In terms of writing the book, putting these thoughts together we’ve gathered over years of experience and from learning from others and being influenced by ideas of others—if some people somewhere read this, think differently about something, and then do something a day, a week, a month, a year earlier than they might otherwise, then that may actually change the success for that individual or the individual’s corporation.
That’s the inspirational piece for us to put the book together.
A Challenge from the Authors
Charlie Hoehn: Can you leave our listeners with a brief challenge, something they can do maybe even today to get them moving in the direction you think they ought to be moving in?
Gregg Garrett: The general challenge is be brave and we say this several times. It is really be brave as a leader. I don’t think many people will ever be disappointed if you do things bravely.
Maybe the more immediate challenge is: don’t wait.
It’s not just rushing and start jamming all kinds of technology into your products. If you really get this perspective, if you really believe the market is starting to indicate that the world is connecting, you don’t need to wait for your product team or your IT team or your digital team to prepare all of your offerings to be able to go to market.
Can you mirror it?
The example I give is again, from the auto industry an easy one for us—if you think autonomous is coming, how can you bring the autonomous experience to the future?
We talk to car dealerships and OEMs that have relationships with them and say, “If in the future you’re going to need to service a vehicle that might drive itself to the dealership, be serviced, and then drive away, how are you going to get payment? Can you do remote payment today?
“Can you imagine that in the future you might need to get payment in the future that way? Why don’t you start that today?
“It is actually not unlikely. It’s positively going to impact your customer today. So why wait?”
“So those are my two messages to the listeners: be brave and don’t wait.”
Warren Ritchie: And for me, this is really more targeted at large corporations that have maybe multi-decades of operation. There was a founder somewhere in their history, and the founder had an intent, and this person was an entrepreneur and they were making investments and had a purpose for their corporation.
Several decades later, when the world has changed, when industry is evolving and there is a technological discontinuity and it has the potential to disrupt current industry that the founder created this company in—what would the founder’s message be?
I’ve got to believe the founders would say, “You’ve got to get ahead of this. You’ve got to get out and get moving. You’ve got to start thinking about this.”
It’s the question of starting to rethink new purpose for your organization. If the organization isn’t able to keep pace with the thinking that the individual is doing, then you’ve got to start thinking about, “How do I compete in the future for the place that it is connecting that disconnected world?”
Charlie Hoehn: What are the best ways to get in touch with you two to connect with you to maybe even work with you?
Gregg Garrett: So you can get to us on our corporate website, www.cgsadvisors.com. That’s got all of our contact information out there.
Of course, we’re both on LinkedIn and Twitter and all those places, but I think the corporate website is probably the easiest to get everything consolidated.