As companies and whole industries go digital, the ultimate winners will be those that can exploit that switch through networked business models, says Peter Hinssen.
The digitization of business — with all its threats and opportunities — is a topic riding high on most boardroom agendas. But, according to Peter Hinssen, best-selling business author and visionary, while the rise of digital will continue to have a huge impact on business and society, that is not where senior management should be focusing their attention.
As he outlines in I-CIO’s exclusive Big Thinker video series, the fundamental revolution underway is not being driven by digital. Rather, the emergence of new network models is proving to be the catalyst for rewriting patterns of individual and business interaction, overturning market positions and even triggering the restructuring of whole industries.
“We are witnessing a revolution in the way society works. Many people, including me, thought at first that this was because of digital technology — that we were witnessing the advent of a new society, with digital natives leading the way. We were wrong. The disruptive element that we see is not just because of digital, it’s because of digital plus the networks.”
Companies are well aware that digitalization is critical for the way they engage with customers, compete in markets, operate as organizations, and so on. But, Hinssen argues, we have now entered a world where the switch to digital has largely occurred, where digital has become (as he predicted in his 2012 book of the same name) The New Normal — where it doesn’t really deliver a competitive edge. “What we’re now beginning to see is how networks can dominate with a power and speed that some find pretty scary,” he says.
Hinssen is not, of course, referring to classic computer networks of fibre and switches and IP. Rather, he is observing the rise of companies such as Uber and Airbnb, Facebook and LinkedIn, Amazon and Alibaba, and indeed others leveraging innovation networks in industries such as pharma and high-tech, where the scale of the enterprise is vastly extended and its speed of execution turbocharged — often at little incremental cost — as a result of their underlying network platform.
“Networks are becoming a social paradigm, networks are becoming a business model paradigm, with all the speed and agility they have. And, in a world where digital isn’t going to be the differentiator any more, companies fundamentally need to understand that [new world] if they want to stay relevant.”
He cites a prime example. “Uber is nothing spectacular per se, but what they’ve done is leverage three existing assets: the existing infrastructure of private cars and taxis, the existing infrastructure of smartphones and the existing infrastructure of Google Maps. And by networking that together they’re capable of building something that has reached critical mass very, very quickly — and makes a lot of [traditional taxi companies] very angry all around the world.”
The car service is now available in 58 countries and approximately 300 cities worldwide, a rapid build up that has given the six-year-old company a market valuation of over $40 billion and estimated 2015 revenues of around $10 billion. That is with a workforce estimated at 1,000-1,500 and with a driver network that, in the US alone, stood at 162,000 in December 2014. “If you see how quickly they’ve been able to get traction, [in terms of] users and revenue, it’s because they’re a network,” says Hinssen. “They would never have been able to do that the old way as a traditional organization, with [their own] products and services.”
That’s where he sees the real disruptive power in business today. “Those new companies are completely rethinking entire industries, they’re rethinking entire business models. And it means others have to understand the new model, the language of networks, how to influence people in networks if they want to survive in an age where networks become the dominant form.”
• Peter Hinssen’s new book, The Network Always Wins, is out now.