How incumbent industrial companies should transform themselves with algorithms, AI, and interconnected datasets

Yet another fascinating book from two well-known authors. Innovation expert Professor Vijay Govindarajan (VG) and digital strategy expert Professor Venkat Venkatraman . The book "Fusion Strategy: How Real-Time Data and AI Will Power the Industrial Future" came out on March 12, 2024. I mentioned in my previous post how I like Venkat Venkatraman 's book "The Digital Matrix - New Rules for Business Transformation Through Technology." So I was really waiting for this new book to come out. In the previous post, I also mentioned that my doctoral dissertation referenced and used Dr. Venkatraman's seminal article "Strategic Alignment: A Model for Organizational Transformation via Information Technology." The article was a core source at my university and the information systems science faculty. I am a true believer in frameworks, and both of these authors are world-known and have authored books and articles that the rest of us can enjoy.

This book goes to the "heart" of how leaders of incumbent asset-heavy companies (agriculture, construction, manufacturing, mining, and transportation) need to reflect what has happened in other asset-light industries through the digital revolution. I have written about the change I have seen in delivering strategy workshops for global brand names, specifically within the software innovation domain for incumbent software companies trying to transform their delivery model and functionality to reflect the new generation of users.

The generation I represent came from a non-flexible and mostly unappealing user experience, specifically in software solutions, while the new generation will not tolerate solutions that do not bring immediate value to the user. Some new industry players did not exist 10-15 years ago. For example, look at StarLink from Elon Musk and Tesla. The former has transformed how we see connectivity, allowing me to be truly virtual when traveling and working from our motor home in the continental US. The latter (Tesla) has transformed the auto industry and pushed other brands to become followers. Who becomes a real threat to Tesla's dominance in the EV auto industry remains to be seen.

AI, specifically generative AI, is changing how we innovate solutions and impacting physical assets. I have been fascinated and enjoying digging into anything that has to do with AI, Generative AI, and how it impacts software vendors, their business models, and opportunities for innovation. My boutique management consulting company, TELLUS International , is focused on business model strategy development, specifically within the technology industry but also for incumbent traditional organizations embedding software into their traditional business. Those workshops have been interesting as these companies do not have a background in software productization and what it takes to build software.

The book is divided into three parts as follows:

??Part 1: When Steel Meets Silicon

??Chapter 1: The Industrial Past Was Prologue

??Chapter 2: Digital Upstarts Vanquished Consumer Giants

??Chapter 3: Industrial Giants Are Fighting Back

??Chapter 4: Four Battlegrounds

??Part 2: Vectors of Value

??Chapter 5: The Battle of Brilliant Machines

??Chapter 6: The Race for Remarkable Results

??Chapter 7: The Showdown of Smart Systems

??Chapter 8: The Clash of Custom Solutions

??Part 3: Conquering the Fusion Frontier

??Chapter 9: Fusion Principles and Practices

The authors discuss how industrial leaders already maintain "digital twins," virtual representations of a product during its design and development. I have had fascinating workshops with both engineering firms and software vendors in digital twin technology and have seen how the entire landscape has changed with such technology. The authors bring new concepts such as "datagraphs," which are real-time data on products. The authors also bring across the concept of "performance twin," which captures detailed real-time performance data when the product is deployed by customers.

The authors also introduce four "vectors of value" by presenting a quadrant for Fusion Products, Fusion Services, Fusion System, and Fusion Solutions.

I am glad that the authors bring "Ecosystem" thinking to the work, as it is a key concept today in the technology industry. I have built my career on partnering and will continue doing so. No company can claim to be the master of everything. Each company must pick its "battles" and partner to create the overall solution or experience.

The book builds a roadmap for incumbent heavy-asset industries and portrays how data has transformed many industries and will continue to do so in the future. I have been blessed to see this transformation firsthand and also witnessed both successes and, unfortunately, failures. I also believe that the book is not only for readers interested in incumbent industries but for readers who want to understand these industries and potentially build a business case as part of an ecosystem play.

Yours,

Dr. Petri I. Salonen