20/05/2015
By Haydn Shaughessy, author of two books on the changing economic landscape, Shift and The Elastic Enterprise
Global business is hypercompetitive, fuelled by fast, new, developing markets and production centres like China. And global markets are a major source of enterprise growth. These facts require that we re-asses our position within the economy.
Because ours is now a global economy, and because the diverse market will no longer tolerate a ‘one size fits most’ approach to product creation, a successful company must embrace and use entirely new measurement tools. These days, a company’s nimbleness and its ability to shift quickly in order to meet the needs of a diverse market is critical. These shifts are executed when the measurement tools, many of which can be found within the markets themselves, dictate change. This reality makes constant contact with the consumer essential to the management of scope and velocity.
The problem for many companies awash in the disruptive waves of the new economy is that they haven’t or can’t embrace the idea of that constant connection. Here the old adage about old dogs and new tricks applies. The old dogs of the business world are not always comfortable in the realm of consumer relations and tend to avoid this new and essential concept of management in today’s economy. But the value of keeping your finger on the pulse of your market cannot be overestimated.
To be successful in this environment, an enterprise needs to have global information and global relationship-building capabilities. But that global market is fragmenting at the consumer level into many thousands of micro-markets or hyper-channels. And it is happening fast across the globe, pushing the demand for mass differentiation.
In practice, constant connection is an invaluable tool. Maintaining a continuous connection with customers allows companies like Netflix and Autodesk to continuously modify services as required by the consumer. Continuous connection allows companies to compete through the sheer velocity of the moves they make in the market. They update their products continuously, but they also adapt their internal workflow so they can experiment and test what might work well with customers. Research and development timelines are no longer ongoing for years. All of this is happening very close to real time.
Mass differentiation is a new phenomenon that acts as a counterpoint to mass customization. In mass customization systems, companies like Nike and Adidas create products that consumers can then customize. In mass differentiation, the manufacturer takes responsibility for serving multiple niches within the greater market with the same basic platform which is then varied extensively through hardware and software, such as apps.
Google, for example, had over 2,000 apps lined up for the launch of Google Glass. No single customer wants all 2,000, but many millions may want some variation of the apps offerings. The smartphone sector has done a lot to introduce this idea of mass differentiation and a portfolio of offerings. This phenomenon is so profound that we have yet to grasp its full implications.
The corollary of scale is that elastic organizations can and do serve micro-markets. Instead of implementing that “one size fits most” approach to products, the elastic enterprise can and does serve a variety of smaller markets with a basic platform, or product that can be customized with apps by the end-user to meet more specialized needs.
Unlike in the past, the elastic enterprise is not scaling to serve mass markets through mass media communications. Their operating principles allow them to grow through mass differentiation; they are able to serve the narrowest requirements in large global markets—that is, serve on mass and micro levels at the same time.
The goal of today’s elastic entrepreneur is to create a wide-enough range of products or apps (through mass differentiation) to pick up all kinds of micro-markets. Increasingly, it also means being prepared to launch a product as part of a wider family of goods, services, and software.
Some of today’s brightest and heretofore most successful businesses (and government entities, as well,) may be reluctant to embrace new ways of understanding our economic environment and innovative new ideas in gathering wealth, however such a pathway is fraught with peril.
Philosopher Thomas Kuhn once said that scientific theories were always vulnerable to criticism, but their adherents, instead of switching to a new paradigm, would add more scaffolding to keep the edifice of a theory from falling. The same is true of economics. However, the problem isn’t that economists and politicians are trying to maintain a building that is in danger of collapse. The fact is they are trying to maintain an edifice when they ought to be building a hotel, a place of temporary accommodation where right and wrong have only temporary refuge, where we can be better situated to continually update our understanding of a situation that is in constant flux.
