Innovation means change. Tracking and mapping political, economic, social and technological change is one of the activities you need to undertake at the beginning of a strategy innovation project. Naturally, the changes of the emerging future are grounded in the changes that take place at present and the changes that took place in the past. What if you had a tool to track down identifiable time patterns of past and present changes in business and society to better forecast the probable changes in future?
The three dimensions of change
Apart from writing on my second innovation book on our X-IDEA innovation method, I am also adding additional thinking tools to the X-IDEA toolbox these days. One of our upcoming new Xploration tools is called Change Time Patterns, which helps executives to understand better how things change in their industry and the wider business environment. It tracks and maps out three dimensions of change: velocity, direction and impact of observable change over time.
Change velocity: How fast do things change here?
The first dimension captures how fast things change in a category or industry. Every industry moves forward at a certain velocity, albeit at very different speeds:
- Information Technology- (IT-) and Internet-driven industries as well as fashion-related industries change the fastest, with novelties introduced in a semi-annual rhythm.
- On the opposite end are utilities and the infrastructure construction; here, new projects take years to complete and then are operated for decades without much change.
- In between these two extremes, things vary by industry, starting from the still speedy fast-moving consumer goods and electronics industries, to the medium-paced automobile industry to slow paced, asset-driven industries such as finance or oil and 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.
- Second, the boundaries between industries have become more porous due to technological and IT-driven changes.
- Third, agile innovation leaders of modern, speedy industries have started to cross over into older, slower industries. Think of initiatives by Google, Tesla or Apple to reinvent the good old car, or new frictionless and safe payment solutions from Amazon, Google and Apple.
Change direction: What’s the path that change moves along here?
The second dimension of change is direction. Here, we can discern four patterns of how change unfolds over time:
- Linear timing asserts that change moves forward in a linear, typically progressive way. This is seen in the economic evolution of humanity from a hunter-gatherer society in the agrarian age to the industrial age into the IT age, and now the innovation age.
- Cyclical timing chronicles change as a wave with four clear cycle phases (trough, rise, peak, and decline). Well-known examples are the macro-economic cycle, the product life cycle, and industry cycles. Checking our present position in these cycles points you to the direction of possible strategic actions in future.
- A pendulum is a third way to describe change over time. Starting from a neutral, integrated 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 is most large and multinational corporation, where organizational structures swing back and forth between the poles of centralization versus decentralization.
- The spiral describes how social and economic change flows in a circular motion before spiralling up again to a higher level, where a new cycle starts that eventually leads to a new leap. This model suggests that a business, industry or society develops, grows, matures and gradually declines until a new wave of innovation spearheaded by a small group of innovators spurs activity to a higher level, where a fresh industry cycle starts.
Such a leap is often triggered by the rise of a new lead technology, which happens every two to four decades. Think of how IT in the 1970s to mid-1990s drove business until the Internet emerged as new lead technology and spiralled 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 impact is by using the labels ‘incremental change’, ‘evolutionary change’, and ‘revolutionary change’. Once you have quantitative data available (such as 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: Once we understand the historic and current speed, direction, and impact of change in your industry, we can map these phenomena out to project possible future directions of change that may guide the strategic actions of the business. Unfortunately, this is easier said than done, as it requires you to collect objective data for all change phenomena and then map them in a three dimensional map.
© Dr. Detlef Reis 2015. This article is published in parallel in the Bangkok Post under the same title on 10 December 2015.