New Decades, New Rules: Focus on the New Scarcity!

If you want to trace the arc of business success in any given decade, pay attention to the scarce ingredients. 

The disruptive innovations in any given decade transform the scarcity landscape and thus reframe the opportunities for the subsequent one. Here’s a quick look at how this has played out in the tech sector over three decades and what we can anticipate from the next one.

1985 - 1995

Technology implementations were extremely expensive during this era, and the scarcest ingredient was venture investment capital. To warrant major investment, you had to target major pockets of trapped value. The focus was on modernizing the global supply chain for a world in which demand still far exceeded supply, customers would wait in line to get what they wanted or needed, and product was king. ERP systems had a big impact on inventory, quality, availability, financing, and—via outsourcing—cost of labor. Big winners were ERP software vendors, Microsoft, Oracle, Cisco, Intel, the big systems vendors, and global systems integrators.

1995 - 2005

With the emergence of cloud computing, technology implementations became much less expensive, and the scarcest ingredient was no longer venture investment capital. At the same time, a growing glut of product from the global supply chain flipped the scarcity dipole from supply to demand. Now it was the consumer, not the product, who represented the scarcest ingredient. Media, advertising and promotion became the investment focus, “eyeballs” become the new success metric, and digital became the new media platform. Yahoo!, Google, YouTube, Facebook, Twitter, Instagram, Snapchat were the big winners. Product lost stature as profit margins became increasingly, thin in an era of rapid cloning, low cost manufacturing, and global distribution.

2005 - 2015

In our current era, with cloud computing and mobile devices becoming ubiquitous, deploying digital applications even at global scale is virtually free. Investment capital is also in over-supply, and business strategies that put the investor’s interests first are falling by the wayside, due both to lack of consumer engagement and regulatory outrage with the financial services sector. Product as a form factor has been thoroughly commoditized which has moved the scarcity factor from products to services. Everything-as-a-service is the current pathway to releasing trapped value, with the critical success factor being the number of engaged and committed customers who will repeatedly consume that service. Being able to reorganize retail relationships around customer profiles as opposed to product catalogs is the hot new playbook. Amazon is dominant in this arena, with Uber, Airbnb, Netflix, Alibaba, TenCent following the same path.

2015 – 2025

In the coming decade all global enterprises, both private and public, will target the trapped value in their ineffective and inefficient outward-facing relationships with their targeted constituencies, be they consumers, clients, customers, patients, students, or citizens. Authentic sustainable engagement will become the new scarce ingredient. The as-a-service model will expand from commodity transactions to incorporate more significant life interests as well—education, health, personal development, family relationships, wealth management, safety and security, and the like. Machine learning and artificial intelligence will be the new keys to the kingdom, enabling institutions to operate at global scale with unprecedented speed, relevance, and accuracy. Operating models will prioritize customer relationship effectiveness over the supply chain efficiency, causing CRM to displace ERP as the most prominent information system, and the hot expertise will lie in user experience design, data analytics, machine learning, and artificial intelligence.

So what?

For the tech sector, this next decade will likely unfold in a relatively non-disruptive way as investment focus shifts gradually from B2C to B2B2C, the big digital opportunity being to enable the rest of the world to catch up. Our next big shift won’t come until bits becomes so prevalent and dominant that atoms reassert their importance via things like 3D manufacturing, electrification of the infrastructure, global surveillance, Internet of Things, and the like. But that is going to take quite a long time to unfold because, unlike bits, atoms are much harder to scale virally.

For the rest of the world, however, the coming decade will be hectic indeed. The vast majority of enterprise systems are still organized around a Maginot Line inherited from their prior decades - the supply chain, management activity is still largely focused on optimizing its own operations, and the enterprise is still defining itself around the goods and services it provides instead of the constituencies it serves and the problems it solves. In a world in which supply exceeds demand, efficient suppliers are much less interesting than effective demand fulfillers. Organizing around the demand chain will be the new systems focus, and leading that shift in perspective will challenge executives everywhere.

That’s what I think. What do you think?

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Geoffrey Moore | Zone to Win | Geoffrey Moore Twitter | Geoffrey Moore YouTube