Innovation means change. Tracking and mapping political, economic, social, and technological change are critical explorative activities at the beginning of a strategy innovation project. Naturally, the changes of the emerging future are grounded in both the changes of the past and what changes at present. What if you had a tool to track down identifiable time patterns of past and present changes in business and society to better forecast likely changes in future?
The three dimensions of change
Apart from writing on my second innovation book on our X-IDEA innovation process method, I am also in the process of adding additional thinking tools to the X-IDEA toolbox. One of our upcoming new Xploration tools is called Change Patterns, which helps executives to better understand how things change in their industry and the wider business environment. Thereby, we track and map out three dimensions of change: velocity, direction and impact of observable change over time. Let’s discuss each of these dimensions in the following sections.
Change velocity: How fast do things change here?
Change velocity captures how fast things change in a category or industry. Every industry moves forward at a certain velocity, albeit at very different speeds of change:
- Information Technology- (IT-) and Internet-driven industries as well as fashion-related industries change fastest, with novelties introduced in a semi-annual rhythm.
- On the opposite end of the velocity spectrum are utilities and the infrastructure construction industry; here, new projects take years to complete, and they are operated for decades without much change.
- In between these two extreme poles, things slow down as we move from industry to industry, starting from the still quick-paced fast-moving consumer goods and electronics industries over the medium-paced automobile industry to slow paced, asset-driven industries such as the finance or oil & gas.
Note three interesting phenomena while considering the velocity of change in an industry:
- Over the past 2-3 decades, change velocity has accelerated in most industries. Here, consider how the key performance indicator ‘time to market’ has shortened in your industry.
- The boundaries between once disjunct industries have become more porous due to technological and IT-driven changes.
- Agile innovation leaders of modern, speedy industries have started to cross-over into older, slower industries. Think of Google’s, Apple’s, or Tesla’s initiatives to reinvent the good old car; think of Amazon’s, Google’s, and Apple’s new solutions for making payments frictionless and safe.
Change direction: What’s the path that change moves along here?
The second dimension of change is the direction. Here, we can discern four patterns of how change unfolds over time:
- Linear timing asserts that change moves forward in a straight, typically progressive way. The economic evolution of humanity from the hunter and gatherer society over the agricultural age and the industrial age into the IT age and now the innovation age suggests such a linear progression.
- Cyclical timing chronicles change as a wave with four clear cycle phases (trough, rise, peak, and decline). Well-known examples here are the macro-economic cycle, the product life cycle, and industry cycles. Checking out our present position in these cycles points to the direction of possible strategic actions in the future.
- The pendulum is a third way to describe change over time. Once put in motion from an initially static position, a pendulum swings back and forth between two extreme poles. For example, political developments often swing back and forth between a regressive, traditional, religious, materialistic and nationalistic pole and a progressive, modern, secular, idealistic, and cosmopolitan pole. The pendulum is also at work in most large and multinational corporation, where organizational structures swing back and forth between the poles centralization versus decentralization.
- The spiral describes social and economic change by flowing in a circular motion before spiraling up again to a higher level, where a new cycle starts that eventually leads to a new leap. This model suggests that a venture, industry or society develops, grows, matures and gradually declines until a new wave of innovation spearheaded by a small group of innovators leaps economic activities to a higher level, where a new industry cycle starts. Every 2-4 decades, the rise of a new lead technology triggers such a leap to a new level of fresh economic growth and prosperity. Think of how IT in the 1970s to mid-1990s drove business until the Internet emerged as new lead technology and spiraled us up to the next level.
Change impact: What’s the impact of change?
The third dimension tracks the impact of an innovation or change initiative, such as a new technology. Probably the easiest way to categorize shock is by using the labels ‘incremental change’, ‘evolutionary change’, and ‘revolutionary change’. Once you have quantitative data available (such as a change in revenue growth or change in market capitalization), however, you may also use a more objective metric system to map out the scope of change.
Conclusion: Ride the waves of change by understanding the speed, direction, and impact of change
Once we understand the historical and current speed, direction, and impact of change in your industry, we can map these phenomena to project possible future trends that may guide the strategic actions of our business. Unfortunately, this is easier said than done, as it requires you to collect objective data for all change phenomena and then map those out in a three-dimensional map.
© Dr. Detlef Reis 2015. This article was co-published in the Thinkergy Blog and the Bangkok Post on 10.12.2015. All rights reserved.
P.S.: This article is one of 64 sections of an upcoming new book, The Executive’s Guide to Innovation (earmarked for publication in 2H.2019). We also touch on this topic in The Creative Class, Thinkergy’s innovation brief for busy executives. Contact us if you’re interested to learn more about our training courses or my upcoming book.