A few years ago, I found myself discussing "digital" with a group of executives who managed large industrial sites. Their equipment was aging and the processes they used had been collecting dust for a long time. There was a clear gap between how people were using digital in their own lives vs. how it was being used in the corporate world. Despite these differences, the executives were not sold on the idea of “going digital” to solve their problems. I needed to find a way to convey why corporates should embrace the digital benefits we all enjoyed away from work.
The solution, of course, came in the form of a slide I created depicting a day-in-the-life of an “average Joe.” It went something like this:
As our friend “Joe” wakes up in the morning, he reaches for his mobile phone to catch up on the news, on an app, of course. As he eats breakfast, he logs into Amazon to buy a few things, all of which will be delivered in 24 hours. He scrolls through Facebook and sees some photos of his friends vacationing in Hawaii. Wow, we should go there next, he thinks. After dropping his son off at the bus stop, he heads to work. Before he even arrives, he gets a notification from the NFC- Near Field Communication tag attached to his son’s backpack notifying him that he has arrived at school; it's a new pilot run by a local startup.
At work, Joe discovers there’s already a problem waiting for him: A machine in a factory 500 miles away has broken down. After spending the morning searching for some kind of documentation to help fix the problem, he finally stumbles upon a few diagrams that may be of use. The factory has no email, though, so he wastes the next thirty minutes faxing the documents one by one. At the end of the day, he learns the machine is still broken, so his only choice is to visit the factory in person. By the time he calls travel, however, it’s already closed. He can’t book his own flight (corporate policy—you know), so he leaves for home, thinking, nothing much was achieved today.
On his way to the elevator, Joe pulls out his phone to call an Uber, which arrives just as he steps onto the sidewalk. As the driver navigates rush hour, Joe books his family vacation to Hawaii on Expedia and then orders takeout on a food delivery app. Dinner arrives thirty minutes later, and, after a long day, he finally relaxes in front of his favorite Netflix show.
Mobile everywhere., for consumers. The Corporate and Industrial world took time to realize the ... [+]
When I shared this slide with executives, the message hit home. While the consumer world had enjoyed a wealth of information, connectivity, updates, and the ability to jump over the middleman to complete a multitude of tasks (all via an app), the corporate world had remained manuel, analog, and slow as hell. Instead of seeing the problem, I urged the executives to see the opportunity: That the corporate world was a fertile, virgin ground just waiting for disruption.
Disruption was a word used in every meeting I had at the time. Executives had begun to see the huge gap between digital civil life and digital corporate life—and they knew what it meant.
At any minute, anyone with an idea could build a product, grab end-users, and "startup" to disrupt a company that had been around for 150 years. This was all made possible by the advent of mobile, open-source codes, and app stores.
The talent, financing, and technology were all available, and they all existed outside the walls of corporates. It was prime hunting time for entrepreneurs who knew how to stand up tech, products, and businesses to go after aging companies that understood little about these topics. And this is exactly what startups did.
Now, this reality is changing. It’s not as easy for a startup to disrupt a corporate as it was three years ago. In fact, for many startups, corporates are becoming a desired partner. So, what has caused this change? And what should startup entrepreneurs and those in corporates responsible for innovation do about it?
The Enabling Tech Has Changed
The enabling tech of mobile and web started with a strong consumer flavor. Over time, corporates began digitizing and, today, many consumer type services are built by corporates who went through the digitization cycle. Some are outward-facing and are enabling services; others are aimed internally to drive utilization, optimization, and automation. Now, the technology of the last decade is nearing the end of it's "s curve," leaving fewer opportunities for innovation and growth enabled by "old tech." Only the late adopters still find it exciting.
The technology that will enable the innovations of the next decade is IoT, AI, AR, VR, the Blockchain, Quantum Computing, and a few other bits and bytes. The early adopters of the corporate world have learned their lesson. They've "app'd" their businesses where there was value to be made. Now, they are focusing on the value Deep Tech can deliver.
The Type Of Problems Deep Tech Solves For Are Different
Deep Tech is not a linear evolution of mobile and web. Older technologies have solved problems of access, connectivity, middleman, and enabled end users to do more on their own, but Deep Tech actually enables driving intelligence and automation into behaviors, assets, and processes. These utilization, optimization, and automation type of problems are less "consumer-like."
Yes, there are plenty of opportunities to improve existing services or create new ones for consumers by injecting them with intelligence and automation, but the more significant benefactors of these new technologies are corporates. In the last decades, automation has been a vital tool for improving utilization and optimization across entire supply chains. Inject this automation with intelligence, and a new world of value generation is created.
Problems Are Closer To The Core
To create new value, one usually has to live inside the walls of the corporate. This is because the types of problems intelligent automation is good at solving are usually found at the core of companies. So, without access to the problem space, entrepreneurs won’t even know these problems exist, let alone how to fix them.
Even if they have previous experience with a specific industry, solving these problems is complex, as the necessary solutions usually involve integrations with existing assets, dealing with silos of decision making, partial data, and a good amount of change management. Unless there is active collaboration from within the corporate, solving "core" problems is a difficult task that cannot be done from the outside-in.
A few months ago, I was talking with some VC's in Israel, and I asked them what startups most needed their help with. It wasn't tech, or how to build a product, how to hire, or how to raise capital. It was how to find the right person in a corporate and how to collaborate with corporates.
Corporates Own The Data
There is another challenge in the way startups are looking to disrupt corporates. By its nature, Deep Tech is fueled by data. To create intelligence that drives value by intelligent automation, quite a lot of data is needed. While the current data being collected (and the way it is used) in most companies is not great, these companies still own this data. Without having access to it, intelligent automation cannot move forward. For an outsider to generate value or disrupt a company, access to this data is a must.
Corporates Have Gone Startup
Many corporations have moved up the innovation curve over the last few years. In-house innovation has improved; some are making VC style investments, while others are operating accelerators. In short, many corporates have "gone startup," which increases the competition startups have to face when attempting to disrupt a corporate.
A startup? A corporate? Maybe it's both. Startups are no longer the only ones who know how to ... [+]
If Not Disruption, Then What?
The shift we’re witnessing is from a win-lose reality to win-win reality. Yes, corporates understand their core, and yes, they own the data. But some of the best minds, the most curious and entrepreneurial spirits, and in some cases the necessary funding, are often found outside corporates. The speed and agility of a small group (driven by a dream of changing the world or of a financial exit) is hard to replicate within a corporate environment. This reminds me of the joke about two hunters that were chased by a lion and found refuge on two separate trees. One had a gun, and the other had the bullets.
Disruption needs to be replaced by collaboration, and the heavy lifting will have to be on the corporate side of the fence. Companies looking to capture additional innovation edge need to create the mechanisms that streamline collaboration and marry it with the technological talent that resides beyond their walls. There needs to be more transparency about the problems corporates seek to solve, more agility in trialing solutions (please read my post: Shameless Minimum Viable Products And Why They Are A Good Thing For Corporates), better solutions for investment, and the sharing of IP and the fruits of success.
On the startup side, corporate collaboration is key to growth and success. Ensuring access to corporates needs to be a part of startups go to market strategy. Startups need to configure their business model in a way that enables such collaboration. Just finding the right person within the corporate and signing the dotted line, will not guarantee success. Startups and Corporates think, act, and behave in many different ways. Aligning these two beasts together is not an easy task. The challenges are many. However, the need to collaborate is already redefining how startups and corporates engage and break together the path to success.
