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Hi, I'm Rob Siegel,
lecturer of management at the Stanford Graduate School of Business.
I teach six different courses at the GSB, but today, we're going to talk about
the key takeaways from one of them, the industrialist's dilemma.
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What's different about the industrialist's dilemma is that,
the combination of physical and
digital is completely different than anything that's happened before.
And it's increasing the speed with which markets are able to change.
And it also enables new companies to end into markets that previously would not
have been able to.
And you can study every industry to see how the combination of hardware and
software, digital and physical, are being impacted by these technological and
business model changes.
One of the things we've learned in studying the industrialist's dilemma is
that neither incumbents nor
disruptors are necessarily preordained to win in the market.
Disruptors have a blank sheet of paper, they can think with a clean slate about
how they're going to meet customer needs, but they often don't have the domain
knowledge of what it takes to be successful in a particular market.
Incumbents often have deep balance sheets, but they need to move more quickly and
build skill and
competencies that maybe they haven't had previously in their organization.
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In a world where every product is connected,
companies need to keep in mind two things.
Number one, they need to develop the capabilities to write the software to
communicate with the customers, and then the how to manage it on an ongoing basis.
To listen to conversations with customers, to understand how customers are using
their products, and to think about how they can constantly improving their
products, to delight customers and thinking about customer outcomes.
At the same time, organizations need to understand that the entire ecosystem might
be jealous of that ongoing conversation and
relationship between maybe a company that manufactures something and the end user.
And people in a channel might want to be a part of that data stream going back
and forth.
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In a world where digital and physical are combining to create massive disruption
across industries, somebody is going to end up being the underdog and
somebody is going to be on their heels.
Being an underdog can actually be very liberating.
In some ways, when you're on your heels, you have nothing to lose and
you have a license to try new things and be very creative.
You can look at ways in which headwinds can actually become tailwinds,
that can actually propel you forward.
So a change in a technology, a change in an industry, could actually be
an opportunity for a company to catapult itself to do business in a new way.
An example of a company that turned a headwind into a tailwind,
is the North American electronics retailer Best Buy.
Eight years ago their product was being commoditized, everybody was
buying televisions, and telephones online and just trying to get the lowest price.
But as all of these products became increasingly connected to the internet,
their level of complexity went up.
What Best Buy figured out is, they could be the best service retailer not just
selling the box themselves, but making sure the customers knew how to connect
them to the networks and to each other to deliver a better customer experience.
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Companies that innovate on both new technologies and
new business models end up becoming the winners long term.
A great example is Align Technologies,
the people who make the clear in this align teeth straightening tool.
The technology behind the clear plastic aligners,
is very difficult to manufacture.
But what they did really well, is they also increased their channels,
selling not only through orthodontists but through dentists, which very much expanded
the market and allowed adults to start using the product and not just teenagers.
What we found is that having business model innovation and
technological innovation, was a real force multiplier.
And doing only one of these, was necessary but not sufficient for long term success.
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As companies from the technology industry moving to things like health care and
financial services, they start getting in the areas where governments increasingly
regulates these areas.
In addition, it starts to get to national industrial policy.
Leaders of companies for the next several decades, are going to have to be very
conversant in how to work with and collaborate with governments all over
the world and know how to be successful in a world that's increasingly complex.
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Hi, I'm Rob.
I'm the short bald
guy in front of the class.
I have a linebacker's mindset, and
I used to carry around books that were this thick when I was in high school.
[LAUGH]
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