Why pragmatism, not persistence, wins the digital race?

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From the course by Institut Mines-Télécom

Innovating in a Digital World

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Institut Mines-Télécom

Innovating in a Digital World

561 ratings

Facebook, AirBnB, Tesla, Amazon, Uber. In just a few years, companies like these have changed the face of the global economy. Meanwhile, hundreds of thousands of start-ups are disrupting old business models, taking on centennial industrial groups – and winning. It’s clear that the rules of business have changed forever. This MOOC provides a knowledge toolkit for the ongoing digital revolution. You’ll discover 15 concepts that are essential for understanding the new mechanisms of digital business and innovation. Each concept is explained in its own beautifully designed, content-rich instructional video, along with additional resources for you to explore. The ideas are illustrated with up-to-the-minute case studies and examples from a wide range of industries. Week 1 : Why Digital Changes Everything Week 2 : Creating Value in a Digital World Week 3 : Thinking and Acting Differently Week 4 : Entrepreneurship in a Digital World This MOOC is ideal for learners from a wide range of backgrounds. It is brought to you by four expert professors and researchers from Telecom ParisTech, a leading European graduate school in the field of digital technology and social science. This MOOC is supported by the Patrick and Lina Drahi Foundation.

From the lesson

Thinking and acting differently

Going digital is a bit like emigrating to another country. To succeed digitally, people and firms need to adopt a whole new mindset. Entrepreneurs should forget about building the perfect business plan, and instead put the focus on “trial and learn” processes. And companies should forget about long-term strategy, protecting their IP, product planning, and entry barriers, and concentrate on running instead of defending. This is true in every area from strategic decision-making through to getting the most from the assets that firms own, control, or use – knowledge assets in particular.

Why pragmatism, not persistence, wins the digital race?5:53

Meet the Instructors

Rémi Maniak
Associate Professor
Management Science
Thomas Houy
Associate Professor
Management Science
Laurent Gille
Emeritus Professor
Economics
Valérie Fernandez
Professor
Management Science

[MUSIC]

Strategy in the Digital Era.

Has Amazon gone crazy?

Initially a bookseller, it's now a discount hypermarket, a cloud service

provider, a music distributor, a logistics specialist and a tablet retailer.

And it will change several times again over the next few years.

Strange, if we consider that strategy means setting a goal and sticking to it.

Actually, Amazon is not crazy.

It has simply understood the principals of strategy in the digital era.

So how can others implement this type of hyperactive strategy as Amazon has done?

Dynamic capabilities.

Forget your strategy classics.

Forget what Michael Porter said and wrote.

The 80s guru developed a highly defensive paradigm,

whereby companies should do everything to protect its products from the competition.

It should accumulate resources like factories, patents, or brand image.

They act as a barrier to keep assailants out.

In the long term, it can thus stabilize a triptych consisting of a fixed strategy,

a product range and cumulative resources.

But the digital revolution has done away with this principle.

Established products are promptly copied or become obsolete.

Technologies progress exponentially and merge together.

Patents are bypassed or surpassed.

In short, there is no sustainable competitive advantage.

In fact, strategy is no longer about setting a goal and sticking to it.

It must be dynamic, finely orchestrating two fast-paced developments.

New offers must constantly be launched,

even when existing products are doing well.

And in parallel, resources need to be renewed continuously.

They are the assets that allow the company to do what it does better than others.

As a result, the strategy-products-resources

triptych becomes a shifting configuration in constant disequilibrium.

Let's look at how to manage this in the digital world.

Playing with products.

Digital technology unlocks unprecedented possibilities for launching new products.

First, by lowering barriers to entry,

it allows virtually any player to enter any market.

The best example is the epic of Elon Musk,

who successively took on the banking, aerospace, and automotive industries.

Second, it means more products can be launched with the same budget.

Development costs are reduced thanks to CAD, open innovation, cloud services, etc.

Finally, it contributes towards successful launches every time

by facilitating beta testing by pilot clients.

Launching innovations online makes it quick and

easy to obtain valuable feedback.

Airbnb, for example, has a habit of testing innovative

functionalities within a pilot region before deploying them on a large scale.

With digital technology, companies can rapidly adjust once success is achieved.

They can easily adapt subsequent versions of an innovation,

based on customers' opinions and actual usage.

For example, car manufacturers use data from connected vehicles to

fine-tune designs for new models.

Promising products can also rapidly be complemented.

For instance, the producer can associate them with a service,

as Apple did when it launched iTunes a few months after the iPod 1.

Or it can associate them with another product that will work in conjunction.

Most connected objects manufacturers adopt this strategy.

Playing with resources.

Digital technology has also accelerated the pace in terms of resources.

Never has it been so easy to develop new technologies or brands.

The digital world offers thousands of technologies on a silver platter,

open standards, open source software, SDKs, cloud services, etc.

For brands, there's a new market to conquer opening every month, for example,

shared mobility, home automation, connected health, virtual reality, etc.

Within a few months, a company's renown can spread throughout these new fields.

Thanks to this digital technology, numerous innovations can be launched.

And in turn, every launch puts the company one step ahead.

Which opens up new strategic territories that can rapidly exploit.

This is what Apple has been able to do since 2000.

Every new release prepares the following move.

For example, the iPhone 5s introduced touch ID technology.

Which was then perfected and deployed for

many applications that were not all planned initially.

This is the key in a hyper dynamic environment, building assets,

then exploiting them based on opportunities.

It's no coincidence that the audience, or the number of active users,

is a key indicator in the digital era.

This is a resource that companies should develop as a priority,

even if it means losing money.

We will see later on what offers they can use to monetize all of this.

This is a very open arena.

A car manufacturer will try to exploit the data collected by

its vehicles to improve healthcare monitoring for its drivers.

A taxi company will deliver parcels.

Amazon is using its servers developed for

e-commerce to become a major cloud services provider.

So Amazon is not crazy.

It has made the strategic pragmatism a fundamental part of how it operates.

It has understood that to survive in the digital era,

companies should forget Michael Porter.

They should constantly build on past achievements and

take up new opportunities wherever they arise.

[MUSIC]

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