Although I’m not a professional futurist, it’s hard not to notice commonalities found within hundreds of conversations with diverse teams and individuals who are busy defining new businesses. Five interrelated trends seem to be rapidly changing the face of business by disrupting existing models:
Deepening Technology Dependence – Such an obvious observation certainly won’t garner me any futurist credentials. This reliance first began decades ago with large enterprises, but now even the smallest incorporate multiple forms of technology to increase their efficiency and effectiveness. As technology consumption increases among small companies, their influence on the evolution of new technologies will continue to increase.
Ubiquity and Mobility Enabling Distributed Operations – This second trend may be having the most profound impact. If you’re seeking an opportunity to form a new business, simply examine businesses that remain highly centralized and ask, “What if we broke this into parts that communicated with each other and were accessible by mobile devices?” You’ll find that opportunities abound in industries as diverse as utilities, healthcare, and manufacturing.
Loosely Coupled Systems – The decades-long conflict over the efficiency of deeply integrated systems versus the flexibility of modular systems is over, and the winner is… both. Distribution of function across reusable modules delivers economies of reuse. Loosely coupled systems employ web-based connection mechanisms that allow rapid communication while avoiding dependencies that often slow development.
Discovering Trusted Vendors – Large enterprises have maintained their dominance for decades because of their reach across diverse geographies and economic domains. Better solutions from smaller companies have eventually been acquired by companies could successfully sell into the huge bases of customers who’d grown to trust them. Finding a trusted vendor now has evolved into searching the world for products and services that match our requirements, and trust can be built based on massive and readily available customer ratings.
Increasing Irrelevance of Centralized IT – While a highly respected friend’s belief that IT groups will disappear may be overstated, The centralized IT group’s impact on business priorities will continue to diminish. Technology has become so central to distributed business units that they risk falling behind competitors if they wait for or look for direction from IT. The issue is too central to their success to delegate it.
These trends and their effects are intertwined, reinforcing, and multiplicative. Awareness of them provides a context for both evaluating new business initiatives and estimating the life expectancy of existing enterprises.
Think your non-tech company won’t be impacted by this trend? Has your market been around awhile? Are things likely to continue pretty much as they have? Think again. A recent article in TechCrunch suggests that the market has reached a tipping point that could affect you. Many non-tech companies acknowledge that success increasingly depends upon how well they leverage technology, and they’re making bold moves to acquire software and other technology companies to strengthen their competitiveness. If you’re in high tech, you should check it out; if you’re in another industry, it’s imperative to learn more.
CEOs are increasingly aware that the technology-based operations of their company are critical to gaining market share and growing revenue. Large companies shop for technology that will make them more competitive. Business combinations that would have seemed baffling in the past are becoming commonplace, for example:
- a chemical and agricultural company bought a weather technology company;
- an auto company bought a music app company;
- an insurance company bought a health data analytics company.
As technology becomes increasingly accessible, astute organizations are leveraging this trend with several key business objectives:
- Erase the hard line between online and brick-and-mortar commerce;
- Deepen interactions with customers;
- Gather and incorporate more data intelligence on their business;
- Add critical technical talent.
If you lead a non-Fortune company, following their lead in making startup acquisitions may be imprudent or impossible. However, frequent conversations with astute CEOs suggests taking three straightforward steps:
- Get an outside audit of current software systems to learn how dependent upon technology your company is and whether it’s time to modernize in order to compete more effectively.
- Talk to thought leaders in your network about how the intersection of business objectives and spending on technology work in your market.
- Recognize that, as each operating division begins to understand how critical technology is to their business, information technology (IT) departments are decentralizing (believe it or not, there was a time when mature companies had a mail and logistics department with an actual mailroom.)
Computing has changed the way every type of business happens. Savvy CEOs understand the value of technology to their businesses and are exploiting it in every functional area.
When I was recently interviewed for a Wall Street Journal article, answering questions about doing business in Texas came remarkably easy. The interview was nominally about Rick Perry, but almost all our time was spent discussing the state’s relatively healthy job scene.
When asked why Texas is special, I told Dan Henninger about a Brooklyn native and friend named John who worked for me in Dallas in the late 80’s. After having lived in half a dozen cities across the country during his career, he deliberately targeted moving to Dallas when he and his wife were ready to start a family. What inspired him was the attitude of businesspeople in Texas when they lived there once before in the early 80’s.
At that time, the energy sector was spiraling downward at a record pace, but he remembered that, instead of bemoaning their situation, the Texans around him were talking about what they were going to do next. In some cases it meant starting over in new areas of the energy sector, while others were planning how to start anew in other markets. No one spent time crying about their dire situation. The optimism he saw in Texas was like nothing he’d seen elsewhere, so he and his wife deliberately returned a few years later.
My friend Ed Trevis (also quoted in the article) provides another perspective from a non-native Texan. As the long-time CEO of a high tech embedded computing business in Silicon Valley, Ed finally became fed up with California’s overbearing tax and regulatory environment, so he surveyed locations in many other states, looking for the best place to relocate. His criteria included a strong, well-educated labor force, less government interference, and an attractive cost of doing business. Texas came out far ahead in his analysis, and the city of Cedar Park outside Austin provided the perfect place to move his business, which has thrived there since the move two-and-a-half years ago.
To be fair, there are great people everywhere, there are thriving businesses in other states, and there are spots that beat out Texas in one way or another. What is unique about Texas, though, is not only its labor force, its supportive governmental policies, and its low cost structure, but the optimism and collaborative attitude so prevalent among its people. As David Booth, who moved Dimensional Fund Advisors’s headquarters to Austin from California, said, “It’s hard to understand if you haven’t lived here.”
Cascadia Capital LLC is a Seattle-based independent investment bank founded in 2000. They recently announced their top information technology predictions for 2011, based on insights from their work with private and public growth companies.
The six trends are:
- Increased competition between growth equity and strategic acquirers
- M&A, not IPOs, drive shareholder liquidity
- Web content management, analytics, marketing automation and customer
relationship management (CRM) convergence
- SMB adoption of cloud services will drive consolidation of cloud vendors
- HIPPA compliance drives M&A for healthcare IT sector
- Technology enabled services companies become acquisition targets
Do you agree with their predictions? What would you add?
Inventor, entrepreneur, and futurist Ray Kurzweil recently gave an interesting keynote at JavaOne in San Francisco. If you’re interested in how we got here and whether we’ll technology will continue to advance exponentially, he offers great cause for optimism.