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Innovation Management Consulting, what, why, and when

This is an edited excerpt of one of my speeches at SAP SKOM 2019.

I won’t show much survey data any more, because every new survey, there is a higher number (and/or proportion) of business leaders who believe Artificial Intelligence (Machine Learning, Deep Learning, Data Science, anyway you call it) will dramatically impact the way business are conducted. The latest I read was 91%.

However, the number of them who believes they are implementing AI well (or correctly) is not increasing as fast. What gives?

As the largest business solution provider, SAP has been witnessing a struggle that becomes more common than we wished to see — many businesses have purchased the technologies but do not have the strategies to benefit from them — which means these new technology were “used as replacement of what has been done”, which basically means very expansive “gadgets” that threatens jobs.

The point is AI (and many other technologies like IIoT, Blockchains, etc) should not only be used to replace existing workforce — if all one is thinking is doing the old processes with new technology, they are not going to standout (or even just stand) in the next round of industry shakeups.

What do I mean by that? Well, let me start with an example, there was a B company who dominated movie rental market, and was once considered raised barrier of entry by establishing presence in over 2800 communities in the US, physically.

Then, there was a new comer (one of many new comers) the N company. It started to compete toe to toe with B company for a little while, and then just took over the whole industry with a storm of “streaming” — a less talked about but very intriguing fact though was that B company actually tested video streaming 5 year before the N company. So how early “adopter” did not translate to strategic success?

While there are some “luck” involved, the main reason was B company looked at streaming as a replacement of DVD and VHS tapes — it run PoC, and determined it’s too expansive, too early, dilute customer spending to high-speed internet and likely enables customers looking for other forms of entertainment online, potentially causing reduction in DVD, VHS spending.

The N company on the other hand, although was a late-comer to the market, have tried to do business differently since its inception — by trying to eliminate the “late fees” it always tried to find ways do business in an “established industry”. “This is how this industry works” had always been a target for action instead of excuse for inaction.

Without generating much fanfare in the business world, in 2006, the N company “suspiciously” published a competition to the then not-yet-red-hot machine learning community, and asked researchers and practitioner to try increase its “recommendation” model by 10 percentage points (it was around ~65% back then, which means the N company already spent quite some time on this in-house by that time).

“What?” I hope you have asked. Yes, a presumably “movie rental” company get into machine learning space?

That’s right, the N company actually did not compete head to head with B company, instead it operated in a completely new industry that rendered the old one obsolete. The N company actually sells insights into what you would like to watch to you, on a monthly fee – it knows what you might like to watch better than you, it can recommend titles you’ve never heard of before, and chances are 4 out of 5 times, you will like it. And that’s a new form of passive entertainment. They never wanted to make money on tape/hour — their business model even before the machine learning challenge had been trying to get rid of late fees, which is a huge revenue generator of the B company that is charged based on tape/hour.

While B company saw streaming as a replacement of DVD and VHS, the N company realized streaming actually provides data that can be used to predict what viewers want to watch, and it can re-shape passive entertainment to another level that old way of delivery can never match — passive entertainment by definition is better when there is less hassle – while B company assessed and reached conclusion “hundreds of steps to a neighbourhood store is not too much a hassle”, they did not realize “trying to figure out what to watch is a much higher-engagement mental work for most of its customers”. And it only saw streaming to replace the steps, while the N company saw streaming can provide data to it so it can replace the “what to watch” part of mental workload.

Machine learning was the enabling-technology in addition to streaming that allowed the N company to shift the passive entertainment industry into next gear where B company was simply out of the league to even compete.

It’s not uncommon that business leaders, executives, and consultants would come to me after my speech and tell me “once you laid out the story, it is so obvious, but, I never thought about it this way.”

And this story leads us to “What is Innovation Management Consulting”?

Innovation Management Consulting provides technology-enabled business strategy service to innovative-minded customers so that they can explore the business model potential of new technical break though, analyze its threat to the incumbent and existing business model, and plan and execute strategy to take advantage of the ability to turn technical breakthrough into business breakthrough.

Why is Innovation Management Consulting important?

Because new technology often shake up industries by replacing it with a new industry. Traditional operational excellence type of innovation are still important, but their focus on industry knowledge and experience could be a double edge sword. When a new industry (or a new form of the industry) is coming to replace and old one, operational excellence by itself is not going to fend off the offence.

Innovation Management Consulting on the other hand, complement traditional management consulting in technology-enabled paradigm shift strategy adaptation, either getting ready for new-comers who are all-in with new technology and had no historic baggage, or be the leading force of shifting of the industry to a new form.

If traditional management consulting is to help business win a war, Innovation Management Consulting is to help customers to pick which front they should fight, who they should ally with, and what border their defence should focus on.

So Innovation Management Consulting do not replace all traditional management consulting, instead they work hand-in-hand for customers to plan and execute for the future.

Of course it does not mean there will not be conflicts — new way of doing things, undermining an old industry of course will cause conflicts between Innovation Management Consulting and *some* traditional management consultants. But most visionary leaders already know this – if you pick the wrong fight, it does not matter how well you fight, because even if you win, you could end up with no achievement.

When should customers adopt Innovation Management Consulting?

Yesterday! Seriously, start now, maybe start small, but start right away.

Will a threat come to you industry tomorrow? Maybe not. Amazon was on the market for ~20 years, and more of that 20+ years it was losing money than making money. But what happened to retail industry in 2017 and 2018? How many childhood big retail names disappeared? When it happens, it happens fast, those 20 years was sufficient for most retail chains to get prepared and shift their business model. But more of them failed instead of adapted. While it was true it take Amazon 20 years to undermine the traditional retail industry, it does not mean retailers should have waited 20 years to respond – there is really no time to waste.

What do customer gets from Innovation Management Consulting?

When customer work with traditional management consulting firms, they expect a small arm of MBAs. What can customers expect from Innovation Management Consulting? We are actually a platoon of double Masters — most of us are MBA with a (couple of) Master’s degree (or PhD) in Innovative technology fields like Machine Learning, Data Science, Applied Statistics, CS, CE, EE, Bio/Chem, or the industry the customer operates in.

Good leaders run business; Better leaders transform business; Best leaders transform the industry. And Innovation Management Consulting is here to help those best leaders of the business (and public) world.

also available at: https://www.linkedin.com/pulse/innovation-management-consulting-what-why-when-alan-tan/?published=t

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